Apple in India – Case

1. Account for the Indian market of mobile phones. Your answer may have no more than
2.400 keystrokes.

India is the fastest growing major economy in the world this year. With 1.3 billion consumers, it has
a rapidly growing middle-class and along with this a rapidly growing technologically aware
population. India is currently the second largest smartphone market in the world. The number of
users in India are growing faster than any other country. Currently it is only 24% of the population
which owns a smartphone

The current structure of the Indian smartphone market is a differentiated oligopoly, with the top 5
companies controlling about 77% of the market. Samsung and Xiaomi are currently the biggest
competitors on the market with Samsung having a market share of 23% and market leader Xiaomi
having a market share of 27%, while apple only has a 1% market share in the Indian market.

The market is characterized by being highly price sensitive. The consumers are focusing on the
value they get for their money and being highly willing to compromise the brand for a lower price.
Currently the premium phone market makes up less than 5% of the Indian smartphone market. At
the moment 75% of smartphones sold in India costs less than $250. The current top selling brands
in the market such as Xiaomi are gaining market share by selling phones for less than $200.

Due to this price competition and the high duties on product manufactured outside India, the market
is quite hard to penetrate.

Most Indians live on the countryside and it is in local unaffiliated shops here, that most Indians
purchase their phones. There are also certain features which are highly valued among the Indian
consumers, including longer battery life and navigation software.
 2. Identify and analyse the 3 most important external factors in the Indian phone market –
from Apple’s perspective. (Exclude competition).

- High price sensitivity and low value of brand – low market share of premium phones.
- Import duties on imported manufactured goods and domestic tax reforms.
- Inability to open up stores and need for new distribution channels.

The way in which the Indian market differs a lot from the strategies of Apple are the buying
behaviour of the Indian population. Normally Apple is focusing on a value-added pricing strategy.
But this strategy can be hard for Apple to pursue in the market as the consumers are much more
price sensitive than the major markets which Apple operates in. The GDP per capita in India is at
around half of the cost of the iPhone X, this means that it can be hard for consumers to find the
disposable income for the phone. On top of this the brand value of Apple is not as big a feature in a
market where the emotional buying motives are much less central. Instead the consumers are
focusing on how the features can bring them value, having a general price perception of more for
less, with surrounding companies chasing after a market share leadership strategy by pushing costs.
Apple might find it difficult to chase after these demands for prices for multiple reasons. First the
CEO Tim Cook says that he is not willing to lower prices as apple “would rather be the best in the
market than the cheapest” on top of this the external economic policies in India makes it hard to
chase lower costs.

This Indian market has in recent years been hit by multiple economic changes as a result of political
decisions domestically. One of the major issues for Apple are the high import duty imposed on
goods imported from outside manufacturing of 20%. This is a part of the political movements by
Modi to increase domestic production and attract high-tech jobs for the Indian job market. Applying
duties to the already high prices of Apple products makes the price sensitive market quite hard for
Apple to properly penetrate is it increases their cost substantially. Multiple of Apples competitors
have already adapted to this by moving their production to India trying to avoid this tax. On top of
this import duty, India has also been hit by the most extensive tax reform since its independence.
This includes taxes regarding sales of goods and services and has not only meant that the disposable
income of Indians has most likely lowered but also that this tax will hit Apples prices.
The domestic regulation in India has also caused an issue for the branding strategy of Apple. The
brand has often been affiliated with its strategy of opening huge stores all around the world which
highlights the brand image and luxury status of its phones. But domestic regulation and buying
behaviour of consumers have made this strategy difficult to pursue. The regulation in India states
that “India requires single-brand retailers that are more than 51% foreign-owned to buy at least
30% of their manufacturing materials from Indian vendors.”. This means that there is a need for
investment into Indian manufacturing if Apple wishes to open more stores. Although it might not be
the right strategy for the Indian market. Not only are Indians little responsive to brands compared to
other factors, there is also a tendency among consumers to purchase their phones from local
unaffiliated stores. For Apple to be reaching the end consumers it is important for them to meet the
consumers where they are. Apple therefore are hugely dependent on distribution channels, if they
wish to further spark their sales. This question of distribution channels has also led to disputes
within Apple where the last two India General Managers have had to different strategies for
distribution networks. One pursuing smaller, growing cities and the other pursuing the richer Indian
segment by targeting upscale shopping malls. Apple are relying on its partnerships in order to reach
the right distribution channels.

3. Analyse Apple’s competitive situation in the Indian market.

The Indian market is especially dominated by fierce price competition. From what we are told in the
article we can see that the major competitors in the market offer products half the price of Apple’s
products. Most recently Samsung launched a phone into the sub $100 price category.

The competition on the market is generic competition of heterogenous products as not all the
products have the same features, but they fulfil the same needs. This can among other things be
seen from the fact that only 24% of Indians that actually use smartphones. The market is therefore
very driven by which features are important for the consumer and whether the companies can
provide these features. Apple have shown to be lacking behind in important areas such as payment
and navigations where Google and Samsung already are established.
In this market Apple functions as a very small market challenger, only having about 1% of the
market share but attempting to segment a broader scope of the market. Competitively Apple is
currently attempting to challenge the companies of its own size in the market such as OnePlus
which are close in market share on the premium smartphone market, standing little chance if going
full frontal at Xiaomi.

We can see from the fact that the moves on the market by competitors are quite close, that the
market have moderately aggressive reactions from competitors. This happens for example as there
are short periods of time between manufactures moving into the country and the adaption of the
prices on the market. This can among other things be due to the somewhat close competition on the
market and therefore need for companies to adapt their features and prices. If we look at the threat
of substitution it is moderate in the industry, there is a substantial closeness of competitors although
features differ, which also explains the fierce price competition

The fact that we see a tendency of companies moving production to India as a result the duties has
resulted in the Indian suppliers being more attractive for Apple. Overall the threat of suppliers is
quite low, with many suppliers domestically having low bargaining power. The same counts for
other manufacturers where we can see a tendency of working with internal production companies in
order to create the best manufacturing conditions at the lowest price.

4. Short questions and short answers – your answer may have no more than 2.400
keystrokes altogether. Assess the following statements:

- Apple is operating with a cost leadership strategy in India.

Even though the Indian market is quite price competitive, Apple is not pursuing a cost leaderships
strategy. As highlighted by Tim Cook, their focus is the same in India, to focus on premium quality
rather than being the cheapest. In the Indian market Apple are pursuing a differentiation strategy.
There are doing this by focusing on the products features instead of pursuing the lowest price. The
issues for Apple if they pursued a more price-oriented strategy could be that they end up getting
stuck in the middle of the Indian market- The market which Apple is trying to appeal to is a
majority of a market if they are able to pay the prices since the differentiation also means that they
products are more expensive to develop and produce compared to cost leadership companies.
 - Mobile phones are typically bought with snob motives in India.

The Indian smartphone market is very much characterized by rational buying motives. The
consumers are more focused on price, durability, battery life and features rather than focusing on
the brand and the social or esteem needs.

- It would make sense to make use of sociodemographic variables when you segment
the Indian smartphone market.

This is partially true, I would say that factors such as income, class, educational level and job are
quite important for the segmentation and usability of each segment. This would give Apple an
opportunity to target higher income consumers as well as adapting to the fact that India is a lot more
class divided than what they are used to. On top of this the features used are very much dependent
on job as it dictates how the consumer uses the phone as well as behavioural variables such as how
long he uses it and how close he is to an outlet – which is quite relevant when talking about the
battery life. On top of this I would say that psychographic variables are also quite important. From
this we can tell the values and lifestyle of the segment which is important as Apple relies more on a
believes-and-value-based buying motive rather than based on price and rational buying motives. I
would say that geographic variables are less important in this case, mostly when it comes to which
outlet the population on the countryside uses.

5. Discuss one of Apple’s challenges that relates to their marketing mix in India.

One of the major challenges which relates to the marketing mix of Apple are the issues with
adapting a business model made for western buying motives into a very different market. What this
means for Apple is that the competition is used to competing on similar markets such as the Chinese
or other Asian markets. They general have very little damage to their brand image when lowering
prices. This is not the same case for Apple. They are dependent on their high-price-high-value
brand image which is a part of their business model and pricing strategy in the west where they are
among market leaders.

This has also made a need for them to continue their products which are selling very poorly in the
west. These are products such as the SE and the 6s. This also means that the high demand for
updates software requires an update on the hardware of these products along with a need for
production to move to India in order to keep prices down.

We can also see that Apple has a need for adapting their distribution channels to this new market.
Since the buying behaviour graphically is placed more on the countryside and in small local shops,
there is a far greater need for Apple to invest into partnerships and networks to achieve new
distribution channels and production facilities.

We can see from their competitor’s strategy following extensive market research that when Indians
buy from emotional motives it is based in people, it might therefore be a strategy for Apple to do
like their competitors and invest in endorsement for celebrities in either Bollywood or cricket. This
is also due to the fact that their placement of huge stores is difficult to pursue as a part of their brand
due to local regulations in India.

Overall there is a great need for Apple to adjust their marketing mix if they wish to continue having
brand image in the west while still keeping prices at its current level in India. This counts both for
their promotional mix, distribution and the need for features on products to be customized for the
Indian market.