Economics Concepts Followed by Samsung

People Respond to Incentives

An incentive is something that induces a person to act. It is a kind of award for people. Because most of the people make decisions by comparing cost and benefits. People only and only do something because of an incentive, there is no other reason why someone would do something just for doing it. People get attracted towards incentives.

Example –

Usually Samsung company gives mobile cover and screen guards with the new mobile phone, so that people get attracted towards their phone. Mobile covers and screen guards are kind of incentives for their customers. As a part of incentives, Samsung provides a limited offer on certain handsets by providing a year of free subscription on music consuming apps like Gaana or Hungama etc. they also give free sim cards that has various offers on subsidised data rates for a particular amount of time, say 1 year. These offers act as incentives which attracts customers into buying their phones.

Law of Supply

Law of Supply states that if the price of a product decreases, then the quantity supplied also decrease. Or Vice versa. In other words, price and quantity supply are directly proportional to each other. Quantity respond in the same direction as the price changes.

Example –

Whenever Samsung launches a new phone, there is a decrease in price of phones which were launched by Samsung earlier. As the price decreases of phones, their supply is also decreased.

Market Based Price Discrimination

In the market based price discrimination, monopolist charge different price in different markets for the same products. In other words, there are different-different prices in different-different market for the same product.

Example –

There are different prices of Samsung products or phones in different markets. Samsung A7 64 GB price in India is Rs.23,990 and the price of same phone in Russia is RUB 16,750 means Rs.18,090 in Indian Currency. So, there is different price in different countries for the same phone. Because every country is having the different market.

Economies of Scale

Economies of Scale means percentage drop in average cost of production following a 1%   increase in output.

1.      External economies of scale

2.      Internal economies of scale

While we are talking about the economies of scale, it helps to understand about the average cost curve.

Example –

Whenever a Samsung company purchase its spare parts from other companies to manufacture its products, there would be percentage change in average cost of production at 1% increase in output.

Perfect Competition Market

In perfect competition market, there are many competitors. All the firms or companies sell same type of product or an identical product. In this market, competition is at its greatest possible level. In this market, there are large number of buyers and sellers. And homogenous products are produced by every firm.

Example –

Samsung company has many competitors like Vivo, Honor, OPPO, Motorola, Lenovo, MI etc. these companies also launching the phones with the same features which Samsung have nearly at the same price.