Apple

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)

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)

The demand of iPhone 5S(champagne color) increased but the demand is still the same.

Figure 4 : Demand and Suply curve for iPhone 5S

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].

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].