Structural Analysis

of
Telecommunication and
Tele Services Industry

*(Includes design, manufacture and marketing of mobile communication

and media devices/ personal computers, and sale of a variety of related
software, services, accessories, networking solutions and third-party
digital content and applications)

Competitive Stratergy of Apple Inc in India

By
Aditya V 17MB03
Kavin Kumar B 17MB22
Kiran Kumar S 17MB35
Introduction

1. Apple Inc is a global company which is committed to bringing the best user
experience to its customers through its innovative hardware, software and services.
The Company’s business strategy leverages its unique ability to design and develop
its own operating systems, hardware, application software and services to provide its
customers products and solutions with innovative design, superior ease-of-use and
seamless integration.

2. Selected financial data of the company with regards to its global sales as
obtained through Annual 10-K report of Apple is as shown in the picture below:-

3. India as a market, along with middle east, features in Europe segment of sales
where growth of 10% is registered. Apple India sales registered a 17% increase for
the year 2016-17 as compared to 53% in the year 2015-16. The drop can be attributed
to Demonetisation and GST woes, but the company has declined to comment on it.

4. Iphone with 141 billion dollar contribution to overall revenues is undoubtedly a

major source of revenue. Indian smart phone market with 300 million plus users and
penetration of just 22.5% offers an attractive ground for Apple Inc to shore up its
revenues and counter balance the head winds it is facing in Greater China.

5. Apple India is having 2.5% market share in smart phone shipments in India.
Xiami leads the pack with 26 % followed closely by Samsung at 24%. India premium
smart phone segment( INR 30000/- and above) grew by 20%, based on counter point
research data in Jan 18, which is a heartening prospect for Apple Inc.

6. Another interesting factor which can be gauged from the sales report is
significant rise in contribution of Services in overall revenue. Apple services include its
own operating system on a plethora of mobile communication devices that include
Iphone, IPad, Iwatch etc and also services like Apple Pay and Apple Maps.
7. Windows, Google and Amazon dominate this services space in India. Apple is
still at a very nascent stage and is analysing Indian market to increase its presence in
Services market of India.

Aim of the Study Group

8. Aim of the study group is to Analyse the Tele Communication Industry

including Services in India wrt Apple Inc. The Aim of the group can be broadly
classified as under:-

(a) Study Tele communication Industry and Services related to mobile

equipment like smart phones, laptops, PCs, Smart watches etc

(b) Understand business model and strategies being employed by Apple Inc
to increase its presence in India both in Tele Communication and Services.

(c) Understand the business model of India, its ecosystem and consumer
behaviour wrt Tele Communication and Services in India.

Understanding of Apple Inc Strategy in India using Seven Point Scale

9. We are using Porter’s five point scale and in addition added Exit barriers and
Government actions as additional factors to be considered in arriving at overall
attractiveness.

10. Weightage of each Factor in Seven Point Scale. Each of the points are given
weightage based on their relative importance to the Apple Inc. The relative weightage
is as tabulated below:-

7 Point Scale Item Weightage Justification

Rivalry Among 5 Indian smart phone market is fastest
Competitors growing smart phone market in the
world. Further, India is enjoying a
demographic dividend where a
miximum chunk of this population is
relatively young (<35 years of age.
Lastly, India is considered as an
exciting prospect and a potential
engine for world growth in the years
to come. All these factors provide a
fertile ground for MNC to invest in
India.

Mobile communication Industry

and Services Industry is very
lucrative for this very reason. MNCs
like Samsung, Windows, LG and
recently Chinese behemths like
Xiomi, Huwei, Vivo ,Oppo, One Plus
etc are investing huge amounts to
7 Point Scale Item Weightage Justification
penetrate Indian mobile
communication and services market.

Hence Rivalry among competitors is

Barriers to Exit
Barriers to Entry
Threat from Substitutes
considered as a strong force.
3 India is an open market to large
extent. India does not impose any
restrictions for any Multinational
company in exiting its business due
to low profitability. GM (General
Motors) which started its winding up
process in India is a case to support
this view.
4 Barriers for Entry have significantly
reduced post 1994. Librelisation and
Globalisation are more accepted in
India. Indian PM visit and meeting
with Business leaders across various
countries supports this view.
However, it is a difficult playing field
considering the number of players
involved and challenges to
overcome.
2 Threat of digital cameras or landline
phones or any other kind of
appliances do not pose threat to
mobile phones, laptops, smart
watches.

Demonetisation has increased

awareness towards cashless
transactions and digitalisation of
payment services.

Usage of digital maps to find location

is gaining more currency and traction
in India.
Bargaining power of 4 Indian buyer is a cost sensitive buyer.
buyers Apple products on the other hand are
priced at a premium. Availability of
cheaper products from other
competitors provide significant head
winds for Apple Inc to gain share in
Indian Market
Bargaining power of 3 Suppliers gain from more orders from
suppliers Apple Inc. Apple Inc is a global
company and has a robust supply
chain. Apple Inc has also its foot print
in India at Banglore through
 7 Point Scale Item Weightage
Government Actions
Justification
Taiwanese OEM. Overall, the
bargaining power of suppliers is
moderate to weak
2 Government has indicated in various
forums its keenness to bring Apple
Inc to India and make ecosystem
conducive for Apple Inc to
manufacture its products in India and
supply them through its retain stores.

Reforms regards FDI in single brand

retail stores, Taxing of mobile imports
are steps which favour Apple Inc to
manufacture and market its products
in India.

Summary

11. The overall attractiveness score for Apple Inc to promote its products and
services in India stands at 3.2785 which can be graded as above average.

12. Business model employed by Apple includes:-

(a) Capture young minds right from college days by offering products at
relatively cheaper rates. Build brand loyalty and slowly expand market.

(b) Bargain for concessions, tax breaks aggressively. Analyse the market
over a period of time and slowly increase capacity.

(c) Use Indian talent in services like Apple Pay and Apple maps to increase
revenue through services globally.

(d) Analyse and understand profitability in shifting manufacturing from

China, Japan and Taiwan to India and then take steps accordingly.

(e) Build up retail stores to improve better distribution and carry out forward
integration in a phased manner.

13. Tele communication Industry including services in India has a huge potential.
The CAGR is highest in the world. The demographic distribution and penetration of
smart services by Digital India, Demonetisation and GST only ensures consistent
growth in this sector in the years to come. The Industry is different from other markets
around the world where in the service provider like BSNL, RJIO, Airtel, Vodaphone
are separate from hardware manufacturers like Apple,Samsung, Xiomi,huwei,Oppo.
The services sector gives another dimension with another set of players like Google,
Amazon and Windows. Overall it is a complex three dimensional market.
References

14. The study group delved largely on the following references to bring some sense
to its arguments.

(a) Investor Relations K-10 Annual report published by Apple for the year
2017.

(b) Open source – sites like livemint.com, statista.com,ibef.org, counter

research point. Each link is mentioned against the justification provided.