FIN 370 Week 3 Learning Team Assignment Essay
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Learning Team: Current Market Conditions Competitive Analysis This paper will give a short history and descriptions of Apple’s I Pad minicomputer. It will also give factors that affect demand, supply, and equilibrium prices in the market. Issues that Apple faces that affect its competitiveness will also be addressed. Lastly, this paper will identify the long term profitability of the iPad including, price elasticity of demand, technological innovation, and cost structure. Steven Jobs and Steven Wozniak were friends in high school, which shared like interested in electronics.
They designed what would become the Apple and on April 1, 1976, Apple Computer was born. This is an American based company located in California. Apple specializes in design advancing, and the sales electronics, computer software, and computers. Apple is accredited for some of the most popular products of the modern world of technology such as: iPod, iPhone, iPad, and iTunes.
Apple has expanded its retail stores to fourteen countries worldwide with 408 retail store not to mention their online stores, Apple Store and iTunes.
Apple’s value as of March 2013 is $415 million, and it is the largest most publicly traded companies. The iPad is a tablet designed minicomputer that was released in 2010 by Apple. This device has equipped with Wi-Fi and has a multi- touch screen. There are five different versions of this particular tablet. Each has the capability to play music, record videos, a camera function, browsing the web, e-mailing. Games, GPS navigation system, and social networking can also be downloaded to the device. A market is as a collection of consumers and retailers of a specific merchandise or service. Demand is the actual volume that consumers are prepared and able to obtain. Quantity necessitated is the demand at a specific amount and is symbolized as the demand curve. The supply of a product is the quantity that manufacturers are prepared and capable to convey to the market the sale of the product.
The market can be analyzed by matching the supply and demand curve. Equilibrium is the connection of supply and demand curves. The equilibrium amount is the amount where the number demanded matches the number supplied. A change in price does not necessarily mean that the demand will change. It is more likely for the quantity demanded will affect the price. If the price is changed the curve will move along the demand curve. When the price is reduced the quantity demand will be increased. When the IPad was released, it was the only product in that market at that time. Therefore, at that time it absolutely controlled the tablet division. Some corporations tried to contend with Apple, but recognized their position just could not compete. The competition combated Apple by creating smaller tablet that is an unfamiliar place for Apple. This creation worked and caused Apple to lose sales. The competitors rapidly established their place in the market. Price elasticity of demand is an issue that our organization, Apple faces that affects our competitiveness and long-term profitability with regards to the iPad. “Price elasticity of demand and supply tells us exactly how quantity responds to a change in price.
As elasticity increases, quantity responds more to price changes. Demand or supply is elastic, if the percentage change in quantity is greater than the percentage change in price”(University Of Phoenix, 2010, pp. 154-157). After reviewing data, specifically targeted to the three types of iPads; their pricing, capabilities and memory storage, it was determined that if the price of the iPads increased; then the consumers may not purchase them (“What Is An Apple Ipad’s Elasticity Of Demand?”, 2012). The price elasticity of demand tells us that although apple is very technological innovative, but as it relates to price elasticity of demand; the quantity does not matter (all the changes, modifications, additions, advancements, etc.) consumers will still purchase the cheaper iPad (cost efficient) Apple should not invest in making more iPads. Consumer(s) can’t readily identify / understand the importance /significance of having more capabilities, memory, storage, etc. The consumer(s) would ultimately shop for and purchase the iPad that’s more conducive to their needs. Although apple has is very technological innovative, but as it relates to price elasticity of demand; the quantity does not matter (all the changes, modifications, additions, advancements, etc.) consumers will still purchase the cheaper iPad (cost efficient) Technological innovation is an opportunity for our organization, (Apple) to face that affects our competitiveness and long-term profitability with regards to the iPad. Through technological innovation our organization will be able to make improvements to something that already exists; such as the Apple iPad. Is the improvement to something that already exists. Technological innovation will always have a huge impact on Apple Corporation.
As it directly relates to the iPad, with the technological innovation, we are able to re-invest and re-invent the iPad. As with any product of this magnitude, the cost will increase, more features will be added, more storage, more variability, etc. As long as we are innovative and have a willingness to be creative we will consistently bring new items to the market that will steady intrigue the consumers and adapts to their technological needs. “Cost Structure (TC = FC + VC) is the costs of production, the identification of how costs associated with the production of a good or service are distributed throughout the process The cost structure consists of fixed costs, variable costs and total cost “ (University Of Phoenix, 2010, pp. 283-285). According to “Internal Factors: Costs ” (n.d.), ” When analyzing cost, the marketer will consider all costs needed to get the product to market including those associated with production, marketing, distribution and company administration (e.g., office expense).
These costs can be divided into two main categories: fixed costs and variable costs”. Fixed costs are costs that are spent and cannot be recovered (rent, credit interest, maintenance costs, security and administrative expenses, often salary). The major factors affecting fixed costs are (1) Changes in business organization, (2) Changes in technology applied, (3) Sale of manufacturing equipment and (3) Decisions to undertake advertising activities, etc. Variable costs are costs that vary with production. Factors affecting variable costs, including productivity and others that change the supply of and demand for labor (internal factors), (1) Involve costs of items that are either components of the product (parts/packaging), (2) Directly associated with creating the product (electricity to run an assembly line), (3) Coupons and (4) Variable costs, especially for tangible products tend to decline as more units are produced. This is due to the producing company’s ability to purchase product components for lower prices since component suppliers often provide discounted pricing for large quantity purchases (). Total cost the sum of all costs of inputs used by a firm in production TC = FC + VC Apple is one of the world’s most admired brands. Every year, as rumors about Apple’s products start to emerge web sites begin to speculate which suppliers are likely to win Apple’s business.
Getting a contract from Apple can lift a company’s value by millions of dollars. On October 22 Apple released a variety of new hardware and software. Apple’s new iPad is clearly focusing on improving the iPad product profit margin, while also maintaining it strong market share. One of the ways Apple can maximize their profit is by reducing the price of the original iPad mini. Another recommendation that can maximize the profit for Apple is to also make radical improvements to the full-size iPad and the mini. Apple has four products in the iPad lineup. While Apple decided to keep the price of the iPad 2 at $399 Apple dropped the price of the IPad mini to $299. The newest iPad, the new full-size iPad Air is thinner and lighter than the previous full-size iPads and much more powerful. The new iPad Air will sell at $499, while the second new iPad tablet the iPad mini with Retina display will sale for $399. By Apple dropping the price on the iPad mini this move should help Apple maintain market share with it strong competition. Strong competitors like Google and Amazon have recently dropped the prices on their popular tablets. Android tablets such as Google and the Kindle Fire have been gaining on Apple over the past year with the lower prices and higher performance.
The Kindle Fire HD sold for $139, this alone affected Apple’s revenue. The price decrease put Apple’s base iPad mini closer to the price of Google and Amazon’s top of the line tablets. Apple chose to drop the price of the original iPad mini tablets to maximize their profits with the competition. Overall by dropping the price, this will draw more individuals to the Apple iPad mini and increase Apple’s marginal revenues and profitability. This will keep Apple’s market share in competition with Google and Amazon without sacrificing too much profitability. Although, there are several competitors in this market; such as The Kindle Fire, The Windows Tablet, Galaxy Table, etc. none are able to uphold the standards that the iPad will carry. With all of our advancements in technology, research, investments, etc. we continue to be in high demand. If our corporation continues to be technological innovative and productive; then we will continue to grow and consistently re-invent. We will be more profitable, growing and will remain cost efficient; when it comes to manufacturing and producing the iPad. Based on the current market conditions, our competitive market analysis concluded that the Apple iPad will be an extremely productive and very successful.
Duhigg, C., & Barboza, D. (2012, January 25). In, China, Human Cost Are Built Into an IPad, p. The iEconomy. Internal Factors: Costs . (n.d.). Retrieved from http://www.knowthis.com/pricing-decisions/internal- factors-costs Reisinger, D. (2013, October 22). IPad 2 Survives iPad Air, Still cost $399. CNET, p. . University Of Phoenix. (2010). Economics, Eight Edition. Retrieved from University Of Phoenix, ECO365 website. What is an Apple iPad’s Elasticity of Demand?. (2012). Retrieved from http://applecoeconomics.wordpress.com/2012/05/17/what-is-an-apple-ipads-elasticity-of-demand-9/