Aug 16, 2019 in Economics

Strategies adopted by companies and market leaders depend on the existing market structures. The reason for this lies in the fact that various market structures create different opportunities and restraints for firms in terms of pricing and other related decisions. This paper examines the problem of market structures in relation to Apple, Inc. The strong market position of this company is an indicator of its proper utilization of the opportunities open to the current market structure. In general, Apple, Inc. demonstrates a very effective market performance, but further reforms may increase the company’s capitalization even further. Therefore, some relevant recommendations will be formulated in this paper.

Market Structure of Apple, Inc.

It is evident that Apple, Inc. operates under the conditions of monopolistic competition. Monopolistic competition refers to the type of market structures when a large number of producers sell differentiated products in the market. It means that these products differ from one another both in relation to their quality and price. On the one hand, firms try to select prices that allow maximizing their revenues. On the other hand, they try to promote their brands to make the demand for their products less elastic. In this way, they can impose higher prices. Firms operating in the monopolistically competitive market cannot influence the prices charged by other companies directly and consider them as “given”.

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Apple, Inc. operates in the consumer electronics industry. There are a large number of companies offering their technological products. These products differ substantially among companies, and the impact of the companies’ brands on consumer decision is very high. For this reason, Apple, Inc. promotes its brand using all available means. These strategies are effective, especially among young people. Apple, Inc. does not influence the prices of other companies but tries to select an optimal price according to the existing market demand for its products and the elasticity of consumer demand. Apple’s new products with low elasticity are typically priced higher than older products with high elasticity.

Other market structures do not allow analyzing the situation in the consumer electronics industry properly. Perfect competition is characterized by an unlimited number of producers, a horizontal demand curve and absence of any entry barriers. The situation in the consumer electronics industry is different. Thus, the number of consumers and producers is not unlimited. The demand curve has a traditional form and is not horizontal. Moreover, there exist some entry barriers (especially in the legal sphere). Oligopoly is characterized by a small number of firms with considerable market power. All companies depend on one another, and the prices under oligopoly are typically stable. It does not correspond to the situation observed in the consumer electronics industry. Monopoly is the market structure when only one producer exists. As the consumer electronics industry is characterized by a large number of producers, this market structure is also inapplicable.

Our Process

Level of Competition under Different Market Structures

It is reasonable to examine the level of competition faced by companies including Apple under different market structures. The first market structure under consideration is an oligopoly. It refers to a small number of producers that control the entire market. They typically supply homogeneous products, and the strategies of all companies depend on one another. It is especially true in relation to the selected prices. Therefore, firms are highly interested in maintaining stable market prices and obtaining substantial economic profits. If this implicit agreement is disturbed by any of producers, “price wars” may emerge. It may lead to a decline in prices to their competitive level. The level of competition Apple could face under oligopoly is low, and the company has an opportunity to obtain substantial economic profits.

Perfect competition refers to the situation when there is an unlimited number of producers and consumers in the market. The demand curve is horizontal, and the market prices are equal to companies’ marginal costs. No firm has the power to affect the existing market price. Companies do not obtain any economic profits in the long run under perfect competition. The level of market competition Apple could face under this model is extremely high. Monopoly refers to the situation when there is only one producer, and there are no close substitutes to its products. The demand for these products is inelastic, and the monopolist does not even have the supply curve and can select any point in the demand curve that allows maximizing its profits. The level of competition Apple could face under monopoly is minimal. In fact, a monopolist does not experience any competitive pressure; it is restricted only by the shape of the demand curve. Monopolistic competition refers to a large number of producers and consumers. However, the products offered are heterogeneous. Therefore, companies are mostly concentrated on non-price competition. They try to promote their brands and demonstrate the advantages of their products in comparison with those of their key competitors. The level of competition Apple actually faces under this market structure is high but not maximal.

Our Benefits

Competitive Strategies for Apple, Inc.

As Apple, Inc. is a commercial company, it is reasonable to propose the following strategies for maximizing the company’s profits in the long run. The first strategy refers to brand promotion, and this process can be improved further. It is necessary to compare the expected positive effects of brand promotion with the corresponding costs. If the marginal revenues exceed or are equal to the expected costs, then specific measures should be realized. Otherwise, the company should examine other available alternatives.

The second potential strategy refers to entering new markets. The developing markets are more dynamic, and the company’s long-term competitive positions will depend on its ability to meet the requirements and expectations of consumers from the developing countries. In particular, Apple, Inc. should examine the possibility of entering the developing markets in Asia and Eastern Europe. Consumers from developing countries are usually more sensitive to any price changes, and the company will have to pay more attention to price competition.

The third potential strategy refers to more effective targeting of consumers. Currently, Apple, Inc. mostly is oriented to the needs of younger people, whereas the needs of other population groups are neglected. As a result, the largest fraction of the company’s revenue comes from young people. However, the structure of revenue may change if a proper examination of consumer needs and preferences is performed. Apple’s marketing specialists should consider the dominant differences among various population groups and assess the elasticity of their demand. On this basis, the company can make rational decisions about the desired characteristics of its products and optimal prices.

The first strategy will not affect the company’s supply but may increase the demand for products. As a result, the price elasticity of demand may decline, and the company may charge higher prices. The market structure (monopolistic competition) allows implementing the strategy to the maximum possible extent as the non-price competition plays a crucial role under such conditions. The existing government regulations do not create any problems for the companies’ brand promotion. The second strategy can increase both the company’s supply and the market demand for its products. The price elasticity of demand may increase as consumers from developing countries are more sensitive to price changes. The market structure in the consumer electronics industry is similar in all countries, and no substantial problems should emerge in this field. Government regulations allow the proposed market expansion of multinational companies.

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The third strategy will change the structure of the company’s supply and increase market demand. The elasticity within every new group will decline, and the company will be able to increase its prices. The market structure of monopolistic competition encourages the effective targeting of consumers. Domestic and foreign government regulations do not prohibit targeting. Thus, all the above-discussed strategies seem to be effective according to the analyzed criteria.

Recommendations regarding the Company’s Strategies

Although the above-mentioned strategies seem to be well-supported and potentially profitable, it is reasonable to make the following recommendations. Ethical implication of the first strategy is that Apple, Inc. will focus on its advantages in comparison with other companies. In general, this strategy is ethically acceptable (as the company uses objective information) but not optimal (as Apple, Inc. stresses only its strengths and neglects those of other companies). This strategy aligns with the company’s current values as the brand promotion has been a key element of Apple’s vision from the very beginning. This strategy does not align with my values as I believe that it is necessary to recognize the strengths and advantages of competitors’ products if they exist.

Ethical implication of the second strategy is that consumers from developing countries should also be able to enjoy Apple’s latest products. Moreover, they may also get an opportunity to express their attitude towards the company’s products and influence their future development. Thus, it seems that the second strategy meets all ethical requirements. This strategy aligns with the company’s current values as Apple, Inc. considers the rapid market expansion as one of its key priorities. This strategy also aligns with my values as it aims at serving the needs of the maximum number of people.

 

Ethical implication of the third strategy is that differences among the needs of various consumer groups will be taken into account. Thus, the company will consider not only the preferences of young people but other age groups as well, which seems to be ethically just. It is consistent with the company’s current values as it tries to address a variety of consumer needs. It also aligns with my values as I believe that the interests of all consumers should be equally important for any modern company.

It may be concluded that Apple, Inc. operates in the monopolistically competitive market. The impact of both price and non-price competition is significant. Although the current company’s operations are highly effective, they can be improved with the help of the proposed three strategies. The first one refers to relying on brand promotion and ensuring that marginal revenues exceed marginal costs. The second strategy refers to expanding the company’s market share in developing countries. The third one refers to orienting to differences among various population groups. All three strategies are effective according to the key criteria, but the second and third ones are preferable from an ethical point of view.

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