Management Economics Report: An Analysis of Apple Inc.'s Market

This report provides a comprehensive market analysis of Apple Inc., focusing on its historical background, product offerings (specifically the iPhone), and competitive position within the telecommunications industry. The analysis includes an examination of Apple's sales and revenue status, demonstrating its financial performance through a five-year income statement. The report delves into the market structure of the telecom industry, identifying it as an oligopoly and discussing the characteristics of this market type, including high barriers to entry and the influence of a few dominant players. Furthermore, the report critically discusses different types of market structures, ultimately suggesting the optimal structure for Apple Inc. based on its current operations. It also offers key suggestions regarding government interference in Apple's operational activities, considering the societal benefits that can arise from such interventions. The report concludes with a summary of findings and recommendations, supported by references to relevant sources.

Management Economics-2

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Historical background and overview of Apple with its products/services..............................1
2. Market analysis of Apple Inc. for reviewing its competitive image including sales and
revenue status...............................................................................................................................2
3. Market structure of telecom industry.......................................................................................4
4 a) Critical discussion on types of market structure to suggest the optimal structure for Apple
Inc................................................................................................................................................5
4b) Key suggestions on interferences of government on operational activities of Apple Inc. in
terms of societal benefits.............................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management economics refers to one of the important concept that mainly deals with
various applications and theories, to solve practical problems of business. Applying this subject
in business, helps in measuring the performance and way for making improvement in the same,
to run company effectively (Thampapillai and Ruth, 2019). To understand its role in business
environment, a study is conducted over telecommunication sector in present report, by choosing
Apple Inc. as main company and one of its products on iPhone. This firm is targeted due to its
largest presence in given industry, where it has expanded business in all over the world. For this
purpose, an in-depth study is conducted by evaluating its historical and current position of
respective firm in given sector. Along with this, different forms of market structure are being
critically analysed for recommending which one is best for present company, to run business
competitively. Furthermore, key suggestions either for lesser or greater government intervention
on the production of mobile handsets are made, by considering societal benefits.
MAIN BODY
1. Historical background and overview of Apple with its products/services
Today, in development of economy, telecommunication industry has played a main role in
every country, where investment in telecoms lead to generate a high growth dividend because it
helps in reducing costs of interaction, expansion of market boundaries, as well as enormously
inflates the flow of information (Nan and et. al., 2019). Modern revolutions in this sector like
‘just-in-time’ production mostly relies completely on the efficient and ubiquitous network of
communications. Along with this, increasing demand of mobile phones, laptops and other
telecoms itself stimulate the economic growth, as to meet it leads to utilise more resource for
production of same. In this regard, Apple Inc. is one of the best example in telecommunication
sector which contributes a large share in development of related products. At first, this firm deals
in computer business and founded in 1977 but after launching the first series of iPhone by Steve
Job in 2007, it has shifted to Apple electronics firm with a great financial success (Economic
Analysis of Apple Company, 2013). The headquarter of this firm is located at Cupertino,
California of United State. Today, after Samsung, Apple Inc. in electronics industries has
become the second largest IT company in the world, as well as third largest manufacturer of
mobile phone after Nokia. The manner in which Apple designs, produce and develop its
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consumer electronics devices such as series of iPhone, Mac book, Mac computers, Apple TV,
iPad, iPod music player and more, made this firm as one of the expensive manufacturer in
telecom (Li, 2018). All these devices run on a same operating system iOS which has been
developed by Apple Inc. itself. This software is similar to the Android system and could be run
in Safari web browser, iTunes media browser and in App store. Along with this, respective firm
has also introduced some specific features on its apps, like iStudy, iWork productivity and iLife
creativity that suites for satisfying millions of its user at world-wide level. Through selling near
about 8.8 million mobile handsets in 2010, iPhone has become one of the most widely sold
product in the United States (Hanifah, Rahayu and Dirgantari, 2018). After then, Apple
Company continuously has made development in this product and introduced a series of iPhone
range from iPhone 1 to iPhone 11 Pro till 2020, which shows its highest market share at global
level.
2. Market analysis of Apple Inc. for reviewing its competitive image including sales and revenue
status
In telecom sector, Apple Inc. has become a technology giant and a dominant household
name, which has attained its global leader position by launching mobile phones (a series of
iPhone), personal computer devices (Macintosh), software (iOS), electronic accessories, tablets
(iPod) and more. It has completely revolutionised the smartphones by introducing most
innovative and secure features in iPhone series (Chan, Selden and Pun, 2020). However, the
moment when this company has started its productions, demand for its computer products was
low. But from the last few decades it has made a tremendous progress in mobile industry, where
demand its mobile handsets and other digital products are continuously increasing. Along with
this, a number of factors that increases demand and stimulate itself in contributing a major share
in economic development. It includes loyalty facilities as well as technical innovations, where
introducing a range of substitutes of its gadgets, allows Apple to retain its demand at a high level
(Nan and et. al., 2019). In addition to this, popularity of brand name of Apple Inc. with its logo is
recognized at global level, that helps in developing willingness among customers to its products
easily. With reference to supply side, Apple Inc. always experience a positive shift in the supply
curve when changes occur in price for amount of raw materials and production.
Economic growth can be measured in terms of positive alteration within level of goods and
services that are produced by a nation over a certain period of time (Helmers, 2018). A constant
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growth in this regard, lead to raise living standards of people with increase in opportunities of
employment. Therefore, expansion of telecommunication market of companies like Apple,
Samsung, Sony and more, results in offering more employment to people, for raising their living
standards which would also make them able to afford the more expensive products. Currently,
Apple has established more than 510 retail stores and employs over 137,000 people as full time
worker, in 25 nations. All these facts indicate high brand loyalty of Apple and its major
contribution in economic development at world-wide level (Schmit and et. al., 2019). Therefore,
all these things put a significant impact on increasing demand for its products or as an indicator
of aggregate demand for running business successfully. Furthermore, to ascertain its financial
position and analyse its competitive factors, an Income Statement of last five years has been
presented as below –
Five Year Income Statement of Apple Inc.
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 273857
Cost of revenue 140089 131376 141048 163756 161782 169277
Gross profit 93626 84263 88186 101839 98392 104580
Operating expenses
Research and development 8067 10045 11581 14236 16217 17884
Sales, General and administrative 14329 14194 15261 16705 18245 19558
Total operating expenses 22396 24239 26842 30941 34462 37442
Operating income 71230 60024 61344 70898 63930 67138
Interest Expense 733 1456 2323 3240 3576 3049
Other income (expense) 2018 2804 5068 5245 5383 4228
Income before taxes 72515 61372 64089 72903 65737 68317
Provision for income taxes 19121 15685 15738 13372 10481 9893
Net income from continuing
operations
53394 45687 48351 59531 55256 58424
Net income 53394 45687 48351 59531 55256 58424
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Net income available to common
shareholders
53394 45687 48351 59531 55256 58424
Earnings per share
Basic 1.54 1.39 1.55 2 2 2.22
Diluted 1.54 1.39 1.54 1.99 1.98 2.2
Weighted average shares
outstanding
Basic 34514 32818 31297 29726 27701 26363
Diluted 34751 32995 31504 29995 27888 26596
EBITDA 84505 73333 76569 87046 81860 82899
3. Market structure of telecom industry
The telecom or mobile industry refers to be a good example of
oligopolistic market, which mainly consists small number firms who are
operated as interdependent and with existence of less or non-price
competition (Domon, 2018). Therefore, market analysis of Apple Inc. with a
substantial share of approx. 12.1%, displays all such characteristics that
resembles with oligopolistic structure. The influence of such market structure
can be seen over high barriers to entry in terms of economies of scale,
capital requirements, product differentiations, high investment on R&D
(Research & Development) for innovation of new models of smartphones.
But existence of both non-price and intense competition in smartphone
industry, arise difficulties for new entities to enter into this market easily (Lv
and Wan, 2019). It also provides evidence about factors where despite of price,
specification of handsets as battery life, storage capacity, camera
capabilities, security mode and all, are concerned more while purchasing the
same, by consumers. Therefore, based on these reasons it has been
concluded that Apple has operated its business in oligopoly with high degree
of market power.
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Apple Company is considered as the most prevalent and prominent
mobile manufacturers within oligopoly market structure, where operating
business in this sector, give advantage to gain interdependence in decision-making especially in
price strategies, because any small changes in price of handsets and other digital devices of one
firm impact directly on rivals as well (Lin and et. al., 2019). To retain high position in this sector,
Apple Inc. employs aggressive as well as defensive marketing techniques for achievement of
large market share, where by introducing more new innovative features in its digital devices
especially in iPhone series, the demand of its products is continuously increasing at global level.
Furthermore, it has been analysed that Apple Company is passionate about designing, increasing
creativity as well as selling world’s most innovative digital devices and software (Chan, Selden
and Pun, 2020). This vision statement unites entire shareholders of respective firm as a team
each and every day with a hallmark of its customer-driven culture.
4 a) Critical discussion on types of market structure to suggest the optimal structure for Apple
Inc.
Market structure can be defined as characteristics of business environment, in which a
company operates its business. It differentiates a firm in terms of presence of competition,
interdependence of decision making among firms, product differentiability, products’ elasticity
or inelasticity etc. In general, market structure can be classified majorly into four main forms as
oligopoly, monopoly, monopolistic and perfect market structure (Hanifah, Rahayu and
Dirgantari, 2018). Hereby, within monopoly market, overall control over price of
products/services are gained by a single firm, so it creates high barriers for entry or exit of new
entrances. On contrast, oligopoly is completely different from monopoly market structure, as
area mostly dominated by few but large employers including limited competition either with
differentiated or homogenous products. Therefore, for entrance in this market, large finance need
to be invested for new firms which limits the opportunity for small ones (Li, 2018). While,
perfect competitions illustrate the presence of numerous firms that operate business at small or
medium scale, henceforth, no single firm get advantages for possessing the market power. In
context with monopolistic competitions, firms get more power to generate high revenue by
setting price of their products at own manner. But cannot operate over long run approach, due to
low entry barrier that allows new entrepreneurs for grabbing consumers’ attention.
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In context with Apple Company, as currently it operates business in oligopoly market, that
gives advantages of fewer competitions with large barriers of new entrances. Based on whole
new idea on android and smartphone, it has established an intelligence and innovative electronics
navigator, also known as "Siri" in its iPhone series as well as in iPad build-in system software, to
make its users for more conveniently handling their mobile devices (Economic Analysis of Apple
Company, 2013). In this regard, such a brilliant idea aids a whole new concept in smartphone
regarding with human brain supporting. This would make iPhone as an intelligence device that is
comprised with communicating, messaging, memorising, data providing, gaming, calculating
and networking. So, all these features indicated that operating business in oligopoly market, lead
to Apple Inc. in running its business successfully.
4b) Key suggestions on interferences of government on operational activities of Apple Inc. in
terms of societal benefits
Since it has been evaluated that mobile or telecom industry is one of the fast developed
industries, in which all large companies have set their growth at global level, by expansion in
other nations. Therefore, considering over major contribution of this sector in enhancement of
economy, including role in giving direct and indirect employment to both highly skilled and
semi-skilled people, government is required to put more interventions of the same. It includes
giving support to firms operating in this industry for further expansion of business (Thampapillai
and Ruth, 2019). In context with Apple Inc., one of the major keys behind its success is its ever-
present concern on evolution of mobile handsets, where it has long been known to reel of its
sales success in a majority from continuous innovations in iPhone series and other digital
gadgets. But a number of factors present that influences the operational activities and business
policies of telecom firms. It includes inflation which refers to a general and progressive increase
in the price of goods or services, therefore, has a great impact on firms’ operations (Athey and
Luca, 2019). For an instance, with inflation, costs of raw materials required for production of
mobile phones will be more, as well as labour cost also might be raised under this condition, so,
all these things lead to increase costs of production. Consequently, to respond on such situations
price of Apple's products also be adjusted as per inflation period, which in turn lead to decline its
demand.
Considering the societal benefits, as it has evaluated that innovations in mobile phones
has made life of people more easy, in terms of communications and interconnections with
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outsiders. But still production of this product at large scale, creates negative impact on
environment. Along with this, continuous usage of mobile phones and digital phone radiations,
effect negatively on health of users also, with arising a number of health issues such as B-cell
lymphomas, eye irritation, headache and more (Athey and Luca, 2019). Therefore, concerning on
effect of cellular phone on environment and health of public, Government emphasises more on
taking actions by introducing new laws and enforcing existing ones. But it might hamper the
trust between consumers and mobile phone companies, in terms of declination of sales. So, all
such interventions put threat on productions and sales of mobile phone industry, as well as
enforces Apple and other telecommunication companies to create better innovations for reducing
the negative impact of their products.
CONCLUSION
From all over the report, it has been summarised that concept and theories of economic
management helps economists and employers, to understand whole market situation and way in
which company is operating in a particular marketplace. Through this process, where a firm
lacks its productivity including the ways to improve the same, can be evaluated. Along with this,
knowledge and importance of various market structure, also aid companies in analysing the area
with key strategies, to move business competitively. It has also been summarised through this
report that for firms that deal in telecom industry, if operates in oligopoly market, then it would
make it easy for them to earn and retain longer sustainability in business. It also provides them
advantages to become market leader, by introducing more new features of communication
devices.
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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.
Thampapillai, D. J. and Ruth, M., 2019. Environmental economics: Concepts, methods and
policies. Routledge.
Nan, G. and et. al., 2019. An economic analysis of platform protection in the presence of content
substitutability. Journal of Management Information Systems. 36(3). pp.1002-1036.
Helmers, C., 2018. The economic analysis of patent litigation data (Vol. 48). WIPO.
Schmit, T. M. and et. al., 2019. Improving economic contribution analyses of local agricultural
systems: Lessons from a study of the New York apple industry. Journal of Agriculture,
Food Systems, and Community Development, 8(C), pp.37-51.
Domon, K., 2018. An Economic Analysis of Intellectual Property Rights Infringement: Field
Studies in Developing Countries. Springer.
Lv, H. and Wan, Y., 2019. Contracting for online personalisation services: An economic
analysis. Journal of the Operational Research Society. 70(7). pp.1149-1163.
Lin, S. S. and et. al., 2019. Comparative Analysis of Preannouncement Effect of New Products
and Market Reaction. International Journal of Information and Management
Sciences. 30(1). pp.87-97.
Chan, J., Selden, M. and Pun, N., 2020. Dying for an iPhone: Apple, Foxconn, and The Lives of
China's Workers. Haymarket Books.
Hanifah, S., Rahayu, A. and Dirgantari, P. D., 2018. Gambaran Brand Experience Dan Brand
Love Iphone Pada Komunitas Fanspage Facebook Iphone Indonesia. Journal of Business
Management Education (JBME). 3(1). pp.1-10.
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.
Online
Economic Analysis of Apple Company. 2013. [Online] Available Through: <
http://mingcheng0317125.blogspot.com/>.
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