Apple Watch

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Apple Watch Immediate Competitors
Product  There are 4 versions (Apple watch series 4; Apple watch
series 3; Apple watch Nike + and Apple watch Hermes)
of smartwatches, predominately under two series, GPS
and GPS + Cellular
 Highly customizable smart watches, which allows the
customers to select their own Apple Watch face sizes,
band styles (i.e. Casetify printed band, Nike sport band,
Hoco original stainless steel band and etc) and colors.
 Present total integration of product with Apple hardware
(iPhone, iPad) and software (IOS, iTunes, Apple store).
This enable people to stay connected through calls and
text even when they don’t have their phones with them.
 Make payments through Apple watch using credit or
debit card
 Apple smart watch is well known for its high quality and
innovations
 Up to 14 calendar days to return the product from the
time customer receive it, at no cost or they can simply
drop it off at any Apple store.		  Health track specifically designed for female—Fitbit
 Better Battery Life (i.e up to 30 days with regular
use and up to 45 days with minimal notifications)—
Xiaomi
 Customizable watch face designs and features (i.e.
personal weatherman) (Chen 2019)—Xiaomi
Amazfit Bip
 Water, dust, temperature and scratch resistance ow
ing to the Gorila 3 SR+ glass (Samsung n.d.)—
Samsung
 Allows voice assistance and measures over 21 in
door and 39 outdoor fitness activities (Carnoy 2018)
—Samsung
 Personnel fitness coaching app—Fitbit
 Value given for consumer feedback when designing
products—Fitbit (Personal Goal Setting App) was
developed in response to the customer feedback on
requiring for a more personalized digital guidance
for fitness activities.
Price  Apple pursue premium pricing strategy: its’ prices range
CNY 2,142 (Series 3) to CNY 11,396 (Series 4)
 Company sell products at a higher margin compared to
other competitors stressing on the product value cater
through differentiation and brand recognition.
 Apple facilitates customers to get up to CNY960 in
credit of Apple store gift card towards new device if cus
tomer traded their smartwatches (eligible Apple Watch
Series 3 (GPS + Cellular) with stainless steel case)		  Premium quality for less price, brands such as Sam
sung (i.e. GearS3 – CNY1,649) or Fitbit (i.e. Fitbit
Versa – CNY1,298) have a lower relative base price
compared to Apple Watch (i.e. Series 3 GPS –
CNY2,142)
 Priced for the value addition (i.e. Xiaomi Amazfit –
CNY799) opposite to Apple Watch’s premium pric
ing strategy
 Less cost more sales pricing strategy—Xiaomi
 Offering a separate line of smartwatches with basic
functions for cost conscious customers—Fitbit
Place  Strong retail network: 42 Apple retail stores in China
(Apple Inc. n.d.)
 Direct sales channel: Apple stores placed on major cities
(Shanghai, Beijing, and Hangzhou) and shopping malls
(Eg: China central mall, West Lake shopping Centre in
Hangzhou)
 Apple online stores
 Apple pursue free next business day delivery to most of
the metro areas for its watches		  Strategic usage of channel marketing —Samsung
(strong in distribution network)
 Usage of Omni-channel strategy—Samsung aims to
connect physical and digital retail and connect every
point of shopping experience of the customer
(Howse 2017)
 Efficient usage of traditional channels—Fitbit
(available in store)
Promotion  Advertising (Media presence, magazines, and bill
boards): Vogue China decorated its cover page with the
Chinese super model Liu Wen wearing an Apple watch
which indicates that apple trying to build brand associa
tion with the community
 Mobile advertisements: on tram station and bus stops.
 Apple launched a large promotional campaign to attract
Chinese customers by encouraging them to use Apple
Pay for shopping		  Effective usage of social media and e–commerce for
marketing—Xiaomi (it barely use TV ads or physical
banner ads but rather focusing on the benefit of using
social media, internet and word-of-mouth to promote
its watches) (Karam 2018)
 Effective usage of third party sales, through the use
of agencies and intermediate parties —Huawei

 

Strengths:
 Attractive design, customization and replaceable band of Apple
Watch differentiate the product from competitors
 Apple has unique identity and global status, which can increase
the brand loyalty and enhance the brand image.
 Since the supply chain is based in China, which allows Apple to
obtain the full control of the manufacturing process
 A cellular connection or eSIM technology is the latest feature of
Apple Watch series 4, which allows consumers to use the
Watch independently without their iPhone (Kahn 2018)
Weaknesses:
 Apple Watch only supports the IOS system, whereas other
smartwatches have the option to pair with other operating
systems.
 Low battery capacity of Apple Watch has led other competi
tors to take it as an opportunity to gain the competitive ad
vantage
 Market cannibalism: Apple Watch may decline the sales of
iPhone as it replaces the function of the smartphone
 The unique design of the Apple Watch has increased the
replicates (Saltzman 2019)
Opportunities:
 The growth of children’s smartwatches in China allows Apple
Watch to expand its product line
 The continuous growth of Chinese economy and technological
development (Gilbert 2013) has increased the affordability of
people in demanding smartwatches
 The busy lifestyles and health consciousness have boosted up
the need in wearable devices that can assist people to get up
dates on their health and business schedules.
Threats:
 The growth of local brand (i.e. Xiaomi and Huawei) has in
creased the competition as people tend to choose local brand
over international brands in order to support the domestic
economy
 Even Apple Watch is assembled in China, as an international
brand, it still subject to the high tariff rate, which continuous
to make its product more expensive.
 Due to the lower price offered by Xiaomi, its shipment has
excelled Apple (IDC Worldwide Quarterly Wearables
Trackers, 2018)
SWOT Analysis

 

Porter’s Five Forces
Threat of New Entrants
 Apple Watch ranks #1 in the Chinese smartwatch industry due
to its successful brand reputation, whereas, itself does not elimi
nate the threat of new entrants, especially corporations are will
ing to take risks and challenge the status quo with differentiated
products without fearing to damage their brand associations.
 The R&D of smartwatches requires companies to have a sub
stantial amount of upfront cost (roughly $40 million) in order to
rapidly build the foundation (Sacconaghi, Garfunkel & Colledge
2005, p. 47) in the industry. Therefore, a higher capital require
ment may set up effective barriers to new entrants.
 The International Data Corporation (IDC) shows that in 2018
(3rd quarter), China’s smartwatch shipments reached 14.5 mil
lion with a growth rate of 13% year-on-year (Draper 2019).
This adoption rate may create incentives for companies to par
ticipate in the market.		 Threat of Substitution
 The threat of substitute product for Apple Watch is high,
since Apple Watch requires to pair with a specific operating
system (IOS), unlike other smartwatches (i.e. Wear OS) that
are capable of operating with both IOS and Android systems/
phones, which might be a more flexible option for users.
 Whereas, brand loyalty may limit the threat of substitution,
as Apple buyers sometimes have the propensity not to switch
to other brands/products.
 Given Apple Watch has emphasised its abilities of a fitness
and sleep tracker, it also dives directly into competition with
current fitness wearables (i.e. Fitbit) (Jary 2019).
Bargaining power of suppliers
 Given Apple has hundreds of suppliers (Apple Inc. n.d.) in pro
ducing various components of the Apple Watch, the bargaining
power of suppliers is relatively weak in the marketplace, as Ap
ple has the flexibility to choose from among a huge number of
potential suppliers to produce components for its Apple Watch.
 Since the competition in making Apple’s components is rela
tively high, the switching cost for Apple to change from one
supplier to another is not a significant obstacle for the company.
 Where in fact, Apple demands its suppliers meet higher stand
ards and as well as higher restrictions and benchmarks for build
ing safe and respectful workplaces.		 Bargaining power of buyers
 Buyers tend to have a stronger bargaining power when they
buy large volumes in relation to the sales, or when the prod
uct is standardised/undifferentiated in the industry (Wolff
2016, p. 698). For Apple Watch, individual bargaining pow
er is relatively weak, as the loss of one buyer may represent
a negligible amount of sales for the whole company.
 The collective marketplace bargaining power of buyers can
sometimes be seen as a strong force, especially when a mas
sive number of buyers are defecting to Apple Watch’s com
petitors.
Intensity of Industry Rivalry
 The competitive force within the wearable electronics industry is strong, given not just Apple itself, but its competitors (i.e. Xiao
mi, Samsung or Sony) all have invested significant capital on research and development for smartwatches.
 The rivalry among the competitors of Apple Watch will not only limit to wearable electronics industry giants, but also the
‘contactless’ payment system or health tracking features, as well as other smart clothing and accessories (i.e. smart glasses) that
would meet the same need

 

Political factor
 The trend of nationalising decision made by the Chinese gov
ernment may discourage private ownership of technological
companies (i.e. Apple Inc.) (Blading 2018)
 The Chinese government pressures multinational businesses to
produce and source domestically, which could adversely impact
companies if they could not find necessary material with the
expected quality in China.
 The trade war between the US and China can heavily increase
tariffs and trade barriers (Salinas 2018), which discourage the
Chinese people to buy international products (i.e. Apple Watch)		 Economical factor
 Due to high tariffs imposed by the US, consumers will have to
bear the burden of tax and pay more for Apple Watch.
 Being the second largest economy in the world, Chine has a
favourable GDP growth rate. Whereas, the large amount of
foreign currency reserve of USD 3 trillion (Santander 2019)
can be considered as a healthy indicator to serve any unex
pected downturns in economy, which creates a more stable and
safe business environment.
Social factor
 In 2018, 11.9% growth of elder population was recorded and in
next 30 years, people aged 65 and over expected to make up
30% of china population (Agencia EFE 2019), which arise the
need of expanding the market strategy from focusing on youth
to older generation.
 Sourcing from: The world bank, population ages 65 and above,
2017
 The hierarchical culture and power distance in China and the
casual culture in the US may arise cultural conflicts between
the operations of two countries. International companies (i.e.
Apple) who want to operate in China, should be familiar with
the local culture, which is shaped with Confucianism
(Lunicheva 2014) and other unique cultural aspects.
 People in China are obsessed with using luxury items, and
since Apple has been classified under the expensive brand cate
gory, therefore, it may provide more opportunities for the com
pany to expand.		 Environmental factors
 In 2007, China became the world’s biggest emitter of carbon
dioxide and other gases (Zhang and Da 2015). In order to
overcome this situation (the growing concerns in global warm
ing), the China government has imposed strict regulations to
protect the environment, which makes the companies to adhere
to these rules, while operating in China.
 With the growing concern in water scarcity, companies are
advised to implement water and waste management systems
(Jiang 2009), which can be a costly decision for the firm to
address.
 China has signed the Basel Convention Agreement to limit the
toxic waste (Duan et al. 2008), this leads companies to focus
more on the sustainable operations, and practice sound envi
ronmental protection programs.
Technological factor
 Since people recognise the benefit of using technology as a
crucial part of their daily lifestyle, it may increase the demand
for high-tech wearables such as Apple Watch.
 With the growth of technological aspect in China (i.e. Artificial
Intelligence and 5G networks) with other infrastructure (Li,
Niu, Papathanassiou and Wu 2014), allows high capital compa
nies such as Apple to provide a better service to its consumers
at a more efficient manner.
 The trend of using transit cards in China enables Apple to
launch a new update (IOS 4.3) with the feature, which allows
the users to make payments through their smartwatches.
 The increasing research and development (R&D) funding (i.e.
China has a 5-Year Plan [2015-2020], where 2.2% of its GDP
has be assigned for R&D) in China (ChinaPower n.d.) provides
more space for innovations.		 Legal factors
 The Cybersecurity Law in China provides a secured informa
tional platform for organizations to operate without the fear of
cyberattacks and other threats (Orji 2012), by enforcing for
eign firms to store data in China will limit their associated
compliance risks.
 The new Foreign Investment Law will create a “stable, trans
parent and predictable market environment for fair competi
tion” (Zhang, Gao and Ben 2019).
 Intellectual property rights in China requires companies to
purchase property rights (i.e. Patents) in relation to the use of
software and hardware (Dimitrov 2009), which could add ad
ditional costs for the company
PESTEL Analysis

 

Recommendation 1: to promote the Apple brand in China as one of the top 4 brand’s in their consideration set when pur
chasing an electronic wearable through advertising on mediums such as television and social media
strengths and points of differentiation from other mass produced Android devices. According to Pierini (2018), Apple current
ly only has 9.7% of the Chinese mobile phone market share, where the majority (i.e. 80%) falls into the four biggest Chinese
owned smartphone manufactures – Huawei, Oppo, Vivo, and Xiaomi. Although this strategy isn’t directly focused on increas
ing sales of the Apple Watch, it is important for Apple to recognize that rational consumers with one of these 4 brands won’t
buy the Apple Watch as it isn’t compatible with their Android operated device (unlike its competitors, i.e. Wear OS). Addi
tionally points of differentiation for the Apple Watch is also reliant on it being connected to a compatible iPhone device.
Recommendation 2: to expand the current market share through the increase of facilities (service span) or innovation
omi) use the longevity of their batteries to promote their smartwatches. Therefore, it is recommended for Apple Watch to in
vest in the area of using Solar Cell technology as a power source. Thus, users do not have to charge their smartwatches on a
regular basis, which can be used effectively as a selling point in the electronic wearable industry.
Recommendation 3: to concentrate on specific needs of different age categories
 Aging population of china keep growing and it is expected that in 30 years, 30% of population will be consisted with elder
generation (Agencia EFE,2019).Therefore, it is important to focus on the elderly crowd without relying too much on younger
generation. In order to attract elderly people, Apple can introduce a smart watch with specific features, i.e. the concentration of
medication intake, doctor/therapists channelling, finding the locations of hospitals/aged care centres or set a reminder of doc
tor appointments etc.
Recommendation 4: to introduce an affordable version of smartwatch (similar quality) with basic functions
 Since Apple Watch is consider to be a comparative luxury item in China, consumers need to contemplate if they are willing to
pay a premium price to obtain the watch. This has confined Apple to expand its market share and at the same time to compete
with low priced smartwatch competitors. Therefore, in order to expand the market share, Apple can introduce a smartwatch
with basic features at an affordable price. This will facilitate apple to exploit market share through attracting middle-class peo
ple who love to possess branded items.
 Apple has already taken the approach of a ‘budget’ more cost effective iPhone with the XR model. Likewise with the Apple
Watch, they could take a more similar approach where the display or other features that are not fundamental or considered as
important to Chinese consumers can be loss in an effort to save costs of production, therefore a lower RRP. However, in this
scenario Apple has to be mindful not to reduce its product quality parallel to its price as it will damage the reputation of the
company.

 An advertisement on TV that promotes the advantages of using the iOS operating system when the Apple Watch is paired with
an iPhone, such as its capability in picking up tasks or viewing notes/schedules that were created on one device and able to be
viewed on the other device and vice versa.
 Increase sales and usage of iPhone devices by launching comparative advertising on social media that highlights the iPhone’s
 As Android is consumed by 80 % of the Chinese mobile phone market, an update in the “Watch iOS” can make it compatible
with the android operating system in order to attract Android users.
 Apple has already allowed users to use their smartwatch to pay for transits in the main cities of China (Beijing and Shanghai).
It can be recommended to expand this facility to other cities and regions of China as public transport is a popular mode of
transportation and there is a high demand for the apple pay system in the cities mentioned above.
 One of the major weaknesses of Apple watch is the comparative low battery life than its competitors; as competitors (i.e. Xia To take a further step in innovations, a hologram technology should be considered into the smart watches, so to provide users
with better visual experience (same as using a laptop/computer).
 Although this option can be packaged as a premium Apple Watch, the introduction of the product may still be too futuristic
and would require a significant amount of investment on R&D.
 Additionally, Apple Watch can expand the market to children, which allows them to use the smartwatch under the parents’
approval (i.e. limit the gaming time), or with build-in emergency contacts to allow better protection of children.
To increase the market share of Apple Watch in the electronic wearables industry in China to 8% by the end of September 2020
According to Passport GMID (n.d.), the current market share of Apple Watch in China is approximately 5.1% in 2018 for electronic wearables.
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