Wednesday, September 11, 2013

Apple's Low Cost Strategy To Enter Emerging Markets

Apple launched yesterday its new Iphone range, composed by 2 devices: One enhanced version, with a better processor, and new features, and one low cost, which is sort of the same than the previous version.

I believe there are two goals in the fact that Apple launch a low cost device:
  1. Being able to compete on the second hand market: Apple can propose an old version new at a good price. Now that the smartphone markets become mature, the second hand market starts to count in the overal smartphone market, therefore there is room for growth on it. This is what Renault made in the car market by launching the low cost brand Dacia, with a certain success.
  2. Being able to compete in the emerging markets, where smartphone prices tends to be lower. This is the reason why its competitors excell, and take some market shares to Apple.
This is the second point I would like to discuss. Indeed, emering markets are very important for global companies as it is where growth is. The goal in this market is to set a presence that will secure a big market share, if possible a leading position, in order to generate long term profitability once the market matures.

But Apple have a dilemma: Indeed, even though they are not a luxury brand, they have a luxury branding strategy. And by trying to have an accessible price, they may alter this strategy. I believe they must have struggled with this move. And probably this is the reason why they have picked a targeted price of 500$ which is actually very close to the standard price of 600$.

But Apple must be able to get competitive in terms of pricing in order to generate new customers. Because if they don't they may not be able to compete soon with the other manufacturers like Samsung.

What do you think about it?