BackFive lessons Tim Cook can learn from successful multinationals in India
Apple's India thrust might already be too late, given how crowded the market currently is
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One of the big takeaways from Apple CEO Tim Cook’s earnings call on Tuesday, minutes after the company posted record first-quarter profit, was Apple’s shift of focus towards India and its potential as the next big driver of iPhone sales for the company.
Cook said, “It’s incredibly exciting. India’s growth as you know is very good, quickly becoming the fastest growing Bric country, and the third largest smartphone market in the world behind China and the US."
The Apple CEO also revealed that the company has been “increasingly putting more energy" in India and its renewed push could be due to the distinct demographic advantage over Apple’s other big market, China. “In India," Cook said, “the median age for the population is 27. In China, that’s nearly 36 years. Think of China’s median age being 36-37, 27 is unbelievable. Half the people in India are below 25. I see the demographics there being incredibly great for a consumer brand and people who really want the best products."
Cook also revealed that his company was betting on the Narendra Modi-led National Democratic Alliance (NDA) government’s desire to bring economic reforms, and in doing so, “speak to a really good business environment for the future".
Late to the party?
Apple’s India thrust might already be too late, given how crowded the market currently is. It’s great rival Samsung Electronics moved into India even before the smartphone boom began and currently leads the market share as of Q3 2015 in both the mobile phone and smartphone segments (19.2% and 23.3%, respectively). Besides Samsung, India has become home to prominent Chinese smartphone manufacturers like Xiaomi (currently fifth, as per IDC data), OnePlus, Lenovo (fourth as per market share) and Vivo, to name a few. Equally prominent are local brands like Micromax (second in terms of market share) and Intex (third as per market share), who have a firm foothold over the Indian mobile phone market. One of the keys to their success has been pricing, and given that 70% of smartphones are selling for less than $150 in India, as a Reuters report says, “Apple’s high-end phones remain out of reach for most consumers. The basic 6S sells at just under $700 in India or nearly half the average annual wage."
Will Apple give up on its premium price to emerge as a mass product? That could well be integral to their India plans. Even while late to the party, Apple could take a leaf out of the earliest multinational entrants to the Indian market, Bata and Colgate-Palmolive (1937), which with their long-term commitment to the Indian consumer have become household names in the country.
Localize and respect the Indian consumer
The other aspect that most successful multinationals in India have succeeded in is to understand the market better and take a more need-based approach to introduce their products. A classic case in point would be how Ford and Hyundai came into India with offerings like Escort and Santro, respectively, and while the latter read the market better recognizing the need for smaller cars, the former stalled. For Apple to make a mark in India, a market where they sold only 800,000 iPhone units in Q4 2015, compared with the 28 million worldwide, it would need to understand and, importantly, respect the needs of the consumer and localize accordingly.
Aggressive marketing/advertising
While Apple has been marketing its products through mostly print and television advertising, its visibility vis-a-vis its competitors is still found wanting. The likes of Samsung and Micromax have been associated with specific Indian events over the years, the odd cricket tournament, some Bollywood-related events, and successfully piggybacked on those. Even though it would represent a departure from its core marketing strategy, India is a market where visibility matters most. Apple could well do with a Vivo IPL equivalent!
Make in India, Make for India
Apple’s success in China is largely due to the company manufacturing its units there. In June last year, Reuters reported that Foxconn, the Taiwanese company that manufactures all of Apple’s products, is in talks with the government of Maharashtra to set up a plant in the state. The move, when it materializes, could see Apple sell its phones for lower prices, thanks to lower production costs. It could also allow Apple to offset rising wages in China.
Another potential focus area for Apple could be a product or an offering specific to the India market, completely different from its global product listings. This could well be a slimmed-down version of its iPhone, or even a smart watch, something that enables Apple to stand out from the rest of the congestion.
Distribution
To game the Indian market, Apple might have to re-look its existing distribution strategy, which includes franchise outlets like Reliance Digital or Maple (Mumbai) or iWorld. Earlier this month, Apple India filed an application with the Department of Industrial Policy and Promotion (DIPP) to start its own retail stores, a great starting point to increase sales in India. Soon after it launched the iPhone 6S, as the Financial Times reported, “it sold mostly via online retailers and neighbourhood phone stores".
Over the last few years, Apple has also “experimented with a few ‘store-in-store’ mini-shops, in partnership with local retailers". The FT report added, “Any plans for a similar push in India face a number of obstacles. Premium retailers in India often struggle to find appropriate locations for their stores, and must grapple with a range of awkward rules, including requirements to source some products locally, rather than importing from abroad."
While the challenges of opening shop in India are obvious, the market represents a unique, albeit belated opportunity for Apple to enter. India is the fastest growing smartphone market in the world, with approximately 250 million smartphone owners in 2016, and according to the FT report, “that is expected to double by 2018". India is still a young and growing smartphone market, with approximately 40% of all mobile phone sales in the country coming from smartphones. Compare this with China, where 90% of all mobile phones are smartphones, and which is a mature, if not saturated, market and one where smartphone sales are slowing down.
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