Apple Incorporated is a U.S. based computer and electronics firm that manufactures products such as the iPod, iPhone, Macintosh computer, iPad, and Apple Watch. Apple Incorporated was founded in 1976 by Steve Jobs and Steve Wozniak, who released the Apple II computer in 1977 (Apple Inc…, 2015). The next product launched by Apple Inc. was The Apple Lisa which was released in 1983 and was the first computer to have a mouse and a graphical user interface (Apple Inc…, 2015). The first Macintosh computer came in 1984 however it was not successful due to the lack of market share to compete with IBM (Apple Inc…, 2015). After several years of financial losses, Steve Jobs launched a product redesign in 1997 that led to the iMac in 1998 (Apple Inc…, 2015). During the 2000s, Apple began to focus on portal MP3 devices such as the iPod and mobile phones like the iPhone. Then Apple began a new line of business in the music industry with iTunes. Today, Apple Inc. is a major competitor within the computer and consumer electronics industry. Apple Inc. is headquartered in Cupertino, California and has 76,000 employee based in the United States. Apple Inc. has directly and indirectly created and supported 1.9 million jobs in the United States (Israel & Johnson, 2016). Apple Inc. has stores located in 18 countries including the United States (Apple Inc., 2016). After a brief overview and history of Apple Inc., this critical analysis will take a look at the industry in which it operates, apply economic theories to create profit maximization, analyze the economic implications of operating in global markets, assess the impact of ethical and regulatory considerations, analyze the macroeconomic environment, analyze the microeconomic environment, and finally address recommendations for the long-term output of the firm. Apple Inc. currently operates in many different industries such as mobile phones, computer, tablets, MP3 music devices, operating systems, and cloud storage. These industries are all considered to be an oligopoly. Apple Inc. is an oligopolist within the industry because the industry only has a few producers compared to many in a perfectly competitive market (Krugman & Wells, 2005). For example, in the mobile phone operating system industry there are only a few producers: Apple Inc., Android, Windows, and Blackberry. It is very difficult to obtain entry into an oligopoly industry because the market share is already controlled by major corporations and it would be costly to do so. After examining Apple Inc.’s 2015 10-K report, the company is starting to see an increase in price competition of their products versus competitor’s products (U.S. Securities and Exchange Commission, 2015). Competitors are lowering their price and decreasing their profit margins in order to keep their market share. By doing so, they hope to affect the supply and demand of Apple Inc. products. Competitors are lowering prices in order to generate a higher demand for their products. Apple Inc. has a considerable higher price point compared to a competitor such as Dell. Competitors want to increase the demand for their products while taking away the demand from Apple Inc. As Apple continues to grow in each of its markets, competitors are going to try to chip at Apple Inc.’s market share. Apple Inc. can combat this attempt to decrease demand by generating organic demand of products and services. Apple Inc. can lower prices to compete with the lower prices of the competitive market. However, if Apple Inc. were to lower their price point it would affect their profit margin and could potential inhibit company growth. Instead of lower price point, Apple Inc. generated new demand through innovation and new product and service offerings. For example, with each new iPhone Apple Inc. released, there is a surge in sales and a surge in demand. New products and improvements to existing products continue to generate demand for Apple Inc. and create positive value for the company. Apple Inc. also faces other risk factors to their company’s growth and success. Apple Inc.’s “operations and performance depend significantly on global and regional economic conditions” (U.S. Securities and Exchange Commission, 2015). Simple uncertainty about the future of the global and regional economies Apple Inc. serves is a general risk factor. Risks such as decreased lending and credit, higher unemployment, decreased consumer spending, and declines in income can negative affect the company’s aggregate demand. With a decrease in lending and credit given, consumer spending will go down. As customers aren’t able to purchase products and services with credit from the banks then Apple Inc. aggregate demand will fall and their GDP will also decline. Higher unemployment can also affect the company’s sales and profits. Higher unemployment means less consumer spending and potentially a risk of deflation with the regional economy. All of these factors contribute to the company’s aggregate demand. A way that Apple Inc. has contributed to the global and regional economies is by creating jobs through innovation (Apple Inc., 2016). Apple Inc. creates jobs through the innovation of their products and services. By creating jobs, Apple Inc. is combating the risk factors of higher unemployment, decreases consumer spending, and tighter lending and credit. Creating jobs decreases unemployment, increases income, increases consumer spending, allows for more lending and credit, increase demand for their products, and increases net profit and margins. Apple Inc. also faces economic implications from operating in global market as well as operating in different market and industry structures. First, Apple Inc. experiences from major benefits from operating in the global market. Apple Inc. gains access to new customers by expanding to other markets around the world (Dewhurst, Harris, & Heywood, 2012). Access to new customers allows Apple Inc. to increase demand for their products and services. An increase in demand equals an increase in potential profit. Along with access to new customers, operating in a global market allows Apple Inc. access to new suppliers as well (Dewhurst, Harris, & Heywood, 2012). Access to new suppliers gives Apple Inc. the opportunity to increase margins by finding a local supplier that would be most cost effective compared to using a supplier from a distant location. Secondary to new customers and suppliers, Apple Inc. has gained exposure by entering the global market and expanding to multiple countries. Gaining access to new customers and suppliers, gives way to gain access to investors. Additional investors mean greater company growth and more success within each new market that Apple Inc. enters. Aside from the benefits of operating in the global market, there are struggles. Many companies that operate in the global markets have difficulties fully understanding the operating environment and customer needs with in the new market (Dewhurst, Harris, & Heywood, 2012). Struggling to adapt to the regional and local markets can be unfavorable when expanding into new markets and competing with local companies. In order to successfully operate in global markets, it is suggested that a company should approach global integration through the “AAA Triangle” (Ghemawhat, 2007). The three A’s stand for adaptation, aggregation, and arbitrage. Each represents a different strategy to approach the global market. Adaptation is the approach that “seeks to boost revenue and market share by maximizing a firm’s local relevance” (Ghemawat, 2007). In the case of Apple Inc., it is very important to establish market share within the new market being entered. Apple Inc. has successfully adapted to many different markets around the world and created relevance within each market. Next, aggregation is the approach that “attempts to deliver economies of scale by creating regional or sometimes global operations” by “standardizing the product or service offering and grouping together the development and production processes” (Ghemawat, 2007). Lastly, arbitrage is explained as “the exploitation of differences between national or regional markets, often by locating separate parts of the supply chain in different places” (Ghemawat, 2007). Apple Inc. has over 750 suppliers worldwide in regions of different markets in which they operate (Apple Inc., 2016). This is an example of how Apple Inc. has successfully used the approach of aggregation by grouping development of a market and the production for that market. Apple Inc. differs in the way they operate within different market and industry structures. Apple Inc. has two major industries in which they operate: mobile phones and computers. Apple Inc. experience two different market structures with the two different industries: oligopoly and monopolistic competition. Within the mobile phone industry there are few major competitors making the market an oligopoly. On the other side, Apple Inc. is in a monopolistic competition in the computer industry. A monopolistic competition is established by having several producers in the market, products are not identical, and there are no barriers to entry into the market (Ahlersten, 2008). Apple Inc.’s iMac and Macbook are the only products that have the iOS operating software making it not identical to any other product out there. The computer industry has little to no barriers that prevent a new producer to enter the market place. The computer market has many different producers other than Apple Inc. such as Dell, Toshiba, HP, Lenovo, Asus, Samsung, Acer, and Sony. Apple Inc. has the experience of operating in an oligopoly as well as in a monopolistic competition with the mobile phone and computer industries. In addition to operating in global markets and in different market and industry structures, Apple Inc. has regulatory and ethical considerations when making economic decisions. Apple Inc. could have to make or change business decisions based on regulatory factors. Since Apple Inc. has producers, suppliers, and retailers all over the world there are countless regulations that need to be upheld. In each of the countries in which Apple Inc. operates, governments are constantly modifying regulations in regards to factory conditions, labor laws, and taxes. In regards to factory conditions, Apple Inc. has been under the spotlight about worker conditions in overseas markets. Apple Inc. will have to adjust production and this will result in a “change in their cost structure, affect delivery timetables, and could result in higher prices for its products” (Thierer, 2012). More specifically Apple Inc. faces the regulatory issue of antitrust and the company is being investigated for supposedly “anti-competitive practices in the e-book market” (Thierer, 2012). For Apple Inc., antitrust can become a threat that will affect any and all business decisions as well as the company’s innovations.
In addition to working conditions and antitrust, Apple Inc. has to consider the regulatory risks of spectrum usage, privacy, and patents. Apple Inc. and many other technology companies rely a great deal on healthy wireless ecosystem. Today, providers are doing their best to keep up with the exponential increase in demand for data. However, federal regulations continue to limit the availability of a greater supply (Thierer, 2012). With Apple Inc.’s increased demand for spectrum availability, an investment in spectrum capacity could open the company to new and different regulations from the Federal Communications Commission and puts them at an increased risk (Thierer, 2012). Privacy laws affect millions of computers that handle consumers’ personal information. Apple Inc. is one of them. New rules and laws will affect how Apple Inc. handles consumers’ information, both personal and professional. Lastly, patents have become a greater regulatory consideration for Apple Inc. in making business decisions and innovations. Apple Inc. not only has to protect themselves from others using patented ideas but has to also be aware of other companies’ patents. Apple Inc. has become a big target in the legal battles regarding patents over last few years. The cost of litigation for the cases against Apple Inc. and other companies can be a risk to Apple Inc.’s ability to innovate in an efficient manner (Thierer, 2012).
Along with regulatory considerations, Apple Inc. has also faced ethical considerations and how they impact the company and their business decisions. Consumers and businesses alike are now more aware than ever of ethical behavior or lack thereof towards consumers, employees, and suppliers. Apple Inc. faces the scrutiny of ethical labor in their China based factories were iPhones, iPads, and other devices are assembled. In these factories, workers experience harsh conditions, excessive overtime, underage workers, and falsified records (Duhigg & Barboza, 2012). These labor conditions are very appalling to the U.S. and European consumer because of strict labor laws in such countries. However, in China these conditions are very likely at many other plants and factory in the nation. Ethics is a choice, Apple Inc. just like many other technology companies that assemble their products in China have choice to be ethical Labor conditions that result in illness and unsafe working environment are unethical and need to be addressed. Current and former Apple Inc. executives say that they have made significant steps in improving factories in the recent years (Duhigg & Barboza, 2012). Apple Inc. has created a “supplier code of conduct” that creates the standards on labor, safety, and other issues (Duhigg & Barboza, 2012). The company has also vigorously increased auditing and when abuses and violations to the code of conduct are discovered, corrections are required (Duhigg & Barboza, 2012).
Besides labor conditions and the ethical implications associated with them, Apple Inc. has another major ethical flaw: secrecy. Apple Inc. is secretive that they disguise the shapes of products under development using phony packaging and black cloaks (Hawthorne, 2012). Without information, consumers, investors, employees, and activists have no idea whether a company is participating with sweat shops, endangering the environment with pollutants, or even using dangerous chemicals. Apple Inc.’s secrecy has negatively affected the company’s ratings at Greenpeace and ClimateCounts for years (Hawthorne, 2012). Lack of information and openness to the public can create a negative image of Apple Inc. from an ethical point of view. After Steve Job’s death, the new CEO, Timothy Cook, has started to hear the complaints of consumers and activists. Timothy Cook and Apple Inc. have become more open to the public and even published the Fair Labor report on its Chinese factories and coinciding the company’s Greenpeace score has increased (Hawthorne, 2012). By allowing the public into the walls of Apple Inc., the company has overall become more ethical than before with the veil of secrecy disguising the public’s point of view.
Apple Inc. experiences several risk factors that could affect corporate operations on a macroeconomic level. Apple Inc.’s operations and performance depend greatly on global and regional economic conditions. Customer spending is a major macroeconomic risk factor that can adversely affect Apple Inc.’s operations (U.S. Securities and Exchange Commission, 2015). Consumers and businesses alike may decrease spending with the uncertainty of the economy. This may be a respond to “tighter credit, higher unemployment, financial market volatility, government austerity programs, negative financial news, declines in income or asset values and/or other factors” (U.S. Securities and Exchange Commission, 2015). Consumer spending and demand are also affected by changes in cost of living such as housing cost, fuel, other energy costs, and healthcare costs. This risk factor continuing to grow as Apple Inc. raises prices of goods and services to correspond with the U.S. dollar strengthening (U.S. Securities and Exchange Commission, 2015). A decrease in consumer spending and the uncertainty of the market prove to be risk factors for the demand of Apple Inc.’s goods and services. In addition to a decrease in consumer spending, another risk factor reported on Apple Inc. 10-K filing is the possibility of financial havoc that would affect the banking system and financial markets (U.S. Securities and Exchange Commission, 2015). If the banking system and financial markets became unstable it could have numerous affects on Apple Inc.’s business. First, it would create financial instability for outsourcing partners and suppliers. Financial instability of partner and suppliers can lead to inability to be given credit in order to develop or manufacture products. A decrease of delay in manufacturing would result in delays and a shortage in supply. A financial turmoil can also affect Apple Inc.’s consumer spending. If the banking system and financial markets are not able to grant credit, some consumers may not be able to purchase the goods or services from Apple Inc.
As macroeconomics topics such as financial stability and the banking system can affect consumer spending, it can also affect the microeconomic principle of supply and demand. If consumer spending were to decrease, the demand would decrease and Apply Inc. would either have to lower the supply or quantity being produces or lower the price of the good and services in order to combat the decreased demand. Other areas of Apple Inc. help keep demand and supply at equilibrium such as product innovation. Product innovation and the release of new products or new versions of existing products help to keep demand constant. With every new iPhone that is released, Apple Inc. is organically increasing the demand for the new product. Increased demand equal increased consumer spending which leads to a higher margin and gross profit. Apple Inc.’s microeconomic environment in which it operates focuses on the theories such as supply and demand, market and industry structures, and cost of production. Cost of product is one way Apple Inc. can increase gross profit by decreasing the cost of production. Apple Inc. as well as many other companies do so by outsourcing suppliers. Apple Inc. has factories around the world that make their products at a lower cost than it would if it were made domestically in the United States. By outsourcing production, you decrease the cost of product and increase the margin of the product. Making a decision to go from domestically producing a product to producing overseas is one area of the microeconomic environment in which Apple Inc. operates.
This analysis of Apple Inc. has taken a look at the industries in which it operates, applied economic theories to create profit maximization, analyzed the economic implications of operating in global markets, assessed the impact of ethical and regulatory considerations, analyzed the macroeconomic environment, and analyzed the microeconomic environment of the company. Apple Inc. is a major technology company that has grasped the global market. Apple Inc. successfully innovates and creates products and services that are demanded by the consumer. Apple Inc. has a bright future as one of the best technology companies in the world. In order to achieve future success Apple Inc. must remain aware of the risk factors involved with global and regional markets. Consumer spending is at risk and ultimate the demand for their products is at risk. Apple Inc. should also continue to make stride in improved their ethical code of conduct and continue to improve the factory and working conditions for its suppliers. Apple Inc. must also adhere to all regulatory changed in the future and adjust accordingly to them. By increasing the public’s value of the company through better ethics, more innovation, healthy financial market and banking systems and monitoring consumer spending Apple Inc. will flourish in the years to come.

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