Personal computers and other consumer electronics are the primary focus of Apple, Inc., a multinational corporation. Similar to networking solutions and software development, the company interacts with third-party digital material and apps. The iPad, iPod, Macintosh computers, and the iPhone are just a few of the items available from Apple, Inc. (Apple, Inc., n.d.). Apple Inc. has its headquarters in Cupertino, California, but it sells its products worldwide through its network of stores. An oligopoly market structure exists for Apple, Inc. When only a few giant companies control the market, it is known as an oligopoly. Apple’s newest smartphones, the iPhone 7 and iPhone 7 Plus, will go head-to-head in the smartphone market. The organization has produced high-quality products despite the intense competition in the industry. Product differentiation and its focus on providing quality, elegant, and excellent customer service offer them an additional advantage in the smartphone sector.
Analyses of Customers and Rivals
When Apple unveiled the first iPhone in June 2007, it was available for purchase by the general public. People still want these products, despite the company’s reputation of selling premium stuff at a high price. Customers are loyal to the business because of its well-known brand, which keeps them from being overtaken by competitors. The purchasing power of consumers does not threaten Apple Inc. because the company is allowed to establish its prices for its products. As a result, the firm ensures that the product’s price does not dissuade or overly reasonable for customers. The iPhone 7 and iPhone 7 Plus have been available for purchase starting in 2016 through Apple Inc. In an oligopoly, Apple Inc. considers the pricing, output, and quality of its nearest rivals when designing new goods because of the interdependence of enterprises in oligopolies. Apple Inc.’s real rivals in the computer operating system and mobile phone markets are Microsoft Corporation and Samsung Group.
Consequently, they threaten the industry because they offer near-identical substitute products. An overly competitive smartphone market has led to pricing wars amongst rival manufacturers. Apple relies on its world-class design teams and a pool of highly trained engineers to fund its enormous R&D operations, despite the efforts of some competitors to mimic the company. Consequently, the market leader in innovation and distinctiveness is Apple, Inc. As a result of its ascension to the top of the smartphone market, the company can now charge premium prices. The chart below shows the overall revenue generated by Apple’s iPhone compared to the money generated by the competition. According to a graph, iPhone sales outpaced those of other tech companies throughout this period (Rosoff, 2015).
An assessment of the comparative advantages and international opportunities
When a company has a lower opportunity cost than its competitors, it has a competitive advantage (Deardorff & Stern, 2011). There is a lot of competition in the smartphone sector, and some companies have a distinct advantage over their competitors. Assembling their products in China and other Asian countries allows Apple, Inc. to take advantage of lower production costs. Producing Apple’s goods and services is more efficient and cheaper because of Asia’s comparative advantage. For one thing, it has a protected ecology and a strong brand that appeals to customers, which gives it an edge over its competitors. Apple, Inc. is the world’s most popular smartphone brand because of these two criteria. To keep its clients within its ecosystem, the corporation is the only one running iOS. The corporation has retained clients while sales of iPhones have increased. Apple, Inc. is one of the few electronic firms that make opulent goods, contributing to its excellent brand image. As a result, buyers get good value for their money from Apple’s high-quality products. The company’s products are sold at a premium price because of the high brand appeal. As you can see on the graph below, sales of iPhones have increased steadily since 2007. From 2007 to 2015, the company’s sales went up from 4.2 million dollars per year to 241.3 million dollars per year (Rosoff, 2016).
According to a new trade theory, economic scale and the network effect in critical industries play a significant role in determining international trade patterns (Reinert, 2009). According to the new theory, trade between countries that produce similar goods and services will be encouraged. Comparative advantage is the ability to make goods and services at a lower cost than the rest of the world. Trade interest in specific goods and services grows as countries specialize in their production—effects of government policies and externalities on revenue and expense margins. Most multinational firms are forced to adapt their operations to match the new trade ideas to boost efficiency and foster innovation. Apple, Inc.’s global expansion is aided by the economies of scale obtained in industrialized countries. Apple has an advantage over the competition because it entered the smartphone market first. It is difficult for smaller companies to compete because of their large size. Apple’s production operations in other countries are impressive because of the range of options for talented workers, as well as the degree of adaptability and dedication required.
Product Demand, Supply, and Prices are all affected by these factors
Apple, Inc.’s promotion and marketing tactics directly impact the demand for iPhones. Apple exploits scarcity as a marketing strategy to draw in new customers. Customer perceptions of a product’s value are influenced by its limited supply rather than its abundance (Kurtz, & Boone, 2009). iPhone sales will rise as more money is spent on advertising and promotion. Second, the consumer’s income will influence the demand for Apple products. Customers on a tight budget will be unable to purchase the iPhone 7 and 7 Plus, for example, due to their high price.
On the other hand, high-income users can afford the pricing of the iPhone. Customers’ willingness to pay for the product is a third consideration. Currently, the iPhone 7 and iPhone 7 Plus prices are $858 and $83749 for the two devices. iPhone buyers are used to paying premium pricing; therefore, a rise in the product’s price is unlikely to affect sales.
Definition of Supply
Apple’s supply will be affected by the cost of production variables. Increases in raw material, labor, input, and machinery costs will lead to a fall in profit margins as manufacturing costs rise (Kurtz & Boone, 2009). On the other hand, Apple can meet the demand for iPhones in the target regions because Asian countries have access to low-cost labor and high levels of efficiency. For two reasons, new technology will boost the number of iPhones available for purchase. Engineers and designers at Apple, Inc. are well-versed in producing high-tech goods that appeal to consumers. Government laws and levies will impact the supply of Apple products. The collection of a product can be significantly influenced by the government’s economic and industrial policies. Apple’s store may alter if the government modifies its tax policy based on the tax paid per unit sold.
Factors Affecting the Cost of Living
Apple’s product prices will be affected by the following factors. The pricing of iPhones will be influenced first and foremost by the product’s life cycle. For example, during the iPhone’s launch period, the company will decrease its prices to attract new customers and break into a new market. For the second time, Apple, Inc.’s credit term for iPhones will impact pricing. Higher prices are associated with longer credit terms, while lower prices are associated with shorter credit terms (Kurtz, & Boone, 2009). The corporation will also take into account market competitiveness when determining product prices. Due to the oligopoly nature of the business, the company’s pricing policy is based on market competition.
Factors Affecting Revenue in Total
Increases in price or quantity have a more significant impact on a company’s total revenue than decreases. This will happen to Apple’s overall revenue if the company decides to raise the iPhone price: Each iPhone sold at a higher price after a price rise will enhance total income. There is a direct correlation between a price rise and decreased sales, which lowers the company’s total revenue (Mankiw, 2011). The price elasticity of a freshly launched iPhone varies based on the markets it is sold. For example, in the United States, the demand for an iPhone is inelastic because it is a high-end product.
Put another way; people can afford to pay more for an iPhone; thus, a price rise will enhance overall income. The demand for an iPhone in Cameroon, on the other hand, is elastic. As a result, raising the price reduces overall revenue.
The total revenue is also affected by changes in supply—the supply curve shifts when a company’s cost structure shifts. Even if a business introduces new technology that decreases production costs, it will indicate on the supply curve that it can create more iPhones at the same price. As a result, the company’s overall revenue will rise since it will sell more iPhones at the same price. According to the company’s financial report, Apple’s annual sales in 2015 were $182,795 million (IndustryWeek, n.d.)
A variety of things influences Apple, Inc.’s productivity. First and foremost, the availability of plants and equipment is essential to the productivity of iPhones. The organization is well-equipped and has a well-established maintenance program in terms of resources. Apple Inc. also considers factors including utilization, expenses, idle time reduction, and modernization to boost output. Second, productivity is influenced by the company’s people resources. To do a high-quality job, Apple has hired a sufficient number of qualified employees. In the United States, the corporation employs about 76,000 people in positions of authority (Apple, Inc., n.d.). Employees are encouraged to work harder by the company’s incentive program. Third, Apple, Inc.’s productivity is greatly influenced by the employment of creative and cutting-edge technology. This technology also aids in quality control, material handling, software development, and communication system upgrades for the organization (Mankiw, 2011). As a result, the organization considers waste reduction, timely delivery, and repair and maintenance.
Variations in Cost Metrics
An externality exists whenever an agent or group of agents does anything that affects another party without paying for that effect. Because the market is failing, having an externality in the industry leads to decreased profitability for a company. Examples of externalities include consumption and production and the associated costs and benefits. Externalities lead to a discrepancy between revenues and expenses. On the other hand, government policy has an impact on the market’s competitiveness. Government subsidies, taxes, and regulations have an enormous effect on Apple, Inc.’s industry.
Many of its rivals look up to Apple because of its innovative products and impressive financial performance. High-quality items are the reason for the company’s solid market position. Legal and political considerations must be taken into account, though. To save money, the corporation hires workers from all over the world. When it comes to Samsung’s application processors, Apple, Inc. must develop a strategy to mitigate risk. In addition, the corporation should try to limit the involvement of other agencies in its activities. For example, a corporation should not train external workers to the same level as private employees. In this way, the corporation will avoid having its original items duplicated. Public relations with other countries governments should be a priority for the corporation as it seeks to extend its international market share. Apple, Inc. will use the resources accessible in other countries by expanding its global operations.
Apple, Inc. (n.d.). Retrieved October 08, 2016, from http://www.apple.com/about/
Deardorff, A.(2011). Comparative Advantage, Growth, and the Gains from Trade and Globalization: A Festschrift in Honor of Alan V. Deardorff. New Jersey: World Scientific. IndustryWeek. (n.d.). 2015 IndustryWeek 50 Best US Manufacturers. Retrieved October 08, 2016, from http://www.industryweek.com/resources/iw50best/2015
Kurtz, D. L., & Boone, L. E. (2009). Contemporary business. Mason, OH: South-Western Cengage Learning.
Mankiw, N. G. (2011). Essentials of economics. Cincinnati, Ohio: South-Western.
Reinert, K. A., Rajan, R. S., Glass, A. J., & Davis, L. S. (2009). The Princeton encyclopedia of the world economy. Princeton: Princeton University Press.
Rosoff, M. (2016). The end of the iPhone’s amazing eight-year run. Retrieved October 08, 2016, from http://www.businessinsider.com/apple-iphone-sales-by-year-2016-4
Rosoff, M. (2015). REMINDER: Apple’s iPhone revenue is bigger than any other tech company’s total revenue. Retrieved October 08, 2016, from http://www.businessinsider.com/apple-iphone-revenue-vs-competitors-total-revenue-2015-9