IPHONE.

1MKP001N coursework: The iPhone in South Korea

Table of Contents

Introduction …...............................................................................................................2

1. Competitive forces ....................................................................................................3

2. Implications for the success of the iPhone in South Korea ................................................4

3. Aspects to be considered before entering the market ...................................................5

4. Marketing Mix ...........................................................................................................6

5. Monitoring ..............................................................................................................10

Conclusion .................................................................................................................12

Bibliography ...............................................................................................................13

Appendix A .................................................................................................................16

Appendix B …………..…………………………………………….………………………………..22

Appendix C ……………..…………………………………………………………………………..24

Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010


Introduction

The enthusiasm for the IPhone launch in 2007 seemed universal. However, Apple decided to

not enter the South Korean market until 2008 as the market requires special attention since

many other failed before due to a lack of research and the wrong strategy. The current paper

discusses the implications of the South Korean market conditions and its environmental

factors in regard to the special market requirements in context to the entry mode and market-

ing mix for a successful launch of the IPhone.

The competitive forces in the market environment force Apple to clearly position its product

and be aware of its micro-environment. South Korea is a ‘Newly Industrialised Economy’

(Lasserre, 2007) and ‘Emerging Market’ (Kotabe and Helsen, 2008) wherefore a profound re-

search in regard on the macro-environment is substantial to identify opportunities and

threats.

This paper considers these environmental opportunities and threats and puts them in relation

to Apple’s global product strategy in regard to the Korean customers needs and wants by ad-

apting its marketing mix accordingly. The marketing mix may be extended by Booms and Bit-

ner’s (1981) additional three Ps: participants, physical evidence and process but their frame-

work will not be part of this report.

Moreover, determinants of the possible monitoring process of the success are outlined in re-

lation to the 4 P’s.



1. Competitive Forces

Before entering the South Korean market, Apple needs to critically evaluate the competitive

forces that have made its business environment more complex in recent years, by taking into

account Porter’s five forces (exhibit 1).1

The threat of new entrants seems to be the biggest threat for iPhone because as South

Koreans are most likely to use mobile phones with the latest technology and features, they

are more likely to switch phones. Thus, the customer switching costs and their brand loyalty

are very low, which makes it easier for new entrants to compete. Moreover, the Korean Com-

munications Commission has now opened this industry (Ramstad et al, 2009), which makes

it easier for foreign companies to enter the market. Consequently, this will allow increasing

competition. Another threat for the iPhone is the fact that South Koreans are very quick in

embracing new technology. Having done so, local companies will be able to compete with

iPhone.

The threat of substitutes is linked with the threat of new entrants because their ability to take

up the latest technology might lead to cheaper substitutes, and the costs of switching to sub-

stitutes seem to be low in South Korea.

Considering the population of South Korea of 48 million people compared to phone suppliers,

the bargaining power of buyers seems to be low. However, this is compensated by low costs

to switch suppliers. Moreover, Apple might consider selling iPhone through a local phone

carrier, which is discussed later on. As the South Korean phone network is driven by an oli -

gopoly of three telecom organizations, the concentration of iPhone’s direct buyers is quite

high. Thus, the bargaining power of buyers is also a threat Apple has to analyse.

As the iPhone’s production settings are mainly based in China, the bargaining power of sup-

pliers is a less important threat for the company when launching the iPhone in South Korea.

The intensity of rivalry is also a great threat for iPhone. Protection of local mobile phone

manufacturers helped home grown companies like Samsung and LG to sell together about

90% of mobile phones in the country (Ramstad et al, 2009). With the opening up of the in-

dustry, competition will increase and prices become more competitive. However, the low

switching costs of consumers as well as a differentiated product might be an advantage for

iPhone when entering the market.

1 Porter’s five forces are entry of competitors, threat of substitutes, bargaining power of buyers, bar-gaining power of suppliers, and rivalry among existing players. It is common practice to add a sixth factor: stakeholders such as government, trade associations, shareholders etc. who also create com-petition among different entities (Sekhar, 2010). A threat arising from the government are high taxes and restrictions for foreign companies, entering the market.



2. Implications for the success of the iPhone in South Korea

The South Korean market conditions and its environment require special advertence regard-

ing the success of launching iPhone.

In order to make a statement about implications for iPhone’s success, the PEST analysis is

applied for analysing its micro-environment in South Korea.

South Korea is characterized by a constitutional democracy consisting of executive, legislat-

ive and judicial branches. The country opened up many trade barriers in the last decades,

and entered many international organisations such as WTO, OECD, UN etc. (CIA, 2008).

These are positive political factors for the launch of iPhone. However, the political situation of

its neighbouring country North Korea is of high concern, particularly regarding its nuclear

tests which are a threat to the country, and therefore might have negative implications.

South Korea belongs to the twenty largest world economies.2 The economical growth was

encouraged by close ties between government and business sectors through direct credit

and import restrictions (CIA, 2008).3 The South Korean economy is highly concentrated on

electronic and technological development. The mobile phone market is almost saturated. The

phone network is driven by a clear oligopoly of three telecom organisations (SK Telecom,

KTF, LG Telecom) which provides clear restrictions for market entries.4

The South Korean culture is characterised by its high homogeneity.5 Koreans strive for being

up-to-date, particularly regarding latest fashion and technology, and moreover inherit big

brand awareness as status symbols. Also South Korea’s demographical factors6 are positive

for the launch of iPhone, as the product suits a majority of the population, but in return it also

portrays a threat, as the product must tick all boxes of the high expectations towards mobile

phones.

The technological environment in South Korea is of high standard and is substantial for the

mobile phone industry, which accounts for one of the highest mobile phone penetration rates

in the world.7 Moreover, the CIA (2008) points out the outstanding telecommunication net-

works and technologies, achieving the high standard required and appreciated by the South

2 The country ranks 13th in its GDP purchasing power parity.3 Although the rapid growth rate mitigated after the Asian Crisis (1997-1998), South Korea still embod-ies an emerging market with high potential for growth (Kotabe et al, 2008).4 The South Korean mobile phone market is highly influenced and characterized by its oligopoly of three major mobile phone network providers and the strong competition of mobile phone producers. The implications of this highly competitive market are a threat to Apple but can be conquered with the right marketing strategy.5 Native Koreans account for most of the inhabitants.6 81% of the overall population of 48.6 million people are living in urban areas and 72% are aged between 15 and 64 years (CIA, 2008).7 According to the CIA (2008), there are 45.6 million mobile phones registered in the country, which portrays the high penetration rate.



Korean population and its focus on innovation. Therefore, it is essential to offer a product

which can keep up with the high standard of the market in order to be successful.

To sum up, the South Korean market holds a big potential for the introduction of iPhone by

means of the well-being of the economic and financial environment, its stable legal and polit-

ical situation and a big group of potential customers.8 Nevertheless, there are potential risks

and obstacles of entering the market, which have to be taken into consideration, such as the

almost saturated mobile phone market, an unstable situation in North Korea and the highly

competitive environment, creating pressure in terms of market entry, pricing and technolo-

gical development.

3. Aspects to be considered before entering the market

Besides the market entry strategy and marketing mix, iPhone should also consider the ex-

ternal factors influencing the choice of entry mode and time of entering the South Korean

market.

In respect to the external factors, socio-cultural distance between home and host country,

country risk/demand uncertainty, market size and growth, direct and indirect trade barriers

and intensity of competition are vital factors to be taken into account by iPhone (Hollensen,

2007). Even if South Korea is home to leading hardware manufacturers, a thriving computer-

game industry and savvy technology consumers, Koreans are still happy to carry a mobile

phone and an MP3 player as separate devices instead of using a “one-product-does-all”

device, and one way for iPhone to outrun this gap regarding culture might be to strongly rely

on Koreans avidity for the “latest and greatest” trends in mobile phone technology and their

generally stable and large incomes. The Self-Reference Criterion can be a powerful negative

force in global business (Keegan et al, 2008), and iPhone should not neglect it, otherwise

their market entry could be a failure.

South Korea, a market dominated by two major players, Samsung and LG, carries a demand

uncertainty that should likewise be considered before launching the product. Regarding the

market size and growth, the perspectives seem encouraging with a GDP per capita of

$28,100, GDP – real growth rate 2.3% and an unemployment rate of only 3% for South

Korea in 2008. (CIA, 2009). The Korean government raised trade barriers on smart phones

to protect domestic manufacturers and this probably represents iPhone’s major constraint for

entering the market. The strategy used by the government made Samsung and LG the

second and third largest makers of cellphones by units in the world and it helped the country

to develop one of the broadest markets for cellphones. So, iPhone should consider facing a 8 South Koreans have a high mobile phone turnover and are highly aware of fashion, brands, and tech-nology which all is combined in the iPhone.



hard strife, and tailor the necessary strategies in order to win an important market share in

the market.

One of the main questions for iPhone is when to enter the South Korean market. The answer

may be related and dependent on Korea’s Communication Commission that decided only in

late 2008 to open its home market in April 2009 to advanced cellular phones using foreign

platforms. A rule set in 2005 forced advanced cell-phone devices to use Korea's Wireless In-

ternet Platform for Interoperability. The move effectively stopped foreign wireless handsets,

such as those from Apple entering their market .

Another issue that iPhone has to take into consideration is the legal environment that may

seriously delay their entry to the South Korean market. There are a set of regulatory hurdles

regarding the location-based services that iPhone provides for its customers (e.g. maps, dir-

ection finders) and that are subject to government permission.

As a last aspect that iPhone might consider before entering the South Korean market is the

iPhone clones that, in case these are not stopped from popping in the market, will consider-

ably depress its expected sales, as it happened in China.

4. Marketing Mix

After performing a SWOT analysis (exhibit 2), Apple will be able to draw a marketing plan.

The marketing mix elements will be discussed below to decide on how to approach the

iPhone’s entry into the South Korean market.

The first step Apple need to pay attention to is its global product strategy. Should the com-

pany aim for a standardized9 or adapted product strategy?

Adaptation of the iPhone means considering differences in customers’ needs in South Korea.

Consequently, “appropriate changes are made to match local market conditions” (Kotabe et

al, 2008, p.353). Apple also has to consider legal conditions in South Korea such as taxation.

Adapting the iPhone to local needs will increase customer satisfaction but also leads to

higher production costs.

The market is not only characterized by protection of local phone manufacturers (Ramstad et

al, 2009), but Apple must also carefully consider technological issues next to South Koreas’

9 Standardization means selling exactly the same product to an ethnic consumer that Apple already sells to the general market consumer, assuming similar customers’ needs across countries in order to achieve large economies of scale and minimize costs, and hence being able to offer the iPhone at a lower price in South Korea (Kotabe et al, 2008). Standardization also builds up a global brand and product image. However, ignoring local differences might dissatisfy its customers.



unique environmental and marketplace conditions.10 Consequently, Apple should consider

the product adaptation approach when entering South Korea, taking into account local condi-

tions and wants in order to boost customer satisfaction, and hence increase sales. They

might modify the iPhone by augmenting the core product and product attributes with local-

ized support features that cater local market conditions.11

Having made the decision about its global product strategy, Apple has to decide on whether

to enter South Korea with an advanced version of the iPhone before launching it anywhere

else. As a consequence of stiff local competition, time might be a key success factor for

Apple when entering South Korea. The market is almost saturated, and Apple will enter it late

because it has already embraced 3G technology. As South Korean consumers are quite

tech-savvy and most likely to use mobile phones with latest technology and new features,

they are very likely to switch mobile phones. Consequently, entering the market with an ad-

vanced version of iPhone might create a competitive advantage for Apple and probably res-

ults in gaining market share more quickly.

In terms of global pricing, Apple follows a price standardization policy.12

Keegan et al (2008) differ between three alternative global pricing policies: extension/ethno-

centric, adaptation/polycentric and geocentric.13

Exhibit 3 discusses the ethnocentric/standardization and polycentric/differentiation pricing

policies, which Apple might consider when launching iPhone in South Korea. The more flex-

ible geocentric approach recognizes that several factors are relevant to pricing decisions:

“local costs, income levels, competition, and the local marketing strategy” while price is integ-

rated with other elements of the marketing program. “Local costs plus a return on invested

capital [ROI] and personnel fix the price floor for the long term” (Keegan et al, 2008, p.382).

In the short term, Apple might set the price less than its costs plus ROI in order to penetrate

the market and gain market share. Hence, the geocentric approach lends itself to global

competitive advantage because prices support “global strategy objectives rather than the ob-

jective of maximizing performance in a single country” (Keegan et al, 2008, p.382).

Kotler et al (2008) differ between two global pricing strategies/objectives: market skimming/

financial objectives (Appendix B) and penetration pricing/nonfinancial objectives. Penetration

pricing may be used by Apple to gain a market position in South Korea by setting a low price,

10 Samsung’s and LG’s smart phone sales have been limited due to high prices and the lack of Korea-language software applications (Ramstad et al, 2009), although there is a high degree of English liter-acy in South Korea.11 E.g. Apple might adapt the language or raise the ring volume so phones can be heard on crowded South Korean streets (Kotler et al, 2008), and offer shiny features to stick them on the phone etc.12 It charges the same price for its iPhone all over the world without considering local competitive or market conditions.13 The ethnocentric pricing policy can be equated with Hollensen’s (2010) price standardization, and Keegan’s polycentric pricing policy with his price differentiation approach.



and hence attracting a large number of buyers. Apple might consider penetration pricing due

to the intensive local competition from Samsung and LG in South Korea whose selling price

for phones is almost twice as high as it is outside the country.14 Exhibit 4 shows the pricing of

selected Samsung mobile phones in South Korea. Moreover, in 2009, the South Korean

GDP per capita at nominal values (US$17,074) and GDP at PPP per capita (Intl. $27,938)

was far behind the USA’s (US$45,934, Intl. $45.938) (IMF, 2010). Apple should consider the

lower income levels of its local consumer when setting a price, but they have to avoid setting

the price for iPhone so low that consumers lose faith in the product’s quality (Hollensen,

2010).

Summarizing the discussion above, iPhone is advised to respond to competitive and market

conditions, and should consider the geocentric approach in connection with penetration pri-

cing when entering South Korea, because this will enable Apple to quickly penetrate the mar-

ket and gain market share from its strong local competitors in the short term, and lends

global competitive advantage while Apple’s global strategic objectives are supported rather

than the objective of maximizing performance only in South Korea.15 Having gained a stable

market share in the country, local costs plus ROI will characterize the iPhone’s price in the

long-term.

Regarding its promotional strategy, Apple has to make three decisions: How to position the

iPhone in South Korea? Which media to use for communicating the message? Building up a

standardized or adapted promotion?

Having identified the target audience (Appendix B), Apple can now determine the communic-

ation objectives and design a message. How should the company position16 the iPhone in

South Korea? As South Korean mobile phone users appreciate fashion combined with func-

tion, Apple should position iPhone in South Korea on the basis of performance/technology

and design while differentiating it from competitors. Nevertheless, Apple is advised to refrain

from promoting iPhone as a “blue ocean” product because both Samsung’s and LG’s

strategy of creating blue ocean products and offering these phones at high prices failed

(Ramstad et al, 2009). Therefore, Apple should learn from its competitors and position

iPhone as an inspiring product that is useful and ahead of consumers’ expectations instead

of narrowing the market into unprofitable niches.17 14 Both companies together sell about 90% of the mobile phones there (Ramstad et al, 2009).15 iPhone’s price might then even be similar to its selling price in other countries. Consequently, grey markets are avoided and customers will not lose trust in the iPhone’s product quality.16 “Product positioning is the activity by which a desirable position in the mind of the customer is cre-ated for the product” (Hollensen, 2010, p.477). Positioning the iPhone for the South Korean market be-gins with describing the product as a comprising different attribute that is capable of generating a flow of benefits to buyers and users by matching the special requirements of its South Korean customers.17 This might convince customers and makes them switch to iPhone, so that finally the iPhone will automatically be a blue ocean product with a consumer focus (Halligan, 2006). Although Apple should consider entering the market with an advanced model of iPhone, but when the company would posi-tion the iPhone as a blue ocean product and sells it at a lower price than its competitors in order to be



Apple must now select channels of communication. Kotler et al (2008) differ between per-

sonal18 and nonpersonal communication channels. Apple might decide to use nonpersonal

communication channels such as print media (newspapers) and broadcast media (television)

to reach as many consumers as possible. Although advertising and public relations within the

marketing communications mix are more expensive than other tools, especially PR creates

awareness and interest in iPhone before its launch. An original but tasteful TV campaign,

that pays particular attention to iPhone’s performance and design features, will finally lead to

desire and action (buying the iPhone) when iPhone is launched. Especially opinion leaders

will be affected by this communication. They will carry messages to people who are less ex-

posed to media, so that finally personal communication will be stimulated through word-of-

mouth (Kotler et al, 2008).

Furthermore, it has to be discussed whether to standardize or adapt Apple’s promotional

strategy. Because “advertising is based largely on language and images, it is mostly influ-

enced by the sociocultural behaviour of consumers” in South Korea.19 As iPhone has no mar-

ket share in South Korea yet and is therefore an unknown product, the company is advised

to react to the market, and adapt its advertising in a way that emphasizes iPhone’s perform-

ance and design features. Also language has to be adapted. Consequently, the initial high

spending on its promotion strategy will pay off in the long-term because Apple’s global stra-

tegic objectives are supported.

Considering iPhone’s distribution strategy, Apple has now to decide on how to enter the

South Korean market (Appendix B). Lasserre (2007) describes four entry modes: Joint Ven-

ture, acquisition, agreements such as franchising, licensing or distributor contracts and direct

entry. The choice on entering the market is based on a combination of ownership dimension/

level of control and investment intensity (exhibit 5).

Exhibit 6 discusses direct entry, acquisition and Joint Venture, which Apple might consider

when launching the iPhone in South Korea. However, the most suitable entry mode for

iPhone into South Korea seems to be a distribution contract with a local phone carrier. A dis-

tribution contract requires fewer investments but might lead to a conflict of interests that

emerge when sales of iPhone reach a certain level.20 Especially when the country is risky

and characterized by stiff competition, Apple might want to test the market without commit-

able to penetrate the market and compete with its strong local rivals, customers might lose faith in the phone’s quality, which consequently would create a bad image of Apple.18 While personal communication channels (face to face, phone, mail, chat) allow for personal address-ing and feedback of consumers, they do not reach a broad target audience, and therefore are very time intensive, as approximately 93% of South Koreans have a mobile phone.19 However, standardization “allows the realization of economies of scale in the production of advert-ising materials, reducing advertising costs and increasing profitability” (Hollensen, 2010, p.606).20 Apple might open its own store in South Korea when the country becomes a significant portion of the company’s turnover though.



ting too many resources upfront. Hence, a distribution contract will be the most suitable solu-

tion for entering the market quickly.21

Having analyzed consumer needs and set channel objectives, the company might now make

a decision on the number of channel members. Kotler et al (2008) differ between three

strategies: intensive, exclusive and selective distribution. Exhibit 7 discusses intensive and

exclusive distribution. Due to their disadvantages, Apple should rather consider selective dis-

tribution, which means using “more than one but fewer than all of the intermediaries who are

willing to carry” (Kotler et al, 2008, p.325) the iPhone. This will allow Apple to “develop good

working relationships with selected channel members and expect a better-than-average

selling effort” (Kotler et al, 2008, p.325). Moreover, by using selective distribution, the market

will be more covered with iPhone compared to exclusive distribution, and it will give the com-

pany more control over prices and promotion than intensive distribution does.

Summarizing the discussion above, Apple is advised to sign distribution contracts with ap-

proximately two to three phone carriers in South Korea which enables to enter the market

profitable and successful.

5. Monitoring

The success of Apple’s market entry depends on its concrete goals and objectives. These

will influence marketing performance measures and standards.22

Regarding its product strategy, possible market performance measures will be numbers of

sales of its advanced model compared to other markets in which the iPhone was launched

and compared to competitors (so far information available), sales growth rate within a certain

time, market share gained after a certain time, percentage of total profits, return on invest-

ment, and by the monitoring criteria listed by Sargeant and West (2001):

the actual sales achieved against the budget,

the actual costs incurred against those budgeted,

the overall strategic direction that the organisation is taking – i.e. will the overall cor-

porate objectives be achieved in a manner commensurate with the organisation's mis-

sion?

21 This strategy also reduces costs in marketing and logistic, as the distributor carries out logistical tasks, stocking, transporting and billing (Lasserre, 2007), and increases revenue through long-term agreement deals. Having chosen a local distributor, Apple might offer the iPhone through its contract phone carrier in different contract plans based on capacity, free minutes etc. Customers can make their decision for any plan depending on their needs and budged. Offering different plans might also be an additional driver to pull the iPhone through its distribution channels. 22 To evaluate how Apple performed in the South Korean market as well as for getting feedback for a possible reformulation of the company’s global marketing plan, the control process is the final and es-sential stage of international market planning (Hollensen, 2010).



In terms of iPhone’s promotion strategy in South Korea, possible performance measures will

be the advertising effectiveness like the awareness level achieved, cost per contact with tar-

get audience, sales per territory relative to its potential.

Measures to control the performance of iPhone’s pricing strategy will be the response time of

competitors to iPhone’s selling price, margin structure relative to marketing expenses, mar-

gins relative to channel member performance.

Regarding iPhone’s distribution strategy, possible market performance measures will be

sales, expenses and contribution margin of Apple’s distribution contracts, percentage of

stores carrying the iPhone/market coverage, sales relative to market potential of each phone

carrier, percentage of on-time delivery, expense-to-sales ration of each partner, order cycle

performance of each carrier (Hollensen, 2010).

If nothing else, the success of iPhone’s market entry can also be measured by behavioural

control such as reactions about the iPhone launch in newspapers etc.



Conclusion

Once IPhone has evaluated the forces affecting competition in the market, the political, eco-

nomic, socio-cultural and technological factors with significant implications for them, as well

as other external factors influencing the entry mode and queries that might come up after en-

tering the Korean market, then the plan of action can be shaped and the appropriate

strategies in terms of product, price, place and promotion formulated. Relative pros and cons

of any of the strategies that have to be taken into consideration have been broadly discussed

in this paper.

Taking into account all the aspects debated, IPhone’s launch in South Korea will be profit-

able and successful when :

Apple adapts iPhone to local market condition and customer wants to a certain

amount, and introduces an advanced version of its product,

chooses a geocentric pricing approach while penetrating the market with lower prices

compared to competitors in the short term,

promotes the iPhone through PR before launching, and through an adapted TV cam-

paign at the time of launch while emphasizing on the product’s performance and

design,

distributing the iPhone through two to three selected local phone carriers.

To which extend the iPhone’s entry into the South Korean market has been successful can

be monitored by regular control of output, like profits, sales figures and expenditures as well

as by behavioural controls.



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Appendix A

Exhibit 1 Porter’s five forces



Exhibit 2 SWOT analysis



Exhibit 3 Discussion of ethnocentric/standardization pricing policy and polycentric/differenti-

ation pricing policy

Pricing policyEthnocentric/

standardization

Polycentric/

differentiation

Explanationsimply charging a fixed world price

for the iPhone in South Korea

charging the most appropriate price

for the South Korean market

Advantages

low-risk strategy that creates a

consistent price image for Apple

enables the company to easier

introduce the product in the

South Korean market (Hol-

lensen, 2010)

homogeneity avoids grey mar-

kets/parallel importing, “whereby

[the iPhone] can be purchased

in one market and sold in an-

other, undercutting the estab-

lished market prices in the pro-

cess” (Hollensen, 2010, p.529)

the iPhone might be rather ac-

cepted by its potential custom-

ers

setting the price takes into ac-

count local factors of the South

Korean market “such as com-

petition, wages, taxes” (Keegan

et al, 2008, p.381) as well as

“differences in customer charac-

teristics, preference and pur-

chasing behaviour” (Hollensen,

2010, p.529)

Disadvantages

Apple might not be able to max-

imize its profit in the South

Korean market

ethnocentric approach is not

suitable when there is competi-

tion from local manufacturers

Samsung and LG (Anon., 2006)

as this approach is most com-

monly adapted when a company

utilizes independent distributors,

Apple might have less control

over the price set by its local

partner

a significantly different price can

cause a bad image of Apple

it encourages the creation of

grey markets

Exhibit 4 Pricing Samsung mobile phones in South Korea (Source: Ramstad et al,

2009)



Provider Model Price Date of info

Samsung

Samsung Galaxy K (SHW-M130K) $710 12-Oct-10

Samsung Galaxy S SHW-M110S $790 02-Jul-10

Samsung T-Omnia II $810 01-Dec-08

Exhibit 5 Entry modes (Source: Lasserre, 2007, simplified)



Exhibit 6 Discussion of entry modes: direct entry, acquisition, Joint Venture

Entry mode Advantages Disadvantages

Direct entry

gives the company the most

control over its operations

bears the highest risks (Lasserre,

2007) as Apple has no experience

in the market that is characterized

by its strong local manufacturers

it will be very difficult for Apple to

compete against its rivals

Acquisition

Apple will have resources, as-

sets and competencies avail-

able immediately

the company will save time,

which is especially appreci-

ated in the highly competitive

South Korean market

acquiring a local company de-

mands cross-cultural integration

skills

involves high costs (Lasserre,

2007)

Joint Venture provides the company with the

opportunity to gain new capa-

city, resources and expertise

as well as knowledge and

technology

Joint Venture may be chosen

when it is uncertain if the mar-

ket accepts the iPhone due to

the competition from espe-

cially Samsung and LG

might allow only limited control

possibility of being disappointed

by its partner

cultural differences both the coun-

try’s and corporate (especially

managerial and human resources

are often critical resources)

it takes much effort and time to

build the right relationship

Apple will have to make high in-



vestments (Lasserre, 2007)

Exhibit 7 Discussion of intensive and exclusive distribution

Distribution

strategy

Intensive

distribution

Exclusive

distribution

Explanation

distributing the

product through as

many retailers as pos-

sible

“giving a limited number of dealers the exclusive

right to distribute” (Kotler et al, 2008, p.324) the

iPhone in their territories

Advantages

secures wide mar-

ket coverage and

availability of the

iPhone

leads to more control over dealer prices and

promotion as well as to stronger distributor

selling effort

might enhance iPhone’s image

Disadvantages

Apple might lose

control over dealer

prices, promotion

and services

phone will be difficult to purchase for people

because the market is less covered

future entrants into the market might be able

to make their product available for multiple

phone carries

As Apple has no market share in South Korea

yet, its objective will be to penetrate the mar-

ket. Therefore, exclusive distribution might

not be the most suitable strategy.

Exhibit 8 Words counted



Appendix B

Additional information question 2

According to Lasserre (2007), South Korea can be categorised as a Newly Industrialised

Economy holding the following market characteristics: The market growth is high, the size is

medium to high, the segmentation is an established middle class and a diversity of seg-

ments, customer’s value product differentiation and service, the distribution is characterised

by pull logistics and beginning of mass retailing, and the competition is deregulated, active

and diverse.

The PEST analysis might be extended by environmental and legal factors to PESTLE ana-

lysis to additionally analyse iPhone’s macro-environment in South Korea. Environmental

factors such as global warming, pollution, energy consumption or waste regulations are in

this case of less importance.

South Korea’s legal system is a combination of continental European civil law, Anglo-Amer-

ican law, and Chinese classical thought (CIA, 2008). This allows Apple to operate in a secure

legal environment which is substantial for the market entry.

Additional information question 4: global pricing strategy/objective market skimming

Market skimming might be used by Apple to achieve financial goals such as return on invest-

ment when a high price is set to skim maximum revenues from the top end of the market so

that the company makes fewer but more profitable sales in a short term. A great disadvant-

age of this approach is that due to Apple’s small market share in South Korea, it is unlikely

that the company will bear up against local competitors like Samsung and LG. Building a

premium position also requires enough resources for promotion etc. as well as visible local

presence of Apple in South Korea. Market skimming might also lead to grey markets when

they sell the iPhone more cheaply in other countries (Hollensen, 2010).

Additional information question 4: iPhone’s target audience

Usually, Apple’s primary customer targets are middle-upper income professionals who use

the iPhone to coordinate their busy schedules and communicate with colleagues, friends and

family. Its secondary customer target market consists of high school, college and graduate

students who need a portable multifunctional device. Additionally, the South Korean target

market is also characterized by its tech-savvy phone users who might use the iPhone as a

status symbol.



Additional information question 4: iPhone’s distribution strategy

First of all, Apple should follow the network perspective, which means that the company

makes use of a business network for internationalization and especially when expanding into

the South Korean market because through the relationship of its domestic network, Apple

has gained experience and improved knowledge, which can be used as bridges to networks

in South Korea.



Appendix C

Minutes of the IPhone group assignment meetings

Group: Adelina Cimpeanu

Dorothee Eickhoff

Anja Lorbeer

(Tanzeem Karishma Binte Rahman)

Tutor: Mesfin Habtom

First meeting

Date: 20th October

Time: 10am – 12pm

Location: Stapelton House Cafeteria

Present: Adelina Cimpeanu

Anja Lorbeer

Tanzeem Karishma Binte Rahman

Dorothee Eickhoff

Absentees: none

Tasks of the day: - Introducing the IPhone case by discussing the content

- Reviewing the questions

- Short brainstorm on content of assignment

Agreements: Division of tasks

Tanzeem: Question number 4

Adelina: Ouestion number 3

Dorothee: Question number 2, taking the minutes

Anja: Question number 1

All: Question number 5, Introduction and Conclusion

Informal deadline for the group: 24nd of November

Progress since last



meeting:

Any other business: Talking about some other group work as the group is the same for

all group projects

Date of next meeting: Following Wednesday 27-10-2010 at 10 am

Closure: The meeting was closed at 11.45am

Second meeting

Date: 27th October

Time: 10am – 12pm



Anja Lorbeer

Tanzeem Karishma Binte Rahman

Dorothee Eickhoff

Absentees: none

Tasks of the day: - Discussing the progress after research in regard to the ques-

tions divided

Agreements: Change of tasks

As the group agreed on the divison of tasks before doing research

and before knowing the extend of capabilities of each group mem-

ber a redivision had to be undertaken.

New division of tasks

Tanzeem: Question number 1

Adelina: Ouestion number 3, Conclusion

Dorothee: Question number 2, Introduction, and taking the minutes



Anja: Question number 4 and Question number 5

Informal deadline for the group: 22nd of November

Progress since last

meeting:

- The group got more familiar with the case.

- It showed that some group members put more effort and have

broader knowledge concerning the different questions wherefore the

new divison of tasks was made

Any other business: Setting a date for a branding presentation meeting Saturday the

30iest of November



Third meeting

Date: 3rd of November

Time: 10am – 12pm





Anja Lorbeer

Dorothee Eickhoff

Absentees: none

Tasks of the day: - Reorganising the group after Tanzeem decided to leave the

group

Agreements: - Sending all parts ready to all of the group members for feed-

back

- All group members are obliged to give feedback

Progress since last

meeting:

- All group members are making progress in the research and

findings can be discussed

Any other business: Tanzeem left the group, Anja took over her part





Fourth meeting

Date: 10th of November

Time: 10am – 12pm



Anja Lorbeer

Dorothee Eickhoff

Absentees: none

Tasks of the day: - Discussing progress

Agreements: none

Progress since last

meeting:

- The single parts take shape

- Research is completed

- The group members are in the writing phase

Any other business:




Closure: The meeting was closed at 11.35 am

Fifth meeting

Date: 24th of November



Time: 10am – 12pm



Anja Lorbeer

Dorothee Eickhoff

Absentees: none

Tasks of the day: - Word shortening – discussing which parts can be cut.

Agreements: - Internal deadline: Wednesday 1st of December

- Sending a draft to Mesfin

Progress since last

meeting:

- The main 5 Questions of the assignment are answered. The

introduction and conclusion have to be added

Any other business:

Date of next meeting: Monday 06-12-2010 at 10 pm for the submission of the assignment



IPHONE.

Documents

Transcript of IPHONE.