Apple’s China Strategy

Doing business is China is really, really difficult and this is a point on which there seems to be a broad consensus among foreign investors and foreign companies in China. The external environment with its various factors is too important and businesses need to consider those factors carefully when planning to move to a certain market.

The importance of the external business environment jumped at me while reading some recent Apple news. Thus I would like to explore the story of Apple in China, its strategy for the Chinese market, its successes and difficulties. Why did Apple decide to conquer the China market? It is simple: the Chinese market is huge and all big companies strive to put their foot in its door, especially as the middle class in China is growing. But with growing middle class the competition from local firms is cut-throat as they all want their share.

In January 2015 Apple proved that it is possible to crack the Chinese market. How did Apple make it happen? They offered a premium product to the growing numbers of Chinese middle class consumers that want to buy luxury goods. They signed on with China Mobile and thus took the opportunity to bring the brand to the mainstream Chinese. They introduced iPhone 6 which appealed to the Chinese audience with its big size. Apple as a status symbol became the desirable brand.

And it was all going well until recently! Some recent developments make people wonder whether Apple’s success story in China is nearing its end. In March, 2016, China passed a law that required all content shown in China to be stored on servers based on the Chinese mainland. As a result Apple’s iBooks and iTunes movies services were shut down in the country. Apple also reported 13% drop in its second quarter revenue as sales of iPhones slipped.

As a result of this government interference in the technology market fears rose among investors of the successful prospects of Apple in China. Billionaire investor Carl Icahn sold all his shares in Apple due to concerns of China’s economic slowdown and worries over government interference in the technology market. Apple now sells more in China than it does in the whole of Europe but the sales are now shrinking and revenue is dropping.

Apple’s China story is a good example of how external forces might affect a big technology firm or any other firm. In this case the external forces that are in play are Social- consumers, and Political- the government, maybe also Economic- the economy’s slowdown. The major negative impact has come from the government and the fears among investors that it is very easy in China to impose strict regulations on a market and make the country even more prohibitive for doing business. And coming back to the initial statement- yes, doing business in China can be really, really difficult. What will happen to Apple is interesting and we will continue to follow the news.

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