Apple Inc and the economic environment

Topics: Company

Its revenue until 2012 was $1 56 billion in total. Through this figure, we can see the development and the influence of Apple. To be successful like that, Apple has to face many difficulties and challenges. Almost of all difficulties and challenges is the competition in the market share. In other words, most difficulties of Apple come from the economic environment. Therefore, this coursework will describe and analyze the economic environment of Apple, including the market structure and the adjustment of Apple before new market regulation and condition.

It also evaluates the globalization impacts and the reaction of Apple with globalization. II) History The history of Apple was related to the name of two men ; Steve Jobs and Steven Waking. It is noticeable that both Steven Jobs and Steven Waking did not graduate at Reed College and US Berkeley respectively. Steven Waking had a dream of creating a computer and in 1 975, his dream came true with the Altair 8800 – the first commercial microcomputer. However until he met Steve Jobs – his former friend, his design was actually developed.

On April 1 , 1976 Apple Computer Inc was established by these two guys formerly of Apple Inc today. Initially, the company’s office was located In a garage of Steven Job family and the first product was a computer called Apple l. Its form was a circuit board and was introduced in Palo Alto, California at a Computer Club. One year later, Apple II which was the first personal computer with plastic shell and color graphics, was launched. This marked the first SUCCeSS of Apple because it increased the consumption and this was a chance for Apple to expand its business.

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Along with the leave and return of Steve Jobs, many products were created such as computers namely Lisa, Macintosh, Imax and music device called pod. Especially, in 2007, Apple hit the market by the appearance of a smart phone – phone which was followed by pad in April 2010. Immediately, pad accounted for 84% of tablet PC market globally at the end of 2010. Until now, Apple is improving these two products: phone and pad. Throughout its history, these two products are the two most prominent success of Apple. They brought Apple becoming a company has the largest market cap in the world, bigger than Google and Microsoft.

Apple’s worldwide annual revenue in 2010 totaled IIS$65 billion, growing to IIS$1 27. 8 billion in 201 land $156 billion in 2012 (David Goldman February 29, 201 2) Ill) Market Structure There are four types of market structure namely perfect competition, monopoly, monopolistic competition and oligopoly. In the case of Apple, its market structure is oligopoly market with phone and computer product whereas, pod market was known as a vertical monopoly. 1 . Oligopoly market An oligopoly market is known as a market structure where include only a few companies and a new one is difficult to pervade.

In the case of Apple, it has some characteristics including: -) The market was dominated by a few suppliers, in this market, there are a number of companies which have enough power to control the market price. Apple produces many products such as computer, software and smart phone. In computer and smart phone market, Apple with Dell and Sony (computer companies) ; Samsung and Monika ( smart phone) have enough abilities to impale the price. -) The market share of each company is quite big. Therefore, they have relation with each other. For instance, when Dell decides to reduce the price of a computer, it will affect the market share.

Immediately, Apple has some reaction to protect its market share. -) The new firms are difficult or impossible to join because there are significant barriers such as: process technology and monopoly tenants. Moreover, in the oligopoly market, powerful companies often invest in research and technology innovation. Apple also spends a lot of money on research and technology in order to improve its product range such as pod and especially phone. Design is changed continuously with the best application and as a result Apple’s products always have the trust of customers and consumers.

Therefore, it has an important position and was known as the most powerful company in its market structure. -) Market demand curve can create easily however, the demand curler of each company s hard to set up because a company has to predict accurately the market demand and supply of competitors in each price. 2. Monopoly market Before 2001, Apple was on the brink of bankrupt. However, when the first pod was introduced and immediately this pod brought lots of profits to Apple with 100 million units was sold in six years. This first generation Of pod has created a new market for Apple.

After that, pod sales still increased from nine to ten million units per three months. Although Apple face the competition from Microsoft with a product called Microsoft’s June digital Edie player in 2006 or existing player created by Sony, pod still accounted for eighty percent of the market share (Geoff Giggle 2006). And from these success pod had brought, Apple has used a strategy namely focus strategy. It created a new version of pod with better application such as pod Shuffle, touch and pod Anna with Apple tunes software. IV) Supply and Demand Nowadays, competitive market is known as a market which contains many producers.

Supply and demand are two of the most essential factors that probably change the structure of the competitive market. Supply refers to the umber of products which are produced and delivered to customers, whereas, demand is known as the quantity of goods or services that customers want to buy. Therefore, supply has a strong relation with demand and in the opposite; demand also has a connection with supply. In a competitive market, understanding the relation between demand and supply will help the company survive . For instance, the quantity of product will be based on the demand.

In other words, the more demand will be followed by the more supply. However, if there are too many suppliers in one market, it ill lead to the change in price and after that the change in demands will appear as a result. 1. The supply of Apple There are many factors that affect the supply of Apple: Price: In both short run and long run, if the price of Apple’s products increases, Apple will produce as much as possible in order to take the biggest profit. However, if the price continues to rise up, the demand will fall down and as a result Apple’s outcome also decreases. ) Cost: Cost and profit create price of a product. In a same price, in order to maximize the profit, a company has to minimize the cost of the product. Therefore, a firm has to have a specific strategy. This is a reason why Apple has built many factories in China, Vietnam and India. These countries have a huge number of workers and wages are cheaper than other countries. On the other hands, Apple also uses outside material with the purpose of reducing the cost of product. Technology: As can be seen, Apple has used a successful technology and design in its product.

It creates a new sense for customers, raise up the demand and therefore leading to an increase in supply in order to maximize profit. Moreover, Apple also applies a suitable technology in its factory in order to reduce the cost of products. -) Number of suppliers or competitors: It is easy to realize that Apple are facing with many competitors or other suppliers such as Sony, Dell, Monika and Samsung. These competitors also contribute products in the market share. As a result, it will rise up the supply of computer or smart phone. 2.

The demand of Apple There are four factors that affect the demand of Apple including: -) The price Of product: As I mentioned, price is a ” bridge” connects the demand and the supply. A product from Apple when was launched in the market with a suitable price and the best applications for customer. The demand of this product will increase and Apple will product as much as possible with purpose of maximizing its profit. -) The income of consumers: Admittedly, with the price Apple has used for its product such as phone 5 or phone 55, not anyone can purchase it directly because the price is higher compare with their income. ) References: With a huge number of customers who prefer Apple’s products, even the price of product increases, they still buy them. These customers will affect directly to the demand of Apple’s product. -) Population: It can be said that Apple’s product such as phone and pod has influenced a huge number of customers especially young generation. Therefore, an increase in the demand of Apple’s product will follow the increase of young generation. 3. Example Analyzing In this course work, will analyze the supply and the demand of an Apple product – phone 5. This product – phone 5 was launched in the market on 21 /09/2012.

On the first day, Apple sold over two million units compare with four million phone as were sold in first three days. These figures demonstrate that the quantity remains but the demand increased rapidly. However, there Were only five million units Was sold compare with 1 0 million reduction from analysts. There were many reasons given at that time such as the shortage of phone supply, but Mr.. Tim Cook CEO of Apple indicated that it happened not because of the reduction in the demand of phone 5, it happened because of the supply of Apple was inefficient. The graph above shows the equilibrium curve.

The point in the middle where the supply meets the demand was called the equilibrium point. This is an important point because both consumers and suppliers do not change the quantity or the price of product. However, in the case of Apple with phone 55, it has a shortage of product cause of the supply did not change but higher demand. It leads to a shortage of product. It can be seen that the demand curve moves from ODL to DO which means the demand of phone as increases dramatically in fact. This shift created shortage from q to SQL. In addition, the price rose between Pl and UP following by an increase in quantity from IQ to Q.

In this situation, Apple was suitable to produce more phone S in order to maximize its profit. As a result, a new equilibrium point is E not El . Overall, in a short run, in the graph below, with the purpose of maximizing the profit Apple produced the annuity of phone at which marginal revenue equals with marginal cost. It can be seen easily that: Profit per month = (250$ in price per unit – 100$ in cost per unit) x 5 million units = 750 million per month. This is a huge profit which is expected by every companies in the world. In a long run, as can be seen in the graph below, phone cannot bring profit for a long time.

A reason for this is due to Apple’s competitors or other firms join into smart phone market. There are more supplier and as a result the profit maximizing quantity and the price fall down. At the point where price ND average total cost is equal, the profit will be zero. Therefore, in order to reach the profit again in a short run, Apple has to change design, add more useful application and create a new product. This happens like a cycle and this is a reason why we have many versions of phone, pod and pad. V) Effect of new market regulation and condition 1. Local market a) Environmental regulation concern.

In United State, Apple is not required to point out the amount of Carbon emission. However, the environmental regulation will have a great impact in the development of each company. Moreover, according to Greenback’ port, Apple is known as the least green company and almost of all material are based on coal, accounted for 54 % in total. Therefore, if American government promulgates a policy or using higher tax in order to protect the environment, the outcome of Apple will be affected. In future, if Apple wants to maintain its position and development, they should spend or invest more on resolving the environment problem. ) Other regulation In recent years, the U. S government is using a new regulation called financial transparency. This leads to an increase in cost of products and after that affect the profit of every company. In the case of Apple, it builds many factories in some countries. These campaigns will help Apple to reduce the cost of product and it also has another purpose of creating a supply network in these countries. Moreover, in 2006, US government asserts that Microsoft had to abolish its dominance in software market. This policy brings a big advantage to Apple because its software would have a big market.

Catching this chance, Apple continuously provides new software product such as SO X or Mac SO. As a result, in 2010, Apple got over Microsoft to become the biggest market cap company in USA for the first time since 1989. . International market Nowadays, with globalization, international trade becomes free. In addition, many economic communities were established such as E. IS, Asian, VETO and NONFAT while Apple Inc is a multinational corporation. Therefore, this is a great opportunity for Apple to join into other markets. However, Apple will encounter the competition from local companies in order to protect their market.

An example of this is China, China is now the top concern of Apple. With the biggest population in the world, China is a potential market with the big demand of consumer. On the other hand, Apple faces the reaction of China government and other companies. For instance, in April 2013 China’s commerce market indicated to strengthen the regulation related to sale- service. The purpose of this policy targeted the warranty of Apple products. According to nation broadcaster China Central Television, Apple products in China have shorter warranty period compare with another countries.

This had led to a reduction in sale of Apple and damaged strongly the profit of Apple in China the next month. In addition, Apple also was sued by China companies such as Preview Technology or Shines Network Technology Co. Another concern of Apple is black market in China. This market can create fake products of Apple with cheaper price but the quality is not the same with real products from Apple. Therefore, it will affect the brand and reduce the market share of Apple. Another concern of Apple is the material of other companies. Apple is not using its own material.

It is using another companies’ material such as components taken from Foxing, Quanta Computer, SamSung while the software taken from Microsoft. If these companies have some problems, it will affect the supply of Apple. VI) Globalization – effects and reaction 1. Globalization effect Nowadays, globalization has related to the social, cultural, economic, technology and others. Therefore, it has affected many companies all over the world, Apple is also not an exception. With the development of technology in transportation and communication, many companies are expanding their business.

It means that the competition with many companies will be very intensive. In the case of Apple, today, in United States, three companies namely Fajitas Technology Solutions (Holding) B. V. , International Business Machines Corporation and Media Net Digital Inc. Are respectively top three com petitions of Apple. In the world, the competition from Samsung and Monika is a major obstacle. -) The recession of international economic from 2008 has led to the reduction in consumption. Consumers try to avoid unnecessary fee, they do not spend more money on a mobile phone or a computer.

This has significantly affected the outcome of Apple. -) The trade around the world has now become free. Moreover, with the consolidation of many economies such as WTFO, ELK, SEAN, and NONFAT… Apple will face many challenges and competition but it is a chance to develop and pervade other markets. -) The globalization creates an increase in the odder lifestyle and high-tech products are favored and used widely. Tastes and demands of customers are becoming higher. Therefore, it requires Apple changing the design and the technology in order to create a new advantage competitive strategy. 2.

Reaction While the international economy is in the recession, Apple consider it as a chance to develop and expand its business. Not only reinforcing its local market, Apple also joins into others market such as Africa and Asia especially in China, Vietnam and Indonesia. As a result, in 2011, Apple became the highest revenue company in America. Catching the demand of customers, Apple always changes its products with higher quality and technology, for example Pip, Pips, Pip and now Pips. In addition, Apple does not have the cost pressures. Different products with high-technology lead to a profitable price. Apple created a huge system of retail and distribution all over the world. This system gives products to customers everywhere and therefore it contributes the biggest percentage of Apple’s success. Through this, Apple has created an international strategy which based on the demand of customers. Dealing with problems from foreign market, the reaction from another companies such as in China and India, Apple are tying to solve these problem and satisfy the requirements. VII) Recommendation Nowadays, business environment is an important factor that contributes into the success of Apple.

However, in the both long run and short run, Apple will cope with many obstructions from other competition such as Samsung Monika and Microsoft. In order to keep its position, there are some recommendations: Apple should focus more on Asia market such as China, India, Indonesia and Vietnam. These are extremely potential markets which will bring a huge benefit to Apple. For instance, in Vietnam, this country has just joined into OMIT in 2008, therefore Vietnam has to open its market, this is a good opportunity for Apple with the purpose of pervading and dominating this market – the same thing Apple has done with China market.

Apple should create and develop a new range of products. Now it is focusing too much on smart phone such as Phone or ‘pad. If there are any problems with this market, it will affect the total outcome of Apple. Apple is relying on materials taken from other companies such as components taken from Foxing, Quanta Computer, Samsung while the software taken from Microsoft. Because of this, Apple is depending on these companies. If Apple wants to develop and expand its business globally it should create its own material, do not depend on other companies.

Apple should care more about consist of black market which will bring a lot of disadvantages to Apple. Apple is in a oligopoly market, therefore like have mentioned before, other companies will follow Apple’s product and create a new one which is better. It leads to a decrease in prices sooner or later. And in the black market where contains actually a lower price, it will be a better choice for customer who do not have enough money to pay for an expensive product from Apple.

VIII) Conclusion Through this course work and following my research, I suppose that in both short run and long run Apple should focus more on the environment of economic which is not only based on the relation between the supply and the demand. Through the analyzing of Apple, we can understand the important between demand and supply and the effect of globalization in a multinational cooperation. In general, in a near future, the design Steven Jobs has used for phone will be applied in other Apple products.

However, in order to remain he success Apple has to predict the demand of customer in future and also continues innovation to expand its business. On the other hands, Apple should create a new product, in both short run and long run it will bring as much profit as possible. The new product plans which Apple is focusing today is not pad, phone or pod, it is focusing on the new design for television, a smart television with internet connection at home. To my way of thinking this is actually amazing idea.

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Apple Inc and the economic environment
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