Friday, August 15, 2008

Apple Takes a Bite into Emerging Markets

Announcements this week show Apple’s iPhone making headway in emerging markets in spite of a history of challenges working with local carriers. The company announced plans to launch the iPhone in 10 Latin American countries and India this month. A later launch (end of 2008) has been suggested for two of the world’s largest mobile markets, Russia and China. Apple’s recent willingness to do away with revenue-sharing requirements and allow carriers to subsidize phone purchases is credited with accelerating negotiations worldwide.

In spite of a delayed official launch, Russia may already be home to one of the highest concentrations of iPhone users in the world with an estimated 500,000 gray-marketed devices. The robust industry sells unofficially-imported iPhones (even Russian President Dmitry Medvedev has been seen using one), “unlocks” them from any carrier restrictions, and imports local language software. This overwhelming demand highlights the existence of the top-of-the-pyramid market in developing countries. While small in number, this market is not only profitable but is also a strong influencer of consumer choices further down the economic pyramid - particularly in urban areas where low- and high-income consumers live in close proximity. This influence from the top-of-the-pyramid market can create a demand for more affordable and appropriate versions of a product among the rest of the population.

Apple’s roll-out in emerging markets will undoubtedly see impressive sales, but iPhone buzz in developing countries may ultimately pay off more for others. Apple’s strategy of targeting the elite in emerging markets with its high-end products leaves an opportunity for rivals who see the potential in the much larger lower-income markets. Companies that introduce an iPhone-like device that is more appropriate for local environments, telecommunication networks, and income levels will realize sales by fulfilling the aspirations of those who have been influenced by the local elite but can’t yet afford an iPhone.

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1 comment:

Mark Beckford said...

I agree with the premise that Apple's focus on the higher-income segment in emerging markets will open up opportunities for lower end products. Apple, more than any other tech company targeting consumers, has so much opportunity to carve out new business in its Mac and Phone device categories. Until these markets mature and/or saturate, they won't need to move down to the bottom of the pyramid like current market leaders Cisco, Intel and Microsoft just to name a few.