iPad Strategy?

I believe that Apple came out with the iPad as it did for two reasons. First, it sensed from the iPod Touch the emergence of a market for a tablet and wanted to be the first mover. Second, it knew that those who love all things Apple will pay the premium and will love it even if it were a bit unwieldy.

Apple's business model for the iPad is a bit like that of a pharmaceutical firm. Just as a pharmaceutical firm would charge a premium for prescription drugs and their customers must buy, Apple lovers must have the iPad. Being the first mover, it had captured the lion's share of the tablet market as anticipated. The premium cost of the iPad allows Apple to maximize profit. And, just as the pharmaceutical firm eventually would have to switch to generics with lower margins and capture additional profit, Apple would have to introduce a more generic 7" form factor iPad with camera(s) in order to compete with the Android tablets.