The biggest surprise when Apple released the iPad was the price of $500. The iPad is still the best-selling product of its kind. Competitors have had trouble producing and successfully marketing any products near the $500 mark. The closest competitors, Motorola’s Xoom tablet and Samsung’s Galaxy Tab, are debuting at $800 and $600 respectively. Why have these companies not been able to set a lower starting price and how did Apple do it?

The answer is a full integration of marketing, retailing and software engineering. Apple does much of this in-house, leading to increased profits. Other companies outsource many of these services, leading to lower profits for those companies. Apple sells many iPads through it’s own retail stores and online iTunes store, rather than through independent retailers, allowing Apple to retain higher profits.

Competitors do not have similar strategies and have suffered when it comes to the success and price points of similar products.