Iphone in China can succeed. Here's how...

So Iphone entered China early September. And thus far, no more than a few thousand sales have been registered. Where did Apple go wrong?

The problem isn’t due to the Iphone’s popularity, as there is a huge demand for Iphone’s in China. One can see black-market Iphones all over the place, which sell for anywhere from 4000 RMB to 6000RMB (about $600 to $875 dollars).  It also isn’t the fact that there aren’t enough cell phone users. A China news agency report printed early May 2009 showed that after introduction of 3G technology, mobile users grew to a total of 670 million people. That’s almost twice the population of the U.S.. Also, it isn’t that people don’t want a new phone since they already have one, most people I met there change their phones on a frequent basis. So, shouldn’t Iphone be making a huge blast in China?

A recent Forbes article by Shaun Rein on why Apple is Failing in China outlines some interesting  points. Here are some of my observations and commentary to his article:

1. Apple entered the market assuming China is the same as the U.S.
   • Anyone who’s been in China knows how easy it is to get a pre-paid phone number and keep that as long as one wishes. Iphone is making Chinese consumers lock in to an expensive phone plan without realizing that model, although it works for the U.S., has never been popular in China. Chinese like to change phone numbers quickly and easily, although most don’t. And imiting their “options” isn’t going to win over any new customers, considering they can get a black market iphone for around the same price that doesn’t do that.
2. Apple didn’t understand consumer spending
   • Chinese usually prefer to buy cheaper plans, although they will go all out on getting a phone. They prefer texting over calls, etc. So by having them lock into expensive call plans, they are turning off customers. No pun intended.
3. Apple didn’t understand the competitive marketplace and partnered up incorrectly
   • Partnering up with a telecom (Unicom) that sells to a least wealthy consumer and has lower number registered users was a mistake.
   • Most people believe this company to have worst signal, and most people don’t want to change carriers, let alone change phone numbers.
4. Apple took too long to enter China
   • If you are not in China quickly, then the black market for your products will start becoming the main market and it’ll be harder to get back in when u decide to.

So what can Apple do? They are locked into a contract with Unicom, but have to make the best of it.

• Spend time doing more market research to understand what people want out of a phone.
• Find a way to address needs, such as: being able to keep existing phone numbers, working with Unicom to change the people’s perceptions of their service (ie providing better coverage, affordability, etc)
• Reach out to other businesses and educating them on the power of developing great apps.
• Chinese people don’t want “convenience” through the internet, as much as Americans. They are more interested in developing connections, playing games, and keeping informed, learning English, etc etc . So Apple should develop free apps that work as English dictionaries, news feeds, as well as reviews of restaurants, entertainment, and others. (those would attract the cosmopolitan crowds at least)

The lesson here is find good partners, do your due diligence, and plenty of market research, or partner up with people who understand the market.

What do businesses need to understand about the Shanghai Expo and the opportunities it will open in the market?

The next 2-5 years will see a dramatic growth in a few areas. Here’s actually my take on this.

I just attended an expo in Beijing promoting the Shanghai Expo 2010. There are two major observations and some conclusions that I can draw from the information information given there.

1) Japan, apparently known for having won the award for best pavilion several times, will probably win the award this year. Their pavilion is 80% focused on Green Technology. Their winning will be due to Japanese engineering as well as the world’s attention on Green Technology. This will draw the attention of China and the desire to step up it’s Green Tech efforts even further. Currently the stimulus plan allocated a large sum of money on this sector, except I’ve heard that it’s not easy for Foreign Companies to get direct access to that money other than with partnerships with Chinese companies. Who knows what will happen afterwards though.

2) Japan winning, as well as the world focusing so much on Green Technology will further focus China’s eyes on encouraging innovation. China, known for wanting to learn from other countries and “copy” their style, will be further convinced that in order for innovation to start coming out of China certain laws and enforcement will need to be in place. This will increase the desire for the Gov’t to protect intellectual property rights.

Out of these two results, I think we will be seeing a huge increase in Green Techs focusing on efficiency as well as alternate sources of fuel, and China trying to lead the efforts in innovation in these aspects. Based on the fact that the Gov’t here has been pushing a lot in certain “experimental” hubs to promote development of technology, I think all these things will lead to creating a “goal” for China to become the world’s innovator. How likely they are to achieve that goal is another issue altogether, but the fact that it will become a goal will reveal a lot about where China will be headed.

What does this mean to business in China? Basically, If I were to bet my future on any market in China, I’d start learning either of the following:

either a) Ecommerce and Internet, which has a correlation with intellectual property rights as well as the push from the gov’t to promote the tech sector.

or b) Green Technology.

I’m pretty confident that the pattern that China is taking will lead to these results, and my advice to all those interested in China right now is to start looking for ways in on any of these fields and get first mover’s advantage.

What do you guys think will be the effect of the Expo?