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Apple Inc Case Solution
Apple Inc. is one of the world's great multinational corporations. It specialises in designing, manufacturing and marketing media devices, telecommunication devices, desktop computers, mainframes, processors and handy digital music players. The company also designs and forms the particular software for their own devices. The Apple Inc. was originated by Steve Wozniak and Steve Jobs, and it established on the 3rd of January 1977. It is built in Cupertino, California. In the beginning, the company has struggled to survive in the market because their compatibility at that time was limited as Microsoft Windows was more popular as well as predominant (Lüsted, 2012).
Though, with the passage of time, Apple Inc. has primarily developed into a monopoly in several sectors and into an oligopoly in some other sectors, exceeding all other comparable organisations in the market of electronics. This research paper aims to explore Apple Inc. from the microeconomic perspective and also in the light of oligopoly and monopolistic theories.
Following questions are answered in this case study solution
The Theory of Monopoly and Apple Inc.
The Theory of Oligopoly and Apple Inc.
Case Analysis for Apple Inc
2. The Theory of Monopoly and Apple Inc.
Monopoly is such a market structure that is characterised by a single seller who sells a unique and distinctive product in the market. The monopolies can get benefit from economies of scale and can also maintain the profits in the long run. In a monopolistic market, the seller does not face any competition because he is the lone seller of goods having no close substitute (Machlup, 1952).
Demand and Supply
Consistent with Forbes, Apple Inc. is now one of the most powerful and dominant brands in the world. The customers of Apple even agree to line up for hours irrespective of the weather conditions with a purpose to become one of the foremost to own Apple’s latest product. Given below is a diagram that shows the change in demand before and after the launching of iPod in 2001. In the figure, the demand increases and then changes from D0 to D1 (Forbes, 2012).
As stated by the theory of monopoly, the demand curve shifts have been defined as the changing point of demand curve towards the right or left resulting from a change in the fundamental factor of demand. This indicator demonstrates that Apple Inc. is a monopoly amid several existing market structures (Economics Online, 2016).
As the owners of the Apple Inc. know that there is a demand for their products in the market, so they will sell the products at a higher price. However, it is not only the price that affects the demand for Apple products, yet there are some other factors too. Hence, it is a shift in the demand curve rather than a shift beside the curve. The prior equilibrium for Apple products has shifted from (D0, P0) to (D1, P1). It indicates that the people are ready to pay even slightly higher prices for Apple products because Apple is an innovative company that produces advanced products. In addition to that, Apple is familiar with the policies and strategies that help in keeping the demand for their products high. Thus, whenever Apple introduces a new product, in spite of what new features are present in it, customers still buy these new products. They completely consume their resources and frequently check the status of upcoming products in the market (Cruikshank, 2006).
Now days, Apple has a huge range of listings that includes the iPods, iPhones, iPads, iMacs, Mac Pros and MacBook's. As Apple Inc. is a leading innovator in today's market, therefore, various other competitors have also developed in the market that are trying to compete with Apple's technology. However, Apple is still a prominent innovator in this rival market (Ahuja, 2009).
3. The Theory of Oligopoly and Apple Inc.
An oligopoly is such a market structure in which a few, large firms dominate and control most of the market. In an oligopoly, the market is shared between various firms and all these companies usually sell the similar goods and services. Oligopoly is considered most typical market structure where a firm can be affected by the price and output of other firms as well (Vives, 2001).
The two main products of Apple Inc. are software and hardware. In the hardware market, the market structure of Apple is oligopoly whereas it is monopolistic in the software market. Oligopoly means that a few firms dominate the market, and the market is occupied by a large customer base. In the present era, the hardware group of Apple is competing in an oligopolistic market structure since Apple is not the single company that manufactures electronic goods. The market also includes other big firms that likewise manufactures and sells such electronic products like Samsung, Dell, IBM, Sony, Asus, etc. (Tey, 2013)
However, Apple Inc. has stayed on top of the business charts regardless of the ever-increasing competition in the business sector. Whereas low-price strategy helps the company achieve a bigger share of the business market, it also gives rise to a continuous risk of losing profit. The risk arises because there is a chance that the rival companies might also adopt a similar strategy which may cause a significant loss of the company's profit and share of the revenue. A twist in the demand curve of the company implies that its marginal revenue curve shows a break. Thus, the point where MR curve is cut by the marginal cost curves, the profit is maximised (Ballagan, 2011).
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