Analysis of Economy and Industry |

Analysis of Economy and Industry

Analysis of Economy and Industry

Posted on Aug 2017:- By: PaperHub

Given that Apple operates in the electronic, computer software and smartphone industry, there are various economic conditions that affect the performance of organizations operating in this industry. One of the major economic conditions that are likely to affect the performance of the industry is the inflation levels. An increase in inflation levels in the target markets means that the industry sales will decline as the purchasing power of target customers also declines. For example, if the inflation levels increase with a margin of 10% in the South African market, it means that the prices of the smartphone products will increase with the same margin leading to an overall decline of the sales volume generated by firms operating in the industry.

            On the other hand, in the case of a decline in inflation levels within various markets, the industry sales end up increasing. The increment in industry sales is because the purchasing power of the industry's target customers increases following a decline in the inflation levels within the economy.

            Secondly, economic growth is likely to lead to an increment in industry sales volume. Economic growth means that the majority of the people in the economy will be in a position to earn income, which they can in turn use to purchase different smartphones of their choice (Apáti, 2007). Hence, when the industry sales rise due to economic growth in the target markets, such as in the U.s, Apple's smartphone sales will increase.

            On the contrary, if the economic growth is going to decline, it means that the industry’s sales will also decline, as most of the target customers will have less income or no income at all due to lack of employment opportunities. Therefore, economic growths within the target markets have a direct impact on the overall sales of the players in the smartphone market. For example, if the projected GDP growth globally will be 3% in the next six months, it means that Apple’s sales will also increase with the same margin. This shows that there is a close relationship between the Apple’s sales growth and the economic growth levels globally.

 Also, the prevailing exchange rates are also going to have a direct impact on the performance of the smartphone industry. In the case that the exchange rate will keep on fluctuating it means that the companies operating in the industry will be exposed to foreign currency exchange risks, which will adversely impact on their overall financial performance. For example, the decline in the value of the dollar will hurt the sales of Apple, as it means that it will be generating less income from sales compared to when the value of the U.S dollar is high in the international financial market. 

            Thus, it is clear that the prevailing economic conditions in the world economy or the specific target markets by the players in the smartphone industry have a direct impact on their overall sales. Hence, when there are favorable economic conditions, such as high levels of GDP growth, then the industry sales will end up increase, but a decline in GDP also results in an automatic decline in the sales of companies operating in this economic sector.

 There are various industry issues, which are likely to have a direct impact on the performance of Apple in the future. First, the levels of competition are going to have a direct effect on the performance of the company. When new players enter the smartphone industry, it means that the firm will end up losing a certain market share to them and this will have a negative implication on its overall future performance (Porter, 2008).



            Second, innovation is another issue that is affecting the performance of players within the smartphone market globally. It means that the capacity of an organization to keep on producing highly innovative products have a direct influence on its overall sales and ability to compete effectively. Innovation has been a source of competitive advantage for players like Samsung in the global smartphone sector. To achieve high levels of innovation Apple has to continue investing in research and development so as to come up with highly creative and innovative products (Porter, 2008).

 Finally, there is also a growing trend of customers being concerned about the quality and safety of the smartphone products, following the incidences of Samsung smartphone exploding while in the hands of customers. This shows that safety and quality issues are of paramount importance as far as the efforts of smartphone companies' ability to increase sales and remain competitive in the future are concerned. Hence, it is vital for Apple, to ensure that it maintains high levels of quality and safety for its products to continue enjoying a significant market share in the future. The current market share for Apple smartphone products globally standard at 13.7%, which is a decline compared to 14.8% recorded in 2016 (Reisinger, 2017). However, Samsung is the smartphone company with the highest market share globally as it standards currently at 20.7%.