Marketing Within The Global Economy Essay

Question:

Discuss about the Marketing Within the Global Economy.

Answer:

Business Overview

Apple is a multinational technology conglomerate that has headquarters situated in Cupertino, California. The Company is known to design, develop as well as sell individual electronic goods as well as computer software. The hardware goods of Apple include iPad tablet computer, iPod manageable media player as well as Apple smart watch. On the other hand, the software goods of Apple include macOS and iOS operating systems (Rodrigues & Minshall, 2015). Steve Jobs, Steve Woznaik and Ronald Wayne instituted the Company in the year 1976. It is integrated as Apple Computer Inc. in the year 1977 however; it was renamed as Apple Inc. in the year 2007.

Purpose of the Report

The report mostly focus on the operation of Apple in the United Kingdom and Brazil and the report also seeks to analyze how the macroeconomic environment within these two contexts might have an influence on the economic activity of the Company.

Analysis of the Market Structure - United Kingdom and Brazil

United Kingdom

Apple Inc. is considered in two different market structures such as oligopoly and monopolistic competition. The share of the UK Smartphone market had augmented enormously due to the share of Apple. IPhone accounts for more than 39.5 percent of Smartphone sales in the UK. Almost one-third of the iPhone sales are made through the retail stores of Apple. Both iPhone6 and iPhone6 plus emerged as the best-selling product of Apple that shifted more than 10 million units (Hardman & Steinberger-Wilckens, 2014). Apple mostly faces a monopolistic competitive market structure in the UK, as it has no barriers to entry. The major feature of the Company is that it involves product differentiation. In other words, the Company differentiates its product by making use of several features. Apple also takes the prices charged by its competitors as specified and avoids the impact of its own prices on the prices of other firms. As per the reports, more than 86 percent of UK purchasers upgraded from an older iPhone model however; only 5 percent of the individuals switched across from Samsung (Lambert, 2017).

Brazil

The market structure of Apple in Brazil is competitive as the Company faces competitive obstacle in the market of Brazil. Although Brazil is considered as one of the largest and fastest growing Smartphone markets, yet Apple does not have a single retail store in Brazil. As a result, Apple commands less than 10 percent of the market share in Brazil that is quite similar to that of other developing countries such as China, India and Russia (Baghestany, Yazdani & Ahmadian, 2015). Apple mostly faces competition from Samsung that is considered as the brand of choice in Brazil. Apple faces a rising battle in Brazil where IPhone is continuously facing competition from Android. The individuals find it too costly to afford an iPhone. With a price tag of $2000 in Brazil, the iPhone is more than three times more costly as compared to other similar models such as Samsung.

Comparative Analysis of Macroeconomic Indicators - United Kingdom and Brazil

Year

GDP growth rate (Brazil)

GDP growth rate (UK)

2007

6.07

2.56

2008

5.09

-0.63

2009

-0.13

-4.33

2010

7.53

1.92

2011

3.91

1.51

2012

1.92

1.31

2013

3.02

1.91

2014

0.10

3.07

2015

-3.85

2.22



Figure 1: GDP Growth Rate

(Source: Created by Author)

The graph shows that the GDP growth rate of the UK was 2.56 in the year 2007 that was comparatively less as compared to the GDP growth rate of Brazil that was 6.07. The GDP growth rate of the UK from the year 2010-2012 averaged to 1.58 percent. However, on the other hand, the GDP growth rate of Brazil from the year 2010-2012 averaged to 4.53 percent. On the other hand, in the year 2013, the GDP growth rate of the UK was 3.07 that were relatively higher as compared to that of Brazil that was 0.10. Similarly, in the year 2015, the GDP growth rate of the UK in the year 2015 was 2.22 that was comparatively higher as compared to Brazil (Data.worldbank.org, 2017).


Apple experienced a reduction of 40 percent in the sale of iPhone in Brazil as compared to that of the United Kingdom. The factors that led to the slowdown of sales is due to the ongoing global recession in Brazil. The lack of new features in the latest iPhone has led to reduction of attractiveness to customers. However, despite the economic unsteadiness Samsung stays the market leader in Smartphone sales in Brazil. Both Apple and Samsung is recognized as a premium brand in the country. Apple has also been focusing on more costly items to partly cover increase in cost that are caused by fluctuation in currency as well as demand of individuals for more highly developed devices (Sturgeon et al., 2016).

Year

GDP per capita at Constant Prices (UK)

GDP per capita at Constant Prices (Brazil)

2007

3.1

1

2008

2.9

1.4

2009

2.4

1.7

2010

2

1.7

2011

2.1

2

2012

2.6

2

2013

2.2

2.5

2014

2.3

2.5

2015

2.9

2



Figure 2: GDP per capita at constant prices

(Source: Created by Author)

The diagram illustrates that the GDP per capita in the UK was three times more as compared to that of Brazil. Brazil has also overtaken the UK to become the sixth largest economy of the world. Despite expanding at a mere 3.5 percent in the year 2006, the powerhouse of the Brazil has viewed its GDP reach a record of ?1.6 trillion. The overall, profit of Apple for the first quarter of 2015 increased to 1.7 percent to $18.4 billion. By contrast, the sale of Apple fell by 40 percent in Brazil mostly due to fall in real GDP. However, the strategy made by Apple is likely to augment the sale by reinvigorating the iPhone line. Apple is looking forward to market iPhone with larger screen to the thousands of individuals who did not purchase a new iPhone (Data.worldbank.org, 2017).

Year

CPI (Brazil)

CPI (UK)

2007

3.6

2.3

2008

5.7

3.6

2009

4.9

2.2

2010

5.0

3.3

2011

6.6

4.5

2012

5.4

2.8

2013

6.2

2.6

2014

6.3

1.5

2015

9.0

0.1



Figure 3: CPI

(Source: Created by Author)


The rate of inflation is high in Brazil as compared to that of the United Kingdom. As a result, the purchasing power of Brazil is likely to decrease. As a result, the individuals in Brazil are likely to pay more for same commodities and services that will in turn reduce the sales of Apple. On the other hand, the consumer price index is comparatively less in the United Kingdom and as a result, the individuals are likely to purchase Apple at the market rather than at the elevated price. The type of inflation that is mostly faced by Apple is asset inflation that is mostly created by high demand. This is mostly because; the prices of the product of Apple are relatively high as compared to its competitors (Pimentel & Choudhry, 2014). There is a specific status to owning an Apple product, and that permits Apple to charge elevated prices. The stability or low CPI in the UK is likely to contribute to the well-functioning economy, which lead to increase market share for Apple.

Year

Unemployment Rate (Brazil)

Unemployment Rate (UK)

2008

8.1

5.4

2009

7.1

5.4

2010

8.3

7.8

2011

7.9

7.9

2012

6.7

7.8

2013

6.1

8.0

2014

6.5

7.5

2015

6.8

6.3



Figure 4: Unemployment Rate

(Source: Created by Author)

Over the year 2008-2015, the average rate of unemployment in Brazil averaged to 7.2 percent whereas, the average rate of unemployment in the UK averaged to 7 percent. In the year 2013, the UK witnessed highest rate of unemployment whereas; Brazil witnessed the lowest rate of unemployment of 6.1 percent. The increase rate of unemployment in Brazil is likely to lead to decline in consumer expenditure that will in turn affect trade that will lay off employees due to losses. In the year 2011, the rate of unemployment has been equal in both the countries. In the year 2014, the UK faced slow rate of economic growth however; the rate of unemployment fell unexpectedly. The high rate of unemployment is likely to decrease the demand for iPhone in Brazil and as a result, companies will produce lesser amount of products as well as they will cut workers (Mazzuia et al., 2015). In the year, the consumer market of Brazil worth of BRL2.9 trillion, leading the region of Latin America in terms of consumer expenditure. Despite increasing government expenditure on several social programs that have helped to diminish inequality of income, the Gini Index of Brazil measures the inequality of income ranging from zero to 100 percent. The new middle class of Brazil is frail with yearly disposable income just above thresholds of middle class and as a result, they can easily return to poverty in case of any shock to the economy. As a result, Apple might not have stable platform to expand its business in Brazil. On the other hand, consumer spending pushed the UK to another solid quarter of expansion in the run-up to the referendum of Brexit. Household expenditure accounts for more than 60 percent of the economy of the UK. As a result, Apple will find its expansion in the UK because; more expenditure is likely to increase the scale of Apple (Gausden & Hasan, 2016).

Year

% of GDP (Brazil)

% of GDP (UK)

2007

18.9

19.4

2008

18.8

20.3

2009

19.7

21.8

2010

19.0

21.5

2011

18.7

20.9

2012

18.6

20.7

2013

19.0

20.1

2014

19.5

19.7

2015

20.2

19.4



Figure 5: % of GDP

(Source: Created by Author)

The biggest annual budget deficit has been witnessed by Brazil in the year 2014 with a budget gap 343.9 billion reais. The 6.7 percent gross domestic product of Brazil is compared with 3.25 percent deficit of the year 2013. On the other hand, the UK posted its biggest budget surplus before the financial crisis that took place in the year 2015. The surplus of the country was below the expectation of the economists and it indicated that the government borrowed ?74 billion in the fiscal year to bridge the gap between proceeds as well as expenditure. A major budget deficit had been witnessed by Brazil in the year with almost 111.25 billion Reais and as a result, the % of GDP of Brazil had been low as compared to that of the UK. The major budget deficit is equal to 1.9 percent of GDP. There is only a single way by which Apple can survive in Brazil and that is only possible if the government prints more money to pay off the deficit.

Year

Current Account Balance (% of GDP)

Current Account Balance (% of GDP)

2007

0.1

-2.5

2008

-1.7

-3.5

2009

-1.5

-2.9

2010

-3.4

-2.8

2011

-2.9

-1.8

2012

-3.0

-3.7

2013

-3.0

-4.4

2014

-4.3

-4.7

2015

-3.3

-5.4



Figure 6: Current Account Balance (% of GDP)

(Source: Created by Author)

The balance of payment records the business deal of both the countries with the rest of the world. The UK has had a persistent current account deficit in the last 15 years. This has been mostly caused by deficit in trade in commodities as well as deterioration in investment incomes. In the year 2015, the current account deficit of the UK was ?96.4 billion (5.4 % of GDP). Apple mostly paid the UK employees abroad that led money leaving the UK and in turn creating debt on the current account (Bussiere, 2013). At present, outflows to UK employees are larger than inflows of overseas employees in the UK. The UK has a deficit in trade in commodities however; since the year 2011, the current account deficit has been augmented due to decrease in direct investment income. On the other hand, Brazil had a comparatively less current account deficit. In the year 2007, Brazil had a current account surplus of 0.1 percent of GDP. However, since 2008 Brazil faced current account deficit, the highest being 4.3 percent in the year 2014. As a result, due to current account deficit, both Brazil and the UK have lesser number of chances to create more jobs to expand the market for Apple (Dhingra et al., 2016).

An analysis of the monetary and fiscal policy

Both monetary and fiscal policies have played a key role in the suppression of inflation in Brazil. Despite the present economy slowdown in Brazil as well as increase in inflationary pressure, the long-term success of the Plan brings out greater stability of price. The policies bring out the foundation for alleviation of poverty as well as distorted distribution of income. The first characteristics of the Brazilian macroeconomic support include a shift from a system of semi-fixed rate of exchange to a managed floating exchange rate. The use of monetary policy and the rate of exchange helped to absorb the external shocks of the Brazilian economy (Fagiolo et al., 2014). The use of high level of rate of interest mostly regulated the target system of inflation. However, Brazil also utilized fiscal policy with the sole target to generate primary surplus. This will in turn help to maintain the stability of public debt and provide credibility to the government. However, Apple is a retail business that is mostly affected by fiscal because; it changes the amount of disposable income that is expended by individuals. As a result, if Brazil makes the use of more fiscal policy, it will result in higher rates of interest and the retailers also requires to pay more for lines of credit. However, higher rates of interest is likely to attract more foreign investors that will in turn give the retailers more power to purchase while purchasing merchandise from overseas suppliers in domestic currency (Matheson & Pereira, 2016).

On the other hand, the present UK demand policy mostly concentrates on using monetary policy as the monetary policy has little advantage over the fiscal policy. With the help of fiscal policy, the country will be able to change the rate of interest more easily as compared to level of tax and investment. This will prove beneficial for Apple, as monetary policy will not involve government expenditure that will lead to high rates of interest (Friedman, 2015). The cost of credit will remain constant rather than increasing and as a result, it will increase purchase of the individuals. Monetary policy will also reduce uncertainty about the expansion of the market for Apple in the United Kingdom.

An analysis of the foreign trade policy instruments

A global economic crisis has been weathered by Brazil that has been supported by local and overseas demand as well as good macroeconomic policies. Brazil has also contributed to worldwide economic recovery by considerably rising imports. Brazil is one of the most active participants of the WTO (World Trade Organization) and within the BRICS group of leading up-and-coming countries. Brazil stays committed to strengthening the multilateral business system (Hopewell, 2013). Foreign investors in Brazil receive the similar legal treatment as that of domestic investors in most of the economic sectors. This will in turn prove beneficial for Apple to expand its market. The decision to leave the EU, have led the UK to reconfigure its foreign trade policy. The UK trade policy observatory had formed a collaboration between Ghatham House as well as the University of Sussex that in turn supported the enhancement of new trade policies in the post-Brexit period (Walsh & Mander, 2017).

References

Baghestany, A. A., Yazdani, S., & Ahmadian, M. (2015). World trade market structure for corn. International Journal of Life Sciences, 8(5), 1-5.

Bussiere, M. (2013). Balance of payment crises in emerging markets: how early were the ‘early’warning signals?. Applied Economics, 45(12), 1601-1623.

Current account balance (% of GDP) | Data. (2017). Data.worldbank.org. Retrieved 25 January 2017, from

Dhingra, S., Ottaviano, G. I., Sampson, T., & Reenen, J. V. (2016). The consequences of Brexit for UK trade and living standards.

Fagiolo, G., Treibich, T. G., Roventini, A., Napoletano, M., & Dosi, G. (2014). Fiscal and monetary policies in complex evolving economies (No. 006).

Friedman, B. M. (2015). Has the financial crisis permanently changed the practice of monetary policy? Has it changed the theory of monetary policy?. The Manchester School, 83(S1), 5-19.

Gausden, R., & Hasan, M. S. (2016). Would information on consumer confidence have helped to predict UK household expenditure during the recent economic crisis?. Applied Economics, 48(18), 1695-1709.

Hardman, S., & Steinberger-Wilckens, R. (2014). Mobile phone infrastructure development: lessons for the development of a hydrogen infrastructure. international journal of hydrogen energy, 39(16), 8185-8193.

Hopewell, K. (2013). New protagonists in global economic governance: Brazilian agribusiness at the WTO. New Political Economy, 18(4), 603-623.

Lambert, T. (2017). Monopoly Capital and Entrepreneurism: Whither Small Business?.

Matheson, M. T., & Pereira, M. J. (2016). Fiscal multipliers for Brazil. International Monetary Fund.

Mazzuia, A. R. D. O., Machado, D. R., Fukumothi, D. K., Nunes, L. F. B., Tucci Neto, C., Jorge, H. M. D. H., ... & Mattos, C. A. D. (2015). Iphone app use to Cobb angle in adolescent idiopathic scoliosis: Does this apply?. Coluna/Columna, 14(2), 101-104.

Pimentel, R. C., & Choudhry, T. (2014). Stock returns under high inflation and interest rates: evidence from the Brazilian market. Emerging Markets Finance and Trade, 50(1), 71-92.

Rodrigues, A., & Minshall, T. H. (2015). Assessing strategic importance of innovation to multinational corporations.

Sturgeon, T., Gereffi, G., Guinn, A., & Zylberberg, E. (2016). Brazil in Global Value Chains.

Walsh, C., & Mander, S. (2017). Contextualising the drivers for trade: Some lessons from historical case studies. Marine Policy, 75, 290-299.

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