Jerona Green, Darlene Wilson, Bronda Perkins, Christopher Pollard ECO/365
April 8, 2013
Current Market Conditions Competitive Analysis
In today’s society the cell phone market is a huge competitive industry for cell phone companies. There have been studies that show that half the world has cell phone accounts. One attribute that defines the cell phone market is the idea of consumers is giving up their land line phones. This has caused a large influx of customers into the market for cell phones. As technology continues to advance, a variety of cell phones are developed and marketed to different areas across the nation. Cell phones are available for business and social purposes such as social networking, text messaging, retrieving e-mails and for playing games.
Apple Inc. ranks second as the largest information technology company across the world (Bloomberg). Apple Inc., like other cell phone corporation, has supply and demand that is affected by a variety of factors. Businesses create products and offer services based on their customers’ demands, which can have an effect on the supply availability. The preference of the customer and the desire of the product that a company sells can affect the demand curve. As more customers want a product like the iPhone, the demand curve shifts to the right. Family, friends and colleagues can have a strong influence on a person’s choice of cell phone. When friends and family members have an iPhone, the consumer is more likely to purchase the phone because everyone else is getting it and speaking of the new cell phone. This type of “word of mouth” advertisement is free and beneficial to Apple Inc. Apple Inc. marketing strategies caused the iPhone to become very popular and its strategy keeps Apple products in the news media. Because of increased advertising Apple Inc. could raise the demand of the iPhone. The rising demand of the iPhone caused a temporary shortage of the supply because Apple Inc. could not produce iPhones fast enough to meet the demand. To regulate the demand for the product Apple Inc. raised the price of the iPhone to restore equilibrium. This technological breakthrough allowed Apple Inc. to produce more iPhones cheaper and easier. The breakthrough caused Apple to supply stores with more iPhones, but with the increased price, and the demand for the iPhone did not keep up with the supply. As a reaction to the increased supply available, Apple dropped the price of the iPhone to eliminate the surplus.
The size of the market also has an effect on demand for a product like the iPhone. Cell phone use is almost a necessity to many people. Therefore, because the number of potential buyers that want or need to purchase a cell phone is large, the influx of potential buyers increases the market size that which allows different companies like Apple Inc. into the market. If the size of the market increases the demand curve shifts to the right. When the iPhone first came to the cell phone market in 2007 it offered an alternative in the cell phone market. Generally competition between cell phone makers can cause the demand for a product to fall. As an example, if Samsung were the market leader before the iPhone’s initial debut, and just as many people are still buying cell phones, the introduction of the iPhone caused several consumers to leave Samsung for Apple Inc. This eventually leads to price wars where companies must lower the price of their products, and may require a cut in supply, to fall in line with the decrease in demand.
Price elasticity is a tool designed to identify the change in demand or supply of a product compared to the movement of price. Apple uses elasticity of demand to determine if there profits will go up or down by lowering its price. However, before the iPhone was released it was estimated to be sold at a very high value, but Apple dropped that price tremendously....