Apple Inc. Feras Awwad

Apple is one of the world's principal producers of a product mix consisting of a range of electronics goods and gadgets, as well as their related software applications, in a broad range of different international industry segments. The company operates on an oligopolistic model and sells products that are relatively inelastic. A microeconomic analysis is used to discuss the relevant factors and make recommendations based on these insights.

Analysis of Apple Inc.

History of Apple Inc.

Supply and Demand for iPhone 7

Cost Structure

Apple's Market

Analysis of Apple Inc.

Similar to the path that Moore's law, the number of people and devices connected to the internet is growing at an exponential rate; although this trend could never mirror the advances in processing power that has been achieved, it is significant nonetheless. For example, in 2016, it was estimated that 3.4 billion people are connected to the internet which accounts for ~46% of the world's population (Number of Internet Users, 2016). Furthermore, Cisco has estimated that about 50 billion devices will be connected by 2020; which is based upon an earlier analysis in January that claimed 8.7 billion connected devices in 2012 (Danova, 2017). Apple Inc. is one of forerunners that has innovated at nearly every turn to provide well-designed products to consumers that enable them to always be connected via computer, tablet, watch, smartphone, etc.

The purpose of this analysis is to examine the business operations of the Apple Inc. organization from a microeconomics perspective and discuss how factors such as products supply and demand conditions, price elasticity of demand, cost of production, market entry barriers, market share, and market structure explain the performance of Apple in the computer market and industry. The paper will start with historical overview of Apple and conclude with data derived recommendations based on the analysis of the above factors suggesting how Apple could manage its future business operations to stay competitive in the computer market and industry based on the findings of this investigation.

History of Apple Inc.

Apple was founded in April 1976 by Steve Wozniak, then 26 years old, and Steve Jobs, 21, both college dropouts. Their partnership began several years earlier when Wozniak, a talented, self-taught electronics engineer, began building boxes that allowed him to make long-distance phone calls for free. The pair sold several hundred such boxes out of their garage (Apple Computer, 2017). Later that year Wozniak was working on the first Apple computer for a hobbyist club and eventually had local retailers ordering their computers.

Jobs also hired many local computer enthusiasts to assemble the computers and design software to supply the order (Apple Computer, 2017). Jobs wanted to a build a larger company to attempt to be competitive in the industry so with a business plan he consulted with Mike Markkula to invest in the company as Chairman. Within one year, the company's annual sales reached $1 million and became one of the fastest-growing companies in the US with their products carried by over 100 dealers. By the end of 1980, Apple went public selling 4.6 million shares at $22 each in a matter of minutes and offering 2.6 million more which quickly sold out by May that following year. Then, by the end of 1982, Apple became the first company to each $1 Billion in annual sales (The Human Relations in Management Business Essay, 2017). Although Apple's path took many twists and turns throughout its history, it emerged as one of the dominant industry players.

The company designs, develops, and sells consumer electronics, computer software, and online services. The company began to expand quickly after Steve Jobs implemented a strategy known as the "digital hub", which moved Apple's focus away from just the personal computer platform and began to include various peripheral devices as well such as mp3 players, watches, etc..The company's hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, the Apple smartwatch, and the Apple TV digital media player. Apple's consumer software includes the macOS and iOS operating systems, the iTunes media player, the Safari web browser, and the iLife and iWork creativity and productivity suites. Its online services include the iTunes Store, the iOS App Store and Mac App Store, Apple Music, and iCloud (Apple Inc. 2017). The evolution of Apple products is quite complex in regards to its product mix, however the following illustration summarizes some of the major product...

Then analyze data on these variables for five years (for example, 2011 -- 2015, or 2012 - 2016) to evaluate/analyze demand trends overtime and the demand trends impact on Apple products. You may include annual sales, revenue, profit etc. figures/charts (line graph) to show market demand trends overtime as measured by sales, revenue, profit variables. You should also examine/highlight the determinants of supply factors that could impact the market for Apple products. For example: input costs, technological improvement, prices of substitutes, number of firms in the market, and expected future price.
Apple has enjoyed an increase in the demand for the iPhone for the past 10 years between 2007 and 2016. In 2007, Apple recorded sales of 270,000 iPhone however, the sales increased to over 74 million units in 2016. In the first quarter of 2017, the sales of the iPhone has increased to 78 million units. An increase in the sales of the iPhone has led to an increase in the demand for smartphone globally (Statista, 2017); although Apple worked to pioneer the market, other market entrants have enter this industry, fueled competition, and worked to build a large and dynamic array of different brands and subsequent product offerings. However, despite increased levels of competition, a high demand for the original branded iPhone smartphones from its loyal customer based, coupled with consistent innovation, has significantly aided Apple's ability to record an increase in the net profits year by year. Comment by Feras: Broad description but incomplete analysis.

The theory of supply and demand illustrates the quantity demanded versus the quantity supplied in the market (Mankiw, 2007). The study discusses the supply and demand for iPhone which is one of Apple's major products. The study explores the law of demand and supply for the iPhone, and its elasticity of demand.

Demand and Supply: The law of demand illustrates the quantity of a product demanded in a given market. Apples operate in a global market and iPhone 7 is one of the latest products that the company has released. Since the company has released the product, the demand for the product outstrips the supply. However, the law of demand and supply argues that the supply must equal to the demand for the market to reach the equilibrium. In the case of iPhone 7, Apple is unable to meet the demand for its product at its retail and online stores around the world.

The same trends also affect the demand for the iPhone 6, although not to quite the extant as the newer model. However, much of the growth in demand has been fueled by the demand in the emerging markets, such as in China (illustrated here).

Figure 2 - iPhone Historical Demand (Balani, 20'5)

Figure 3 - Supply and Demand of iPhone

As being revealed in Fig 3, the Point A is where the market has reached its equilibrium. When demand is higher than the product supplied, there is a shortage in the market. However, when there is short of iPhone in the official market, the black market will increase their price creating another equilibrium price. When the iPhone 5 was sold in China, the black market started selling the same product at an unreasonable high price. The black-market price for iPhones being so high is one signal for the price elasticity of demand leaning more to the inelastic side, but there are other estimates that also support this position.

Apple's price elasticity of demand nearly imitates that of an essential good; or at least it does so far more than being a normal good. One the one hand, you would think that there would be a large number of substitutes that consumers would perceive in the market given there are numerous of brands of electronic goods. For example, in the personal computer industry, companies such as IBM, Dell, HP, and Toshiba compete with Apple while in the phone market Apple must compete with brands such as Samsung and HTC. Yet the demand for the iPhone remains rather inelastic by comparison. The explanation of how Apple is able to maintain this market position is largely related to their ability to innovate, maintain high-switching costs, and maintain high levels of customer loyalty that allow the company to be more inelastic than the typical normal good. However, Apple also has other tricks that allow the…