Team Final Microeconomics Project

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<ul><li> 1. Presented by The Dream Team James Bryan Taylor Butler Casie Cadwallader Courtney Dobbs Matt Lee Iris Oscos Eddie Zaldivar</li></ul><p> 2. Order of Discussion Introduction Production Problem Production Problem Solution Distribution Problem Distribution Problem Solution Consumption Problem Consumption Problem SolutionSolutions Affect On SocietyRecommendationsSummary 3. Factors of Production of The Germane Resource Changes In Efficiency &amp; Profitability Germane Resource Re-plan Firm Attributes Internal Capacity Partner FirmsJames 4. Factors of Production ofThe Germane ResourceApple Inc. SamsungiTunes App StoreMacBook AiriPad 80% tablet market shareiPhone 5 mil sold first 3 daysiPod $200 mil in salesAlpha Processor Inc. 20% of total salesTFT LCD Screens 18% market shareSmartphones 2.4 bil in profits 5. Changes In Efficiency &amp;ProfitabilityApple Inc. Samsung 37.50% 40.20% - 5 yr. avg.Gross ProfitMargin 26.7% 23.46% 5 yr. avg.Net ProfitMargin 10.81 17.65 5 yr. avg.P/E RatioGross Profit Margin 37.02%Net Profit Margin 11.86%P/E Ratio 9.59 6. Germane Resource Re-PlanApple Inc. Samsung Safari 8% total net traffic Apple Pages Apple Game Center Apple NumbersProductPortfolioSunset: Customer service-levelSoftwareBugs TV Tablet SmartphoneProductEcosystem 7. Company AttributesApple Inc. SamsungStock Exchange$457 mil/share940 mil sharesGross Profit Margin37.50%P/E Ratio10.82Dividends$3.05/shareRank1stStock Exchange$1,410 /share22 mil sharesGross Profit Margin37.02%P/E Ratio9.59Dividends$7,500/shareRank20th 8. Internal CapacityApple Inc. SamsungPre-Tax Earnings 2012 - $34.21 bil 2011 - $55.76 bilTotal Revenue $60.06 bilExpenses $13.42 bilNet Gain $46.64 bilCash Holdings 2012 - $50.86 bil 2011 - $37.53 bilAssets 2012 - $176.06 bil 2011 - $116.37 bilPre-Tax Earnings 2012 - $17 mil 2011 - $19 milTotal Revenue $165 milExpenses $23 milNet Gain $141 MMCash Holdings 2012 - $22 mil 2011 $23 milAssets 2012 - $134 mil 2011 - $112 mil 9. Partner FirmsApple Inc. SamsungLGSharpToshibaBlackBerryMicrosoft 10. Differentiate Between Short-run &amp; Long-run Costs (a) Fixed costs, variable costs, total costs (b) Diminishing returns (c) Economies of scale to long-run costsCasie 11. Short-run, Long-run, Fixed, &amp; TotalCostsShort-run costs Incurred during a short period of time that are, as a result of time constraints, relatively fixed.Long-run costs Incurred during a long period of time, and as a result of very few time constraints, the costs are variable as opposed tofixed.Fixed costs Any costs that are not altered as a result of any changes in total output. Variable costs are those costs that do change alongwith changes in total output.Total costs Any and all fixed costs and variable costs that a firm incurs. 12. Fixed CostsRemain constant regardless of the levels of productioniPad Production Cost$179/mo per unitGalaxy Tab 2 Production Cost$120/mo per unitFacility costsInsurance expenses for buildingsCost of fixed assetsProperty &amp; land. 13. Variable CostsCosts that vary directly in accordanceto changes in the levels of out-put. 16GB vs. 24GB modeliPad Variable Cost Dual SIM vs. a single SIM modelGalaxy Tab 2 Variable CostDirect material costsHourly rate wagesUtility costs directly related toproducing 14. Diminishing ReturnsLack of new innovation Shipments jumped 48.1% to22.9 million Revenue Q4 - $568.16 to $508.19 Q1 - $469.93 17.3% revenue drop per unitApple Inc. Samsung 15. Economies of ScaleFab facilities are geographically collocatedLow labor costs in China Low cost of manufacturing Scale and pre-purchaseagreements with componentsuppliers Purchase components forits products ahead of time Discounts Reduces supply ofcomponents available tocompetitors $80 billion cash assets Undercutting thecompetitionApple Inc. Samsung 16. Analyze Germane Product &amp; Resource Markets by: (a) Explaining the rules for profit maximizing (b) Explaining the rules for the germane resource use (c) Differentiating between the various marketmodels.James 17. Explaining The Rules For ProfitMaximizing If a firm such as Apple or Samsung chooses to maximize its profits, it must choose thatlevel of output where the marginal cost is equal to the marginal revenue and themarginal cost curve is rising. 18. Explaining The Rules For The GermaneResource UseHighest amounts of sales 65% of the iPad units sold on EbayDemand for iPad 2 has exceeded thesupply Created a deficit by not keeping up with demand Limited distribution centersHas met demandMany distribution centers Holds market share on Samsung tabletQ3 2012 27% Samsung device market 21.8 % market shareApple Inc. Samsung 19. Sales Figures 20. Differentiating Between The VariousMarket Models 21. Differentiating Between The VariousMarket Models 22. Analyze the Market System by: (a) Explaining the laws of demand and supply (b) Describing the germane product markets (c) Describing germane resource marketsCourtney 23. Explaining The Laws of Demand &amp;Supply Low supply and a high demand, the price will be high. In contrast, the greater the supplyand the lower the demand, the lower the price will be 24. Describing The Germane ProductMarketsApple Inc. SamsungMarket is mainly in the U.S. Only distribution center is here in Elk Grove,California In the process of opening up more centers, Opening up of more centers in N. America &amp;internationally Increase product marketDistribution centers overseas Ingram Micro More retail stores More of a contenderBased in S. KoreaAdvertising &amp; distribution increase Spent over 4.5 times more than Apple on advertisingDistribution Kiosks in the mall Retail stores in AmericaDistribution centers San Diego, California Coppell, TX 25. Describing Germane Resource Markets 26. Compute or Describe the Elasticity of Demand &amp;Supply by: (a) describing the impact on total revenue (b) illustrating the determinants of elasticityCourtney 27. Describing the Impact On TotalRevenue Luxury good or items that can be easily replaced, they are goods that can be switched foranother. For such products, consumers will easily put off or buy another product if the priceincreases even a little bit 28. Describing the Impact On TotalRevenue Apple and Samsung both have elastic supply and demand because the products theyproduce and distribute are considered luxury goods. Having an iPad or a Galaxy tablet are not essential for anyone to have but people wantthem. This is beginning to affect Apples total revenue because as Samsung products arebecoming more popular, people are starting to switch over to the less expensive model. If the price of Apple products is more expensive than Samsungs, the demand for Appleproducts will go down but Samsungs will not; thus the total revenue for Apple will godown while Samsungs will go up. This is supported by the expected numbers from the first quarter of 2013; Applesrevenue was to be around 41 to 43 billion while Samsungs was expected to be at 46.7 to48 billion 29. Illustrating The Determinants ofElasticity Both Samsung and Apple are elastic because their products are considered to be luxuryitems. The companies market structures are in an oligopoly competition. Both are at the top of the game when it comes to electronic devices. There is not really anavailability of substitutes when it comes to each companys own products; ratherSamsung could be looked at as a substitute for Apple because Samsung has the cheaperproducts whereas Apples products are more expensive but still looked at as a betterquality just because of the history of the company. The difference between the availability is that Samsung has many more distributioncenters than Apple does, so being seen as substitute and being more readily available tocould be seen as being more elastic. 30. Demonstrate An Understanding of MarketFailures, Externalities, and GovernmentIntervention by: (a) Analyzing government intervention (b) Explaining market failures (c) Relating government intervention to marketfailures.Matt 31. Analyzing Government Intervention Government intervention can be best defined asactions on the part of a government that effecteconomic activity, resource allocation, and thevoluntary decisions made through normal marketexchanges. When the economy is struggling, thriving, or anatural disaster takes place, governmentintervention occurs for the purpose of allocatingresources most efficiently. For example, Governments can intervene witheconomic activities in a number of ways, such asby setting price floors and ceilings, levying taxes,expenditures, controlling the money supply,quantitative easing, and setting up programs tohelp those in poverty 32. Analyzing Government InterventionGovernmentintervention thatdirectly affects Apple isthe recent discovery ofApples tax evasionscheme.The United Statesgovernment isintervening in order tocollect the billions ofdollars in taxes owed tothem by Apple.The government alsofunded early generationApple technology anddevelopment. 33. Explaining Market Failures Market failure can be defined simply as a business being permanently closedApple Inc. Samsung Apple Bandai Emate 300 Mac TV Apple iii Mac Portable Lisa iPod U2 Spc. Ed. 20th Anniv. Mac Newton Message Pad Appleworks eMac Power Mac G4 Too many models introduced 34. Relating Government Intervention ToMarket FailuresTroubled Asset ReliefProgram (TARP) General Motors AIG Bank of America 35. Analyze Income Distribution by: (a) Describing income inequality (b) Evaluating the impact of government programsto redistribute incomeMatt 36. Describing Income Inequality 37. Evaluating The Impact of GovernmentPrograms to Redistribute Income 38. Solutions Effects on Society Recommendations Summary References AppendixesEddie &amp; Taylor 39. Evaluate The Impact of Globalization on TheDomestic Economy by: (a) Identifying international financial institutions (b) Describing the role of multinationalcorporations (c) Demonstrating how demand and supply impactforeign exchange ratesEddie &amp; Taylor 40. Identifying International FinancialInstitutions The World Trade Organization (WTO) is an international financial institutionthat deals with the global rules of trade between nations. The WTOs mainfunctions are to ensure that trade flows as smoothly, predictably and freely aspossible. Recently the World Trade Organization issued an important ruling that mayallow the United States to be one step closer to opening up Chinas market formovies, music and books. The WTO upheld a panel decision that China brokeinternational rules in restricting market access to foreign films, DVDs, andother cultural products. Currently, Apple is trying to access China and get intoIndonesia before Samsung does 41. Identifying International FinancialInstitutions According to Archer with the Capital Press Agriculture news Indonesia, China and Indiahave great potential because of their growing middle classes who want quality (CapitalPress, 2013, Online). It would be of tremendous benefit to Apples overall profit andcompany because of the increased revenue they would be gaining from these countriespurchasing their products, just like Samsung would if they were to get there first. People who are eager for a product and quality like these three countries are wouldprobably be more willing to buy the first product available to them rather than waitingfor another company to become available for their purchase, so in this case if Apple wereto beat Samsung there, Apple would see an increase in sales and Samsung wouldnt be assuccessful. The World Trade Organization would be overseeing all the trading that would take placebetween the United States and these countries if it comes down that China did breakinternational rules and the U.S. is able to trade with them again. 42. Describing The Role ofMultinational Corporations Environment, employment and economy. All three of these factors hold a significant role in globalization. Many people believethat moving our businesses overseas has a negative impact on our economy. U.S. multinationals strengthen the domestic economy by enhancing Americasproductivity 43. Describing The Role ofMultinational Corporations Moving companies and corporations overseas, actually helps produce more jobs andbrings about many more advantages. When companies successfully compete in foreign markets, more jobs are produced The creation of Multi-National Companies has actually helped to decrease the worldspoverty rates. Newer and better products are constantly created. Consumers discover these products and demand that they be imported to the U.S. Companies that interact in the global marketplace are able to successfully import theseproducts. Those that effectively invest time and money are the ones that profit the most. 44. Describing The Role ofMultinational Corporations When companies successfully compete in foreign markets, more jobs are produced. Domestic parent companies currently employ 22 million U.S. workers. The creation of Multi-National Companies has actually helped to decrease the worldspoverty rates. Adult literacy rates increased from 45-70%, infant mortality rates dropped 56%, lifeexpectancy and production of food per capita has increased 39%. Child labor rates have dropped by an average of 10%. School enrollment rates for ages 6 to 23 rose for all developing countries to 57 percent in1995. 45. Demonstrating How Demand &amp; SupplyImpact Foreign Exchange Rates 46. RecommendationsApple Inc. Samsung Larger share of marketOpen moredistributions centers Compete with lower-end marketLower their prices Grass rootsReinvest in R&amp;D New technologyDiversify theirportfolioInnovationFuture TechnologyRaise Tablet Prices Stigma &amp; reputation 47. Results of: (a) firms economic efficiency and improvement oftotal revenue programs to minimize market failure. (b) win-win strategies and development programswithin the firm or industry to minimize market failure. (c) firms public infrastructure (manufacturing anddistribution locations) and innovative developmentprograms based on government policies and legislativeissues to minimize market failure.Iris 48. Economic Efficiency &amp;Improvement of Total Revenue Programs ToMinimize Market Failure Apple and Samsung have similar strategies to minimize economic failure and maximize corporateprofits; however, there are many factors that will influence profit maximization. For Apple, a mainthing they look for is the upselling of their products. An example of that would be an iPhone buyeralso wanting and purchasing an iPad, so Apple would get the benefit of them shopping with theircompany twice for different products, which increase the amount of profit Apple receives. They tryto make sure that their products differ enough where people will want one of each of them andtherefore they are able to bring in more money from their customers. While Samsung is has the same mentality, their phones and tablets arent almost interchangeablewith the same features but they work to make sure their customers a...</p>