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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.
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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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