Factors Affecting Demand and Market Equilibrium for Apple Inc.
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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.
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MANAGEMENT ECONOMICS-1
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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 economicsis 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 otherwords, 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 inCupertino, 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 rangemanufactured by Apple Inc. has been chosen to complete the study, which is reportedly the most widely used device worldwide(Keller, 2015). New phone 1
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 marketshare 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 topSmartphone 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. Quarter2018Q12018Q22018Q32018Q42019Q12019Q22019Q32019Q42020Q1 Samsung23.5%21.0%20.3%18.8%23.0%23.0%21.8%18.8%21.2% Huawei11.8%15.9%14.6%16.2%18.9%17.7%18.6%15.2%17.8% Apple15.7%12.1%13.2%18.3%11.8%10.2%13.0%19.9%13.3% Xiaomi8.4%9.5%9.5%6.7%8.9%9.7%9.1%8.9%10.7% vivo5.6%7.9%8.3%6.9%7.4%8.6%8.4%7.7%9.0% Others35.0%33.6%34.1%33.1%30.0%30.8%29.1%29.5%28.0% TOTAL100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% 2
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Figure1Market 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 factorsinfluences both positively and negatively the demand for goods and services. Thus business manager is expectedtoconcentrateonsuchfactorswhenevaluatingthepotentialdemandofthe 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,householdincomethathelpstosetthemuchmoreacceptablepricefortheir 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 certainkinds of items which can affect the current salesfromtheiPhoneseries.ThiswillincludeSamsungGalaxyNote9,SonyXperia XZ3,Huawei Mate 20 Pro,ASUS ROG Camera,Samsung S10 plus, Google Pixal 3 and several 3
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 severalcasualty-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 preferenceswhile 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 appearsthatproducingproductscannotfulfilconsumerrequirements.Rapidchangesin 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 profitabilityand consumer base, each organization is expected to do a thorough proper researchof market demands and then set the 4
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 dissuasionthat 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 ofiPhone 11 isRs 64,900, foriPhone 11 Pro is Rs 99,900 and iPhone 11 Pro MaxStarting price will beRs 1,09,900 thatis 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 demandthe 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, SamsungS10 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 & picturequality and the key advance of tech development. Other than that, there are certain common considerations that may influence the market price elasticity addressed below: 5
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Essentially, if any of the things such as fruits, medicine, vegetables andessential itemsdo 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 arestill 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 lifelike 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 gadgetand 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: Inthe present sense, where it is simple to say that even if the no of substitutes is small, the elastic demand of productwill also remain highand 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 manymore, it showsextremely 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. Variouscustomershavedifferentattitudestotheessenceofthegoods,suchas 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 6
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 pricephonesandothergadgetsforconsumers.There,itcanbeassumedthatresponsive 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 presenceand 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 initiallevel 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. CompetitivePricing: 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 Fromtheabovediscussion,ithasbeenobservedthatmanagementeconomicsisa straightforwardmethodofapproachingeconomiccircumstancesandproblemswiththe application of various methods, theories and principles. In order to maximize the demand of the 7
products, it is important for the managersto 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. 8
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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.andEmbrechts,P.,2015.Quantitativeriskmanagement: 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 AppleInc.2020.[Online].AvailableThrough: <https://www.apple.com/> 9