ECN70204 Group Assignment- Apple Inc. (Final Copy).docx

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Business Strategy report on Apple Inc. Managerial Economics GROUP ASSIGNMENT Managerial Economics ECN70204 February 2019 STUDENT NAME: STUDENT ID: NGUYEN THI DIEM MY SITI NOOR HAFIZAH 0338394 Master in Finance & Master in Management Taylor’s Business School Taylor’s University Page 1 of 15
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Business Strategy report on Apple Inc. Managerial Economics Table of contents INTRODUCTION .......................................................................................................................... 3 Structure and competitiveness of the industry .................................................................................... 4 The nature of the product, market concentration ............................................................................. 4 Barriers & price power ................................................................................................................ 4 Product differentiation, ................................................................................................................ 5 The degree of vertical integration, ................................................................................................ 5 Diversification and international operation .................................................................................... 5 The forces driving competition ..................................................................................................... 6 The profit, supply and demand framework and the elasticity concept ................................................... 7 Elasticity of Apple iPhone. ........................................................................................................... 8 Non-price competition ................................................................................................................. 8 Supply and demand ..................................................................................................................... 9 Pricing strategy .......................................................................................................................... 9 Performance of Company .............................................................................................................. 10 Variety, Quality, and Technological Progressiveness ..................................................................... 10 Advertising and promotion ........................................................................................................ 11 Product’s pricing ...................................................................................................................... 11 Current outlook and prospect ..................................................................................................... 12 Porter Five Forces Model .............................................................................................................. 13 Bargaining Power of Supplies .................................................................................................... 13 Bargaining power of buyers ....................................................................................................... 14 Threat of New Entrants ............................................................................................................. 14 Threat of Substitutes ................................................................................................................. 14 Competitive Rivalry .................................................................................................................. 15 REFERENCE LIST ...................................................................................................................... 16 Page 2 of 15
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Business Strategy report on Apple Inc. Managerial Economics INTRODUCTION Apple Inc. is American Multinational Corporation, established in 1977 and based in Cupertino, California with more than 132,000 employees in 2018 (Statista, 2019). In 2015, Apple Inc. was the 2 nd world largest Information Technology firm after Samsung Electronics. This corporation leads the world in innovation with iPhone, iPad, Mac, iPod and softwares including iOS, macOS, watchOS, tvOS. Steve Jobs, co-founder and CEO of Apple Inc. realized that the increasing demand from consumers for mobile phone with multiple functions (communication, music and internet). Hence, 1 st generation of iPhone 2G smartphone was launched in January 2007. He described iPhone as “a revolutionary and magical product that is literally 5 years ahead of any other mobile phone.” BBC News (2007) reported that 525,000 units of 1 st generation iPhone were sold during the first weekends after its launch. Steve Jobs’s slogan “this is only the beginning” has set the standard for the smartphones market globally. As to date, Apple Inc. has produced a range of iPhone models throughout its 11 years journey (Grothaus, 2019). Market Stucture Apple Inc. market composition is referred as oligopolistic due to limited number of companies in the market. Samsung takes the lead in the market share by 19% followed by Apple with 13.4%. With the market share statistics (refer table above), the market concentration can be derived based the Herfindahl-Hirschman Index (HHI). The calculated result indicates the HHI as 2350, thus recognized the smartphone industry as a concentrated market. In the smartphone market, it is very difficult for new rival enter the oligopolistic market due to high operating cost.
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