Apple in China (2015)

The case is about the US-based technology giant Apple Inc.’s (Apple) journey in China. Apple officially opened its first store in China in 2008, though prior to that Apple products were sold at premium prices in the Chinese grey market. Apple expanded rapidly in the Chinese market through flagship stores and distribution points in China. China was a fast-growing market for Apple due to a growing middle class who were eager to own Apple’s high-end products and expansion of Long Term Evolution (LTE) network in the country. In the first fiscal quarter ended December 2014, Apple was propelled to number one position in the Chinese smartphone market for the first time based on units shipped. In the second quarter ended March 28, 2015, Apple’s revenue in Greater China surpassed Europe making it the company’s second biggest market after the US. However, Apple faced some challenges in the country including labour and environmental related issues, strong local competition, strict government regulations and the price sensitive Chinese consumers. Chinese local competitors were cutting into Apple’s market share in China by offering phones with high-end features at budgeted prices. Moreover, owing to the economic crisis in China, Apple stock price was plummeting. Investors were worried about Apple’s growth in China. Analysts questioned whether the Chinese spending classes, pinched by the economic instability, would be able to afford Apple products. The devaluation of the Yuan was also a major concern. The task before Apple’s CEO Tim Cook was cut out as the company had a lot of exposure to China, and the company had pinned a lot of its growth to that market.