(A CASE STUDY ON WHY APPLE A HIT IN CHINA)

China contributed to mind-boggling global sales that Apple reported in its

fiscal 2015 first quarter ended Dec. 27, 2014.
Taken from cnbc, ad week, business insider, Reuters

Prepared by: -
1. Aishwarya Das (181)
2. Jha Sandeepkumar (189)
3. Parul Aggarwal (194)
4. Jain Rishabh (198)
 ABSTRACT
The case is about the US-based technology giant Apple Inc.’s (Apple) journey in
China. Apple officially opened its first store in China in 2008, though prior to that
Apple products were sold at premium prices in the Chinese grey market. Apple
expanded rapidly in the Chinese market through flagship stores and distribution
points in China. China was a fast-growing market for Apple due to a growing
middle class who were eager to own Apple’s high-end products and expansion of
Long Term Evolution (LTE) network in the country. In the first fiscal quarter
ended December 2014, Apple was propelled to number one position in the
Chinese smartphone market for the first time based on units shipped. In the
second quarter ended March 28, 2015, Apple’s revenue in Greater China
surpassed Europe making it the company’s second biggest market after the US.
However, Apple faced some challenges in the country including labour and
environmental related issues, strong local competition, strict government
regulations and the price sensitive Chinese consumers. Chinese local competitors
were cutting into Apple’s market share in China by offering phones with high-
end features at budgeted prices. Moreover, owing to the economic crisis in China,
Apple stock price was plummeting. Investors were worried about Apple’s growth
in China. Analysts questioned whether the Chinese spending classes, pinched by
the economic instability, would be able to afford Apple products. The devaluation
of the Yuan was also a major concern. The task before Apple’s CEO Tim Cook
was cut out as the company had a lot of exposure to China, and the company had
pinned a lot of its growth to that market. Now again apple is facing tough time in
China. With only seven million iPhones sold in China during the second quarter
of 2018, Apple's market shares in the country dropped by 12.5 percent year on
year to 6.7 percent, according to a report by the International Data Corporation
(IDC). Aug 7, 2018

ABOUT APPLE
Apple Inc. was a technology company founded in 1976 in California, US. Apple
was mainly into offering online services, computer hardware and software
products and consumer electronics. Its product list included iPhone (smartphone),
 iPad (tablet computer), Mac (desktop and personal computers), iPod (portable
media player), Apple watch (smart watch), Apple TV (digital media player) and
it also dealt with operating system software and application software. The
company provided digital application services by the iTunes Store, App Store,
iBook’s Store, I Cloud and Mac App Store. How one of the co-founders of Apple,
Steve Jobs, was shunted out of the company in 1985 and how he returned back in
the late 1990s to change the fortunes of the company, is part of business folklore.
Job’s return was marked by Apple’s foray into electronic and digital products that
took it beyond computers.

While iOS may not be the leading OS in China, Apple is China's leading device
manufacturer and accounts for the largest share of monthly active devices in the
region, according to New zoo.

Android accounts for 74% of active devices in the Chinese smartphone market,
leaving the iOS ecosystem with just a 26% share. Yet, Apple iPhones and iPads
represent 25.6% of monthly active mobile devices in China, well above that of its
closest rivals OPPO, Huawei, Vivo, and Xiaomi at 17.9%, 14.1%, 13.9%, and
12.3%, respectively (see chart, below).

The prominence of Apple iPhones and iPads in China highlights the

fragmentation among the Android ecosystem.

The fragmentation of the device and software ecosystem in China could play to
Apple's advantage. China is an important growth market for Apple, but one that
Apple has been struggling to capitalize on over the past few years; although China
accounts for the most active iPhones in use globally, it's only Apple's third-largest
market in terms of revenue. Here's how Apple could grow that revenue in China
in 2018:

 Leverage the reach of the iOS App Store to win over developers. Apple's App
Store is China's leading mobile app store by downloads, recording more than 500
million app downloads in March 2017. That's more than twice the amount of
downloads its closest rival Tencent recorded in the same period, according to
China Internet Watch. If the App Store has more reach than competing app stores
in China, that could compel more developers to create more content for iOS and
help grow overall revenue.
 Increase its share of active devices by driving switchers from Chinese
manufacturers and prompting upgrades from pre-existing IOS users in China. The
release of the iPhone X has driven faster switching rates from competing vendors
like Huawei and OPPO, according to Morgan Stanley. Apple's newest flagship
has also spurred upgrades; about half of China's iPhone X buyers upgraded from
the iPhone 7 or 7 Plus, which are only a year old.
In addition to spurring iPhone ownership and iOS development in China, Apple's
also focused on staying within China's regulatory constraints. Apple's made a
number of compromises to accommodate China's strict regulatory body.

Last month, Apple removed its "tipping tax" in China, which applied Apple's
standard 30% revenue cut for in-app purchases to voluntary tipping from users,
just two months after it introduced the controversial App Store policy. And a few
months ago, Apple announced the removal of several virtual private network
(VPN) services from its App Store in China, after the Chinese government had
been pressuring the firm to ban all VPNs — which allow users to bypass China's
heavily regulated internet — that aren't approved by state regulators. Continued
cooperation with the Chinese government could help Apple win over additional
consumers and developers in China.

Apple, for many years, has embraced the idea ‘think different.’ And yet it’s
become clear that in China you can’t think too different.’

—Tim Calkins, Kellogg School of Management

While many Apple users in China have no complaints, some are troubled by the
dual standards for China and the rest of the world. One customer who bought an
iPhone at a Beijing Apple Store recently said the company’s image had suffered
by agreeing to store data in China.

For Apple, China is critical not just as a market, but as a manufacturing centre.
Most of its iPhones and other products are assembled in China through local
partners.

In recent years, it has also faced increasingly tough competition from Chinese
smartphone makers. Apple went from China’s third-best selling smartphone
brand in 2015, with a 13% share, to fifth in 2017, with a 9% share, according to
research firm Canalys.

In addition, in 2016 Apple was forced to shut down its iBook’s and iTunes
Movies services. Apple has taken steps in the past year to shore up its position,
including adding China-friendly smartphone features and naming a China-born
executive to a newly created role to oversee operations in the country.

MAKE A PREMIUM PRODUCT

As China's middle class consumers who are ready to buy luxury goods and status
symbols.
"Apple has a premium product in a country that is doing well economically," Case
in point: When the company tried to market the lower-priced 5C, it was a bust. If
the masses want premium.

"People love Apple here, so much that they are willing to pay double on the black
market," said Shaun Rein, managing director of Shanghai-based China Market
Research Group. "There are month-long waiting times here for some of these
products."

UNDERSTAND THE CHINESE CONSUMER

Apple did a lot of good for itself when it finally signed on with China Mobile and
tapped into its network of an estimated 760 million subscribers. It was a chance
to bring the brand to the Chinese mainstream. The company worked long and
hard to meet the carriers' technologies, but it paid off.

And Apple did something else that was uniquely appealing to the Chinese
consumer—it introduced the iPhone 6 Plus in a country where bigger is better.

"Most people don't have TVs in their homes here, and the young Chinese use their
mobile phones for everything—to watch movies, talk to friends and play video
games," said Rein. "So having that big screen was critically important."

It took Apple years and a lot of strategizing to finally integrate a new product
while maintaining the essence of the brand. But maintaining the brand's image
had to be a priority, Rein said.

The Chinese also love big, beautiful flagship stores, where they can touch the
products and try them out. That's something Apple needs to catch up on, Rein
said. Apple CEO Tim Cook has announced a goal of 40 stores in China by the
middle of 2016, about twice the current number.

LEARN FROM OTHERS’ MISTAKES

While Apple was doubling its sales in China last year, Samsung has been losing
market share at an alarming rate. The reason is Samsung did the very opposite
from what Apple did—it offered too many models at a rapid pace, said Jeongwen
Chiang, marketing professor at China's CEIBS business school.
"It diluted its prestige image, and some also say the quality and customer service
are deteriorating as a result. At any rate, Samsung is in trouble now in China," he
wrote to CNBC in an email.

It's easier to persuade consumers to pay a premium for a much smaller selection
of products than bombarding them with too many options too often, Jeongwen
said.

"It's the Jobs mentality that we know what is better for you," said Elimeliah.
"Apple does it best with minimal options, while Samsung is so disparate" in its
product choices.

STAY GLOBALLY MAINSTREAM

Not only is the Apple brand a status symbol, but it's also a way for Chinese
consumers to connect with the broader, global economy—something they want.

"They have a global product that looks the same everywhere, and they brought it
to China without any compromise," said Frank Gillett, analyst at Forrester
Research.

In some ways, the Chinese government's push toward building a more consumer-
driven economy will help American and other Western companies gain traction
with Chinese consumers.

"Apple is building brand equity in China, and in a way that's aligning with
Chinese consumers," said Elimeliah. "They are able to differentiate themselves
from the competition."

The iPhone 6 Plus is testament to a product that was able to remain true to Apple's
vision, while also catering to a new type of consumer eager to join the global
consumer marketplace.
When a Chinese publishing group recently released its consumer survey of the
luxury market in China, the top ranking wasn't held by a brand like Chanel, Louis
Vuitton or Hermes. Instead, Apple was named this year's preferred brand for
gifting among China's richest men and women. According to a Chinese Luxury
Consumer Survey conducted by Hurun Research Institute, Apple emerged as the
top luxury brand for gifting among the rich Chinese men and women. It became
a must have, aspirational brand for all wealthy and middle-class consumers. In
China, people went to extremes to lay their hands on Apple products. For
instance, a high school student from rural China reportedly sold his kidney to buy
an iPad 2...

The designation is not just a testament to Apple's awe-inspiring growth, which

was illustrated quite profoundly by this week's not-so-outlandish investor claims
that the company is worth close to $1.3 trillion. It's also a sign of the shift from
luxury as status symbol to luxury as cultural code. Where status symbols show
off economic success, codes are reflections of one's cultural capital.

"Apple has all the markings of a luxury brand: a tightly controlled narrative,
considered design and metered supply, especially around launches and in certain
emerging markets," says Colin Nagy, executive director of media at New York
agency The Barbarian Group.

Here's a look at how Apple's standing in the Hurun Research Institute's survey of
Chinese luxury consumers changed from 2014 to 2015:
Like their Japanese or Western counterparts, China's wealthy elite are looking for
smart technology that helps improve their overall lives, according to a study
by Wearables.com and The Centre for Generational Kinetics.

Apple smartphones provide a narrative that we can identify with and aspire to, in
an intrinsic, club-like, unobtrusive way. They are meant to express our own
personal quality of life. Codes are reflections of the things we do, adventures we
enjoy and places we see.

The company made special efforts to attract the Chinese customers. Tastes of the
local people were considered while designing Apple products in China. For
instance, Apple introduced a new gold colour option for iPhone5S, as in China,
this colour symbolized wealth and fortune. The company also launched gold
versions of the iPad Air 2 and mini 3, Apple Watch and new MacBook...

OS X El Capitan
First, a keyboard shortcut for Chinese to English. This may seem surprising to
many Westerners, but there are an estimated 400 million people learning English
in China. To make the weight of that number obvious, there are more people
learning English in China than there are people speaking it in the US and UK
combined. While not all students master it, all students are required to learn
English, starting usually in primary school and continuing through college.

Suffice it to say, there are a lot of people switching from Chinese to English on
keyboards in China. Every single computer I’ve used in China has had, not just
an English keyboard installed, but a 3rd party one that allows for faster and better
switching. Presumably, Apple’s new system makes the process better (though I
don’t have the beta & can’t comment on that directly).

Second, improved pinyin predictions. This is HUGE. Absolutely HUGE. The

Chinese language is, as you’re likely aware, a character-based language, with
over ten thousand of distinct characters. While Macs enabled input by writing the
character stroke-by-stroke, most people use a system called pinyin that writes
words out phonetically with roman characters. So, for example, if I wanted to
enter the characters for “China,” for example, I would type “zhongguo,” which is
the pronunciation of the word, and then choose the appropriate characters (中国)

The problem is that, in pinyin, there are 70 different characters spelled “zhong”
and over 70 spelled “guo.”1 China-pinyin keyboard Now, not all of those can be
combined and so the system is smart enough to only give seven suggestions of
that combination (plus emoji!), and will sort them by frequency of use. If the first
one is what you want, you merely hit the spacebar and it will insert it. If it isn’t,
then you use the arrow keys or number keys to choose whatever character(s) you
wanted.

Ideally, the algorithm always determines what character you want and lists it first
so you can enter it with a spacebar, barely slowing you down. In reality, Apple’s
algorithm is terrible. It’s not so bad for the very basic Chinese I type, but it
frustrates my wife to no end. In fact, most Chinese people I know have installed
3rd party system keyboards with better character algorithms. This was one reason
why enabling 3rd-party keyboard on iOS was so important for Apple to localize
in China. I’m hoping this is much-improved, as it was desperately needed.

Third, a new Chinese system font. This is just as big a deal as getting a new
system font for El Capitan. I’m not especially attuned to font quality with English
fonts, let alone Chinese fonts, but the maker of Pleco, the hands-down best
Chinese dictionary app, is. This was his response:

Fourth, multiple-character Chinese input. For those who do want to write Chinese
characters stroke-by-stroke on the keyboard, you previously had to do this one
character at a time (SLOW!). The new system should improve that tremendously.

IOS 9

China Transit here, there were less China-exclusive items mentioned, but China
was still all over the iOS update:

First, transit. Getting transit directions in China was far more important for Apple
than getting US transit directions. Consider just a few numbers:

The US has ten cities with a population over 1 million. China has 171.

The US has 34 cities with a population over 500,000. China has 450.

In 2014, China had 62M vehicles of all kinds registered, in a country of 1.3
billion. This is expected to reach 200M by 2020.

Most people in China get transportation by public transit. Having a mapping

service in China without transit directions would be like having one in the US
without driving directions. Apple hit this hard

Apple developed transit directions for just 10 cities in the non-China world, but
over 300 cities in China.
The Non-china Cities for which Apple has transit directions have a combined
population of about 38M. Just the 9 listed cities in China have a combined
population of over 130M.

Second, improved battery life & reduced OS upgrade size. These upgrades do not
exclusively benefit China, but they were important upgrades in China. In the last
years, as I’ve talked with non-Apple users in China, the number one reason they
bought another brand was because of screen size, which Apple addressed with
iPhone 6/6+. The number two reason was poor battery life. Apple getting an extra
hour of battery life was important; getting 3 more hours in battery savings mode
is huge for the hundreds of millions of people who commute on public
transportation without a power source.

Reducing the size of the OS upgrade, likewise, is important for China and the
developing world where the phone is often the only computer. When I didn’t have
enough free space to upgrade, I could just upgrade via iTunes on my Mac. For
many iPhone users in China, for whom iPhone is their only computer, that was
never an option. There are a lot of people still on iOS 7 in China as a result.

Third, consider the App Effect video that Apple ran. The first app to open was a
Chinese one. Appeffect4The second (if not the first) real-life scene in the movie
was in China. The first identifiable landmark in it was Shanghai. Shanghai and
Hong Kong both appeared in the video twice, 3 and the video featured Chinese
people and scenes all throughout. AppEffect1This is important, not just from an
American perspective of including in your advertisement the people to whom you
want to sell. This is especially important in China where people have a deep
nationalistic sense. Appearing first in an Apple video is not just including Chinese
people; it is seen as recognizing China’s importance in the world stage.

WatchOS

Time lapse WWDC First, Apple offered up just five time lapsed cities in its new
time-lapse watch face. Apple could have time lapsed anything they chose, but
they didn’t choose New York, El Capitan, or Tokyo. The US only got one face,
and most of the world was ignored. But two of the five faces shown were of
Chinese cities, Hong Kong and Shanghai. Second, in the demonstration, Lynch
showed off three apps: VW, WeChat, and Vine, but spent far more time in
WeChat than in any other app, demonstrating two new SDK features in it. Wechat
WWDC With thousands of apps in the App Store, Apple could have showcased
any app they wanted, and they did WeChat. This is not a surprise, seeing as it is
the largest stand-alone messaging client in the world, with 549 million users
spending an average of 40 minutes a day in the app. It is the primary way Chinese
people communicate. In fact, it is so important that, if a phone (or watch) didn’t
run it, Chinese people would choose a different phone.

Conclusion

The importance of China to Apple has been noted by many, and it was once again
on full display in this latest event. Apple has been increasingly China-focused
and China-savvy, not least in their brilliant pricing of Apple Watch. Many foreign
companies have struggled to enter China, but Apple has succeeded, in no small
part due to Tim Cook’s understanding of and involvement in China. As a result,
Apple has taken every opportunity it can to localize for the Chinese market. This
WWDC wasn’t the first event, and it won’t be the last.

Apple launches new clean energy fund in China

The pipa, a lute that occupies a musical place somewhat similar to the guitar; and
Chinese percussion, including gongs and drums. Creating support for these
instruments involved more than just adding a few sound files and graphics; it
required engineering new ways of interacting with the virtual instruments to
mimic local playing styles and implementing additional scales used in Asian
music. In addition, Apple added Chinese-language support to the user interface
and a set of 300 loops to support these instruments. This is what localization looks
like when it finds a home in the core of an enterprise – it takes transcreation and
then goes a step beyond.
Apple announced a new first-of-its-kind investment fund in China to connect
suppliers with renewable energy sources. As part of Apple’s commitment to
address climate change and increase the use of renewable energy within its supply
chain, 10 initial suppliers and Apple will jointly invest nearly $300 million over
the next four years into the China Clean Energy Fund. The fund will invest in and
develop clean energy projects totalling more than 1 gigawatt of renewable energy
in China, the equivalent of powering nearly 1 million homes.