eco 365 - answer 1 question and final editing
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eco_365_wk3.docx
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Apple Inc. is an American international corporation that designs, develops, and sells computer hardware, software electrical products, online services, and personal tablets and computers. Apple has its headquarters in Cupertino, California where its top executives work. Steve Jobs, Ronald Wayne, and Steve Wozniak founded Apple in April of 1976 to develop personal computers to be sold and used by customers. Apple is the world’s second-largest IT Company after Samsung Electronics. It is also the most publicly traded stock and corporation in the world by market capitalization with an estimated market value of $662.2 billion as of November 13, 2014. Apple employees 72,800 full-time employees and maintains 425 retail stores in 14 different countries around the world. Apple offers a number of products to its customers including the new iWatch, iPad, iPod, Mac Books Air and Pro, iTunes music and the iPhone.
One of the most recent products is the iPhone 6, which was released to the public on September 19, 2014. The iPhone 6 is a smartphone, which runs on iOS operating system. It includes a number of changes from the iPhone 5 such as a larger 4.7 or 5.5-inch screen, upgraded cameras, faster processor, improved LTE and Wi-Fi connectivity, and support for a new mobile based payment system (Apple Pay).
The Smartphone market is a very big and complex market. After all according to Emarketer’s article in 2014 1.75 Billion people (more than half of the world) worldwide use a Smartphone. Factors that affect demand within the iPhone are when new features are added to the phone. One of the strategies that Apples used to increase the demand for the iPhone 6 is the better battery life, Apple Pay, faster processor and a bigger and clearer screen. Factors that affect the demand for this product is when the demand curve shifts to the right, the supply decreases. When the iPhone 6 was released to the public it sold over 10 million iPhone 6 and iPhone 6 plus which caused Apple to sell out of its phones. Although Apple did not increase it price it did continue to increase its supply. Apple introduces a new iPhone every year after it adjusts to the equilibrium price. Apple’s iPhone is in a very complex and competitive market. Apples Smartphone competitors include the Sony Xperia, LG 63, HTC one, Google Nexus and its biggest competitor, the Samsung Galaxy. Since Apple is an American corporation, its potential customers are those who seek an Americanized design, software and capabilities. Apple products tend to be made of higher quality materials.
Apples has been faced with many obstacles in the past including a time just 13 years ago when Apple was on the verge of bankruptcy. Much of this was due to a lack of knowledge and decision-making on marketing its product. Apple lacked the capability to study how its products behaved in the market. This knowledge and ability gives a corporation a tremendous advantage over its competitors. For example, knows it cannot continue to sell its iPhone 6 for the next 5 years at the same price without investing on a new iPhone 7. The competition is already planning out a release of their new phone to be able to capture some of the Smartphone market. This means that Apple has to set a plan to reduce cost and reduce the supply of iPhones being produced while create what is going to be the new iPhone 7.
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The understanding of competitive forces in a market segment is crucial towards the realization of success in new product rollout. This paper performs a competitive market inquiry to establish the potential success of Apple’s new iPhone 6 smartphones. Although Apple is a household name when it comes to manufacturing phones, the company competes with Samsung, the world’s market leader in smartphone manufacture and sale which also has a seemingly similar product in Samsung Galaxy Note.
The iPhone 6 is Apple’s latest phone and is seen to compete with another high end product, the Samsung Galaxy Note. While Samsung has launched the Galaxy Note already, it is the main rival of Apple’s iPhone 6 in the race for the market’s biggest share.
Demand and supply forces
The demand and supply forces always work to reach a point of equilibrium in the competitive market (Cusack, Iversen & Rehm, 2006). The smartphone industry has lately been very competitive as Chinese companies flood the market with cheap gadgets. However, when it comes to the high-end smartphone market, two market leaders in Apple and Samsung stand out. While both firms have a strong brand following, Apple should take note of the low key sales made by Samsung, perhaps suggesting that Apple are losing a significant amount of the market share.
Opportunity and challenge
The Asian population is in an ever-exponential rise. Also, the number of middle level income earners is also on a sharp rise in all developing nations. This presents an opportunity for Apple to sell more gadgets now and in the future. The company must however overcome the push by numerous Chinese white labels for market share as well as their main rival, Samsung. This can be circumvented through consumer friendly price tags and enhancement of the product features so customers are sure to spend money on the right product.
Fixed costs
Fixed costs present the biggest hurdle for Apple in ensuring that the venture is highly profitable. Fixed costs are costs sustained independent of the amount of products produced (Nix, 2008). There are usually four groupings of cost that affect the fixed costs of producing the iPhone 6. These include the bill of materials, commonly referred to as BOM, which represent the expenses incurred in the acquisition of components that are incorporated into the device. Bill of materials is paid to the various suppliers of the phone. Another cost that needs to be factored in is warehousing and transportation costs. This cost is incurred during the transportation and storage of the product prior to sale. The company pays this cost to shipping companies as well as warehousing companies. A third cost is manufacturing cost, which includes labor and is compensated to contract manufacturers. There are also warranty costs that are paid back to product buyers for product returns that cannot be resold.
Cutting down on fixed costs results to improved profit margins and decreased costs of doing business and that is why cost control should be the first step for Apple to take so as to guarantee profitability in iPhone 6. Product differentiation is also important in that Apple will be able to produce the highest quality smartphone and be able to command better prices than the rivals such Samsung Galaxy Note. Companies that can differentiate themselves by providing top-quality products or services often are able to command higher prices in the market. Apple should however ensure that it attracts more customers and makes more sales. Consequently, costs will go down and profit margins expand.
References
Cusack, T., Iversen, T., & Rehm, P. (2006). Risks at work: The demand and supply sides of government redistribution. Oxford Review of Economic Policy, 22(3), 365-389.
Nix, J. (2008). The John Nix farm management pocketbook (No. Ed. 39). The Andersons Centre.
Smartphone Suers Worldwide will total 1.75 billion. (2014). Retrieved from http://www.emarketer.com/m/article/smartphone-users-worldwide-will- total-175-bilion-2014/1010536
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Apple Inc
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Essay
Name
University
Date
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Apple Inc. is an American international corporation that designs, develops,
