Week 2 Case Study: Supply and Demand
Introduction
The selected commodity for this study is the iPhone. The commodity lies in the cellphone industry which perceived as the leading in the sector. This product is manufactured by a worldwide popular company known as Apple Incorporation. The line of the phone uses an application operating system known as iOS. iPhone first generation gadget was introduced in the market in 2007, and from then the company has continually innovated new lines of product brands (Paam et al., 2019). Presently, the company has released twelve designs of iPhone generations where each is fitted with an iOS operating system. The phone is very popular especially in the US as well as other major markets like the European nation and China. The fundamental uniqueness of this mobile phone is its iOS operating system that is more stable (White, 2019). iPhone’s software and hardware are compatible with several applications. This makes the smartphone operating flexibly in comparison with several other operating systems.
In the past few decades, Apple Incorporation has emerged as the world’s social media visual hub. The camera integrated into the iPhone gadgets undeniably offers amazing and superior images and videos on Instagram as well as Snapchat. This has made many people prefer the iPhone at the expense of other models of smartphones available in the market which are less powerful in a social media context. Since 2007 when iPhone was the first launch in the market, it demands has continually risen with speculations that the commodity may overlap its supply (Paam et al., 2019). The commodity, iPhone, demands and supply is influenced by a couple of factors. The main factor affecting demand for this product is the shortage of the components, perfectionism and forecasting demand. The shortage is due to company quality of product focus as opposed to quantity. The company, for instance, has faced shortages of components like NAND memory as well as OLED panels. Forecasting demand allows the company to obtain pre-order information which is essential on commodity distribution based on various models.
The key predominant determinants of supply of iPhone products include taxes, technological advances, and prices of resources and other items in the market (Huang et al., 2019). It is worth noting that resources applicable for production of iPhones are quite expensive. Considering the high cost of necessary components, the cost of producing the commodity is high hence reduced quantity of production.
Data
In October 2017, the demand for iPhone X surpassed its initial supply within minutes of pre-order opening. Only 10 minutes after iPhone X became available, clients placing orders were informed to wait for up to four weeks to acquire the smartphones, implying that the initial supply of this product was already finished (Bradshaw, 2017). While projections for the number of iPhone X smartphones which Apple can produce over the next several months since October was between 20 million and 40 million, analysts approved that the commodity will remain unavailable for a longer period than earlier versions of iPhone (Bradshaw, 2017). Figure 1 below displays the demand trend of iPhone X in 2017.
Figure 1: Demand Trend of iPhone X in 2017 (Bradshaw, 2017).
Figure 2 below shows a graph about how the market prices of iPhone models have been changing over the years. According to this data, as of 2018, iPhone X was the most costly iPhone to be launched by Apple. iPhone X had an initial selling price of between 999 USD and 1,149 USD (McCarthy, 2019). The organization released another version of the iPhone in the fall of 2018, referred to as iPhone XR that had a reduced initial cost ranging from between 749 USD and 899 USD (McCarthy, 2019). At the start, the initial iPhone, which was launched in 2007 by Steve Jobs, had two versions with varying prices. 4GB version of this iPhone had a cost of 499 USD while the 8GB was priced at 599 USD.
Figure 2: Changes in iPhone market prices (McCarthy, 2019).
Figure 3 below suggests that Apple iPhone is the most supplied smartphone in the industry as compared to other products in this line of business.
Figure 3: Smartphone product market share (McCarthy, 2019).
As depicted in Table 1 below, Apple iPhone was ranked third in terms of the supply of its products in 2017 and 2018. The supply is compared in two periods which are 3rd quarter of 2017 and the 3rd quarter of 2017. There was a slight change in the supply of iPhones between these two periods (Jkielty, 2018). In the 3rd quarter of 2018, 46.9 million iPhones were supplied while in the third quarter of 2017, 46.7 million iPhones were shipped, implying there was a slight variance of only 0.2 million products.
Table 1: The best 5 smartphone firms in the world (Jkielty, 2018).
Analysis
From the data collected in the above section, it is evident that both the demand and supply of the iPhone are increasing. For instance, table 1 depicts that there were more iPhones which were supplied in the third quarter of 2018 as compared to the third quarter of 2017. There were more iPhone brands which were supplied in 2018 as likened to 2017. Further, the data shows that there was more demand of iPhone X after its release in 2017 that customers who had made their pre-orders of the product were told to wait for up to four weeks to receive their commodities. Figure 3 further depicts that Apple iPhone brand has the largest market share in the smartphone industry. Figure 2 also shows that the prices of iPhone models which have been manufactured ever since the first release in 2017 have been on the increase apart from the brand that was released in 2018.
There are various factors which have led to the continuous growth of the iPhone brand. The first factor is the operating system which is built on that is iOS. This operating system is powerful, and the compatibility between the iPhone hardware and software even makes it stronger. Apple has also concentrated on the international smartphone market rather than focusing on the domestic one only. For instance, table 1 in the data section demonstrates that 93.6 million iPhones were shipped to other countries. The quality of iPhone smartphones has also triggered its continuous growth over about 12 years since the product was released in 2017. Throughout this period, Apple has been focused on releasing high standard smartphones which are built with quality components. Today, a large number of users prefer to use iPhones in social media because they produce quality images and videos.
Conclusion
From the analysis, I consider that the iPhone is a profitable product to Apple Company. Since the launch of the first iPhone in 2017, Apple has produced several other models of iPhone smartphones. Each of these models has been allotted a high price tag, yet the consumers have bought them in large numbers. The technique which Apple adopts of changing the versions of iPhone is flawless, and the firm should continue implementing this strategy. People have different tastes and preferences, and the best thing to cope with these styles is to produce various models of a brand. For instance, the consumers were more attracted to iPhone X despite it being costly that the supply exceeded the demanded products. The high market share and volumes of products shipped overseas also show that the iPhone is a profitable commodity. If I was to produce the iPhone, I would concentrate on the international market. Some competitors also have a big share of the global market, such as Samsung and Huawei. To counter this stiff rivalry, I would extend the brand to more parts of the world, such as the emerging and developing countries. By doing this, I would increase the supply of the brand and ultimately, the revenue.
References
Bradshaw, T. (2017, October 27). Demand for Apple’s iPhone X exceeds supply. Retrieved September 19, 2019, from The Banker: https://www.ft.com/content/11385c32-babb-11e7-8c12-5661783e5589
Huang, B., Saaty, T. L., & Li, Y. (2019). Collaborative R&D and Pricing Policy of Supply Chain under the Selection Behavior of Heterogeneous Customer. Mathematical Problems in Engineering, 2019.
jkielty. (2018, December 19). 19 Mobile Web Predictions for 2019. Retrieved September 19, 2019, from DeviceAtlas: https://deviceatlas.com/blog/19-mobile-web-predictions-for-2019
McCarthy, N. (2019, September 5). How The iPhone’s Price Developed. Retrieved September 19, 2019, from Statistica: https://www.statista.com/chart/11067/how-the-iphones-price-developed/
Paam, P., Berretta, R., Heydar, M., & García-Flores, R. (2019). The impact of inventory management on economic and environmental sustainability in the apple industry. Computers and Electronics in Agriculture, 163, 104848.
White, J. (2019). Apple settles tax bill with France ahead of DST. International Tax Review.