Apple's IPhone In China: Market Entry Strategy Essay.

Identify a product or a service from your organisation or an organisation that you are familiar with, and write a report evaluating the potential for the international expansion.

For this assignment, you are required to evaluate one potential market. The following points need to be included within the report:

A clear description of the organisation, the product or the service, and the reason for international expansion.

An analysis of the market in terms of: political, economic, financial, legal and cultural factors.

Based on the analysis recommend a general strategy that the organisation should adopt (e.g. international, localisation, global standardisation and transnational strategy).

Recommend a choice of entry mode for the chosen international market justifying your decision (e.g. exporting, turnkey project, licencing, franchising, joint venture, merger and acquisition, strategic alliance and wholly-owned subsidiary). 

Introduction to the rising trend of international business

International business has become more prevalent in the contemporary world, which is expanding in its popularity with the passage of time. There are various reasons behind the extremely rising trend such as unavailability of products or services, unfavourable local government rules & regulations, high costs raw materials and high labour costs. These are some of the reasons; however, the reasons are limitless that are shaping and flourishing the international business. To some companies, the international business has better prospect for their wider expansion and elevated business revenues. Irrespective of the benefits that the international business has, it is full of challenge that comes in variety of ways such as the external environment of the chosen market and market competition (Madsen & Walker, 2015). The main purpose of this assignment is to propose a better strategy to the Apple Inc. Company for their market expansion into the Chinese market. The assignment covers the market entry with the Apple iPhone.

Apple Inc. is a multinational company, which is based in America. Apple is the world’s largest company for the information technology in terms of revenues and it is the world’s second largest company for mobile phone manufacturing. It has repeatedly received high admiration from customers. It is one of the most profitable brands in the world. However, it has faced some criticism for its labour- contractor relations. It has also been criticised for polluting the environment. Despite of all these criticism, the company still enjoys a high drift in its business especially in the Smartphone department. The Apple’s iPhone has had a stupendous success in the Smartphone industry. It continued its domination until Samsung with android OS version redefined the market domination. Both Samsung and iPhone are the two dominating mobile phone brands in the mobile phone market (Apple, 2017).

The company is engaged in a wide range of products and the services such as consumer electronics, online services and computer software. The company’s hardware products include a wide range of products such as the iPhone Smartphone, the iPad tablet computer, the iPod portable media player, the Mac personal computer, the Apple TV digital media player and the Apple Watch smartwatch. Of all the mentioned products iPhone are the most searched and dominating of all the listed items. It becomes news every time when Apple unveils the new version of the iPhone series. However, the company’s performance is hardly hit by Samsung, which is the leading manufacturing brand of Smartphones. Apple’s iPhone is better that Samsung and other android brands for quality of products; however, the sales are lesser than Samsung (Apple, 2017).

Overview of Apple Inc. and its market domination

International expansion happens because of various reasons such as following (Dunning, 2012):

• For acquiring an expanded market to enhance the domination and the revenues
• High labour costs of the local market
• High costs of raw materials of the local market
• Unfavourable local government’s rules and regulations for trade practices
• High population of the target country, which is good for a potential business
• Unavailability of the required raw materials
• Potentiality of the target market for the chosen product

These are some common reasons, which encourage the participation of a company’s products at some chosen international platform. The high population of China and a potential inclination towards the electronic gadgets are some reasons that make it a favourable market for the chosen product. However, many other factors are there, which are potential barriers to the expansion into the Chinese market. The expansion into the Chinese market is mainly to capture a wide attention of a large population; however, Chinese people have their own favourites such as Samsung followed by Xiomi and others. This would be challenging to penetrate into the market and prove its dominion in the same. Nevertheless, the anti-hatred feelings of state run union in China against the America might create some problem to the flourishing of the prospect. It is very necessary for the company that it have adequate knowledge of the best strategy, which could help them gain more customer responses (Wild, Wild & Han, 2014).

China is the fastest growing market in the world of economy, which is only second to the United States of America. The country has stunned many big & powerful countries with its sheer business growth. The cost of raw materials in China is very cheap, which is one of the reasons that attract the attention of foreign investors towards the country (Chang, Luo & Ren, 2014). They are also very effective in the production rates, which is why most foreign companies target China for the manufacturing of bulk units in less time. Despite of all these advantages the country has loads of other factors that pose challenging business environment to the foreign companies. The external environment of the country is favourable to some extent, which is also challenging as well. Following are the analysis of the external environment of China (Chang, Luo & Ren, 2014):

The political scenarios in China are very close to some kinds of high-end risks, which is never ignorable. Employees there are not safe, as they can easily become a victim of some unsocial activities such as kidnapping. In addition to this, there is always a political trauma in between the central and the state government. It then becomes very challenging to the foreign companies to actually know about the rules and regulations. The political condition in the country is stable to some extent but it creates problems at the other point. A single communist party runs the state, which is up against democratic feeling. People living in China can never own their desired things for the business purpose unless they have prior allowance from the local government of China. This is because of such reasons that many different countries find it difficult to enter into the Chinese market. This is why the United States of America had a long run relation of conflicts with China on human rights. US blame that China does not allow freedom of doing business and living freely in the country. The political scenario in the country is very unfavourable for the international business. Despite of all these facts different foreign companies are still heading attracted towards the country because of high population of the country and low material costs (Breslin, 2016).

Reasons for international business expansion and China's potential market

China has remained the primary choice for the numerous foreign investors in the recent years (Du, Wei & Cai, 2012). The economic growth of the country has surpassed many other countries. The economy growth is second only to the United States of America. The low labour costs and the reasonable raw material costs are such factors, which has created sufficient curiosity among different nations. However, the growing minimum wage for the labours is becoming a strain on the future growth. The country, which once enjoyed high foreign business because of its low labour costs, might fall short in future with the minimum wage rising to a new level.

A strong private relationship with the various stakeholders is an answer to success in China. Localization is very necessary because the local government rules and regulation does not aloe much leisure to the foreign companies. Making relationships with the various stakeholders is time consuming and expensive also. It is also necessary especially for the American based companies that they have good relationships with the state run union of the country. Corruption is another issue in China, which is threatening to the economic benefits of the concerned company. It has highly rated threat for the operation into the Chinese market. This results in enormous unjustified expenditures (Laruelle & Peyrouse, 2012).

The technological advancement in China has overshadowed even the importance of Google search engine. They have their own search engine, which the Chinese people can use to search any content. The technological advancement of the country gets reflected in their various mobile phone productions of which some are top-notch products that have also left its impression on some other market such as India. The high-end technological advancements and the high-end infrastructures are good for business. The highly competitive atmosphere has provided place to some other brands to cash on the created opportunities. Technology is becoming cheaper in China (Tong, Xue & Zhang, 2014).

The country has different climate at its different places. This is also quite susceptible to some natural calamities such as earthquakes and floods. This may disrupt the business to some extent. Water shortage is another issue, which might create some sort of breakdown in the business. Low carbon technology is quite prevalent in the country (Day, 2016).

The local government rules and regulations provide less supports to the foreign companies, as it prefers more to the local companies. This is because of such reason foreign companies find it difficult to dislodge the challenge posed by the local companies. Local companies find the high favours of the local government, which allocate them the most suitable locations for the business. The local government of China has biasness for the local companies, which is evident in their numerous business related policies. This is because of the fact that many foreign companies are struggling in China. Walmart is the one name, which is a giant company but it could not sustain the same reputation in China as well. The company is still struggling to rejuvenate the lost place.

Analysis of the external environment of China

China is a potential market, which is why many companies and foreign investors are getting attracted towards it. However, some of the external challenges that it has, might test the supremacy of those companies. Nevertheless, it is always advisable for a company that they have a sound strategy before they enter into the Chinese market. This would certainly help those companies find a better response into the Chinese market (Wei & Kong, 2014).

 There are various strategies available for conducting a successful business with some international market; however, not all the strategies can ever be feasible with all the countries. This is because of such reasons the best feasible general strategy for the Apple Inc. Company would be the global standardization (De Vries, 2013). Global standardization is the standard mode of marketing in the global countries. However, the company needs to have some different strategies to support the business into the Chinese market. This is because the Chinese market is challenging for many reasons such as local government policies, high labour costs and competition from the local market. Apple’s iPhone would find stiff competition from Samsung and some other local brands in the Chinese market. Some local brands such as Huawei, Oppo, BBK and Gionee might pose bigger challenges to Apple as these brands are increasingly becoming the popular choices for the Chinese customers. The global standardization process would help the company being connected to the most basic thing of a business. The global standardization would be accompanied by some suitable entry mode into the Chinese market.

Global standardization can be achieved with the help of some innovative thoughts, which is very necessary for standardizing the taste of local flavour and win a wide acclamation (De Vries, 2013). McDonalds in this regard present a better example of the standardization, which is easily evident in its hamburger. McDonalds do not make the hamburger in major time; it is rather made by some other recognized platform owned by McDonalds. However, customers are experiencing the same taste despite the fact that it is made by some other. The standardized platform constructed by McDonalds attracts a reduced labor costs and higher productivity rates. The Apple Inc. Company should look for standardizing the process of manufacturing. This is helpful for reducing the cost of labour and enhancing the customer satisfaction.

Franchising would be the best mode of entry into the Chinese market (Beckmann & Zeyen, 2014). This is because of the fact that the franchising of the business would provide the option to enter the market by being at distant places. Moreover, this would also help to know the responses of customers. This is very productive in the sense that it does not require any real contact to the people living in China. The Apple Company can own some chosen franchise in China for entering into the Chinese market. This would also help prevent from the complicated consumer behaviour, as the franchisees would have adequate knowledge of their home country’s customers. The biggest advantage of acquiring some franchisee for the business is the prevention from the start-up mistakes, which entrepreneurs can make in some other market such as China. Acquiring franchisee would also help know the existing competition in the market and the driving forces behind the different kinds of consumer behaviour. Moreover, Apple’s iPhone has the prime competition from Samsung, which is moving neck to neck. They both are in fight of the top slot. The results are also surprising because Apple has remained behind to Samsung for quite a few times. It is needed for the Apple’s iPhone that they enter into the Chinese market and give Samsung a tough fight. The Chinese customers have their more preferences towards Samsung; however, they also prefer some other brands such as Oppo, Huawei and Gionee. Apple should hire reputed franchisee as they do high extensive research on the market, which is very handful for the success of the venture. Franchisees provide a transparent picture of the competition in the market, which is very necessary to have knowledge about the competition level. This would also help modify the products as per the demand of the customers in the target market. Moreover, franchisees are the most feasible mode of entry considering the complexities of external environment in China. The external environment and the local government policies have lesser scope for the foreign companies in China. They have limited opportunities here in this country. This is for such reasons it is advisable that the Apple Company should look for some trusted franchisee, which could sufficiently provide some necessary data on the required materials (Beckmann & Zeyen, 2014).

Proposing a better strategy for Apple's market expansion into China

Conclusion:

The business expansion of the Apple’s iPhone into the Chinese market requires some strategic planning before they actually enter the market. The Chinese market has high potentials in it; however, it also has some threatening external environment, which is never suitable for any international business. The external challenges that are present in the country require some equally good strategy, which could help the company acquire a good business growth. The global standardization would be the most feasible recommendation as a general strategy for the Chinese market. This would help Apple standardize their product and win a high acclamation of the Chinese customers. Taking help of some reputed franchisee would be the most feasible entry mode against the numbers of complexities that are there into the Chinese market. This would help to know about the competition such as from Samsung. Moreover, this would help Apple unveil their best quality in the market. The neck-to-neck competition in between Samsung and iPhone would again come across in China. Furthermore, this is necessary that Apple has adequate knowledge of the severity of competition from Samsung, as this would help the company pose some serious competition to its archrival Samsung.

References:

Apple. (2017). Apple. [online] Available at: https://www.apple.com/ [Accessed 6 Jun. 2017].

Banalieva, E. R., & Dhanaraj, C. (2013). Home-region orientation in international expansion strategies. Journal of International Business Studies, 44(2), 89-116.

Beckmann, M., & Zeyen, A. (2014). Franchising as a strategy for combining small and large group advantages (logics) in social entrepreneurship: A Hayekian perspective. Nonprofit and Voluntary Sector Quarterly, 43(3), 502-522.

Breslin, S. (2016). China and the global political economy. Springer.

Casson, M. (Ed.). (2013). The Growth of International Business (RLE International Business). Routledge.

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.

Chang, E. C., Luo, Y., & Ren, J. (2014). Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market. Journal of Banking & Finance, 48, 411-424.

Cravino, J., & Levchenko, A. A. (2017). Multinational firms and international business cycle transmission. The Quarterly Journal of Economics, 132(2), 921-962.

Czinkota, M. R., & Ronkainen, I. A. (2013). International marketing. Cengage Learning.

Day, K. A. (2016). China's environment and the challenge of sustainable development. Routledge.

De Vries, H. J. (2013). Standardization: A business approach to the role of national standardization organizations. Springer Science & Business Media.

Du, L., Wei, C., & Cai, S. (2012). Economic development and carbon dioxide emissions in China: Provincial panel data analysis. China Economic Review, 23(2), 371-384.

Dunning, J. H. (2012). International Production and the Multinational Enterprise (RLE International Business). Routledge.

Dunning, J. H. (2013). Multinationals, Technology & Competitiveness (RLE International Business) (Vol. 13). Routledge.

Forsgren, M., & Johanson, J. (2014). Managing networks in international business. Routledge.

Hamilton, L., & Webster, P. (2015). The international business environment. Oxford University Press, USA.

Hill, C. W., Cronk, T., & Wickramasekera, R. (2013). Global business today. McGraw-Hill Education (Australia).

Hovhannisyan, N., & Keller, W. (2015). International business travel: an engine of innovation?. Journal of Economic Growth, 20(1), 75-104.

Laruelle, M., & Peyrouse, S. (2012). The Chinese question in Central Asia: Domestic order, social change, and the Chinese factor (Vol. 29). New York: Columbia University Press.

Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.

May, M., Collins, S., & London, S. (2012). International business.

Neelankavil, J. P. (2015). International business research. Routledge.

Poulis, K., Poulis, E., & Plakoyiannaki, E. (2013). The role of context in case study selection: An international business perspective. International Business Review, 22(1), 304-314.

Preston, L. E., & Windsor, D. (2013). The rules of the game in the global economy: Policy regimes for international business. Springer Science & Business Media.

Sitkin, A., & Bowen, N. (2013). International business: challenges and choices. Oxford University Press.

Tong, Q., Xue, Y., & Zhang, L. (2014). Progress in hyperspectral remote sensing science and technology in China over the past three decades. IEEE Journal of Selected Topics in Applied Earth Observations and Remote Sensing, 7(1), 70-91.

Verbeke, A. (2013). International business strategy. Cambridge University Press.

Wach, K., & Wehrman, C. (2014). Entrepreneurship in International Business: International Entrepreneurship as the Intersection of Two Fields. International Entrepreneurship and Corporate Growth in Visegrad Countries, 9-22.

Wei, F., & Kong, Y. (2014). Government governance, legal environment and sustainable economic development. Sustainability, 6(4), 2248-2263.

Wild, J., Wild, K. L., & Han, J. C. (2014). International business. Pearson Education Limited.