Global Operation of Apple - Research Paper Example

Apple Global Marketing of the Table of Contents Table of Contents 2 Apple: A Brief Overview 4 Overseas Location 5 Marketing Strategy 5 Operations Strategy 7 China: Country Analysis 9 Industry Analysis 13 Challenges Faced 15 Conclusion 16 References 17 Global Operation of Apple The current age of business can be dubbed as the age of immense competition and turbulence. Companies around the world are struggling hard to sustain in the market place. As the global business environment continues to shrink, companies are literally forced to expand their marketing activities. However, with increasing globalization and opening up of the world economy, the complexities related with international expansion have greatly reduced. A number of companies around the world have therefore considered making their presence in foreign countries. This step towards global operation and international marketing has allowed the companies to gain large number of benefits. Global operation of the companies has not only created new avenues to earn more revenue, but also played major role in ensuring companies sustain for a longer period of time. In addition, a company with global operation also has competitive advantage over its competitors, as it allows the company to cater to variety of customers and gain their loyalty (Cherunilam, 2010, p.24). Apart from that, the brand value of the company also increases greatly. In the context of USA, there are several companies which have considered international expansion such as Starbucks, Walmart, McDonalds and Apple among many others. However, this project will shed light on how Apple, the US technology giant is managing their global marketing and operation. The paper will emphasize on the marketing and operation strategy of Apple in the international market. Along with that the paper will carry out in-depth analysis of the business environment of the chosen location. The industry in which the company belongs will be also analysed thoroughly. Once the analysis potion is covered, the issues faced by the company in the chosen market will be highlight and how the company should deal with it will be recommended. Finally, on the basis of the findings a conclusion will be drawn. The study will now provide a brief introduction of ‘Apple’. Apple: A Brief Overview Apple Inc., commonly known as Apple is a US based company involved in manufacturing and marketing of technology products. The company was founded by Ronald Wayne, Steve Jobs and Steve Wozniak, and in the year 1976. It is currently headquartered at Apple Campus, 1 Infinite Loop, Cupertino, California, U.S (Lüsted, 2012, p.9). The company is known for its wide range of innovative products. Some of the bestsellers of the company include iPhone, iPad, and iPod among others. Apart from manufacturing and marketing electronic gadgets, the company is also active in the field of software development. Some of the well known software of the company is Mac OS X, Quick Time Player, logic studio and I-work. According to reports, the company has employee strength of 72,800 people and is headed by Tim Cook. As of November 2013, the company had 394 retail outlets and several other authorised distributors (Łączek, 2012). Since, the company has diversified product range; the competitors are also large in numbers. However, this report will only put emphasis on the mobile division of Apple. Hence, the direct competitors of Apple are Samsung, Nokia, Blackberry, HTC and Sony among others. The total revenue of the company for the financial year 2011-12 was US$ 156.508 billion and the net income was US$ 41.733 billion (Nasdaq, 2013). Overseas Location Apple operates in large number of locations around the world such as Italy, Germany, Canada, Netherlands, France, UK and China among many others. However, the marketing and operation stagey of Apple will be analysed in the Context of Chinese market. Marketing Strategy The marketing strategy is the process adopted by the companies to identify the needs of the consumers, creating products according to the need and making those products available for the customers to buy. Thus the marketing strategy adopted by the companies plays a crucial role in their success. In the context of Apple, the marketing strategy adopted by the company in the Chinese market is presented below: - Product Strategy: - Apple is mainly known as computer manufacturer, which aims to offer innovative and imaginative products. Apple’s iPhone is also a reflection of their innovative product strategy. The company however does not believes in launching several products at a time, rather they focuses on one single product and depending on its results the new product is designed from manufacturing and marketing. The company operates with several versions of iPhone 4S in China. The versions of iPhone 4S are distinguished in terms features. Some of them includes 3G technology, processor speed, and memory and camera quality. In addition, another major area of their product differentiation is related with the storage capacity. The iphone 4S comes in 16 GB, 32 GB and 64 GB and the prices differ accordingly. Price Strategy: - The pricing of the Apple products are generally high. The company uses premium pricing strategy to price their products. Premium pricing is defined as the pricing practise in which the prices of the products and services are kept high in order to portray a perception of quality among the consumers. With the help of premium pricing, the company is able to target a niche segment of customers. Hence, from the product strategy and price strategy, it is obvious that the company uses focus strategy. Place Strategy: - The place strategy or the distribution strategy of a company plays a pivotal role towards the success of a company. In China, Apple operates with hybrid distribution channel, which includes physical store, online store and retail points. The apple store is the apple owned store which only sells products manufactured by Apple. On the other hand the online store is the apple owned store which operates through an online platform. The online store is opened for the purpose of meeting the demand of the customers. In addition, the company also operates with retail outlets. In this context, Apple distributes their products to the retail stores and makes it available for the customers. Promotion Strategy: - The promotional strategy of Apple is very much unique. It hugely depends upon the PR activities to ensure strong promotion. However, the company uses both push and pull strategy in order to communicate with the customers. In the context of pull strategy the company uses advertisements and for pursuing push strategy the company make use of exclusive distribution of the products. Hence, it is clear that the company employs full spectrum of the communication mix. One of the most interesting facts of the promotional strategy of Apple is that the company employs different promotional tools at each stages of new product launch. For example, in the pre launch stage, the company uses PR, creates buzz about the product, viral marketing etc. On the other hand, during the product launch the company heavily depends upon TV advertisements, social media, print media and their official website. However, in the post launch stage it relies on digital campaigning, and independent website reviews. Operations Strategy A company manufacturing and marketing products has to depend on certain processes so as to make the products manufactured and make it available at the right place and right time. Each of these activities acts as operation of the company. The operation strategy of Apple in China is similar to the operation strategy pursued by the company in other overseas locations. The Value chain of Apple in China will help to illustrate the operation more clearly. Figure 1 (Source: McCubbrey, 2010) Inbound Logistics: - Some of the essential components required for manufacturing iPhone can be availed from several sources. However, there are some vital components which are available from single sources only. For example, the G5 processor is only supplied by IBM. In addition, G4 processor is only provided by Motorola. The other essential parts are either brought from the Chinese suppliers or are imported from the US suppliers. Operations: - The operation of the company in China is principally carried out by the external vendors. Once the raw materials are acquired, it gets delivered to the house of external vendors, where the assembling of products takes place. It is also important to mention that Apple, only manufactures some of its products in their home country and most of the products are manufactured in China, Japan and Taiwan. Outbound Logistics: - In China, the company sells iPhone with the help of resellers and distributors. The company has large number of distributors and the distributors ultimately sell the products to the end consumer. In addition, the company also distributes iPhone to the retailers and cataloguers. However, the most vibrant channel of the company is Apple online store. The company pursues just in time strategy. The logistics department of the company is outsourced to third party vendors. Marketing & Sales: - In order to market and sell iPhones, the company relies on high end promotion. The company spends large sums of money to carry out its promotional activities. The promotional tool used by the company is mainly advertisements. Additionally, PR techniques are also put into practise to create hype for the products. Finally, to sell the products it uses various distribution channels such as retailers, distributors, wholesaler and company owned stores. After Sales Service: - The after sales service department of Apple in China is very strong. Moreover the company always tries to offer world class services to the customers. According to the company, customer satisfaction is largely dependent upon the quality of service. The company has therefore initiated several programs pertaining to customer service. The service department is however outsourced to the US consulting giant AT & T. This strategy of the company has paid off to a great extent. According to reports, the sale of iphone will cross 35 million in China by the end of 2013. The study will now analyse the business environment of China in order to identify the challenges faced by the company. China: Country Analysis A thorough analysis of Chinese business environment and the mobile phone industry is necessary to find the challenges faced by Apple in China. China is one of the fastest developing nations of the world. The economy of China is currently witnessing a boom and is considered as one of the vibrant economies of the world. China is also known for its rich culture and ancient civilizations. The Chinese people are also known for their love towards luxury items, and trendy gadgets. The report will now analyse the external business environment of China. Political Factors: - The People’s Republic of China adopts communism in their political system. The country is rules by Communist party of China for the last 60 years and has is the only political party of the country. The stability of the Chinese government is extremely high. One of the major causes is the low involvement of people in politics. Although the business environment of China is favourable, but the country has imposed stringent regulations for the foreign companies in order to protect its domestic players. Figure 2 (Source: CIA, 2013) Economical Factor: - China is one of the strongest economies of the world. The total GDP of the country is $12.38 trillion and the GDP per capita is $9,100. In the financial year 2011- 2012, the country witnessed growth at a rate of 7.8% per annum. The unemployment rate of the country is 6.4 % and around 13.4% population of the country is leaving below the poverty line (CIA, 2013). However, the disposable income of the Chinese people is very high. This provides great opportunities for the companies such as Apple, which targets higher income group to sell their products. Some of the other key economic indicators of the country are provided below. Figure 3 (Source: CIA, 2013) Social Factor: - China is characterized by the presence of diversified culture and religion. As of 2012, the total population of the country is 1,343,239,923. The major religions of the country are Taoist, Buddhist, Muslims and Christian. Some of the major ethnic groups of the country are Han Chinese 91.5, Mongol, and Tibetan among others. The literacy rate of China is around 92 %. Chinese is the official language of China (CIA, 2013). One of the interesting characteristics of Chinese people is that the people of the country have the ability to get quickly adapted to the changing situation. The biggest problem in China is that some of the companies have the tendency to create duplicate products and sell that in the grey market with lesser price (Global Times, 2011). Technological Factor: - Technology is one of the essential requirements of a business. The use of technology in the modern business can be found everywhere, starting from inventory management to a new product development. China in this context is one of the top three technologically developed countries. The communication system of the country is also well developed. Moreover, in order to further strengthen the communication and technology infrastructure of the country, the Chinese government has initiated several programs. This is the reason for which a company such as Apple, which depends heavily on technology and innovation, considers China as one of the favourite destination. Environmental Factor: - With the increasing awareness about the environment among people, business houses are forced to carry out their activities in a sustainable way. The environmental factors become more important for a mobile phone company. Studies suggest that mobile phones affect the natural environments adversely and also have issues pertaining to health. Moreover, government has also taken strict steps towards the companies which are not complying with the environmental regulations. Legal Factor: - The legal factors of a country include employment regulation, competitive regulation, health and safety regulation, product regulation etc. The legal framework of the country is well developed and the government also takes strict actions against the companies which fail to obey with regulatory frameworks. Similarly, for a technology company such as Apple, legal frameworks are well established and the company is bound to obey it for continuing the operation. Therefore from the above analysis of the business environment of the China, it has been found that Apple has hardly any issue with the external business environment. However, there are certain areas where the company needs to focus hard and comply with the rules and regulations imposed by the government. The only problem that the company is facing from the external business environment is the stringent rules and regulations. Industry Analysis The mobile phone industry of China is growing at a rapid pace and reports suggest that the total number of mobile phone users in China will surpass the mobile phone users of Brazil within a short span of time. In order to get deeper insights into the mobile phone industry of China, the report will consider Porter’s five forces analysis. Bargaining Power of Buyer: - The bargaining power of buyer refers to the ability of the consumers to bargain for the price. The providers of mobile phone in China are large in numbers. Some of the established players in this market include Nokia, Samsung, Apple, Motorola, Sony Ericson, LG, Philips, Blackberry, Sharp and NIVS among several other local players. Hence, buyers have the option to choose from a pool of mobile phone sellers. The bargaining power of the buyers is therefore assessed to be high. Bargaining Power of Supplier: - The bargaining power of the suppliers refers to the capability of the suppliers to increase the total cost. China is considered to be the hub of manufacturing world. The manufacturing industry of China is also the biggest in the world. Reports suggest that most of the products sold in USA, Asia and Europe (to some extent) are made in China. Similarly, the suppliers of raw materials for manufacturing mobile phones are large in number. It provides manufacturers with the opportunity to choose from large number of suppliers. Moreover, it also restricts the providers from increasing the total cost. Hence the bargaining power of the suppliers is assessed to be low. Threat of New Entrant: - The threat of new entrant is characterized by the possibility of new players entering the industry and increasing the level of competition. The mobile phone industry of China is characterised by high entry barriers. Moreover, the initial cost required to set up a mobile phone company is extremely high. Therefore the threat of new entrant in the mobile phone industry of China is low. Threat of Substitutes: - The substitutes are also the products which perform the similar function as the main product. The substitutes for a mobile phone can be tablets, pager, land lines and mini laptops to a certain extent. Although there are large number of substitutes for a mobile phone, but given the huge popularity and acceptance and the benefits offered by a mobile phone, the threat of substitutes is assessed to be moderate. Intensity of Rivalry: - The intensity of rivalry refers to the level to competition within the industry. Apple’s I-Phone belongs to the mobile phone industry of China. The competitors of Apple’s iPhone in China include Nokia, Samsung, Motorola, Sony Ericson, LG, Philips, Blackberry, Sharp and NIVS among many other local players. The presence of large number of competitors clearly reflects that the intensity of competition within the industry is very high. Figure 4 – Market Share of Mobile Companies in China (Source: Butterfield, 2008) The figure above reveals the market share of Apple to be very and high price can be one of the causes of low market share. From the above findings, it has been clearly identified that the biggest challenge of Apple in China is the intense competition. Moreover, due to high price the market share of the company is very low. In addition, with the development of modern technologies new gadgets such as tablet PCs are coming which is also affecting the sales of Apple I-phone. Challenges Faced On the basis of the findings from the Country analysis and industry analysis, it has been understood that the company is facing with the following challenges or issues. Intense Rivalry: - The biggest challenge of the company in China is the intense rivalry. The Chinese phone market includes established players such as Samsung, Nokia, HTC, LG and Sony among others. The market share of Apple’s iPhone is comparatively very less. Hence, the company should develop new strategies to become more competitive and increase the market share. Grey Market of China: - One of the prevailing challenges for the company in the Chinese market is the presence of grey market. In this market, duplicate products are manufactured and sold at a lesser price than the original manufacturer. As a result of the iphone sales in the grey market, the overall sales of iphone have reduced tremendously. Product Cost: - The products of Apple are priced high in comparison to the competitors. Most of the people of China belong to middle income group and affording an iPhone is difficult for them. Therefore, the company needs to seriously consider its pricing strategy to increase sales. Conclusion The study was about analysing the operation of Apple in the Chinese Market. The study revealed that the business environment of China is favourable for doing business, but there are some factors which negative affects the overall sales of the company. Some of the major areas of concern are grey market sales, high product cost and intense rivalry within the industry. Therefore the company is recommended to reconsider the pricing strategy. This approach will not only help the company to gain market share and become more competitive, but will also the company to control gray market sales. References Butterfield, D. (2008). Nokia to build a TD-SCDMA phone. Retrieved from http://idannyb.wordpress.com/2008/09/13/nokia-to-build-a-td-scdma-phone/. Cherunilam, F. (2010). International Business: Text and Cases. New Delhi: PHI Learning . CIA. (2013). East & Southeast Asia: China. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. Global Times. (2011). iPhone 4S big hit in Chinas grey market. Retrieved from http://www.globaltimes.cn/NEWS/tabid/99/ID/679460/iPhone-4S-big-hit-in-Chinas-grey-market.aspx. Łączek, A. (2012). About. Retrieved from http://appleincorporated.wordpress.com/about/. Lüsted, M. A. (2012). Apple: The Company and Its Visionary Founder, Steve Jobs EBook. Minneapolis: ABDO. McCubbrey, D. J. (2010). Using Information Technology Competitively. Retrieved from http://cnx.org/content/m35523/latest/?collection=col11227/latest. Nasdaq. (2013). Top Three Dividend Picks from 49 Big Investment Gurus. Retrieved from http://www.nasdaq.com/article/top-three-dividend-picks-from-49-big-investment-gurus-cm225184#.UT5h19ZHLfI. Appendix – Apple Market Synopsis Read More