ADVANCED STRATEGIC MANAGEMENT – WEEKEND CLASS

ASSIGNMENT 2 - CASE STUDY

Introduction of iPhone 12 in China

Apple’s new smartphone launch was off to a bad start from the get-go: first the product’s release was delayed worldwide, then the brand’s iPhone 12 live-stream was made unavailable on Chinese video and social media platforms at the eleventh hour with no explanation. And after much anticipation – China is Apple’s second-largest market by revenue – when Apple finally debuted its latest model in China on October 14, the new phone ultimately received a mixed reception within the Chinese market. The #iPhone12 tag trended on Weibo, reaching over six billion views, but many netizens either criticised the phone over its high price tag – which does not include accessories – or negatively compared it to domestic players Huawei and Xiaomi, both of which also released competitive phone models recently. Chinese consumers also doubt the environmental angle that Apple has pushed.

A poll by Caijing Magazine inquiring whether respondents would buy the new iPhone 12 revealed a split in buyer intentions: 10,000 users voted no, and 9,269 said yes. Meanwhile, a little over 5,400 users were still on the fence. And those who plan to buy the new phone are also willing to put off a phone upgrade until the upcoming Double 11 – an unofficial holiday for singles and popular shopping season – which would see sales hit popular e-commerce sites Tmall and JD.com.

Apple’s iPhone used to be highly coveted in China simply because it is a foreign brand, which was in line with China’s imported consumerism trend. It has become a symbol of social status and economic success with every yearly upgrade. The American smartphone maker has acknowledged its position in its hurried reopening of all 42 stores in China during the country’s first sign of post-pandemic recovery. This year, the brand reaped a 225 per cent iPhone sales increase in China from the first to second quarter, due in part to its cheaper iPhone SE model and discounts to spur spending during the midyear shopping festivals and national holidays.

But the reception of Apple’s new product launches has been diminishing over the years, and the Chinese appetite for Apple hype has been waning. This has been especially true over the past two years when the American brand lacked 5G capabilities, unlike domestic brands. Rising US-China trade war tensions and the recent push to ban WeChat in the US have also repelled many Chinese users against Apple as a response, driving patriotism and support for domestic brands instead.

The diminished luxury status of the iPhone is a reflection of most foreign brands losing their grip on the evolving Chinese consumer who once worshipped but now boycotts Western brands, reflecting the country’s rising nationalism. And even when other foreign brands’ price points are comparably much lower than domestic brands, the rise of national brand quality has now been deemed more important in the minds of Chinese consumers.

Additionally, today Chinese-made smartphones are on equal footing with iPhones. National sentiment aside, domestic brands have caught up by improving their branding and user experiences, adding enhanced features that social-media-savvy Chinese consumers prefer, such as 5G and better cameras. These improvements have also boosted digital communications for fashion brands wanting to expand their AR and digital capabilities in an increasingly virtual world.

From a design standpoint, form and function now hold more sway over having several colourways to choose from; the once-trending gold colour of recent iPhones might have once evoked tuhao, or wealth, but is no longer appealing to Chinese millennials and Gen Zers.

Apple is also losing ground because Chinese brands have introduced new marketing techniques that are more suitable for Chinese consumers. Chinese consumers look positively on KOLs and ambassadors, which is a marketing tactic Apple has always avoided. The smartphone brand Oppo, on the other hand, has excelled in leveraging KOLs by having them stylise their phones. This, in turn, boosted user-generated content to support Oppo’s campaigns.

Huawei, meanwhile, has prioritised fashion collaborations; it expanded its product line in collaboration with other fashion brands like the South Korean sunglasses label Gentle Monster, thus boosting its popularity tremendously. Meanwhile, one of the only prominent fashion collaborations Apple has ever launched was its Hermès Apple Watch strap.

Apple’s iconic retail design and experience has been replicated in every city in China, yet Huawei has been catching up with its flagships and is outrivalling Apple’s stores. The brand also offers improved experiences to visiting customers ranging from lectures and art classes to lessons on how best to shop from its wide range of products.

This all goes to show that if Apple wishes to return to its former glory in the Chinese market, it can no longer depend on its past position as a status symbol – the brand will have to deliver what the Chinese consumer wants to keep up.

Tasks

1. Analyse Apple’s business environment with reference to the introduction of iPhone 12 in China using applicable tool(s) of environmental analysis.

2. Outline strategies being applied by Apple competitors – Huawei, Xiaomi and Oppo, in the Chinese mobile market.

3. As a business strategist for Apple (China) prescribe strategic solution to the challenges iPhone 12 is facing with its introduction on the Chinese market.