HELP University Business Report: Apple iPhones and Market Dynamics

This report provides a comprehensive analysis of Apple's iPhones, examining various aspects of their business and market position. It delves into the popularity and success of Apple as a technology company, focusing specifically on the iPhone as a key product. The report explores the role of complementary goods, such as chargers, headphones, and applications, and their influence on iPhone demand. It then analyzes the competitive landscape, identifying substitute products and the impact of scarcity on Apple's operations, particularly in terms of hardware innovation and component supply. Furthermore, the report investigates the factors affecting the demand and supply of iPhones, including price, income, and technological advancements, using graphs to illustrate these relationships. Finally, the report classifies Apple within an oligopoly market structure, discussing its characteristics and implications, including the kinked demand curve. Overall, the report offers valuable insights into the business strategies, market dynamics, and challenges faced by Apple in the highly competitive smartphone industry.

Running head: APPLE’S IPHONE 1
Apple’s IPhones
Aishath Shaahy Habeeb (B1701886)
Aibakht Bissenova (B1700795)
Vanessa Law Houi Lam (B1701167)
HELP University

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Summary
Apple Incorporated, commonly known as Apple, is without any doubt one of the most
popular and successful software technology companies in the world at the moment. Apple is
mostly popular for its iphones, macbooks and apple watches which are creatively innovated
and updated to the taste of the technologically globalised societies of the world. The
handphones created by Apple, commonly known as iPhones, are definitely the most trending
and sensational handphones in today’s world. It is most popular for its easy interface, high
quality camera and good social networking applications. Apple is ranked 9th place in the
fortune global 500 with a whopping $215,639 million as their revenue for the year 2017
(Fortune, 2018). For this reason, we would like to choose Apple and their iPhones as our
choice of company and product.
It is of common knowledge that a handphone does not gain popularity and
excel economically only due to its physical features. One of the most important things for any
product is its complementary goods. According to dictionary(2018) , complementary
products are products which are closely related to each other and are usually used together
but are sold separately. In the case of Apple iPhones, some of the complementary products
that could be listed are the iPhone charger, headphones and applications. The charger and
headphones are produced by Apple and it comes with the handphone as a package. However,
some of the iPhone applications are made through third parties and these applications have a
significant influence on the demand for the iPhone. According to Stolyar (2018) the best
iPhone apps right now include Google, Google chrome, Facebook, Youtube and Instagram.
These trending applications are used by thousands for daily productivity and entertainment
and it is not only used by iPhone users. Hence, Apple is highly reliant on these software
engineers to develop and innovate their apps to increase the sales of iPhones. Handphones
have become a centre of globalisation and no matter which sector we are working in, having

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a reliable and up-to date phone is of utmost importance and this is exactly what iPhones
provide us with. Apple launches a new phone every year, not only with innovative exteriors
but they make sure the new phones fix any previous glitches from any apps that consumers
normally use. Having a handphone with no application is near to useless which is why Apple
ensures to provide us with the best complementary applications that they possibly could.
In the 21st century we are living in a world which is highly competitive in all ways. If
we look at business sectors, firms are constantly trying to beat their rivals by providing
consumers with better quality products or services at best prices. Due to the high competition
the amount of substitute goods in the economy has increased. Substitute goods are products
that are quite similar to each other and can satisfy the same functions for a consumer. The
hand phone industry is very competitive and Apple iPhones have always been a product of
interest. The competitors for iPhones changes with every new release as competing firms take
the new iPhone as the benchmark and try to add the features of iPhones to their handphones
to increase the demand for their product. The latest iPhones released were iPhone 8, iPhone 8
Plus and the sensational iPhone X. For these iPhones currently some of the competing
substitutes are Samsung Galaxy 8, Samsung Galaxy Note 8, OnePlus 5, Nokia 8, Google
Pixel Xl and Sony Xperia XZ Premium (Field, 2018). These handphones an only duplicate
some features of Apple iPhones such as the exterior and the camera quality. They advertise
their handphones as phones better than iPhones when in reality the quality of the phones are
lower than that of apple products which enables them to sell it in a lower price. However,
price and demand of goods and services are inversely proportional and as consumers most of
us will prefer the cheaper one and for this reason the above mentioned products are currently
seen as the substitutes for the iPhones.
Scarcity represents as an economic issue faced when there is unlimited human wants
in a world of limited resources. Because of the inadequate resources, not all human wants and

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needs can be satisfied. Therefore, scarcity is featured by everyone in this world and Apple is
certainly not exempted from scarcity as well. We all know that apple’s iPhone is receiving
extraordinary acceptance throughout the countries. Among the many resources available in
this world, we believe that Apple is potentially suffering from a major lack of hardware
innovation scarcity. Reason to this is that an article by the popular Pokemon GO Katz (2016)
is an example of that this software was enabled by the iPhone and its competitors, but really
used very little of the phone’s processing capacity.The real innovation was in the game itself,
and the game is a virtual thing, run by some distant server far away. This is the essential
challenge for the likes of Apple and its competitors – the rapidity of revolution for their
physical products is much slower than the speed of innovation of the software and application
developers that use their goods as a conduit to consumers (Team, 2011). Furthermore, we
believe the main risk for this American company remains the component supply related issue.
Although many in the industry struggle with securing components and reliable production,
this is a more substantial risk to Apple than its competitors. Apple iPhones are produced and
assembled in a very critical manner, and it needs a big labour force with the correct
knowledge of it. Even in today’s world, a lot of companies facing problems with finding
employees with skills that are fit for the job. Apple also faces this scarcity of resource
because of shortage labor when manufacturing those Apple’s items. Thus, Apple’s goods
have obstacles with scarcity in parts of iphone and labors when producing phones and other
devices of Apple.
As consumers, it is of utmost importance for us to realise what affects the demand and
supply of the products that we wish to consume. Similarly, producers pay close attention to
these factors to maximise their profits. Apple iPhones being the most popular handphone in
the world right now has many factors affecting its demand and supply. Some of the factors

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affecting the demand of iPhones include price of the iPhones, price of the related substitutes
and complements goods, income of the society, changes in the taste, future expectations of
the price of the iPhone and the number of consumers. Explaining some of the non price
factors; iPhone is an expensive handphone specially the recent ones and when the income of
the society increases more people will be able to afford it as purchasing power increases and
demand for iPhone will increase and vice versa. Similarly if the future expected price of the
iPhone X is predicted to increase the demand for iPhone X will increase now as more people
will try to purchase it now. The following graph ,figure (a), shows the effects of the changes
in price has on the demand for iPhones. When the price of iPhone 8 increases from $450 to
$550 the quantity demanded changed from 600 to 200 iPhones which shows that consumers
will purchase more at lower prices.
The supply of the iPhones takes into account some factors that can affect the
production of the iPhones. Some of these factors are the price of the related resources to
produce iPhones, technological advancements, expectations of the future price, taxes and
subsidies and government restrictions. Explaining some of these factors; when the prices of
relevant resources needed to make iPhone increases then the supply of iPhones will decrease
and vice versa. Technology is the body of skills and knowledge concerning the use of
resources in the production and advancement in technology lowers the cost of production per
unit which increases the supply of iPhones. Moreover, if the expected future price of the good

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is predicted to increase then Apple will produce more iPhones to sell it in the future to earn
more profit. In addition to this, subsidies is a form of payment from the government to
producers to enhance or increase the production and if Apple receives subsidies from the
government then the supply of iPhones may potentially increase as well. The following graph
figure (b) shows the effect of taxes, if absorbed by Apple, will Affect the iPhone supply.
Taxes are imposed by the government on firms. If the government increases the taxes Apple
has to pay and if it is absorbed by Apple then the supply curve will shift from S to S1 and
quantity produced will decrease from Q to Q1.
Market structure is defined as the nature of competition in the market for services and
goods ("Key Summary on Market Structures", 2018). Our team strongly believes that Apple
falls under the oligopoly market structure in the smartphone operating system, because the
company matches the characteristics of the oligopoly structure. The three main oligopoly
market structure characteristic includes limited competition which a market is shared by
small number of very large producers, firms with identical or differentiated product and the
industry has barriers to enter. The main reason why we believe so is because Apple shares the
same industry with their competitors. Also, it is operated by a small number of very large
producers, however, each of the producer is holding percentages of the market share.
Furthermore, the second reason is because Apple and their few competitors are selling
identical or similar products in the electronic technology. In other words, the products sold by

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Apple are similar and identical. The products are similar in many ways such as they sell
smart phones, computer hardware, laptops and so on. Moreover, we also believe that Apple is
indeed an oligopoly market structure is because entering market is hard as economies of
scale, huge capital investment may be the barriers ("Oligopoly", 2018). That is, Apple has
few shareholders holding sizable percentage in the market share, 33.24% of other
institutional, 29.04% of mutual fund holders and 0.97% of shareholders and so they won’t be
able to exit whenever they want ("Apple Inc", 2018). As you can see in graph below, the two
oligopoly firms are both at point Y having a price of 3000 and supply at a quantity of 3 but
when Apple increase their price, this will shift their price to point X. When this happens and
the competitor firms (Samsung) chooses to ignore the changes made by Apple, Apple will
continue producing at point X. If the competitor firms decide to match the changes, it will
make all firms shift from producing at point X and start producing at point Z. This will cause
the price to decrease from 3500 to 2500 and their quantity supplies to increase from 1.5 to
3.2. For oligopoly market structures, their demand curve is different from that of the other
market structures as theirs is called the kinked demand curve and is illustrated on the graph
below.
All in all, the company we chosen by our group was Apple as it is one of the most
popular and successful software technology companies in the world at the moment and it

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generated the most revenue for the company since its introduction. There are a few
competitors in Apple’s company such as Samsung, Nokia, Oppo, Huawei and so on.
Moreover, to compliment this product we chose iPhone charger, headphones and
applications. In terms of scarcity as it being a software technology company, the main scarce
is lack of hardware innovation and also big labour force as Apple should only hire staffs that
has a skill in software or hardware technologies. Also, there are few factors that can affect the
demand curve such as price of the related substitutes and complements goods, income of the
society, changes in the taste, future expectations of the price. Not to mention that the
technological advancements, expectations of the future price, taxes and subsidies and
government restrictions can also affect the changes in supply. The market structure is
considered oligopolistic competition as the firm sells identical or differentiated product and
also dominated by a small number of large firm.

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Turn It In

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References.
Apple. (2018). Retrieved from
http://fortune.com/global500/apple/
Apple Inc. (2018). Retrieved from
https://money.cnn.com/quote/profile/profile.html?symb=AAPL
Dictionary, c. (2018). complementary products Meaning in the Cambridge English
Dictionary. Retrieved from
https://dictionary.cambridge.org/dictionary/english/complementary-products
Field, M. (2018). The best Android alternatives to the iPhone X and iPhone 8.
Retrieved from https://www.telegraph.co.uk/technology/0/best-alternatives-iphone-8/
Kawa, L. (2016). The three charts that show that Pokemon Go is in decline. The Sydney
Morning Herald. Retrieved from https://www.smh.com.au/business/pokemon-go-is-
in-decline--these-charts-tell-the-story-20160823-gqyo61.html
Key Summary on Market Structures. (2018). Retrieved from
https://www.tutor2u.net/economics/reference/key-summary-on-market-structures
Oligopoly. (2018). Retrieved from
https://www.economicshelp.org/microessays/markets/oligopoly/
Team, T. (2011). Scarcity of iPhone. Retrieved from:
https://www.forbes.com/sites/greatspeculations/2011/02/14/scarcity-of-iphone-guts-
bruises-apple-but-its-still-going-to-420/#6b365cc12b92