Team Final Microeconomics Project

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  • 1. Presented by The Dream Team James Bryan Taylor Butler Casie Cadwallader Courtney Dobbs Matt Lee Iris Oscos Eddie Zaldivar

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 & 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 &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 & 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, & 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 & 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 & 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 &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 &internationally Increase product marketDistribution centers overseas Ingram Micro More retail stores More of a contenderBased in S. KoreaAdvertising & 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 &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 & 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 an