Summary
Apple is a successful multinational company. However, the company’s exemplary performance is under the imminent threat of its microeconomic environment as highlighted in the article “Apple Cuts Outlook as Chinese Slowdown Hits iPhone Demands” by Gurman (2019). China is an integral market in Apple’s operations. Gurman (2019) Apple collects billions in sales revenue in the Chinese market, and the iPhone is the most popular product sold in the country. Apple revised the revenue expectations from China in 2019 downwards that is from $89-$93 billion to $84 billion because of the falling iPhone demand among consumers (Gurman, 2019). The news was released by Tim Cook, the company’s CEO, and caught many stakeholders by surprise. Following the announcement, Apple’s share price significantly declined due to the company’s uncertain future.
Problem
The primary problem is the fall of iPhone demand in China. Over the last seven years, China has recorded high economic growth, thus the decision by many multinational companies like Apple to establish operations in the nation. However, China’s is going through economic growth is slowing down, and the development affects the consumers’ purchasing power. Besides, Apple is in direct competition with local and other foreign brands operating in the same market.
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Solution
The solution to this problem is lowering iPhone prices in China. Apple is known for its premium pricing strategy that allows the company to charge high prices on all its products. Apple iPhone may range up to $1000. On the other hand, many local companies are selling cheaper phones in the same market. Due to the tightening economic growth, consumers are more conscious about their money and choose the cheaper phones over the more expensive alternative. Therefore, lowering the prices will increase Apple’s competitiveness with the smaller brands taking over the market.
Unintended Consequences
However, lowering the iPhone prices will have several unintended impacts on Apple. Foremost, lowering the prices will reduce the amount of revenue collected per unit of the product; thus the company’s profit margin will be affected (Giachetti, 2018). Lowering the prices is likely to lead to the loss of luxury consumers, whose demand increases with costs.
References
Giachetti, C. (2018). Explaining Apple’s iPhone Success in the Mobile Phone Industry: The Creation of a New Market Space. In Smartphone Start-ups (pp. 9-48). Palgrave Macmillan, Cham.
Gurman, M. (2019). Apple Cuts Outlook as Chinese Slowdown Hits iPhone Demand. Retrieved from https://www.bloomberg.com/news/articles/2019-01-02/apple-cut-first-quarter-sales-forecast-on-weak-iphone-sales
