Apple Case Study

Nova School of Business and Economics

Apple Inc. Case Study

Strategy 12/13

1

Question 1 “The structure of a market can profoundly affect the conduct and financial performance of its firms (...). Market structure can range from perfect competition at one extreme to monopoly at the other. In between these extremes are at least two other broad categories of market structure: monopolistic competition and oligopoly.”1 Taking into account the competition faced by Apple, we can say that there is monopolistic competition. This type of market has two main features that is easily observed in Apple’s scenario: there are many sellers, as we can state through exhibit 6 “Apple’s competitors” (Microsoft, Intel, Hewlett Packard, Dell, Nokia, Samsung) and each seller offers a differentiated product,” “the products are slightly different, but basically very similar”2. “The notion of product differentiation captures the idea that consumers make choices among competitors products on the basis of factors other than just price.”3 This is observed because “differentiated seller that raises its price will not lose all its customers”2 due to loyal clients that value some characteristics attached to the brand. For example “Macintosh’s loyal customers allowed Apple to sell its products at a premium price.” and “Analysts estimated that Apple commanded a wholesale ASP of $659 from its iPhones, while competitors ‘ ASPs on roughly similar hardware ranged between $250 and $350” and nevertheless, “Apple generated more than 50% of the cell phone industry's total profits”. The Herfindahl - Hirschman was estimated just for the year 2011, because of the changes that occurred along the time, with the values of exhibit 3b: Summing the square values of HP (17,7%), Dell (12,6%), Lenovo (12,5), Acer (10,6%) and Apple (4,7%) we get Minimum HHI. HHImin = 0.1772+0.1262+0.1252+0.1062+0.0472 = 0.076275 Then to calculate the Maximum HHI, we add the square of the share of the remaining companies....