Apple's iPhone in China: CanApple Cash in on the World's BiggestMobileMarket?

Details

Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Telecommunications

Buy Now

Case Code : COM0241
Case Length : 08 Pages
Price: Rs. 200;

IBSCDC regularly updates the list of free cases. To view more free cases, please visit our site at frequent intervals.

Apple has always carried the image of lifestyle and innovation in all its products and services. Apple had built its brand image on traits like imagination, liberty regained, innovation, passion, hopes, dreams and aspirations and powerto- the-people through technology.¹⁹According to Eric Clemons, Wharton professor, Operations and Information Management, "Apple brings several things [to the market]: really sleek, cool hardware, great software and a cool, hip image."²⁰ Embodying this brand image, on June 29th 2007, Apple released iPhone in US smartphone market, which was named, 'Invention of the Year' by Time magazine, because of its design, features and touch screen technology.

Within 4 months of the launch, Apple sold 1.4 million iPhones²¹ . The company also introduced improved models - iPhone 3G and iPhone 3GS - and expanded the market beyond US. In 2008, the recession in US and other parts of Europe affected Apple iPhone's sales in these countries. It therefore began expanding into Asian markets like India, which was offering huge potential for mobile telecommunications. However, Apple's iPhone did not make expected sales in India, because of its pricing strategy.

The iPhone was priced at $700,while in US it was sold at $199²² with a 2-year contract with service provider, AT&T. In India, large number of customers prefer prepaid services instead of making long-term contracts with mobile carriers. Besides, Apple faced competition from Nokia and Blackberry smartphones, which were more preferred by business people. Mehul Srivastava of BusinessWeek opined, "Local corporations are willing to shell out $700 for BlackBerrys (RIMM)²³ or more business-functional Nokia phones, but many perceive the iPhone as an entertainment tool for young people."²⁴

Meanwhile, byQ3 2009,Apple iPhone seized 17.1% share of global smartphonemarket and was present in more than 80 countries.²⁵ Although, iPhone had its presence in many countries, it did not officially enter into the world's biggest mobile market - China - for a long time.

Analysts opined that the delay was primarily caused due to prolonged negotiations between Apple and ChinaMobile,which failed to finalise on revenue sharing issues. The negotiations went on for 18months²⁶ Apple even offered to sell iPhone to China Mobile, under the condition that the later subsidise the services to iPhone customers, which did not materialise. Failing to reach a consensus with ChinaMobile, Apple decided to partner with China Unicom, for the release of iPhone in Chinese mobile market.

Next >>

19]"Apple's Branding Strategy",http://www.marketingminds.com.au/branding/apple_branding_strategy.html
20]"What's In A Name Change? Look at Apple ", http://www.forbes.com/2007/01/25/apple-microsoft-motorola-ent-salescx_kw_0125wharton.html, January 25th 2007
21]Gonsalves Antone, "iPhone named 'invention of the year'", http://www.informationweek.com/news/personal_tech/showArticle.jhtml?articleID=202801348, November 1st 2007
22]Srivastava Mehul, "Apple's iPhone, an Indian Flop, Prepares for China", http://www.businessweek.com/globalbiz/content/apr2009/gb2009041_266236.htm, April 21st 2009
23]Research in Motion Limited is a US-based wireless device company
24]"Apple's iPhone, an Indian Flop, Prepares for China", op.cit.
25]"iPhone around the world", http://www.apple.com/iphone/countries/
26]Lane Slash, "Apple, China Mobile still struggling to reach iPhone deal?", http://www.appleinsider.com/articles/09/02/09/apple_china_mobile_still_struggling_to_reach_iphone_deal.html, February 9th 2009