Yes – Apple needs China. Who can ignore a country with a population of over 1.3 billion that is experiencing a boom in middle-class incomes? Not Apple. And when it comes to business, sometimes concessions have to be made. Now although this example is a more extreme one, the bigger picture is that for any business to break into any new market, local cultures and policies must be adhered to. Business expansion is a complex process that involves knowledge and expertise of the local country to the nth degree, which sometimes means changing policies or approach to enable successful entry and long-term growth.
That is what Apple has been forced to do. With competition in the smartphone niche heating up, and its mature markets getting to saturation point, the Wall Street giant must cooperate with the government to get a piece of the Chinese market.
There was public uproar when Apple removed hundreds of apps from its app store in China upon a request from the Chinese government. Of notable mention is Microsoft owned Skype that suffered from the purge. The move by Apple was in response to a government move to affirm its grip on surveillance and censorship by increasing enforcement.
Apple acknowledged that it had actually removed 674 VPN apps in 2017 alone, which is more than twice as many VPN apps the company removed from its App Store in 2016. The reason is purely to comply with local cyber security rules. From complying with these regulations, the company will be able to operate freely and improve its Internet services
Apple has once again, according to many, abased itself by agreeing to host Chinese users’ iCloud accounts in a new Chinese data centre. Such an act is a first-of-its-kind by a leading American tech company with a record of fighting for data privacy. However, such an approach is dictated by the Chinese digital commerce regulations that demand foreign multinationals operating in China store users’ data in the country.
Despite acceding to such demands, Apple operations in China have been chequered with a not-so-cosy relationship with authorities. From stories of Apple factory workers being made ill from chemical emissions to a spate of intermittent suicides at its manufacturing campuses.
In the US, where the rule of law is strong, Apple has recourse for its battles. Conversely, China has a whimsical legal system that provides very limited options when there is a conflict with government authorities.
The ethical conundrum becomes more complex for Apple in China when we factor in the reality that the Chinese government wields a lot of leverage over its operations in the country. Apple iPhones are not only manufactured in China, but the sales of Apple products account for a quarter of the company’s global turnover.
Clearly, the larger a company is, the more scrutiny it receives from the Chinese government. Admittedly, most decisions Apple is taking deserve some moral fury. But, truth be told, every US tech company that seeks to “cash in” on the lucrative Chinese market must make concessions.
Notably, LinkedIn limits its content while Evernote stores Chinese account holders' data within China. The few companies that resorted to being ‘moral’, such as Google, had to pack up their bags and go home.
As a result, the Apple story is a script that will be repeated by most companies seeking to increase their stake in the Chinese market. Although the next example is less extreme, there are some key learnings in the art of lead generation.
Netflix uses original programming to expand into Europe
Netflix, the global streaming giant with a Midas touch, has long set its eyes on the European market. Starting their onslaught on Europe, Netflix began by building its subscriber base by providing access to hit US films and shows coupled with a modicum of locally acquired programming.
The pervasive onslaught to the Europe market has been a motley cocktail of an original content offering, licensed programming, and co-productions, which started in 2014. This expansion isn’t just being maintained, but is continuing at pace with reports of $1bn being invested in original productions to fuel further growth across Europe.
The company has immersed itself into the European market by bankrolling the production of locally made shows casting top European talent. Buoyed by the success of programmes such as The Grand Tour and The Crown, Netflix has managed to attract European subscribers into its network.
Moreover, Netflix has invested heavily in content production from European drama to boost its appeal to its target audience. Therefore, their audiences have found the stories from the network to be resonating with their backgrounds. This is high quality tailoring of content for specific audiences.
With competition in the streaming industry at its all-time high, Netflix has used its original content as a differentiator that has made it gain wide subscription in Europe. Facing aggressive competition from such players as Amazon, Netflix seeks to ensure that almost 50% of the content streaming from its platform is original. Indeed, Amazon and HBO are both focussing on the production of local language content for each European country.
While Netflix has managed to increase its foothold in Europe, the journey has not been that easy. Beginning January 2016, the company had to launch a serious crackdown on VPNs who wanted to stream Netflix’s content for free.
Despite this, some have managed to circumvent the process to enable users’ access to content. They do this through encryption of their IP addresses to avoid detection of their domicile. But some VPNs, such as F Secure Freedome, do not allow users to watch Netflix. Despite it being a VPN that can help customers encrypt their IP address and access Netflix content, the company prefers to bar users from accessing Netflix.
To re-cap, Netflix provides different content for different countries despite the fact that users use the same website. This means that even when you are travelling from one country to another, you cannot load the content you love because what you want to watch is not available in the area you are in. Such VPN control is a pain for many, but is vital to streaming providers as they seek to focus on highly targeted content.
In summary
Whether a behemoth on the scale of Apple or Netflix, or a niche player trying to unlock additional revenue streams across new countries, there is a common thread across all of their business expansion strategies. Namely: be sure to put the local customer, culture, regulations and policies right at the heart of any drive or you will fail. That doesn’t mean a business must toe-the-line and compromise its values and culture beyond recognition, but it does mean flexing to the local market demands to establish a foothold.
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