Apple iPhone in China Strategic Plan

1 Apple iPhone in China Strategic Plan

Paper Outline I. The mission, objectives and strategy tasks of Apple's Phone in China’s mobile market II. The external environment for the handset market in China A. Industry analysis using Porter’s five forces model B. Macro-environment analysis (PESTLE Analysis) C. Core competencies and critical success factors III. The internal environment for the handset market in China A. Strengths & weaknesses of Apple's iPhone B. Value analysis C. VRIO analysis IV. The key problems & challenges facing the Apple's iPhone in China's handset market V. The key players in the handset market in China VI. The sources of Apple's iPhone’s competitive advantages in China’s market VII. Strategic Choice VIII. Apple’s current business level strategy IX. Apple’s current corporate level strategy X. Apple’s current functional level strategy XI. International strategy XII. How Apple could evaluate and control recommended strategy XIII. Balance Score Card framework XIV. Impact of Steve Job’s leadership on the culture and performance of the company XV. Strategic changes I would recommend as the CEO of Apple Inc. XVI. How Apple iPhone’s current culture and structure will influence the implementation of the strategy recommended XVII. Opportunities for iPhone’s future growth Buy this excellently written paper or order a fresh one from ace-myhomework.com

2 The mission, objectives and strategy tasks of Apple's Phone in China’s mobile market The mission of Apple Inc. to enter the Chinese market was to market iPhone handset products irrespective of the tough competition in the market. The main objective of Apple Inc in China is to tap market potential in the country because it is the largest mobile market in the world. The strategy of establishing operations in Chinese market was done by establishing a deal with China Unicom, which is the second largest handset seller in the country, to sell iPhone handsets in Chinese market.

The external environment for the handset market in China Industry Analysis using Porters Five Forces model Bargaining power of customers The bargaining power of customers is low because there is no single individual or organization that can control the market. The products are bought in small pieces and there are no customers who buy in large quantities such that they can exert pressure upon the suppliers. In most cases customers buy single handsets and this does not provide them with the power to control the price of the products.

Bargaining power of suppliers The bargaining power of suppliers is low because they are many and they cannot regulate the price and quality of products supplied to the manufacturers of handsets. Manufacturers have a wide range of choice to choose from for the supply of materials and products. This renders suppliers powerless in controlling the market.

Rivalry among competitors There is intense rivalry among competitors in the market. Many companies have been licensed to sell their handset brands in the Chinese market. On the other hand, the grey market creates competition to the legitimate companies and this intensifies rivalry among the companies in the Chinese market.

Threat of substitute products Threat of substitute products is low and the introduction of handsets phased out the traditional means of communication such as landline telephones, mails among others. Before the internet enabled phones were introduced into the market, the use of internet had become a major threat to the use of handsets. Today, handsets are used to communicate via the internet and therefore, internet is no longer a substitute to the use of handsets.

Threat of new entrants Threat for new entrants is very high in the global markets. The Chinese government has issued many licenses to new companies and this has made it easy for new companies to enter the market. Both domestic and foreign investors have entered the Chinese market and this creates a major threat of new companies entering the market.

Macro-Environment Analysis (PESTLE Analysis) Political factors China is politically neutral and the political climate favours the mobile handset industry. Both domestic and foreign companies are allowed to compete equally in the market and there are no political hindrances. On the other hand, globalization has influenced the opening up of international markets and more products are being introduced into the market.

Economic factors Since 1980s, the Chinese economy has experienced an influx of wireless communication and this has led to an increase in the number of companies selling

3 handsets. International trade has also influenced the sale of mobile handset products in all countries of the world, hence creating a large market for the products.

Social factors Consumer behaviour has changed in the global markets and people in the modern days are looking for products with advanced and innovative features. There is a high increase in the number of young people who are interested in products which are innovative. Youths look for fashion and taste rather than efficiency in the products they buy.

Technological factors To support mobile technology, China imported equipments from other countries to enhance wireless communication. This technology has caused the massive entry of companies selling mobile handsets. Currently China is running the 4th generation (4G) technology and this is supported by a lot of subscribers in the market.

Legal factors Loopholes in the Chinese laws have enabled Apple to penetrate the market by use of grey market. By the use of grey market, the company obtains excess profits from the sale of its products because no taxes and other expenses are incurred in the marketing of the products in the China market. In 1994, China Unicom was introduced into the Chinese market to prevent the monopoly of MPT and for the improvement of the quality of telecom services.

Core Competencies and Critical Success Factors Companies in the mobile industry have used technology as a competitive strategy to enhance the manufacture of innovative products. Apple Inc. is competent in manufacturing innovative products and this has been a competitive strategy the company has adopted to capture the demand of its products in the global markets.

The critical success factors of the companies in the mobile industry are the improvement in production technologies. The Chinese market has been deregulated and many companies can penetrate the market. There is an increase in the number of communication companies which encourage many people to buy mobile handsets.

The internal environment for the handset market in China Strengths & weaknesses of Apple's iPhone Apple Inc has been able to penetrate the Chinese mobile handset market by the use of grey market. This has been strength in that the company does not incur excess costs involved in the marketing of these products. Apple was able to unofficially launch the iPhone product before the official entry into the Chinese market. This was strength because many people became aware about the existence of the product before they were legally accepted in the market. Apple has cutting edge strength in manufacturing innovative products by the use of modern technologies.

Value Analysis The performance of iPhone is good compared to the cost that customers incur to buy the product. The brand is appealing to many people especially the young generation due to the innovative features embedded within the product. There are stylish features in the brand which make it acceptable to the youths. However, analysts have claimed that the price of iPhone is high compared to other smart phones in the Chinese market.

VRIO analysis Value

4 Apple Inc has been able to exploit all opportunities in the market by using the large resource capacity of the company. The company has neutralized external threats from the competitors in the market.

Rarity The management of Apple has been able to control all its resources compared to the scarce resources required in the manufacture of the iPhone handsets.

Imitability The iPhone handsets can be imitated easily because some companies in the grey market have been able to come up with similar products. There are no extra costs required that can hinder other firms to manufacture similar products.

Organization Apple is ready to exploit the resources in the market to obtain benefits from the expanding handset market. The management of the company has made adequate strategies to improve production of iPhone by establishing an organized system of production and marketing.

The key problems & challenges facing the Apple's iPhone in China's handset market Apple faces intense competition in the Chinese market because there are many companies offering the same product in the market. Products such as Nokia and Blackberry smart phones have been preferred by the business people and this diverts the demand of this class of consumers.

The key players in the handset market in China By 1994, Nokia, Motorola and Ericsson had been the key players in the Chinese market and have dominated about 80 percent of the market. Philips, Siemens and Alcatel have dominated about 20 percent of the market. In the current market condition, local companies have entered the market and are creating a lot of competition. Companies manufacturing brands such as Ningbo Bird, Konka and TCL have entered the market and a lot of competition has been experienced. The grey market has also been a source of competition for example, the sale of the iPhone brands. The competitive advantage of these companies has resulted from the deregulation of the Chinese market hence allowing many companies to enter the market. The companies have adopted intense research and development to differentiate their products to fulfil the growing demand for mobile handsets.

The sources of Apple's iPhone’s competitive advantages in China’s market The iPhone brand is innovative and has features which attract many young people. In addition, Apple Inc. managed to introduce iPhone brands to the Chinese market by the use of the grey market. The iPhone brand has been readily accepted in the Chinese market and despite intense competition from other brands like Nokia and others, the market growth has been good.

Strategic Choice It is recommendable that Apple should reduce the price of the iPhone brand to attract more customers. It has been found out that the price for iPhones is very high and this has discouraged many people from buying these products. Applying a lower price for the iPhones will attract more customers because the law of demand states that when prices are reduced the demand tends to increase.

Apple’s current business level strategy Apple Inc has adopted product differentiation strategy as its business level strategy to market its products in the Chinese market. The company has diversified its product range to attract as many customers as possible. Apple started its

5 operations by manufacturing and selling personal computers and later penetrated into the market of computer software. In the recent past the company has entered the market for smart phones to capture as many customers as possible. The products of the company are differentiated by the use of innovative technologies.

Apple’s current corporate level strategy Apple’s corporate strategy involves diversification to attract as many customers as possible. Apple has a wide range of portfolio in which it accrues a lot of income. The company has diversified its operations into the areas of manufacturing and selling personal computers, computer software and smart phones. The company has plans to venture into the market of internet subscription. This strategy has made the company to survive in the global competitive markets and to overcome turbulent economic situations being experienced in the global markets.

Apple’s current functional level strategy Apple Inc. has established a set of strategies to strengthen its functional resources. To create core competencies, Apple Inc. has coordinated its resources to achieve maximum output from its activities. The management of the company has a well laid down system of coordinating all the resources to reduce costs and improve efficiency. The company has used modern technologies to support the management of its resources.

International strategy To penetrate into the Chinese market, Apple used the strategy of grey market to introduce the iPhone product before the official launch of the product. This strategy had an impact on the business of the company in that the iPhone was readily accepted by consumers in China after the official launch because the brands were well known to them.

How Apple could evaluate and control recommended strategy To evaluate and control the low pricing strategy for the iPhone in China, the management of Apple Inc. should come up with a strategy of liaising with all stakeholders. As such, the company will be able to identify strategies which are cost efficient and which will promote the profits made by the sale of the iPhones at reduced prices. Suppliers of the company should be regulated to reduce their power to hike prices for the materials they provide to the company. This strategy will reduce the production costs of the company and enhance profitability.

Balance Score Card framework The pricing strategy has not been appealing to many customers in the market because the price for iPhone has been high. Compared to other brands in the market iPhone brand has been priced too high and this has reduced the demand for the product. However, the pricing strategy has been appealing to the shareholders of the company because the high price has generated more profits to the company. To excel in the sale of iPhone in the Chinese market, Apple must use internal processes such as reduced costs of production to ensure that the prices cover the costs involved in the production. This strategy will be appealing to both customers and shareholders because the reduction in costs will enable the management to reduce the price of iPhone hence attracting more customers and generate more income to the shareholders. The learning process of the customers in the market and growth of the iPhone in the market has been very fast and this has led to the fast adoption of the product.

Impact of Steve Job’s leadership on the culture and performance of the company

6 Steve Job has been the president of the company for a long period of time and his leadership has promoted the innovation of many products being manufactured by the company. Steve has introduced the culture of using modern technologies to manufacture differentiated products. The performance of Apple Inc has been excellent because Steve Jobs introduced the culture of leadership at all levels of the organization such that the employees of the organization are free to come up with innovative production methods. This strategy has led to the introduction of better technologies at the company and improvement in performance of the products in the market.

Strategic changes I would recommend as the CEO of Apple Inc. As the CEO of Apple Inc., I would introduce the strategy of market discrimination as a strategy of pricing the iPhone brand. As such, I would offer the product to different customers at different prices depending on their purchasing power. This strategy would improve performance of iPhone in markets with elastic demand to price. The products would be sold at a higher price to markets which have inelastic demand. This strategy is suitable because it would enable the company sell the iPhone to all markets depending on their response to prices. The strategy is feasible because there are different income classes in China which are separated by an invisible boundary. Market segmentation is acceptable because it is legally acceptable and customers respond differently to prices depending on their purchasing power.

How Apple Iphone’s current culture and structure will influence the implementation of the strategy recommended The current culture and structure of Apple Inc. will help implement the market segmentation strategy because the company has a well laid down system of research and development. The R&D department has the capacity to come up with marketing strategies which would help separate customers according to their response to different prices for the iPhone. However, the culture of the company should be directed towards customer-oriented production and marketing. The company should come up with consumer friendly strategies to increase the demand for its products.

Opportunities for iPhone’s future growth The use of internet has intensified in developing and developed countries.

This provides more opportunities to Apple to provide products which support the use of internet at consumer-friendly prices. The innovation of technologies which promote cost reduction will help the company to reduce its costs of production. The future growth of Apple is predicted to be high because the company has a wealth of resources to support all kinds of innovations. The market for the iPhone brand is predicted to grow fast because the brand has innovative features such as webbrowser which help the young generation exploit the changing environment in technology.