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The market structure of Apple store is oligopoly. In the market, the Apple store’s iPod represents a vertical monopoly. This is a situation where a particular company has the control of all the aspects of distribution, production and product sales. Although Apple store is not a company on its own, the iPod hold a dominant position in the market1. This paper therefore seeks to discuss the market structure where Apple store operates and why it is in that market.
What the economic theory says about the role of advertising in this particular market and the observation made on the data. The economic profits for the firm both in the short run and long run will also be discussed and whether the data supports the economic theory and how the profit stream can change over time (Zielenziger, 2011).
As stated in the above paragraph, Apple store operates in an oligopoly market structure. The company is also associated with a vertical monopoly market structure. The Apple store company sells its products in various markets across the globe. It does this through its retail outlets like its online store where the company has sold numerous products to consumers and other business enterprises2.
The Apple store has invested in programs that promote reseller sales including ASCP which focuses on certain reseller locations and APRP which provides expertise in products and customer service (Deffree, 2011). The Apple store company also sells some computer products to the agencies of the government and the creative markets falling within its geographical location. These markets are considered fundamental to the third party computer applications and hardware developers.
The better-quality extension and computing recital of the Apple store products turn up to be the major attraction of the consumers within the market location. In addition, the Apple store company provides computer products to the customers within the scientific market just as it does to the information technology markets (Apple Inc., 2011).
The economic theory says a lot in the role of advertising of the Apple store company. According to the economics theory of pricing and revenue, it is very logical that if the price of a product increases, the revenue should increase as a result. Due to the improvement of technology, the Apple store company has been able to produce high quality product which have quite a show of demand.
Even though, the prices of the new products such as the Iphone4 and the new Mac handbook are high, consumers seem to be quite interested in the product3. The hiked prices of the new products should therefore, bring an impact in revenue during a particular period. According to the company’s reports, the revenue has risen from $99.9 billion to $108 billion as at the year 2011 because of the adverts. It is now evident from the economic theory that the role of advertising is very significant in the revenue accruals (Deffree, 2011).
According to the economic theory, the role of advertising is sensitive to issues such as in the appreciation of how the customers predispose towards the effects resulting from adverts. Advertising makes an impact to the customers about the products, it creates awareness, evokes an immediate response from the customer, it communicates messages to the target market, it creates favorable reputation and impression about the product and reminds the customer of the features of the product that is offered4.
To economic theory, advertising is important in fulfilling the needs of the customers as far as information about the product is concerned, it consolidates position, encourages product trial, and changes perceptions about the mental repositioning and overcome prejudice. It also reinforces attitudes as well as enthuse the trade and the staff (Apple Inc., 2011).
Economic theory links advertising to the elasticity and inelasticity of demand of a product, the Apple store’s Iphone is easy to analyze. Elasticity in demand of product relies in the accessibility or availability of products that can substitute the basic commodity, income of the consumer which enables him to consume the good and time that a consumer may use to stop using a particular commodity5.
This is observed in the company’s data. It is evident that whenever the product availability to the customer increases, more sales are made and the company realizes more profits and hence positive escalations in the profit data (Zielenziger, 2011).
The economic profits of this company according to the company’s reports rose from $99.9 billion to $108 billion as at the year 2011. This is a positive margin which may have resulted from the opportunities and issues that face the Apple store company. The Apple store continues to expand globally although the universal shortage of expertise and skilled labor continues to affect its competitive edge.
However, the Apple store has the opportunity to exploit emerging markets such as Brazil and India besides utilizing cheap labor available in these economies6. The Apple store has grown to be a market leader in computer and electronic industry based on its humble background. Due to the fact that the Apple store has immense market globally, it has outdone stiff competition in the industry (Apple Inc., 2011).
To sum up, the market structure of the Apple store is oligopoly. The paper has described the market structure of the company and stated the role of advertising from the view point of the economic theory as well as the economic profits of the firm as it appears in the short term and long term. It is also evident from the paper that the Apple store represents a vertical monopoly in the market; this is because of the sole control of all the aspects of distribution, production and product sales.
From the illustrations in the paper, it is clear that the company’s profit may change overtime if it considers government regulations and issues that might affect its future. This is clearly supported by the data on its annual report concerning its annual profits. In order to remain competitive and keep a positive profit margin, the Apple store should consider exploiting all the marketing opportunities resulting from the emerging economies (Zielenziger, 2011).
Apple Inc., (2011). The new, faster MacBook Air. Retrieved from: https://www.apple.com/
Deffree, S. (2011). iPhone 4 supply and demand issues could hurt Apple brand. New York: Cengage Learning.
Zielenziger, D. (2011). Apple’s Report: Annual Revenue Tops $108 Billion. 18th october 2011. Washington : International business times. 11th november 2011.
1 Apple Inc., (2011). The new, faster MacBook Air.
2 Deffree, S. (2011). iPhone 4 supply and demand issues could hurt Apple brand. New York: Cengage Learning.
3 Deffree, S. (2011). iPhone 4 supply and demand issues could hurt Apple brand. New York: Cengage Learning.
4 Zielenziger, D. (2011). Apple’s Report: Annual Revenue Tops $108 Billion. 18th october 2011. Washington : International business times. 11th november 2011.
5 Apple Inc., (2011). The new, faster MacBook Air.
6 Apple Inc., (2011). The new, faster MacBook Air.