Economics for Managerial Decision Making: Market Structure
As legend and reality have it, Steve Jobs and Steve Wozniak started Apple Computer in a garage in Cupertino, Calif., in 1976. From those humble beginnings, and through extreme market swings, Apple Inc. has become the most valuable company in the world. “Given the company’s unbelievable innovation over the last few years, and the subsequent mountains of cash that it has earned as a result, the likely catalyst for the stock to eventually peak and decline will be Apple’s inability to continue to innovate at its current pace. Certainly, this is likely to happen at some point as the company confronts the burdens of stunning success in a relatively short period of time” (Forbes, 2012, p. 2). Following the death of co-founder Jobs in 2011, Apple’s new management must take careful steps to maintain and grow its market.
Apple Inc., now headed by CEO Tim Cook, still has the overwhelming customer loyalty it built under Jobs’ stewardship. Jobs was a major component in not only product and strategic development for Apple, but also was its highest-profile spokesman, often turning product introductions into major events. Nearly a year after his death, however, customers still camped out in front of Apple stores in September 2012 to wait for the new iPhone. No other technology company has this type of overt showing of customer loyalty and support. To maintain this, Apple must continue to produce innovative, elegant products. In nearly all categories, other companies sell more products—smart phones, computers, tablets, etc.—yet it was Apple, not Samsung, Hewlett-Packard, Dell, or any other company that hit the heights Apple hit this year on Wall Street. The fluctuations, not on Wall Street, but with consumer tastes must be taken into account for Apple to keep its lofty place. “Tech companies often rise and fall in 10- to 15-year cycles, [James Ragan, stock analyst with Crowell Weedon] says. Apple, too, faces unique risks, especially in the fast-changing world of technology. The smart phones segment, where Apple makes much of its money, is becoming a replacement business, Ragan says. And in tablets, in which Apple holds a commanding market share, competition is likely to heat up, he says” (Krantz, 2012, p. 2). Apple has, since its beginnings, been at the forefront of consumer technology. It introduced the first useable home computer, created a sensation with the Macintosh computer, an even bigger sensation with the iPod, and later the iPhone and iPad. Without the driving force of Steve Jobs, Apple’s leaders need to double their efforts to keep ahead of other technology companies. If one other company introduces a new piece of technology that captures the enthusiasm of the consumers the way Apple has, Apple may find itself faltering.
A pricing strategy is defined as “activities aimed at finding a product’s optimum price, typically including overall marketing objectives, consumer demand, product attributes, competitors’ pricing, and market and economic trends” ("Definition of Pricing Strategy", 2012). In the Simulation called Economics for Managerial Decision Making: Cost and Revenue Curves, the Company named Quasar created a new notebook called the Neuron. In this simulation it was up to all parties involved to decide how the Neuron was going to be priced. Remembering when the Laptop first came out by Dell, this student priced it at $1,050 to start. This was deemed a good price.
The actual cost of the item is not always the most important aspect of an item, rather how it is marketed either by bundling, where the item is being marketed geographically, how it is promoted, and even penetrating the market. Most of these terms are common sense terms, however penetrating the market is an important one. As seen in the simulation a few years after the Neuron was released the patent was no longer valid...
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