Apple Company - Research Paper Example

 Apple Company Introduction to Apple Company Apple Inc. is an American company that specializes in production of high technologically integrated products. It specializes in production of computers and computer-associated products peddled to outmatch competitor’s products while availing quality and better software services to its customers at the same time. The range of items and services the company gives to consumers in various market segments such as iPhones products, iPods, iPads, MacAir, MacBook, Apple laptops and desktops, Apple TVs, guarantee services and proper packaging are all attributable to the combined efforts of the Company’s workforce (Elliot, 2012, p. 234). The Company is also engaged in a variety of stock exchange portfolios such as financial securities; Company shares, debentures and traded bonds. The ticker tape, AAPL: NASDAQ GS drives the Company’s financial and exchange markets with the highest stock price noted in February 18th 2014 at 555.19 billion dollars. The Company’strading period ends every September 28th with the September 2013 net income hitting 37.04 billion dollars as 225.18 dollars noted as2013assets value. The paper will focus on iPhone products with respects to its demand and supply. Factors Affecting Demand and Supply for Apple Product With respect to the demand of the iPhone products, the paper will showcase how iPhone products have an ever increasing demand based on the sales of the products ranging from iPhone 5, iPhone 4 and iPhone 4S. Focus will be based on iPhone 5 that was ushered and launched September 21, 2012. During the same day, it is noted that over 2 million purchase were attached to first pre-ordering. This in comparison to iPhone 4 launched in October 2010, 1. 4 million purchase were recorded as the increase in first pre-ordering. On the other hand, iPhone 4S attracted over 4 million purchases with the first three days following its launch. In a snapshot, a robust demand for iPhone products is looming based on the promising purchases indicated. Surprisingly, opening-weekend sale of iPhone 5 has dealt the Company’s image and reputation a blow based on the demand and supply of this product despite its massive upgraded features. Shortage in supply of iPhone 5 opened avenues for company’s critiques leading to its downgrading. This is supported by Apple chief Tim Cook on his apology as quoted, ‘While we have sold out of our initial supply, stores continue to receive iPhone 5 shipments regularly and customers can continue to order online and receive an estimated delivery date. We appreciate everyone’s patients and are working hard to build enough iPhone 5S for everyone.’ This followed the failure by the company to hit the 10 million sales mark projected by analysts as the company only managed to sell 5 million products. Tim Cook illustrated that it was due supply insufficiency of iPhone 5 products that led to inability to hit the 10 million sales and downplayed demand shortages on the same. The company held that there was an excess demand attached to the products and that more sales could have been realized. This is as illustrated below showing the demand of iPhone 5 at its launching. It is clearly depicted that there was more demand as compared to supply with initial demand projected to be 10 million while only half materialized. It was evident that the company supply restricted the amount of revenue that could have been achieved subsequently loosing so much in terms of sales. Price As stated by the law of demand that the quantity of demanded falls as prices increases and quantity rises as prices decrease , Apple cell phone products also follows the same principle. Ceteris Paribus, consumers purchasing decisions are embedded on prices while Apple Company tends to raise prices following a boom in demand as a strategy to control inventory and to weed out the possibility of customer’s disappointment. Apple Company temporarily lowers their prices during lower demands as consumer attracting strategy based on the ability to set own price for a particular niche. Income Quantity of goods demanded increases with an increase in consumers’ income and falls when income falls. The marginal utility comes into play where people would tend to limit their consumptions of goods at some levels of income despite income fluctuations. The company appreciates such situations and consequently designs a variety of phone products in order to influence consumers to purchase new products with increasing income. Example are cases where consumers would want purchase Apple iPhone even if it calls for taking debts. The high-rated level of Good Will on Apple Company contributes strongly to increased customers to purchase iPhone products. Self-perception Many consumers would want to feel superior to others based on self-perception and hence rush for Apple iPhone. This makes the demand for iPhone to increase despite its escalated prices as people are driven not by prices attached but need to fulfil self-perception desire. Many competitors thus find it so hard to keep pace with the Company sales despite offering their products at lower prices. Consumers have thus been driven by social classes and see price as a non-determinant factor in purchasing the Apple iPhone Products. Taste and Preferences Quantity demanded is attached to a particular niche or segment or consumer’s taste and preference. A positive change in consumer’s tastes towards one product means a negative change to initial product. As a counteractive measure of this, Apple Company designs a variety of cell phones ranging from iPhone to iPad as well increased brand advertisements which is still beneficial to the company as consumers only move in between the same Company’s products hence continuous revenue generation. Expectation Consumers’ expectations about changes in future prices and quantities of a particular brand influence current demand of that given product. If prices are expected to fall in future people would hoard their money waiting to buy at lower prices in the future so as to save and the reverse holds. Prices of Related Goods Goods exists as complementary or as substitutes in most situation. Completion in the electronic industry is ever increasing. Apple Company products have a lot of substitutes from Microsoft, Samsung and Dell. The company pricing policies are thus attached to actions of other competitors offering the complimentary and substitute commodities. When competitors lowers prices, counteractive measure of attack or collide have been explored by Apple Company in order to remain relevant.Apple Company dose this via constant innovation with respect to iPhone and iPods as counteractive measures to thwart introduction of Droid that was sold at pocket-friendly prices. The Company has remained peak with respects to its operational framework despite fluctuating in market forces. The Company approaches the global markets by establishing foreign subsidiaries and warehouses marked as distribution points. This is peddled by product positioning which has allowed the company to be famous, a competitive advantage in both domestic and global markets (Sutherland, 2012, p. 134). The combination of improved sales, marketing, product, promotion and customer retention has worked to proactively weed out unnecessary impacts attached to fluctuations in demand and supply. Through supportive data aiding in the definitions and identifications of niche-associated problems and investments opportunities, the Company’s top management has developed and implemented working strategies circumventing around market research and segmentation as counteractive measures against sudden fluctuations in economic forces. In case of inevitable problems, prompt solution strategies driven by the need to attract and retain more customers, have been framed with respect to product quality. On other hand, proper strategies have been outlined to explore and benefit from opportunities attached to fluctuations of market forces. The Company remains tall above its competitors by focusing on new opportunities identificationwhile designing customers’ taste and preference-attached products. This can be attributed to ability of the Company to uphold high levels of consumers’ flexibility while simultaneously keeping pace with technological changes. The company has created unique impressions in their consumers’ minds based on distinct; product promotional strategy, pricing, distribution process and packaging methods aimed at outstripping competitors while benefiting during economic fluctuations. The company is thus, not easily shattered by equilibrium disturbances arising from fluctuations in forces of demands and supply. Price Elasticity of Demand for Apple’s Products The marginal cost of manufacturing a 16-gigabyte Apple iPads is 260 dollars (including 26.80 dollars for its processors and 95 dollars for touch screen displays). Its flash memory costs 59 dollars for 32-gigabyte, 16-gigabyte consumes 29.50 dollars while 64-gigabyte costs 118 dollars. Variations in flash memory translate into increased costs of production of 64-gigabyte model selling at 699 dollars to 348 dollars and that of 32-gigabyte version cost rise to 289.10 and sold at 599 dollars. From the information we now compute price elasticity for the three products as; Price elasticity of demand for the 32-gigabyte iPad is ep= P/ (MC – P) = 599/ (289-599) = -1.93 Price Elasticity of demand for the 16-gigabyte iPad is ep= P/ (MC – P) = 499/ (260-499) = -2.09 Price Elasticity of demand for the 64-gigabyte iPad is ep= P/ (MC – P) = 699/ (348-699) = -1.99 From the computation of eps; the demand for iPad is thus relatively elastic as they are all less than negative one, the criterion used to explain elasticity. This has an implication on the production and pricing decision in that; the percentage change in quantity demanded would be higher than percentage changes in price should the company change the current price levels. On the other hand, revenue increases with decrease in prices since there would be a greater quantity response and the revenue would decline following disproportionate decrease in demand. Apple iPad has greater elasticity in absolute term as noted by Robert Hansen based on his comparison between iPhone 3G with price elasticity of -1.43 to iPad elasticity. Apple’s Primary Competitive Advantage with Respect to Demand and Supply of iPhone Products Apple iPhone products has outstripped other substitute products as a leading smartphone within both domestic and global markets with particular reference to the United States Market. A competitive advantage has been established with respect to iPhone products where many people choose the iPhone products over other complementary and substitutes. The immediate competitive advantage is attached to iPhone’s unique quality, brand and price. With respect to uniqueness, it has a widescreen format presenting a user friendly platform as users comfortably touch the screen while watching videos. With respect to quality, the use of iOS has presented a vast applications that adds to its uniqueness and hence attractive to consumers. In comparison to emerging Android phones, customer loyalty about iPhone is not compromised as consumers have increasingly believe that iOS stands erected as the best operating system. Translating these to sales volume, with respect to expectations in iPhone 5’s sales, price has become as silent as a determinant factor to consumers’ purchase of iPhones. This translates into increased economies of scale with respect to increased market share of the Apple iPhone products hence outstripping competitors. Consumers have attached escalating prices of iPhone products to quality and thus would buy at increasing prices. This culminates into the Company charging their prices higher based on consumers’ deeply-rooted perception of quality products and hence making the company to fetch huge profit margins. With respect to the company’s brand as a competitive advantage, consumers attach possession of iPhone products as status symbol which makes the company brand to be powerful in a global markets (Cruikshank, 2005, p. 111). The perception that iPhone owners are ‘tech geek’ as well as rich social classhave increasingly portrayed iPhone asdistinct from its close substitutes rather than a perfect substitute. iPhone fans are willing to pay higher prices despite fluctuations in demand and supply of the products, with increase in price, a slight decrease in quantity demanded is felt but does not hit zero. With respects to substitute’s trade off, demand curve of iPhone products shifts to the left insignificantly as illustrated from D1 to D2 showing the substitution effects. Marketing Strategy The realization and recognition of the vast pros attributable to a combined strategy o both marketing agents and online marketing focused on higher levels of consumer recognition,peddled to creating products awareness on both local and global perspective, has resulted into a broad customer attraction and retention way up the competitors. This has resulted into increased economies of scale that empties into increased sales volume and thus, revenue multiplier. The uniqueness in its marketing strategy where there is a combination of marketing agents, online marketing as well as in-store displays makes the Company attract more customers as this makes customers make purchases free from compulsion (Pride & Ferrell, 2013, p. 56). Marketing mix has also work as a competitive advantage of the Company based on fair pricing, quality products, physical evidence as its website http://www.apple.com to facilitate its customers conversion process and location, a year warranty on its product, special discount promotional offers on refurbished commodities and strategic Company’s headquarter location. Substitutesfor Apple’s iPhone Products Apple Company is particularly is focused on production of computers and its associated products. It faces competition from other electronic firms producing similar products such as Dell and Samsung.In essence, for every product on Apple’s roster, it is arguably inevitable to find non-apple substitute; Apple iPhone 3GS (AT& T) has been counteracted by the Google Nexus One (T-Mobile). It can perform what the iPhone does. It is as speedy and slim, combined with a powerful touch screen slab, thousands of apps and a great web browser making it a worthy competition.A less competitive alternative is the Samsung Mythic SGH-897 (AT&T). It features a broadcast TV, lacking in the iPhone,web-based widgets and a niche touch screen. It’s not focused on apps thus touted as the simpler alternative. Apple iPod touch (3rd generation) Portable media players (PMP) in the market other than the iPod touch are the Sony X Series Walkman (NWZ-X1051) and the Microsoft Zune HD. Although they can’t outstrip the marvelous performance of the iPod, they make viable choices. The Sony X Series Walkman rivals the iPod’s market share as it features an integrated Wi-Fi, high quality noise cancellation resulting to great sound and the noted ease-of-use (Sander, Peter &Scott Bobo, 2012, p. 78). It comes with free music as opposed to the iPod for which a user has to pay for music from iTunes. And at $100 less of the iPod’s retailing price, the best PMP you can buy is the Microsoft Zune HD. It has a wireless music store, an incredible OLED touch screen and a touch notch web browser. Market structure for Apple Company Apple Company is operated under a monopolistic competition market structure based on its sale of slightly differentiated products. This assertion is informed by the fact that, Apple Company is able to set its own prices without necessarily destabilizing the whole market equilibrium. The firm fits all descriptions attributable to monopolistic market structure as it has managed to set its own prices, minimal ability to control the whole market based on the existence of several competitive firms such as Samsung, Dell, Microsoftor Sony as well as meeting consumers’ perception based on existence of non-price variables with respect to other competitors ‘commodities. Apple Company faces limited competition from Dell and Microsoft as it specializes in manufacturing user-friendly computers resulting into its competitive advantage hence increased market share (Cruikshank, 2005, 56).A monopolistic competition firm initiates its unique pricewith respect to a particular market segment or niche peddled by the notion that products’ differentiation meets specific consumer’s taste and preferences. The price determination is thus pegged at firm’s objective, cost function, government regulations as well as demand for products. The Company is thus able to charge escalating prices based on existence of a variety of products despite failure to produce at minimum point of its long run cost curve. Product prices are thus determined by ability of the firm to produce variety of commodities (Pride & Ferrell, 2013, p. 87). The fact that the iPhone product possesses high levels of product differentiations as compared to its substitutes based on other smartphones such as Android systems, higher sales generations are feasible. Being a monopolistic competition, iPhone enjoys a short-run output and price decisions same way as a monopoly. This is as illustrated; Profit maximization is effected while producing where marginal revenue equals marginal costs while charging $250 per unit. It is noted that the said price overrides $100 which is the average total cost. The economic profit is illustrated by the rectangular portion. Barriers and Entries in the Industry There are few barriers to entry in monopolistic firms as sellers are many but selling differentiated products to variety of buyers. Economies of scale, government regulations, expertise levels as well as increased competitive advantages are projected as some of vital barriers to this industry. Apple Company has created by barriers to entry to competitors based on its brand image, massive loyal following and unique positioning. This extends to patents and innovation, lower price sensitivity to target consumers, customer loyalty and advertisement. Dell’s Adamo faces stumbling blocks based on its inability to offer value proposition to match Apple’s. These created barriers leads to economic profits in the short run but as new firms as well as competitors enters the smartphone production market. The quantity demanded for iPhone thus diminishesshifting bothmarginal revenue and demand curve to the left. Eventually, a fall in profit maximizing price and revenue is noted where economic profit equals to zero as a result of an equal price change equivalent to average total cost. This results the firm launching a new iPhone product aimed at regaining economic profit and a new cycle begins (Sander, & Scott, 2012, p. 67). This new invention will be highly differentiated so as to compete fully as was seen by the launch of iPhone 5 following one year existence of iPhone 4S in the market as a counteractive measure for introduction of Samsung Galaxy. This is illustrated by the following graph showing Zero Long Economic Profits; Reference Cruikshank, J. (2005). The Apple way. McGraw-Hill Professional Elliot, Jay, (2012). Leading Apple with Steve Jobs: Management Lessons from a Controversial Genius. Hoboken, N.J: Wiley. Internet resource. Pride, W. M., & Ferrell, O. C. (2013). Foundations of marketing. Australia: South-Western, Cengage Learning. Press. Sander, Peter J, and Scott Bobo, (2012.). The 100 Best Stocks to Buy in 2013. Avon, Mass: Adams Media, Internet resource. Sutherland, A. (2012). The story of Apple. New York: Rosen Central. Press. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&cad=rja&uact=8&ved=0CGMQFjAH&url=http%3A%2F%2Finvestor.apple.com%2Fsecfiling.cfm%3Ffilingid%3D1193125-13-416534%26cik%3D320193&ei=5HQQVMbfLYnraJzPgqgG&usg=AFQjCNHTIVoLmezSwDrJVyji-EgzzVDD7A&sig2=4llrZRp8GVOt8ShoyKP7Zg&bvm=bv.74649129,d.d2s http://www.reuters.com/article/2012/09/24/us-apple-iphone-idUSBRE88N0HL20120924 Read More