Technology is
getting more and more advance everyday, from huge and big desktop to laptop ,
from big and bulky handphones into touchscreen smartphones. Apple Inc. plays an
important role in this advancement of technology. Apple Inc. is an American
multinational corporation that designs and manufactures consumer electronics
and computer software products. The company bestknown hard ware products
include Macintosh computers, the iPod and the iPhone. Apple software includes
theMac OS X operating system, the iTunes media browser, the iLife suite of
multimedia and creativity software, the iWork suite of productivity software,
Final Cut Studio, a suite of professional audio and film-industry software
products, and Logic Studio, a suite of audio tools. The company operates more
than 250 retail store in nine countries and an online store where hardware and
software products are sold.
Established in Cupertino, California on April 1, 1976 and incorporated on January 3, 1977, the company was known as Apple Computer Inc. for its first 30 years, but droped the word “Computer” on January 9,2007 to reflect the company’s ongoing expansion into consumer electronics market in addition to its traditional focus on personal computers. Apple has about 35,000 employees worldwide and had worldwide annual sales of US$32.48 billion in its fiscal year ending September 29,2008. For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2009. (Santiago A. Mirabal,2009)
Established in Cupertino, California on April 1, 1976 and incorporated on January 3, 1977, the company was known as Apple Computer Inc. for its first 30 years, but droped the word “Computer” on January 9,2007 to reflect the company’s ongoing expansion into consumer electronics market in addition to its traditional focus on personal computers. Apple has about 35,000 employees worldwide and had worldwide annual sales of US$32.48 billion in its fiscal year ending September 29,2008. For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2009. (Santiago A. Mirabal,2009)
Figure 1 : Shows history of Apple Inc.
In year 1996, Apple Inc. faced a drop in its business. Due to some unpredictable issues, Apple Inc. faced a
very bad fall in its business but in 1997 Apple Inc.’s late CEO Steve Jobs announced that Apple would join Microsoft to release a new version of software which is the Microsoft Office compatible with the Macintosh. Since then, Apple Inc. started to go up slope in its business again.
Figure 2 : Shows Apple Inc. revenue over the years
Apple Inc has high barrier to entry because it has
already conquer the mobile communication and media device market(60% of the
world’s touch panel capacity) and it is difficult for new competitors to come
into this market. Apple is now a trademark for media devices. Whenever people
talk about tablets or mobile phones, the first thing that will pop up in
people’s mind will be Apple. Apple has already built a very strong fan base
since its return in the 2000s and since then its product is getting more and
more well known throughout the globe. Although competitors can get the same
component but in limited quantity, therefore the price will be higher and by
that Apple Inc. place them at a cost disadvantage(MJ Fern,2011). This is the
reason why the market which Apple dealing has a high barrier to entry and is
difficult for new competitors to come into this market.
Although Apple Inc. has high barrier to entry and is
making a lot of profit, but the bad thing about the company is that it is being
shortsighted which could clobber the company(Henry Blodget,2013). When Apple first introduced the iPhone, it had
the market to itself, it was far ahead of its competitors. And by far the best
phone at that moment. But after that, several things has changed, Apple’s
competitors had caught up, the competitors are selling something similar to
iPhone at a cheaper price which helps the competitors to emerge in the market.
Besides that, another phone operating system which is Google’s Android system
has taken over the world and is the biggest and number one competitor for
Apple. Third party companies which are creating new applications for smartphone
makes the operating system more valuable and cause them to emerge in the
market. This causes the other operating system to emerge.
Figure 3 : Shows the growth of Apple's competitors
Despite all
these, Apple still has a high demand for its product. There are still a lot of
brand loyalty customers who always buy product from the same brand. Apple Inc.
has all its product designed in California and assembled in China, we can
assume that all of its supply come from China. We might be thinking if its
competitors are chasing up with Apple, how Apple maintains its demand in the
market in order to make profit. Apple will always come out with new products,
for example each generation of iPhone has a gap of one year between them which
mean Apple will launch a new iPhone every year, same goes to the other
products. Apple just launched its new iPhone 5S and iPhone 5C not long ago.
Apple maintain its demand by adding a new color as an option for the iPhone 5S
which is the champagne color and because of Apple never had this color in the
previous iPhone, so the demand for this color is very high and Apple’s CEO Tim
Cook said that they can’t keep up with demand. As for the iPhone 5C, it is a
cheaper version of iPhone which Apple created to target the cheaper market so
that everyone can afford an iPhone. “If
you look at the iPhone sales across the quarter, we were very constrained for
much of the quarter on iPhone 5. As we begin to produce more and ship more,
sales went up. iPhone 4 was actually in constraint for the entire quarter.
Sales remained strong. That’s how sales progressed along the quarter,” said
Cook. Overall, the iPhone provides 56pc of Apple’s revenue.(Tim Cook,
2013)
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As for pricing, Apple applies the notion of value which
is a pricing strategy that is driven by its focus on the
value—real and perceived—to its customers (S. Prakash Sethi,2012). The
customer is willing to pay a price that is equal to the product's perceived value
to the customer. Hence, as long as the customers are satisfied, Apple is under
no obligation to reduce its prices.
I would say that Apple products are quite inelastic.
Since it has already build a place in consumer’s mind, people are willing to
buy its product no matter how. For example, an Apple fan will buy its product
no matter what it is or a normal consumer will buy an iPhone even if the price
increases because he or she needs a phone. One of the conditions of pure
competition is homogenous product, all brands
are perceived as being exactly the same. Marketers do not want their product
seen as a "commodity" and attempt to differentiate their product.
If you want to be able to raise the
price of your brand above that of the competition, you have to differentiate
your brand. This means that you have to convince the public that your brand is
different and better. By not increasing the price, Apple is having pure
competition with its competitors, I would say that its product is inelastic because
people still buy Apple products although there are many different brands out
there selling similar products and Apple’s pricing might be a little bit higher
than the other products.
As a conclusion,
Apple Inc. is one the best company renown in the world. It has already been
through ups and downs and now it is still standing still dealing in its own
market. Apple has the strategy to face all the problems it encounters and ways
to maintain its demand so that it could make profit.
Reference
Blodget, H. 2013. Apple Is Being Shortsighted -- And This Could Clobber The Company. [online] Available at: http://www.businessinsider.com/apple-is-being-greedy-2013-9 [Accessed: 24 Oct 2013].
Reference
Blodget, H. 2013. Apple Is Being Shortsighted -- And This Could Clobber The Company. [online] Available at: http://www.businessinsider.com/apple-is-being-greedy-2013-9 [Accessed: 24 Oct 2013].
Carnegiecouncil.org. 2013. Two Faces of Apple. [online] Available at: http://www.carnegiecouncil.org/publications/ethics_online/0068.html [Accessed: 24 Oct 2013].
FernStrategy | Strategy Development for Technology Firms. 2013. Apple and Industry Forces. [online] Available at: http://fernstrategy.com/2011/02/17/apple-and-industry-forces/ [Accessed: 24 Oct 2013].
Warman, M. 2013. Apple: 'We can't keep up with demand' - Telegraph. [online] Available at: http://www.telegraph.co.uk/technology/apple/9822856/Apple-We-cant-keep-up-with-demand.html [Accessed: 24 Oct 2013].
Wikiwealth.com. 2013. Entry barriers are high (Apple Inc.) - WikiWealth. [online] Available at: http://www.wikiwealth.com/five-forces-competitor:apple-inc:entry-barriers-are-high-app [Accessed: 24 Oct 2013].
