Cheaper Symbol, Risky Status

Apple on Tuesday will introduce two iPhones, including a new lower-cost model targeted at overseas countries where expensive smartphones are out of reach for many consumers.

The addition of a cheaper iPhone could help Apple sell tens of millions more phones. But it could also diminish its reputation as a premium brand.

Many luxury companies have faced this challenge before, with wildly different results. Luxury carmakers have introduced less expensive models, but many efforts have tripped up. Tiffany & Company found so much success with its cheaper “Return to Tiffany” jewelry, that it attracted too many teenagers. And Target has paired up with a variety of high-end fashion designers, often with considerable success.

For Apple, the devil will be in the details: just how much lower the price of the cheaper iPhone is, and just how much cheaper it looks and feels. If the iPhone is deemed cheap, it could get into the hands of so many people worldwide that it loses power as a status symbol and turns Apple into a maker of commodity products like Dell, Hewlett-Packard or Asus.

“It’s hard. It’s an art and a science,” said Milton Pedraza, chief executive of the Luxury Institute, a research firm. “It’s hard to know you’ve gone over the line until you do it.”

Makers of luxury cars have long struggled with how to increase their market share with less expensive models, while still retaining the brand’s cachet and exclusivity.

The marriage of Daimler-Benz and Chrysler failed partly because German engineers developing Mercedes sedans were opposed to sharing parts with mainstream Chrysler models made in the United States. While that preserved the integrity of the Mercedes brand, the company missed a golden opportunity to cut overall costs. Still, Mercedes is taking another stab at lower-cost models, introducing the CLA sedan later this year.

Toyota’s Lexus brand stumbled some when it introduced lower-priced IS sedans that lacked the high-end features and overall glitz of its signature models. Lexus has since addressed the issue by making its entry-level cars more powerful and sporty.

The fashion industry has also experimented with going more mainstream. Ralph Lauren offers lower-priced lines while also having a high-end product. But a partnership with Neiman Marcus and Target was a major failure.

Even the travel industry has tried extending luxury brands, like Starwood’s Aloft line of hotels, which is promoted as “a vision of W Hotels,” a top Starwood brand, and “style at a steal.”

Of course, many retailers try to drive up sales by lowering prices, and that effort has become only more prominent in the Internet era, when consumers have technology tools to browse an entire industry and compare prices in nanoseconds.

“This cheaper iPhone is just one part of a whole trend that is going on that is epically changing the face of this industry,” said Robin Lewis, chief executive of The Robin Report, a retail strategy newsletter. “It’s devaluing the definition of the word ‘value.’ And it’s going to affect every premium brand.”

Still, many analysts believe that if Apple can get consumers — particularly those in China and India — to buy a cheaper version of the phone, those people would be more likely to buy Apple’s premium products in the future.

“It’s going to be the TV, it’ll be the wrist watch, it’ll be the integration in your BMW — all these things later down the road that still carries the premium brand,” said Laurence Isaac Balter, chief market strategist at Oracle Investment Research, which has clients that own Apple shares.

Apple has crossed over into pushing nonpremium products before, and failed. In the 1990s, after Steven P. Jobs had been ousted from the company, Apple started a program offering its software to makers of generic personal computers, and some of those manufacturers were able to build computers faster and cheaper than Apple could. The company, having lost its value to consumers as a premium brand offering an exclusive product, almost went bankrupt.

Stephanie Clifford and Bill Vlasic contributed reporting.

Aircraft Makers Shy Away From Risky Bets in Building New Planes

Boeing’s announcement last week that it had begun pitching airlines on an enhanced version of its 777 jet, rather than a whole new plane, underscores how the aerospace industry is pulling back from the risky bets that have led to costly, and humbling, delays on other planes, like Boeing’s 787 Dreamliner.

Instead of following the Dreamliner template, in which it sought to create a revolutionary plane brimming with new technology, Boeing is now seeking a safer, more incremental path. It plans to add the most crucial new technologies, like lightweight plastic composite wings and more fuel-efficient engines, to the 777, while avoiding the time and expense of designing a replacement from scratch.

Airbus, too, has expressed concern about the “go for broke” mentality that prompted Boeing to fill the Dreamliner with novel features, including a greater use of composites and a more advanced electrical system to increase the fuel savings.

After smoke and fire erupted from the new lithium-ion batteries on two 787s in January, forcing the grounding of the entire fleet, Airbus dropped its plans to use the volatile batteries on its new A350 jets and went back to more tried-and-true ones.

“Risk, risk, risk,” Tom Enders, the chief of Airbus’s parent company, European Aeronautic Defense and Space, said of Boeing’s approach to the Dreamliner.

Mr. Enders said Airbus had made similar mistakes in designing some of the components on its latest planes. “It’s pushing the technology envelope and not always taking enough care that the technologies were mature when we put them on an aircraft,” he said. “And that doesn’t benefit the customer, obviously.”

Aviation analysts said Boeing had to make a technological leap with the Dreamliner over the last decade to again surpass Airbus in total plane sales, just as it now has to upgrade the 777, its long-range workhorse, to counter a new challenge from the A350.

But while Boeing needed to take radical steps, like molding the entire fuselage of the Dreamliner out of the plastic composites to cut fuel costs by 20 percent, it can achieve similar fuel savings on the 777 by using advanced engines and adding huge composite wings to a metal frame.

The prospect of gaining such savings with a more cautious approach delights both the airlines and Boeing’s investors, who would love to see it complete the development process without the kind of white-knuckle ride — or the extra billions in cash — that the Dreamliner required.

W. James McNerney Jr., Boeing’s chief executive, said recently that “we all remember the times of fighting through the 787 development where the technologies weren’t quite as mature as we hoped they’d be.” He said the company’s strategy in updating the larger 777, and creating two additional versions of the 787, was to “harvest some hard-fought gains” in that technology without taking such big risks.

Mr. McNerney said the new version of the 777, which is still subject to final approval by Boeing’s board, would include much more substantial improvements than most planes derived from existing ones and could be ready by the end of the decade. “So I think we may be in an era where we can absorb somewhat less risk and still deliver a lot of performance,” he added.

The company’s plans for the updated 777, known as the 777X, are also significant because it could be the last new model that Boeing builds before the 2030s. And the updating is not risk-free: advances in engine technology can prove difficult, and the composite wings on the new 777 will be wider and more complicated to fabricate than those on the 787.

Boeing’s efforts to seek advance orders for the plane will also set off an intense new phase in its rivalry with Airbus, one determined more by how efficiently each company can produce the planes than their visions.

“Airbus squandered a decade on the A380,” a gigantic jet that has had disappointing sales, said Richard L. Aboulafia, an aviation analyst at the Teal Group in Fairfax, Va. Boeing, he added, lost the advantage with its troubles on the 787. With the A350, which also has a composite body and wings, he said, “what’s important is that Airbus is catching up.”