Current Market Conditions Competitive Analysis Karon Kanadjian ECO/365 April 10, 2013 Current Market Conditions Competitive Analysis Apple is probably one of the most recognized companies in the world when it comes the designing, development, and marketing of cutting edge technology with products that everyone wishes to own. Apple Inc. (Apple) was founded and incorporated in 1977 by Steve Jobs and Steve Wozniack, making headlines with the release of the apple I computer.
According to “Reuters Edition U. S. ” (2013), “ The Company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings” (para. 1). With two decades of predominantly manufacturing personal computers, including the Apple II, Macintosh, and Power Mac Lines, the company began facing rocky sales and low market share.
With a combination of low sales, high pressure demands on the staff, and continued struggles regarding the company’s direction between Jobs and Sculley his CEO, Jobs surprisingly was ousted from the company in 1985. Siegel ( 2011), “A power struggle erupted between Sculley and Jobs. In the spring of 1985 Apple’s board sided with the CEO, removing Jobs from his command of the Macintosh group” (para. 1).
He however returned with the greatest comeback in 1996 after the procurement of NeXT by Apple. Steve Jobs shortly was appointed interim CEO where he inspired a new corporate philosophy of recognizable products and simple designs. Today Apple has established itself as a leader in the consumer electronic and media sales industries and has surpassed Google and Microsoft combined in sales with $156 billion in 2012 (Edstrom & Holt, 2012) .
In an extremely competitive trade, companies are trying to invent continually ways to retain their current customers and continue to have an edge to appeal to the new growing market of customers, especially in these very tough times economically, where people face even tougher decision making choices about the phone they purchase and the type of service they select. With the transition from 3G’s to 4G’s, companies are staging a bid to their existing customers as well as the new customers promising excellent service and plenty of extras bonuses to lure them into their clutches.
They recognize customer loyalty is a thing of the past with the longevity of merely two years for an average customers contract before making a switch to another provider. This accelerating trend has become a main factor in companies raising the bar in quality while dropping their prices especially for smartphones. With the rise in blogging, a potential customer can obtain reviews of cell phones and the differences of the product features. They can determine the advantage or disadvantage of a particular phone offered as a bonus with a contract commitment.
Even You Tube has search sites that allow you to watch various video reviews (“Effects Of The Emerging Competition Of Cellular Phone Companies,” 2012). As mobile phones become a vital, and integral part of most individuals everyday living, cellular phone companies have had to continue to target the demands of this implausible market. Many telecommunication companies give cell phones as a bonus to their packages, but the unrelenting predicament they face is, which phone do they offer that will beat out the competitors, take a larger share of the market, and still manage to be profitable.
With this fierce competition among the cell phone providers, some companies have turned to consolidation with other providers. Merging together has offered their talents to pool and offer top-notch phones and services. For example, Google purchased Motorolla in 2011 enabling them to compete significantly with Apple in both the software and hardware division. The same goes for Microsoft, who partnered with Nokia in producing the Windows Smartphone (“Effects Of The Emerging Competition Of Cellular Phone Companies,” 2012).
If the predictions hold true, the next few years will see more mergers allowing companies to remain in the game. One issue affecting Apple is the competiveness from other cell phone companies such as Samsung having somewhat identical features on some of their products at a lower price. Apple simply faces a vastly improving competitive threat with game changing capability. The advantage of other companies is the ability to cover a whole variety of products – phones, smartphones, tablets, TVs, and domestic goods like fridges (Shaughnessy, 013). Through the years Apple has created expensive devices that customers are willing to pay over $600 for a phone, but they need to create a market in the lower price categories of smartphones to compete with some of their competitor’s like Samsung who has created a clamor for quality products at a relatively inexpensive price range that fulfills customer requirements and requests, and thereby potentially overlook an expensive Apple device for a Samsung product (Shaughnessy, 2013).
On the contrary, Louie Partners, and a former member of TiVo’s board, says “Apple is the one company in the world that’s powerful enough to take on monopolies and force them to change. ” Apple products have created their own following of customers who will wait outside their stores in the rain to get the newest product and their items demand is considered relatively elastic. Either way it is examined, it could imply Apple shows a potential for both demand elasticity and demand inelasticity (s3hrlich, 2012) (Murray, 2012).
The costs to stay in the game are staggering. Apple has variable costs such as raw material costs, packaging, and labor, which are directly involved in the company’s manufacturing process of phones. The “A Tale Of Apple, The IPhone, And Overseas Manufacturing” (2012) website gives an unsettling look at Apple and offers an exhaustive report by Keith Bradsher and Charles Duhigg of the New York Times. The report based upon numerous interviews with current Apple employees as well as former employees concerns the iPhone production and the practice of abroad manufacturing.
It also includes excessive, oppressive, and illegal overtime hours, hazardous conditions, inappropriate, and sometimes forced labor of 16-18 year-old student “interns” on night shifts with wages so low that 64 % of workers claim their pay does not cover their basic needs (Eisenbrey, 2012). American’s are quick to criticize Apple for its facility in China employing 230,000 people, six days a work week, 12- hour shifts, and many of the workers earn $17 per day or less. More than one fourth of the employees live in dormitories considered deplorable to American standards.
Through the efforts of the manufacturing plant in China, Apple can stay ahead of the game. An example given was concerning the CEO Steve Jobs in 2007, shy of a month before the new scheduled iPhone was to show up in stores. Jobs was furious with the prototype he was carrying in his pocket a few weeks prior along with his keys, as the front glass screen was majorly marred. He gave them only one solution, to use glass that was unscratchable, and he wanted it perfect in six weeks!
With an assembly line overhauled in a Chinese factory and new screens arriving shortly at the manufacturing facility, before midnight a supervisor woke up 8,000 workers at their company’s dormitories and within an hour they began a 12-hour shift fitting the new glass into the devices. According to “A Tale Of Apple, The Iphone, And Overseas Manufacturing” (2012), ” Within 96 hours, the plant was producing more than 10,000 iPhones a day a 12-hour shift fitting glass screens into beveled frames. ” (para. 1-3). If Apple needed 3,000 people overnight, it was accomplished in the factories of China.
Could you see 3,000 people in a U. S. plant being hired overnight? With cheap labor and production speed as shown, it is a big incentive for Apple. According to “A Tale Of Apple, The IPhone, And Overseas Manufacturing” (2012), “The entire supply chain is in China now,” the article quotes a former high-ranking Apple executive as saying. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours” (para. 1-3). The U. S. ould not compete with the speed of a company in China taking 15 days to assemble 8,700 industrial engineers to oversee employees amassing the iPhone. The average U. S. company would take as long as nine months to be ready to commence work. This depicts a vibrant picture of how companies in China work versus companies in the U. S. The cost structure for the iPhone is divided as 15 dollars to manufacturing cost, $207 to major components, $89 to other costs, making a profit of $319. Apple’s profit per phone is more than 20 times the labor cost, according to Ross Eisenbrey.
Apple has changed the world with its technological innovations being responsible for nearly 50,000 American jobs, but it is not enough. It needs to rebuild American manufacturing of the past where employees worked reasonable hours and a decent wage was the standard. Most of the phone components are assembled in China or Asia however, on the bright side, the glass for the iPhone manufactured in Kentucky is reviving a Corning factory. It has grown to more than $700 million a year, employing close to 1,000 Americans supporting the emerging market.
As the market has continued to expand so has the glass manufacturing plants extending to Japan, and Taiwan. Most of Corning’s customers are in Taiwan, Korea, Japan and China, making it profitable to build and produce their glass factories next door to the assembly factories overseas (London, 2012). A major factor affecting cellular phones in the current market conditions are fixed cost. Some major providers are offering consumers a flat monthly rate to ensure they sign their current mobile contract, but mid-way through the contract, the carriers are silently raising the prices customers are currently paying.
Of the four major networks, three have reportedly either raised their rates or discontinued their current monthly deals. The planned hike in prices help the networks counterbalance the high costs of the mobile Web, the delivering of apps, and mobile video. The demand for faster networks and upgrades are estimated to cost the industry a whopping $50 billion a year (“Cnn Money”, 2011). During 2012, Apple fell short of being the top brand for cell phones although Samsung’s sales soared (Muller, 2012). However, Apple continues to improve their products as people tend to want the latest upgraded phone to have minimal problems. Apple will increase its U. S. smartphone share and possibly increase its profit margin per phone as well with its new iPhone 4S, according to multiple industry analysts” (Palenchar, 2011, para. 1). Possessing more shares available gives Apple more room to grow and make changes to their product. The Apple app store alone has 500,000 apps while the Android store carries 45,000 (Warren, 2011). A large amount of the profit comes from the app store. The Apple app store has thousands more apps than the Android market. Developers should continue creating apps for Apple to help increase profits.
Apple is a very popular cell phone. To increase their profits they should decrease their price making their supply and the demand increase for their brand. With technology so advance, maybe the next big thing for Apple is a built in mind reader in out cellular device! References Muller, R. (2012). Mobile phone sales. My broad brand. Retrieved from: http://mybroadband. co. za/news/gadgets/64760-most-popular-cellphone-brands-in-the-world. html/attachment/mobile-phone-sales Palenchar, J. (20111). Apple Seen Raising Share, Maximizing Profits With iPhone 4S. Twice. Retrieved