The Essay Explores The Impact Of Macroeconomic Variables On Apple's Products.

You are asked to locate a news article that relates to macroeconomic issues and to consider how the issues raised impact on an organization. That is, you will use the macroeconomic concepts learned and analyze the situation described in the news story. You will then discuss how the outcomes of the analysis would impact on the organization you have chosen.

Apple Inc. is an international company whose headquarter is based in California. The company is a global operation that ships finished products and component around the world.  Apple Inc sells its products to the small and medium sized businesses including learning institutes, mobile network service providers, governments, and retail outlets. Apple Inc. manufactures products in four lines which include computing hardware and software, iTunes store, watches and mobile devices. The products that the company sells include iPods, Mac, iPads, Software, iPhones, accessories, iTunes, and watches. It also sells digital content and applications via App store, Mac App Store, iTunes Store, and iBooks Store (Inc., 2014). The following paper will entail the effect of macroeconomic variables such as gross domestic product (GDP), inflation and unemployment on supply and demand of Apple’s products. The paper will also discuss how current monetary and fiscal policies in the United States affect the demand and supply of the corporation’s merchandises. Lastly, the study will describe how both macroeconomic variables, as well as monetary and fiscal policies, affect Apple’s performance.

Statista (2018), show Apples income increased from $ 8 Billion in 2004 to 229 in 2017 with 216.76 million phones being sold. The iPhone alone accounts for about 70% apple’s total revenue. According to Haslam (2018), macworld results for the 3^rd quarter of 2018 show a revenue increase of 32%.

Focus economics (2018) shows the trend of macroeconomic variable for US economy. Data extracted for 2014 to 2017 is as shown in the table below.

According to the 2008-2018 US inflation calculator, the inflation rate in the US as at July 2018 was at 2.9%.  The trend suggest that there the unemployment rate has reduced but inflation rate has increased over the past three years. The level of unemployment has reduced from 5.3 in 2015 to 4.4 in 2017. The implication is that the government is working to reduce the unemployment rate in the United States. This aspect shows the strengthening of the economy and implies that there would be strong markets.

Ideally with the increased and rising Gross Domestic Product over the past three years, the consumers demand is supposed to improve since an increase in Gross Domestics Product promotes consumers purchasing power and their wellbeing. Additionally, the supply of the iPhones is supposed to rise because an enhancement in Gross Domestic Product will boost the production capability of the company due to the availability of cheap inputs. Increased Gross Domestics Product will mean that many people in the United States have access to good money. This will also allow them to retain extra cash after purchasing their basic needs. The surplus amount would allow them purchase other commodities like the iPhone. This would increase the supply of Apple Inc. commodities.  

The reduction of the unemployment rate suggests that people have been employed and hence are capable of generating income that would enable them buy iPhones after obtaining other basic needs. Increased employment rates also exposes many people to salaries. This would also increase their disposable incomes. With high disposable incomes, people always become free to purchase many commodities outside the basics which would also see increased supply for the Apple Inc. products.  Nevertheless, if the unemployment were rising, then it would imply people have less money, hence the supply and demand of the iPhones would go down. Nonetheless, since the rates are down, there would be an increased in the demand and hence the supply of the iPhones. The disposable income is what affects the supply of commodities. Employment exposes people to better disposable incomes but if unemployment is high, then the low demand will lower the supply due to low disposable income.

Trends in Apple's Income and Revenue

The value of money is very important when it comes to business. Inflation rate is responsible for the stability of currency. The value of money allows customers to buy goods at considerable prices which may arouse their interests in purchasing goods and services. According to the statistics in the macro-economic variables table, the inflation rate is going up implying that people can not buy products at considerable prices, and this would auger negatively on the demand and supply of the iPhones. This confirms what Haslam (2018) said that iPhone did not meet the target sale of $41.79 million in the quarter. Although the sales brought in revenue of $ 29.906 billion which is a 20% increase in revenue year on year the increase in revenue is related to the higher selling price and not the number of the iPhone. During a season faced with inflation, businesses may make losses because of less or lack of buying by customers. Customers are not willing to buy because they are not willing to use a lot of money in buying little commodities.

The US government often use these policies to improve their economy. The monetary policies are responsible for the regulation of money supply while the fiscal policies works towards appropriation of taxes and government expenditure levels. The US government has currently increased its spending steadily in an attempt to boost economic growth. The effect of this is reduced taxes e.g. for exports. This has there helped Apple Inc. to cheaply access overseas markets on high demands of their products through exportation thus increasing supply. Sanchirico, (2016) argues that Apple Inc. is one of the wealthiest businesses in the US and is handled with a lot of care as it highly boosts the American economy. It therefore, experiences insulation from the government when it comes to taxes which see them increase their supplies.

Monetary policies which involve money printing, supply and circulation are very important for the growth of businesses. The US policies regarding this situation has been very strict. The strictness especially in the printing of few dollars to circulate around the country has led to the stabilization of inflation cases.  This is the reason why even though, inflation has been seen to increase, the margin is not so big, hence showing some form of stability. This is very important for the Apple Inc. this is because they retain the value of their products and may increase gently. In the case where a company’s product is deemed as valuable, there are high chances of demand increasing based on value. Increase in demand would automatically increase the supply of such products and hence the company continues to be profitable. Although, this company has not reached the target sales of $41.79 million, they are still seen to maintain their profit margin (Haslam, 2018). This is attributed to the binding monetary policies of money supply.

Fiscal policies have also been responsible for economic stabilization. Lockamy, (2017) reports that for a long time, inadequate demands for companies’ goods and services resulted from the high unemployment rate. These policies are therefore, viewed to be the genesis of employment when they are smartly adhered to. Due to the fact that in the face of unemployment, people have less income to buy products, the government finds it inevitable to intervene. This intervention is in terms of coming up with fiscal policies which promote and increases employment rates. The provision of job opportunities will then increase many people’s abilities to purchase the products from Apple Inc. this will then give them the opportunity to supply more taking into consideration, the increased number of customers.

Macroeconomic Variables and Trends in the US Economy

Monetary and fiscal policies do not only lead to an improvement in the operations of Apple Inc. and other businesses, they also have side effects. One effect is that these policies especially the fiscal taxation fluctuates. Other times there is increased taxation and reduced government spending, this situation is characterized by loss of jobs which also reduces disposable income (Figari & Fiorio. (2015). Therefore, customers have not money to buy products hence the supply reduces and many companies may close as a result. These policies may also affect the length of business cycles i.e. expansion, recession and recovery. If the policy implementation that resulted in increased taxes stay for long time, there are high chances that a business recession time may take long hence leading to closure. This may affect the operations of Apple Inc. and other business and they may collapse.

Stable macro-economic variables (high GDP, reduced unemployment and low inflation) combined with better fiscal policies are very important in promoting the growth of a business. Some of the reasons for this include the fact that many people will be employed. Through their employment, they will have an access to better disposable incomes which may increase their willingness and ability to purchase commodities. The second reason is realized with low inflation (Lockamy, 2017). This will increase the value of money. With this value increase, businesses will be able to profitably account for their goods and services which would also see them expand in their operations. Customers on the other hand, will see the benefit of using their money because the money will be considerable to the commodity purchased.  The performance of Apple Inc. will then be affected either positively or negatively depending on the stability of the macroeconomic variables and the effectiveness of the policies.

The operations and success of a business organization depends on two main issues. These issues the economic (monetary and fiscal) policies and the macro-economic variables. The government must make sure that their policies are aimed at stabilizing the economy which will see businesses flourish. Higher unemployment rate may be a factor which may lead to low demand of commodities. With such low demands, businesses may face a high rate of closure due to lack of market for their products. The US government has been very instrumental in ensuring business organizations like Apple Inc. and others are growing economically through their policies which thrive to act positively to these businesses. They have ensured overseas taxations have been reduced, employment rates enhanced and expenditure towards sustaining the business sector increased. With all these improvements put in place, Apple Inc. as a business organization in the US has been given a platform on which it will further grow.

References:

Figari, F., & Fiorio, C. V. (2015). Fiscal Consolidation Policies in the Context of Italy's Two Recessions. Fiscal Studies, 36(4), 499-526. doi:10.1111/j.1475-5890.2015.12074

Bett, M. (2012). Apple Q2 2012 financial result.  Macworld. Retrieved from https://www.macworld.co.uk/news/apple/apple-financial-results-3581769/.

Focus economics (2018) Economic Forecast from the world’s leading economics. Retrieved from https://www.focus-economics.com/countries/united-states

Haslam K. (2018). Apple Q3 2018 financial result.  Macworld. Retrieved from https://www.macworld.co.uk/news/apple/apple-financial-results-3581769/.

Klimczak, K. (2014). Determinants of demand and Supply. Economics and Sociology, 3(2), 58

Lockamy, A. (2017). An examination of external risk factors in Apple Inc.’s supply chain. Supply Chain Forum: An International Journal, 18(3), 177-188. doi:10.1080/16258312.2017.1328252

Mbugua, S. M. (2013). Macroeconomics Determinants of Supply in supply industry. Retrieved from https://www.focus-economics.com/countries/united-states

OECD (2016). Gross Domestic Product. Available at https://stats.oecd.org/glossary/detail.asp?ID=1163

Sanchirico, C. W. (2016). As American as Apple Inc.: International Tax and Ownership Nationality. SSRN Electronic Journal. doi:10.2139/ssrn.2394227

Statista (2018). Global Apple iPhone sales from 3rd quarter 2007 to 3rd quarter 2018 (in million units). The Statistics Portal. Retrieved from https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/