2012 – 2015 Strategic marketing plan for Apple iPhone series smart phones in China

By | February 12, 2013

This Assignment Is Published With Permission From The Author For Online Review Only
All Rights Reserved @ ChinaAbout.Net

Executive Summary

This project selects the Apple’s iPhone products to perform a strategic plan for the next four years. Three major components are involved: a) a comprehensive situational analysis to help the iPhone to position in the market; b) a tactical marketing plan that contains not only organizational strategies but also marketing strategies under the 4Ps marketing mix framework; c) last part is a critical thinking of the threat from Android’s network effect and some recommendations are given to help address this threat.

 

 

Acknowledgement

 

To be omitted deliberately.

List of figures

Figure 1 The classical iPhone 4 model…………………………………………………………. 7

Figure 2 Monthly income of the surveyed people……………………………………….. 10

Figure 3 The global smart phone market by operating system……………………….. 13

Figure 4 Global market penetration of smart phone…………………………………….. 16

Figure 5 The US smart phone penetration………………………………………………….. 17

Figure 6 The US new smart phone users by weekly applications…………………… 17

Figure 7 The Porter’s (1980) Five Forces framework…………………………………… 18

Figure 8 The iPhone packaging and the contents inside……………………………….. 28

Figure 9 Computer operating system network based effects – market share and probability of adoption by a new customer…………………………………………………………………………………………. 32

 

List of charts

Chart 1 The age groups of the surveyed people…………………………………………… 10

Chart 2 The most favorite smart mobile phone brand…………………………………… 11

 

 

List of tables

Table 1 Summary of the different features of voice phone, feature phone and smart phone   9

Table 2 The industrial life cycle………………………………………………………………… 20

Table 3 Business strategies for existing products…………………………………………. 25

Table 4 Igor Ansoff’s growth matrix…………………………………………………………. 26

Table 5 Pricing strategies in different product categories……………………………… 29

 

 

 

Table of contents

Executive Summary…………………………………………………………………………………………. 1

Table of contents……………………………………………………………………………………………… 4

2012 – 2015 Strategic marketing plan for Apple iPhone series smart phones in China.. 6

1.     Introduction……………………………………………………………………………………………… 6

2.     Objectives of this report……………………………………………………………………………… 6

2.1           To provide general course of action and recommendations for the next years’ marketing effort for iPhone series smart phones in the Chinese market…………………………………………. 6

2.2           To provide detailed tactics and implementation instructions of the marketing plan   6

2.3           To offer a specific Gantt chart process plan for the marketing activities in the coming four years  6

2.4           To offer recommendations on the marketing of iPhone in the coming few years       6

3.     Situational Analysis……………………………………………………………………………………. 7

3.1           Product Overview…………………………………………………………………………. 7

3.2           The market segments……………………………………………………………………… 8

3.3           Customer analysis…………………………………………………………………………. 9

3.4           Product Offering…………………………………………………………………………. 12

3.4.1     Affordable leading smart phone……………………………………………… 12

3.4.2     Innovative mobile phone usage experience……………………………….. 13

3.5           Market Size………………………………………………………………………………… 13

3.5.1     Global mobile smart phone market………………………………………….. 13

3.5.2     China smart mobile phone market……………………………………………. 14

3.6           Growth Potential…………………………………………………………………………. 15

3.7           Competitive Environment…………………………………………………………….. 17

3.7.1     The threat of entry (High level)………………………………………………. 18

3.7.2     The bargaining power of suppliers (middle level)………………………. 20

3.7.3     The threat of substitutes (low level)…………………………………………. 21

3.7.4     The competitive rivalry (high level)…………………………………………. 23

3.7.5     The bargaining power of buyers (low to middle level)……………….. 23

3.8           Positioning of Apple iPhone…………………………………………………………. 24

4.     Tactical Marketing Plan…………………………………………………………………………….. 25

4.1           Organizational Strategies……………………………………………………………… 25

4.1.1     Consolidation strategy…………………………………………………………… 25

4.1.2     Growth Strategies…………………………………………………………………. 26

4.1.3     Market Penetration………………………………………………………………… 26

4.1.4     Product Development……………………………………………………………. 26

4.2           Marketing Mix……………………………………………………………………………. 27

4.2.1     Product………………………………………………………………………………… 27

4.2.1.1 Location based service……………………………………………………. 27

4.2.1.2 Packaging and accessories……………………………………………….. 28

4.2.2     Price……………………………………………………………………………………. 29

4.2.2.1 Captive pricing………………………………………………………………. 29

4.2.2.2 Price skimming………………………………………………………………. 30

4.2.2.3 Psychological Pricing………………………………………………………. 30

4.2.3     Placement…………………………………………………………………………….. 30

4.2.4     Promotions…………………………………………………………………………… 30

5.     Conclusions…………………………………………………………………………………………….. 31

6.     Critical discussion – the threat of Android under a network effect…………………. 31

7.     Recommendation – Cross sharing of the iPhone operating system (iOS)…………. 33

Reference……………………………………………………………………………………………………… 34

Appendix 1.0 The state and trends of mobile Internet………………………………………… 39

Appendix 2.0 Market research questionnaire for smart phone users……………………… 46

Appendix 3.0 Gantt chart process plan in 2012 for iPhone in China…………………….. 54

 

 

 

2012 – 2015 Strategic marketing plan for Apple iPhone series smart phones in China[1]

 

1.        Introduction

 

Apple’s iPhone series products have become worldwide famous and popular, here we will provide a strategic plan for the products in the Chinese market for the coming four years by stating two components: how the competitive marketplace is addressed and how the day to day marketing operations are arranged.

 

2.        Objectives of this report

 

2.1    To provide general course of action and recommendations for the next years’ marketing effort for iPhone series smart phones in the Chinese market

2.2    To provide detailed tactics and implementation instructions of the marketing plan

 

2.3    To offer a specific Gantt chart process plan for the marketing activities in the coming four years

 

2.4    To offer recommendations on the marketing of iPhone in the coming few years

 

 

3.        Situational Analysis

 

3.1    Product Overview

figure 1

Figure 1 The classical iPhone 4 model

Source: Apple.com 2011

The iPhone is a line of Internet and multimedia-enabled smart phones marketed by Apple Inc. The iPhone is among the most popular phones on the market and was released with much fanfare in July 2007. And it was among the most affordable large storage phone devices in the market at that time. The addition of a touch screen and virtual keyboard leaves more room for a larger screen allowing viewing of movies and web surfing on the go (Kubasiak, Varsalone & Morrissey 2009, p.356). As the speed, functions and software system continue to upgrade, the iPhone enjoys a rapid growth globally.

According to Gerard Blokdijk (2008, p.60), the marketing of the iPhone has definitely transformed how mobile phones should be made and has set a benchmark for other mobile phones to follows. Its Wi-Fi connectivity allows individuals to download and view videos, play music, go online via its build-in web browser, and send emails. Its wide, multi touch screen with virtual keypad and buttons separate it from the rest competitors’ offers for a long time since its release into the market because of how it seamlessly integrates futuristic design with functionality.

 

3.2    The market segments

China is the largest mobile phone market in the world. With mobile revenue growing faster than fixed-line, China’s telecommunication providers are rolling out 3G networks and providing value-added services such as mobile phone gaming to capture market share (Beaconequity.com 2011). With the support form the fast growth of the fundamental network service, the mobile phone market also witnesses a rapid growth. Together the market is also segmented accordingly. A market segment is a group of customers with shared characteristics that respond to marketing activities generally in a similar way (Nijssen & Frambach 2001, p.40). The iPhone series smart phones are classified into the category of smart phones. Before we can define the smart phone market, let’s see how the mobile phone market is segmented. Based on the features of a hand phone, there are three major kinds:

 

  • Voice phone
  • Feature phone
  • Smart phone

A voice is phone is a mobile phone that supports only voice call and SMS which are the two fundamental functions that a mobile phone should have. And a smart phone must be contrasted with a feature phone which is a term commonly used to describe a low-end or mid-range mass market mobile phone which does not have such advanced functionality as a smart phone hand set. A feature phone may offer a subset of the functionality of a smart phone, but is typically far more basic with voice and messaging being the main features of the phone (Chehimi, Stichbury & Cartwright 2008, p.5). In another definition, a feature phone is a mobile phone that supports advanced features other than voice call and short message such as WAP/MMS/Java/Blue Tooth/PoC/A-GPS and etc (Plunkett 2008). The functions of the three phones are categorized as below:

Mobile phoneFeatures
Voice phonevoice call, short message
Feature phonevoice call, short message, Jave ME, GPS, Wi-Fi, picture browsing, music, mobile broadband access, camera, MMS
Smart phonevoice call, short message, Jave ME, GPS, Wi-Fi, picture browsing, music, mobile broadband access, MMS, receiving and sending emails, office document editing, video game, operating systems, abundant applications, web access, qwerty keyboard

Table 1 Summary of the different features of voice phone, feature phone and smart phone

Obviously the iPhone series products can all be classified into the market segment of smart phone and the iPhone series also lead the smart phone market segment till today.

 

3.3    Customer analysis

 

By defining the market, the scope of the customer analysis is determined. This can be considered as one of the most important analyses within the strategic marketing plan as customer ultimately are the central focus of every market oriented firm (Nijssen & Frambach 2001, p.39). To better understand the most recent customer behavior and preference changes and major tends, we have carried out an on-line survey which had been participated by 400 Chinese smart phone users during 10 November 2011 to 20 November 2011. Among the 400 surveyed smart phone users, 155 are female customers while 245 are male customers, such differences could be accepted because of the survey was an online survey and men tend to surf the Internet more than the women users in term of the average hours spent online, and the age group configuration is listed below in the pie chart:

chart 1

Chart 1The age groups of the surveyed people

 

Among these surveyed people, 21.25 percent of them (85 out of 400) are using iPhone, and their income levels are shown below:

figure 2

Figure 2 Monthly income
 (CNY) of the surveyed people

And among the iPhone users (85), the majority (65) of them are using iPhone 4G, this may be due to the iPhone was released the Chinese market in a more later time and also it became popular later than in the developed countries, hence more people start to buy iPhone when it is already world famous. This can be seen from the fact that 50 out of 85 of them only own the iPhone for less than 12 months.

chart 2
Chart 2 The most favorite smart mobile phone brand

 

When asked about which is their favorite smart mobile phone brand, the top two favorite brands are: Apple (113) and Nokia (90), the other brands such as HTC, Blackberry and Motorola also has a wide customer preference though it is much less than Apple and Nokia. And Good brand equity, Fashionable design, Powerful functions and Friends and families’ influence are all considered to be critical determinants of their decision to buy a smart phone. Two important trends show that there is great potential for the growth of the smart phone market in the future in term of strong demand: one is that 49.5% of the surveyed people express that they have a plan to buy a new smart mobile phone in the coming half a year; and another one is that 74% of the surveyed people suggest that they would encourage their friend and families to buy a smart phone. When looking forward to the most desired functions and features of the future smart phone, 4G Support, Superior voice control, Superior voice control, NFC-enabled technology and Enhanced camera are the top five expected functions to be included in the future smart mobile phones.

 

3.4    Product Offering

 

3.4.1            Affordable leading smart phone

As said above, the most original iPhone model was released to the market with much fanfare in July 2007 and it was among the most affordable large storage phone devices in the market at that time. Therefore we can see that from the very beginning Apple had targeted at providing the affordable innovative smart phone to the customers. And also even when Apple iPhone series have become very popular in the market and its price are still affordable though it is not cheap but the prices are reasonable considering the great value offered by the products, what is more, when the iPhone has been defined as high end products, the company also tends to satisfied with the low end market while at the same time keeping the high quality of the product. For example, in response to the emails from iPhone customers who are upset about Apple dropping the price of iPhone by $200 two months after it went on sale in the US market, in an open letter Steve Jobs Apple CEO replied to all the iPhone customers in this way that “I am sure that we are making the correct decision to lower the price of the 8GB iPhone from $599 to $399, and that now is the right time to do it. iPhone is a breakthrough product, and we have the chance to ‘go for it’ this holiday season. iPhone is so far ahead of the competition, and now it will be affordable by even more customers. It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone ‘tent’ ” (Apple.com 2011). Though the 8GB version is not yet in the market in China, the low end version of iPhone is already very much anticipated by the Chinese customers.

 

 

3.4.2            Innovative mobile phone usage experience

According to the ranking by ComputerWorld at end of the year 2007 which listed the 25 most innovative products of 2007, the year when the iPhone was first released to the market. Though features that iPhone provided at that time were already not new such as a big touch display screen, WIFI and Bluetooth, but the real innovation of the iPhone is that the whole is much greater than the sum of the parts. The software and hardware work together to make using this device a pleasure (Tuaw.com 2007). To date, as we can see in our daily life, the iPhone with the powerful performance and software design has become the new platform of gaming together with instant connection to the Internet and social website anywhere at any time. The great and innovation mobile phone usage experiences are enjoyed by most iPhone users.

 

3.5    Market Size

 

3.5.1            Global mobile smart phone market

figure 3

Figure 3 The global smart phone market by operating system

Source: Androidrepublic.co.uk 2011

Since there are too many smart phone brands but relatively fewer operating systems, here let’s look at the global smart phone industry by different operating systems. As the figure above shows, from the second quarter of 2007,  the then dominant operating Symbian developed by Nokia started to drop dramatically as it can not seize the touch screen smart phone trend. In contrast the Android developed by Google and iOs developed by Apple eat in the market share rapidly. As of the third quarter of this year, according to a latest report from Gartner, the global smart phone market grew by 42 percent year-over-year to deliver over 115 million units. The overall mobile phone market however only grew by 5.6 percent so the trend of shifting from feature phones to smart phones continues to grow in strength. As for Android handsets, they are now 52 percent of the global sales compared to only 25 percent same period last year. Not a bad growth figure for Android, showcasing the popularity of some of the Android powered smart phones over the recent year. The same report hints at China being a large part of the success of Android, a market where Apple and their latest iPhone 4S tends to be too pricy for the average mobile phone owner (Androidrepublic.co.uk 2011). The rapid growth of the Android operating system has close relationship with the two company’s different business strategies: Apple Inc and Google Inc. Google has authorized many other smart phone manufacturers to use its system though it also has its own smart phones while Apple refused to share its iOS with other mobile phone brands. These two different strategies could be influential to the future development of the two giant mobile phone producers which will be critically discussed later.

 

3.5.2            China smart mobile phone market

There were 963.99 million subscribers of mobile communication services in China as of the end of October 2011, growing 1.23% on month and 14.48% on year. 110.51 million (11.46%) were 3G users, according to statistics published by China’s Ministry of Industry and Information Technology (MIIT). The number of subscribers at the end of October accounted for 71.1% of the country’s population (user density). Also at the end of October there were 287.69 million subscribers of fixed telecommunication networks in China, translating to a user density of 21.5%. Mobile subscribers sent 73.61 billion text messages, averaging 2.48 per phone number a day in October (Digitimes.com 2011). Even though the 3G mobile phone users account for only about 11.46% of the total mobile service subscribers in the whole country, considering the huge market based, the 3G mobile phone market in which the iPhone service mainly engages is still very large (110.51 million) and promising in the future provided with the rapid growth in the number of the 3G users and growth potentialities which will be discussed in the next point. In term of market share of mobile phone games market which is considered as a sub-market associated based on the mobile phone market, the mobile phone game market in China is also in a rapid growth. Database according to industry data released showed that the number of Chinese mobile phone game users increased steadily, as the first quarter of 2011 reached 142 million, growth of 5.09% (Chinahourly.com 2011).

 

3.6    Growth Potential

figure 4
Figure 4 Global market penetration of smart phone

Source: Onlinemarketing-trends.com 2011 (sees appendix 1)

 


China’s Ministry of Industry and Information Technology has predicated that the penetration rate of 3G subscribers will reach 15% in the first quarter of 2012 and the amount of 3G line numbers will enter the stage of rapid growth, reaching 150 million. The trend will trigger huge demand for 3G smart phones, creating tremendous business opportunities for mobile phone and upstream suppliers (Wantchinatimes.com 2011). This suggests that the smart phone market in China will be anticipated to grow in a fast pace and another fact that make the market analysis believe that the smart phone market and 3G subscribers will have great growth potential is the very low market penetration of smart phone in China compared to other major developed countries. For example in the US market, as the below figure and chart suggest, smart phone penetration in US increased by a significant 1.58%. It is now 35.1% with 82.2 million users. The weekly new user rate was about 863k/wk during July or about 586k/wk average over the last three months (Asymco.com 2011) indicating a gradual growth. In comparison, the less than 10% in the emerging markets of China, India and Brazil is believed will become the areas with fastest growth in the demand for smart phones because the developing countries’ mobile phone market tend to follow the track of the developed economies and even the smart phone penetration rate in Chinese market only reaches the 35.1% like what the digit is in US market today in the coming years, it will indicate great room and potential for growth.

figure 5

Figure 5 The US smart phone penetration

Source: asymco.com 2011

figure 6
Figure 6 The US new smart phone users by weekly applications

Source: asymco.com 2011

 

3.7    Competitive Environment

In an economic perspective, the term competition refers to the competitive market structure. The competitiveness of market structure refers to the extent to which individual firms have the power to influence the market price. The less the power of the firm to influence the market price, the more competitive the market structure (Jain & Ohri 2010, p.210). The competitive environment in an industry is a critical indicator of the attractiveness of the market because if there are too many firms selling identical products that a company is offering, it would mean a very low profitability due to the company’s little power to influence the market price.

figure 7
Figure 7 The Porter’s (1980) Five Forces framework

Source: Adapted from Porter (1980)
Michael E. Porter (1980) described the competitive forces which shape an industry in his five forces model and industrial competition. The Porter (1980)’s five force model as depicted in the figure has been one of the most widely used models in analyzing the competitive environment by analyzing the five forces, through the application of the model one can assess the forces driving competition in an industry and evaluate the odds of a company successfully entering and competing in an industry. In other words, the model can help measure the industry’s attractiveness for entry or exit, analyze the competitive trends and plot the future strategy (Stahl & Grigsby 1997, p.145). In following we will use the Five Forces framework to analyze the competitive environment of the smart mobile phone industry in the Chinese market.

 

3.7.1            The threat of entry (High level)

The seriousness of the threat of entry depends on the barriers present and on the reaction from existing competitors that entrants can expect. If barriers to entry are high and newcomers can expect sharp retaliation from the entrenched competitors, obviously the newcomers will not pose a serious threat of entering. Michael E. Porter (1998, p.24) in his famous book, On competition, listed out six major sources of barriers to entry which include: economies of scale, product differentiation, capital requirement, cost disadvantages independent of size, access to distribution channel, government policy.

The threat of entry in the smart phone market in China is strong for several key factors: Firstly, about the economies of scale, the scale economies in production, R&D (research and development), marketing and finance is not large enough to be key barriers to entry in the smart phone market. Also, many existing feature phone and voice phone manufacturers who have similar industrial background with the needed functional scale economies would not meet too much difficulties in term of the economies of scale. Secondly, the product differentiation is large enough to provide a niche market for new player to operate in. Based on different hand phone feature, such as pricing, size of screen, with or without key board, operating system and so on, the product differentiation level is high in the smart phone industry; Thirdly, the policies made by the Chinese government support the entry into the IT industry which includes the smart phone market. For example, most recently China’s National Development and Reform Commission (NDRC) released a circular on July 23 announcing 10 major measures to encourage private enterprises to invest in and develop key strategic emerging industries. The industries include: energy saving, new generation information technology, biotechnology, high-end equipment manufacturing, new energy, new materials, and new energy vehicles (China-briefing.com 2011). The smart phone market is categorized in the new generation information technology; fourthly, access to the distribution channel is not difficult. Besides that many exiting companies have already their own distribution channel, new competitors could use new business mode such as E-commerce and direct sale to get them established in the market without too much reliance on the existing distribution channel.

With the growing of the smart phone market, there will be more competitors entering into the industry which is in accordance with the features of an industry that is in the growth stage of the industrial life cycle which relates to different stages an industry will go through, from the first product entry to its eventual decline like a human life. As the smart phone market is in a fast growing stage, the fair margins and differentiated products will attract more new entrants into the industry as the table
below shows.

table 2

Table 2 The industrial life cycle

Source: Norton & Hughes 2009, p.78

 

3.7.2            The bargaining power of suppliers (middle level)

The concentration of suppliers and the availability of substitute suppliers are significant factors in determining supplier power which enable the supplier to rise the supplied product price to earn more profits (Daft & Marcic 2011, p.166). According to Milind T. Phadtare (2011, p.85), the capacity of the suppliers to bargain a better price depends upon the following factors: (1) number of suppliers, which means that when supplier industry consists of a few firms and the market or the number of customer is large, the bargaining power of suppliers is high; (2) the level of differentiation of the products or the differentiation of inputs which refers to the how different suppliers provide different input characteristics for inputs that basically do the same job. This suggests that the more differentiated the product are, the stronger bargaining power of the suppliers will be; (3) the existence of switching cost which will increase the bargaining power of the suppliers because it is costly to change to another suppliers, it is obvious for any company to make any decisions to generate profits while at the same time control the cost; (4) how important the supplier’s product is an important input to the buyers’ business. This means that if the supplied goods are critical to the buyer company’s business, then the suppliers tend to have strong bargaining power of the suppliers.  

The bargaining power of the suppliers in the smart mobile phone industry in China is in a middle level based on the following analysis. First of all, regarding the number of the suppliers in the China mobile phone parts supplying market is large and also for one single mobile phone component, the supplier are a lot in different size and compared to the most smart phone manufacturers,  the suppliers are in a smaller size which reduced their bargaining power. Secondly, because many of the mobile phone parts are made according to the industrial standard which means that switching cost from one supplier to another could be very low irrespective of the contract limitations. And low switching cost together with the large number of suppliers enable the mobile phone manufacturers to have more bargaining power while suppressing that of the suppliers. Fourthly, the supplier market which supplies the mobile phone production varies by different components of the part, for example, the largest screen supplier of the Apple iPhone is Sam sung because of the good quality and reputation of the Sam sung screen products, such few supplier phenomenon could also be found in other key parts of smart phone such as the CPU (the smart phone chip) and the RAM (for storage use) which are controlled by a few large MNCs (multinational corporations).

 

3.7.3            The threat of substitutes (low level)

The threat of substitute products is the extent to which alternative products for services may supplant or diminish the need for existing products or services (Griffin 2011, p.81). The impacts of a substitute could be critical to providers of the existing product to be replaced. According to Melanie Allen (2001, p.107), a substitute product could limit the average industrial profit by reduce the demand for the established ones and therefore affect the level of the price that can be charged or even redefine or destroy the industry because the substitute products and services could probably be offering better value to the buyers which poses a considerable threat to an established industry. And in an some cases, the substitute products could make the established products and services obsolete.

Here we discuss one major possible substitute for the popular smart phone which also appeared as the substitute of the voice phone and feature phones: the tablet computer. A tablet computer, or simply tablet, is a complete mobile computer, larger than a mobile phone or personal digital assistant, integrated into a flat touch screen and primarily operated by touching the screen. It often uses an on screen virtual keyboard, a passive stylus pen, or a digital pen, rather than a physical keyboard (Gookin 2010). Besides the differences in the design of the product, the most obvious difference between these two products is that the tablet would not have the voice call functions. Hence, the key factor deciding whether a tablet could successfully substitute the smart phone is that the voice call and traditional text message functions would be out of use by the customers. But the removal of the voice call and traditional text message functions from a mobile phone actually would need the entire user or at least the majority of the users to have a 3G Internet access which allow them to communicate without these two traditional functions. But this seems to be impossible considering the only about 10% penetration of the smart phone users and also even when a customer has a smart phone, it does not necessarily means that he or she will be connect to the Internet all the time. Therefore the substitute effect of the tablet seems to be minimal.

 

 

3.7.4            The competitive rivalry (high level)

Competitive rivalry is the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position. According to Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson (2011, p.130), it is of significant importance for tho leading organizations to understand competitive rivalry because the competitive rivalry influences an individual firm’s ability to gain and sustain competitive advantages. The Chinese market is like the global mobile phone market, it is full of world leading mobile phones leaders such as HTC, Sony Errison, and Motorola together with the local mobile phone manufacturers such as ZTE, Dopod, Huawei, Konka and Oppo and so on. One factor that drives up the competition between the established players is the monopoly of telecommunication industry. The telecommunication service industry is under control of the major state owned corporations, and according to the most recent news, China Telecom and China Unicom, which account for two-thirds of Internet access in China, have used their position to hinder other players from entering the market, China Central Television (CCTV) said (Babescene.com 2011), and the the monopoly of the telecommunication industry will enable these service providers to have more bargaining power and at the same time drive up the competition among the established competitors to compete for the chance to cooperate with the huge telecommunication service providers (SPs).

 

3.7.5            The bargaining power of buyers (low to middle level)

The power of buyers is the extent to which buyers of the products or service in an industry have the ability to influence the suppliers (Griffin 2011, p.81). The buyer power is one of the two horizontal forces that influence the appropriation of the value created by an industry. According to Robert J. Chapman (2006), there are a number of factors which increase the power of buyers: (1) Buyers are large compared with the supplying industry; (2) In business-to-business markets where buyers produce the product in-house, extending their value chain backwards; (3) Buyers can switch suppliers with minimal cost impact. There are the extent to which products can be differentiated will have a direct impact on prices. While the market of iPhone is not in a business to business style, we will check the other two factors in determining the bargaining power of the suppliers. In term of the size of the buyers, as the iPhone products target mainly at the individual consumers in the market rather than the business users, and because individually they are in smaller size compared to with the supplying industry they would not be given very strong bargaining power to bring down the market price immediately. But the individual customers could gain their power by choosing not to buy the iPhone series and instead choose to buy the competing products; this is how the customers use the group purchasing behaviors to affect the decision making of the Apple Inc’s decisions over the iPhone products. Hence we range the bargaining power of the buyers in a low to middle level.

 

To conclude the results of the industrial competitive environment, the overall environment should be considered as with a medium competition level. And taking into the consideration of a rapid growing market and the strong demand as found out by our survey, it would be a good news for business and marketing expansion in the smart phone industry especially when there is an average sound profit margin which is a typical feature of a market which is in the growth stage of the industrial life cycle.

 

3.8    Positioning of Apple iPhone

 

Operating in a fast and rapidly growing mobile phone industry in China with a medium level of competition, and by targeting at the smart phone segment with a top brand awareness and brand equity, Apple’s iPhone series product offers not only affordable leading smart phone, innovative mobile phone usage experience but also a sense of superiority to the Chinese consumers. Therefore the iPhone has been positioning at providing the affordable and excellent smart phone usage to the majority of the smart phone users by offering unique customer experience which is different from the competitors.

 

4.        Tactical Marketing Plan

 

4.1    Organizational Strategies

ProductStrategyNotes
iPhone 3GsConsolidationTo harvest the lower end market
iPhone 4 – 8 GBPenetrationTo penetrate the market in lower price
iPhone 4s – 16 GBGrowthTo skim the market
iPhone 4s – 32 GBGrowthTo skim the market
iPhone 4s – 64 GBGrowthTo skim the market

Table 3 Business strategies for existing products

 

4.1.1            Consolidation strategy

 

The major consolidation strategy applied will be harvesting which means the company would gradually decrease in company support for the product and major target of selling the product is to expand the customer based and provide iPhone experience to as more potential customers as possible. And also with the rapid growth of the Chinese economy, the lower end customers would gain the financial power to buy the most recent iPhone model in a short period of time, it is necessary to build up a good brand image among them.

 

4.1.2            Growth Strategies

table 4
Table 4 Igor Ansoff’s growth matrix

Source: Jacobs 2010, p.37

 

The iPhone series have been proved to be a worldwide success; hence a market penetration strategy that focuses on the current expanding market and existing preoducts will be a major growth strategy to grow the business and market share in China’s smart mobile phone market.

 

4.1.3            Market Penetration

 

Market penetration occurs when a company enters/penetrates a market with current products. To better penetrate the market, two major strategies will be used: penetrating pricing and seeking to expand with the telecommunication service providers while at the same time increase the number of the outlets and exclusive dealers in China.

 

4.1.4            Product Development

 

Before the release of the next generation of the iPhone, the much anticipated iPhone 5, the market penetration will be adopted to find growth in the existing market waiting for the replacement of the iPhone 5 which will be used to continue the market expansion and at the same time the R&D of the next generation iPhone should put into the new strategic plan.

 

4.2    Marketing Mix

 

4.2.1            Product

 

4.2.1.1      Location based service

There are more and more smart phones being equipped with features that allow a device to know its physical location (Babin 2007, p.10) which bring about the demand for the location based services. The development of the location based value added service should not be constrained to the GPS (Global Positioning System) usage, but the company will focus on the development of the relative service which are majorly relative to health, indoor object search, entertainment, work, personal life and so on. There are two the largest challenges that Apple would meet in expanding the location value added service are: on one hand, the government has a history of controlling the usage of GPS on the mobile phone as well as other location based services, hence the development of such services should be proceeded with carefulness and communications to the government should be made closely; on the other hand, another challenge is the lack of partnership network in China, the provision of the entertainment, work, personal life services would need participation of a great number of relative service providers which are not well obtained by Apple at present.

 4.2.1.2      Packaging and accessories

figure 8
Figure 8 The iPhone packaging and the contents inside

Source: Sadun & Sande 2010
As the figure above illustrates, the content of a standard iPhone box will include a USB to Dock Connector Cable (bottom), a USB power adapter (center), and a stereo headset (top). In summary, iPhone packaging is considered as simple, smart and also environment friendly due to the low packaging material consumed in each box. In the coming years, it is good for the company to continue to adopt such a simple packaging design which has received widely compliments. And in the Chinese market, one problem met by the consumers is with the USB power adapter which is a western style adapter, it is very inconvenient for the Chinese consumers. Therefore it would be good for the company to put a Chinese style adapter into the iPhone box which should not be difficult but will contribute to the customer satisfaction by giving considerate and customized services.

 4.2.2            Price

A pricing strategy is an approach or a course of action designed to achieve pricing and marketing objectives. The major categories of pricing strategies are differential pricing, new-product pricing, penetration pricing, product line pricing, psychological pricing, professional pricing and promotional pricing (Pride & Ferrell 2011, p.301).

 

ProductStrategyNotes
iPhone 3GsConsolidationCaptive pricing, Psychological Pricing
iPhone 4 – 8 GBPenetrationCaptive pricing, Psychological Pricing
iPhone 4s – 16 GBGrowthPrice skimming, Psychological Pricing
iPhone 4s – 32 GBGrowthPrice skimming, Psychological Pricing
iPhone 4s – 64 GBGrowthPrice skimming, Psychological Pricing

Table 5 Pricing strategies in different product categories
The key terms of pricing strategies and choice reasons are list below:

 

4.2.2.1      Captive pricing

When products have complements, companies can charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor (Marketingteacher.com 2010). The captive pricing can be used in the iPhone 3Gs products to attract the lower end consumers to buy the phone and the profit could be regained when these customer buy applications in the Apple store.

 

4.2.2.2      Price skimming

Price skimming is the practice of introducing a new product on the market with a high price and then lowering the price over time (Gitman & McDaniel 2009, p.309). At the beginning the price could be set a higher level and then the company needs to monitor the changes of the demand and price in the market to find out the price which is acceptable in the market by the customers. Price skimming could help the iPhone 4S product lines to earn a premium profits. And also the high introductory price can create an image of quality and prestige.

 

4.2.2.3      Psychological Pricing

 

Lucky numbers, such as 999.99 and 888.88 are always welcome and containing special meanings in the Chinese market due to the long existing Chinese cultures in understanding some numbers.

 

4.2.3            Placement

 

Placing and distribution strategy is to obtain the most extensive distribution possible. To obtain the most extensive distribution, three major strategies could be adopted: the first strategy is to enhance to online shopping functions and use the third party logistic company to disseminate the products; the second strategy is to cooperate with the telecommunication service providers and use their network to sell the products; the third strategy is to increase the Apple stores numbers in the major cities and also the number of the exclusive dealers.

 

4.2.4            Promotions

 

Four major promotional activities will be engaged by Apple to increase the customer’s wishes and desire to buy the iPhone products: public relations, online marketing, advertising and business development. In term of business development, as mentioned earlier, the telecommunication industry is controlled by the several big state owned service providers, it is important for Apple to expand the partnership from the current China Unicom to other SPs. And mass media advertising should be the focus of the promotion strategy by issuing advertisements in the mainstream media channels such as the CCTV (China central television) and major mainstream newspapers.

 

5.        Conclusions

 

By targeting at a fast growing market size in the smart mobile phone segment, the Apple iPhone series in the coming few years will be focusing at penetrating the existing market by increasing the investments in the marketing efforts in China in term of enhanced promotional activities, product offering and distribution channel enlargement. But in term of the industry rivalry, one key threat belong to the rise of the android mobile phone systems, this will be elaborated in the next part.

 

6.        Critical discussion – the threat of Android under a network effect

figure 9

Figure 9 Computer operating system network based effects – market share and probability of adoption by a new customer

Source: McGuigan, Moyer & Harris 2011, p.385

When the value of a product or service to individual consumers depends on the number of the other consumers adopting it, it is known as a network effect or network externality. Network refers to the fact that the different instances of the product are logically connected (or possibly physically connected through a network). The term externality denotes an impact one consumer has on another without a compensating payment (Messerschmitt 2000, p.232). The network effect should not be strange to Apple Inc as the most classical case of the network effect belongs to the Microsoft windows systems while Microsoft expanded the customer based dramatically base through the cooperation with IBM which helped with the expansion of the network by selling the famous IBM personal computers, while and one of the most affected company was Apple Inc which had been leading the personal operating system industry at the beginning. Now the history seems to be happening again. As mentioned above, Google has authorized many other smart phone manufacturers to use its system though it also has its own smart phones while Apple refused to share its iOS with other mobile phone brands, these two distinct different strategies could again result in a network effect in which Apple would again be the loser. The failure could happen in this way: suppose the iPhone 6 becomes a failure that could not receive the same popularity that it is receiving like the iPhone 4 does in the past, the users would go to the competitors, and when the users number reduces significantly, the independent application developers would more likely to choose a larger mobile phone operating system to build their software. And this in return would influence the consumers’ decisions because the iOS has fewer applications than the competitors’, such as Android, then the network effect will become significant and the failure of iOS together with the iPhones will become possible. Hence the opening of the iOS to other mobile phones actually would be good for Apple’s iPhone because of the network effect.

 

 

 

7.        Recommendation – Cross sharing of the iPhone operating system (iOS)

One recommendation based on the above critical discussion is regarding the product design in term of the crossing sharing of the iPhone operating system (iOS) because of the influences created by the possible network effect. When the iPhone was released in 2007, developers clamored for the opportunity to develop applications for the revolutionary device. But at first, Apple did not welcome third party application developers to join the development. The company’s way of placating wannabe iPhone developers was to allow them to develop web-based applications which under iPhone’s built-in Safari web browser will require the users to connect to the Internet that hosts the application in order to run it. Also there were also many inherent limitations of a web-based application which attracted complaints and dissatisfaction from the independent software developers (Kochan 2011, p.2). Based on the most recent data which has been displayed at the beginning of the study, the Google’s Andriod mobile phone operating system has grown very fast and eats in the market share released by the decrease of market share of Nokia because of the company’ lagged behind pace in the smart phone market sector. The idea of cross sharing of the iOS is open the iOS to other band mobile phones for them to use the iOS platform and share the applications and contribute jointly to the building of the system. This means that Apple will be in war with Google’s android system to compete for the other brand mobile phone producers to adopt their operating system. If the Apple Inc could adopt this strategic change in a recent time, say within one year approximately, with the popularity of the iPhone, many current independent mobile phone manufacturers would change from using the Android system to the Apple iPhone operating system (iOS) because many users are really interested in trying the Apple store but can’t afford or have not made up their mind to purchase the iPhone series products, or they are waiting for the iPhone 5. Hence in term of the product strategy, the cross sharing of the iPhone operating system (iOS) is a key strategic changes which is strongly recommended to cope with the threat from the Google’s Android operating system.

Reference

Allen, M. 2001, Analysing the Organisational Environment, New York: Select Knowledge Limited. p.107

Androidrepublic.co.uk 2011. Android now running 52 percent of smart phones sold.  Last Update on November 15, 2011, Accessed on 25 Nov 2011 [online] Available: http://androidrepublic.co.uk/android-news/android-now-running-52-percent-of-smartphones-sold/2011/11/15/

Apple.com 2011. To all iPhone customers. Accessed on 25 Nov 2011 [online] Available: http://www.apple.com/hotnews/openiphoneletter/

Apple.com 2011. iPhone design. Accessed on 25 Nov 2011 [online] Available: http://www.apple.com/asia/iphone/

Asymco.com 2011. US smart phone penetration growth rate update. Last Update on 31 Aug 2011. Accessed on 26 Nov 2011 [online] Available: http://www.asymco.com/2011/08/31/us-smartphone-penetration-growth-rate-update/

Babescene.com 2011. Telecom monopoly in China. Accessed on 26 Nov 2011 [online] Available: http://babescene.com/2011/11/10/telecom-monopoly-in-china/

Babin, S. 2007, Developing software for Symbian OS: a beginner’s guide to creating Symbian OS. 2nd edition, West Sussex: John Wiley & Sons. ltd. p.10

Beaconequity.com 2011. China – the Largest Mobile Phone Market in the World. Last Update on Jan 12, 2011. Accessed on 26 Nov 2011 [online] Available: http://www.beaconequity.com/china-is-the-largest-mobile-phone-market-in-the-world-2011-01-12/

Blokdijk, G. 2008, iPhone 100 Need to Know Time Savers. New York: Lulu. p.60

Chapman, R. J. 2006. Simple tools and techniques of enterprise risk management. Danver, MA: John Wiley & Sons, Inc.

Chehimi, F., Stichbury, J. & Cartwright, S. 2008, Games on Symbian OS: A Handbook for Mobile Development. West Sussex: John Wiley & Sons Ltd. p.5

China-briefing.com 2011. China Encourages Private Enterprises to Invest in Strategic Emerging Industries. Posted on August 18, 2011. Accessed on 25 Nov 2011 [online] Available: http://www.china-briefing.com/news/2011/08/18/china-encourages-private-enterprises-to-invest-in-strategic-emerging-industries.html

Chinahourly.com 2011. 2011 Q1 904 million mobile phone games market Analysys International: industrial observation data. Last Update on 09 Oct 2011. Accessed on 26 Nov 2011 [online] Available: http://www.chinahourly.com/internet/2011/51048/

Daft, R. L. & Marcic, D. 2011, Understanding Management. Mason, OH: South-Western Cengage Learning. p.166

Digitimes.com 2011. China October mobile phone user base grows to nearly 964 million.  Last Update on 25 November 2011, Accessed on 26 Nov 2011 [online] Available: http://www.digitimes.com/pda/a20111125VL204.html

Gitman, L. J. & McDaniel, C. 2009, The Future of Business: The Essentials. Mason, OH: South-Western Cengage Learning, p.309

Gookin, D. 2010. Laptops For Dummies. River Street, Hoboken, NJ: Wiley Publishing Inc.

Griffin, R. W. 2011, Management. 10th edition, Mason, OH: South-Western Cengage Learning. p.81

Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. 2011, Strategic Management: Competitiveness & Globalization, Concepts. 9th edition, Mason: South – Western, Cengage Learning. p.130

 

Jacobs, D. 2010, Mapping strategic diversity: strategic thinking from a variety of perspectives. New York: Routledge. p.37
Jain, T. R. & Ohri, V. K. 2010, Principles of economies. New Delhi: VK Publications. p.210

Kochan, S. G. 2011, Programming in objective – C. 3rd edition, Boston, United States: Pearson Custom Publications. p.2

Kubasiak, R. R., Varsalone, J. & Morrissey, S. 2009, Mac OS X, IPod, and IPhone Forensic Analysis DVD Toolkit. Burlington, MA: Syngress Publishing, Inc. p.356

Marketingteacher.com 2010. Pricing Strategies. Accessed on 26 Nov 2011 [online] Available: http://marketingteacher.com/lesson-store/lesson-pricing.html

McGuigan, J. R., Moyer, R. C. & Harris, F. H. D. 2011, Managerial Economics. 12th edition, Mason, OH: South-Western Cengage Learning. p385

Nijssen, E. J. & Frambach, R. T. 2001, Creating customer value through strategic marketing planning: a management approach, Netherlands & Boston: Kluwer Academic Publishers, p.39

Norton, A. & Hughes, J. 2009, CIMA Official Learning System Enterprise Management. Oxford: CIMA Publishing. p.78

Onlinemarketing-trends.com 2011. Online Marketing Trends: The Latest Online Media Trends,Analysis,News,Research on Online Advertising,Mobile Trends,Social Media,Search Marketing and More. Last Update on Nov 2011. Accessed on 26 Nov 2011 [online] Available: http://www.onlinemarketing-trends.com/2011/11/smartphone-penetration-north-america-vs.html

Phadtare, M. T. 2011, Strategic Management Concepts and Cases. New Delhi: PHI Learning Private Limited. p.85

Plunkett, J. W. 2008. Plunkett’s Entertainment and Media Industry Almanac 2008. Houston, Texas: Plunkett Research, Ltd.

Porter, M. E. 1980. Competitve strategy, New York: The free press.

Pride, W. M. & Ferrell, O. C. 2011, Foundations of Marketing. Mason: South Western, Cengage Learning. p.301

Sadun, E. & Sande, S. 2010, Taking Your IPhone 4 to the Max. New York: Springer, p.6

Stahl, M. J. & Grigsby, D. W. 1997, Strategic management: total quality and global competition. Oxford: Blackwell Publishers Ltd. p.145

Tuaw.com 2007. Computer World crowns iPhone as 2nd most innovative product of 2007. Dec 28th 2007. Accessed on 26 Nov 2011 [online] Available:  http://www.tuaw.com/2007/12/28/computerworld-crowns-iphone-as-2nd-most-innovative-product-of-20/

Wantchinatimes.com 2011. 3G subscribers in China to see 50% growth next year. Last Update on 22 November 2011, Accessed on 26 Nov 2011 [online] Available: http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20111022000003&cid=1102

 

 

Appendix 1.0 The state and trends of mobile Internet

 

 

Source: Onlinemarketing-trends.com 2011

 

Appendix 2.0 Market research questionnaire for smart phone users

 

Demographic questions:

What is your gender?

  • Male  
  • Female

What is your age?

  • Under 18
  • 18 – 25
  • 26 – 30
  • 31 – 40
  • 41 – 50
  • 50 and above

What is your current occupation?

  • Student
  • Profession
  • Military
  • Doctor
  • Administration
  • Technicians and engineers
  • Business men or women
  • Marketing and sale jobs
  • Customer service
  • Retirement
  • Others

What is your monthly income?

  • No income at all
  • < = 2000
  • 2001 – 3000
  • 3001 – 5000
  • 5001 – 8000
  • 8000 and above

What is your current education level that you hold?

  • Secondary School
  • High School
  • Bachelor’s Degree
  • Master
  • PhD or professional

Product usage related questions

Are you using an iPhone?

  • Yes
  • No

If you are using iPhone, what is the iPhone model that you are currently using?

  • iPhone
  • iPhone 3G
  • iPhone 3Gs
  • iPhone 4G
  • iPhone 4Gs

How long have you been using a smart phone?

  • 1 – 5 months
  • 6 – 12 months
  • 13 – 18 months
  • 19 – 24 months
  • 2 years – three years
  • Three years and above

How large do you think the smart RAM is enough for your usage?

  • below 2G
  • 2G
  • 4G
  • 8G
  • 16G
  • 32G
  • 64G
  • 128G and above

How easy is your smart phone to operate?

  • Very easy
  • Manageable
  • Hard

Which of the following functions do you use the most? (select 1 only)

  • Calls
  • Text
  • Internet
  • Apps (such as playing games)
  • Others

Are you on contract or Pay as using an unlocked iPhone?

  • Unlocked iPhone
  • Contract

Are there many friends and colleagues around you that are using an iPhone?

  • Can’t find one easily
  • Only a few
  • Some
  • A lot

Value drivers

What is your favorite mobile phone brand (select one only)?

  • Apple
  • Nokia
  • Motorola
  • Sony Errison
  • HTC
  • Blackberry
  • ZTE
  • Dopod
  • Huawei
  • Konka
  • Oppo
  • Others

 

How satisfied are you with your smart phone?

  • Not satisfied
  • Not sure
  • Satisfied
  • Love it very much

 

What are the reasons and key considerations behind your buying the smart phone? (Multiple choices)

  • Good brand equity
  • Good after sale service
  • Fashionable design
  • Powerful functions
  • Friends and families’ influence
  • Others

 

Will you recommend your friends and families to buy a smart phone?

  • I strongly recommend iPhone
  • Yes
  • Not sure
  • No

 

There are more and more new smart phone products released soon, will you try them?

  • Yes
  • Not sure
  • No

 

Do you plan to buy an iPhone recently (within half a year)?

  • Yes
  • Not sure
  • No

 

About the price of smart phone

Do you agree the most smart phone pricing is expensive?

  • Strongly agree
  • Somewhat agree
  • Not sure
  • Somewhat disagree
  • Strongly disagree

 

Do you agree that the smart phone worth the prices?

  • Strongly agree
  • Somewhat agree
  • Not sure
  • Somewhat disagree
  • Strongly disagree

 

About the future of smart phone

How interested are you with coming smart phones such as iPhone 5?

  • Not interested
  • Not sure
  • Interested to some extent
  • Very interested

 

Are you disappointed about the absence of next generation iPhone in the most recent exhibition?

  • Yes
  • No
  • Don’t care
  • Not sure

 

What are the most expected and desired features in the next generation of smart phone in your opinion? (Multiple choices)

  • Expandable memory
  • 4G Support
  • Superior voice control[2]
  • Video chat
  • Micro-HDMI out
  • Removable battery facility
  • Higher Storage Capacity
  • Biometric security capability[3]
  • Slimmer, faster and sleeker
  • Cloud-based syncing
  • NFC-enabled technology[4]
  • Dual-core processor
  • Customizable home screen
  • Flash support
  • Enhanced camera
  • More carriers
  • Bigger screen
  • Better battery life
  • Fewer failed and dropped calls
  • Superior 3D graphics
  • Others, please name:

Thank you for your time!

 

 

 

Appendix 3.0 Gantt chart process plan in 2012 for iPhone in China

 

Million CNY

Events \ MonthJanFebMarAprMayJunJulAugSepOctNovDecBudget
Market survey and customer behavior research××××××5
Promotion activities×××××××××30
Advertising evens××××××××××80
Public relations activities××××××6
Marketing force training×××××××××10
Distribution channel reinforcement××××××××7
Telephone marketing×××××××××15
Reporting of the targeting achievement (Process monitoring)××××××4
Total budget157

Appendix 4.0 Gantt chart process plan in 2013 for iPhone in China

 

Million CNY

Events \ MonthJanFebMarAprMayJunJulAugSepOctNovDecBudget
Market survey and customer behavior research××××××10
Promotion activities×××××××××60
Advertising evens××××××××××160
Public relations activities××××××12
Marketing force training×××××××××20
Distribution channel reinforcement××××××××14
Telephone marketing×××××××××30
Reporting of the targeting achievement (Process monitoring)××××××8
Total budget314

Appendix 5.0 Gantt chart process plan in 2014 for iPhone in China

 

Million CNY

Events \ MonthJanFebMarAprMayJunJulAugSepOctNovDecBudget
Market survey and customer behavior research××××××20
Promotion activities×××××××××120
Advertising evens××××××××××320
Public relations activities××××××24
Marketing force training×××××××××40
Distribution channel reinforcement××××××××28
Telephone marketing×××××××××60
Reporting of the targeting achievement (Process monitoring)××××××16
Total budget628

Appendix 6.0 Gantt chart process plan in 2015 for iPhone in China

 

Million CNY

Events \ MonthJanFebMarAprMayJunJulAugSepOctNovDecBudget
Market survey and customer behavior research××××××32
Promotion activities×××××××××192
Advertising evens××××××××××512
Public relations activities××××××38.4
Marketing force training×××××××××64
Distribution channel reinforcement××××××××44.8
Telephone marketing×××××××××96
Reporting of the targeting achievement (Process monitoring)××××××25.6
Total budget1004.8

[1] Here China refers to mainland of China, excluding Taiwan, Hong Kong and Macau.
[2] Enhanced voice control feature will let customers compose e-mails or text messages by just using their voice
[3] Just need to swipe the finger without the need of entering a password to unlock the phone
[4] The feature allow a smart phone to act as a payment device (e-wallet) or even a car key  The end.

Leave a Reply

Your email address will not be published.