COMPANY: APPLE INCNEW PRODUCT: APPLE I WATCH

Purpose of Product Development Process:

“to improve the effectiveness of people engaged in developing and managing new products -This mission includes facilitating the generation of new information, helping convert this information into knowledge which is in a usable format, and making this new knowledge broadly available to those who might benefit from it” (1).

FeaturesThe i-Watch: Is only compatible with Apple. Recalls all passwords, eliminating the need to enter

the passwords on various devices. Can act as a TV Remote Identify/find mobile devices. Can give direction while travelling. Includes health monitors and fitness tracking

sensors. Can display who is calling, without the need to grab

the phone Display a preview of i-Phone camera on Watch

display – which can be used to capture images.

COST ESTIMATES Parametric Cost Estimates: Use of cost estimating

relationships and relevant mathematical algorithms.

Neural Networks: Cost analysis of historical data.

Function Costing: Product cost from specification of its performance.

Activity-Based Costing: Using experts reasoning to estimate costs.

Generative Costing: Cost is estimated by adding the processes involved in product development.

Target Costing: This requires setting a target cost by subtracting a desired profit margin from market price.

PRICING DECISION

Three primary impacts on pricing decisions are:

1. Customers2. Competitors3. Costs

long-run pricing decision are based on:1. Market-based pricing: what customer want?

Reaction of competitors? What price to charge?2. Cost-based pricing : What is cost of producing?

Therefore what price to charge to cover cost and achieve targeted return.

SUGGESTION

Based on market based pricing Apple inc can base it I watch pricing on:

Target Costing:  It will allow Apple inc to attain the targeted operating income per unit.

 Activity-based costing: It will help managers to determine accurate costs of product in order to set prices.

It will also aid managers in cost management manage by reducing or changing various activities and assess their impact on costs.

Expected GrowthThe growth of Phones and tablets have dropped significantly, since:

• Smartphone sales are expected to grow by around 19%, as compared to 39% growth in 2014.

• Tablet growth is expected to be 19.4% this year, as compared to growth of 51% in 2014.

• Majority portion this growth arrives through emerging markets, while the selling prices and margins are decreasing.

Since Apple Inc. creates more than 50% of its revenue from the I Phone sales the development and execution of smart watch can mitigate the threat it is facing in the tablet and PC. 

The I Watch is therefore a product which has the potential to adopt the iPhone effect.