The Apple Company Analysis - Essay Example

?The Apple Company Introduction The success of a company depends on the market performance of its product. Performance of a product is largely determined by the attractiveness of a product to the customer and the ability of the company to sell the product at a profitable price. Various constraints influence pricing strategies. Each of these constraints has associated micro and macro-economic factors that affect the sales of a product. The Apple Company is a popular company in the technology industry. Successful manufacture and sale of the Apple Iphone has made the company to become a leading company in the gadget and high-tech business. At the end of 2010-2011 financial year, Apple sold 27 million compared to the 6 million units sold in 2008. This essay will therefore analyze Apple’s Iphone from a microeconomic and macroeconomic perspective. The main factor that affects the supply and demand of a product is price. Price is the exchange value of a product at a given time and market. Consequently, Apple will experience a change in the demand of its product if it changes its price. Currently the IPhone is the most highly priced smart phone in the market. This is in comparison with other similar products such as Samsung Galaxy. The Apple Company will also be willing to increase the supply of the product at high market price. Technology is the second factor that influences IPhone’s demand and supply. In the current digital age, high tech gadgets such as smart phones are increasingly becoming necessary. In addition, technological advancement has increased efficiency in the production of the product (Bade, 2007, p. 23). This has increased the supply of the product leading to a reduction in price. Advancement in technology has also caused a reduction in the prices of other related smart phones particularly those manufactured by Chinese companies. This has caused a shift in the customer base for the product. Market structure relates to the nature or influence of buyers and suppliers in a market. Perfect competition, oligopoly, monopoly, and monopsony are the basic market structures. The Apple Company operates in a perfect competition market. A perfect competition market is considered as an ideal market, which is characterized by many buyers and suppliers. In addition, a perfect competition market is characterized by freedom of entry and exit. This promotes the production homogenous products and availability of numerous substitutes. In such market, product, promotion or advertisement are critical factors that suppliers use to increase the sale of their products. Advertisements and free market information makes the consumers to have readily available information about prices, products, and competition of the supplies (Bade, 2007, p. 43). Thus, consumers in the high-tech and gadget market are aware of products of other related producers such as Nokia, Motorola, and Samsung. The profitability of a product determines its existence in a competitive market. In addition, profitability of a company determines the company’s preference for its production. The Apple Company continuously advertises its products in order to maintain its position in the market. IPhone advertisements are common in popular print and electronic media. Online magazines and social media are some of the common platforms through which Apple advertises its products. Through these advertisements, the company informs potential and existing customers about the high-tech capabilities of their devices. A typical advert will illustrate user friendly and device intelligence features that make the IPhone to stand out from other similar products. In addition, the company needs to increase its investments in research and innovation. Acquiring patents for smart phone features will increase the profitability of the product. In addition, the Apple Company will have profitable operations through reduced costs of operation. Technology innovations will lead to efficient operations and reduced cost of operation. The current market structure is slightly profitable compared to other market structure such as monopolies. Moving towards a monopoly is likely to increase the profitability of the company by a considerable margin. Innovation is the basic factor that the company can apply to shift from the current perfect competition market into the profitable monopoly market. In addition, the sustainability of the IPhone market is closely associated to people’s technological requirements. Therefore, the company needs to improve the product continuously in order to match the technological requirements of the people. According to Steve jobs, Apple’s success resulted from the company’s ability to provide people with practical technological solutions. Elasticity is a measure that determines how a change in a certain economic variable affects other related variables. Both the elasticity of demand and supply will influence the pricing strategies and profitability of the company. Income elasticity of demand is the main elasticity that affects the sales of the IPhone. This elasticity measures the shift in demand resulting from increased income. Thus, the company is likely to experience increased sales and profit following an increase of people’s earnings. The current dependency on technology has made smart phones to become basic commodities (Bade, 2007, p. 113). This indicates that the product’s demand will have a direct correlation with people’s income. Secondly, the Cross Price Elasticity will determine the competitiveness of the IPhone. The Cross Price Elasticity indicates the shift of demand of a product in relation to changes in the price of other related products. Apple is a strong brand name that has gained enormous popularity. Thus, prices of other related products will have an inverse variation on IPhone’s demand. The company’s products will also be subject to price elasticity of supply. Price elasticity of supply measures changes in the supply of a product in relation to changes in prices. The Apple Company has all its expectations in technological advancements. The Apple Company has technology and innovation as its main resource. Through the leadership of talented and dedicated business leaders, the company has been able to harness existing technology. In addition, the company has a close association with its suppliers and business associates. However, the company has not been active in funding research through scholarship and provision of educational infrastructures. Macroeconomics indicates the overall fluctuation in a country’s economy because of decisions made at individual firm level. Unemployment, national income, GDP, inflation, balance of payments, and exchange rates are some of the variables that are used to study microeconomics. Fluctuations of the above indicators of microeconomics have a major significance to the success of Apple Company. Economic growth affects or determines people attitude and expectation. This in turn affects people’s purchasing power and consumer’s decision-making. Economic growth indicates an increase in business activities within a given country (Bade, 2007, p. 13). This increase has a similar implication on the purchase of Iphone and hence the profitability of the company. In addition, economic growth indicates positive performance in the international market. This indicates that Apple Company is experiencing favorable international business. On the other hand, negative economic growth indicates reduced purchasing power and preference for basic goods such as food. This indicates that economic degradation slows down the company’s growth. Unemployment measures the number of qualified people without jobs within a given country. Currently, the federal government is implementing various factors such as the stimulus packages to reduce unemployment. In the recent years, unemployment has increased constantly due to scarcity of resources and other demographic factors. Although unemployment measures the level of disposable income within a country, the level of unemployment does not have a direct implication on the sale of the IPhone. This is because the product has the qualities of both a giffen and basic good. Inflation indicates the value of a country’s currency in relation to it GDP. Inflation indicates the amount of money in circulation (Bade, 2007, p. 23). Inflation is independent of people’s purchasing power and choice of products. Thus, the rate of inflation is unlikely to affect domestic market. However, the international market for IPhone will respond inversely to the level inflation. Exchange rate is a system that the central bank uses to regulate the operations of commercial banks. The central bank regulates the lending abilities of commercial banks through balance of payment and exchange rates. Fluctuation in exchange rates and balance of payments is likely to affect the availability of capital for the company and the price of its stocks in the market. This will affect the confidence of the company’s shareholders and customers. Thus, the company’s success will respond positively to fluctuations in exchange rates and balance of payment. The business cycle is a periodic but irregular fluctuation of a country’s economy. Business cycles are responsible for unpredictable occurrences such as recessions and economic depressions. Economic recessions and depressions lower people’s purchasing power. This indicates that the Apple Company and sale of IPhone will suffer the consequences of negative business cycles. Positive business cycles are responsible for economic boom and they have a positive impact on the company’s success. Conclusion The Apple Company has developed into a leading company in the technology industry. The IPhone is among its most successful products in the competitive gadget and technology market. The success of the product and the company depend on both the macroeconomic and microeconomic factors that influence the sale of the product. Apples success is dependent on IPhone’s demand and supply, which affects sale and profitability of the company. Apple operates in a perfect competition market but it has chances of creating a monopoly through technological advancement. Thus, technology is the main aspect that influences the company’s elasticity of demand and supply. The company is also subject to various macroeconomic factors that determines the overall economy. Economic growths, inflation, balance of payment and exchange rates have a direct implication on Apple’s success. On the other hand, unemployment and business cycles have insignificant effect on the company’s success. Works Cited Bade, M 2007, Foundations of Microeconomics, Addison Wesley, England. Read More