Market Structure of Apple Inc.

Based on the characteristics of products produced by Apple, the company may be segmented
into Oligopoly market structure. Oligopoly is defined as a state of limited competition in
which market is shared and controlled by a small number of firms which sell the same or
identical products. There are three important characteristics of Oligopoly that can be seen
from Apple to justify its market structure:

1. The market or industry is dominated by the small number of large company or organization

Apple is one of the biggest smartphone producers in the world, aside from its close
competitor such as Samsung and LG. In year 2020, Apple had increased its market share in a
smartphone industry to 46% compared to year 2019 with 39%. Its biggest competitor,
Samsung, followed behind with 25% in year 2020, however showing a downturn trend
compared to year 2019 with 28%. This can be seen that Apple had dominated nearly half of
the market share for the smartphone industry, driven by the ongoing and increasing demand
for its updated high-end smartphones.

2. Firms in the market sell same or identical products

Both Apple and its close rival Samsung had pioneered and succeed in the smartphone
industry since touch screen phone was introduced back in year 2007. Previously, hand phone
industry is mostly dominated by Nokia when its global market share peaked at 49.4%. Today,
Nokia market share in the smartphone industry had only less than 1% in year 2020. Both
Apple and Samsung are actively dominating the market share and price of smartphones
offered by both company more or less the same with both firms also introducing better
features and operating system to attract more customers.

3. The industry has significant barrier to entry

The smartphone industry is almost impossible to be entered by other firms because it

is too costly to enter and compete with the strong players in the industry. Besides, the
industry is one of the most advance and rapidly-change industry as both Apple and Samsung
updating their technology almost every year. The other firms that decided to enter the
industry need to invest largely on the research and development in order to compete with
dominant player. In addition, the brand loyalty and recognition which identified with both
Apple and Samsung have make it more difficult for other firms to grab strong market identity
and recognition in the smartphone industry.

Target Market of Apple

Apple mostly produced high-end technological devices such as smartphone, laptop,

computers, software and any other electronic items. Based on the study by John Dudovskiy
(2021), apple target market can be segmented into four main segments: geographic,
demographic, behavioral and psychographic.

Based on geographic, Apple has always maintained and expanding its target market both
domestically (US) and internationally. Apple has expanded both its operations and sales in
Europe, Japan, China and the Asia Pacific region. In the last year April 2020, Apple had
announced its largest geographical expansion with its stores and applications such as Apple
Music, Apple Podcasts, and iCloud were made available in 20 more countries with Apple
music having the availability in 52 additional countries. Apple also had gained additional
momentum in its expansion plan towards Africa regions after the firm successfully opened
Apple stores, Apple Arcade, Apple Podcasts, and iCloud in African countries such as
Cameroon, Democratic Republic of Congo, Libya, Morocco, Nigeria, Tanzania, and Tunisia.
Nowadays, the apple stores are expanded and can be found in more than 170 countries.

Demographically, Apple target market had focused on the group with age range 20-55 years
old. However, different products have targeted a different range of age group. The study by
Richard Andrew (2020) shows that Apple smartphone are more used by people of the 20-45
age groups while Apple applications such as iTunes and App Store are frequently used by
those within age group of 18-30 years old. Smart devices such as Apple Watch, Apple TV
and MacBook are mostly use by those people from range of 20-55 years old. On gender
based, Apple products market was not gender-dominated and it shows that ratio between male
and female users are 1:1 (53/48) in year 2011. For year 2020, the current male users were
recorded at 60.8% while female users at 39.2%. thus, it can be said that the target market is
expanding towards male users.

Based on behavioral segment, Apple target market was always on its hard core brand loyalists
and switchers. Rapid advance of Apple technology and iOS operating system compared to
Android had increase the interest of users to switch from using Android to iOS. Based on the
research conducted by Danny Maiorca (2021) with 5000 Apple and Android smartphone
users in the US, 31.5% respondents believed that Apple smartphone had provided them with
better security and privacy protection and they willing to change platform once they upgraded
their smartphones. Most of the respondents also informed that they willing to change from
Android to Apple smartphone due to better user experience and Apple smartphone has a first-
hand access to new applications compared to android. In addition, 25.2% of the respondents
also informed that Apple had provide better value for money compared to android phones.
While Android phones are sometimes get slower over time, Apple smartphones tend to
perform well throughout their lifespan.

Psychographic segmentation divides buyers into different groups based on lifestyle, social
class, value and personality. On psychographic view, most of the target market of Apple are
those customers coming from middle to upper level social class. The study also shows that
the target market for Apple consumers is focus to those with determined and focus
personality. These consumers often seek benefits of owning Apple products as a self-
expression of a successful person, with high sense of achievement and belonging. They also
choose Apple products for its speed service, efficiency and advanced features and
capabilities.

Challenges face by Apple in the Market

As a strongest player in the industry, Apple often face with many ongoing challenges that
may affect its performance as a company. One of the major challenges for Apple is the
constant competition in the market that the company have to protect its position as a dominant
player. While the smartphone and electronic devices market is constantly changing and more
and more advanced technology being introduced, Apple has to always increase its
expenditure in research and development to stay on top of the other competitors. However, as
the expenditure increases, it did hurt the financial performance of Apple both in short and
long run. Besides, the fact that some of Apple competitors had made collaboration with
content providers that exclude Apple to provide better update on application and services
providers which is not offered on Apple platform. This technological first-hand had always
being one of the competitive advantage for Apple and to lose this advantage will affect the
demand of Apple products by consumers.

In addition, as more big firms able to penetrate and emerging into the market, they have
provided consumers with long range of choices of smartphone to choose in the market with
more or less the same technology and features like Apple products. New big player like
Huawei, Redmi and Realme have becoming more actively involved in increasing their market
share. Besides, the ability of these competitors to provide advance smartphones with better
value of money or lower price than Apple has shifted the view of consumers especially those
who are more elastic to product pricing especially in recent economic downturn due to
pandemic and various issues. While Apple did not have problem to maintain loyalty of its
hard core based customers, most of the consumers still categorize under switchers, which they
are being flexible to change to any products as long as certain criteria being fulfilled.

Suggestion to Increase Revenue in Short and Long Run

In order to increase revenue in a short run, Apple can try to keep attract and retain current
customers especially the brand loyalists. These hard core loyalists did not affect their buying
of Apple products even if the price increase drastically as most of them are from middle or
upper level income class. Besides, owning Apple products has becoming a lifestyle instead of
necessities to these loyalists. Apple can attract these customers to keep repeating the purchase
of different Apple products by providing them needed information of the purchase and also
excellent after sales technical service and support. Apple also can try to attract new customers
by providing information why Apple products are better than other competitors products and
justify the worth of value of money for Apple products compare to other identical products.
An extensive advertising campaign and multimedia promotions will be needed but to gain
competitive advantage, Apple will be able to receive new customers and expand the base for
brand loyalists.

Another way to increase the revenue in the short run is to offer discount and rebate for Apple
items. When discounts are properly marketed and informed to consumers, it will help to
create an incentive for consumers to start buying. The discounts can be on limited products
such as quantity discounts offered on two or more products of same range, seasonal discounts
or limited time discounts on selected items. A rebate which is also known as a deferred
discount is issued after the purchase of the product as a percentage of the price in cash. The
publicized discount will help to generates additional sales while the lower redemption rate
will help to reduces its cost.

For Apple to increase revenue in a long run, it is to be suggested that for Apple to reevaluate
and refining its pricing plan. Apple may be able to sell more items to more consumers by
lowering prices of certain products and able to taking market share away from competitors.
For example, Apple can introduce a line products that less expensive by taking out one or two
small features but still upgraded in technology, to attract more interest of middle class
consumers that inflexible to price elasticity. As Apple has a strong brand name and
reputation, it will have no problem to increase the price of its products. However, Apple has
to make sure it will not exceed the breaking point of increasing price where customers have to
shift to other substitute products due to overpricing.

Another way to increase revenue in a long run is for Apple to know its customer base well.
Apple can do this by consider offering a survey to find out its customer current demographics
and preferences. When a customer makes a purchase, Apple can request them to fill out a
short survey that can help to define its target audience and refining the marketing strategies.
Apple also can send surveys to potential customers in new markets through social media or
online advertising to understand their spending behaviors and preferences. In order to
encourage people to fill out the survey, Apple can offer a discount for subsequent purchase or
the chance of winning a gift card or coupons.

Changes in Objectives of Apple

While profit maximization still one of the core objectives not only for Apple but also other
businesses, Apple has also always driven its success by following and implementing other
important objectives.

Job Satisfactions

Job satisfaction of its employees has always become one of the main virtues that help Apple
to heighten its position in the industry. Without help, assistance and hard work from its
employees, Apple will not be able to expand and becoming one of the largest company in the
world. Since during Steve Job premier, teamwork efforts have been heavily emphasized.
Trust towards employees have been imposed by allowing them to be involved in making
important decision and allow them to do their task by believing in their ability and provide
less monitoring and control on them. Apple also had provided a clear goal setting to each of
its functioning unit. Apple’s teams are divided into functions and not divisions, where these
groups completely own expertise, innovation and development of these functions. The
development process at Apple is organic, where these teams work on tasks in parallel,
unified, and channelized by the executive team meetings. To motivate employees, Apple had
provided them with benefits and incentives that commensurate to their position and
experience such as stock options, employees gift, staff purchase discount and many others.

Building Business Reputation

This year, Apple has been crowned as the world’s most admired company for 14 th year in a
row. Building the reputation as big as Apple required consistent hardwork and determination
to succeed. The company success is driven by its motivation to produces products that are
beloved by consumers, like iPhone and MacBook. The ability of Apple to delivers consistent
returns for its investors being intentional to create the best experience possible for its users
allow to company to be loved by people. Apple also known as company that is not afraid to
take a stand for the things it values. As one of the smartphone producers, Apple also has a
reputation as one of the companies that firmly protecting the privacy and rights of its
customers and known for standing up for protecting users’ privacy as a core value of the
company.

Financial Stability and Liquidity

The balance sheet of Apple showing that the financial performance of Apple remains strong
in year 2021 despite the Covid-19 pandemic situation. For the year 2021, Apple has recorded
total assets of $351 billion, total liabilities of $287.91 billion, and total shareholders’ equity of
$63.09 billion. Apple also has a strong current ratio, which evaluates its current assets in
relation to its current liabilities, with 1.07. This ratio indicate that the company has enough
current assets on hand to cover its current liabilities in case of liquidation. Apple's debt-to-
equity ratio also has been increasing for over past five years as the ratio shows a jumping
point from 1.43 in 2015 to 4.56 in 2021. This indicates Apple has been raising more cash,
which it uses for share buybacks, potential dividend increases, and growing the business.
Apple also has a strong cash position as its major strength. In year 2021, Apple holds around
$34.94 billion cash and cash equivalent assets and holds $27.79 billion in term of marketable
securities that can be converted into cash. It also has non-current marketable securities of
$127.88 billion. Based on this financial data, it can be said that Apple is a very well-managed
company, and it has a very strong foundation of financial stability and liquidity.
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