Macroeconomic Variables for Apple’s iPhone Market Responses

Response 1:

All number of macroeconomic variables can affect Apple’s iPhone market. “Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demand for the Company’s products and services.

In addition, consumer confidence and spending could be adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, changes to fuel and other energy costs, labor and healthcare costs and other economic factors” (Apple, p.5).

Unemployment is lowest it’s been in the past eight years, but inflation continues to increase by roughly 2% over the last few years according to the Bureau of Labor and Statistics. While smartphone companies may try to keep their prices affordable, as the cost of other goods continues to increase, it may make new iPhones less appealing.

However, it’s important to consider how smartphones are usually purchased. Most of us pay for our phones on a monthly phone bill, so the up-front cost is significantly diminished. We are also able to trade-in old phones, and given enough time, free upgrades are made available through the major phone services (Verizon, ATT, etc.).

GDP for the last 3 years has continued to increase between 2 and 3% every year, indicating that consumption is not slowing down.

This is the beneficial situation Apple and other smartphone companies find themselves in. Regardless of economic factors, consumers will always need cell phones until something drastically better takes its place. More than likely, a major economic collapse like in 2008 would be one of the few things that could negatively affect smartphone sales in general.

However, other countries are major consumers of Apple products, namely China. If China’s economy suddenly bottoms out, it would have a major impact on iPhone sales. Even the trade war that is raging between the Trump administration and China has affected Apple’s supply chain, and therefore made it a more costly venture.

Apple. (2019) Form 10-K. Retrieved from https://investor.apple.com/investor-relations/default.aspx

Response 2:

Within Apple iPhone macroeconomic variables have a large impact with economic growth, production, income and inflation. Recently Apple had to cut back on production with the iPhone Xr models as they did not product enough sales as previous models.  “Different timing of iPhone launches would affect our year-over-year compares” (Apple, 2019).

What Tim Cook brought to investors’ attention is that it was difficult to sell different within a different market and slow economic period.

While reviewing information of sales and estimates that were made the economic growth and revenue were low for Apple. The economic standpoint and trade market caused a disruption with overwhelming inflation.

Apple has worked with China to over the last 25 years and this time it has become the slowest growth and raised tensions not only with companies who utilise factors in China but also the government. Apple continues to assist China by collaborating through use of technology and create products that consumers want.

The macroeconomic challenge that was greatly faced this past quarter with was due to consumers not buying in and the increase in price of the product. Apple contributed that consumers gave into replacing a battery instead of buying a new phone.

The overall experience Apple has seen within the last three years has changed how consumers buy and when they limit their spending based on finances. Technology and software that can often be used for longer periods of time have now become less available based off of software updates.

While government and political actions have most recently been a negative factor to actions internationally with China. Apple must focus on the positive performances they have had in the past. In addition, trying to find a financial balance for production and sell cost of products.

References:

Apple. Letter from Tim Cook to Apple investors. (2019, January 2). Retrieved from https://www.apple.com/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/

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