Apple's iPhone in China: CanApple Cash in on the World's BiggestMobileMarket?

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Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Telecommunications

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Case Code : COM0241
Case Length : 08 Pages
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Mobile Handset Market in China Contd...

On the other hand, network and telecommunications equipment suppliers like Huawei competed with foreign firms by making huge investments on R&D. However, the dominant position of local brands did not last long as foreign players revised their strategies. With focus on low-end handsets, they catered to consumers of all segments. Foreign brands also reduced the prices of mobile handsets and promoted colour-screen phones with many other features. Expressing his views on the slowdown of local brands, Koichiro Kimura (Kimura), researcher at Institute of Developing Economies (Japan), stated that the competition in the mobile industry moved from sales promotion to product development capability, resulting in the setback of local firms that focused on selling and distribution

Kimura further added, "First there has been a change in the competition strategy of the foreign affiliated firms, which have widened their product range to cater for the low end of the market and which have strengthened their sales forces in provincial cities and rural areas. Second, new local firms have continuously entered the market. The entry of local firms who have been following the same strategy as those already present has greatly intensified competition among all of the Chinese firms.

Third, there has been a change in consumers' preferences. Replacement demand has increased, and moreover consumers have begun to prefer advanced, multifunctional handsets to ones with a narrow range of functions. Fourth has been a diversification in sales channels. Large electronics stores and telecommunications carriers also have begun to sell handsets through their retail outlets. These changes have reduced the advantage hitherto enjoyed by local firms in respect of sales networks and marketing."¹⁰ Because of their differentiating strategies, by 2007, foreign brands - Nokia, Motorola and Samsung - held 61.4%¹¹ shares in Chinese mobile phone market..

In 2008, the Chinese telecommunications industry once again underwent restructuring to enhance the competition. The significant changes of the restructuring include creation of three full-service state-owned telecom operators - China Mobile, China Unicom and China Telecom - and issue of licenses for 3rd generation (3G)mobile technology. Following the issue of 3Glicenses, all the telecom operators began investing in 3G networks with each player emphasising on different standards. For instance, China Mobile focused on development of Time Division Synchronous Code Division Multiple Access (TD-SCDMA) network; China Unicom towards Wideband Code Division Multiple Access (W-CDMA) network and China Telecom on CDMA2000 networks.

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10]Kimura Koichiro, "Growth of the Firm and Economic Backwardness: A Case Study and Analysis of China's Mobile Handset Industry", http://www.ide.go.jp/English/Publish/Download/Dp/pdf/130.pdf, December 2007
11]"Nokia, Motorola and Samsung Take 61% of China's Mobile Phone Market", http://www.cellular-news.com/story/25962.php,September 11th 2007