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Apple in China (2015)
EXCERPTS
GLOBAL STRATEGY
Apple relied on foreign partners globally to assemble its products. Apple sold products globally through its retail and online stores as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. A part of Apple’s internationalization strategy was to open Apple stores in big cities. Apple competed in highly competitive global markets with timely introduction of innovative new products and technologies to the marketplace, enhancing existing products and services and stimulating customer demand for new products. For its global markets Apple adopted a one size-fits-all strategy while designing products. Apple seldom customized its products to suit local tastes. Instead it created a cult culture in technology and turned its customers into followers... |
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APPLE ENTERS CHINA
China was one of the largest consumer markets in the world with a population of 1.3 billion as of 2008. It had the world’s largest Internet user base with over 500 million users. Moreover, China was the world’s second-largest economy and was emerging as a major global economic power. Between 1979 and 2014, China’s real gross domestic product (GDP) grew at an average annual rate of nearly 10%. Moreover, the growing size and purchasing power of China’s middle class presented an enormous opportunity for companies globally to sell their products in the country...
EXPANSION
Despite its lacklustre debut, Apple continued to make investments in China. In September 2010, Apple launched iPhone4 in China. To ramp up sales, Apple added more distribution points in China and opened the second Apple Store in Shanghai in July 2010...
LOCALIZATION
The company made special efforts to attract the Chinese customers. Tastes of the local people were considered while designing Apple products in China. For instance, Apple introduced a new gold color option for iPhone5S, as in China, this color symbolized wealth and fortune. The company also launched gold versions of the iPad Air 2 and mini 3, Apple Watch and new MacBook...
TEETHING TROUBLES
Apple’s products were assembled in China through suppliers such as Foxconn and Pegatron. Chinese factory workers assembled millions of Apple products sold globally. However, Apple’s methods for controlling costs among its suppliers, and the 2010 wave of suicides at Foxconn, forced the Chinese government to investigate Apple and its Chinese suppliers. An undercover investigation by BBC flagship programme Panorama revealed poor treatment of workers at Foxconn’s Longhua plant, in which more than 300,000 people worked. Some violations of the law were also found at facilities operated by Apple’s other supplier Pegatron as well...
APPLE BREAKS THE ICE IN CHINA
According to a Chinese Luxury Consumer Survey conducted by Hurun Research Institute, Apple emerged as the top luxury brand for gifting among the rich Chinese men and women (See Exhibit IV). It became a must have, aspirational brand for all wealthy and middle-class consumers. In China, people went to extremes to lay their hands on Apple products. For instance a high school student from rural China reportedly sold his kidney to buy an iPad 2...
THE ROAD AHEAD
As of September 2015, Apple operated 19 corporate offices and 22 retail stores in Greater China. The company planned to nearly double the number of retail stores in China from 22 to 40 by mid-2016. As of early-2015, there were about 1.29 billion mobile users in China...
EXHIBITS
Exhibit I: Apple Stock Price Chart (2011-2015)
Exhibit II: Apple Inc Income Statement
Exhibit III: Financials by Operating Segments
Exhibit IV: Favoured Luxury Brands for Chinese Wealthy
Exhibit V: China Smartphone Shipments (in millions)
Exhibit VI: Apple (Greater China) Quarterly Revenues*
Exhibit VII: Apple China - YoY Growth
Exhibit VIII: China’s Smartphone Market Share (as of Q2 2015)
Exhibit IX: Devaluation of Yuan (2014-2015)
Exhibit X: Top 25 Countries Ranked by Smartphone Users (2013-2018)
Exhibit XI:
