Apple introduced its first phone into the market in 2007. This new product was introduced to consumer as the iPhone and item became a flagship product of the company that attracted consumers from the start. The company offered an innovative smart phone which allows users to not only make calls but to move seamlessly from listening to music, to browsing the web, checking emails and back at the touch of a finger The company presented its product based on four pillars. It offered a small amount of products, focused on the high end, give priority to profit over market share and created a halo effect that makes people starve for new Apple products (Nielson, 2014). Apple surprised consumers with the release of the iPhone and today it continues to dominate by continuously reinventing its product. In this paper I will present a business proposal for the iPhone that addresses market structure, price elasticity, marginal cost and marginal revenue, suggested non-pricing strategies, barrier to entry and fixed and variable cost. Additionally, I will recommend an appropriate pricing and non-pricing strategies for the iPhone based on the projected economy's stage in the business cycle and the prevailing projected economic conditions for one or more macroeconomic factors.
Market Structure According to InvestorWords, market structure is defined as the collection of factors that determine how buyers and sellers interact in a market, how prices change, and how different levels of the production and selling processes interact. The four basic market structures are Pure Competition, Monopoly, Monopolistic Competition and Oligopoly. The market structure that the Apple iPhone belongs to is Oligopoly. This is because a small number of firms control a large majority of the market (Investopedia, 2015). Apple alongside a few other companies such as Samsung have a large majority of control of the market they operate in but Apple appears to have a competitive edge over its competitors. From the beginning, Apple have set itself apart from its competitors with its personal computers and that presence continues currently with the iPhone. Differentiating the iPhone from every other smart phone on the market is important because it allows consumers to see that there are no close substitutes for the phone that Apple sells. This is done by creating a phone that is unique and attractive to consumers who is willing to pay for its product. One of many things that makes the iPhone different from its competitors is its hardware. Not only does the iPhone have a longer battery life than most on the market, but its offers a sharper resolutions due to its high pixel density and it also has a built-in storage with different storage size options. Most smart phones on the market have an external storage device slot that requires consumers to buy a mini storage device to insert into the phone to get more storage.
Identify the elasticity of the product "Apple products have a very large following because it creates demand for its products, giving the company power over prices through product differentiation, innovative advertising, ensured brand loyalty, and hype around the launch of new products" (Nielson, 2015). The iPhone is inelastic because the Apple brand is so strong that many consumers are willing to pay a high cost for apple products. If the price rises for apple iPhone, many will continue to buy (Pettinger, 2014). The consumer request for the product drives the demand for the phone so customers will pay the price to get the product they want because they value the brand.
Pricing and Elasticity of your product "Price elasticity of demand is an important business and economic concept that refers to the relative change in quantity demanded to the change in price of a product or service" (Kokemuller, 2015). Although a less known brand will experience a decrease in demand if the price of its product raises, that doesn't seem to be true for the iPhone. With each release of a new iPhone, millions of people either preorder the product month ahead or wait in long lines to get the coveted new phone. There are die hard iPhone users that will stay true to the brand regardless of price because they can afford the price tag. Some consumers see the iPhone as the brand to have and I believe that it have went from a wanted item to a needed item for many consumers. Apple is in a position where it's able to make strategic moves when it comes to the pricing of the iPhone and the price is set high based on the average cost of a smart phone.
Marginal Cost and Marginal Revenue "A market such as an Oligopoly will witness a decrease in marginal revenue as production increases. This is because a reduction in price is often necessary to spur additional sales beyond the traditional demand seen for the product" (Long, 2015). The decrease in price will lead to a decrease in total revenue, which will lead to a decrease in marginal revenue. In order for Apple not to experience a decrease in profit, it must base production decisions for the iPhone on both marginal revenue and marginal cost. The profit from the iPhone will increase when marginal revenue equals marginal cost.
Barrier to entry To increase barrier to entry, Apple can use branding, advertising, research and development and product differentiation for the iPhone. This allows Apple to have a unique identity in the marketplace. "Apple's brand position has evolved, but today's brand is still consistent with these early promises. Apple's core competence remains delivering exceptional experience through superb user interfaces" (Marketing Minds, 2015). When you see the Apple logo or hear the name of an Apple product, consumers know that they are getting a superior product. It's loyalty to the brand that allows Apple to continuously outshine its competitors and discourage others from entering the market.
Fixed and Variable Costs "Fixed costs remain unchanged when you increase or decrease your sales or production volume. Variable costs change with changes in the volume of production activities" (Cole-Ingai, 2015). In order to increase profit, Apple should decrease its fixed and variable cost. Keeping production cost to a minimum will prevent customers from experiencing a price increase for the iPhone. If Apple keeps a steady eye on what's going on in the market, it will be able to determine a good price for the iPhone so that it remains competitive in the smart phone market.
Pricing and Non-pricing strategies When deciding on a pricing strategy, I believe that Apple should use price discrimination for its products. Price discrimination is a pricing strategy that charges customers different prices for the same product or service (Investopedia, 2015). This will allow Apple to maximize profit by fluctuating the price of the iPhone based on the expected income of a particular age group. I believe this will attract higher income buyers as well as lower income buyers, which in turn can maximize its profit. Although Apple frequently adapt many pricing strategies, it can also use non-pricing strategies to attract consumers to its product. "If you are running an oligopolistic business, then the non-pricing strategy is the best thing to apply to maximize consumer response and improve market performance" (Kimmons, 2015). A non-pricing strategy that Apple can use to reach potential customers is through product branding. By using this strategy, Apple allows consumers to buy into the "Apple lifestyle". Buying the iPhone isn't just about the phone, it's about being a part of a company that has a heartfelt connection with its customers (Marketing Minds, 2015).
Local economy's stage in the business cycle. A business cycle demonstrates the financial activity of an economy over a period of time (Barlowe, 2015). The business cycle can be confusing because it is not always possible to determine what stage the economy is in or how long it will last but it always includes four stages. The four stages are expansion, peak, contraction and trough. Expansion is the increase in pace of economic activity; the upper turning of a business cycle is considered the peak stage; contraction is a decreased in pace of economic activity; and lastly the lower turning point of a business cycle where contraction turns into expansion is known as trough (Moffatt, 2015). I believe the economy is in a expansionary phase. The United States has a mixed economy and has maintained a stable overall GDP growth rate, a moderate unemployment rate, and high levels of research and capital investment (Wikipedia, 2015). I believe the plan to use branding and price discrimination for the iPhone will work in the current state of the economy. Unemployment rate is down from where it was last year so people can afford to buy the luxury items that they want.
Current global economic conditions and local macroeconomic indicators Macroeconomics is the study of the behavior of the economy as a whole (Heakal, 2015). Macroeconomic focuses on national output, unemployment and inflation, which helps people make better business decisions. Consumers worry about how much a product or a service will cost in the market, while businesses are concerned with whether consumers have enough money to buy it product (Heakal, 2015). When there is uncertainty about economic conditions, that could pose a threat for Apple because consumers tend to spend less in response to things such as tighter credit or unemployment . These economic conditions could have an unfavorable effect on demand for the iPhone if consumers don't have the income to be able to afford the product. When the economy isn't doing well, consumers will spend less. The opposite will happen when the economy is doing great. Consumer spending is likely to grow just in pace with the economy and as consumers income rises, their spending will rise at about the same rate (Conerly, 2015). However, Apple have continuously surprised the market that it operates in and they will continue push forward with technological advances that makes the iPhone the phone to have. When the iPhone 6 and 6 Plus was introduced into the market earlier this year, consumers flocked to the Apple store and telephone providers to get it. The reason for Apple's compounding, growing success is a simple multiplier factor involving customers. Once they buy one product, like an iPad, Apple's other products like the iPhone or a laptop computer become a natural. To date, no company has as effectively corralled customers to other seemingly different products by getting them to purchase just one. (McGee, 2011). I don't foresee a decline in iPhone sales right now because I believe that consumers are now invested in the brand and what it offers and they will continue to buy it as long as Apple continues to brand and price its product accordingly.
Credit market conditions Nasdaq defines credit market as a market for trading credit-related products (2011). If the state of the credit market is low then that will affect Apple's planning or operating decisions. The credit market can affect the ability to obtain credit finance research and development or prevent consumers from being able to obtain credit to finance the company's product. However, the iPhone is a highly competitive phone on the market so I don't foresee sales going down any time soon. Today's consumers are relying on their phones for more and more things everyday and they are also upgrading their phones more often. Apple can provide an upgrade for the phone and charge twice as much for it than it cost to make that upgrade because consumers are more than willing to cough up the money to get the product that they want. Phone companies are offering deals to customers to assist with getting a new upgraded phone. Apple has a product that has a highly integrated product range, effective supply chain management and a innovative internal organizational structure. It will continue to make a great product and adapt to changes in the economy accordingly to ensure the livelihood of the company and its product.
Conclusion
The iPhone have been in the market for some time and I believe that it will continue to be the leading manufacturer of smart phones as the years go on. If the company continues to brand its product as the item to have, current and potential customers will continue to flock to its innovative design and unique features. Pricing is an important part of the phones success but through continuous research, I believe that Apple will find a way to make current and potential customers happy and increase its revenue in the process. Understanding the market that it operates in and developing pricing and non-pricing strategies will continue to keep the company ahead of its competitors.

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