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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
2MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
3MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
4MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
5MKP001N coursework: The iPhone in South Korea
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.
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6MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
7MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
8MKP001N coursework: The iPhone in South Korea
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
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
9MKP001N coursework: The iPhone in South Korea
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.
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10MKP001N coursework: The iPhone in South Korea
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).
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
11MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
12MKP001N coursework: The iPhone in South Korea
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.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
13MKP001N coursework: The iPhone in South Korea
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Business Review.
Viswanathan, N. K. & Dickson, P. R. (2007) The fundamentals of standardizing global mar-
keting strategy. IN International Marketing Review, 24(1), 46-63.
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
16MKP001N coursework: The iPhone in South Korea
Appendix A
Exhibit 1 Porter’s five forces
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17MKP001N coursework: The iPhone in South Korea
Exhibit 2 SWOT analysis
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18MKP001N coursework: The iPhone in South Korea
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)
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19MKP001N coursework: The iPhone in South Korea
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)
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
20MKP001N coursework: The iPhone in South Korea
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-
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21MKP001N coursework: The iPhone in South Korea
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
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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.
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24MKP001N coursework: The iPhone in South Korea
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.
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25MKP001N coursework: The iPhone 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
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26MKP001N coursework: The iPhone in South Korea
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
Location: Stapelton House Cafeteria
Present: Adelina Cimpeanu
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
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27MKP001N coursework: The iPhone in South Korea
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
Date of next meeting: Following Wednesday 03-11-2010 at 10 am
Closure: The meeting was closed at 11.50am
Third meeting
Date: 3rd of November
Time: 10am – 12pm
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010
28MKP001N coursework: The iPhone in South Korea
Location: Stapelton House Cafeteria
Present: Adelina Cimpeanu
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
Date of next meeting: Following Wednesday 10-11-2010 at 10 am
Closure: The meeting was closed at 11.30am
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29MKP001N coursework: The iPhone in South Korea
Fourth meeting
Date: 10th of November
Time: 10am – 12pm
Location: Stapelton House Cafeteria
Present: Adelina Cimpeanu
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:
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30MKP001N coursework: The iPhone in South Korea
Date of next meeting: Following Wednesday 24-11-2010 at 10 am
Closure: The meeting was closed at 11.35 am
Fifth meeting
Date: 24th of November
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31MKP001N coursework: The iPhone in South Korea
Time: 10am – 12pm
Location: Stapelton House Cafeteria
Present: Adelina Cimpeanu
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
Closure: The meeting was closed at 11.45am
Adelina Cimpeanu, London Metropolitan Business School10024470, 10035616 6 December 2010