Strategic Task Planning for Foreign Entry - Apple - Case Study Example

Marketing Proposal Table of Contents Background 3 Strategic Analysis 4 Strategy of Organization 4 Industry Environment 5 Potential in target country 7 Strategic task planning for foreign entry 8 International Management Strategy 10 Reflection 12 Reference List 14 Background This strategic report is based on the organization Apple Inc. Apple operates in the personal computer and the consumer electronics industry. The company is based in California and was established in 1976 (Rawlinson, 2015). Apple is best known for its key products like Mac computers, iPhones, iPods, etc. The company operates in 16 countries with 453 retail stores and in 39 countries with online stores. The company holds the number one positioning terms of brand image and its financial position have also recorded a steady growth. As of the report of Financial times (2015), the profit made by the company has increased by 37% to a value of $18 billion. The products offered by the company are directly associated with technological advancements in the field of personal computing and consumer electronics. Apple is best known for its innovative approach in terms of product design and product quality and over the past half decade it has gained a significant recognition and brand awareness in the smartphone sector with the inception of iPhone. The strategic report will focus on the smartphone industry. Owing to the rapid technological development the smartphone industry has recorded a steady growth over the years. According to the reports of Market Watch (2014), the smartphone industry has exhibited a growth of 23.6% in the 2014 financial year. The massive growth in this industry is mostly because of the growing demand in the emerging markets particularly in the Asian region. The smartphone industry is dominated by several well established brands like Apple, Samsung, LG, Motorola, Sony, etc. These brands seek out for new ways to increase their market and by attracting new customers and retaining old customers. The increasing competitiveness in the industry has compelled the firms to come up with innovative ideas to create new value propositions for the customers. In terms of customer base Samsung holds a larger number than Apple. According to the reports of Chowdhry (2015), Samsung shipped 307.5 million units of smartphones, whereas Apple shipped 191.4 million units. However, in terms of profitability Apple has earned 89% of the overall profit earned by the smartphone industry which accounts for $18.8 billion. The report published by Danova (2015) indicates that the smartphone industry is likely to exhibit further growth in the near future. It has been estimated that over the next five years (2015-2020), the smartphone industry is like to grow with a CAGR of 16% over the next five years. The USA market is saturated with several smartphone companies and is dominated by Apple, which is its home country. The customer base of the US market is characterized by their high affordability and strong affinity towards innovative technology based consumer products (CIA, 2015b). The US market has become a fierce battle ground for two massive smartphone companies, Apple and Samsung, contributing to 68% of the market (Cheng, 2014). The Bangladesh market where Apple is proposed to enter shows a contrasting scenario. The economy of this country is significantly lower as compared to that of the US. The GDP of the nation is $186.6 billion whereas the GDP of US is $17.42 trillion. However, the increased GDP growth of the country (6.2% as of 2014) suggests that this market can be lucrative for Apple’s entry. Strategic Analysis Strategy of Organization Market Market strategy of Apple is solely based on creating a strong brand recall among the consumers, which as a result helps in attracting a lot of new customers and also helps in retaining the old ones. Apple has managed to gain a significant portion of the smartphone market by focusing on its brand image and at the same time it has also created a strong competitive position in the industry. The company has been able to create a brand image which is associated with high product quality and improved lifestyle of the consumers (market watch, 2014). The marketing communication of Apple strongly portrays the idea that the company is capable of delivering exceptionally product value which has the ability to improve the lives of the consumers (Financial times, 2015). This brand image as a result has created a high status symbol associated with the company’s products. The marketing mix of the company highlights its market strategy on the grounds of Product, Price, Place and Promotion. Product: Apple has ensured that its products are developed in an innovative way, by introducing new technologies and features that improves the overall user experience of the consumers while they are using the product (Financial times, 2015). The company holds a relatively short product portfolio as compared to that of its rival brands. This as a result allows the company to target and cater to a narrow customer segment. Price: The pricing of the product is relatively high as compared to other smartphones. Apple has always been known to put a higher price tag to its products, thereby catering to a niche segment of the market. Moreover, the highly priced products also portray the premium nature of the products thereby strengthening its brand image. Place: Apple operates in 16 countries with its retail stores and in 39 countries with its online store (Rawlinson, 2015). Promotion: The promotional activities of the company include the television commercials, billboards, news paper ads, etc. The promotional campaign of Apple iPhone, instead of focusing on what the product is made of, focuses on what it can do and how it can improve the lives of the users. Non-market The non-market strategies of the company are focused on its product development and innovative value addition for the consumers. The company has ensured that its products are attractive both in terms of appearance and utility. Apple’s newest iteration of smartphones is the iPhone 6 and iPhone 6 plus. These products have been designed in such as way so that it can deliver the best performance in the industry. The company has ensured that its products can offer the highest possible value addition for the customers as compared to that of the rivals. The product innovation of Apple has also created a strong competitive advantage as the company patents most of its innovations so as to get exclusive rights to market the product. In terms of product features the company has always highlighted in the ease of use and consistency in high performance. As far as the utility of the iPhone is concerned, the company has ensured that it can create a wide ecosystem of Apple products that includes Mac pc, iPad, iPod and the iPhone. Thus in order for a consumer to derive a higher combined value a consumer must own all the products in the Apple ecosystem, as their functionalities are interrelated to each other. Industry Environment Competition The smartphone industry is one of the most competitive industries in the world, where the existing firms constantly seek out for new ways to improve their market share and hold the leadership position. The competitiveness of the smartphone industry have been analysed by the Porter’s five forces. Buyer’s Power: The buyer’s power is can be determined by their switching costs (Zeng et al, 2012). The smartphone industry is characterized by high saturation and the presence of several well companies offering almost identical products with comparable value additions. This as a result leads to increases the available options for the customers and they can easily choose from any one of them, thereby increasing the buyer’s power. The firms constantly look out for new ways to create differentiation in terms of product design and utility to draw the attention of the customers. However, some of the companies offers inimitable user experience and patented features that cannot be duplicated by other rival brands. This as a result reduces the buyers’ power in terms of their freedom to choose between products. Therefore, the overall buyer’s power is moderate. Supplier’s power: The suppliers in this industry are the firms that manufacture and sell raw materials like internal components and build material. The smartphone companies are relatively much bigger than the supplier firms in terms of their financial prowess and corporate infrastructure. This as a result allows the smartphone companies to influence the supply chain in their favour. Moreover, the number of supplier firms are also quite large, which as a result leads to reduced switching costs for the smartphone companies. However, there are certain components like integrated circuits and processors which are only supplier by certain limited companies only, thereby reducing the supplier’s power. Therefore, the overall power of suppliers is assessed to be moderate. Threat of New Entrants: The smartphone industry has significantly high entry and exit barrier. In order to enter in this industry the new entrant will require investing large amount of capital to manufacture smartphones in bulk and also to invest in R&D and marketing activities. Such huge capital invest may not be a viable option for small start-up companies. Moreover, the exit barrier is also quite high as the employed capital cannot be easily withdrawn to close off the business. The industry consists of several well established brands which also makes it difficult for the new entrants create their own brand recall. Therefore, the threat of new entrants is low. Threat of Substitutes: The direct substitutes of smartphones can be fixed land lines or feature phones. However, the utility and features of a smartphone cannot be substituted. Thus, the threat of substitutes is low. Rivalry among firms: The major firms in the industry such as Samsung, Apple, LG, Sony, Motorola, etc. battle against each other in terms of offering the best value for money to the customers and creating a differentiating factor in terms of brand image and product design. The competiveness among the firms is gradually increasing as the demands of the customers are also increasing over with time. The customers are always looking out for new feature to surprise them, which as a result makes innovation a vital factor for the sustainability of the firms. Potential in target country The target country in which Apple has been proposed to enter is Bangladesh. The analysis of the target country has been conducted by using PEST analysis. Political: The political environment of Bangladesh is relatively less stable than that of the US, particularly in terms of conflict with several militant and political groups. The political disputes can however disrupt the supply chain of the company and eventually make it difficult to run business operation. However, Bangladesh has shown promises in terms of dealing with it political scenario. Economic: The economy of the country is also quite weaker than that of the US, with it GDP of $186.6 billion. However, over the recent years, the nation has recorded a steady growth in its economic condition which as a result has increased the affordability of the customers. This as a result makes Bangladesh a lucrative target market for the company. Social: The social status of a region portrays the consumer behaviour of the people. In Bangladesh, the young population particularly the one ones falling under the age group of 18-35 are looking forward to improve their lifestyle and are more attracted towards urbanized life. This as a result draws them to technology based products such as modern smartphones and they are ready to pay a premium for them. Technological: Over the recent years the technological development of Bangladesh has shown promising improvements with inception of high speed internet connection and better carrier services, etc. This as a result will make Bangladesh a profitable market entry target for Apple. The potential of Bangladesh to prove itself as a lucrative market for Apple can be justified by the fact that despite of being one of the developing countries with weaker economies, it has shown significant developments over the recent years. The steady and rapid growth of the country’s economy and the change in the purchasing trend of the customers suggest that the population of Bangladesh can be among the target customers of Apple. The social trend indicates that the young people are increasingly adopting costly smartphones and are trying to have a higher social status among its peers. Strategic task planning for foreign entry In order to enter in the Bangladesh market, Apple needs to ensure that it has devised the right strategic planning that will allow the company to successfully expand its business in target market. The following goals and objectives will have to be materialized in order to foster market development. Collaborate with a popular network carrier to enter in the Bangladesh market. Design Promotional campaign for the new market entry. Establish Apple store in metro cities. Access distribution channel by collaborating with local distributors in Bangladesh. Design pricing strategies. Propose attractive value addition. Managing HRM issues The company will also have to be able to manage the HRM issues involved with the international expansion. Internationalization is a firm is often faced with issues regarding cross cultural management where the firms need to manage employees with different cultural background. In order to expand in to the Bangladesh market, the company needs to ensure that it has the required human resources to operate in the target market. The cultural background varies across nation and is highly likely that the cultural practices and beliefs between the Bangladesh and the US population are strikingly different (Geert-hofstede, 2015). Therefore, the company needs to ensure that it is capable of working with and managing the employees having a different cultural background. Apple has ample amount experience operating in the South Asian market, particularly in India. In order to manage the HRM issues, the company will have to recruit the employees based on their skills and abilities along with their knowledge base and experience (Aaker, 2010; Tolonen, 2009). The company should not exhibit any type of discrimination based on the cultural background. In order to facilitate the employees to give higher output, the company should highlight on their training and development programs. The training conducted by the company will help the employees to increase their output, thereby increasing the overall performance of the company in Bangladesh. The Hofstede’s cultural dimension model proposes that Bangladesh citizens are hold a higher level of masculinity and power distance scores (Geert-hofstede, 2015). The high masculinity indicates that the employees would like to have a high level of competition in the work environment and they also exhibit a higher motivation to achieve success. This as a result indicates that the HR mangers need to create policies in Bangladesh that will help to increase the competitiveness among the employees, thereby motivating them to work harder. The high power distance level of the Bangladesh population indicates that the people accepts and prefers unequal power distribution among them. By keeping this in mind the company can incorporate an autocratic leadership style in the organizational environment to foster better control over the employees. In order to make sure that the human work force of the company is meeting the desired level of productivity the company needs to properly manage the cross cultural issues differences it will have to treat its employees based on their cultural background. Most of the international HRM issues develop due to the cultural mismatch between the host and the home country. By following the proposed strategies Apple will be able to overcome the issues related to the HRM. International Management Strategy The implementation of strategic management is extremely vital in terms of market development strategies. The market development can only be successful if a company’s operations are based on its strategic planning. Based on the Ansoff matrix it can be stated that Apple will be opting for a market development strategies. The Ansoff matrix states that strategy of a firm can be one of the following: market penetration, market development, product development and diversification (Adcock, D., 2010). The market penetration allows a company to penetrate in to the existing market in order to gain access to more customers in the existing market. The market development strategy allows the companies to enter in to a new market and gain access to a larger customer base. The company offers their existing products in a new market (Chernev, 2010). The product development strategy of the company allows it to develop new products for the existing markets thereby attracting the customers by product value proposition. Finally the diversification strategy of the company allows it to enter in to a new country or market with newly developed products (Boone and Kurtz, 2012). Based on the strategies proposed to Apple, the company will follow the market development strategy where it will introduce the existing product line up of iPhones in the Bangladesh market. The strategic planning should be conducted in such a manner that it is in line with the vision of the company. In order to manage the internationalization of a company in to a foreign land, the company needs to select a proper entry strategy (Bose, 2010; Czinkota and Ronkainen, 2012). A direct entry in the Bangladesh market can be more risky despite of the fact that Apple bears a strong brand image. The in order to gain access to the local distribution channel, the company will require having business collaboration with the distributors and whole sellers. Being a new entrant in the market Apple is unlikely to have such business connections. Therefore in order to enter in the Bangladesh market, the company needs to select the right entry strategy. In this case the right entry strategy for Apple will be to enter in to business collaboration with one of the popular carrier companies and create franchisee operation with the selected distributors (Doole and Low, 2008). Rather than directly entering in the foreign market, creating business collaboration with the existing companies will help Apple to reduce the financial risks. The business collaboration with involve establishing a joint venture with Airtel in Bangladesh. This will allow the company have low risk of operation as the partner company has sufficient knowledge about the Bangladesh market and its consumer behaviour (Chandra, Styles and Wilkinson, 2012; Doyle and Stern, 2010). Airtel is one of the popular telecommunication firms in the country, owing to its brand image and financial prowess it will be a suitable partner for Apple (Airtel, 2015). Airtel will handle the distribution of the Apple iPhones through the Airtel stores, where iPhones will be available in bundle offers with Airtel sim cards and introductory offers. The Apple phones will be available both on contact and as an unlocked version. The franchisee operation will be conducted with collaboration with local distributors who will have to agree to the terms and conditions of Apple. This joint venture will allow Airtel to establish standalone Apple stores that will offer unlocked iPhones in Bangladesh (Terpstra, Foley and Sarathy, 2012). Entering in the joint venture will help Apple to establish its business operations in Bangladesh without much risk. Apple stores will be established in cities like Dhaka, Chittagong, Khulna, Sylhet, etc. These cities bear most of the urban populations of Bangladesh (Geonames, 2015). The population in this area also have a relatively higher disposable income which will prove to be lucrative for the company. Creating a joint venture will also help the company to gain access to a wider distribution network, thereby increasing the customer base of the company. The strategic planning of Apple is to focus on the needs of the customers and create a unique value proposition for the target customers (Finish, 2008; Forsyth, 2009). The customer centric strategy of the company will allow it to focus on delivering exceptional product value for them. The competitive advantage achieved the company is on the grounds of product features and its strong brand image. In order to attract the target customers of Bangladesh, Apple will have to design the appropriate promotional campaign. The promotional activities of the company will include the television commercials, billboards and hoardings, news paper, etc. This as a result will help the company to create an awareness that Apple is entering in the Bangladesh market. The promotional campaigns will also involve introductory offer from the company, where the customers can avail discounted products and bundle offers with Airtel. In order to attract the customers the company will also offer financing options such as EMI. The television commercials will not be strikingly different from that aired in the home country (Foxall, 2008). The commercials will portray the product features and will also highlight the fact that the company is offering attractive offers for the Bangladesh markets. This as a result will create a high brand preference among the customers. Moreover, the customers who are budget conscious will also be attracted to the company’s proposal of EMI and other bundle offers. The pricing of the iPhone will be kept identical to that of the home countries. Lowering the price will also reduce the overall attractiveness of the brand image of Apple’s iPhone. The company should introduce the iPhone line up by creating an attractive deal, but lower the base price is not advisable despite of the relatively weaker economy. Reflection This section is based on the reflection on the issues that the company might face while implementing its expansion strategies in the Bangladesh market. While designing the expansion strategies for Apple I have realized that there are certain issues involved in the internationalization in the Bangladesh market. Issues on the grounds of leadership can occur during the human resource management of the company in the host country. The leadership styles followed by the company in the home country may prove to be ineffective in managing the employees. This as a result may create de-motivation among the workers and at the same time it can also lead to poor overall performance. Any improper behaviour by the service personnel of the company will hamper the brand image of the company. Thus Apple needs to ensure it has implemented a leadership style that can fully monitor and control the behaviour of the employees. According to me there can also be certain issues regarding the business operations of the company proposed to run in Bangladesh. Relying on a business franchisee may reduce the financial risk of the company, but at the same time it can also reduce the profitability of the company, as there is a third party involved. The franchising operation can also reduce the control of the company over its operations, which in turn can impact the brand image of the company. The company can also face issues in terms of supply chain. Since Apple products are not manufactured in the host country therefore, they need to be imported in the host country. Importing products from the home country can increase the operating cost of the company, mostly because of the import taxes levied by the Bangladesh government. Moreover, the political relationship between the host and the home country can also impact the imports of the products thereby disrupting the supply chain of the company. The marketing issues involved in the expansion strategy may involve in the promotional activities. The designing promotional campaign solely for the Bangladesh market can be cost extensive for the company. As a result it has been proposed that the company should use the existing television commercials. This strategy can be financially more preferable but it may not create the same impact on the customers in Bangladesh as it has influenced the US customers. The pricing of the product can be a problem and may pose a significant challenge for the company to attract the target customers. Moreover, Bangladesh has scored quite low in the indulgence dimension in the Hofstede model. This as a result indicates that the population of Bangladesh despite of having the necessary affordability may to choose to invest in highly priced smartphones. The iPhones, on the grounds of its high pricing can be considered as a luxury product. Therefore owing to the low indulgence level of the population that may avoid buying an iPhone and may instead purchase a lower priced alternative that can get the work done. Reference List Aaker, D., 2010. Strategic Market Management: Global Perspectives. 6th ed. Oxford: Blackwell Publishing. Adcock, D., 2010. Marketing: Principles and practice. 4th ed. London, Thousand Oaks CA: Sage Publication. Airtel, 2015. Airtel Bangladesh. [Online] Available at: [Accessed 26 June 2015] Boone, L. E. and Kurtz, D. L., 2012. Contemporary Marketing, Page 84, 7th ed. New York: Kaplan Publishing. Bose, C., 2010. Modern Marketing – Principles & Practice. . 5th ed. Mason: South-Western Cengage Learning. Chandra, Y., Styles, C., and Wilkinson, I. F., 2012. 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