Apple and the Chinese challenge
Apple has won the world over and is arguably the best smartphone around. However, Apple’s China venture will be unique in terms of opportunities and challenges.
India and China are Apple iPhone’s last frontiers. While Apple has sizzled with its iPhone sales throughout the world, India was a wash out when Apple launched its iPhone 3G in India in 2008. Instead of the regular lines and throngs of consumers outside Apple stores, the price sensitive Indian markets found iPhone to be steeply priced and very elitist. Without the initial sales burst, Apple couldn’t back its launch in India with a marketing campaign.
After an year of the India Fiasco, iPhone readies itself for China in co-operation with the China Unicom. China Unicom has a three year contract to market the iPhone 3G and iPhone 3GS in China. The Chinese iPhone is somewhat crippled due to the absence of Wi-Fi on the phone following the Chinese government regulations (which could be a product drawback). Although BDA China, forecasts that the iPhone will take 10 to 15 percent of the Chinese smartphone markets, there are hurdles aplenty in the 700 million subscriber China market, the largest Telecom market in the world.
1. iPhone faces the biggest hurdle from the thriving Chinese grey market which churns out touch devices by the Millions.
2. The trick will be to price it right, low enough to drive sales and high enough to maintain exclusivity.
3. Apple is also handicapped by its partnership with China Unicom, which is the 2nd largest operator. China Mobile would have been a better bet for Apple. The share of the market that Apple gets an access to through China Unicom is much smaller than China Mobile.
4. There are host of competing devices such as Lenovo,Dell, HTC, based on the Android , Palm apart from Nokia (which controls 67.3% of Chinese smartphone markets, 2008).
5. Then there is competition to China Unicom from China Mobile and China Telecom.
Inspite of the above given points, what has worked for Apple is the fact that Chinese grey markets have sold 1.5 million iPhones in the country without any marketing support purely on the buzz around the product. Many believe that the greatest challenge for Apple would be maintain the price and brand salience around the iPhone. It could be very tempting to lower the price and get numbers in the Chinese markets and yet that would dilute the brand salience and exclusivity. The ideal would be to price it at the correct stretch so that consumers associate the brand with higher status and Apple doesnot get associated with the price wars that it is highly susceptible to at lower prices.