It appears common for people to improve their health and become their best selves in terms of productivity in the modern world. Apple Inc. developed the devices, Apple Watches, that assist users in achieving the stated goals; hence, the items seem to be incredibly popular nowadays. The smartwatches themselves are designed for fitness tracking, wireless communication, and health analysis. Furthermore, the devices can be easily synced with an individual’s smartphone to track messages, calls, and other crucial data. Another critical point is that Apple Inc. manages to advance the devices by adding new functions and capabilities each year, consequently attracting more customers to its versatile watches. The domestic market of smartwatches is the U.S.; however, the devices are also available for users in Australia, Europe, Asia, and Africa. Overall, Apple Inc.’s strategy appears to be highly competitive and results in considerable benefits in terms of its revenues, considering that the company constantly focuses on product differentiation and the proper segmenting of the markets.
The Price Elasticity of the Items
To begin with, the Apple Watches are the devices that necessarily require a connection to smartphones. It is significant to note that smart devices are not independent and derive all the data from an individual’s phone via Bluetooth and Wi-Fi (Apple Support, 2019). As a result, these items might be recognized as excludable since people need to have other products to be able to use smartwatches and as a result, their free consumption is limited. Furthermore, considering that the watches’ prices are not affordable to every user, the devices cannot be perceived as rivalrous because people need to earn a considerable amount of money to be able to purchase these goods and the devices’ purchases do not affect other users. Consequently, the price elasticity of Apple Watches’ demand is elastic in the global market, the UAE specifically, since the popularity of the items is so high that their actual cost matters to few consumers (Hsiao & Chen, 2018). However, the price elasticity seems inelastic in the domestic market as Americans’ average salary is higher than in other countries, and the watches appear to be not necessary or luxury items as customers are unreactive to price changes (Hsiao & Chen, 2018). Income elasticity can be concluded as the same one as the price elasticity: the global market’s demand is elastic, and in the U.S., it is inelastic. As for the cross-price elasticity, both markets share negative demand as users can easily opt for buying cheaper smartwatches of the same quality manufactured by different brands.
Macroeconomic Scenarios and Expectations for the Second Half of 2021
The weak economic situation might lead to a decrease in sales of the smartwatches, considering that with the Covid-19 restrictions, numerous people lose their positions and can no longer afford to spend money on such devices. As for the recession, it seems that at the moment, it is bound to increase and severely influence both the domestic and global markets of the company. Unfortunately, it is challenging to determine when there might be a recovery from the recession with the worldwide pandemic, considering the current unemployment rate and inflation. Furthermore, the demand for Apple Watches might become dwindling, and Apple Inc. might suffer from the drastic change in revenues (Hsiao & Chen, 2018). In other words, it might severely affect the company as it might be forced to fire workers opt for using cheaper materials of a worse quality to increase the number of customers (Bowman, 2020). Another critical point is that with the problem of scarce resources, raw materials might soar in their prices and, consequently, input will be more expensive (Hsiao & Chen, 2018). As a result, the production cost is likely to soar in the future along with the employees’ salaries, which will force Apple Inc. to increase the cost of the smartwatches themselves.
Market Structure and Strategy Identification
It seems significant to note that the company maintains an oligopolistic market structure; however, in terms of Apple Watches manufacturing, Apple Inc. is recognized as monopolistic competition. To be more exact, the corporation produces differentiated products, various models of smartwatches, both in global and domestic markets, the U.S. and the UAE, for example. Consequently, Apple Inc. is forced to employ the product differentiation strategy and a strong focus on the devices’ innovation and advancement. As a matter of fact, it seems that this strategy aspect helps Apple Inc. to attract more competent users compared to other technology manufacturing brands (Dudovskiy, 2021). In addition, the company’s revenue is no longer based only on the different models of iPhones since the manufacturer also produces Air Pods, smartwatches, computers, and accessories for them (Hsiao & Chen, 2018). Another critical point is that Apple Inc. should still opt for improving customers’ experiences in accordance with the prices for its products, considering that the domestic and global market competitors focus on the strategy based on the more affordable prices and relatively similar quality of their products.
Market Segments and Different Pricing Strategies
Market segments of Apple Inc. are usually based on the analysis of different people’s values and lifestyles for enabling the production of the products that can cater to the users’ needs. For instance, in the U.S., the company employs the target segment of conscious progressiveness that includes practical people focused on the significance of education and work. Therefore, they purchase the devices to organize their responsibilities conveniently and become more productive and efficient throughout the day. In contrast, in the global market segment, Apple Inc. should focus on consumers strongly associated with the internet, conferencing, calling, and messaging. As a result, Apple Inc. needs to position itself as a manufacturer that can satisfy all the users’ needs in terms of convenient devices’ usage when it comes to communication and building or sustaining relationships online. As for the company’s pricing strategy, Apple Inc. employs a minimum advertised price, which allows the manufacturer to focus on product differentiation and not struggle from the possible changes in the FX market or policies imposed by the government (Nellis, 2019). The approach is beneficial since it minimizes the risks of a drastic decrease in revenues, considering that the products never drop below a specific cost.
Demand Development in Domestic and Global Market
The demand for Apple Watches in the UAE can be identified as average since the country’s technology market is highly competitive and includes numerous leading technology companies. Thus, users do not always opt for purchasing smartwatches, considering that they are recognized as luxury items based on their prices (Hsiao & Chen, 2018). Furthermore, the global recession considerably influences consumers’ paying capacity due to the growing unemployment rate and inflation; whereas, the domestic market is not severely impacted, and Americans can still afford the purchase since Apple Watches are not perceived as luxury devices for most U.S. residents. By and whole, one can claim that Apple Inc. managed to build its brand name more strongly in the domestic market since a few aspects may influence the company’s revenues in the U.S.
Additionally, the corporation is incredibly reliable in terms of fiscal policies imposed by the government since it pays taxes for every sale both in the domestic and global markets. Furthermore, the worldwide monetary policy leads to the comany not being dependant on the banks and, therefore, Apple Inc. has a consistent revenue with no drastic decreases or increases. By and whole, the monopoly-like control of the corporation allows the demand for its items not to be impacted by the government imposing policies in any market, considering that Apple Inc. produces software that can be used only on Apple devices.
Price Competitiveness and FX Markets
Undoubtedly, like any company, Apple Inc. is dependant on the currency markets and exchange rates. In other words, the company adjusts the prices for its devices in accordance with the FX market’s fluctuations in both global and domestic markets. Still, it appears that the U.S. users are not heavily influenced by this type of change, considering a relatively stable FX market (Hsiao & Chen, 2018). For instance, the company’s competitiveness in the UAE might be negatively impacted by drastic alterations in the FX market as the company is bound to suffer from a decrease in revenues. The last few months demonstrate slight fluctuations in the exchange rates which resulted in changes in the company’s earnings (WSJ Markets, 2021). In other words, whether they need to make their devices cheaper with the drop of currency rates or soar the cost along with the exchange rates, it might result in reduced earnings.
Overall, Apple Watches appear to be the modern devices that are highly in demand both in domestic and global markets. In other words, Apple Inc. maintains a successful strategy and operates in the market effectively, allowing it to be the leading technology manufacturing corporation. Furthermore, relatively cheap production costs and a strong focus on enhancing a brand image enable the corporation to soar its revenues on a yearly basis.
Apple Support (2019). About Bluetooth, Wi-Fi, and Cellular on your Apple Watch. [online] Apple Support.
Bowman, J. (2020). Why Apple Could Be Slammed By a Recession. [online] The Motley Fool.
Dudovskiy, J. (2021). Apple Business Strategy: A Brief Overview. [online] Research-Methodology.
Hsiao, K. and Chen, C. (2018). What Drives Smartwatch Purchase Intention? Perspectives from Hardware, Software, Design, and Value. Telematics and Informatics, 35(1), pp.103–113.
Nellis, S. (2019). Apple Lowers Some iPhone Prices outside the U.S. to Offset Strong Dollar. Reuters.
WSJ Markets (2021). Currencies. [online] WSJ.