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Apple Success in China

 

Apple Success in China

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Apple Success in China

Question 1

Apple is an American company with its headquarters in Cupertino, California.Ronald Wayne, Steve Wozniak, and Steve Jobs established the Corporation in 1976. Apple was incorporated in 1977 as Apple Computer, Inc. (Dougherty, 2010). However, in 2007, the company was renamed Apple Inc. to reflect a shift in its focus towards consumer electronics. The Corporation is a world leader in information technology regardingrevenues and assets, and the second-largest cell phone manufacturer across the world (Dougherty, 2010). Apple designs, develops, manufactures, and sells computer software and hardware, consumer electronics, and online services. Apple’s products include iTunes Store, Apple Music, iTunes media player, Safari web browser, iPhone smartphone, Mac personal computer, and other products (Dougherty, 2010). The corporation’s products are sold in its chain stores and online (by third-party wholesalers).Apple’s market segments include Japan, China, Europe, and the Americas.By 2010, Apple was operating three hundred and one retail stores in ten different countries (Dougherty, 2010). Apple’s operations in China began in 2009. The company started penetrating the Chinese market through the sale of its iPhone 3GS through China Unicom. China Unicom is China’s second-largest wireless operator, with over 140 million subscribers. Initially, iPhone models in China were sold or imported on the country’s gray market (Dougherty, 2010).

Question 2

Apple’s considered several factors when it began its operations in China. First, economic factors werecritical towards the choice of China as Apple’s favorite region of operation.Economically, the company found it cheaper to produce in China than even in the United States of America.Producing an iPhone in America could cost the company about sixty-five dollars more compared to producing it in China (Blodget, 2012). Apple paid Chinese employees one dollar, or even less, per hour. Therefore, the costs could reduce the profits obtained by the company. Moreover, the Chinese economy was thriving due to the increasing global demand for electronic, which were mostly produced in the country’s city-factories (Panzarino, 2011). Regular Chinese citizens were increasinglyflashy and had more money, which they were willing to spend on products that were initially deemed to be luxuries. The middle class’ purchasing power had become higher.

Secondly, social factors influenced Apple to shift its focus into the Chinese market. The Chinese customers do not only buy products because of their usefulness but also due to status. In the Chinese culture, the ideaof “face” forms an integral part of the society (Panzarino, 2011). Apple’s retail shops provided an opportunity to such consumers to have a gist of their products in a visually arousing and beautiful atmosphere, leading to increased sales. Chinese’s need to project a positive self-image to others made most of them, more so the wealthy, to look for prestigious and high-end products (Panzarino, 2011).

Third, political factors in China motivated Apple to invest in the country. China is politically stable, and that makes it an ideal business destination. The country has enjoyed good government policies related to business operations (Panzarino, 2011). Lastly, legal factors played a role in attracting Apple to China.  Despite the various strategies to protect local firms, the Chinese government allows other foreign firms to operate in the country (Panzarino, 2011). Further, Chinese factories are not legally restricted regarding hiring and firing of employees. Such factories are free to compel workers to resume work at a brief notice (Panzarino, 2011). Such liberty enables Apple to produce more products within a short period, making its operations more efficient.

Question 3

Apple found its way into the Chinese market through a joint venture or partnership. For a long time, the company’s presence in China was small. The Chinese consumers considered Apple computers to be costly and their applications to be limited (Denlinger, 2010). However, the launch of Apple’s iPhone changed Chinese’s perception to the company’s products. When Apple introduced the iPhone in China for the first time, the company did not find an official distributor (Denlinger, 2010).Despite that, the iPhone was often seen in “trendy” areas of Beijing and Shanghai. Consequently, it grew more popular among people with increased disposable income and who wanted to be flashy among their peers.

The trend motivated China’s two prominent mobile operators (China Unicom and China Mobile) to start negotiations with the company to have an opportunity to distribute iPhones in the Chinese market (Denlinger, 2010). Despite China Mobile having more subscribers; it lost the opportunity to China Unicom due to disagreements with Apple. As a result, China Unicom became the country’s official iPhone distributor. However, Apple and China Unicom agreed that Apple would not incorporate Wi-fi on the phones sold in the Chinese market (Denlinger, 2010). To many Chinese customers, that was not a problem since most of them were in a position to purchase unlocked gray market ones, which had the feature, from Hong Kong.

Question 4

Apple’s entry into the Chinese market was not a smooth ride: the company encountered several problems. In China, the iPhone faced some challenges in the early days. During its launch, most customers were not in a position to purchase it due to its high cost (Newman, 2013). Many people considered the iPhone to be for the affluent. In the beginning, sales volumes were low: China Unicom took more than one month to sell 100,000 pieces of iPhones, compared to 1 million pieces sold in eight different countries during the iPhone 3GS’ launch weekend alone (Newman, 2013). In addition, it was not easy to buy the iPhone since there was no authorized dealer or store in China. Most of the iPhones bought in the country were from gray markets in Hong Kong, and this posed a great challenge to the company.The majority of the Chinese preferred iPhones from Hong Kong since they could be cracked and could use Wi-fi unlike the model sold by Apple stores in China (Newman, 2013). Furthermore, Chinese regulations could not allow Apple to sell iPhones that used Wi-fi in the country’s market. The Chinese companies enjoyed such protectionism, making the growth of competitor companies almost impossible (Newman, 2013). Similarly, the Chinese government had laid down strict regulations that were meant to protect the country’s local technology companies. Such regulations took time to overcome, leading to a slower pace of expansion of Apple (Newman, 2013).

Question 5

Despite the challenges highlighted above, Apple proved that with determination and time, it is possible to succeed in the Chinese market. To boost its sales volumes in China, Apple opened additional distribution points for the iPhone in the country. The company opened its second store in Shanghai in 2010 (its first store in China was opened in 2008 in Beijing) (Nasr, 2015). In the 2010 fiscal year, the company’s revenues in China doubled to 1.3 dollars. Apple reached the 100,000 units sales in the country within four days when the iPhone 4 was launched in October 2010 (Nasr, 2015).

At the same time, Apple started selling the iPad to the Chinese. Within a short time, it became a good seller in China. In the first six months of the year 2011, the iPad had dominated close to two-thirds of the country’s tablet market (Nasr, 2015). The tremendous growth in the demand for the iPhone and iPad in China was attributed to the launch of an online store in the country and a Chinese version of the App Store (Nasr, 2015).

Additionally, the population of the Chinese middle class was expanding. These people had increased disposable income to buy Apple products (Nasr, 2015). In the beginning, Apple was perceived as a symbol for the rich. However, with time, Apple established itself to be an “affordable Luxury” brand (Nasr, 2015). Additionally, through a joint venture with China Unicom, the corporation succeeded in alleviating strict government regulations. It signed an agreement with China Unicom to sell iPhones that did not have the Wi-fi feature on them, which the Chinese government prohibited (Nasr, 2015).

The above measures brought better outcomes to Apple. The company’s revenues grew tremendously. In 2009, the Asia-Pacific region attained 3.18 billion dollars (Nasr, 2015).  In 2010, annual revenue grew to 8.26 billion dollars (Nasr, 2015). In 2011, Apple’s revenue from the Asia-Pacific region hit 22.5 billion dollars, more than 600% growth in a period of two years (Nasr, 2015). By the last quarter of the same year, approximately 70% of that revenue emanated from China.Over the two explosive years, Apple’s earnings from China grew exponentially from 2% to 12% since many Chinese embraced the Apple craze (Nasr, 2015). In January 2012, a Beijing store was compelled to close, and security beefed up when the iPhone 4s was launched in China since customers were in frenzy such that they could not be contained (Nasr, 2015).

 

 

 

 

 

References

Blodget, H. (2012).This article explains why apple makes phones in china and why the US is screwed. Retrieved from: http://www.businessinsider.com/you-simply-must-read-this-article-that-explains-why-apple-makes-iphones-in-china-and-why-the-us-is-screwed-2012-1?IR=T

Denlinger, P. (2010). For Apple, the Best China Strategy was not having one. Retrieved from: https://www.forbes.com/sites/china/2010/05/06/for-apple-the-best-china-strategy-was-not-having-one/#3d0ddf6634c9

Dougherty, M. (2010). The history of Apple, Inc. Retrieved from: http://www.brighthub.com/computing/mac-platform/articles/65346.aspx

Nasr, R. (2015). Apple’s success in China can teach US firms a lot. Retrieved from: http://www.cnbc.com/2015/01/29/apples-blowout-success-in-china-what-it-did-right-and-what-us-companies-can-learn-from-it.html

Newman, J. (2013). Apple in China: By the numbers. Retrieved from: http://www.macworld.com/article/2056896/apple-in-china-by-the-numbers.html

Panzarino, M. (2011). How Apple has found success in China, and why it is just the beginning. Retrieved from: https://thenextweb.com/apple/2011/09/05/how-apple-has-found-success-in-china-and-why-its-just-the-beginning/#.tnw_ugrb8QHM

 

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