Apple has established itself as a company that has become synonymous with success. It seems that in China, it has met it's match. The iPhone which has had revolutionary success in the United States and in Europe, has started its pursuit of trying to crack the Chinese market. This is proving to be a hard nut to crack. There are several issues that the iPhone faces: the threat from the large counterfeit industry which produces 'knock-off iPhones', the extremely strong bargaining power of the dominant mobile phone carriers as well as service limitations.
More Battles Ahead For IPhone in China
An article by 'PCWorld' reflects upon the 'trials and tribulations' that Apple are facing in China. The company's predicament is illustrated from the beginning of the article as although Apple has "emerged from winding negotiations with an iPhone deal in China", there will still be the ongoing issues of "government pitfalls and look-alike competitors in the country". After protracted negotiations Apple has finally managed to secure a deal with the local carrier Unicom. Amidst the cautionary rhetoric in the article, there is the admission that this deal "launches Apple into a huge market where its products have a following among fashion-conscious urbanites." From the outside this seems to be an extremely promising opportunity for the company as whilst China has nearly '700 million mobile subscribers', Unicom had 141 million subscribers at the end of July. These figures represent a large market share and appears to have all the right ingredients to create a lasting synergy between the local carrier and Apple. However this optimistic sentiment does not carry throughout the article.
In order to gain some credibility, the author quotes an analyst at Daiwa Securities who expects that "2 million iPhones will be sold in China each year, not far above the number sold in other countries". Apple currently sells approximately 30 million iPhones per year worldwide. If these sales expectations are accurate then this does not appear to be as lucrative an opportunity as once imagined. Another negative pitfall that needs to be accounted for is the threat of the 'black market' and competition from 'imitation handsets'. This is a more prevalent threat in China than most other countries and is a risk that cannot be ignored. With regards to the level of service provided there is another obstacle. The Chinese iPhone will "not be able to access Wi-Fi, a function China banned on mobile phones until this year and now only allows on certain handsets". In my opinion, this is a significant draw-back as a company like Apple should persevere to ensure that they offer their clients the same quality of service worldwide. Without this key feature, this ambition would not be realized.
There is a 'conflict of interest' problem on the horizon between Apple and Unicom. In order for customers to purchase songs or applications on the iPhone they have to use the App Store service of iTunes. However there are fears within Unicom that this would "draw users away from the carrier's own value-added services". This conflict of interest is not the only obstacle. There could also be problems related with billing, as Apple would require "a government license to accept download payments through Unicom."
After reading this extract, I wasn't too sure the future would be as bright for Apple in China as I'd first thought. However I was skeptical of cementing these sentiments until I had further evidence. Would this article prove to be filled with unrealistic pessimism? Or would it turn out to be a prophetic vision?
Apple and Its Iphone Get Fleeced in China, But Will Google Fare Any Better?
The second article I read on this issue not only confirmed what I had seen before, but it nailed the point home. You can tell how badly something has turned out, when it becomes a reference to failure. 'Venturebeat' pulls no punches in its reflection on the iPhones success in China. Although there is the acceptance at the start of the extract that, "China is the largest market in the world, it's consistently the fastest growing economy and there is a lot of money to be made there", there is also the illustration of the success at which "local entrepreneurs have found ways to fleece American companies bare". Like the first article there is the mentioned deal with Unicom, but describes it as "a pretty depressing deal".
'Venturebeat' refers to the 'black market' issue that the iPhone faces but puts emphasis not so much on the problems with competition but with reference to "creating confusion and dangerous brand dilution". This could occur in the event that a person in China buys the imitation and "gets turned off by phones that don't work, and may not buy the real thing when it does hit the market". The counterfeit industry is clearly a growing problem in areas like China and this can only work in creating greater obstacles and problems for MNC's like Apple.
Similarly to the 'PCWorld' extract, the 'Venture Beat' article mentions that with Apple's deal with Unicom, the company will gain access to 140 million subscribers. However it continues to mention, rather cheekily, that this pales in comparison to China Mobile's 600 million subscribers and 70% market share. This is proof that certain facts can be manipulated to push forth a certain view. One article could mention how Apple has done well in gaining access to 140 million viewers, another could use this as a negative aspect and say that they wouldn't be able to rival China Mobile's dominance.
Ultimately one can make out that China is becoming a little bit of a conundrum for large MNC's. There are many pitfalls and obstacles along the way when a country decides to enter China. However I still believe that this shouldn't dissuade these companies from entering. It should instead make them more aware that whilst they are entering a large market, they are entering a 'different market'. I feel the key to success in China is not trying to force a certain product upon the locals because this will never work. The key ingredient is to discover what the local consumer there wants. If a company manages to find the right mix between maintaining its traditional product and service yet catering to the local market and their requirements, then the sky really is the limit.
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Very good. Well researched; well written and an interesting choice of media. Good analysis of language and interpretation of greater consequences. 8/10
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