Management Economics Report: Analysis of Apple Inc. Economic Data

This report provides a comprehensive analysis of Apple Inc.'s economic data, focusing on the iPhone series. It begins with an introduction to economic management and its importance in today's global economy, followed by a description of Apple Inc., its history, products, and services. The main body of the report identifies factors influencing demand and market equilibrium for the iPhone, including the price of substitutes and complements, consumer income, taste, preferences, and expectations. The report further examines the impact of these factors on the price elasticity of demand, considering substitution and income effects, and suggests pricing strategies such as penetration pricing. The analysis aims to provide insights into how Apple Inc. can manage its economic data and make informed decisions regarding pricing and product development to maintain its market position and profitability.

Management Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of Company and its Products:..............................................................................1
2. Identifying demand and market equilibrium............................................................................2
3. Products and services affected by factors which influences price elasticity of demand.........4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Economic management can be defined as a process of managing economic resources
such as finance, income, expenditure, investments and other funds of a business entity or
community with the help of critically summarised data. In today's global economy, it has become
crucial for the organizations to manage their economic data in order to determine business
objectives, business policies, structure planning, cost control, price determination, business
predictions and so on (Bowes and Krutilla, 2014).
This report covers the critical evaluation of economic data of Apple Inc. company which
is helpful in providing guidance for policy making. Along with this application of different
economic concepts such as demand and supply, cost analysis, price policies, etc. on the
economic factors which can influence the elasticity of demand and supply within the
organizational context.
MAIN BODY
1. Description of Company and its Products:
History: Apple Inc. is known as the wealthiest company in the world now a days but it
was a tiny start-up company which was incorporated by two college dropout friends, Steve Jobs
and Steve Wozniak on 1st April, 1976 in Los Altos, California. There was a third co-founder
Ronald Wayne also but he left the company after 12 days of corporation. In July, 1976 the
company introduced Apple 1st which was a desktop computer with single motherboard and pre-
assembled unlike other computers of that era. About a year later, it launched Apple 2nd which
was upgraded machine with integrated case and keyboard (History and products of Apple Inc.,
2019).
Industry, Products and Services: Apple Inc. is famously known for providing computer
hardware and software products and services. The company is conducting its business in various
sectors or industries mostly addressed as computer hardware, software, consumer electronics,
cloud computing, digital distribution, semiconductors, fabless silicon design, financial
technology (Fintech), etc. It manufactures and distributes media devices and mobile
communication, portable digital music players and personal computers. The Company sells a
range of related services, software, networking solutions, accessories and third-party applications
and digital content. It includes products and services such as iPad, iPhone, Mac, Watch, iPod,
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Apple TV, iPhone OS (iOS), watchOS operating systems and OS X, iCloud, Apple Pay and so
on. The Company deals in and sells applications and digital content through the App Store,
iTunes Store, Mac App Store, iBooks Store, television App Store and Apple Music. The
desktop computers range of the company include iMac, 21.5 inches iMac with 4K Retina
display, 27 inches iMac with 5K Retina display, Mac mini and Mac Pro. The portable computers
of the company include MacBook, MacBook Pro, MacBook Air and MacBook Pro with Retina
display. Apple operates in handset sector and it is executing all its business operations in
competitive business environment due to high level of competition.
Selection of product: The product range that has been chosen for economic data analysis
for this report is the iPhone series because is the most popular smartphone series introduces by
the company in 2007 and years later on. Another reason behind its selection is that it will be easy
to find detailed information regarding it as this range of products is very famous among
customers. The CEO of Apple Inc. launched a product with the qualities of three different
products which were an iPod with big touch screen, an internet communication device and a
revolutionary mobile phone. The company then released iPhone 3GS, iPhone 4, iPhone 4S,
iPhone 5, iPhone 5C & 5S, iPhone 6, 6 plus, 6S &6S plus, iPhone SE, iPhone 7 & 7 plus, iPhone
8 & 8 plus and iPhone X afterwards. iPhone is the series of smartphones based on its own
operating system known as iOS. iPhone includes Siri, a voice activated intelligent assistant and
Apple Pay and touch ID on qualifying devices.
2. Identifying demand and market equilibrium
There are various types of factors which should be focused by the companies while
analysing that the of its products in future will be increased or decreased. With the help of them
it can be analysed that such components may leave negative or positive impact upon sales. While
planning to set prices of an item it is very important to analyse external factors such as
substitutes, preferences, taste and expectations of customers, income level, complement goods
etc. It can help to formulate strategies which can help to deal with unfavourable implications of
them which may take place in future (Branch, 2014). An assessment of all of them can guide the
company to be aware such challenges which may take place in future. An analysis of all of them
is as follows:
Price of substitutes: The products which could be used in the place of another are
known as substitutes. There are various such types of items which may affect sales of current
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iPhone series. These are Sony Xperia XZ3, Huawei Mate 20 Pro, ASUS ROG Phone, Samsung
Galaxy note 9, Google Pixal 3, Samsung S10 plus etc. One of the major competitor is Samsung
S10 plus and price of its demand in market. Reduction in demand of customers results in
decrement of price. Currently price of this smartphone is decreasing due to high level of
competition. It is affecting demand of iPhone and it is decreasing due to various reasons such as
high battery backup, low price as compare to iPhone etc.
Price of complements: There are various complements for iPhone series which are
survivor clear case, Fast wireless charging pad, Anker 3A portable power bank etc. One of the
major complement is Fast wireless charging pad. Price of it is increasing due to massive
increment in the demand of iPhone series in the market. Increment in the price of it will not
affect the sale or demand of phones because all of them are not necessary to buy with an iPhone.
When there is no high necessity of them then it will not affect the demand of them (Brickley,
Smith and Zimmerman, 2015). Demand is increasing due to good quality complements.
Consumer income: It is one of the major factor which should be focused by business
entities while planning to sale their products to the customers. Consumption of a good increases
when consumer income gets enhanced. A slight shift in it may leave negative impact upon sales
of products. Currently, it is increasing due to high level of development all around the world. It
directly leaves impact upon demand and supply of iPhones because if it decreases suddenly then
customers will not be able to buy them as their price is very high. Increased income of
consumers results in enhanced demand of iPhones as there is direct relationship in these two
factors. Increment in consumer income is resulting in continuously increasing demand of
iPhones.
Consumer taste and preferences: While manufacturing products it is very important for
the companies to take consumer taste and preferences in to consideration as it can help to match
up with their preferences and taste which may result in higher profits. These are changing
frequently due to high level of innovations such as wireless charging, better batteries, strong
screens etc. in the telecom sector. All such types of modifications may leave negative impact
upon demand of iPhone only if Apple is not able to meet expectation level of clients. Continuous
changes in preferences are not affecting demand and price of iPhones because the company is
highly focused with latest innovations in the market (Grafton, Kirkley and Squires, 2017).
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Consumer expectations of price: All the customers have different expectations
regarding prices and for all the companies it is very important to analyse them and then set price
for the products which are going to be sold to them. All the clients of Apple Inc. are willing that
price of iPhones should be decreased so that they can buy them easily. Their expectations are
affecting demand of products because sometimes very high price is set by the company for
iPhones. Apple tries to match expectation level of customers but high quality and cost of
production of products stops the company to set expected price of clients for iPhones.
Demographics: It includes number of buyers of the products all around the world.
According to a study Apple Inc. have sold more than 77 million iPhones in the last quarter of
2018 all around the world. It shows that there is a huge number of buyers of them worldwide
(Sales of Apple Inc. in 2018, 2018). This huge sale is also showed that the number of iPhone
users is continuously increasing. Due to this demand and sales of them in enhancing and
resulting in higher profits for the company (Hitomi, 2017).
In order to keep the demand and sales high it is very important for Apple Inc. to focus on
all the above described elements as it can help to reduce possibility of reduced demand of
iPhones. If managers within the company ignore such elements, then it may result adversely for
the company. Due to this customer base may get affected and market share may be decreased. By
taking all of them in to consideration business entities such as Apple Inc. may reduce possibility
of declines profits and sales of products that are manufactured by them (Keller, 2015).
3. Products and services affected by factors which influences price elasticity of demand
Price elasticity of demand is mainly used by economists to determine impact of prices
changes in the goods demanded by the customers. Due to this iPhone series may get affected
because if Apple Inc. modified the price of iPhones and increases it suddenly then it will result in
reduced demand of them because customers want that it should be decreased.
It indicates that there is more elastic demand of iPhones because changes in price may
result in decreased sales of them. There are various substitutes of this series in the market which
are grabbing attention of customers and affecting sales of them. These are Huawei Mate 20 Pro,
Samsung Galaxy note 9, Samsung S10 plus, ASUS ROG Phone, Sony Xperia XZ3, Google Pixal
3 etc. All of them are affecting market share and demand of iPhones and grabbing attention of
customers due to various reasons (Kinnaman, 2017). The causes of it are good battery backup as
compare to iPhones, low price, high quality, good functionality etc.
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Substitution Effects. Luxury vs. Necessity - From the point of view of customers
iPhones are luxury products as its price is very high. In order to show high level of standard of
living it is bought by various middle class customers and a slight rise in it may leave impact upon
demand. This factor shows that the product of more elastic as changes in price can affect sales of
iPhones.
Income effect. Percentage of income – Purchase of an iPhone represents a large portion
of consumer's income because price of them is very high. This factor states that demand is elastic
because if the income level gets decreased then clients will not be able to buy iPhones due to
higher cost.
In order to be highly competitive in the market it is very important for Apple Inc. to use
appropriate pricing strategy so that it can deal with the companies which are offering substitutes
to the clients (McNeil, Frey and Embrechts, 2015). For this purposes different options could be
analysed by the company which are discussed below:
Penetration pricing: In this pricing strategy companies set low prices for all their
products at initial level and when demand gets increased then price is increased by them. Main
aim behind use of it is to enhancement in market share and aware customers regarding the
products which are launched in the marketplace. It could be used by Apple Inc. to attract large
number of clients towards its iPhone series which will help it to capture larger area of market
(Stead and Stead, 2017).
Economic pricing: In this type of strategy low prices for all the products is set by the
companies in order to sell high volume of different products. Due to this, cost of promotional and
marketing activities gets decreased as low price is enough to attract large number of customers.
If Apple Inc. is willing to attract lower class clients, then it could be used by it which will be
beneficial for it to increase number of users of iPhones all around the world.
Competitive pricing: According to this strategy companies should set prices for their
products according to competitors available within the market. With the help of it higher level of
competitive advantage could be acquired by the company. In order to deal with end number of
competitors Apple Inc., can use this pricing strategy as it can help the company to retain its
existing market share and attract new clients.
Premium pricing: Business entities which are offering highly qualitative products to the
customers use this strategy to set price for them. It is mainly used by such companies which are
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launching a new product in the market which is having high level of competitive advantage. It is
considered as the most effective strategy at the beginning of PLC. As Apple Inc. is selling high
quality iPhones to the customers which are distinct from all the other existing companies in the
market so it could be used by the organisation to increase profits.
Skimming pricing: In this pricing strategy companies set high prices for all their
products when there is no competitor in the market. It helps them to generate higher profits
before a new company enters to the market. With the help of it, monopoly could be enjoyed by
an organisation if it is selling a unique product to the customers which is not sold by any other
enterprise in the market (Vanek, 2017). While launching a new iPhone with some specific
features Apple Inc. can use this strategy to set prices. With the help of it higher profits could be
generated by the company.
From all the above described strategies of price setting Apple Inc. should select
competitive pricing as it can help it to deal with all the competitors which are planning to capture
its market share by offering substitutes to the customers. In order to respond competition, the
organisation can select this option as it will be highly beneficial for it to grab attention of
different clients in the market place (Wu, 2016).
CONCLUSION
From the above project report it has been concluded that management economics can be
defined as a process which is used for the purpose of dealing with application of different
concepts, tools and theories which are related to economics. While planning for enhancing
demand for the products it is very important for the companies to analyse different elements.
These are substitutes, complements, income level of customers, their taste, preferences and
expectations, demographics etc. With the help of all of them all the negative implications could
be determined which may result in reduced demand of products. In order to meet expectation
level of clients it is vital for companies to adopt best pricing policy.
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REFERENCES
Books and Journals:
Bowes, M. D. and Krutilla, J. V., 2014. Multiple-use management: the economics of public
forestlands. Routledge.
Branch, A., 2014. Maritime economics: Management and marketing. Routledge.
Brickley, J., Smith, C. and Zimmerman, J., 2015. Managerial economics and organizational
architecture. McGraw-Hill Education.
Grafton, R. Q., Kirkley, J. and Squires, D., 2017. Economics for fisheries management.
Routledge.
Hitomi, K., 2017. Manufacturing systems engineering: A unified approach to manufacturing
technology, production management and industrial economics. Routledge.
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.
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
Sales of Apple Inc. in 2018. 2018. [Online]. Available through:
<https://www.scmp.com/tech/enterprises/article/2131811/apples-china-sales-grow-
second-straight-quarter-strong-iphone>
History and products of Apple Inc. 2019. [Online]. Available through:
<https://www.apple.com/uk/business/products-platform/>
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