Pricing in today’s market – Seller is the King


While reading today’s newspaper, I noticed two ads, which resulted in an inspiration for this blog.

I saw following ad of Samsung Galaxy S4, considered top of the line smartphone, at a price of Rs. 72,000.

DSC_1587

Then I noticed following, the offer of new Sony LCD 46′ TV, which is considered top of the line TV, for Rs. 59,899. 

 DSC_1586

Now, compare the price of a 46 inches TV for 60,000 versus a 4 inches Smartphone for 72,000. I am not sure about the exact cost of manufacturing each of these items, but from it’s size, it certainly tells,  that cost is the not the driving factor for selling price, but it’s largely dependant on demand & supply relation. In fact it is that invisible ‘value’ (what we call as brand image), that becomes the driving force. It is not as bad, at this stage.

But, if you take into account the underlying facts, that in today’s largely oligopoly market, only few large players govern the market, while the consumers have a weak say, or you can say, we have a disruption of free-market economy today. Smartphones market today is in fact a duopoly market, controlled by Apple and Samsung, with 98% market share of smart and feature phones. They are able to survive, as they leverage their broad penetration in the horizontal smartphones supply chain, which allows them greater profitability against their competitors, who are only assembling. It becomes fairly hard, if not impossible, for other players to compete with equal opportunity, in such a situation.

Although, Islam promotes free-market economy and does not allow price control, so that both seller’s and buyers interest is protected, and there’s no injustice. But to ensure that skilled market operators do not take any advantage of an unsuspecting customer’s ignorance and naivety, for example, in situations like that of duopoly, where consumer interest is hurt, price control becomes important.  But such price control again is allowed, when we are talking about commodities which are necessities, and I am sure, smartphones are far from it.

So, we have to live with TV for Rs. 60, 000 and Smartphone for Rs.70,000, while we know that chipsets and display screens are the most expensive items.

Seller is always right ! 🙂

Sources:

http://i-epistemology.net/attachments/404_V11N1%20Spring%2094%20-%20kamali1%20-%20Tasir%20-%20Price%20Control%20-%20in%20Islamic%20Law.pdf

http://www.asymco.com/2012/12/03/samsung-electronics-product-line-revenues-and-operating-income-in-context/

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