Apple Essay

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Apple exists in an oligopoly market structure, wherein a small handful of companies control the market. Apple, along with Samsung, Microsoft, Alphabet (Google) and Nokia, essentially control the tech industry (smart phones, computers, portable devices, etc.). While smaller companies do exist, it is these larger companies that set the stage for prices, products and innovation. To what extent Apple’s current status as a blue chip stock may be representative of the company’s actual true value and is a question that an analysis of micro- and macroeconomic trends and conditions may be able to determine. This paper will analyze economic data and business data to explain how the core economic principles impact the sustainability of Apple, Inc. and what actions the firm can take now to ensure success in the future.



Apple’s current market share of smart phone market stands at 19.2% and the company leads all others with 77.3 million phones sold, which put it just ahead of Samsung for the first time (Angerer, 2018). The company’s market cap is currently over $822 billion and its P/E is 16.486. In the personal computer market, Apple is a top 5 vendor against competitors HP, Lenovo, Dell and Asus, all of which sold more units than Apple in Q3 2017 (Clover, 2017). These companies represent the real barriers to entry in the tech market: they stand out as proof of the fact that the market is an oligopoly, controlled by a few titanic companies. In the U.S., Apple’s market share is dominant as well:



Source: Fortune (2016)



Trends in current macroeconomic indicators for the last three years suggest that things may be about to get worse for all, however.
Analysts have indicated that we are in the late stage of the business cycle, with hints of economic recession looming just around the corner (Mobasheri, 2017). Real GDP has risen steadily over the last three years:

Source: FRED (2018a)



Inflation as measured by CPI has also risen steadily:



Source: FRED (2018b)



This should not be surprising as the Fed’s policy (and every other central bank’s policy around the world) has been to “quantitatively ease” the market shock that emanated from the Global Economic Crisis of 2008 by way of printing trillions of new dollars and propping up the bond market with them. The spillover effect of bond purchases into the stock market has been well documented (Zhang, Zhang, Wang & Zhang, 2013; Yavas & Rezayat, 2016), but the real story is the rising inflation in various asset classes as a result of QE (Heller, 2017): stocks, bonds, housing, food, precious metals—the price of nearly everything has gone up since the central bank began heavily diluting the dollar (which is currently plunging in value as well):



Source: Goldprice.org (2018)



The unemployment rate sits at 4.1% as of October of 2017 and is purportedly down from 6% as of 2014, though unemployment statistics have been questioned for decades (everyone from serious market analysts and hedge fund managers to Abbott and….....

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References

Angerer, D. (2018). Apple overtakes Samsung in shrinking smartphone market: Survey. Retrieved from https://www.channelnewsasia.com/news/business/apple-overtakes-samsung-in-shrinking-smartphone-market-survey-9922566

Clover, J. (2017). Apple’s Mac shipments down. Retrieved from https://www.macrumors.com/2017/10/10/apple-mac-shipments-down-q3-2017/

Heller, R. (2017). Monetary mischief and the debt trap. Cato Journal, 37(2), 247-261. Fortune. (2016). Smartphone brand market share. Retrieved from https://fortunedotcom.files.wordpress.com/2016/02/476885906137.gif

FRED. (2018a). Real GDP. Retrieved from https://fred.stlouisfed.org/series/GDPC1

FRED. (2018b). CPI. Retrieved from https://fred.stlouisfed.org/series/CPIAUCSL

FRED. (2018c). Fed funds rate. https://fred.stlouisfed.org/series/FEDFUNDS

Goldprice.org. (2018). DXY. Retrieved from https://goldprice.org/

Mobasheri, A. (2017). Recession is near. Retrieved from https://www.cnbc.com/2017/06/27/op-ed-a-history-of-economic-cycles-suggests-a-recession-is-near.html

PR. (2017). Apple press release. Retrieved from https://www.apple.com/newsroom/2017/11/apple-reports-fourth-quarter-results/

Spangler, T. (2018). Apple posts record revenue. Retrieved from http://variety.com/2018/digital/news/apple-iphone-x-sales-earnings-q1-2018-1202684154/

Statista. (2018). Apple income. Retrieved from https://www.statista.com/statistics/265125/total-net-sales-of-apple-since-2004/

Yavas, B.F. & Rezayat, F. (2016). Country ETF returns and volatility spillovers in emerging stock markets, Europe and USA. International Journal of Emerging Markets, 11(3), 419-437.

Zhang, J., Zhang, D., Wang, J. & Zhang, Y. (2013). Volatility spillovers between equity and bond markets: Evidence from G7 and BRICS. Romanian Journal of Economic Forecasting, 16(4), 205-217.

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