The Case of Apple Inc
Apple is a multinational that design Macintosh computers, IOS operating systems, iPods, iPads, iTunes store, smartphones, and other professional software. The corporation headquarter is in Cupertino, California. Steve Jobs and Steve Wozniak founded the multinational in 1976 (Grady, 2009). The corporation has more than 400 retail location in many countries. The first product was the Apple I followed by Apple II. The introduction of Macintosh computer became the benchmark for Apple Inc. This personal computer was the first to employ the graphical user interface and incorporate mouse movement.
The founder Steve Jobs left the firm due to conflicts and later returned in the midst of near collapse. Under the stewardship of Jobs, Apple launched the iMac and the iBook at low prices in the market (Dormehl, 2012). Apple introduced the ITunes Music Store to permit the downloading of digital music at reduced prices. The iPod invention is a preserve to the music lovers and comes in various iPod lines.
Currently, Apple has surged forward in manufacturing electronic devices that capture the latest technological features in the market. Apple has had a run of success and has relied on the iPhone. In the face of emerging competitors, the company has to involve other ideas to maintain the leadership.
Sources of Risk in the Operation of Apple
The company’s financial report cites risk, uncertainties, competition, and other economic factors. The company continues to face intense competition in the industry. There is pressure to deliver products in the market. Customers demand products in line with the technological advancements that frequently changes (Grady, 2009). Apple faces inventory risk associated with commitment to advance customer orders. The company has risks due to reliance on the manufacturing services provided by the third parties. The company faces risk of patent and intellectual rights and faces numerous litigation that use up funds for expansion. The company faces uncertain future given the war on terrorism, natural catastrophes, impending financial crisis that could jeopardize the company’s crucial activities.
Government Regulation Affecting Apple
Apple has a well position for any outcome due to the existence of predominant risks in the market that pose to destabilize the company’s operations. Regulatory risk normally threatens the future of Apple’s hegemony. The government has set up factory regulations to improve the workers condition in both the local and the overseas market. This regulation threatens the survival of apple in the economy. Apple has to adjust the cost structure and the delivery timetables that can force the products to sell at high prices in the market. The Antitrust officials in both the domestic and the overseas market investigate Apple Inc for anti-competitive practices in the firm. The antitrust laws are a threat to the operations of the firm and can affect strategic decisions and innovations.
The federal spectrum policies limit Apple’s business model that heavily relies on the wireless spectrum. The wireless providers cannot handle the demands of most multinationals data. The federal spectrum policies also limit the availability of new supplies (Grady, 2009). Apple can invest directly in the spectrum capacity by acquisition or independent ventures that are incapable to alleviate the risk of growth of the business.
New rules of privacy regulation can limit the power online and mobile services. Apple Ins comes under scrutiny due to the practice of retaining information on devices and this burdens the company. Consequently, Apple defends its own patent in the ongoing patent conflict with other firms that produce similar products. This suits come at an additional costs and use up funds intended for innovation purpose. Apple faces unexpected risks that lead to the firm spending colossal amounts in enticing the regulators. The unexpected risks disrupt the company’s operations since the rival firms get a chance to undercut the firm in crucial deals.
Apple’s Production Function
The production function for apple entails the relationship between the quantities of input per interval and the maximum output produced. Apple has many variables of production. A variable factor of production can correspond to one fixed factor of production. The company’s production function allows labor and capital to remain variable while holding other factors fixed. Apple has the capacity to produce at a certain output level while using a lot of capital and less labor and vice versa.
The Introduction of New Product and the Finance Impact
Apple introduces the iPod line and the iTunes store to provide entertainment facilities and an easier way to listen and purchase the digital media. The company unveils a strategy to provide portable music and revolutionaries the computer and the music industry (Reder, 2009). Apple has since launched a compatible iTunes that permit the window users to access the music store. The music store allows convenient subscriptions to download and listen to digital media.
Currently, Apple launches the iPhone and newer versions of the iPod line that have the latest technology. Apple TV is a wireless media that offers more than 50 channels (Dormehl, 2012). Apple unveils the iPad to fit in the Apple product line that has the latest apps.
Apple competes tremendously with other companies for market share for its products. The global market has aggressive price cuts that lower the gross margins. The company strategizes to launch new products in the market that have a short life cycle .Apple adopts the latest technology to enable advancements in the midst of strong competition. Apple’s ability to compete aggressively is in line with the introduction of new products in the market. The company continually launches new products with the latest technologies in the market. The company makes many investments and relies heavily on reach and development to ensure aggressive pricing strategy. Apple maintains a competitive advantage and has a healthy financial position. The current acquisitions and expansion programs illustrate the company’s financial strength. Apple is the only permitted manufacturer of Macintosh. The company’s financial position depends on its ability to improve the Macintosh and benefit from its design strengths.
Price Fluctuation for Apple Products
Price elasticity is the inverse relationship between price and demand. It is the percentage change of the quantity demanded over the percentage change in price. The industry of Apple Inc has many substitutes occasioned by intense competition that forces elasticity due to the proliferation of brands. The launch of Apple iPhone had a price reduction from $599 to $434, due to price elasticity of demand (Scott, 2008). Given the situation, the company lost close to 5 per cent of iPhone sales for every corresponding increase in price (Reder, 2009). Immediately after the launch of iPhone, the company applied market skim strategies to maximize the revenue. During this period, the price elasticity of demand was low and Apple immense on the profit margins. This brand of Apple Inc benefited from the early adopter occasioned by a high consumer base. The early adopters pay a premium price to determine the price of the product in the short fun. In the end the product experienced price elasticity of demand. This is because of the tendency of demand to respond to price change.
Apple Inc halves the price of the iPhone to sustain the product in the market. Apple lowers the price to benefit from first mover advantage. The law of demand cites that with an increase in the quantity demanded the price has to fall. The price elasticity of demand measures the response due to price fall (Douglas, 2012). Apple considers the iPhone brand as a luxury good. In this case, customers can postpone purchasing the commodity in the presence of substitutes in the market. Most consumers wait for increased competition that forces the luxury good to fall. The iPhone does not have direct substitutes in the market. Most of the iPhone consumers represent the middle and the upper class. The restriction of the iPhone dissuades the potential customers to look for substitutes and fuels market elasticity.
The company proposes the design of a multi-sided touch screen interface for input and output. The display will appear on an output display screen that receives a force on one of the interface. Apple could incorporate the force sensitive functionality of the wheel and a navigating menu. Apple considers the launch of a next generation mouse design that enable multi switch operational mode (Scott, 2008). When a user holds the mouse in the normal way the mouse pointer will appear. When the user holds the mouse downwards with a firm grip the cursor changes to navigation mode. Apple considers a telephone interface to aid in portable communication. This telephone will resemble the iPod wheel. A user will dial a number by rotating the wheel and selecting numbers from a display list on the telephone. The telephone permits touch screen display.
The touch sensitive digital media uses bezel to sense the touch gestures. The operations of touch and drop enable the device to either play, select, and exit. This device works like the iPhone and rotates. This device has a sensor that determines the rotation. One can modify the points of orientation around the bezel-controlled areas (Dormehl, 2012).
The multi-touch mouse has a sensor that detects mouse movement on the surface. The multi touch mouse has several points of detection that collect feedback on all the operation that are near.
Apples Profitability and influence of the Industry
Apple is a profitable company with a profit margin of $37.04 billion in the last four quarters. The profitability record of the company implies well-managed operations (Grady, 2009). Apple’s cash flows continue to accelerate from $9.14 billion to $9.91 billion as at December 2013. The company has a positive impact on the earnings growth and this illustrates healthy operations. The company’s total debt is 0.14 times the total equity. Apple’s operations generate $56.28 billion in earnings. This is a decline from $58.43 billion in 2012 (Dormehl, 2012).
Apple INC profitability ratios display a significant drop from 2011 to 2013. According to the Economic Value Added (EVA), the invested capital stands at $140.51 billion in the recent quarter (Scott, 2008). The profitability of the company appears sustainable as long as the company maintains the strong fundamentals.
The industry experiences a lot of competition and the market share of Apple goes down. To enable the survival of the company, Apple has strategized to lower prices and beat rivals in the market. Apple’s new pricing strategy will enable its products to compete effectively in the market. Recently, Apple experiences growth in the manufacturing scale and innovation prowess to deliver aggressive prices. The aggressive pricing reflects ability of the cooperation to push down cost in the industry (Douglas, 2012). This gives the corporation more power to influence the prices in the economy. Apple takes advantage of consumer’s buying power to acquire services at a low price. This enables the company to yield a large share of profit against the competitors.
The Area of Operation
Apple has to employ drastic measure to continue thriving in an industry that has immense competition. Recently the company experienced a share fall due to a conservative approach. The company has to de-bundle the software to maintain a competitive edge. Apple must seek absolute profit within the ethical constrains present. The company must contravene the absolutist goal of the founder and maximize on the software technology. Apple can lay out strategy to create operating systems for other computer firms and compete with Microsoft.
Some of Apple products appear in an oligopolistic market structure. The oligopoly has few competitors that control the market. The small firms maintain the position in the market since it is costly for the potential rivals to enter given the entry barriers. The industry of Smartphone has IOS, Android, and Windows phone in the contemporary world. The three operating systems continually add new features to beat the rivals. Other products of Apple such as iMac appear in the monopolistic market structure. This market has many competitors that ensure revenue share that is similar to remain in the competition.
Apple produces its products overseas to benefit from economies of scale, expertise, trade specialist, and other corporate partners. Apple creates more jobs to the overseas network of contractors than in the domestic market (Scott, 2008). Apple Inc relies heavily on the expertise from other countries. The overseas labor market is readily available and is flexible. Apple Inc is ahead of the competitors and benefits from the manufacturing process to sell its prices at low prices than the competitors.
Apple participates in the non pricing strategy by offering the customers distinct products from the rival markets. These products do not have substitutes in the market. Apple engages in a lot in research and development to design luxurious items that apply the latest technological designs.
Strategic Decisions in Apple Inc
Apple was near collapse and experienced a turnaround under the founder. The founder concentrated the firm on making long-term investments to sell few products and stir growth. The company market capitalization grew to become one of the largest multinational in the world. Apple has a culture of collaboration to necessitate synergetic effects. Apple maintains an integrated system in hardware and software in contrast to other computer firms. Apple has well organized industrial analysis, competitive advantage, coupled with innovation.
The marketers of Apple employ scarcity and social proof and break away from the status quo. Apple has marketing prowess coupled with intelligence, innovation, and creativity (Grady, 2009). The executive team of Apple Inc is among the first to launch in the electronics industry and proclaim on the effect of carbon footprint in the environment. Additionally, the team provided the consumers with apt information to aid them in evaluating electronic products. Apple employs a climate strategy and has development plans in the product development process.
Apple Inc due to its strategic decisions has been able to transform technology in the country. Apple is one of the companies that leads the industry in innovation and receives numerous awards in the recognition of some of its products. Apple spearheads the revolution of digital music together with supporting physical components.
References
Apple Inc. - Overview. (n.d.). Apple Inc. - Overview. Retrieved January 6, 2014, from http://investor.apple.com/
Dormehl, L. (2012). Different thinking: Steve Jobs, the counterculture and how Apple Inc. took over the world. London: Virgin.
Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint Education.
Grady, J. D. (2009). Apple Inc. Westport, Conn.: Greenwood Press.
Reder, M. E. (2009). Case Study of Apple, Inc. For Business Law Students: How Apple's Business Model Controls Digital Content Through Legal And Technological Means. Journal of Legal Studies Education, 26(1), 185-209.
Scott, M. (2008). Apple, inc. Westport Greenwood.
