Market Analysis about Apple in China
The Chinese information, communication, and technology (ICT) sector includes a dynamic and a wide range of products and services from local and international companies. Millions of people in the country use mobile phones and other devices, making the market highly appealing to multinational companies. One of the leading multinationals in the technology sector in the country is Apple Inc. Although the Apple Inc has faced challenges in the Chinese market, the company is positioning and reinventing its strategic marketing plan to remain relevant and profitable in the market.
Challenges Facing Apple in China
Apple is one of the leading technology firms in China. One of the primary challenges the company faces in China is the growing competition from cheaper locally manufactured brands. Apple is known for its expensive devices targeting high-end market. However, customers in the developing markets are keen on the prices of products than the value promised by expensive Apple brands. Hence, consumers are more likely to purchase the cheaper local brands as opposed to the expensive classy Apple products. As a result, some of the company’s brands such as iPhone 5c have failed in the Chinese market (Culpan, 2018). Hence, the company faces a barrier to expanding the Chinese demand for its products. Furthermore, piracy culture makes it hard for Apple to succeed in the Chinese market.
Strategies to Address the Challenges
Apple has been reinventing in the Chinese market to expand its market amid stiff competition from cheap local brands. The company has been using a mobile carrier in China to reach its customers, including China Mobile Ltd, which allows the firm to access a broader market. The strategy has opposed directing marketing by the company in the uncertain market has enabled Apple to reach millions of consumers (Haslam, Tsitsianis, Andersson, & Yin, 2013). Furthermore, the company uses local factories to assemble its devices, making it possible to sell at better prices than if they were manufactured in the United States. Besides, the company has been producing products targeted to the market. Note
Apple Inc. is an American multinational specializing in the manufacturing and marketing of personal computers, software, Apple operating system, mobile devices (iPhone) and other technological appliances (Foros, Kind, & Shaffer, 2013). The company leads in the digital market sector with iPods and iTunes. Apple’s customers are in several countries across the world, including China. The company is one of the most innovative technological firms internationally. It has reinvented its mobile phones through iPhone, Apple store, and iPad, making it the most innovative provider of top technology in China (Kovácsová, 2013). The ever-changing and unique electronics ideas have allowed Apple to establish a strong reputation among its customers in the Chinese electronic market.
Although China has become more accepting to foreign investors, the country maintains a stringent regulatory environment for foreign companies. While companies operating in other sectors are affected by the regulatory environment, technology firms face unique challenges due to laws restricting the use of the Internet (Cheng, Yip, & Yeung, 2012). Thus, entry into the Chinese business environment is a complex process.
The Social and Cultural Environment
China has the leading population in the world, creating a large market for technological devices as well as other products and services. The country experiences extreme environmental issues, including global warming and its related effects such as storms. In addition, the poverty levels are high, especially in regions affected by unemployment (So & Walker, 2013).The challenges affect the performance of technology companies in the country by reducing their sales volumes.
The Business’ Primary Competitors both Foreign and Domestic
Apple faces stiff competition in the Chinese market from local and international technology companies. Microsoft has remained one of the leading competitors of Apple, especially in the production and marketing of software and mobile applications. Other competitors in the market include Android and Blackberry (Hong, Bar, & An, 2012). Furthermore, the company competes with such brands as Samsung, Huawei, and Oppo, among other manufacturers.
Competitor’s Strengths and Vulnerabilities
Although Apple is performing relatively well in the Chinese market, it is competing with some of the famous brands in the market, especially those operating on Android system such as Samsung and Huawei. The brands are stronger than Apple in the environment based on their competitive prices compared to the company’s products. For example, the Samsung tablet is almost half the price of iPad due to the relatively lower cost of production. However, the quality of the competing products is significantly lower compared to the quality of Apple products. Besides, the competitors are prone to the high level of counterfeiting in the country (Khan, Alam, & Alam, 2015). Thus, Apple remains the manufacturer of superior quality products in the Chinese market.
The Business’ Single Greatest Competitive Advantage
Apple has differentiated itself from remaining relevant in the highly competitive market. For instance, the company has adopted the “best fit segment” pricing strategy (skimming) to maintain an edge in the highly competitive market (Khan, Alam, & Alam, 2015). The company first targets the early adopters who are less price-sensitive and desire the benefits of the new product before the market is saturated. It enables the company to maintain high cash flow, especially immediately the product is introduced into the market.
Business Value to Consumers
Apple is a globally recognized brand and enjoys a high number of loyal customers regarded as “Apple Fans.” To this segment, Apple represents value-addition by providing quality products that communicate class. Hence, customers who purchase its products for a relatively higher price than competitors pay for the high quality. The company manufactures for high-end market and for young consumers who desire new and special products, creating an “Apple culture” to appeal to loyal fans (Khan, Alam, & Alam, 2015). Once the customers are used to the products, they continue buying due to the high-quality appeal.
The Political Environment in China
The country is characterized by a high level of corruption and prevalence of counterfeiting. The piracy culture plays a role in the decline of performance by technological and related companies in the country due to the tendency to produce counterfeits and market at a lower cost than the original versions. However, the country has ratified some of the international trade agreements, including the Kyoto protocol in 2002 and the World Trade Organisation (WTO) (So & Walker, 2013). As a result, the country has become more receptive to foreign investment.
The Economic Environment in China
For the last two decades, China has become the leading consumer market in the world as a result of its rapid economic development. In 2009, the financial performance of China surpassed that of Japan to become second after the United States. However, during the same time, China surpassed the United States as the leading automobile market. Consequently, Apple considers the market as its fastest developing market in sales due to the economic potential. The sales revenue of Apple from the Chinese market has been approximately 10% of the overall revenue since 2010 (Hong, Bar, & An, 2012). Hence, the Chinese economy has played a role in the impressive performance of Apple regarding sales revenue.
The Company’s Pricing Structure
Pricing is the most decisive factor for the company’s operations in the Chinese market due to the challenges shipping to the country. The company has been designing models customized to the needs of the Chinese consumers to allow them to sell at a relatively lower price than the American & European versions of the same product (Khan, Alam, & Alam, 2015). As a result, although the company emphasizes the differentiation factor and trust their image, they still market products that fit the economic reality of the Chinese market.
Regardless of the excellent performance of Apple in the Chinese market, some areas should be addressed to improve its market share and performance in the highly competitive environment. The company needs to continue reinventing itself and creating new and more effective strategies to overcome the competition and operate effectively in the Chinese market. Apple could maintain the high quality aspect in all its products by manufacturing products targeted to the needs of Chinese consumers.