MBA502 - Part 1 Final
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Part One Final
Southern New Hampshire University
MBA 502: Economics for Business
Sonja Wilson
January 1, 2023
2
Supply, Demand, and Market Equilibrium
Apple Corporation is a technology company that designs, manufactures and sells computers, tablets, cell phones, smart watches and accessories, along with many related services including several applications. (Apple, Inc., 2021) About 22% of the global market share for smartphones is controlled by Apple, and they also account for 75% of profits in the industry as of
2021. This is all attained by the significant markup on the Apple iPhone. (Brown, 2022)
Elasticity
Price elasticity is the responsiveness of the price of something due to the demand of it. (Miller, 2021) Due to Apple’s hold on the smartphone industry, there is not as much of an effect
as other products. Elasticity would say that raising the price of the iPhone would have a reduction in demand, but this is not the case with the iPhone. However, it is possible that a reduction of price would create an increase in demand. While their greatest competition is Samsung, price could play a large role in consumers choosing between the two companies. Non-Price Demand Factors
Price is not the only factor that pushes demand. When it comes to Apple smartphones, there are a couple things that come to mind that would have an effect on demand, like camera quality and alternative payment options. Apple has marketed a newer iPhone by showing that they filmed a commercial with the phone alone. The quality of the camera is shown to be well over the competition. With the current social media influencer craze, having a high quality camera can make all the difference, creating a higher demand for the iPhone for those particular consumers. Smart phones are a big ticket item, with people paying up to and over $1,000 for a cell phone. The Apple iPhone 13 Pro retails for between $999 and $1400. (Brown, 2022). For many, that is a significant expense. Apple and most cellular providers have made iPhone
3
ownership more in demand by offering different payment options. Instead of needing to come up with the full phone cost up front, payments can be spread over several months, up to 24, with no interest. While many cannot afford to pay $1400 up front for a phone, paying around $58 each month is much more manageable. Along with the payment options, they also offer a trade-
in deal, which gives iPhone users more reason to stay with Apple because they get credits towards a newer model. (Apple.com)
Non-Price Supply Factors
Supply shortages can be caused by many factors, including labor shortages and other supply shortages that make producing the iPhone difficult. Apple saw a negative effect on supply during the Covid-19 pandemic, and both of these issues were a part of the overall iPhone supply shortage. There were issues getting necessary components to make iPhones, lack of labor
due to government shut downs, and significant shipping delays. This had a negative effect on the supply of available iPhones. (Apple, Inc., 2021) Industry and Market Equilibrium
The market equilibrium refers to the point in time that the amount demanded matches the supply. (Miller, 2021) Apple is the leader in the smartphone industry. (Brown, 2022) Because of this, there is typically not any issue with market equilibrium in this industry. During the pandemic, they did end up having more demand than they had supply for, however. That created
an increased demand that they were not able to fulfill. This meant that the consumers had to wait
longer than anticipated to receive their device. Now that the supply disruptions are clearing up, consumers should have an easier time getting their desired devices, thus bringing Apple, and the iPhone, back into market equilibrium.
4
Prediction & Decisions
Apple has seen what supply struggles can do to their profits. Due to this, it could be predicted that Apple will find alternative ways to manufacture their products, specifically the iPhone, in case of future issues. By understanding the effect that the pandemic had on their supply, they can prepare for future disturbances and prevent the same losses they have seen previously. This will help to reset and maintain the market equilibrium on iPhones.
Based on the needs to maintain the market equilibrium, I would recommend finding alternative locations to manufacture the iPhone. As new versions are unveiled each year, the consumer desire to upgrade will remain. If the supply is lower than demand for too long, it could push consumers to the competitors. By having alternate locations, along with back up providers of some of the technology that is needed to make an iPhone, it will help to offset some of the imbalance in uncertain times. As seen during the pandemic, many people turned to social media as a social outlet, and many, if not most, were doing so with their smartphones. Being able to maintain supply for the demand is imperative to keeping the Apple iPhone in the leading position
for smartphones.
Production and Costs of the Apple iPhone
Apple Incorporated makes the iPhone which dominates the smartphone market. The cost to produce the iPhone is around $570, and that includes the labor costs associated. The iPhone is
then sold for between about $1,000 and $1500 depending on the specific model and storage options. The costs that go into producing the iPhone come from many areas as discussed below.
(Brown, 2022)
Inputs and Costs
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