Free Essay About Differentiating Market Structures
In the recent period, the telecommunication industry has recorded tremendous growth through increased product innovation and changing consumer tastes and preferences. The industry has continued to attract new market entrants who capitalize on product affordability and convenience. One notable market player is Apple Incorporation that was established in 1976 by innovation strategists; Steve Jobs and Steve Wozniak. The company started its operations in the manufacturing of computers and later diversified in the manufacturing of smartphones. Due to the intense competitiveness in the industry, the Apple company has maintained the production differentiation strategy introducing a series of smartphones including I pads, I phones and iPod.
The company operates in the telecommunication industry that falls into the monopolistic market structure. A monopolistic market is a form of structure that is composed of many buyers and sellers that engage in internal competition to satisfy the unpredictable consumer’s utility. The market players have no influence in setting the market price thus firms adjust their product price based on the reaction by market forces of supply and demand (Case & Fair, 2007). Further, consumers possess a high bargaining power since they have access to market information especially in the current era when technology revolution is selling the information asymmetry gap between the producers and the consumers.
The telecommunication industry continues to record the unrestricted entry of firms producing similar products on functionality but slightly differentiated in terms of size, color, accessory features and pricing strategy. The Apple Company faces stiff competition from mobile phone producers such as Nokia, Samsung, BlackBerry, Huawei and the recent entry of Google and Facebook companies. Therefore, the critical factors in sustaining market advantage in the monopolistic industry are through continuous product innovation strategy and creating a favorable product price for the target market.
The market differentiates itself from an oligopolistic market in that the latter is dominated by few sellers who offer slightly differentiated products. Notably, the firms often collude with each other to set the market price and incur undue advantage at the expense of the computers. Therefore, the few firms succeed in deterring other potential entrants from venturing into the market. Similarly, the telecommunication industry lose the grip to rank as a monopoly market in that a monopolist has the privilege to serve a broad consumer base hence the producer retains a high bargaining power over the consumer to set the market price of the products and services. Unlike the monopolistic structure where consumers drive the innovation culture in the market, the monopolist market consumers are confined to one type of product that improves gradually based on the firm’s capacity of financial and capital resources to advance production development.
Therefore, the telecommunication industry is a monopolistic market whose driving force is continuous product differentiation dominated by Nokia, Apple, Samsung , Blackberry and the industry still retain an enormous gap for investment by other companies due to the urge by consumers seeking for quality and unique products suited to their social culture.
How might the company you selected find itself working with organizations in the same industry that are an oligopoly, perfect competition, monopoly, or monopolistic market structure.
In the recent years, the Apple Company has continued to report a marginal declining trend in customer base and sales revenue. Tim Cook noted that the firm needed a business process re-engineering meant to advance technological factor in maintaining continuous product improvement and differentiation of products in reaction to consumer tastes and preferences. Samsung Company has overtaken the Apple market dominance due to its preferred Android application operating system. Based on market survey, most smartphone users expresses a high-level satisfaction in the Android operating system that eases the access to features such as downloading music and an explicit interface.
The Apple Company could consider outsourcing the production of smartphone components to a reputable company in the industry as a tactical approach to reducing the operation cost (Rothaermel, 2013). Further, the company has the option of neutralizing the Samsung Company’s competitive strategy on the Android application system. Tim Cooks could form collusion with the Google Company that manufactures the Android application system to capture the mental perception of consumers’ inclination towards Google Android operating system. In the current assessment, the phone accessory production market is dominated by few firms due to the high cost of capital-intensive and skills required establishing sustainable products. The market operates as an oligopoly thus the producers possess a high bargaining power over the mobile phone manufacturers. One of the advantages of the collusion strategy with input suppliers is accelerating the flow of the materials in relation to the market demand and collaborating with suppliers to deliver market-oriented products. Therefore, if Tim Cook sized the market opportunity, the company would strive to serve the market with efficient phone products at an affordable cost.
In another perspective, the upsurge in the global use of internet is a strategic opportunity that smartphone manufacturers are struggling to improve and retain the customer base, as well as capture the insatiable nature of the internet users. The internet providers have continued to advance from Third generation to the fourth generation network. While few phones are compatible with the fourth generation, the opportunity is worthwhile for Apple Company to seize and boost market penetration. The internet sector is dominated by a section of firms that apply the traits of monopolistic market structure to penetrate the target market. The internet market and the smartphone market are complementary and, therefore, a collusion strategy would be preferable for the smartphone manufacturers to maintain a continuous product innovation approach.
Particularly, Apple Company’s introduction of the make to order production strategy where customers would order a product suited to their taste and preference. The internet sector within the telecommunication industry operates as an oligopolistic market within the monopolistic structure of the entire mobile communication industry.
Competitive strategies applicable to Apple Company maximize profits
The strategy would succeed considering the firm’s strong brand identity across the globe and the huge technological resources necessary to implement the strategy.
Adopt the Android operating system
Most of the smartphone users have a high preference the Google Android operating system due to its convenience. As a tactical approach to minimize the growing competitive force by Samsung Company, the company should use the Computer Aided design system to re-engineer the production approach and install the Android system. The company should collude with the Google Company to design a differentiated operating system that suits the interests of iPhone functionality. The approach would strive for increasing a market penetration and boost revenue in the long-term.
Invest in research and development
The Apple Company should channel resources in product improvement research by sponsoring employees to periodic training, education scholarship as well as motivation as a strategic technique to accelerate innovation strategy to sustain the target consumers and build customer loyalty and minimize market dwindling risk through product diversification.
Outsource part of production process to ease operation cost
Outsourcing is one of the strategic techniques adopted by most global companies to reduce operation costs. The firms contract companies with efficient resources and delegate part of the production stages. The Apple company’ declining revenue trend could be reversed by outsourcing production of phone components to an external firm at a reduced cost. Consequently, the company will shield its income statement from unpredictable economic changes such as inflation that overstretch the cost of inputs and production process.
Further, outsourcing exposes the firm to more innovation strategies timely with the market change at reduced costs. Ultimately, reduced operation cost would enable the Apple company advance its focus strategy of low priced and differentiated smartphones production.
Jones, C. (2015). Apple's worldwide iPhone market share declining except In China.Forbes. Retrieved from http://www.forbes.com/sites/chuckjones/2015/04/06/apples-worldwide-iphone-market-share-declining-except-in-china/
Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior performance. Simon and Schuster.
Rothaermel, F. T. (2013). Apple (in 2013): How to sustain a competitive advantage?Havard Business Review.