Factors Affecting Demand and Market Equilibrium for Apple Inc.

This document discusses the factors that affect the demand and market equilibrium for Apple Inc. and its products. It explores the concept of price elasticity of demand and its influence on sales and consumer preferences.

MANAGEMENT
ECONOMICS-1

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Overview of the selected organization and its essential products & services.........................1
2. Identify the factors which affect demand and market equilibrium..........................................3
3. Evaluate that how price elasticity of demand influence the products and services.................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Managerial economics is described as the procedure of amalgamation of different economic
principles within the market activity and service in addition to making cleaner and more effective
decisions and to make successful planning by top management (Brouwer and van der Heide,
2012). In other words, management theory is linked to the application of economic concepts and
analytical reasoning to the problems of making rational management decisions. The key role is to
enable scarce resources such as labour, capital and land to be used more productively. This has
gained traction among businesses in the modern period because it promotes the management of
full financial records so that specific market targets can be met, effective plans are formulated
and correct prices are set.
For the better understanding of managerial economic concepts Apple Inc. Selected and it
includes the numerous economic elements such as demand and supply variables, cost estimation,
pricing and industry policies are addressed. Therefore, variables are being elaborated that can
affect the elasticity of demand & supply in the sense of the selected company.
MAIN BODY
1. Overview of the selected organization and its essential products & services
Overview: Apple Inc. is a multinational technology based company and headquarters is
based in Cupertino, California, U.S.A. The corporation was first founded by Steve Jobs, Steve
Wozniak and Ronald Wayne in 1976. Apple Inc. is known for their revolutionary concepts and
online selling of Smartphone, mobile gadgets, streaming services and goods (Apple Inc, 2020).
In July 1976 the firm introduced Apple, which was a regular chipset computer and particularly
post-assembled compared to other computers of that time. The firm has a range of devices, such
as iPhone, Air Pods, portable earphones, iPad tablets, smart TVs and watches, making it the
world's bestselling brand. Apple's products are innovated through recognizing customers '
expectations and desires cantered on individual experience and technology growth, contributing
to customer loyalty and on the expected quality of the company that satisfies the customer's
requirements.
Range of products and services company offer:
Particular iphone range manufactured by Apple Inc. has been chosen to complete the
study, which is reportedly the most widely used device worldwide (Keller, 2015). New phone
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series i.e. iPhone 11 and iPhone 11 Pro/11 Pro max have been developed and released in the
current time business. Users of Smartphone are increasingly growing, contributing to a rise in the
market share value for the mobile industry. Technological developments in this sector are very
rapid, as numerous telecom providers are launching a new collection of Smartphone within 2
weeks. It has been decided that Apple is one of the top Smartphone firms worldwide because it
has achieved tremendous success in the United Kingdom, US, Asian and European countries.
The accompanying figure indicates the market share of Smartphone’s in various businesses and
the volume of Smartphone available for sale. Below mention graph and data provide better
understanding of tip Smartphone’s market shares.
Quarter 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1
Samsung 23.5% 21.0% 20.3% 18.8% 23.0% 23.0% 21.8% 18.8% 21.2%
Huawei 11.8% 15.9% 14.6% 16.2% 18.9% 17.7% 18.6% 15.2% 17.8%
Apple 15.7% 12.1% 13.2% 18.3% 11.8% 10.2% 13.0% 19.9% 13.3%
Xiaomi 8.4% 9.5% 9.5% 6.7% 8.9% 9.7% 9.1% 8.9% 10.7%
vivo 5.6% 7.9% 8.3% 6.9% 7.4% 8.6% 8.4% 7.7% 9.0%
Others 35.0% 33.6% 34.1% 33.1% 30.0% 30.8% 29.1% 29.5% 28.0%
TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
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Figure 1 Market Shares of Top Smartphone Companies, 2020.
As per above data and graph, it is clearly mentioned that Apple Inc. is one of the leading
brand in international market and in 2020 first quarter they secure13.3% market share. Currently
Samsung is one of the biggest competitors with 21.29% market share in Q1 in 2020.
2. Identify the factors which affect demand and market equilibrium
In contemporary market economics it has been established that different factors influences
both positively and negatively the demand for goods and services. Thus business manager is
expected to concentrate on such factors when evaluating the potential demand of the
corresponding item (Callan and Thomas, 2013). Management uses in industries to determine
external factors such as customer desire, appetite and require, replace as well as supplement
goods, household income that helps to set the much more acceptable price for their
manufacturing products. This also contributes to positive forward-looking strategies that endorse
coping with adverse market conditions and effectively solving future problems in a better way.
Price of Substitute: It is understood the products that could be used as substitutes rather
than others. There have also been various certain kinds of items which can affect the current
sales from the iPhone series. This will include Samsung Galaxy Note 9, Sony Xperia
XZ3, Huawei Mate 20 Pro, ASUS ROG Camera, Samsung S10 plus, Google Pixal 3 and several
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more. Its big rival is the Samsung S10 plus and its business growth rate, which increases Apple’s
sales competition and contributes to a decline in iPhones prices (Kinnaman, 2017). The price of
this handset has been declining due to the high competition point. This affects use of the iPhone
as well as other reasons, such as strong backup power, low price relative to Apple also reduces
demand.
Price of complements: There are several casualty-clear case products for iPhones, High
speed battery powered battery pack is among the big supplements and others are portable battery
store, Anker 3A. This demand is that due to a rise in market demands for the apple watch.
Growing their value does not impact Smartphone purchases or demand because most of them
will be not expected to purchase for an iPhone. If they don't have a big need, it doesn't affect
their desire.
Customer income: It is perceived to be the key reason businesses will rely on attempting
to maximise market share with the help of increasing their customer base. It is clear that
consumers at a higher income class choose advance and pricey Smartphone for use. Actually,
iPhone use has been growing worldwide due to growth, but in case whether there is any
difference in the pattern of income it may have negative effects on iPhone sales. Rising customer
income thus tends to raise Apple phones' total demand because there is a clear connection
between income and usage. Higher the income increase demand and low consumer income
reduces the overall consumption and product demand.
Consumer taste and desires: it is also quite important for marketers to consider consumer
needs, tastes and preferences while making goods as it can help to meet their perceptions and
preferences, which can lead to higher sales. Things constantly change because of advanced
technology in the telecom industry such as expandable capacity, solar chargers, large screens,
etc. Any of these types of improvements will have a negative effect on iPhone demand if it
appears that producing products cannot fulfil consumer requirements. Rapid changes in
preferences do not influence iPhone production and efficiency, because the industry is highly
concentrated on the latest advances in technology.
Price preferences of consumers: Growing customer has its own preferences in today's
age in terms of demand for each business operating in the Smartphone world (McNeil, Frey and
Embrechts, 2015). Therefore, in order to optimize the profitability and consumer base, each
organization is expected to do a thorough proper research of market demands and then set the
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best sales price of products. However, iPhone's high price in the sense of Apple impacts sales
because consumers expect costs to decline by any margin. The key explanation for iPhone's
premium costs is higher manufacturing costs as well as new technologies due to which consumer
requirements are not fulfilled, and that they are switching to other alternatives.
Demographics: Apple Inc. reaches the whole world, offering various goods to a vast range
of client base. It is found that each country has its own society, and that each company has its
own choice and needs. This is noted that Apple Inc. primarily schedules their latest product on
different dates based on particular activities or times in a given region. Consequently, confusion
of demographic factors will contribute to a reduction in the overall prices for iPhones which
reduces profit margin. Therefore the administration of the relevant business is waiting for the
right moment and releasing different products on specific dates which will contribute to
enhancing demand and production and would significantly raise the total profit margin.
It is indicated from the above dissuasion that Apple Inc. is expected to concentrate across
each external aspect which will reduce the risks of demand reduction. They seek to fix the most
appropriate retail rates for products in India for example starting price of iPhone 11 is Rs 64,900,
for iPhone 11 Pro is Rs 99,900 and iPhone 11 Pro Max Starting price will be Rs 1,09,900 that is
customer-friendly.
3. Evaluate that how price elasticity of demand influence the products and services
Luxury vs. Necessity:
Economists usually consider the price elasticity to demand the effect of market fluctuations
on consumer-purchased goods. This could affect numerous iPhones which is manufactured by
Apple Inc. W hen the business is continually adjusting pricing and rising which contributes to a
drop in sales because the buyer would choose to purchase products outside their revenue range.
It suggests an increased dynamic market for iPhones when price movements result in lower
prices (Mills and Broughton, 2016). There are various substitutes of this series on the market
which attract the eye of buyers and influence the revenues of Apple Inc. Samsung Galaxy Note
9, Sony Xperia XZ3, ASUS ROG Mobile, Samsung S10 plus, Mate 20 Pro, and Google Pixal 3,
among others. There are numerous reasons why consumers are more addicted to such mobile
devices, such as better battery life, improved audio & picture quality and the key advance of tech
development. Other than that, there are certain common considerations that may influence the
market price elasticity addressed below:
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Essentially, if any of the things such as fruits, medicine, vegetables and essential items do
not bear elastic elements. The explanation that came forth is the sustainability of the persons
because, without such things, a person can't live. Mobile phone comes under the luxury items
rage which has elastic demand. Demands of products are still largely unchanged, but product
prices can change rapidly. At other side, if it is spoken to any of the final products that are
specifically connected to the comfortable life like fridge, washing machines and more, therefore
demand remains elastic as prospective buyers may postpone the whole buying cycle because it
falls beyond the comfort point.
Luxury goods and services such as exotic cars, specialized salon, phones, and electronic
gadget and so on mostly bear higher elasticity than the items related to convenience, since they
could be ignored by a person for a longer time. Some of its factors affect the demand products,
these are discussed below:
 Substitute availability: In the present sense, where it is simple to say that even if the no
of substitutes is small, the elastic demand of product will also remain high and the
explanation given is strong in existence, i.e. the number of substitutes. It could be
illustrated easily in a clear example of Apple Corporation, because if it increases the
phone’s price it will boost the sales of Samsung’s Smartphone.
 Price level: It is known explicitly as a determining variable on the basis of price-related
market elasticity (Stead and Stead, 2017). Essentially, it was said that costly products
such as highly equipped PC, 4 K TV, and many more, it shows extremely challenging
elasticity. Although it is inelastic to consider any of the other factors such as rational
products such as matching package, captures, needle and so on.
 Consumption level: Those are claimed to be the commodity, which may be everything
from soft drinks, sweets, and so on that does not actually fall under the items required or
urgent. This can be conveniently seen that in demand such goods primarily bear high
elasticity. This can be excluded by customers primarily if prices of such goods increase.
 Nature of commodity: Product structure also affects and defines market elasticity.
Various customers have different attitudes to the essence of the goods, such as
convenience, quality or need may be the corresponding value for the consumer. If
products are not of a satisfactory quality, the total market will be decreased and the
revenue number may be influenced by the corresponding date. For products such as
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iPhone the market is more fluid as consumers purchase them to lead a comfortable life as
per their position.
Taking into consideration the above facts, it's simple to claim that Apple mostly offers higher
price phones and other gadgets for consumers. There, it can be assumed that responsive
customers who are not priced will have less interest in such goods. Therefore market elasticity
would be significantly weaker.
Pricing Policy:
It is found that Apple plc is expected using the most effective pricing approach to retain a
stronger global market presence and brand position in competitive climate (Vanek, 2017). More
and more prefect price approach can lead to some other aggressive companies operating within
the same sector being overcome. Any of the pricing practices are concerned with below:
Penetration Pricing: This allows businesses to set the lowest price of products at the
initial level and if competition rises they will make price adjustments. The organization primarily
applies this approach to increase consumer awareness of products introduced in the industry.
Economic Pricing: Organizations are often adopting this pricing strteagy to improve the
selling of different products and to gain ever more customers. It also tends to reduce the
advertising and distribution prices by making goods available at a single point of sale in large
quantities.
Competitive Pricing: In this approach, the manager analyzes the consumer environment
and competitiveness that facilitates determining the right product rates (Wu, 2016). It tends to
achieve the best comparative edge and draws consumers further towards the corresponding
products.
Skimming Pricing: this enables businesses to fix the higher freight rate in the event that
there really is no price pressure. Because of the introduction of this policy businesses are able to
gain greater and higher earnings and also make monopoly in market place.
Apple Inc. will follow and adopt competitive pricing in their organization which makes
them more responsive to other competitor pricing activities and business strategies.
CONCLUSION
From the above discussion, it has been observed that management economics is a
straightforward method of approaching economic circumstances and problems with the
application of various methods, theories and principles. In order to maximize the demand of the
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products, it is important for the managers to examine the different factors that can negatively and
positively affect demand. The most effective pricing approach aims to improve consumer
competition and boost market share in the current dynamic landscape.
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REFERENCES
Books & Journals
Brouwer, F. and van der Heide, C. M. eds., 2012. Multifunctional rural land management:
economics and policies. Routledge.
Callan, S. J. and Thomas, J. M., 2013. Environmental economics and management: Theory,
policy, and applications. Cengage Learning.
Keller, G., 2015. Statistics for Management and Economics, Abbreviated. Cengage Learning.
Kinnaman, T. C., 2017. The economics of residential solid waste management. Routledge.
McNeil, A. J., Frey, R. and Embrechts, P., 2015. Quantitative risk management:
Concepts. Economics Books.
Mills, J. and Broughton, V., 2016. Bliss Bibliographic Classification: Class T: Economics
Management of Economic Enterprises. Elsevier.
Stead, J. G. and Stead, W. E., 2017. Management for a small planet. Routledge.
Vanek, J., 2017. The economics of workers' management: a Yugoslav case study. Routledge.
Wu, C. L., 2016. Airline operations and delay management: insights from airline economics,
networks and strategic schedule planning. Routledge.
Online
Apple Inc. 2020. [Online]. Available Through:
<https://www.apple.com/>
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