Modes of Entry into Foreign Markets: Apple in China

Modes of Entry into Foreign Markets: Apple in China

The increasing demand for iPad and iPhone phones shows that Apple Company has a potential to expand its market share across the world substantially. However, this will depend on the strategy that the company will embrace in accessing markets like China. Entering a new market is not an easy task, because several factors could prove disastrous. For instance, culture is of great importance in foreign marketing. A poor understanding of a foreign market culture can mean hefty losses fro the company. In this case, I would advice Apple to embrace a joint venture initiative in accessing the Chinese market. A joint venture is mutually beneficial to both Apple and the Chinese government in several ways. This paper will address the benefits that Apple will derive by pursuing this strategy. In doing so, it will draw the on the lessons that the company can learn from Google’s experience.

Apple should embrace joint ventures with the Chinese government in order to realize success and void the pitfalls faced by Google (Che & Facchini, 2009). Joint ventures are effective in scenarios where a multinational lacks the capacity to analyze and penetrate a market. Although Apple does not have capability issues, the big challenge is affective penetration of the market because of unique nature of the government as well as a difficult cultural environment.  By using this approach, Apple can derive many benefits by as opposed to Google’s approach. Using a different method will definitely be expensive for Apple since it will have to part with tariffs.  In addition, it will allow the company to gain a larger share of the market. Moreover, Apple will gain control as well as increase its focus on product development to meet the needs of the customers. The physical presence of Apple in China will inspire a sense of ownership to the customers (Lawrence, 2009). Accordingly, the customers will connect well with the company and the company will be better placed to understand the needs of end-users. Physical presence will also lead to competitive pricing, thus competitors will have a big hurdle in fighting for market share within the Chinese market. Therefore, Apple will advance in China with little worry.

If Apple uses joint venture, it will have an easy access to vital information and contacts (Che & Facchini, 2009). The company will find numerous business opportunities within the Chinese market. In addition, Apple will find it easy to tap into new technologies and methods that it does not currently possess. In this way, Apple will not have to invest heavily and its responsibilities as well as any risks will be shared among the partners (Ramsey & Limited, 2007).

Another benefit that Apple will have is that the company will widen the economic scope of Apple since efforts to built reputation within the market can take many years. Joint venture initiatives allow the use of existing assets, thus sharing any inherent economic risks. In addition, Apple will enjoy a greater ease in surmounting the difficulties experienced in accessing local resources as well as dealing foreign exchange challenges (Larson, 2011). Without pursuing a joint venture strategy with the Chinese government, Apple might find it hard to access the Chinese domestic market as well as labor. At the same time, Apple will also be able to control its operational activities without having to worry about the government controls (Larson, 2011).

Lessons to be learned from Google experience

In entering the Chinese market, Google experienced several glitches that other firms can learn from before talking any initiatives to enter the market. First, it is evident that any policy that undermines the Chinese government will attract the wrath of the communist regime in China. Chinese policies mostly go opposite to those pursued by the West. Hence, any attempt to paint the Chinese government in bad light will be opposed (Larson, 2011). Apple should adopt a joint venture as highlighted above in entering the Chinese market. In this manner, the two parties will enjoy a platform of mutual respect and any grievances that arise could be handled in private and in a friendly manner.

Justice and relationships

The legal avenues in China are not appropriate in mitigating trade disputes, and can lead to expulsion from the country (Haddick, 2010). As highlighted above, it is of paramount importance that the aggrieved party pursues dialogue, rather than resorting to the courts. Building relationships through a joint venture is the best approach in dealing with the Chinese government. Indeed, any issues can be ironed out amicably, and without unnecessary tension.

Censorship

It is generally accepted that management principles are universal. However, there are certain aspects of the corporate culture that cannot be applied universally. Therefore, western companies must understand that not every value appeals to other countries (Haddick, 2010). Political and cultural orientations differ from one nation to another and these can greatly affect a firms’ operation (Wagner, 2009). According to Wagner, “Cultural issues, defined as the body of norms, beliefs, and values shared by a group of people are a big challenge to businesses which work internationally” (p. 12). Therefore, Apple must understand what the Chinese culture appreciates or does not entertain so that any possible clash between the two cultures is avoided.

Honesty

Prejudice is prevalent in Chinese business environment. It is hard for a foreigner to understand the implications of a statement that the Chinese make. For instance, a ‘yes’ in Chinese could means something different than is obvious in the western world (Wagner, 201). A ‘yes’, if it is not followed by nonverbal features that imply genuine acceptance, could be detrimental if a company is not keen.

Technological Innovation

Technological advancement is a dream for any company, including Apple. However, these dreams might fail to excel in a county like China. Technology is not a recipe for success because the government usually has its own priorities. However, Apple should invest in technology for posterity. Continued presence in the market demands that Apple exceeds the expectations of the consumers. With improved technology, Apple will continue to make strides in the Chinese market and even beyond (Haddick, 2010).

Conclusion

In conclusion, Google’s entrance in the Chinese market was a disaster. The company invested millions of dollars, but achieved little success. Indeed, Apple should look at the case of Google and correct the mistakes as highlighted above.  Operating in China is not an easy task as the communist regime can frustrate a company, even if it has the best products in the world. Apple can over come where Google failed by embracing cooperation with the government. This will translate into great success because of the large Chinese market.

 

References

Che, J., & Facchini, G.. (2009). Cultural differences, insecure property rights and the mode of entry decision. Economic Theory, 38(3), 465-484.

Haddick, R. (2010).This Week at War: Google has more Guts than the U.S. Government. Retrieved from http://www.foreignpolicy.com/articles/2010/01/15/this_week_at_war_google_has_more_guts_than_the_us_government

Larson, C. (2011). Red Delicious and Rotten: How Apple Conquered and Learned to think like the Communist Party. Retrieved from http://www.foreignpolicy.com/articles/2011/08/01/red_delicious_and_rotten?page=full&wp_login_redirect=0

Lawrence, A. (2009). Figuring out how to deal with China. Retrieved from http://www.greenleaf-publishing.com/content/pdfs/ds_google.pdf

Ramsey, V. & Limited, T. T. (2007). Construction Handbook. London: Thomas Telford.

Wagner, (2009). Foreign Market Entry and Culture. New York: GRIN Verlag.

 

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