IPhone5 from Apple Inc.
Apple Inc is a company renowned as one of the leading organizations in the production and sales of smart phones. iPhone5 is one of its many smart phones that sell significantly well in the market industry of smart phones. Many Apple customers like this product due to its usability and friendliness, as well as affordable prices as compared to other almost similar quality smart phones in the industry. For any product to perform well within the market industry, the producer must greatly consider the market structure, which could be an oligopoly or monopolistic market structure. Secondly, price elasticity and the demand and supply of the product also make it possible for the product to be successful in the market, based on the product lifecycle.
This paper presents an analysis of iPhone5 as an existing product in the smart phone industry. The analysis looks at how iPhone5 has fared on the market based on Apple’s market structure, price elasticity of the product, customer loyalty, and market barrier strategies, among other things.
Tey (2013) states that Apple Inc’s market structure is double edged, meaning that the firm has two functioning aspects of market structure. These are the oligopoly and monopolistic market frames. Oligopoly is a type of market with very few competitors, known as oligopolists. They are the most dominant companies in the sector, taking control of all the activities within the market. This type of structure is advantageous because these few firms pose less competition with one another, since they design and implement average prices for the commodities so that each company may enjoy the profits that accrue from the sale of their products. In this type of market, any firm that decides to lower its prices will face fierce competition, as the other firms will definitely lower their prices. The company lowering its price without the consent of the other oligopolists is subject to ousting and alienation out of the market structure for failing to abide by the rules (Tey, 2013). In the smart phone industry, some of the dominant oligopolists include Apple, Samsung, Nokia, Motorola, and the Google Corporation.
The monopolistic market structure is one in which one firm takes control of the major part of the market. In this case, Apple is the only company that produces the range of iPhones – meaning that it encounters no competition from any other company based on the sales and production of these products.
The price elasticity of iPhone5 based on its demand around the globe in the smart phone industry is, evidently, very elastic, especially in the United States (Tey, 2013). This means that the firm stands to make more profit on this product because its demand is high, making its elasticity to last long in the market. The price elasticity of iPhone5 in the United States is more elastic than anywhere in the world because many people in the country do not view this product as a luxury good like other countries do. Secondly, the employment rate within the US is higher than in most parts of the world, meaning that many people in the country can afford to buy this product as they view its price to be very affordable as compared to other parts of the world (Tey, 2013).
The price elasticity of iPhone5 based on its supply is also notably elastic. This means that there will be increased supply of this product, making it popular with many people – not only in the US but also globally in the near future. The continued popularity and availability of this product will increase its demand. This means that its prices might reduce significantly. This means that its price will remain elastic due to increased global demand (Tey, 2013).
Relationship between pricing and elasticity of iphone5
A decrease in the price of this commodity will increase its demand, hence increasing its market price elasticity. On the contrary, increase in the prices of the good will decrease its demand and supply, hence reducing its demand. This would eventually decrease its price elasticity. Therefore, if the firm wants the prices for iPhone5 to remain elastic over a long period, the leadership would consider coming up with more stable and affordable price for the product (Tey, 2013). Affordable and stable costs of iPhone5 will increase its demand, supply, and hence ensure its elasticity.
Any changes in the quantity of iphone5 supplied will have an effect on its price elasticity. For example, if the firm supplies fewer products, its prices might go up in order to meet the costs of production. An increase in prices may scare customers away, and hence, its prices will be less elastic. Increased supplies will increase the amounts of goods available to consumers, making the prices of the product affordable, and attracting more customers. This means that its price will be elastic in the market.
The firm might use non- pricing strategies such as marketing strategies that creates barriers to market entries, product differentiation, raising entry costs, advertisements, and economies of scales (Ma, 2014). They may also decide to use strategies such as wage rates of products and other rates such as taxes in the industry. One of the non- pricing strategies that Apple Inc can use as to promote trade barriers to market entry is advertising. The firm must engage in fierce advertisement of its products in order to attract a large number of customers. It must give a reason for the loyal customers to remain faithful through advertisements. The company may also decide to wage rates such as taxes so that only the already existing firms are able to access the market (Sullivan, 1991). Waging rates will mean that the firms in the market come up with high taxes that can only be affordable to them and no other new company.
Thirdly, the firm may decide to use product differentiation as a means of barring new entries into the market. For instance, they can create products that suit the need of the people of different earning categories. They must also come up with products that are easy to upgrade. For example, the iPhone5 should have upgradable features that can accommodate the changes in technology. This means that those who are not techno savvy, and those who do not have enough income to spend on any brand new phone will just have to upgrade and keep using the product (Sullivan, 1991).
The business operations may also change the mix of fixed operation costs, for example, the firm may decide to use different operation methods such as using employees to attract more customers. The company may also want to improve their customer service methods to help retain more customers.
Ma, T. (2014). Professional marketing and advertising essays and assignments. New York, NY: Tony Ma Publishers
Sullivan. (1991). Non-price predation under Section 2 of the Sherman Act, Volume 18, Issue 4. New York, NY: American Bar Association
Tey, J. (2013). The market structure of Apple Inc. Retrieved from http://the-apple-inc.blogspot.com/2013/10/the-market-structure-of-apple-inc.html
Tey, J. (2013). The price elasticity of iPhone5 retrieved from http://the-apple-inc.blogspot.com/2013/10/the-elasticity-of-iphone-5.html