Eco/365

Differentiating Between Market Structures

1

Differentiating Between Market Structures

7

Differentiating Between Market Structures

Ada L Diaz

ECO/365

February 19, 2015

Professor: Evaristo Medina-Irizarry

The information technology industry has attracted different players. One of the acclaimed players in the industry is Apple an American Multi National organization. Apple manufacturers hardware and software utilities and is also involved in online consultation with its customers. This paper discusses the application of microeconomic concepts with respect to Apple operations. I will try to identify the market structure in which this organization competes also how this market structure differentiates from the other alternatives.

The market structure of the information technology is mainly oligopoly where it is like a monopoly one company has most control in the market. However, this is with regard to one line of products that are offered by Apple. The development of operating systems has been dominated by three main companies: Apple, Microsoft and Linux. The operating systems that are developed by these companies are Mac operating system, Windows Operating system and Linux operating system respectively. While there are other small players which develop operating systems, the three named companies have taken up over 92% of the global market in development of operating systems (Amit, Zott, & Pearson, 2012).

Apart from the manufacture of operating systems, there are other features that indicate that Information technology is mainly an oligopolistic market structure. For example, the development of microprocessors which is a unique component of a computer has been narrowed down to two main players (Rumelt, 2012). The two players are AMD and Intel. Even the large computer development companies like Apple, Samsung, Dell and Compaq rely on the supply of AMD and Intel for microprocessors. There are entry level barriers which limit the number of operators in the processor development.

The only unique line of product that is not oligopolistic where Apple has invested in is development of mobile phone and other movable devices. The three main players in this line of product are Samsung, Apple and Motorola. However, the small operators still command a huge following in the market (Hitt, Ireland, & Hoskisson, 2012). In fact, the small players can have a 46% market share at times though the market share keeps fluctuating.

In order to competitively work with different organizations that have different market structures, Apple has come up with robust organization structure. One of the main organs within Apple is the research department. While the major fields where the company operates are oligopolistic, there are challenges of new developments which have the capacity of pushing a player out of the market with minimal notice. In order to withstand any wave caused by developments, Apple ensures that its research department has developed futuristic strategies and identifies the future market needs (Harris, 2014). This helps the company to always develop products fit for the future. Comment by Home: Very good work and contribution

Most of the clients who draw their supplies from Apple are drawn from different types of markets. However, Apple has ensured that all these clients are served with products which do not show partiality or biasness to some form of market structures or clients (Amit, Zott, & Pearson, 2012). In order to attain this, Apple has adopted the recommendations in the international standards in development of information technology products. Two of the standards that are observed by Apple are the ISO/IEC 27001 and ISO/IEC 27002. These standards are developed by two internationally recognized standardization organizations that act independent of the players in the industry. These standards are reviewed regularly and the last review was in 2013. Comment by Home: Very good work

Market structure may vary within those sectors hence there are different sectors within the Information technology sector. Some of these sectors include; hardware development, software development, management of data centers, and provision of Internet services (Hitt, Ireland, & Hoskisson, 2012). The market structure within these sectors varies depending on; the number of players in the sector, the international and local regulations, and the growth rate of the sector, and the adaptability of the new developments into the new systems. One of the sectors that have been in focus in information technology is transmission of signals. The international regulator; International Telecommunication Union (ITU) has set 2015 as the year when all the transmissions must migrate from analogue to digital. While there are countries which have already migrated (especially the developed countries) there are other countries which have not put in lace the right legislation and mechanisms to ensure that all transmissions are digitized (Harris, 2014).

Any company that has been developing hardware which is compatible with analog signal may miss the future opportunities. This is one factor that makes the hardware development sector to be oligopolistic. Slight changes may have great implications in form of capital requirement for the new market needs.

On the other hand, the software development sector’s market structure is based on the new developments that have been made. Many applications in development of software are not fully patented; this makes it easy for other manufacturers to develop similar software with minimal changes are claim originality (Amit, Zott, & Pearson, 2012). This market flexibility has allowed many players in the sector. Almost every smart phone has its own software and these software items are not necessarily form the same manufacturer.

One of the main competitive strategies that are used by apple is a hybrid marketing strategy. At the heart of the first strategy is the online selling point where the customers engage the Apple marketing team one on one. The second strategy is a marketing webpage always up-to-date with all the products that are currently in the market. Third strategy is this webpage also used to inform the consumers of the products that the company is about to place in the market (Hitt, Ireland, & Hoskisson, 2012). All of these strategies are consumer friendly.

Another strategy that is used by Apple is Premium pricing strategy. This ensures that the prices are low-end and this helps in gaining high revenue from maximization of sales in units. This is contrasted with a situation where a company may offer high-end products and aim profit maximization with minimal sales (Thompson, Peteraf Gamble, Strickland, & Jain, 2013).

In an oligopolistic we agree is a controlling market, the aim of the players is to ensure that there are as little competitors as possible. This is done by placing high entry point barriers to new entrants and ensuring that the small players are operating at a loss (Harris, 2014). The premium prices at which Apple offers its products leads to minimal profit. This means that a company that is not enjoying the economies of scale would only operate in losses in such circumstances (Amit, Zott, & Pearson, 2012). This situation is characterized by operating profits which are only enjoyed by the large scale organizations. Comment by Home: provide more details

The companies that operate in an oligopolistic market must always engage their customers such that no further player can break the bond between the customer and the producer. The hybrid marketing system using internet solutions, direct managed stores and third party sales have increased the interaction between the consumers and Apple Company (Harris, 2014). This strategy is similar to what other companies in the industry use to maintain the oligopoly market structure.

My recommendations related to the strategies the organization might consider maximizing its profits:

The following strategies may be considered by Apple in the future

· Targeting the developing economies: while developing economies may have low profit margin, capturing them with economies of scale may help in raining further profits

· Ensuring more hardware items are compatible with other manufacturer products: most hardware items developed by Apple do not receive or become compatible with software products from other companies especially Microsoft. However, allowing universal compatibility may increase the market to include consumers who prefer windows operating systems by would wish to use Apple hardware (Amit, Zott, & Pearson, 2012). Comment by Home: provide more details

In my opinion Apple has become a name brand, the chic item to be seen with. In that control of the market they continue to control different application that can only be use by Apply therefore taking advantage of consumer behavior of always wanting to belong.

The content of the assignments were covered and displays understanding of relevant theory and major points were supported by specific examples but should have provided more details. Differentiating between Market Structures located on the student website and selects one option to complete the assignment. (11.0/12.0) Rules of grammar concerning punctuation and spelling were followed and sentences were complete, clear, and concise (1.5/1.5). General rules of APA 6th about running head, heading, typeface, font size, line spacing, indentation, citation, reference among others were followed (1.5/1.5).

References

Amit, R., Zott, C., & Pearson, A. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53.

Harris, L. K. (2014). Apple Computer Pricing Strategy: Key Success Factors and Profit Margin.

Hitt, M., Ireland, R. D., & Hoskisson, R. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.

Rumelt, R. P. (2012). Theory, strategy, and entrepreneurship. In Handbook of entrepreneurship research (pp. 11-32). Springer US.

Thompson, A., Peteraf, M., Gamble, J., Strickland III, A. J., & Jain, A. K. (2013). Crafting & Executing Strategy 19/e: The Quest for Competitive Advantage: Concepts and Cases. McGraw-Hill Education.