Competitive Market Analysis of Potential Success of Apple Inc.s MacBook - Case Study Example

Introduction

The success of business organizations and their products depends on various factors in the market such as demand and supply, prices of the products, competitive intensity, threat of substitution, etc. The organizations for evaluating the prospects of any of their products in a market, analyze the type of market where the products operate, choices and preferences of the consumers in the market and the type of products offered by rival firms. Organizations also need to assess the factors that can affect the total revenue of their products over time. Looking at these economical aspects of success of an organization’s product, this paper attempts to evaluate the competitor market analysis to determine how one of the popular products of Apple Inc. will thrive in the domestic market and international markets.

Overview of Apple Inc. and its Products

Apple Inc. or simply Apple is the most popular multinational company in computer and mobile technology industry incorporated in 1977, based in U.S. The company having operations worldwide is pioneered in designing, manufacturing and sale of mobile communications and computers, peripherals, media devices, digital music players, software, network solutions etc (Reuters. 2016). The growth of Apple at present, is mainly fueled by sales of its iPhones, Mac products and Apple Watch and it recorded revenue of $234 billion in 2015 (Apple Inc., 2016b).

Type of Market and Analysis of Competitor and Customers

MacBook of Apple is a range notebook or portable computers, which was unveiled in 2006 and updated in the year, 2015. The company re-launched it to replace it with iBook and Powerbook series of its notebooks. The goal of the company is to bring a full-size premium experience of a computer into lightest and highly compact 12-inch notebook (Apple Inc., 2016a). Apple positioned Macbook in the low-end segment of its MacBook family. It comes below its earlier range of extra-portable notebooks, i.e. Macbook Air and MacBook Pro. An addition to the MacBook family, it is the top selling Macintosh by Apple until now and aimed at the professional and education markets.

MacBook is designed keeping in mind the businessperson to provide them with a suitable portable desktop with advantages of mobility, security benefits, and multiple app benefits. The business professionals will be more willing to consider MacBook than any other computer devices because its high-end features and software support that provide them right solutions to any business related activities. However, with updating of MacBook in 2015 at a lower price, now it also targets the teenagers or students. Equipped with 1.1- GHz processor, 8 GB of memory, 256 GB of storage, it costs approximately $1,300 (Apple Inc., 2016a). When the market of personal computers are declining due to mobile penetration, Apple managed to perform spectacularly well in one segment of the market and carved out enviable profits by focusing on the niche.

Apple will find itself in an advantageous position in the computer electronics market and will probable achieve more success among the range of laptops and notebooks with its Macbook. Macbook, is simply a compact portable notebook for all-purpose use by everyone that will set the benchmark of portable computers. It is undoubtedly a laptop that every professional looks for and its excellent build quality and design will outperform any range of laptop or notebook devices offered by other companies (Apple Inc., 2016a).

However, rationally, the MacBook of Apple is ahead of its time in terms of price. As long as the company continues to charge $ 1300 or more for its MacBook, it will not be able to create a revolution in the market of computer and laptops even though it is equipped it unbeatable features (Apple Inc., 2016a). Like most of the Apple’s products, price of MacBook will also represent the premium quality of the Apple brand and provide a sense of privilege for those who can afford it. Besides Apple’s high brand value, the first-rate functionalities and outlook of MacBook, will urge many consumers to purchase it. However, the price acts as the only constraint (Cipriani, 2016). Since the market of personal computers is a vast one with numerous firms and large number of consumers, MacBook will face competitive threats from other computer and desktop devices offered by companies like Dell, Acer, HP, Lenovo etc (Smith, 2015).

Dell’s latest introduction of laptop, Dell XPS 13 at much lower price than MacBook will pose a significant market threat for Apple’s MacBook. With battery longevity of 13 hrs compared to 10 hrs longevity of MacBook, it offers an ultimate combination of portability and high usability. Thus, it will be an easily replaceable substitute for MacBook in the market for rational consumers because of its affordability. Acer’s Aspire S13, will also take away a large segment of consumers due to its extremely reasonable price and ultraportable values with high build quality. Apart from these, some other high performance alternatives of MacBook in the market are Lenevo ThinkPad, HP EliteBook, Asus Zenbook, Microsoft Surface Pro, Google Chorombook Pixel (Smith, 2015). Therefore, it will be highly difficult for Apple’s MacBook to grab a substantial market share.

Analysis of Comparative Advantages and International Trade Opportunities

Comparative advantage implies the ability of the firm to produce a particular product or service more efficiently than any other product or service (Feenstra, 2015). Apple is already pioneered in the production of iPhones, tablets, media player and smart watches because of its strong hold over technology and innovation. It is known for bringing a revolution in the technology industry as before its entry to the market, mobile devices and desktops or computer devices were made separately with very little features in common. Apple was the first to incorporate features of computers in mobile phones, introduce digital media players, tablets and notebooks, software solutions and so on (International Business Times, 2011). It successfully brought some excellent range of premium computer devices like notebooks and laptops (i.e. Macintosh) due to its innovative approach, technological advances, markets experts, tech professionals, cost advantages and high investments in R&D in computer technology (Macworld, 2016). Moreover, the company has comparative advantage in laptops and notebooks because of its intensive focuses on tying up hardware and software applications together with the help of an integrated operating system. These factors will help it to manufacture the best kind of laptops with brilliant hardware designing as well as build-in support.

High comparative advantages of Apple over other electronics and mobile communications companies across the world provide the company with international trade opportunities. Apple has vast operations in major international markets like the UK, Germany, France, Japan, Australia, China, India etc. It has been already experiencing a high growth in some of the large international markets because of the global demand for its iPhones (refer to Figure below).

Figure 1: Shifts in Apple’s growth in recent quarters outside the US

(Source: Wall Street Journal, 2016)

Historically, Apple’s mainstay products i.e. Macintosh computers, do not have any large sellers outside the US, mainly because of their higher prices and limited distribution. However, iPod and iPhones has changed the scenario, helped the company to enter more number of markets by raising the appetite for their products in the consumers. This is specifically for countries like Japan, China and India, where domestic manufacturers dominate the market. Thus, Macbook, will have high potential for successes in these markets which are not actually capable to manufacture such supreme quality and distinct type of notebooks due to the insufficient technology base.

Factors affecting Demand, Supply, and Prices of Macbook

Numerous factors will affect the demand of MacBook in the potential markets, which include the preferences of consumers, brand consciousness, price, portability and durability, user friendliness, product appearance along with internal functionalities. MacBook’s will be any businessperson’s first choice because of its high portability due to lightweight, large memory capacity, high longevity and high built in support. These factors will also attract young students or teenagers for education and entertainment purpose. On the other hand, high brand image of Apple and its success as a topmost valuable tech company will also allure consumers to purchase it.

The factor that determines the supply of MacBook in the market is the cost of production and profit margin of Apple. The cost of production for MacBook is low due to economies of scale and technology intensiveness in the process of production. This enabled Apple to continue with large sales of MacBook in US and other markets, despite the declining market of PCs (Macworld, 2016). On the other hand, high profit margin from sale of each unit of MacBook will make Apple to supply large volumes in the market.

Apple will determine the price of MacBook by keeping in mind the total cost involved in producing it, such that they can recover all the costs and at the same time retain their profits margins. The secondary factors that will can result in setting up high price of MacBook is the high brand image of Apple, heavy costs for sales promotion, and high demand for such all purpose notebook by the business professionals and students.

Factors affecting Total Revenue (TR)

• Price elasticity of demand: Price elasticity of demand MacBook is low. Its ultra-portability, high-end features, software and built-in app support provide the business professionals right solutions for their corporate activities. Therefore, TR from MacBook will not fall but will rise in the case of any price hikes, as this segment of consumers will always chose MacBook over others. However, price elasticity in the lower segment of market, which represents the students or teenagers who use it for general or recreation purpose and for showing status, is high which may result in fall of TR. There are many other substitutes like Dell XPS, Lenevo ThinkPad, HP EliteBook, and hence, a slight rise in price can make them switch over to these products.
• Factors influencing productivity: Out of all the factors, such as resources, financial and human capital, technology, land, technology is the most influential factor that will have impact on the productivity. Apple has technology base, know-how and the experts who engaged in production of MacBook has accumulated enough skills through R&D and training programs to deliver performance oriented notebooks.
• Various measures of Costs, including opportunity costs: The opportunity cost involved in production of MacBook is high, which can result in the reduction of TR of Apple if it fails to achieve high sales volume. There are enormous costs involved in production of MacBook, because of the company’s decision to offer an all-in one notebook that are capable of providing solutions to the businesspersons in their activities. However, looking at the rise in global demand for Apple’s iPhones in the recent years, if the investments in production of MacBook are done in iPhones, the returns in terms of earnings will be higher.
• Effect of externalities and government public policy on marginal revenue (MR) and marginal cost (MC): Substantial positive externality is associated with production of MacBook due to the technology spillover effect. Apple has been able to come up with such high performance notebooks after intensive R&D over its Macintosh ranges. It leads to discovery of new technology, a potential by-product produced in the process of production of MacBook, which can benefit the other firms in computer industry. Even though Apple tries to protect its innovations, new technologies or know-how diffuse easily within the industry and results in widespread benefits. In case of such positive externality, government will provide an amount of subsidy to reach the socially optimum equilibrium at Q2 (refer to figure below). Thus, given the fixed MR, the MC will reduce which will lead to decline in prices.

Figure 2: Technology Spill over- Lower Social Costs

(Source: Rios, McConnell & Brue, 2013)

• Economics factors including income level of consumers: Consumers may forego the purchase of high priced MacBook in situations of adverse economic conditions, such as low growth in GDP, inadequate availability of credit in the economy, which has direct impact on the purchasing power of the consumers. Apart from these, changes in the preferences of consumers can make them switch to tablets and mobile phones, which will result in reduction in demand for MacBook thereby, causing a fall in the TR.

Conclusion and Recommendations

Apple, known as the top successful brand in tech industry, offers a large variety of highly sophisticated electronic products and services, which include ‘iPhone, Mac, iPod, Apple TV, iPad, iPod, iOS and OS operating systems, range of software, iCloud, and a variety of computer and mobile accessories and support services’ (Reuters, 2016). With consistent investment in innovations and efforts in delivering path-breaking products, it has been producing some excellent product lines and MacBook, a portable notebook is one of them.

Following recommendations are made to Apple to increase MacBook’s presence within the market-share and maximize its profit-making potential while operating in any international market.

• An effective marketing strategy can help Apple to attain large market share even when there are numerous companies offering such notebooks at much lower prices. The company’s marketing plan should include promotion of MacBook by highlighting its end-to-end features, so that consumers can differentiate them from the other notebooks.
• A great sales process can be useful in creating awareness among the buyers about MacBook’s features. For instance, the stores or distributors can give accurate demo of product usage to the purchasers and provide them a trial offer of using the product before making purchase.
• Low pricing strategy for MacBook, can also help Apple to attract the consumers from middle-income or low-income strata. Also, purchase offer through loans can also increase the demand for MacBook and raise company’s profitability.
• References

Apple Inc. (2016a). MacBookLight. Years ahead. Retrieved from: http://www.apple.com/macbook/

Apple Inc. (2016b). Apple Reports Record Fourth Quarter Results. Retrieved from: http://www.apple.com/pr/library/2015/10/27Apple-Reports-Record-Fourth-Quarter-Results.html

Cipriani, J. (2016). Apple’s 2015 MacBook pretty, but not for everyone. Retrieved from: http://fortune.com/2015/05/01/apple-2015-macbook/

Feenstra, R. C. (2015). Advanced international trade: theory and evidence. Princeton: Princeton university press.

International Business Times. (2011). Apple's Competitive Advantage: Multiple Products That Integrate as One. Retrieved from: http://www.ibtimes.com/apples-competitive-advantage-multiple-products-integrate-one-300605

Macworld. (2016). Apple Q2 2016 financial results: iPhone sales down, overall revenue down, but Tim Cook plays down 'pause in our growth'. Retrieved from: http://www.macworld.co.uk/news/apple/apple-q2-2016-financial-results-how-many-iphones-ipads-watch-macs-sold-revenue-results-earnings-3581769/

Reuters. (2016). Apple Inc (AAPL.O). Retrieved from: http://in.reuters.com/finance/stocks/companyProfile?symbol=AAPL.O

Rios, M. C., McConnell, C. R., & Brue, S. L. (2013). Economics: Principles, problems, and policies. McGraw-Hill.

Smith, M. (2015). Want A Macbook, But Can’t Afford One? Try One Of These Offbeat Alternatives. Retrieved from: http://www.digitaltrends.com/computing/best-macbook-alternatives/

Wall Street Journal. (2016). Apple Strives for Global Markets: Electronics Giant Speeds Overseas Rollout of New iPhone to 88 Countries as It Looks for Growth. Retrieved from: http://www.wsj.com/articles/SB10001424052748703302604575294530119152528