The report is designed to comprehensively document the efforts to market Apple’s iPhone. It will analyze the international marketing environments, Political, Legal, Economic, Technological, Socio-Cultural, Geographical, Infrastructure, and Competitive. The global market mix will also be examined with regards to Product, Pricing, Promotion, and Distribution Strategies.
This report covers comprehensive research necessary for successful product launch of the Apples’ iPhone. In order to simplify the process, the report identifies two major markets to which to focus, that of the United States and the European Union consisting of France, the UK and Germany. Briefly the idea of entering the Chinese market was reviewed, however there were negative factors affecting this decision.
Some of those negative issues were: the Chinese consumer preferences with cell phones; Apple has not launched iTunes in China and has no plans to; there are no Apple Stores in China; and the iPhone has a closed architecture limiting Chinese consumer expectation of using 3rd party software on their devices. There are many similarities between the US market and the EU market; however, there are also considerable differences. The differences as well as the marketing approach to these differences is discussed with a view to the economy, consumer preferences, legal ramifications and concerns, along with recommendations for the various elements of the marketing mix.
C. Organization of Report Organization of the Report was broken down into sections according the various environments that effect global marketing strategies. The first four sections, often referred to as PEST – Political (and Legal), Economic, Socio-Cultural and Technological, provide a framework to evaluate the opportunities or threats that Apple may face and can loosely be said to be outside their totally control. Normally a PEST analysis is an in depth study of these areas and should be done prior to entry and per country or region as a marketing/business strategy tool. They are covered here in the context of how they impact global marketing planning of Apple’s iPhone and not as they impact the company and strategic planning of other products, the business and product development cycle or research.
The Political environment, reviewed in the next section, discusses the concerns for the two target markets we will be focusing on, the US and the EU (France, Germany, UK). The Legal environment reviewed in section two focuses on IP and piracy issues along with current and future legal concerns facing Apple and the iPhone. In section three the Economic environment is covered regarding these target markets.
The Socio-Cultural environment, in section four, reviews the iPod sub-culture and its effect on the iPhone strategy along with social concerns. Section five presents the Technological environment and its impacts on the iPhone market. Section six discusses the issues of creative destruction and cannibalization and how these issues affect Apple with its new iPhone product as well as other manufacturers. The seventh section reviews the Geography, Climate and Natural Resources environment. Infrastructure environment in section six discusses the various infrastructure issues with the product. The eighth section, Global Marketing reviews: Product Strategies, Pricing Strategies, Promotion Strategies and Distribution Strategies. Finally, the report ends with a discussion of the conclusions and recommendations.
The political environment in the European Union differs greatly regarding mobile phones compared to the United States. The iPhone introduction in Europe is subject to many factors as Europe relies heavily on mobile phone coverage more than the United States. In other words, land line phone use has always been the primary telephone system, and mobile coverage is viewed as a secondary coverage. In Europe, many residents do not even have a land line phone system, and the mobile phone is the primary (and only) phone number. Thus, the political environment is more possessive of the cellular standards. Keep in mind there are different political systems in different countries that must agree on the same cellular standard. The cellular standard must be transparent to a country that is a monarchy as well as a socialist country.
The EU has made it clear that the political aim of the government’s role in cellular standards is to entertain more competition that share the same standards. The telecommunications industry for the most part became completely deregulated in 1998. The European Telecommunications Standards Institute (ETSI) has influence much of the standards in Europe. ETSI developed the third generation (3G) phone standards. ETSI’s members consist of manufacturers, operators and regulators based in Europe that developed a single standard for next generation cell phones. This has contributed to the success of the GSM standard in Europe allowing roaming all over the continent.
One issue that Apple must confront is the apparent “de facto” protectionism of Nokia and Ericsson. These two companies are extremely important to their economy, as Nokia has been mentioned as one of Europe’s most important companies. The future is pretty safe for those two telecommunications giants, and Apple will be at a disadvantage if it must wrestle with them. There is an argument that with cellular standard conforming to European standards, US companies such as Motorola and Apple may be at a disadvantage in keeping up with Europe’s cellular manufacturers.
One can argue that this can be supported by the 2.5G release of the iPhone Europe as opposed to the 3G standard. Apple can argue the European standards are exclusionary and discriminatory as Apple has invested large amounts of money into R&D standards. At present, mobile devices based on current US technology are now locked out of the EU market since the W-CDMA standard has been converted into a requirement.
The development of the iPhone under two different standards is a burden for Apple. The EU arguably also protects its two telecommunication giants, Nokia and Ericsson. Apple is not alone in this fight, as Korean manufacturers such as LG and Samsung face these burdens. Apple also shares this dilemma with Motorola on US soil. However, these competitors are established companies that have introduced product since the early adopter phase of mobile technology. Apple is a late entry in mobile phones. The development of the iPhone must balance the development of the iPhone to conform to US standards, EU standards, and still maintain its uniqueness that the Apple brand has always maintained.
The success of multinational corporations marketing plans depend on many factors, one of which plays out in the legal environment of the countries for which they do business. This section discusses the impacts and considerations Apple will need to address in regard to the legal ramifications it faces in its international strategy and marketing plan. It is important to note that legal concerns in one country can quickly lead to similar legal concerns in another country. Apple has already seen an example of this with a pending law suit in the United States that sparked another law suit in the EU states on the same issue.
Interestingly, Apple’s iPhone experienced an immediate legal battle before it even got off the ground. That legal battle was over a trademark infringement in the US with Cisco’s over the “iPhone” name, a trademark name which Cisco owned. The iPhone trademark was originally registered with the company Infogear in 1996. Cisco acquired Infogear in early part of 2006 and introduced a new family of iPhones during 2006.
Apple was not unaware of this conflict and even acknowledged the Cisco’s trademark issue by approaching Cisco for the rights to use the trademark name. It should be noted that in light of these issues, Apple quickly made sure to register the trademark name in the UK, Singapore, Australia, Canada, New Zealand, Hong Kong and the European Union. In January of 2007, Cisco filed suit after Apple’s highly publicized unveiling earlier that month; but by February Apple and Cisco reached an undisclosed agreement and the trademark infringement lawsuit was dropped2.
However, this case shows the importance of trademark issues and the need to solidify product trademarks, copyrights and patents ahead of time to protect a corporation’s IP rights or keep a corporation from being sued from using someone else’s. Also important to consider that this case would have played out completely different had it been brought before the legal jurisdiction of a foreign country (see section “Legal Differences – between countries and how they impact the international marketing plan of Apple’s iPhone” for further details). Copyright laws vary by country which means that Apple will have to tackle each independently and use an adaptive approach to its global marketing plans.
Intellectual Property (IP) Issues
Apple will have a hard time monopolizing its interface and preventing others from copying it. An example of this issue is already at work in the US before the iPhone has been schedule for market release (June 2007). Merely based upon the marketing material provided in its January preview, competitors are integrating the slick iPhone interface icons into their products (see example in Appendix A)3. They may indeed have a case in which Apple cannot prevent its interface features from being commandeered by other products4. Regardless of its outcome in the US however, this issue of IP rights on the iPhone interface has broader ramifications in the global market.
For example, the Chinese manufacturer Meizu has already made a copycat (see Appendix B for a side-by-side comparison) iPhone product with similar features and interface5. Some would argue, and they would be correct, that it is not features alone that will be selling the iPhone; but that of the image that Apple products project with its consumers. However, given the consumer preferences, marketing conditions, and the readily availability of a copycat product, China would not be considered a primary location for a launch of the iPhone product after the US6.
At present, it is inconclusive to say whether the Meizu’s M8 mimic of iPhone’s interface by its competition is a large global threat in other than the Asian market. Apple could very well play into the unstoppable progression of the market and tout that ‘imitation is the highest form of flattery but it is still imitation’ at copycat product manufacturers. In the end, Apple might very well be the winner in that it will only add to their superior product image.
In addressing IP rights, it must additionally be mentioned that there is an advocacy group for global intellectual property rights, the international TRIPs (Trade-Related Aspects of Intellectual Property Rights) agreement, which outlines standards for protection of IP. A patent, trademark or other intellectual property once registered is expected to meet certain guidelines that of that country. For example, in the US an individual can hold a patent without manufacture for the duration of the patent. In other countries, in exchange for this monopoly it is expect that the holder must produce a product, usually within five years of the patent award, or the patent will revert to public domain.
It is these types of IP issues that Apple’s iPhone must be aware of to avoid costly legal battles should Apple market the iPhone in countries where they do not hold the trademark or patent. Since M8 is scheduled for release in early 2008, it would be prudent that Apple be aware of any legal conflicts it may have marketing the iPhone in China. Although Apple may decide to target the Chinese market in the future, it could face hefty legal battles and costs if they are not careful in establishing, if possible, their products patent before hand.