Market Structure Analysis of Apple Inc.

This document provides an analysis of the market structure faced by Apple Inc. in the technology industry. It discusses the competitive image and revenue status of Apple Inc. and suggests the optimal market structure for the company. The document also explores the different factors that affect Apple Inc.'s economic decisions.

Management Economic

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of Apple Inc. and its products/services................................................................1
2. Market analysis of Apple Inc. to analyse its competitive image and revenue status...............2
3. Discussion on different market structure faced by Apple Inc.................................................6
4 a) Critical discussion on types of market structure to suggest the optimal structure for Apple
Inc................................................................................................................................................7
4b) Key suggestions on interferences of government on operational activities of Apple Inc. in
terms of societal benefits.............................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Today, to run business in efficient way, it is essential for every firm to conduct a proper
economic analysis. It helps in evaluating company’s performance and where changes are need to
be done, to gain more profitability (Li, 2018). For this purpose, number of theoretical and
conceptual models can be applied such as supply and demand, cost analysis price elasticity and
more. A study is going to conduct on handset of Apple Inc. for applying the different
microeconomic concepts, to analyse its managerial decision making process. The reason behind
chosen this particular product of respective company, is its market demand, where offering the
wide range of android phones with unique features help Apple to gain high brand position in
technology industry. For analysing how different factors like market structure, government
policy and more affect its economic decisions, a complete history will be evaluated under present
assignment. Along with this, key suggestions for operating business in optimum market structure
are also made.
MAIN BODY
1. Description of Apple Inc. and its products/services
In development of economy, technology sector shares a maximum contribution role, which
not only helps companies in operating their businesses, but also in reaching the potential
customers (Nainggolan and Hidayet, 2020). One of the such technological innovation includes
smartphones, that aid in growing the telecommunication market at worldwide level. It has
become hub in lives of every person that makes them connect with entire world. With
innovations, smartphones or mobile handsets are getting well-equipped and more compact.
Therefore, it is considered as important tool for all sectors, including corporations, educations,
government and more, for connecting with others (Farr and Faber, 2018). Smartphone with high
version of android features act as walking encyclopaedia, which help corporations in taking
business at next level. Apple Inc. is one of the technological company, which is known for its
fascinating and offering more attractive smartphones, PC, watches and digital gadgets. This
multinational manufacturing company is mainly headquartered in California, US and founded by
Steve Jobs in 1976. But today, it operates business and offer products at worldwide level. It
offers a wide range of products and services like iPhone series, iOS, Apple TV, smartwatch,
Apple Books, iMessage, iCloud and more.
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Formerly, Apple Inc. is known as computer company but efforts of Steve Jobs and co-
partners, aid in setting business on incredible turnaround (Jiao and Wei, 2020). With cooperation
of them, this company has moved successfully in manufacturing of various products. Today, it is
known for producing best smartphones, where first version of iPhone series has been launched in
2007 and year-by-year new handsets with more innovative features produced. This would help in
increasing its revenue, profits and price of stocks significantly. In 2010, stock market of Apple
overtook Microsoft, which is one of the best technology firm (Randall and et. al., 2020). This
made Apple as successful brand, where each and every series of its smartphone (iPhone) consists
seamless integration which strict controlled operating system, which allows handsets for better
software optimisation, as well as easy of use. People who rely on iPhones for personal or
business usage, enjoy the hassle free experience. However, this smartphone is not first one which
offers touchscreen features, norms like fast scrolling page down, sliding to unlock, best security
from theft etc. are first time introduced by iPhone.
2. Market analysis of Apple Inc. to analyse its competitive image and revenue status
While bringing the numerous products and services into a certain market, suppliers used to
find a way for bringing the same in best quality (Rhiu and Yun, 2018). This would help in
attracting a good market for reaching potential customers, by considered process to avoid losses
simultaneously. All such knowledge can be analysed by applying the theory of demand and
supply, which states producer to satisfy consumers’ demand by offering best quality of products
at reasonable price, which they must value. In context with market analysis of iPhones, after its
launch, the demand of this product is continuously increasing, which overlap its supply.
According to law of supply and demand, this behaviour shows a positive shift of demand
(Makov and et. al., 2019). As per shown in below graph, it has evident that due to best quality
and unique features, people are willing to purchase iPhone on any price. This shows positive sign
of increasing sales and high profitability for Apple Inc. at marketplace.
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The elasticity or inelasticity of iPhone can be determined by evaluating various factors, which
includes availability or accessibility of substitutes, disposable income of consumers and more
(Çebi and İlbahar, 2018). As per HIS report, it has evaluated that due to global demand for
getting low smartphones having LTP TFT LCD features (low temperature polysilicon thin-film-
transistor liquid-crystal displays) has made iPhone the best product, due to adoption of wider
displays having higher resolution by Apple Inc. (IHS Says Apple is Driving Growth in High-
Resolution Smartphone Displays, 2016). Therefore, having the best competitive image, make
iPhone as elastic product on demand, where availability of other branded phones, if its price will
go higher beyond the expectations of customers, then they will move to opt alternatives one like
Samsung, Vivo, Sony and more (Audretsch, Link and Scott, 2019). But to some advantage
factor, has made people to buy iPhone on higher rates also. It includes easy configuration and
consistent usage where Apple Inc. ensure that all functions and apps, must perform best way like
the company intended the same to perform. Variety of accessories and Apple store, like
monitoring the users blood pressure, iOS apps, camera lenses, support MS-Office 365, less
security breaches than other android handsets etc. aid iPhone as remarkable brand in technology
industry (Athey and Luca, 2019).
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Figure 1: Market Share of Smartphones, 2016.
The financial performance of Apple Inc. can be analysed by its past five years data, as
explained below –
APPLE INC ADR (AAPL) Cash Flow Flag INCOME STATEMENT
Fiscal year ends in September. USD
in millions except per share data.
2015-
09
2016-
09
2017-
09
2018-
09
2019-
09
TTM
Revenue 233715 215639 229234 265595 260174 267981
Cost of revenue 140089 131376 141048 163756 161782 165854
Gross profit 93626 84263 88186 101839 98392 102127
Operating expenses
Research and development 8067 10045 11581 14236 16217 17383
Sales, General and administrative 14329 14194 15261 16705 18245 19153
Total operating expenses 22396 24239 26842 30941 34462 36536
Operating income 71230 60024 61344 70898 63930 65591
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Interest Expense 733 1456 2323 3240 3576 3218
Other income (expense) 2018 2804 5068 5245 5383 4718
Income before taxes 72515 61372 64089 72903 65737 67091
Provision for income taxes 19121 15685 15738 13372 10481 9876
Net income from continuing operations 53394 45687 48351 59531 55256 57215
Net income 53394 45687 48351 59531 55256 57215
Net income available to common
shareholders
53394 45687 48351 59531 55256 57215
Earnings per share
Basic 1.54 1.39 1.55 2 2 2.15
Diluted 1.54 1.39 1.54 1.99 1.98 2.13
Weighted average shares outstanding
Basic 34514 32818 31297 29726 27701 26750
Diluted 34751 32995 31504 29995 27888 26966
EBITDA 84505 73333 76569 87046 81860 82023
Through this statistical information, it has been evaluated that profitability and revenue of
Apple Inc. has grown year by year continuously, which gives high contribution in economy as
well. Currently, it has given employment to more than 137,000 employees in its more than 500
stores and manufacturing plants (Çebi and İlbahar, 2018). This shows another main contribution
in economic development by giving employment to both skilled and low-skilled people at its
workplace.
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3. Discussion on different market structure faced by Apple Inc.
At initial level, technology sector has come in oligopoly market structure, where only few
companies have dominated the market share like Samsung, Apple Inc., Sony and more, that
offers homogenous items with differentiated features. Because it is difficult for new
entrepreneurs to enter into this sector, due to requirement of huge investment for offering
something innovative then branded ones. Along with this, maximum people also rely to buy
phones from branded companies. So, it also creates barrier for new entrance to earn loyalty of
potential customers (Makov and et. al., 2019). As Apple Inc., is known for its tremendous
technology where its imaginative way of creating innovation in products, aid in facing few
competitors only to survive in market. With increasing globalisation and support of government
has made it possible for new entrance, like Vivo, Oppo, LG, Huawei etc. to operate business in
technology sector and offer mobile handset. It results in transforming the market of technology
sector from oligopoly to monopolistic, where many small or large firms offer same product but
with differentiated features in terms of quality or branding image. Therefore, under such market
structure, there is no perfect substitutes (Rhiu and Yun, 2018). But still Apple Inc. has
maintained its position in oligopoly market structure because it is much difficult for other smaller
or bigger brands to copy its features. In addition to this, revolutionary change in handsets, high
computing techniques and un-identical features of mobile phones, which enables it to survive
longer in market, with more efficiency.
In this sense, considering the current performance of Apple Inc., earning and revenue rate
of this company has estimated as –
Forecasted earning estimate of Apple Inc.
Earnings
estimate
Current qtr.
(Jun 2020)
Next qtr.
(Sep 2020)
Current
year
(2020)
Next year
(2021)
No. of analysts 28 28 36 36
Avg. Estimate 2 2.8 12.32 14.73
Low estimate 1.55 2.09 11 12.48
High estimate 2.43 3.44 13.29 16.75
Year ago EPS 2.18 3.03 11.89 12.32
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Forecasted earning revenue of Apple Inc.
Revenue estimate
Current qtr.
(Jun 2020)
Next qtr.
(Sep 2020)
Current
year
(2020)
Next year
(2021)
No. of analysts 26 26 33 32
Avg. Estimate 51.39B 61.67B 262.74B 295.53B
Low estimate 42.8B 50.47B 252.81B 261.66B
High estimate 54.52B 69.86B 273.88B 326.68B
Year ago sales N/A 64.04B 260.17B 262.74B
Sales growth
(year/est) N/A -3.70% 1.00% 12.50%
4 a) Critical discussion on types of market structure to suggest the optimal structure for Apple
Inc.
Structure of market defines the characteristics of a company in which is run its business, in
terms of competition, product differentiability and elasticity or inelasticity of products.
Generally, market structure of a firm can be categorised in terms of availability of alternative
goods, having same or differentiated features (Randall and et. al., 2020). It includes oligopoly,
monopoly, perfect and monopolistic market structure, where to operate business in any of them,
it is essential to understand key characteristics of each. In monopoly market, a single firm has
gained controlled to overruled a particular area, which creates high barriers for new entrances to
enter or exit. Therefore, consumers do not have any type of alternatives and they have to
purchase products on the rate which company offers to them. While oligopoly on contrast, has
dominated by few employers with limited competition and homogenous or differentiated
products (Audretsch, Link and Scott, 2019). Other than this, perfect competitions states presence
of small firms with large number, where no single unit get advantages to possess market power
(Jiao and Wei, 2020). Therefore, while offering products, consumer preference doesn’t consider
more and companies focuses usually on earning maximum profitability. Under monopolistic
competitions, organisations usually behave in short run manner, by using their power for
generating high revenue. But in long run approach, there is a low entry barrier which allows new
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entrepreneurs to grab attention of consumers, by offering them similar kind of featured products
relatively on less rates.
In this considering the competitive image of Apple Inc., especially for its iPhone series, it
has analysed that operating business in oligopoly market suits best for it. Because, there is a high
demand of its products at marketplace, which enables this firm to set high prices and generate
more revenue (Farr and Faber, 2018). This robust approach also helps Apple Inc. in running its
business for longer period at marketplace, as well as gain loyalty of customers also by offering
them more trendy and un-identical featured smartphones. This would enable respective firm to
earn high competitive image as well and get advantage over its major competitors like Samsung,
Sony and Acer.
4b) Key suggestions on interferences of government on operational activities of Apple Inc. in
terms of societal benefits
Telecom or technology sector considered as ever growing area that enables firms to
strengthen their business, stimulate capital investment, drive innovation as well as increase
connectivity with potential customers (Nainggolan and Hidayet, 2020). All these processes help
organisations to make more investment in business, for stimulating demand of customers. This
would directly aid a nation, in increasing its aggregate demand/ supply, with improvement and
enhancement in economy. Smartphones, laptops and other digital gadgets today, have move from
computing infringement to mainstream. Therefore, sales of these devices aid seamless
connectivity with user interface (Athey and Luca, 2019). Along with this, displaced older
computer system with portable mobile-enabled cloud system helps in increasing sales at both
domestic and global level. This would directly aid in increasing the circular economy, with
opportunity to people to perform their business functions from anywhere, without need to go to
office premises (Li, 2018). Having more than five billion mobile users, aid manufacturers to earn
more profitability, with more contribution in economic development. In context with Apple Inc.,
it has completely revolutionised the telecom industry, by producing iPhone series, whose sales
value is near about &2 billion yearly. In this sense, considering the economic benefits,
government need to make interventions which help companies to adopt circular economy model,
across mobile electronic supply chain, for attracting more new customers and increasing brand
loyalty. This model will also help in minimising the manufacturing cost and risks, by increasing
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sustainability in business, cutting electronic waste and carbon emission, including utilisation of
resources.
CONCLUSION
From the overall analysis of present report, it has been evaluated that management
economics is one of the concerned activity of organisations. It helps in analysing overall
performance of business, by conducting proper market analysis. Through this process,
corporations can make decision how to sustain their brand image as well as enhance
competitiveness. In context with Apple Inc., applying economic models aid supply and demand,
aid this company to evaluate demand of its products, which helps in further setting the price.
Along with this, through understanding importance of government legislations, also aid Apple
Inc., in managing its business with sustainable position.
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REFERENCES
Books and Journals
Athey, S. and Luca, M., 2019. Economists (and economics) in tech companies. Journal of
Economic Perspectives. 33(1). pp.209-30.
Audretsch, D. B., Link, A. N. and Scott, J. T., 2019. Public/private technology partnerships:
evaluating SBIR-supported research. In The Social Value of New Technology. Edward Elgar
Publishing.
Çebi, S. and İlbahar, E., 2018. Analysis of parameters affecting the smart phone design by using
fuzzy Kano model. Alphanumeric Journal. 6(1). pp.83-92.
Farr, J. V. and Faber, I., 2018. Engineering Economics of Life Cycle Cost Analysis. CRC Press.
Jiao, R. and Wei, J., 2020. Brand expansion through reverse socialization: an example of iPhone
in China. Qualitative Market Research: An International Journal.
Li, R. Y. M., 2018. Breakthroughs in algorithms and applications for big data analysis in modern
business world. International Journal of Data Analysis Techniques and Strategies. 10(3).
pp.205-207.
Makov, T. and et. al., 2019. What affects the secondhand value of smartphones: evidence from
eBay. Journal of Industrial Ecology. 23(3). pp.549-559.
Nainggolan, F. and Hidayet, A., 2020. The Effect Of Country Of Origin, Brand Image, Price
Fairness, And Service Quality On Loyalty Toward IPhone Mobile Users, Mediated By
Consumer Satisfaction. European Journal of Business and Management Research. 5(1).
Randall, K.N. and et. al., 2020. Use of a iPhone Task Analysis Application to Increase
Employment-Related Chores for Individuals With Intellectual Disabilities. Journal of
Special Education Technology. 35(1). pp.26-36.
Rhiu, I. and Yun, M. H., 2018. Exploring user experience of smartphones in social media: A
mixed-method analysis. International Journal of Human–Computer Interaction. 34(10).
pp.960-969.
Online
IHS Says Apple is Driving Growth in High-Resolution Smartphone Displays. 2016. [Online]
Available Through: <iphoneincanada.ca/news/ihs-on-apple-high-res-smartphone-displays/>.
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