Growing Up Technological: The Economy of Electronics Markets

I have a confession to make: I am one of those stereotypical suckers for new technologically-advanced portable devices. Despite the fact that I try my hardest not to be allured by Apple's latest iPod or iPad release or Amazon's newest Kindle design, I am inevitably intrigued by the "latest and greatest" tablet or e-reader every single time. Guilty, I know. But, having grown up in the generation of technology, where the Internet is an entitlement and having a cell phone by age 7 is the norm, can you really blame me?

I read a couple of really interesting articles in The Washington Post this morning about the most recent wave of tablet releases and their effect on the national "electronics market."  They got me thinking about how truly fascinating the economics of the electronics industry is and I started asking myself:

• To what extent does competition help or hurt the electronics industry?
• What does it take to change the dynamic within the electronics industry?
• What keeps consumers going back for more?

Competition is the name of the game in a free market economy; it is desired in nearly every market to bring prices down and provide consumers with more options. Case in point: the entire point of airline deregulation (which I researched for my second essay) was to minimize barriers to entry so that more competitors could be introduced into the market and drive fares down. On the surface, it would appear that competition would be both desirable and helpful (as it is in most markets) in the electronics market; however, when you consider that Apple has held a predominant advantage in the tablet market, despite the fact that the industry is overflowing with other tablets produced by a plethora of other companies, you have to wonder if competition is having its usual effect. Why do people consistently buy more iPads than tablets produced by Apple's competitors? Apple is an incredibly trendy company well-known for the innovativeness, quality, and high-performance of its products and, yes, this must play a big factor in people's decisions about who to buy from. But Apple should not be defying competition's "invisible hand" and it appears to be doing exactly that. My theory is that, to some extent, competition hurts electronic markets, because the more choices that are introduced and the more similar they are to one another, the more people are inclined to "just go" with the one made by the most "popular" company. Sort of a "well, if they all do the same thing, then it doesn't matter where I buy mine from" mentality that a dominant company like Apple benefits from greatly.

That could be changing, though, and this brings me to my second question. The articles I read this morning postulate that the emerging key to shaking things up on the tablet scene is the introduction of the so-called "mini-tablets," like Amazon's new Kindle Fire and Barnes & Noble's Nook Tablet. According to one article, these devices are capable of doing about 80% of what the iPad is capable of for roughly 50% of the cost, offering lower-spending tablet cravers a more viable option. Suddenly, the devices being pitted against each other aren't so alike (certainly the differences in hardware and operating systems differ greatly between a device like the Kindle Fire and the iPad). This makes the choice for consumers more difficult and puts price at the forefront once again, reestablishing some competitive balance to the market. It takes something revolutionary, yet still directly competitive with existing products to change the dynamic. Technology writers are predicting that Amazon may have just the revolutionary product needed.

Finally, what keeps consumers going back for more? It is that tantalizing draw that I confessed to being a magnet for at the beginning of my post. The nature of the electronics market is that it is in a state of constant evolution; each new product has only a fleeting moment in the spotlight before it is out-shined by a newer, even better model. The industry benefits greatly from a media advertising culture that tells us we have to own the best or else we are behind the times. To upgrade your products is the only way to stay ahead. That's the true for the developers of these products; why shouldn't it be true for consumers as well?

Wow, this post ended up being longer than I intended, so I'll wrap it up. But I think it would be really interesting to look more into the electronic market phenomenon by examining some numbers from economists. How obsessed are we? What percentage of our economy is dependent upon the success of these sales? What effect does the introduction of new products have on the behind-the scenes folks, such as software writers? All interesting questions that would be fun to answer at a later date. For now, I think I will go check out the Kindle Fire...

Here are the two WP articles. This one is about mini-tablets shaking up the market:

http://www.washingtonpost.com/business/technology/nook-tablet-amazon-kindle-fire-mini-tablets-will-shake-up-market/2011/11/09/gIQAjK5d6M_story.html?hpid=z5

And this one is more of a profile on the Kindle Fire, to give you some perspective on how it will compete with iPad:

http://www.washingtonpost.com/business/economy/amazons-kindle-fire-sets-the-stage-for-major-disrpution-in-tablet-space/2011/09/28/gIQAgotC5K_story.html