Team Final Microeconomics Project
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    Team Final Microeconomics Project Team Final Microeconomics Project Presentation Transcript

    • Presented by The Dream Team• James Bryan• Taylor Butler• Casie Cadwallader• Courtney Dobbs• Matt Lee• Iris Oscos• Eddie Zaldivar
    • Order of Discussion Introduction Production Problem Production Problem Solution Distribution Problem Distribution Problem Solution Consumption Problem Consumption Problem SolutionSolutions Affect On SocietyRecommendationsSummary
    • • Factors of Production of The Germane Resource• Changes In Efficiency & Profitability• Germane Resource Re-plan• Firm Attributes• Internal Capacity• Partner FirmsJames
    • Factors of Production ofThe Germane ResourceApple Inc. SamsungiTunes App StoreMacBook AiriPad• 80% tablet market shareiPhone• 5 mil sold first 3 daysiPod• $200 mil in salesAlpha Processor Inc.• 20% of total salesTFT LCD Screens• 18% market shareSmartphones• 2.4 bil in profits
    • Changes In Efficiency &ProfitabilityApple Inc. Samsung• 37.50%• 40.20% - 5 yr. avg.Gross ProfitMargin• 26.7%• 23.46% – 5 yr. avg.Net ProfitMargin• 10.81• 17.65 – 5 yr. avg.P/E RatioGross Profit Margin• 37.02%Net Profit Margin• 11.86%P/E Ratio• 9.59
    • Germane Resource Re-PlanApple Inc. Samsung• Safari – 8% total net traffic• Apple Pages• Apple Game Center• Apple NumbersProductPortfolio–Sunset:• Customer service-levelSoftwareBugs• TV• Tablet• SmartphoneProductEcosystem
    • Company AttributesApple Inc. SamsungStock Exchange•$457 mil/share•940 mil sharesGross Profit Margin•37.50%P/E Ratio•10.82Dividends•$3.05/shareRank•1stStock Exchange•$1,410 /share•22 mil sharesGross Profit Margin•37.02%P/E Ratio•9.59Dividends•$7,500/shareRank•20th
    • Internal CapacityApple Inc. SamsungPre-Tax Earnings• 2012 - $34.21 bil• 2011 - $55.76 bilTotal Revenue• $60.06 bilExpenses• $13.42 bilNet Gain• $46.64 bilCash Holdings• 2012 - $50.86 bil• 2011 - $37.53 bilAssets• 2012 - $176.06 bil• 2011 - $116.37 bilPre-Tax Earnings• 2012 - $17 mil• 2011 - $19 milTotal Revenue• $165 milExpenses• $23 milNet Gain• $141 MMCash Holdings• 2012 - $22 mil• 2011 – $23 milAssets• 2012 - $134 mil• 2011 - $112 mil
    • Partner FirmsApple Inc. SamsungLGSharpToshibaBlackBerryMicrosoft
    • • Differentiate Between Short-run & Long-run Costs• (a) Fixed costs, variable costs, total costs• (b) Diminishing returns• (c) Economies of scale to long-run costsCasie
    • Short-run, Long-run, Fixed, & TotalCostsShort-run costs• Incurred during a short period of time that are, as a result of time constraints, relatively fixed.Long-run costs• Incurred during a long period of time, and as a result of very few time constraints, the costs are variable as opposed tofixed.Fixed costs• Any costs that are not altered as a result of any changes in total output. Variable costs are those costs that do change alongwith changes in total output.Total costs• Any and all fixed costs and variable costs that a firm incurs.
    • Fixed CostsRemain constant regardless of the levels of productioniPad Production Cost$179/mo per unitGalaxy Tab 2 Production Cost$120/mo per unitFacility costsInsurance expenses for buildingsCost of fixed assetsProperty & land.
    • Variable CostsCosts that vary directly in accordanceto changes in the levels of out-put.• 16GB vs. 24GB modeliPad Variable Cost• Dual SIM vs. a single SIM modelGalaxy Tab 2 Variable CostDirect material costsHourly rate wagesUtility costs directly related toproducing
    • Diminishing ReturnsLack of new innovation• Shipments jumped 48.1% to22.9 million• Revenue• Q4 - $568.16 to $508.19• Q1 - $469.93• 17.3% revenue drop per unitApple Inc. Samsung
    • Economies of ScaleFab facilities are geographically collocatedLow labor costs in China• Low cost of manufacturing• Scale and pre-purchaseagreements with componentsuppliers• Purchase components forits products ahead of time• Discounts• Reduces supply ofcomponents available tocompetitors• $80 billion cash assets• Undercutting thecompetitionApple Inc. Samsung
    • • Analyze Germane Product & Resource Markets by:• (a) Explaining the rules for profit maximizing• (b) Explaining the rules for the germane resource use• (c) Differentiating between the various marketmodels.James
    • Explaining The Rules For ProfitMaximizing• If a firm such as Apple or Samsung chooses to maximize its profits, it must choose thatlevel of output where the marginal cost is equal to the marginal revenue and themarginal cost curve is rising.
    • Explaining The Rules For The GermaneResource UseHighest amounts of sales• 65% of the iPad units sold on EbayDemand for iPad 2 has exceeded thesupply• Created a deficit by not keeping up with demand• Limited distribution centersHas met demandMany distribution centers• Holds market share on Samsung tabletQ3 2012• 27% Samsung device market• 21.8 % market shareApple Inc. Samsung
    • Sales Figures
    • Differentiating Between The VariousMarket Models
    • Differentiating Between The VariousMarket Models
    • • Analyze the Market System by:• (a) Explaining the laws of demand and supply• (b) Describing the germane product markets• (c) Describing germane resource marketsCourtney
    • Explaining The Laws of Demand &Supply• Low supply and a high demand, the price will be high. In contrast, the greater the supplyand the lower the demand, the lower the price will be
    • Describing The Germane ProductMarketsApple Inc. SamsungMarket is mainly in the U.S.• Only distribution center is here in Elk Grove,California• In the process of opening up more centers,• Opening up of more centers in N. America &internationally• Increase product marketDistribution centers overseas• Ingram Micro• More retail stores• More of a contenderBased in S. KoreaAdvertising & distribution increase• Spent over 4.5 times more than Apple on advertisingDistribution• Kiosks in the mall• Retail stores in AmericaDistribution centers• San Diego, California• Coppell, TX
    • Describing Germane Resource Markets
    • • Compute or Describe the Elasticity of Demand &Supply by:• (a) describing the impact on total revenue• (b) illustrating the determinants of elasticityCourtney
    • Describing the Impact On TotalRevenue• Luxury good or items that can be easily replaced, they are goods that can be switched foranother.• For such products, consumers will easily put off or buy another product if the priceincreases even a little bit
    • Describing the Impact On TotalRevenue• Apple and Samsung both have elastic supply and demand because the products theyproduce and distribute are considered luxury goods.• Having an iPad or a Galaxy tablet are not essential for anyone to have but people wantthem. This is beginning to affect Apple’s total revenue because as Samsung products arebecoming more popular, people are starting to switch over to the less expensive model.• If the price of Apple products is more expensive than Samsung’s, the demand for Appleproducts will go down but Samsung’s will not; thus the total revenue for Apple will godown while Samsung’s will go up.• This is supported by the expected numbers from the first quarter of 2013; Apple’srevenue was to be around 41 to 43 billion while Samsung’s was expected to be at 46.7 to48 billion
    • Illustrating The Determinants ofElasticity• Both Samsung and Apple are elastic because their products are considered to be luxuryitems. The companies’ market structures are in an oligopoly competition.• Both are at the top of the game when it comes to electronic devices. There is not really anavailability of substitutes when it comes to each company’s own products; ratherSamsung could be looked at as a substitute for Apple because Samsung has the cheaperproducts whereas Apple’s products are more expensive but still looked at as a betterquality just because of the history of the company.• The difference between the availability is that Samsung has many more distributioncenters than Apple does, so being seen as substitute and being more readily available tocould be seen as being more elastic.
    • • Demonstrate An Understanding of MarketFailures, Externalities, and GovernmentIntervention by:• (a) Analyzing government intervention• (b) Explaining market failures• (c) Relating government intervention to marketfailures.Matt
    • Analyzing Government Intervention• Government intervention can be best defined asactions on the part of a government that effecteconomic activity, resource allocation, and thevoluntary decisions made through normal marketexchanges.• When the economy is struggling, thriving, or anatural disaster takes place, governmentintervention occurs for the purpose of allocatingresources most efficiently.• For example, Governments can intervene witheconomic activities in a number of ways, such asby setting price floors and ceilings, levying taxes,expenditures, controlling the money supply,quantitative easing, and setting up programs tohelp those in poverty
    • Analyzing Government InterventionGovernmentintervention thatdirectly affects Apple isthe recent discovery ofApple’s tax evasionscheme.The United Statesgovernment isintervening in order tocollect the billions ofdollars in taxes owed tothem by Apple.The government alsofunded early generationApple technology anddevelopment.
    • Explaining Market Failures• Market failure can be defined simply as a business being permanently closedApple Inc. Samsung• Apple Bandai• Emate 300• Mac TV• Apple iii• Mac Portable• Lisa• iPod U2 Spc. Ed.• 20th Anniv. Mac• Newton Message Pad• Appleworks• eMac• Power Mac G4• Too many models introduced
    • Relating Government Intervention ToMarket FailuresTroubled Asset ReliefProgram (TARP)• General Motors• AIG• Bank of America
    • • Analyze Income Distribution by:• (a) Describing income inequality• (b) Evaluating the impact of government programsto redistribute incomeMatt
    • Describing Income Inequality
    • Evaluating The Impact of GovernmentPrograms to Redistribute Income
    • • Solutions Effects on Society• Recommendations• Summary• References• AppendixesEddie & Taylor
    • • Evaluate The Impact of Globalization on TheDomestic Economy by:• (a) Identifying international financial institutions• (b) Describing the role of multinationalcorporations• (c) Demonstrating how demand and supply impactforeign exchange ratesEddie & Taylor
    • Identifying International FinancialInstitutions• The World Trade Organization (WTO) is an international financial institutionthat deals with the global rules of trade between nations. The WTO’s mainfunctions are to ensure that trade flows as smoothly, predictably and freely aspossible.• Recently the World Trade Organization issued an important ruling that mayallow the United States to be one step closer to opening up China’s market formovies, music and books. The WTO upheld a panel decision that China brokeinternational rules in restricting market access to foreign films, DVD’s, andother cultural products. Currently, Apple is trying to access China and get intoIndonesia before Samsung does
    • Identifying International FinancialInstitutions• According to Archer with the Capital Press Agriculture news Indonesia, China and Indiahave great potential because of their growing middle classes who want quality (CapitalPress, 2013, Online). It would be of tremendous benefit to Apple’s overall profit andcompany because of the increased revenue they would be gaining from these countriespurchasing their products, just like Samsung would if they were to get there first.• People who are eager for a product and quality like these three countries are wouldprobably be more willing to buy the first product available to them rather than waitingfor another company to become available for their purchase, so in this case if Apple wereto beat Samsung there, Apple would see an increase in sales and Samsung wouldn’t be assuccessful.• The World Trade Organization would be overseeing all the trading that would take placebetween the United States and these countries if it comes down that China did breakinternational rules and the U.S. is able to trade with them again.
    • Describing The Role ofMultinational Corporations• Environment, employment and economy.• All three of these factors hold a significant role in globalization. Many people believethat moving our businesses overseas has a negative impact on our economy.• U.S. multinationals strengthen the domestic economy by enhancing Americasproductivity”
    • Describing The Role ofMultinational Corporations• Moving companies and corporations overseas, actually helps produce more jobs andbrings about many more advantages.• When companies successfully compete in foreign markets, more jobs are produced• The creation of Multi-National Companies has actually helped to decrease the world’spoverty rates.• Newer and better products are constantly created.• Consumers discover these products and demand that they be imported to the U.S.• Companies that interact in the global marketplace are able to successfully import theseproducts. Those that effectively invest time and money are the ones that profit the most.
    • Describing The Role ofMultinational Corporations• When companies successfully compete in foreign markets, more jobs are produced.• Domestic parent companies currently employ 22 million U.S. workers.• The creation of Multi-National Companies has actually helped to decrease the world’spoverty rates.• Adult literacy rates increased from 45-70%, infant mortality rates dropped 56%, lifeexpectancy and production of food per capita has increased 39%.• Child labor rates have dropped by an average of 10%.• School enrollment rates for ages 6 to 23 rose for all developing countries to 57 percent in1995.
    • Demonstrating How Demand & SupplyImpact Foreign Exchange Rates
    • RecommendationsApple Inc. Samsung• Larger share of marketOpen moredistributions centers• Compete with lower-end marketLower their prices• Grass rootsReinvest in R&D• New technologyDiversify theirportfolioInnovationFuture TechnologyRaise Tablet Prices• Stigma & reputation
    • • Results of:• (a) firms’ economic efficiency and improvement oftotal revenue programs to minimize market failure.• (b) win-win strategies and development programswithin the firm or industry to minimize market failure.• (c) firms’ public infrastructure (manufacturing anddistribution locations) and innovative developmentprograms based on government policies and legislativeissues to minimize market failure.Iris
    • Economic Efficiency &Improvement of Total Revenue Programs ToMinimize Market Failure• Apple and Samsung have similar strategies to minimize economic failure and maximize corporateprofits; however, there are many factors that will influence profit maximization. For Apple, a mainthing they look for is the ‘upselling’ of their products. An example of that would be an iPhone buyeralso wanting and purchasing an iPad, so Apple would get the benefit of them shopping with theircompany twice for different products, which increase the amount of profit Apple receives. They tryto make sure that their products differ enough where people will want one of each of them andtherefore they are able to bring in more money from their customers.• While Samsung is has the same mentality, their phones and tablets aren’t almost interchangeablewith the same features but they work to make sure their customers are satisfied, thus wanting tocome back and purchase another Samsung product. One major problem that both Apple andSamsung have had to overcome in the last few years is the big uproar of cell phone radiation. Thecompanies have had to come up with ways to sway consumers from not buying a product becausethey are worried about radiation from the phone they might purchase. The production of Bluetoothdevices has helped both of the companies overcome the decline in profits that cell phone radiationcaused them to experience.
    • Win-win Strategies &Development Programs Within The Firm orIndustry to Minimize Market Failure• Market failure is an “equilibrium allocation of resources that is not Pareto optimal-thepotential causes of which may be market power, natural monopoly, imperfectinformation, externalities, or public goods.• Research and Development• Subsidies & Taxes• Taxation
    • Public Infrastructure (manufacturing and distributionlocations) & Innovative Development Programs BasedOn government Policies & Legislative Issues ToMinimize Market Failure• The results of the firms’ public infrastructure, which is the manufacturing anddistribution locations, will be about the same for both Apple and Samsung. If Appleincreases its distribution locations while keeping regards towards the governmentpolicies and legislative issues the results will be an increase in customer satisfaction andtherefore an increase in revenue.• The same goes for Samsung. It is imperative that Samsung keep an eye on the policiesand legislative issues because they are distributing in locations worldwide. Once thebottleneck in distribution is removed then we will see an improvement in delivery timewhich equates to increased brand loyalty to the firm. This is especially important forSamsung because Apple is famous for its cult-like following. Once it emulates success onthat level, we will see some intense competition between the two
    • References12 failed apple products. (n.d.). Retrieved from http://www.oobject.com/category/12-failed-apple-products/#disqus_threadApple (AAPL) puts price elasticity to the test « Intelligent Speculator. (n.d.).Retrieved from http://www.intelligentspeculator.net/investment-talking/apple-aapl-puts-price-elasticity-to-the-test/Apple access to Indonesia before WTO; China also a problem | capitalpress.com.(n.d.). Retrieved from http://www.capitalpress.com/content/djw-applecomm-sdr-032913Apple faces questions over alleged tax evasion | euronews, world news. (n.d.).Retrieved from http://www.euronews.com/2013/05/21/apple-faces-questions-over-alleged-tax-evasion/
    • ReferencesApple Wrests Sales Lead from Samsung - Digits - WSJ. (n.d.). Retrieved fromhttp://blogs.wsj.com/digits/2013/01/24/apple-wrests-sales-lead-from-samsung/Brookings - Quality. Independence. Impact. (n.d.). Retrieved fromhttp://www.brookings.edu/Does Apple owe a debt of gratitude to the U.S. government? - The Globe and Mail.(n.d.). Retrieved from http://www.theglobeandmail.com/report-on-business/economy/economy-lab/does-apple-owe-a-debt-of-gratitude-to-the-us-government/article11371263/E-Commerce Times: E-Business Means Business. (n.d.). Retrieved fromhttp://Ecommercetimes.com
    • ReferencesHow Samsung Changed the Game on Apple - Forbes. (n.d.). Retrieved fromhttp://www.forbes.com/sites/adamhartung/2013/04/04/how-samsung-changed-the-game-on-apple/Information for the Worlds Business Leaders - Forbes.com. (n.d.). Retrieved fromhttp://forbes.comIntelligent Economist. (n.d.). Retrieved from http://IntelligentEconomist.comLaw Of Supply And Demand Definition | Investopedia. (n.d.). Retrieved fromhttp://www.investopedia.com/terms/l/law-of-supply-demand.asp
    • ReferencesMobile Phones, Mobiles, Compare & Review Latest (New) Mobile Phones - The MobileIndian. (n.d.). Retrieved from http://themobileindian.comSamsung Challenges Apple’s Cool Factor - NYTimes.com. (n.d.). Retrieved fromhttp://www.nytimes.com/2013/02/11/technology/samsung-challenges-apples-cool-factor.html?pagewanted=all&_r=0Seeking Alpha - Stock Market News & Financial Analysis. (n.d.). Retrieved fromhttp://seekingalpha.comU.S. Multinational Companies Strengthen the Domestic Economy - Press Release |Business Roundtable. (n.d.). Retrieved from http://businessroundtable.org/news-center/u.s.-multinational-companies-strengthen-the-domestic-economy-press-rel/
    • ReferencesWhy Samsung tabs failed. (n.d.). Retrieved fromhttp://www.themobileindian.com/news/5485_Why-Samsung-tabs-failedWorld Trade Organization ruling may help open Chinese market to U.S. media - LosAngeles Times. (n.d.). Retrieved fromhttp://articles.latimes.com/2009/dec/22/business/la-fi-wto22-2009dec22WTO | What is the WTO? - What we do. (n.d.). Retrieved fromhttp://www.wto.org/english/thewto_e/whatis_e/what_we_do_e.htm
    • Appendix A
    • Appendix B
    • Appendix C
    • Appendix D
    • Appendix E
    • Appendix F
    • Appendix G
    • Appendix H
    • Questions