Managerial Challenge: How exactly have computerization and information technology lowered costs at Chevron? Computerization and robotics have made output per worker higher and therefore lowered unit labour cost when it comes to processing insurance claims, redeeming coupons, or screening job resumes. Personal computers have decreased manyfold the time and talent required to perform routine work done previously with paper forms and time-consuming, repetitive human tasks. However, not every business uses large numbers of PCs. How have computerization and information technology raised productivity and lowered cost so widely across other industries? One key seems to be enhanced analytical and research and development (R&D) capacity provided by computers and information technology (IT) systems. Chevron Corporation once spent anywhere from $2 million to 4 million each to drill 10 to 12 exploratory wells before finding oil. Today, Chevron finds oil once in the every five wells. The reason for the cost savings is a new technology that allows Chevron to display three-dimensional graphs of the likely oil and gas deposits in potential oil fields. New fast parallel processors allow more calculation-intensive 3D simulation modelling. Using only seismic data as inputs, Chevron can now model how the oil and gas deposits will shift and flow as a known field is pumped out. This allows a much more accurate location of secondary wells. As a result, overall production costs have declined 16 percent industry-wide despite few remaining prime locations for exploration and development. (Adapted from McGuigan, J.R.; Moyer, R.C.; Harris, F. (2016). Managerial Economics: Applications, Strategy, and Tactics, 14th edition, South-Western College Pub., p.p. 307.) ii. iii. i. Based on your own corporate experience, describe and assess how computerization has helped in reducing the production cost of your firm (Identify the types of costs in your company which are related to computerization). You can choose to be specific in the product or service of your firm according to your choice. (25 marks) Using your understanding of cost curves, illustrate the process of this cost savings. Does it contribute to economies of scale? (15 marks) In addition to the cost minimization strategy, discuss TWO (2) other strategies to increase the profit of your company. (10 marks) Question 2 iPhone 14 Pro finally reaches supply-demand parity Delivery dates for the iPhone 14 Pro lineup have fallen to less than a week, suggesting that Apple has finally caught up with demand after a challenging quarter. The zero Covid policy in China led to extended lockdowns followed by employee riots in a Zhengzhou Foxconn plant. It took weeks to get the plant back to normal operations, and iPhone 14 Pro supply is only just showing signs of catching up. In a note from J.P. Morgan seen by AppleInsider, delivery dates have leveled off to less than a week in most regions around the world. The data was gathered directly from Apple's website using the estimated shipment date across various iPhone models. Average lead times for iPhone 14 delivery have reached four days across all four models. All models are available for pickup in US Apple Stores, while ship dates are at about 5 days. Availability in China is even better at a 3-day delivery window. Most SKUs are also available for in-store pickup. Similarly, lead times in Europe have shortened to about 3 days too, with in-store pickup for most models. The note suggests that supply-demand parity has been reached due to lower demand and better supply. Demand tends to slow after the holiday season, then briefly picks up again around the Chinese New Year, which will give Apple time to catch up further. J.P. Morgan still maintains Apple stock as overweight with a price target of $190. (Adopted from: Wesley Hilliard (2023). iPhone 14 Pro finally reaches supply-demand parity. Retrieved from: https://appleinsider.com/articles/23/01/16/iphone-14-pro-finally-reaches-supply- demand-parity) i. ii. Analyze the change of the demand or supply in the equilibrium market of iPhone 14 market due to the riots in a Zhengzhou Foxconn plant with the aid of a diagram. Explain the change in the price and quantity. (10 marks) If the iPhone market shows lower demand and better supply, determine the changes of the demand and supply using a diagram. Discuss the change in the price and quantity. (10 marks) bi. Discuss THREE (3) factors that contribute to the lower demand in iPhone. (15 marks) iv. If the price elasticity of demand of iPhone is elastic, draw the diagram of price elasticity; and determine the pricing strategies that can be adopted by iPhone by using example. (15 marks) Submission of the Report together with the Marking Rubric will be in Lecture Week 11 (14th March 2023, Tuesday)