Executive summary Industrial mobile phone market and smart

Executive summary Industrial mobile phone market and smart phone industry - Chinese mobile market - How did i. Phone change the cell phone and smart phone market ? - Iphone’s market share evolution Company overview and main business activities - The Iphone proposition - Iphone timeline - The Iphone in numbers Iphone’s brand competitors analysis and SWOT analysis (Samsung) - Iphone’s SWOT analysis - Samsung analysis - Compared ads Iphone’s marketing strategies worldwide and in China Iphone’s branding strategies Challenges and solutions

Chinese Mobile Market Biggest market for smart phone Every 4 out of 5 smartphones are ran on Android (2013) Asia Pacific led the growth in both smartphones and “dumb” phones – 77. 3% and 11. 9% increase respectively i. Phone is currently carried by China Unicom and China Telecom, but not by China Mobile

Chinese Mobile Market in graphs Sale of smartphone in Q 3, 2012

Chinese Mobile Market in graphs Percentage of smart phones sold in various price ranges

Chinese Mobile Market in graphs Percentage of smart phones sold per manufacturer

Chinese Mobile Market in graphs Market share of each brand

Chinese consumers’ attitude towards smartphones More than just a phone Entertainment + Communication Life style i. Phone = Most desirable phone for consumers “guo fen” An increasing number of first time smart phone users i. Phone = status symbols

How did the Iphone changed the mobile and smartphone industry ? Before the Iphone: Nokia and Motorola were enjoying record sales of cell phones, based more on fashion and brands than technological innovation Smartphone market: dominated by Blackberry and Windows Mobile: « a staid, corporate-led smartphone paradigm » focused on enterprise and not consumer needs Steve Jobs, 2007: « The phone was not just a communication tool but a way of life. » i. OS, in comparision with other OS (Symbian, Black Berry OS, Windows Mobile) permited multitasking and graphics, not only basic communications functions. Rival manufacturers had to spend more on software and app develpment in order to catch up with the Iphone

Iphone’s market shares NB: Even if market shares in China has decreased from 9. 1 to 4. 8% from over the past year, we would like to highlight that the charts doesn’ take into account China’s highly heterogenous populations across various regions (e. g. consumers in rural areas). This segment of the population is often first time smart phone user and usually cannot afford an i. Phone (thus not the target of Iphone. ). Hence, the charts might be biased.

The Iphone Product of Apple Inc. Devlepment began in 2004: 1000 employees working on the confidential « Project Purple » Apple created the device with a secretive collaboration with AT&T Mobility (Wireless telecommunication provider) Development cost of $150 million over thirty months Macworld 2007 convention: Jobs unveiled the Iphone to the public Medias called it the « Jesus phone » Dark blue: Iphone was available since its original release Light blue: Iphone was available since the release of the 3 G Green: coming soon

Iphone’s proposition in 2007 The main marketing message was « something different, something cool, user friendly and simply Apple »

Iphone’s Timeline Iphone 1 Iphone 3 G Iphone 3 S Iphone 4 S Iphone 5 S Iphone 5 C June 2007 June 2008 June 2010 Ocbr 2011 Sptr 2012 Sptr 2013 « This changes everything… again" « The most amazing Iphone yet » « Loving it is « Forward easy, that’s thinking » why so many people do » « For the colorful » $299 32 GB $399 64 GB $199 32 GB « This is only the begining » June 2009 «The first « The fastest, phone to beat most powerful the Iphone » Iphone yet » $499 16 GB $299 32 GB $399 64 GB Sptr 2013

Iphone in numbers 58: percentage of Apple’s revenue that comes from the Iphone $22. 69 billion: revenue generated by the Iphone and Iphone-related products for Apple durnig the first quarter of 2012 alone $17. 41 billion: Microsoft’s total revenue for the same period (Iphone alone is more profitable than Microsoft) $150 billion: approximate total revenue generated by the Iphone for Apple since 2007 (more than Apple’s revenue for the 12 years before that combined) $106 billion: Apple’s market cap in June 2007, when the first Iphone debuted $524 billion: Apple’s market cap today

Iphone’s SWOT analysis STRENGTHS - Customer loyalty - An entire closed Iphone ecosystem - Apple’s brand reputation (product and i. OS) - Most fashionable phone - Strong advertising and marketing teams - Constant announcement of new operating systems to keep the interest - Financial performances of Apple OPPORTUNITIES - i. TV launch - Growth of tablet and smartphone market - Emerging markets - Increasing demand of cloud based services - Growth of the application market - More innovation in design and performances are always possible WEAKNESSES -Expensive price for all devices proposed - Comes without expandable memory - Fixed battery - Expensive accessories - Incompatibily with different operating systems - Decreasing market shares and long term gross margin decline THREATS -Need to keep up with rapid technological changes - Price pressure from Samsung - Growth of Android operating system - Strong dollar - Threat from cheaper substitutes due to the lack of choice (even if the targeted market is not the same): i. Phone needs to keep its « hype »

Brand competitors analysis: Korean conglomerate founded in 1938 Mainly products consumers’ electronics but also telecommunication equipements, chemicals, medical equipement, semiconductors etc. Revenue in 2013: $268. 8 billion Net income in 2013: $30. 1 billion 2012: Samsung became the world’s largest smartphone maker Samsung Galaxy S: third Android smartphone series product by Samsung Seen has the main competitor to Iphone Realeased for sale in June 2010 As of 2013, over 25 million Galaxy S have been sold Iphone 5 S vs Samsung Galaxy S 4 Apple’s ‘frenemie’ Despite the recent litigation activities, Apple remains a major customer for Samsung which is a key supplier in Apple’s supply chain

Brand competitors analysis: Samsung : 32 % of the global smartphone market (stable) Apple: 14% (decreased compared to the same 2012 quarter) However, both companies sold more phones than last year: Samsung: 80 million, Apple: 30 million

Iphone marketing strategy in China Product Mobile phone + Digital camera + Ipod + Small computer The i. Phone is delivered in a special package, making you feel you acquire not just a phone but that you are becoming part of a community Positioning Primary customer targeted: middle-upper income professional that need one portable device to coordinate their busy schedules and communicate with their entourage. Secondary consumer targeted: high school, college and graduate students who want multifunction device. All these consumers, beside the practical aspect of the phone, want a high social status, fashionable phone that differentiate themselves from their peers. Price High price positioning which is part of their exclusivity and luxury marketing strategy Iphone 5 S: 5’ 288 RMB for 16 GB Iphone 5 C: 4’ 488 RMB for 16 GB Iphone 4 S: 3’ 288 RMB for 8 GB Promotion A convenient phone, allowing you to have a multi tasking device, but also a fashionable phone Apple store, Apple online store, service provider outlet

i. Phone’s brand-building & positioning Arrogance “Yup, if you don’t have an i. Phone, well, you don’t have an i. Phone” Image of “coolness” Never go on sale No star in advertisement A (substantively) identical brand image + service across the globe Apple Store “Geniuses”

Ads: Samsung vs Apple 若人生是一段旅程, 何不携GALAXY S 4的精彩同行 （If life is a journey, why not bring a S 4 along the way) Your finger is the password.

Apple Store – part of the Apple experience Apple Store Nanjing East Road, SH Apple Store 5 th Avenue, NYC Genius Bar

A specific communication strategy notably based on digital marketing NB: Apple never pays for public ads

Iphone’s 5 C marketing strategies in China For years, i. Phone, iconic smart phone in China, was way too expensive for average monthly salaries Announcement of a « cheaper » i. Phone + Apple ‘s deal with China Mobil = blast for chinese consumers and opportunity to reach the chinese market ? BUT, Iphone 5 C = 4'488 RMB disapointement of the consumers, bad publicity for Apple Did they therefore jeopardize their chances to reach the world’s fastest expanding smart phone market ? NO. Apple doesn’t just try to sell as many phone as they can to anybody. Apple strategy : many Chinese don’t have a Smartphone but will soon be able to buy one. Therefore, Apple should make sure that these people buy i. Phones rather than something else. Apple could never compete on price in China Offering low price Iphone would damage the brand identity. Luxury goods in China are popular part because they are expensive. Owing an i. Phone confers a special status. Offering a low-cost phone in China would have been a terrible idea for Apple—it would have destroyed their brand as a luxury product. If a wider share of China's population could suddenly afford to buy i. Phones, the product would instantly lose its cache as the choice of China's elite—a group whose numbers and influence continue to grow. So why did Apple bother creating a cheaper i. Phone and marketing it to China at all? Brand loyalty. Customers who don’t buy i. Phone 5 would surely buy i. Phone 6 Apple is willing to wait for the Chinese market to come to them, rather than the other way around. So by introducing an i. Phone 5 c at relatively high prices, Apple is banking that the type of customer, rather than the number of them, is what truly matters.

Coping with competition in China Chinese market became a priority for Apple For the first time, i. Phone 5 S and 5 C are launched at the same time as they are in the US market Better customer service Quick response to criticism emitted by CCTV User-friendly Apple Care Expected partnership with China Mobile

Challenges & solutions Challenges faced by the product itself Price - ￥￥￥ One of the most expensive smart phones currently on the market the most expensive on Dangdang Lack of innovations on recent models Possible solution – better front camera?

Challenges & solutions PR-Related Challenges Foxconn suicides scandals a major supplier of i. Phones CCTV 3. 15 report Allegations of different warranty policies for Chinese consumers Fake charger incident Flight attendant electrocuted

Thanks for listening ! Questions, comments ?