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Apple iPhone in China

:
Can Apple cash in on
the World’s Biggest
Mobile market ?

Group -2
Aseem Garg
Ashank Suresh
Arpita Garg
Juhi Bhatt
Utkarsh Vardhan
Arush Bhatnagar

Introduction

• People who can afford the technology < people who cannot afford the
technology.

• The rich want the latest accessory.

• China Unicom.

• Competition – Nokia & Motorola.

• Grey Market.

Telecom Operators in China

• In 1987,Ministry of Posts and Telecommunications (MPT) launched mobile services in China
• Since 1994, China Unicom also offered mobile services (GSM) technology
• After -1994, China Telecom, the operating arm of MPT was separated. Since then, China
Telecom offered GSM mobile services.
• After -1998, China Unicom offered GSM and CDMA services.
• After -1998, China Telecom's mobile service was transferred to China Mobile. Since then, China
Mobile and China Unicom both offered mobile services in China. It created a duopoly structure.
• In 2008, Chinese telecommunications industry comprised of three state-owned enterprises
namely China Mobile, China Telecom and China Unicom – offering mobile services in Chinese
mobile market.

• 1994 – United Telecommunications Corporation ( China Unicom) was launched to compete with MPT. the operational arm of MPT. paging and satellite services. China Telecom. • 1998.Ministry of Post and Telecommunication (MPT) first launched mobile services in china. 3G services were launched. .MPT was being replaced with Ministry of Information Industry.Evolution • 1987 . came into market with unique features of fixed-line. China Telecom was being split to form China Mobile Communications Corporation. • 2008 – Formation of 3 full service state owned operators.

• By 2007.4% of the market share. the domestic brands grew from 24% to 37%.Foreign players vs Local players • During the initial years (1987-1998) the market was dominated by foreign players Nokia. Remaining 20% was being held by Siemens. • Motorola held 80% of the share in Chinese mobile handset market. Haier. • In no time. foreign brands – Nokia. Motorola and Samsung – collectively held 61. TCL. Motorola. From 2002-2003. Sony Ericson Lenovo etc. Capital. Konka. Chinese brands like Konka. TCL and Ningbo Bird started losing their market shares. ZTE. Phillips. • After 2003. . Kejian etc which dominated the mobile market. Alcatel. (1996-2000) • 1998. the new players gained market share. saw the introduction of local players Ningbo Bird.

Expanded to rural markets by strengthening distribution channels. foreign players adopted the following strategies- 1. the shares of local players fell. 5. . Customer centric phones 4. New features 3. Subsequently.Competition strategies • In order to compete with local players. Reduced price of mobiles 2.

Customer Preferences • Features and multimedia functions • Price Conscious • Frequency of buying • Brand Image • 3G servies .

Critical success factors of Chinese market .

telecommunication services . • 3g services / smartphones ( • price strategy fashionable . innovative .Critical success factors of Chinese mobile market . multimedia functions ) • diverse product portfolio (Exhibit – 6) (Annexure 2a ) • Encouragement by the • 80% market share with Nokia . government by issuing GSM & Ericsson & Motorola CDMA . • Offering wireless • Lack of intensive competition . .

• Lack of brand loyalty . • Brand image . • Innovative product . • Ability to retain the customers • quality oriented (Annexure -1) • enhanced features .• Lack of brand loyalty among • Consumer preference customers (Annexure 1) (Annexure 2b ) • customer – centric approach .

features . .Apple competing with existing players . • Diversification of sales channels . (Exhibit – 8) • Quality . Opportunities . • Huge market . • Existence through grey market . • Innovative design .

Challenges . • Late entry to the market • Consumer preference (Exhibit • Market share (Exhibit-9 ) 6) • Emerging local brands • Competition (Exhibit – 9) • Government support with local • Grey market brands • Wi-fi ban • Lack of cultish image in china . . • price strategy of competitors .

Fake mobile handsets (Unrecognized by the government) • Fake handsets produced by unlicensed vendors who benefit by evading tax. SITUATION IN CHINA • Chinese grey market :.What is a Grey Market? • An unofficial market for goods that have been obtained from unofficial suppliers. (Exhibit VIII) .

(Exhibit VI) • Led to an increase in export of grey handsets in global mobile phone market. functionality and design from the legitimate handsets.Threats facing Legitimate mobile phones in China • Grey Market mobile phones were comparable and at times better in features. Advanced features Comparable features Wi-fi 2-megapixel VGA camera Windows Operating System Shape and design Bluetooth • China consumers are price conscious and and at the same time show equal interest in advanced mobile phone features. • 37million units in 2005 101million units in 2008 .

Threats faced by Apple iPhone • Smuggling: Unofficial mobile phone sellers smuggle mobile phone before their entry in the market. • Apple iPhone became popular as a stylish gadget due to its cutting edge technology and – creates interest in the consumers which led to unofficial distribution of Apple iPhone. • Apple iPhone was sold unofficially in the Chinese mobile market. Counterfeit iPhone store in China .

How Grey market can help Apple iPhone Without official sale 1. John Zhang (Marketing professor at Wharton): Apple can use its grey market presence to their advantage. Z.” .5million iPhones were already in use in China Grey market can help Apple build upon a consumer base and convert challenge into opportunity. “We know you love the product. Experts opinion 1: Unofficial entry of iPhones in China will hamper the demand of Apple iPhones.

steve wozniak & ronald wayne • Over 400 retails outlets • Products in includes : • Mac . 1976 • Founders were Steve Jobs . ipod etc • Apple went public In on 12 December 1980 • Apple started out with just personal computers • The first apple store was opened on may 19 . iphone . APPLE HISTORY • Founded on April 1 . ipad . 2001 .

COMPANY GLOBAL STRATEGIES .

.GLOBAL STRATEGIES • Inflation In U. • Apple strategy has been to innovate new products • Get to the market first and collect “MONOPOLISTIC PRICE” • Marketing Strategy • When copies catch up Apple introduces new products .S (expanded globally ) • Expanded through Asian Market .

was a failure because of the high price of iPhone . which was offering huge potential for mobile Telecommunications. para 1 of the case study) • • Even its entry into Asian markets like India. • • Growth opportunity offered by Chinese smartphone market (Exhibit XI of the case study) – the • world’s largest mobile phone market.Apple forayed into Chinese mobile market with its iPhone 3G and iPhone 3GS . • Because of the above reasons.Why was Apple introduced in china ? • Slow sales in US and parts of Europe because of 2008 global recession (page 11.

.999 Yuan ) $1024 to Chinese customer .46 Billion . • I-Phone in China market was offered at a price of (6. • China Unicom purchased 5 million mobile units of 3G and 3GS model worth $1.15% ) Nokia (low class – middle class –high class ) average cost was low .Apple Introduced in China • On 28th August 2009 Apple officially entered in to China Market . • China Unicom signed a 3 year non exclusive licence agreement with Apple . • Chinese smartphone market was primarily controlled by Nokia and Motorola ( 89.

• Chinese consumer preferences . Will Apple Succeed ? Threats • Stiff competition in Chinese smartphone segment .50% 5% 4% 3.60% 2. 40% MARKET SHARE AS PER Q4 2009 38% 35% 30% 25% 20% 20% 15% 10% 5% 5% 5% 4. • Consumers were Price consciousness .50% 2.20% 0% NOKIA SAMSUNG SONY ERICSON MOTOROLA ZTE KYOCERA RIM SHARP APPLE OTHERS . • Nokia was the biggest overseas rival .

• Increased the competition among the Service Providers .00% 13. • Introduction of Wi-Fi (Since Apple’s deal with China Unicom is an non exclusive agreement.to further improve its sales.70% 10.00% 0.00% 9% 8% 7% 5. • Premium pricing for larger profits (Sold at $1024 per unit). MARKET SHARE AS PER Q1 2017 45.70% 15.00% 30.00% 20. the company can enter in to agreements with other mobile carriers . Turn • Presence of Grey market in China .00% 25.00% 42% 40.00% 35.00% 20.00% SAMSUNG APPLE HUAWEI OPPO VIVO OTHERS .) .

Current Scenario • Shopkeeper – "iPhones can barely help you make a living now." • Parallel trade down to less than 50% from 80% . • Competition – Huawei. . OPPO. Xiaomi. • Apple ranks fourth in terms of market ranking.90% previously. Vivo. • 10% drop in third-quarter Greater China revenue.

Market Share .

Sales .

. • Decline in iPhone shipments (according to Canalys).Reasons for drop in revenue • Fall in number of mainland tourists to Hong Kong. • China's currency (Yuan RMB) when compared to that of United States (USD).

• Chinese smartphone market was primarily controlled by Nokia and Motorola ( 89.15% ) Nokia (low class – middle class –high class ) average cost was low .Apple Introduced in China • On 28th August 2009 Apple officially entered in to China Market . . • China Unicom purchased 5 million mobile units of 3G and 3GS model worth $1. • I-Phone in China market was offered at a price of (6.46 Billion .999 Yuan ) $1024 to Chinese customer . • China Unicom signed a 3 year non exclusive licence agreement with Apple .

RMB vs Dollar .

THE BIGGER PICTURE • THE FUTURE OF APPLE IN CHINA ? .

. Outlook for Apple • Increasing preference for Chinese mobile brands. • The new iPhone should give Apple a much needed boost.