Apple\'s marketing structure PDF

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Apple’s oligopolistic market structure and pricing strategy...

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Surname 1 Student’s Name Course Professor Date Apple Inc. Market Structure Analysis Apple Inc. is an American multinational company in the technological sector specializing in the manufacturing of smartphones, personal computers, computer software, tablet computers and other computer peripherals (Levy). The company has its headquarters in Cupertino, California, in the United States and is considered the biggest multinationals based on its value. As of August 2020, Apple became the first publicly traded United States Company to be valued at $2 trillion (Nicas). Apple is considered the fourth largest personal computer manufacturer in unit sales as of January 2021 (Conn). The company is also the world’s fourth-largest smartphone manufacturer in the world. Apple’s continued success over the years under the leadership of the current CEO Tim Cook is attributed to the high brand loyalty its customers have on their products and the company’s emphasis on quality. Apple’s market structure has also been an influencing factor in the success of the company. Apple currently operates in an oligopolistic market structure. An oligopolistic market structure is where only a few firms dominate the market ("Oligopoly"). In this type of market structure, other small firms operate in the same field, but only a few big companies dominate and hold the largest market share. For example, in the smartphone market only Apple, Samsung, and Huawei dominate the market, making Apple an oligopoly. However, in the high-end smartphone

Surname 2 market share, only Samsung and Apple dominate and control the biggest market share. According to research done on the global smartphone quarterly market data Apple and Samsung shipped 81.9 and 62.5 million smartphones respectively in 2020 ("Global Smartphone Market Share: By Quarter"). This is an indication that the two companies dominate the smartphone market. Another indication of Apple’s oligopoly market structure is its small output and high prices of its products. Due to the oligopolistic market structure that Apple operates in, the company can regulate the supply and demand of their products. The company achieves this by using a scarcity principle that it would not have maintained if it operated in a competitive market structure. According to Kurtz and Boone, limiting the product's supply makes the product seem more valuable to the customer than the product with an unlimited supply. Due to a lack of competition in Apple’s oligopolistic market structure, the company can manipulate the customers’ decision-making in buying their products by making them seem more valuable. This strategy leads to an increase in the demand for Apple products as customers' perceptions make them purchase the product even with price changes. Apple also uses the scarcity principle as an advertising technique where people are left eager for the product to be released, increasing brand loyalty and demand for the product sometimes even before it is released. This increases the sales of the product leading to more profits for the company. Apple’s oligopolistic market structure and domination in the smartphone market makes the company’s price elasticity inelastic. Price elasticity refers to the changes in quantity demanded or supplies when the price of the product changes ("5.1 Price Elasticity of Demand and Price Elasticity of Supply – Principles of Economics"). The price elasticity of demand refers to the changes in the quantity demanded after the price of a product or service is changed ("5.1

Surname 3 Price Elasticity of Demand and Price Elasticity of Supply – Principles of Economics"). On the other hand, price elasticity of supply refers to the changes in quantity supplied after the price of a product or service is changed. Hence inelasticity refers to low responsiveness to a product or service product change. Apple’s market structure and dominance, particularly in the smartphone market, makes it price inelastic as the people are willing to purchase their products even if they increase the prices. Apple products' consumers only care about the brand recognitions, making them loyal to purchase their products even if the prices go higher. The company also makes sure there is no substitute for a product by releasing one smartphone model over a long period, leaving the customers with fewer choices and options. The Apple products released are also an improvement of the previous product like the case of iPhones which creates an urge to improve consumers. This marketing strategy enabled by Apple's dominance in the market ensures that the customers buy the newly released product without worrying about the price tag attached to the product they are purchasing. Apple’s oligopolistic market structure also ensures that it has total control over the prices of its products. The company sets the prices of the products with little or no influence of outside factors. Due to their dominance in the United States market, the company utilizes price stickiness in their pricing strategy. Price stickiness is an oligopoly theory that involves a company setting a certain price for a product and sticking to it ("Oligopoly"). This price stickiness enabled by low competition or dominance in a certain market where the company does not have to conform to the rival companies pricing strategies. Therefore, Apple, enabled by its oligopolistic marketing structure, can set the prices of their products and have total control as they are not influenced by outside factors such as competitor’s pricing strategy.

Surname 4 However, Apple is now changing its pricing strategy as indicated by its current strategy to reduce its phones' prices for customers outside the United States. Also, the company intends to charge a higher price for the same phones in other countries around the world (Griffin). This decision has been necessitated by increasing the U.S dollar's strength, which is making their phones unaffordable in other countries around the world (Griffin). This strategy adopted by the company can be termed price discrimination. Price discrimination is a pricing strategy that charges people differently for the same product or service (Corporate Finance Institute). This also indicates an elasticity of demand in those countries; hence, sales will increase if Apple lowers their phones' prices to make them available for the people living in these countries. According to the company CEO Tim Cook, the company will lower the phones' price by resetting the prices to the previous local prices before the dollar rises in those countries (Griffin). This is price discrimination as it means that people in other countries may be charged less for the same phones than people in the United States. Strategy is also essential for companies that are interdependent as it helps them anticipate the rivals' responses. These interdependent companies have to wait and see what the rivals do or choose to implement the strategy first to generate the head start profits ("Oligopoly"). In Apple and Samsung's case, the dominant smartphone manufacturers they interact with in terms of strategy with even thee been accusations of imitating the other products. For example, Samsung called out Apple upon their release of the iPhone 6 plus large-screen smartphone, terming it an imitation of their previously released Galaxy Note which had a “phablet” form factor ("Samsung Calls Apple's iPhone 6 plus a Galaxy Note Imitation in New Ad"). Hence these companies copy each other’s strategies and products, which have enabled them to maintain dominance in the smartphone market.

Surname 5 Works Cited "5.1 Price Elasticity of Demand and Price Elasticity of Supply – Principles of Economics." BC Open Textbooks – Open Textbooks Adapted and Created by BC Faculty, opentextbc.ca/principlesofeconomics/chapter/5-1-price-elasticity-of-demand-and-priceelasticity-of-supply/. Conn, Stamford. "Gartner Says Worldwide PC Shipments Grew 10.7% in Fourth Quarter of 2020 and 4.8% for the Year." Gartner, 2021, www.gartner.com/en/newsroom/pressreleases/2021-01-11-gartner-says-worldwide-pc-shipments-grew-10-point-7-percent-inthe-fourth-quarter-of-2020-and-4-point-8-percent-for-the-year. Corporate Finance Institute. "Price Discrimination - Definition, Types and Practical Example." Corporate Finance Institute, 6 July 2020, corporatefinanceinstitute.com/resources/knowledge/strategy/price-discrimination/. "Global Smartphone Market Share: By Quarter." Counterpoint, 2021, www.counterpointresearch.com/global-smartphone-share/. Griffin, Andrew. "The Price of IPhones is About to Be Cut, Says Apple." The Independent, 30 Jan. 2019, www.independent.co.uk/life-style/gadgets-and-tech/news/iphone-priceapple-buy-cost-china-turkey-foreign-currency-a8753811.html. Nicas, Jack. "Apple Is Worth $2 Trillion, Punctuating Big Tech’s Grip." The New York Times Breaking News, World News & Multimedia, 19 Aug. 2020, www.nytimes.com/2020/08/19/technology/apple-2-trillion.html. "Oligopoly." Economics Online, 20 Jan. 2020, www.economicsonline.co.uk/Business_economics/Oligopoly.html.

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"Samsung Calls Apple's IPhone 6 Plus a Galaxy Note Imitation in New Ad." AppleInsider, 15 Sept. 2014, appleinsider.com/articles/14/09/15/samsung-ad-says-apples-iphone-6plus-is-galaxy-note-imitation....