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MKP001N 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

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MKP001N 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
marketing 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
research 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
adapting its marketing mix accordingly. The marketing mix may be extended by Booms and
Bitner’s (1981) additional three Ps: participants, physical evidence and process but their
framework will not be part of this report.

Moreover, determinants of the possible monitoring process of the success are outlined in
relation to the 4 P’s.

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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
Communications 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
substitutes 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
oligopoly 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
suppliers 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
industry, 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,
bargaining 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
competition among different entities (Sekhar, 2010). A threat arising from the government are high
taxes and restrictions for foreign companies, entering the market.

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2. Implications for the success of the iPhone in South Korea

The South Korean market conditions and its environment require special advertence
regarding 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,

legislative 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

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
embodies 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.

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networks and technologies, achieving the high standard required and appreciated by the
South 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
political 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
technological development.

3. Aspects to be considered before entering the market

Besides the market entry strategy and marketing mix, iPhone should also consider the
external 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
8
South Koreans have a high mobile phone turnover and are highly aware of fashion, brands, and
technology which all is combined in the iPhone.

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to develop one of the broadest markets for cellphones. So, iPhone should consider facing a
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
Internet 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,
direction 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
considerably 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
company 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.

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unique environmental and marketplace conditions.10 Consequently, Apple should consider

the product adaptation approach when entering South Korea, taking into account local
conditions 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
localized 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
advanced version of iPhone might create a competitive advantage for Apple and probably
results 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/ethnocentric, 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
flexible geocentric approach recognizes that several factors are relevant to pricing decisions:
“local costs, income levels, competition, and the local marketing strategy” while price is
integrated 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 objective 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

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
literacy 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.

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a low price, 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
pricing when entering South Korea, because this will enable Apple to quickly penetrate the
market 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
communication 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 function, 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
created for the product” (Hollensen, 2010, p.477). Positioning the iPhone for the South Korean market
begins 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

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Apple must now select channels of communication. Kotler et al (2008) differ between
personal18 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 exposed 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
influenced by the sociocultural behaviour of consumers” in South Korea.19 As iPhone has no
market 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
performance 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
strategic 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
Venture, 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
distribution 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

position the iPhone as a blue ocean product and sells it at a lower price than its competitors in order to
be 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
addressing 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
advertising 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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MKP001N coursework: The iPhone in South Korea

committing too many resources upfront. Hence, a distribution contract will be the most
suitable solution 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
distribution, 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
company more control over prices and promotion than intensive distribution does.

Summarizing the discussion above, Apple is advised to sign distribution contracts with
approximately 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
investment, 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
corporate objectives be achieved in a manner commensurate with the organisation's
mission?

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
essential stage of international market planning (Hollensen, 2010).

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MKP001N 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
target 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,
margins 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.

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Conclusion
Once IPhone has evaluated the forces affecting competition in the market, the political,
economic, 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 entering 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
profitable 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
campaign 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.

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MKP001N coursework: The iPhone in South Korea

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MKP001N coursework: The iPhone in South Korea

Theodosiou, M. & Katsikeas, C. S. (2001) Factors Influencing the Degree of International

Pricing Strategy Standardization of Multinational Corporations. IN Journal of International
Marketing.

Theodosiou, M. & Leonidou, L. C. (2003) Standardization Versus Adaption of International

Marketing Strategy: an Integrative Assessment of the Empirical Research. IN International
Business Review.

Viswanathan, N. K. & Dickson, P. R. (2007) The fundamentals of standardizing global

marketing strategy. IN International Marketing Review, 24(1), 46-63.

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MKP001N coursework: The iPhone in South Korea

Appendix A

Exhibit 1 Porter’s five forces

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Exhibit 2 SWOT analysis

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Exhibit 3 Discussion of ethnocentric/standardization pricing policy and

polycentric/differentiation pricing policy

Ethnocentric/ Polycentric/
Pricing policy
standardization differentiation
simply charging a fixed world price charging the most appropriate price
Explanation
for the iPhone in South Korea for the South Korean market
• low-risk strategy that creates a • the iPhone might be rather
consistent price image for Apple accepted by its potential
• enables the company to easier customers
introduce the product in the • setting the price takes into
South Korean market account local factors of the
(Hollensen, 2010) South Korean market “such as
• homogeneity avoids grey competition, wages, taxes”
Advantages
markets/parallel importing, (Keegan et al, 2008, p.381) as
“whereby [the iPhone] can be well as “differences in customer
purchased in one market and characteristics, preference and
sold in another, undercutting the purchasing behaviour”
established market prices in the (Hollensen, 2010, p.529)
process” (Hollensen, 2010,
p.529)
• Apple might not be able to • as this approach is most
maximize its profit in the South commonly adapted when a
Korean market company utilizes independent
• ethnocentric approach is not distributors, Apple might have
suitable when there is less control over the price set by
Disadvantages
competition from local its local partner
manufacturers Samsung and • a significantly different price can
LG (Anon., 2006) 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)

Provider Model Price Date of info

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Samsung Galaxy K (SHW-M130K) $710 12-Oct-10

Samsung 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)

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Exhibit 6 Discussion of entry modes: direct entry, acquisition, Joint Venture

Entry mode Advantages Disadvantages

• gives the company the most • bears the highest risks (Lasserre,
control over its operations 2007) as Apple has no experience
in the market that is characterized
Direct entry
by its strong local manufacturers
• it will be very difficult for Apple to
compete against its rivals
• Apple will have resources, • acquiring a local company
assets and competencies demands cross-cultural
available immediately integration skills
• the company will save time, • involves high costs (Lasserre,
Acquisition
which is especially 2007)
appreciated in the highly
competitive South Korean
market
• provides the company with the • might allow only limited control
opportunity to gain new • possibility of being disappointed
capacity, resources and by its partner
expertise as well as • cultural differences both the
knowledge and technology country’s and corporate
• Joint Venture may be chosen (especially managerial and
Joint Venture
when it is uncertain if the human resources are often critical
market accepts the iPhone resources)
due to the competition from • it takes much effort and time to
especially Samsung and LG build the right relationship
• Apple will have to make high
investments (Lasserre, 2007)

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Exhibit 7 Discussion of intensive and exclusive distribution

Distribution Intensive Exclusive

strategy distribution distribution
distributing the “giving a limited number of dealers the exclusive
product through as right to distribute” (Kotler et al, 2008, p.324) the
Explanation
many retailers as iPhone in their territories
possible
• secures wide • leads to more control over dealer prices and
market coverage promotion as well as to stronger distributor
Advantages
and availability of selling effort
the iPhone • might enhance iPhone’s image
• Apple might lose • phone will be difficult to purchase for people
control over dealer because the market is less covered
prices, promotion • future entrants into the market might be able
and services to make their product available for multiple
Disadvantages phone carries
• As Apple has no market share in South Korea
yet, its objective will be to penetrate the
market. 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
segments, 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
analysis 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-
American 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
investment 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
disadvantage 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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MKP001N 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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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

meeting:

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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
questions 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
member 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
Anja: Question number 4 and Question number 5
Informal deadline for the group: 22nd of November
- The group got more familiar with the case.
Progress since last - It showed that some group members put more effort and have

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meeting: 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
Location: Stapelton House Cafeteria

Present: Adelina Cimpeanu

Anja Lorbeer
Dorothee Eickhoff

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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
feedback
- All group members are obliged to give feedback

- All group members are making progress in the research and

Progress since last findings can be discussed
meeting:

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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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

- The single parts take shape

Progress since last - Research is completed
meeting: - The group members are in the writing phase

Any other business:

Date of next meeting: Following Wednesday 24-11-2010 at 10 am

Closure: The meeting was closed at 11.35 am

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Fifth meeting
Date: 24th of November
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

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- The main 5 Questions of the assignment are answered. The

Progress since last introduction and conclusion have to be added
meeting:

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

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