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Apple computer l
Apple Computer Group IV presented topics on Apple's economics including: 1) The history of Apple from its founding in a garage to expanding into various computer products. 2) Apple's use of advertising campaigns to appeal to younger audiences and promote its brand over competitors. 3) Economic concepts like monopoly power in MP3 players, potential transition to an oligopoly, and the factors that influence supply and demand for Apple's products. 4) Financial topics such as government intervention, Apple's stock performance, and future projections.
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Apple computer l
- 1. Apple Computer, Inc. Economics 101-01 Group IV Mark Bender, Mike Rush, Alicia Sutton, Angelo Granata, Zack Klingensmith
- 2. Topics for Discussion ZackKlingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Transition • Wage Discrimination • Oligopoly Mike Rush Mark Bender • Economic Questions • Government Intervention • Ceterus Paribus • The Stock Market • Summary Angelo Granata • Substitutes/Complements Questions and Answers • Elasticity
- 3. History •Founded in 1976by Current Apple Products Steve Jobs, Steve •Personal Computers Wozniak, and Ronald •Laptops/Notebooks Wayne. •iTunes/Music Downloads •Company started by •Servers selling handmade •Much More… computers that were manufactured in a garage. •Has since expanded its market into a wide range of computer associated materials.
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- 5. The “Look” ofApple • Apple targets a younger audience by appearing as a much more casual company • We decided to dress as we did to represent Apple as well as we could • Notice Steve Jobs at the shareholders meeting:
- 6. Consumer Choice • Scarcityis the reason the study of economics exists. • If everyone had unlimited time and money, everyone would own the best computer possible. • Apple must try to convince consumers that they should spend money on their product and not on Dells or Compaqs or Sonys… • The most popular way…
- 8. “I’m a Mac”vs. “I’m a PC” •Apples newest ad campaign •Boring vs. Hip •Set to make Macs seem like the “cool” thing to do •Long series of commercials •If you were in the market…
- 9. the pc • drab • boring • plain • all work • no multimedia • virus-prone
- 11. Wage Discrimination Q: Whois this? – Born to Unmarried Syrian Father and American Mother – Put up for Adoption – Dropped out of College – Now makes $1/year salary A: Steve Jobs
- 12. Wage Discrimination • Steve Job’s Salary… • $1/year • Sweatshop Worker’s Salary • $50/month ($600/year) • Steve Job’s Stock Option • $381,000,000.00 • Sweatshop Worker’s Stock Option • Non-existent
- 13. Topics for Discussion ZackKlingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Transition • Wage Discrimination • Oligopoly Mike Rush Mark Bender • Economic Questions • Government Intervention • Ceterus Paribus • The Stock Market • Summary Angelo Granata • Substitutes/Complements Questions and Answers • Elasticity
- 14. The Three BasicEconomic Questions What to produce? • Computers • MP3 Players • Software
- 15. The Three BasicEconomic Questions How to produce? • Assembly Lines • Robots • Sweatshops
- 16. The Three BasicEconomic Questions For whom to produce? • Small Businesses • Big Businesses • Individuals
- 17. The Three BasicEconomic Questions The Basic Rule: If you can afford it, APPLE WILL SELL IT!
- 18. The Ceteris ParibusFactors of Demand • INCOME- Economy is doing well and as a result buyers are having more money to spend • NUMBER OF CONSUMERS- More and more people are now becoming interested in Apple computers, iPod and software • EXPECTATIONS OF BUYERS- Buyers of Apple’s products hope and expect that the iPod and other products will become more inexpensive as more are bought and produced. Additionally, consumers also expect Apple to be able to produce to their demand.
- 19. The Ceteris ParibusFactors of Demand • PRICES OF RELATED GOODS- There are many substitutes in both the computer and MP3 player industries. The substitutes in the computer industry are very comparable, but the substitutes in the MP3 are not at all close to the iPod, which was the pioneer in the field. • TASTES- Apple has been able to figure out its customers tastes and adapt its products to fit those tastes.
- 20. The Ceteris ParibusFactors of Supply • INPUT PRICES- The prices to make Apple’s products have been becoming less and less due to foreign countries and foreign companies making the products at much less of a cost. • NUMBERS OF SELLERS- In the computer field there are many other sellers; however, in the field of MP3 players, Apple is the pioneer and holds the majority of the market share in that industry.
- 21. The Ceteris ParibusFactors of Supply • EXPECTATIONS OF SELLERS- Apple is always updating its equipment and software. As a result, it is also finding ways to become more efficient and thus lowering the price of its goods. • PRICES OF ALTERNATIVE GOODS- Apple computers are slightly more expensive than its competitors. Its MP3 player, the iPod, can also be slightly more expensive; however, it is also more technologically advanced than its rival players. • TECHNOLOGY- Because Apple is involved in the technology industry, it must be constantly updating itself if it wants to compete with its adversaries
- 22. Topics for Discussion ZackKlingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Transition • Wage Discrimination • Oligopoly Mike Rush Mark Bender • Economic Questions • Government Intervention • Ceterus Paribus • The Stock Market • Summary Angelo Granata • Substitutes/Complements Questions and Answers • Elasticity
- 23. Substitutes • A goodthat can be • Apple has a large used in place of selection in their iPod another good that is line covering the used for the same ranges of gigabyte purpose. sizes, operating • They are related such functions and price. that an increase in the • There are many other price of one will cause media players on the an increase in the market that could be demand for the other. substitutes to the iPod.
- 24. Apple’s iPod’s andSubstitutes • If the price of metal used in the construction of the iPod goes up in price, then Apple could switch to a substitute • A substitute would be a less expensive material such as a plastic polymer that Apple uses in the construction of their notebooks. • Results in an increase demand for the plastic polymer because of the increase in price for the metal casing.
- 25. Complements • Complements are opposites of substitutes. • They are products that are usually consumed together. • They are related such that a decrease in the price of one will cause an increase in demand for the other.
- 26. Apple iPod’s andComplements If the price of Apple’s iPods went down, then the demand for the complements would increase. Some examples would be • Car application • iTunes Song Downloads • iPod Docking Stations • Protective Sleeves • Radio Transmitters
- 27. Elasticity • Elasticity isthe degree to which consumers respond to price changes • A measure of sensitivity of one variable to another • Formula: absolute value of percent change in quantity demanded divided by the percent change in price
- 28. Elasticity • A valuegreater than 1 is an elastic good • A value less than 1 is an inelastic good • Factors that affect elasticity are the availability of substitutes, consumer’s budget and time restraint
- 29. Apple’s iTune’s andElasticity • Substitute for price elasticity of iTunes is to go out and buy the CD • Average price of an online album is $9.99 • Research firm Ipsos-Insight conducted a survey: $7.99 was the best price for digital-music albums • Consumers are still willing to pay between $10 and $12 for an actual CD • Labels, artists and music publishers will make more money with lower prices—finding the right price elasticity
- 30. Apple’s iTune’s andElasticity • Steve Jobs, Apple’s CEO said he’s still pursuing iTunes because it helps sell the iPod • Apple knows there is interest in the iTunes store, but substitutes such as illegal downloading and the purchasing of CD’s are alternatives highly taken • Price needs to come down if consumers are to start buying in large numbers
- 31. Topics for Discussion ZackKlingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Transition • Wage Discrimination • Oligopoly Mike Rush Mark Bender • Economic Questions • Government Intervention • Ceterus Paribus • The Stock Market • Summary Angelo Granata • Substitutes/Complements Questions and Answers • Elasticity
- 32. Apple’s Monopoly onthe MP3 Market •Competitors can’t touch iPod •Ease of use and ‘cool’ factor •iPod turning many customers onto the Apple brand •Economies of scale achieved by Apple •Apple’s pole position •The iPod has boosted Apple Computer’s Mac sales and may ultimately help the company get into phones. •The ultimate question is whether Apple could survive in the phone business
- 33. Transition From Monopoly •The music industry is very profitable • This means that MP3 players are also a hot commodity as more and more music is made available through pay-sites • Other companies want to cash in on this gold rush
- 34. Oligopoly on theHorizon? • Stealing market share and prices • Apple’s biggest competitor • Microsoft Corp.’s Zune player slowly catching up to Apple Zune and iPod may become the equivalent of • Government Intervention Coke and Pepsi in the MP3 world. Numbers at this Apple News Site indicate Zune has leaped (Talked about later) ahead of Creative, Sandisk, and other devices • Creative-iPod battle heats to grab the #2 spot in sales dollars. They also indicate this is surprising because very few up people even know what a Zune is yet, including the sales people at retailers.
- 35. Topics for Discussion ZackKlingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Transition • Wage Discrimination • Oligopoly Mike Rush Mark Bender • Economic Questions • Government Intervention • Ceterus Paribus • The Stock Market • Summary Angelo Granata • Substitutes/Complements Questions and Answers • Elasticity
- 36. Apple and GovernmentIntervention • Government intervention in music downloading industry created a demand for Apple’s iTunes – Most successful pay music download application (70% of market) • US and French government legislation that makes music downloads universal – iPod’s and iTunes’ .DRV format will become released to all downloading companies – .AAC to .WMA files (Apple would have to switch) – Could loosen Apple’s control of the music download market allowing other competitors to sell music for the iPod
- 37. Apple and theFinancial Market Past Present Future
- 38. Apple and theFinancial Market - Past - • 1976 – Steve Jobs and Stephen Wozniak found Apple. Third co-founder, Ronald Wayne drops out 2 weeks later. • 1980 – Apple goes public in the largest IPO since Ford went public in 1956. – The valuation is over $1.8 billion – Over 40 of the 1,000 employees become millionaires
- 39. Apple and theFinancial Market - Present - • Apple Computer Inc. (AAPL)’s stock quotes
- 40. Apple and theFinancial Market - Future - • Fundamental analysis – a method of predicting a stock’s price based on the fundamental forces driving the firm’s future earnings.
- 41. Apple and theFinancial Market - Future - – Low-priced iPods and Mac computers using Intel chips are expected to boost Apple sales over the holiday – The Microsoft Zune is expected to steal some of the market-share away from Apple. – Next year, Apple’s stock is expected to rise with the release of iTV and an iPod cell-phone – 2006 leaves Apple with share-gain potential. Estimates for share are expected to rise in 2007 and again in 2008 due to a projected increase in revenue (forbes.com).
- 42. Summary Zack Klingensmith Alicia Sutton • History/Background • Monopoly • Advertising • Oligopoly • Wage Discrimination Mark Bender Mike Rush • Government Intervention • Economic Questions • The Stock Market • Ceterus Paribus Angelo Granata • Substitutes/Complements • Elasticity
- 43. Questions and Answers… Doyou have any questions…?
- 44. Thank You ForYour Support! ECN 101-01 Group IV Fall 2006