Microeconomic Analysis Paper

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MBA 502

MICROECONOMIC ANALYSIS PAPER

APPLE IPHONE

Lecturer: Greg Randolph

Linh Nguyen

1/25/2016

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A. SUPPLY, DEMAND, AND MARKET EQUILIBRIUM

I.The extent to h!"h the #$%%&' (n) )e*(n) o+ A%%&e !Phone.

Market structure of pple i!hone:

"ligopoly:

# fe$ large fir%s do%inate the %arket# Lagel &arriers pre'ent the entry of ne$ fir%s

II. Non%!"e +("to# th(t !*%("t the )e*(n) o+ A%%&e !Phone.

- S$/#t!t$te +("to

"ne of the factors that affects the de%and for pple i!hone is the su&stitution effect(

)a%sung is a %a*or s%artphone %anufacturer &esides pple( +heir products as Gala,y ) series

and Gala,y Note are al$ays co%pared to i!hone( +hey are alternati'e products to i!hone( )o%e

people prefer to &uy a )a%sung s%artphones instead an pple i!hone( -ence. a change in

uantity de%and for the products of )a%sung $ill lead to change in the uantity de%and of

i!hone( or e,a%ple. )a%sung discount their product price or introduce a ne$ product to

%arket. then the de%and for the )a%sung phones $ill increase( t that ti%e. uantity de%and for

the i!hone $ill fall( ccording to the graph &elo$. it is possi&le to assess the correlation &et$een

the uantity de%ands of pple i!hone and )a%sung s%artphones fro% the first uarter of 2011

to the th uarter 201( t can &e easily found in %ost of the ti%e. de%and for the product of

i!hone and )a%sung s%artphones changed interchangea&ly: if i!hone3s uantity de%and

increased. the uantity de%and of )a%sung s%artphone reduced and 'ice 'ersa(

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1!$e - )a%sung and pple sales of s%artphone sales $orld$ide fro% 1st4 2011 to th4

201 Lee. 2015

2 E"o#'#te*

pple created an ecosyste% for all their products included Mac7ook. i!od. i!ad

and i!hone( 8sers are ai%ing to &uy other pple products $hen they already o$n one(

or e,a%ple. an user $ho o$ns a Mac7ook and or i!ad $ill likely choose to &uy a

i!hone instead a phone $hich running the ndroid operating syste%( +herefore. the

de%and of other products of pple can affect the de%and of i!hone and 'ice 'ersa(

+he de%and of the products of pple see%s to increase or decrease relati'e to

each other:

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1!$e 2 pple3s sales of products sales $orld$ide fro% th4 2011 to 2nd2012

3Tho*%#on 20-54

III. Non%!"e +("to# th(t !*%("t th(t !*%("t the #$%%&' o+ A%%&e !Phone.

- Te"hno&o'

f technology of supplies are %ore ad'anced. pple $ill ha'e the opportunity to

offer %ore products( or e,a%ple. pple had repeatedly delayed the introducing of

i!hone $hite 'ersion&ecause of a lack of 89 protection $hich effects i%age uality

7en a%%#;ones. 2011( +herefore i!hone $hite 'ersion $as deficient in a long ti%e

despite rising de%and(

2 Re#o$"e#

4
http://www.pcworld.com/author/Ben-Camm_Jones/http://www.pcworld.com/author/Ben-Camm_Jones/


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Resource is a nonprice factor affecting the supply of i!hone( deficiency can

cause decreased ra$ %aterial product nu%&er( or e,a%ple. the -o%e key fingerprint

sensor of the i!hone are %anufactured fro% sapphire Reed. 201


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1!$e 9 Glo&al pple i!hone sales fro%


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1!$e 5pple i!hone 6) !lus costs to %ake( h%iele$ski. 2015

2 MANU1ACTURIN: COST

+his cost $as paid to contract %anufacturer o,conn( pple nc( orders

o,conn to produce a nu%&er of i!hone under contract( or e,a%ple: pple has ordered

@0 %illion units of the i!hone 6 A (? inch and the i!hone 6) A 5(5 inch( o,conn is

e,pected to initially produce this nu%&er of product that ha'e &een ordered( lan. 201

+he cost &ased on the nu%&er of products $hich has &een ordered is a specific nu%&ers(

-o$e'er. the cost $ill increase if pple nc( $ants to increase the nu%&er of products

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that they $ish the %anufacturing partners to produce or 'ice 'ersa( +his cost is

considered as 'aria&le cost(

8 RESEARCH AND DEELOPMENT

Bccording to its latest earnings report. pple spent a&out C1(1@ &illion on

BResearch and =e'elop%ent(D D )her%an. 201


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o,conn is the %anufacturing partner for the pple i!hone( heap la&or in hina

and not ha'ing in'est in factories help pple cut do$n i!hone production costs(


") is the operating syste% of the i!hones top strengths co%pared $ith its

co%petitors( 7esides the %a,i%u% support in the ecosyste% that pple has created

for their products( +he progra% also prioritiJes applications $ritten for the i!hone

ahead of other operating syste%s(

+he top concern of custo%ers a&out a ne$ phone is the &attery life( 9ersace. 201


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1!$e ;pple chipset suppliers( afar. 2015


"utsourcing i!hone is an e,tre%ely attracti'e $ork for co%panies $orld$ide(

+herefore. o,conn do not $ant to lose their contract to another co%pany( Bpple is such

an i%portant custo%er for o,conn. that the co%pany has its chair%an. +erry Gou.

o'erseeing production lines to %ake sure that e'erything is running s%oothly(Dlan.

201


n'esting in R E = is a top priority in the i!hone production process(

C. MICRO ANALYSIS PAPER

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I. MARKET STRUCTURE

1!$e


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s%artphone %arket. non#price co%petition does occur( +his is &ecause products are sold &ase on

&randed or the $ay they are %ade not the cost(

1!$e

=

Horld$ide )%artphone )ales to Fnd 8sers &y "perating )yste% in 2415 +housands of 8nits

Gartner. 2015(

Mergers also e,ists in the s%artphone %arket( s enterprises face the danger fro%

co%petitors and e%erging co%panies( +hey choose to %erge to sur'i'e( or e,a%ple. B+ech

giant Microsoft recently %erged $ith Nokia in an effort to le'erage its position in the

s%artphone %arket O +he 7otto% Line. 201

ro% the a&o'e factors: the s%all nu%&er fir%s. &arriers to entry. non#price co%petition.

kinked cur'e. %ergers> it can &e concluded the s%artphone %arket structure is oligopoly(

II. 1INANCIAL PER1ORMANCE

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1!$e > )hare of pple3s re'enue &y product category fro% the first uarter of 2012 to the

first uarter of 2016 )tatista. 2016

!hone sales contri&uted %ore than 50I of the total re'enue of pple nc in the last years(

+hus. &ased on pples financial statistics. it can assess ho$ the s%artphone %arket i%pact

pple( -o$e'er. i!hone is only partially affected &y oligopoly %arket due to se'eral reasons:

# irstly. i") operating syste% %akes a difference: Last year. ndroid and i") accounted

for o'er 6I %arket share of s%artphones %arket( lthough the %arket share gap

&et$een the t$o is large @2(2I and 1(6I. pple still holds %ore ad'antages o'er

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co%petitors( +he reason lies in ndroid is opened source and i") closed source operating

syste%:

P =ifference in ") $as the &iggest strengths of the i!hone( Hhen consu%ers

choose i"). they could only choose i!hone. &ut $hen they choose ndroid. they

ha'e a lot of choices( +his %eans the other fir%s ha'e a greater co%petiti'e

pressure. if their products do not %ake a &reakthrough feature difference fro%

co%petitors. failure is certain( or consu%ers. the i!hone has al$ays &een

different &ecause of the operating syste%( +herefore. there is a guarantee of

success for the i!hone co%pared to its ri'als(

P ") &ring a large nu%&er of loyalty custo%ers to pple &ecause of so%e

features that their %ain ri'als # ndroid ne'er achie'ed &efore: the &etter support

of the


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custo%ers to other co%petitors(

1!$e -0 )a%sung3s and pple3s ad &udgets d$arf those of the fi'e other largest

spenders( +riggs. 2012/ !rice e,ceeds the a'erage cost:

8nder oligopoly. pple iphone al$ays fi,ed i!hone prices are %uch higher than

production costs -a. 2015( 7esides. the ad'antages fro% soft$are caused i!hone prices

not &eing dependent on other ndroid co%petitors( !hone price reduction only $hen

they launch ne$ products # this speaks to the a&solute superiority of the i!hone co%pared

to their ri'als( pple i!hone pricing $ith a high cost and high profits since people are

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$illing to pay for it &ecause of the prestige that they get &y o$ning it. e'en if there are

products $ith si%ilar properties $ith prices lo$er(

1!$e --i!hone prices $ithout contract at released( aplin'estors. 2015


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fro% i!hone to an ndroid phone than an android loyal custo%ers s$itch to a different

&rand ndroid phone(or other operating syste%s s%artphone %anufacturers such as Hindo$s !hone

or 7lack7erry "). they do not recei'e the support fro% third party applicationde'elopers( RM nc( launched their first ndroid s%artphone %arks the end of

7lack&erry ")( gloo%y future can &e predicted for Hindo$s !hone(7ased on these difficulties of the co%petition. sales of the i!hone $ill &e

guaranteed for the generation i!hone in the near future( +he ne$ generation i!hone had

al$ays had higher sales than the older one is a testa%ent to this

III. POSSIBLE CHAN:ES

n the future. its hard to co%pete $ith the ndroid operating syste% on

s%artphone %arket share( lot of %a*or 'endors such as )a%sung. LG. -ua$ei. iao%i.

Leno'o. -+. )ony and %any other 'endors use ndroid for their de'ices( Hhile Google

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stri'es to pro'ide its operating syste% for as %any %anufacturers as possi&le. pple keep

i") for their o$n. $hich continued ensure a sta&le position for pple in the near future(pple decided to offer larger screen i!hones and it is their good decisions( +he

a%ount of products sold &y the i!hone 6 and 6 !lus increased 2


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;anuary 11. 2016. fro% http://$$$(statista(co%/statistics/26


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$as#no#1/

Microsoft#Nokia Merger 7rings Ne$ o%petition to )%artphone Hars S +he 7otto% Line(

201. pril 2( Retrie'ed e&ruary 15. 2016. fro% https://the&otto%line(as(ucs&(edu/

201/0/%icrosoft#nokia#%erger#&rings#ne$#co%petition#to#s%artphone#$ars

Reed. 7( 201


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;anuary 25. 2016. fro% http://$$$(for&es(co%/sites/chris'ersace/201

Documents

Microeconomic Analysis Paper