Discussion on Market Power
Market power refers to the ability of a company to control the pricing of its products to achieve their desired purpose which is primitively financial.According to( De Loecker et al,. 278)Firms are able to change prices by controlling the demand and supply of their products.However, for a particular company to be able to have market power, there should be minimal, or no competition; that way, market power will be at its optimal,in that case companies like the oil,wheat or flour have very few market power.
Level of influence a company has on determining the price of a product in the market measures its market power.There are two main types of markets that is monopoly and perfect competition.In monopoly the company in question is the sole producer of a product hence it has wide market,this gives it a lot of market power because it’s the one to determine pricing.In the contrally, for a perfect competition market as the name refers there is a lot of competition hence limited market,this brings along limited market power as a company has to price their product similar to their competitors.
Apple Inc in the Smartphone Market
Apple has many retail and online stores where they sell their products, and third-party products, explicitly to the customers .They also hire third disperse channels to sell their products such as cellular network carriers, wholesalers and retailer. In 2014 Apple Inc.’s net sales through its direct sales channels totaled for 28% of their total net assets and 72% was accounted for through their indirect distribution passage.Apple Inc. believes that by hiring knowledgeable salespersons they can heighten the sale of their products (Apple Inc., 2015). They believe these salespeople can explain to the buyer the significance of the hardware and software integration and show the immence skills of Apple products better to the consumer . Apple’s immence retail store locations are commonly located in high-traffic.The stores are all created to reduce complexity and heighten the products in order to ensure a high quality locations in order to better attract their desired customers (Apple Inc). Quality products and good experienced workers attract new customers .Apple Inc. has also invested in programs with third party sellers to promote the exhibit of Apple products.
For example, when the iPhone was first launched by Apple, the company had a wide and steady market power as it basically defined the smartphone and app market with the introduction of the product—it was for a little period of time the monopoly.
At the time, the cost to obtain an iPhone was high and could remain so because of a lack of opposing devices. Thus, iPhone prices were set firstly by Apple and not by the marketplace. Even as the first competitor smartphones came forth, the iPhone continued to represent the high end of the market in terms of pricing and predicted quality( Dolata et al,.277). As the rest of the industry commenced to catch up in service, quality, and availability of apps, Apple’s market power lessened.
Apple is of a market power.Apple’s product,the Iphone,has been able to control the smartphone market now for some time.Clearly this is due to its wide and sustained market all over the glode and also it has a good figure of very loyal customers, thus, has the ability to determine the pricing of the phone.House judiciary subcommittee released report that Apple had monopoly power over software distribution of iphone thus able to get huge profits. In addition,the report went further to state that Iphone enjoys sole supply of software apps on iOS devices.
Looking At The Market For Iphone App
High switching costs
It goes without saying that its mostly unlikely for people to switch from iphone to android phones.Thus,Apple company is given confidence that its customers are unlikely to abandon their product and go for other phones.Brand loyalty and high switching power give Apple company great confidence in their market power hence no fear of losing their market.
On the report its noticed that apple uses its control to remove rivals and promote its apps and services.An example is when Apple released Screen Time.This was an app used by parents to monitor their children’s usage of phones.Other competitors on the same field like Developers of parental controls software complained that they had being removed by iphone from that lucractive market of iphone owners.Hence we can see clearly that Apples monopoly over app distribution is useful for them to eliminate any roivals from their market.
According to the news article I can say that apple company as an example of market power has clearly gone over the odds and emerged as a logoistic.Through some measures they take like ensuring there is no rivals in terms of bringing out their best brands of iphones and also having to produce their own software apps.Although there are other companies that bring competition to them still they cannot reach their levels ,a good example being Sumsang company (Capps et al,. 345).Hence its clear that for a company to become a market power it must ensure its products are of high quality and unique that way its possible to set prices preferably.
De Loecker, Jan, and Jan Eeckhout. Global market power. No. w24768. National Bureau of Economic Research, 2018.
Dolata, Ulrich. Apple, Amazon, Google, Facebook, Microsoft: Market concentration-competition-innovation strategies. No. 2017-01. SOI Discussion Paper, 2017.
Capps, Cory, David Dranove, and Mark Satterthwaite. “Competition and market power in option demand markets.” RAND Journal of Economics (2003): 737-763.
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