Introduction
The appropriation of an oligopolistic market structure has always been considered perfect due to the significant characteristics of smaller suppliers. The presence of a limited number of significant competitors allows for strategic interactions, including pricing and product differentiation (Muhamed & Magdy, 2020). In this market structure, the interplay between Apple and its major competitors, such as Samsung and Google, fosters innovation and drives continuous improvements in the operating system and product quality (Pratap, 2020). The fact that Apple’s iPhone contributes over 55% of its total revenue underscores the product’s significance and market impact despite the competitive landscape within the oligopoly (Mims, 2023). The assessment will demonstrate how structuring the market into an oligopoly has enabled Apple to achieve a competitive advantage, making its products considered superior. The analysis will focus on the market structure to identify the specific characteristics that have instigated the success mentioned. Each characteristic will be described to determine its translatability to the company’s objective in structuring long-run and short-run strategies.
Discussion
Characteristics Analysis
One of the defining characteristics of the smartphone oligopoly is the presence of large interdependent firms. Notably, significant conglomerates such as Apple dominate the industry, and tone firms’ actions can substantially impact the strategic decisions of others (Kenney & Pon, 2011). An example of this interdependence can be seen in the market setting of mobile device prices. When one of these prominent companies, like Apple, adjusts its pricing strategy, it often prompts a ripple effect across the industry as competitors react and adapt to maintain their competitive positions (Cecere et al., 2014). This interplay also extends to determining the overall output of smartphones, with these influential players collectively shaping the supply and demand dynamics of the market.
Consequently, the business actions of companies like Apple are significantly influenced by the actions and strategies of their counterparts. The characteristic can be termed a long-run strategy since it develops the interdependency over time to make the policy profitable. The analysis of the generated idea of dominance by the brand allows it to control the market conditions and define the parameters under the specific variables of quality and pricing.
The other defining characteristic of this market structure is product differentiation. While firms may employ price as a competitive tool, the market is significantly shaped by product differentiation, wherein each player strives to distinguish itself through unique offerings. The strategy can be termed as short-term since the relevancy of the process is compromised by the considered evolution. Therefore, another evolution or update is structured to replace the old form. This involves the creation of a select few products that incorporate distinctive features aimed at attracting more customers through exceptionalism (Pan, 2023). Apple, in particular, has made substantial investments in developing its highly encrypted iPhone series, replete with premium features. This strategy serves to lure high-end customers and foster consumer loyalty. Further analysis of the characteristics considers the generative evolution of Apple products to meet its customers’ criteria and needs.
High barriers to entry are further highlighted as a critical characteristic of this market. High capital requirements in an oligopoly mean massive resources are required to start a smartphone business, discouraging new entrants (Kumar & Stauvermann, 2020). Firms may adopt strategies to keep others from participating, including setting up prices and acquiring other firms to maintain their colossal status in the market. The presentation of high-quality products allows the market to set high prices for the product with standards other brands cannot meet. Other factors that prevent new firm entry include expensive technology associated with smartphone manufacturing legal protections and heavy advertising fees. The strategy can be termed as long-run since it serves the present competitors and those from the future. A new competitor will have to meet the standard in the quality and pricing of the commodity to gain competitive capabilities. This is one of the unique aspects of an oligopoly, as there is an element of conspiracy to determine the market’s direction. The established barrier in high capital requirement initiates the company to engage in innovations that make the products’ quality high, which other brands cannot achieve (Nielson, 2014).
Advertising in an Oligopolistic Market
Advertising is one of the most powerful tools to reach new customers and relay new products to the existing customer base. Generally, in economic theory, the role of advertising in oligopolies exists as a massive factor that contributes to non-price marketing strategies (Dukes, 2004). Namely, in this market structure, players invest heavily in advertising to lower the elasticity of demand for a given brand. This is achieved through the provision of multiple products that are evolving at a fast rate. Apple has continued to supply its market with better and proven products of different forms, such as smartphones, MacBooks, and smartwatches. The players do this to ensure that short-term sellers do not find a breakthrough in the market, ensuring that large firms’ dominance is sustained. The objective is to convince consumers that factors such as pricing are not necessary for the products they sell but the features that their present and new products possess concerning enhancing the user experience (Bester & Petrakis, 2012). Indeed, players in this market structure exploit advertising to prevent new entrants, ensuring that large firms sustain their positions in the market, such as by demonstrating the superior qualities of Apple products (Mims, 2023). Therefore, players in an oligopoly consider advertising a vital resource in keeping their competitors in check and sustaining and increasing market share.
While there is no doubt that advertising is heavily practiced in the oligopolistic market, it is crucial to understand whether there is data that supports its application as a strategy for smartphone markers. The evidence thus far confirms that advertising can increase market share for oligopolistic players in selected markets due to the positive effect of driving up sales, especially for new products (Kumar & Stauvermann, 2020). For instance, advertising has played a critical role in driving sales for the iPhone 13 series in many parts of Europe, posing a considerable threat to giant players like Huawei (Dukes, 2004). The unique features of the iPhone 13 series, such as reliability, durability, battery life, and camera quality, are significant features that drive sales for Apple in the European market through strategic marketing. To this end, advertising acts as a critical avenue Apple uses to inform its customers about new products, reach new potential buyers, and maintain its grip on the market. However, advertising in this industry is more of a mind-game tool for companies to foster competition against each other.
Market Structure and Apple’s Profitability
The market structure in which a company operates enormously influences its ability to generate profits sustainably. As documented in the previous paper, Apple operates in an oligopolistic market structure characterized by a few prominent players who wield much power, even though it is often possible for one player to outdo everyone. Like other market structures, an oligopoly’s unique features can affect Apple’s present or foreseeable future profitability. Therefore, Apple’s profitability as an oligopolistic player in the short-term and long run can help evaluate whether real-world company performance results concur with economic theory in this market structure.
References
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