Economic Analysis of Apple Inc
May 14, 2007
Economic Analysis of Apple Inc.
Industry analysis 4
Personal computers 4
Computer software 5
iPod and iTunes 5
Company analysis 7
Apple Computers Inc 7
Apple Inc 8
Personal computing 11
The primary purpose of this report is to execute an economic analysis on Apple Inc. We will review the impacts that the competitive market has had on Apple, since it was founded in 1976. This report will detail how Apple Inc. is both a dire ...view middle of the document...
In truth, international trade is more of an aspect of the computing industry than a contributing factor. Only the smallest company would fail to market their products internationally. Personal computing is one of the most significant contributors to employing labor abroad because of production costs. Constant technological advancements drive ever-increasing productivity in this industry. Efficiency and output are as a result ever changing the better.
Apple Inc continues to produce innovative personal computers. As detailed in the following section on Apple computers, the demand for Apple computers has been diminished by the limitations Apple has on complimentary products. Dell and Hewlett-Packard are the primary competitors in the personal computer market. Both of these companies are substantially larger and offer substitute products that are highly sought after due to the compatibility. Dell made significant inroads by offering easily accessible custom-built personal computers over the phone and online (they overshot the former PC manufacturer giant and have more than double the sales of Apple). This gave them a comparative advantage at the time. Hewlett-Packard's advantage (almost five times the annual sales) stems from the market share they have gained by providing their products to corporations. The way Apple creates its market share is by creating product differentiation from these other computer manufacturers within the monopolistic competition market structure. This innovation and brand differentiation of the sole drivers behind the demand for Apple's personal computers. As per normal with the demand curve, Apple would be able to sell more if they lowered their prices, thus sliding right on the demand curve to a lower price and a higher quantity. However, such action would not be profitable for Apple as it has a lower profit margin on the personal computers. (Apple Inc 2006 Financial Statements)
In the simplest terms, Apple's market share in computer software is limited by two factors. Apple simply lacks the relative size and market share to threaten the near monopoly created by Microsoft (the near-monopoly is evident when you see that Microsoft consistently has a 20 to 30% net profit margin annually). Secondly, Apple software is limited to its own personal computers. Thereby, its lack of market share in the personal computer market as detailed above limits much of its software sales. That being said, Apple has a distinct niche market when it comes to multimedia software. Typically, individuals working in the multimedia industry (or in education) or having a hobby pertaining to multimedia specifically seek out Apple's software (even if it requires the procurement of an Apple personal computer). This demand is fundamental to the current and ongoing success in computer software market.
iPod and iTunes
Since its launch in 2001, the iPod has dominated the personal...