Apple is proposing to expand its product line to include a new MacBook Touch laptop with a touchscreen. This would put Apple in competition with Microsoft's Surface tablet. Apple analyzes the market structure, competitors, pricing strategies, and costs associated with introducing the new product. Apple expects the market to be elastic and competitors like Microsoft to adjust prices. Apple believes differentiating the product through high quality, branding, and non-price strategies can allow it to price higher than competitors and maintain market share despite elastic demand and price competition. Introducing the new product at a higher initial price that decreases over time and outsourcing manufacturing can help Apple maximize profits with the new MacBook Touch.

1. 1
8Business Proposal
Matthew De Point
Apple Business Proposal
Apple is a company that is a leader in the consumer electronics
and computer industry. Apple primarily sells its products to
retailers and wholesalers that market to products to the
consumer. Apple believes that sales of its innovative and
differentiate products are enhance by knowledgeable
salespersons who can convey the value of the hardware and
software integration and demonstrate the unique solutions that
are available on its products (Apple, 2014). Apple is proposing
an expansion of its product line to add a product to meet the
demand of the market and consumers. This proposal includes
market structures, competitors, pricing and nonpricing
strategies.
Market Structure
Apple is a top competitor in the technology, specifically in the
computer industry. Apple has few competitors that can out-
perform or out-service them. Apple falls under the oligopoly
market. Apple offers products that are differentiated in the
market. According to McConnell (p. 229) because of their
“fewness,” oligopolists have considerable control over their
prices, but must consider the possible reaction of rivals to its
own pricing, output, and advertising decisions. Computers and
consumer electronics qualify as differentiated oligopolies and
heavily rely on nonprice competition, mainly through
advertisements.
Apple maintains specific price levels to generate optimal

2. revenue generation. Because consumers flock to Apple
specifically for high-quality products and services, Apple can
maintain their “price maker” status in the oligopoly market.
Apple is in a highly competitive market, and rivals are
aggressive in all areas of the electronics industry. Rivals often
go to extremes and cut prices of their products dramatically to
increase sales which in turn affects their overall profit and
revenue considerably to gain or maintain market share.
Principal competitive factors important to Apple include price,
product features, relative price/performance, product quality
and reliability, design innovation, a strong third-party software
and accessories ecosystem, marketing and distribution
capability, service and support and corporate reputation (Apple,
2014).
Introduction of a New Product and Differentiation
The MacBook is Apple’s top line of portable personal
computers. Macs feature Intel microprocessors. The proposal
for a new generation of MacBook computers will include an
option for the user to complete actions using a pressurized
sensor on the retina display. The new MacBook Touch is a first
of its kind for portable personal computers for Apple. Offering
a touchscreen option is currently available in the iPad and
iPhone but never for the MacBook series.
Apple faces aggressive competition from Microsoft,
specifically. Microsoft currently offers a touchscreen tablet,
which Microsoft describes as a computer and tablet in one.
Although the two products offer the similar touch screen
capabilities, Apple’s product will continue to dominate the
market by offering the classic, elegant style, powerful
processing, and long lasting battery life as former MacBook
products. Apple expects Microsoft to intensify attempts to
imitate software features.
Pricing and Nonpricing Strategies
Developing a strong pricing strategy will ensure the

3. introduction of the new MacBook Touch is successful. Apple
prices products higher than competitors but can justify pricing
by providing substantially superior products. Microsoft offers
the new Surface Pro 3 starting at $799 for a standard product
while the Apple suggests pricing MacBook Touch at $1599.
Although Microsoft offers the Surface Pro 3 at a lower price,
Microsoft does not offer accessories with the product that drives
up the cost for the consumer. Additionally, Microsoft also has a
reputation for numerous operating system issues calling for
improvements and updates that require the consumer to
purchase a completely new product.
Apple predicts that Microsoft will combat the new MacBook
Touch will strategic price alterations to the elasticity of
demand. Apple has many advantages, including consumer
loyalty and brand identity which will draw in revenue.
Consumers are attracted to and responsive to movement in
pricing, specifically pricing that can save money. Because of
consumer attraction to price changes, products are relatively
elastic due to dramatic changes in the demand of quantities.
Although Apple proposes to market the new product at a higher
price, the sensitivity of the market will decrease as consumers
purchase and review the quality of the product. Additionally,
Apple predicts Microsoft will discount the Surface Pro 3 to help
boost sales and win over the market share. Apple predicts a
slowdown is sales. Apple will lower prices as an incentive to
move units. Apple will need to include nonprice strategies to
maintain market revenue shares.
Nonprice strategies are critical for Apple and the success of the
MacBook Touch. Apple will have the daunting task of proving
the differentiation of MacBook Touch, iPad, and other
touchscreen products. The goal of product differentiation and
advertising, nonprice competition, is to make the price less of a
factor in consumer purchases and make product differences a

4. greater factor (McConnell, 2009). Apple also proposes that
product display is precise and eye catching. Apple is investing
in initiatives to enhance reseller sales by placing high-quality
Apple fixtures, merchandising materials and other resources at
selected third-party reseller locations (Apple, 2014). Other
forms of nonprice strategies include extensive training and
expertise for resellers to be able to provide premium quality
service to consumers. If all aspects of nonprice strategies are
successful, the demand curve will shift the right, and the
product will become less elastic (McConnell, 2009).
Entry Barriers
Apple is aware that the oligopoly market structure requires
entry barriers to maintaining a level of domination amongst
competitors and new companies making way into the market.
According to McConnell (p. 230) in the computer and consumer
electronics industries, patents have served as entry barriers.
Moreover, oligopolists can preclude the entry of new
competitors through preemptive and retaliatory pricing and
advertising strategies. Apple regularly files patent applications
to protect innovations arising from its research, development
and design and is currently pursuing thousands of patent
applications around the world (Apple, 2014).
Marginal Cost and Marginal Revenue
Apple products compete for new technologies and components.
Although most components essential to the MacBook Touch are
available from multiple sources, some of the components are
currently obtained from single or limited sources. Many of the
components Apple uses are subject to industrywide shortage and
pricing variations that could unfavorably affect the profit and
revenue margins.
Out
put

5. in Bil.
Price
Per
Unit
Marginal
Revenue
Per Unit
Total
Revenue
In
Bil
Total Cost Per Unit
Fixed
Cost
Variable
Cost
Marginal
Cost
Average
Fixed Cost
Average
Variable
Cost
Average
Total
Cost
Per

6. Unit
0
1
$1599
$450
$450
$1149
$290
$120
$60
$290
$120
$269
2
$1599
$450
$900
$1149
$290
$120
$60
$145
$60
$474
3

7. $1499
$399
$1197
$1100
$290
$210
$50
$96.6
$70
$383.4
4
$1499
$399
$1197
$1100
$290
$210
$50
$72.5
$52.5
$425
5
$1449
$449
$2245
$1000
$290
$300
$40
$58
$60
$252
Although, Apple manufactures some Macs in the United States,
Apple utilizes outsourcing to manufacture a substantially large
portion of the hardware. Outsourcing manufacturing is cutting
down costs for Apple, but the unpredictability of outsourcing

8. leaves Apple vulnerable to schedule and production limitations.
Future operating results depend upon Apple’s ability to obtain
components in sufficient quantities (Apple, 2014). Maintaining
components specifically for the MacBook Touch can alter the
variable and fixed costs to ensure Apple has enough product
available to meet market demands while remaining in line with
the budget.
Conclusion
Apple is one of the largest producers of consumer electronics
and computers. Apple competes against rivals in an oligopoly
market structure. Because product differentiation is vital in the
oligopoly market structure, Apple has to manufacture and
produce a new product to stay ahead of the competition.
Although being hesitant to enter the touch screen market,
Apples proposes the implementation of the MacBook Touch.
The MacBook Touch would encounter aggressive competition
and elastic pricing from fierce competitors such as Microsoft.
Introducing the MacBook Touch at higher price levels and
gradually decreasing the price as more units sell and will help
combat the demand curve and make the product less elastic.
Outsourcing delays are a major concern for Apple and the
production of the MacBook Touch. Ensuring components are in
stock and available is key to operational and marginal success.
References
Apple. (2014). Investor Relations. Retrieved from
http://files.shareholder.com/downloads/AAPL/0x0x789040/ED3
853DA-2E3F-448D-
ADB4-34816C375F5D/2014_Form_10_K_As_Filed.PDF
McConnell, Campbell, Stanley Brue, Sean Flynn. Economics,
18th Edition. McGraw-Hill
Learning

9. Solution
s, 2009. VitalBook file.
1
3
Business Proposal
Matthew De Point
Business Proposal
Thomas Money has been in business since 1940. The company
started out as a consumer finance but branch out into equipment
financing and started a subsidiary Future Growth Inc. (FGI).
The company made a move in 1951 and purchased an equipment
manufacturing company and have continuously increased profits
year after year. But the global downturn has hit the company
and profits declined about 30% from previous year. The
housing market was hit with the big drop, but there is some
section how still have demand like hospitals and nursing homes.

10. This analysis will look into the market structure and the
elasticity of demand for the goods. There will be suggestion
about pricing strategy and look into revenues and cost. There
will be suggestion about non-price barriers and how the
company can different their product to generate more income.
Market structure
In the monopolistic competition each seller monopoly in a
particular product but nevertheless in competition because
others are selling similar products, but not quite like.
Monopolistic competition is very common. “The equilibrium in
a monopolistic ally competitive market differs from the perfect
competition in that each firm has excess capacity, and each firm
charges a price above marginal cost” (Mankiw & Taylor, 2011).
Each company sets MR = MC. However, free access makes it
more to P = AC. Which means that profits will be zero.
Production, however, will not be effective because companies
produce output were AC, which has not reached a minimum
low. (Mankiw & Taylor, 2011).“But the monopolistic
competitor’s control over price is quite limited since there are
numerous potential substitutes for its product (McConnell 224).
“As new firms enter the market, demand for the existing firm’s
products becomes more elastic and the demand curve shifts to
the left, driving down price. Eventually, all super-normal
profits are eroded away” (Economics Online, n.d.). For
companies how operate on the monopolistic competition market

11. demand is relatively elastic. "However, demand is not perfectly
elastic because the output of each firm is slightly different from
that of other firms" (Economics Online, n.d.).
Elasticity for the product
Price elasticity is percent change in volume divided by the
percent change in price. If elasticity is close to 0 then demand
is said to be completely inelastic, which means that consumer
demand is virtually unchanged with the price change
(McConnell, Brue, & Flynn, 2009). If the value is between 0
and 1 the demand is said to be inelastic. Consumers respond
comparatively fewer price changes and sellers can increase their
income by increasing price. If the elasticity is = 1 then
elasticity neutral and price change has no overall effect
(McConnell, Brue, & Flynn, 2009). If the value is> 1, then
responds to demand proportionally more than the price changes
and the price elasticity of demand is said or the demand is
sensitive price changes (McConnell, Brue, & Flynn, 2009)
Elasticity measures the response of buyers and sellers of market
changes and is useful to examine the supply and demand better.
If demand for the product is elastic price reductions will
increase revenue but if demand for a product is elastic price
increase will reduce total revenue. If demand for the product is
inelastic price reductions will reduce the total revenue and if
demand for the product is inelastic than price increase will
increase total revenue. For this scenario the highest price

12. elastic is when the demand for product is 350. As was stated
here above if elasticity is greater than 1, then the demand is
called elastic, so if the demand for the product is elastic then
reduce in price will increase revenue. The elastic is highest in
demand for 350 pieces of forestry equipment selling at 1634,3
dollars. The company would be getting 92.3% more demand on
their product by reducing the price for 5,6%.
Pricing strategy based on market factors. Pricing strategies are
considered to be the main competitive strategy every business
must exploit (Economics Online, n.d.). The company need to
understand the market and strategize according to its demand
and income level. The chart above shows us the demand on the
market for certain prices. As the chart for total revenue shows,
the company would be getting most revenues by selling their
equipment at the 350 in demand as it would generate 572.005 in
revenue.
How will changes in the quantity decisions affect marginal cost
and marginal revenue. If companies have both marginal
revenue and marginal cost is easy to see whether the company
should increase or decrease the amount produced. If marginal
revenue exceeds marginal cost, they should increase production,
increased production will generate more revenue growth than
the increase in costs.
If marginal revenue, however, is lower than the marginal cost
companies should reduce production because income will indeed

13. decline but with the cost will decrease more. This leads to that
the maximum profit will not be in place unless marginal revenue
is equal marginal cost. (McConnell, Brue, & Flynn, 2009). For
Thomas Money Service Inc. this place that is at 12 pieces
output as the chart above displays.
Created non-price barriers to entry based on market factors.
The sale has dropped 30% from the previous year and the
market for new hoses doesn’t look good but there is believed to
be a demand for hospitals and nursing homes. Because of the
profit in the company has decline they need to turn the table and
hit the market where he is booming. In monopolistic
competition market to increase profits the best way is to use
advertising to stimulate sales and change the characteristics of
the product, for example, appearance or packing (McConnell,
2009). When each company on the market sells different
products and charge prices that are higher than marginal cost,
must be a great incentive to advertise to attract more buyers.
Because of this company need trying to use advertising to create
a certain brand. Because FGI has been on this market for 64
year people know the product and recognize the brand. They
need to inform the market that they have a product that people
trust and that is their differentiated from others. “The goal of
product differentiation and advertising so-called non-price
competition is to make price less of a factor in consumer
purchases and make product differences a greater factor. If

14. successful, the firm's demand curve will shift to the right and
will become less elastic“ (McConnell, 224).
It is essential to realize that customers are not buy the product
in an actual sense but solutions to the needs that the product
meets. That’s what this product will give them, product that
people have trust for long time and that is theirs differentiation
in the market that is theirs brand name will give them the
differentiation that they need from rivals’ products (McConnell,
2009).
Changes in business operations alter the mix of fixed and
variable costs. The change in the business operation by produce
output of 12 pieces will generate them the most revenue. Even
though the variable cost is highest for the company with this
business operation, it will still generate the greatest revenue.
When the company is producing this output the MC and MR are
as close to each other so the company is generating as much
profit as it possible Because of the high fixed cost the company
has that is 990 though they will output 12 pieces when dividing
the cost to each item it would still give them the greatest profit
to have an output of 12.
Conclusion
FGI has for the first time in the history of the company suffer
loss. The company needs to realize where they can do better in
the service of their customer and marketing achieved
considerable benefits inherent in a clearer vision of the

15. direction and future. Differentiation of product they are
offering is essential and they need to focus on that. They need
to know where the company is generating the most profit in the
production, but that is the amount were MC=MR or as close to
each other as possible. FGI also will be successful again
knowing how elastic the product is and how a change in price
effect the demand. They need to know the market factors and
arrange their pricing according to the market to be able to
generate more income so the wheel of fortune will begin to turn
again.
References
Economics Online. (n.d.). Monopolistic competition.
Retrieved from
http://www.economicsonline.co.uk/Business_economics/Monop
olistic_competition.html
Mankiw, N. G., & Taylor, M. P. (2011). Economics (2nd Ed.).
London: Cengage Learning.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009).
Economics. Principles, Problems, and Policies (18th Ed.). New
York, NY: McGraw-Hill Company.
Business Proposal Feedback Checklist
ECO/561 Version 9
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16. University of Phoenix Material
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