Good Apple Iphones Essay Example

A market structure is defined as the competitive environment in which sellers and buyers of products operate in. Apple Inc.’s iPhones fall in the smartphone industry which is too characterized by a market structure like any other industry. As per the dynamics observed in the economy pegged on technology, innovation and operational strategies, the company has emerged as a key player in the smartphone industry (Ireland, Hoskisson, & Hitt, 2009). The company has four key competitors that produce differentiated products in the same smartphone niche ultimately making the market structure an oligopoly.
As it stands, the smartphone market’s 60% sales emanate from five firms with Apple Inc. being one of them. This market is characterized by price rigidity due to its kinked demand curve model. This means that if an oligopolistic firm such as Apple Inc. was to raise its price it would probably lose a substantial market share. However, there are evidences that point out to why iPhone is partially affected by this theory, since it is the most expensive smartphone but still occupies predominant position in the market. This is firstly due to its innovative nature that has been part of its strategy since inception into the smartphone market. This has made the company enhance consumer loyalty which transcends price sensitivity. The second reason is that the Apple Inc.’s marketing campaign is very aggressive making its products seem ideal and essential to target consumers despite the high prices. Trust is the third reason that continues to draw consumers to Apple IPhones. They are perceived as ultimately durable as compared to their competitors.
The Oligopoly market structure is not induced by a single firm such as Apple Inc. It is as a result of market dynamics such as costs of operation, barriers to entry, focus on long run profits, perfect knowledge of the market and interdependence among the firms. The smartphone industry is an oligopoly due to these dynamics that only favor a few companies within it. The cost of operation of investing within this industry market is tremendous thus hindering new entrants to fully participate and effectively break even. The top five companies in the smartphone industry operate globally and enjoy massive economies of scale that may wade off new competition (Ireland, Hoskisson, & Hitt, 2009). Apart from costs there are barriers of entry such as infrastructure, technology, personnel, distribution chain and effective global marketing. With much emphasis on the long run profits, many new entrants may find it hard to keep up with the dominant players as their strategies are pegged on the long run and not the current operation viability.
The oligopoly market differs with other market structures greatly. In a monopoly, for instance, there is only one firm within the market as compared to oligopoly. The monopoly influences its own price, product design and product supply while in the oligopoly the companies prices, product supply and design are sensitive to the market. In a perfect competition, on the other hand, there are many buyers and sellers with no or less impact on the product prices. This ultimately differs with the Oligopoly due to the number of sellers who are limited and their strong influence on the product prices within the market. In a monopolistic market there are many sellers of differentiated products with much ease in terms of entry into the market. In the oligopoly market that the Apple IPhone operates in there are few sellers and a number of barriers to potential entrants.
Apple IPhone might find itself in a monopoly if it invests much in innovation which transcends the products currently in the market. By investing in innovation the company may peak its demand within a subset of the smartphone market (Ireland, Hoskisson, & Hitt, 2009). This would make the company a pioneer in the chosen innovative path. With an aggressive marketing campaign and reliance of its previous clientele-base, Apple IPhone may emerge as a single player affording it the privilege of being a sole price-setter, product supplier to many sellers. It is prudent to note that due to its outsourcing functions and global distribution chain, the company may lock a number of firms from the new market niche for some time.
Focusing on the two key sectors within the smartphone industry, applications and operating system different market structures can be observed. For the applications, the Apple iPhone has a digital distribution avenue or platform known as the AppStore that allows users to download applications. With a number of emerging applications, the company’s developers have been forced back to the drawing board. The applications sector has numerous players making it a perfect competition with many buyers and sellers of the applications as products. The market is saturated to appoint that some of the applications are freely given to the end-clients. The operating system sector unlike the former functions differently. The smartphone operating system is characterized with android, iOS, Windows, and the Blackberry OS. These five players operate in an oligopoly. The iOS is developed by Apple Inc. and is one of the dominant players within this sector. It is ranked second to Android and is mostly compatible with Apple smartphones (Ireland, Hoskisson, & Hitt, 2009).
Apple iPhone may maximize its profits in the long run by tapping into key competitive strategies. The accessories development is the first that if tapped to fruition by the company may change its fortunes for the better. By investing in complementary accessories such as Bluetooth headpieces and mouthpieces, chargers, power banks et cetera the company may boost its revenue streams on a commercial basis. The other strategy is product differentiation which currently the company has incorporated in its operations. The differentiation, however, ought to go beyond the smartphones but also its complementary accessories. By producing products that are ahead of their time, the company is bound to increase its clientele-base and ultimately its profits in the long run. Thirdly, the company ought to also invest in market diversification. It ought to produce products for both the high-end and common consumer in order to tap into all these market niches. By doing so, it diversifies its portfolio as well as change its market standing as a prestigious product for the rich few.
The effectiveness of these strategies are based on the company’s current operational model. With the android supporting smartphones occupying a sizeable chunk of the smartphone market, Apple’s IPhone ought to adopt new strategies that diversify its portfolio. The first strategy, for instance, has the core intent of developing a new income stream for the company. The product differentiation with less restriction on the primary product is further aimed at introducing new products to the market which translates to market expansion as well as profits (Ireland, Hoskisson, & Hitt, 2009). Market diversification, as a strategy, will enable the company deviate from its traditional model in order to chart in new waters. By having an all-inclusive pricing approach, the market will be only adding new numbers to the Apple culture as many like to call it.
The recommendations in light of these strategies to Apple’s IPhone are three. The first is partnering with affiliate companies that may be key in the production of the accessories. This will ensure that the company reduces its operating costs by outsourcing this function. The second recommendation is investment in research that will pinpoint the market needs in order to factor them in the product differentiation process. This will ensure that the company tailor-makes its differentiation process with the end-consume in mind. The third recommendation is based on the third strategy. The company ought to carry out a market survey in order to establish the number of smartphone users’ and their projections. This will guide it in creating pricing cohorts that will advise the pricing-formulae for the company in the long-run targeting all market segments.

References

Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2009). Understanding business strategy: Concepts and cases. Princeton, NJ: Recording for the Blind & Dyslexic.