Management Economics: Apple Inc. and iPhone Demand Analysis Report

This report provides a comprehensive analysis of Apple Inc.'s management economics, focusing on the factors influencing the demand for its iPhone products. It begins with an overview of the company, its history, and its position in the smartphone market, including a comparison of market share with competitors like Samsung. The report then delves into the economic factors that affect iPhone demand, such as the price of substitutes and complements, customer income, consumer tastes and preferences, consumer expectations of price, and demographics. Furthermore, the report examines the concept of price elasticity of demand, explaining how it applies to Apple's products and discussing factors that influence it, including the nature of the commodity, the availability of substitutes, income levels, and the level of price. The analysis incorporates data from various sources to support its arguments, providing a detailed understanding of the economic forces shaping Apple's business strategies and consumer behavior.

Management
Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Overview of Company:................................................................................................................3
Factors influencing demand of product: .....................................................................................5
Factors that influence the Price Elasticity of Demand:................................................................9
CONCLUSION .............................................................................................................................11
.......................................................................................................................................................12

INTRODUCTION
Economics simply implies to examination of various variables and tasks related to
economy and market environment like supply, demand, theory of scarcity etc. Business
economics is particular area of economics which relates to complete study of organisational,
economics, environmental and market related problems. It also contains economic concept and
theories based on assessment of variables impacting business entity, its management and
strategy. This study evaluating how economic information help in policy formulating within
national, international and organisational context and effect of government policies on
managerial decisions and government policies in context of Apple Plc. Company is multinational
company of US and holing place in largest four tech organisations. Study also includes various
economic concepts such as cost analysis, supply & demand and price elasticity.
TASK
Overview of Company:
Company is initially founded by Steve Jobs, Ronald Wayne and Steve Wozniak in year
1976. Apple Inc. is famous for unique designs and sell of smartphones, computer software and
providing online tech services. Company is operating its business through headquarter in
Cupertino, California. It is top brand in smartphones market. Its products includes smartphones
under brand name iPhone, iPad tablets, smartwatches, Air-pods wireless earphones, Apple TV
and smart speakers. Company has reported revenue amounting approx $265 billions in year 2018
worldwide. It employs approximately 124000 employees and maintaining about 520 retail stores.
Company has equal popularity in almost all countries and targeting rich and super rich
population. It can be understand easily as company is selling high price superior products and its
sales is increasing year by year. Company faced criticism on its labour practices applied by its
contractors, its unethical trade and environmental practices such as anti-competitive acts.
However these all circumstances fails to affect company's brand value and popularity.
Company's major activities includes designing, manufacturing, developing interface and
software, and selling and promotions of its products across the various countries. Apple's
products are revolutionized depending on human behaviour and technological evolution by
knowing the requirements and desires of clients and that will contribute to consumer satisfaction
depending on the presumed performance of the item that suits the expectations of the client.

Product Range selected:
As study requires selection of a specific product range so Smartphones chosen. It is most
widely used product and in current era this is crucial for study. Smartphone users are increasing
continuously which leads to an increase in market cap of smartphone industry. Technological
changes are very fast in this industry. Approx within 2 weeks a new smartphone range is being
launched by different smartphone companies. Apple has recently launched “Apple iPhone XS
Max ”. For study purpose this product is taken. Apple is top brand in smartphone market.
Popularity of iPhones is equal in US, UK, European and Asian markets. Company every year
launching a new iPhone and other tech products. Following is chart showing smartphone market
share in respect of different companies and number of smartphones are sold:
Global Smartphone Market Share (%):
2018
Q1
2018
Q2
2018
Q3
2018
Q4
2019
Q1
Samsung 22% 20% 19% 18% 21%
Apple 14% 11% 12% 17% 12%

Xiaomi 8% 9% 9% 6% 8%
Oppo 7% 8% 9% 8% 8%
Motorola 2% 2% 3% 2% 3%
Huawei 11% 15% 14% 15% 17%
vivo 5% 7% 8% 7% 7%
Others 31% 31% 28% 27% 24%
Global Smartphone Shipments (Millions of Units)
Global
Smartphone
Shipments
2018
Q1
2018
Q2
2018
Q3
2018
Q4
2019
Q1
Samsung 78.2 71.5 72.3 69.8 72.0
Apple 52.2 41.3 46.9 65.9 42.0
Xiaomi 28.1 32.0 33.3 25.6 27.8
Oppo 24.2 29.6 33.9 31.3 25.7
Motorola 7.6 8.3 10.6 9.5 8.9
vivo 18.9 26.5 30.5 26.5 23.9
Huawei 39.3 54.2 52.0 59.7 59.1
Others 113.1 100.9 100.4 106.4 81.6
https://www.counterpointresearch.com/global-smartphone-share/
These presented tables and graphs exhibiting the scope and importance of smartphones in
global economy. The recent figures shows that Apple is top brand in smartphone business. Only
Samsung has nearest figures in sales, market share and units shipped of Apple Inc.

Factors influencing demand of product:
 Price of substitutes and complements: It is most vital variable which affects company's
revenue by shifting customer base. Presently people makes a comparison before buying a
product, they compare product price, features and quality. As Apple is design their
products for rich and super rich class and fix its product price according to them. To bit
the popularity of Apple's iPhone XS Max, company's top competitor Samsung has
launched Samsung Galaxy S10 Plus. Due to this company's potential customers are
shifted towards Apple's competitors. Major reason for shifting is lower price of
Samsung's product as compare to Apple. Price of iPhone XS Max is Approx 1600 $
whereas price of Samsung Galaxy S10 Plus is approx 1050 $. Samsung also reduced
price of their other similar feature smartphones. Which provides a reason for customers to
choose Samsung. So price is most considerable factor which determines company's
product demand.
 Customer Income: Customers Income normally a positive or direct impact on product's
demand. As incomes of customers are increases demand of products would increase.
With decrease in customer income, most demand of superior and high value items
decreases. Inflation in economy is determining factor in respect of customer income.
Apple's product are highly priced and targets only no price sensitive customers.
Following are the two graphs showing recent trend in incomes of customers in US and
demand of Apple's product, as follows:

https://tradingeconomics.com/united-states/disposable-personal-income
https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-
2007/

Above graphs displays that with an increase in personal income of customers, there
simultaneous increase in apple's smartphones has been recorded. It is notable that come other
factors also have impact on product's demand but overall impact of customers income is positive.
 Consumer tastes & preferences: This is significant factor having major impact on
product's demand. There are numerous aspects which could influence customer's tastes
and preferences and leads to change in customers' perspective in respect of any particular
product. For instance, in case a top celebrity is engaged in endorsing a new item or
product than it can lead to increment in product's demand. Another example is that a fresh
health research comes out and announced that something in product is really bad for
customer's health, this could decline product's demand. In this context, Customers may
become tried or bored of certain ordinary low priced smartphone and therefore they
switched to iPhone. An increment in any brand's popularity would increase smart-phone's
demand. In Apple, after iPhone 6's defect and negative popularity company has changed
its advertising strategy and campaign. Due to this company succeed in achieving previous
performance and sales.
 Consumer expectations of price: Another factor influencing demand for products is the
perceptions of customers with respect to future commodity prices. If, for some cause,
customers expect the rates of the products to increase in the immediate future, they will
request higher amounts of the products in the current time so that they will not need to
pay higher rates in future. For instance, consumers expects that Apple will launch iPhone
XS Max that has more advanced features and memory, so customers decided to hold the
decision of buying other similar products with different brands. However it also affects
company's exiting product's demand.
 Demographics: Companies like Apple Plc operating their business across the world.
Different countries have different culture and issues. Apple generally launch its products
at different dates while considering appropriate event and dates in such different
countries. Some other brands in smart-phones endorse local celebrities to advertise their
products in different countries. Ignorance of demographic factor can lead to adverse
effects of company's product's demand. So corporates adopts different strategies for

business in different countries. Following is graph which shows increase and decrease in
sales of iPhone in different countries, as follows:
https://www.statista.com/statistics/382175/quarterly-revenue-of-apple-by-geograhical-
region/
The figures show Apple's quarterly earnings, divided by geographic location, from the
very first quarter of 2012 to the latest quarter. Throughout the second half of the 2019 economic
year, Apple produced $25.6 billion in income in the Americas area. Above chart exhibiting
company's sales of iPhones in different geographical areas. For company America and China is
major markets, so company is more focused about these countries. Company also determine
different products range as per company's image and demand in respective countries. Now
company's focusing on rest of Asia Pacific to bit it's competitor Samsung. Apple also select
advertising policies after conducting survey and research. For example, in India company offer
products while considering company's and competitor's status in country's smart-phone market.
Factors that influence the Price Elasticity of Demand:
Price Elasticity of Demand:
Price elasticity of demand implies to specific economic measure that determines
variations in product's quantity purchased or demanded while simultaneously change in product's
prices. It can be technically expressed as:

Price Elasticity of Demand = Percentage variation in Demanded Quantity / Percentage
variation in Price
It is applied by economists and other professionals to know in which manner demand or
supply fluctuates with fluctuations in product's price with aim to understand mechanism of
current economy. It can be understand as in case demanded quantity of any particular product
showing a wide variation as a result of consequences to fluctuations in prices, which is simply
called as "elastic" i.e. to what extent quantity demanded being stretched as compare to prior
point. In case quantity actually purchased resulted in minor variation with changes in prices, then
it called as "inelastic".
In this context, Apple has reported price elasticity of demand at nominal in respect of
iPhone XS Max as compare to elasticity at the time of launching of iPhone X, As company has
decided to reduce the iPhone X's price before launching iPhone XS Max. But in reality
response for iPhone XS Max is not as per targets. Beside this following are some general factor
affecting price elasticity of demand, as follows:
 Nature of commodity: Elasticity of demand in respect of a product is also influenced
and determined by such product's nature. For different people nature of product may
differ, as a particular product for an individual may be necessity, a luxury or a comfort.
In case a product is necessity such as medicines, vegetables, food etc., than product's
demand normally considered as inelastic because it is needed for individual's survival and
demand not changes so much as price changes.
In case a product is comfort such as refrigerator, fan etc., than demand of product is
normally elastic as customer can delay its purchase.
In case a product is luxury such as iPhone, Luxury cars etc., than demand of product
would be normally more elastic.
 Availability of substitutes: More elastic demand will be for a product with wide range
of replacements and substitutes. The cause is that such a tiny price increase will cause
consumers to do for their replacements. For instance if apple increases its iPhones price
than sales of Samsung's product would be increase. So, availableness of product's
substitutes leads to demand sensitive for a change in product's price. Whereas product
with no or few substitutes would be less elastic.

 Income Level: Demand Elasticity in respect of any product is normally low for
customers which are non price sensitive as comparison of price sensitive customers. This
is due to that not price sensitive customers are not normally influenced by any change in
price. However, price sensitive customers are extremely influenced by changes in prices.
In this context, Apple has customer group who belongs to non price sensitive category, so
demand for them is less elastic.
 Level of price: It is also a determining variable in respect of price elasticity of demand.
High priced products like 4K TV, laptop and so on, shows high elasticity in demand
because demand of such product is highly sensitive with regards to changes in prices.
Whereas demand of cheap or inexpensive product such as match box, buttons, needle etc.
are inelastic. Means that demand of these products do not changes so much with change
in price. As iPhone is costly product so it is product with high elasticity of demand.
 Postponement of Consumption: Products such as cookies, soft drinks etc. are products
whose demand is not so much necessary or urgent, normally having high elasticity in
demand because consumption of such products could be easily postponed or deferred if
any increase in prices is reported. Whereas, products with urgent or necessary demand
such as essential drugs shows in-elasticity in demand as of immediate requirement of
these products.
From above discussion it has been analysed that Apple offers a costly product and having
non price sensitive customers so company's product shows less elasticity of demands. Company
is enjoying a good brand value in market and customers are ready to buy company's product even
at high prices.
Pricing Policy: Company should maintain their prices at high as company has non price
sensitive customer group. Company is require to maintain only its brand image in market by
providing super reach feel from its products. Its competitors can bit company by offering
products at lower price but they can not touch its brand image all over the world. Considering all
the above points following chart is showing elasticity of its product's demand. Company is well
know for its product's design and quality, and also company is not so affected by making
fluctuations in product's prices. In different geographical locations company facing different
elasticity in demand but overall demand elasticity of company is low with changes in prices.

CONCLUSION
At last from above study it has been founded that business economics is crucial variable
for corporates as it help to determine viability of business decisions. Various concepts defines
economic and business stability of business entities while assisting them in instantaneous
decision-making. These also facilitates business managers to make a complete comparison of
economic and financial variables. Economic concepts and other quantitative techniques are the
foundation for micro-economic evaluations of variables that affect companies. Business
economics is indeed an essential component of conventional economics and it is an expansion to
existent organizational issues.