Apple Company’s Penetration Strategy in the Russian Market

Introduction

In the recent past, companies have increasingly gone global in an attempt to expand their respective market shares. However, such multinational companies face numerous challenges in the international market, a situation that may limit their growth. For marketers to succeed in the global market, they have to consider the macro-economic environment of the foreign country to assess their ability to satisfy the overseas bazaar (Christiansen 34).

It is important to note that the “micro and macro” environments of business vary from one country to the other. This observation underscores the need to consider the two environments before making investment decisions. In the past, many multinational companies have failed in the international market apparently due to lack of sufficient information regarding the macro-environmental factors in the foreign market.

Such factors, which may be political, legal, technological, and/or economic in nature, will be discussed in details in this presentation. To mitigate such failures in the future, this paper explores the diversity of macro-environmental in different countries. Specifically, the paper achieves the stated objective by examining the macroeconomic forces present in Russia compared to other countries. Additionally, the paper develops a marketing strategy that multinational businesses may utilize to penetrate the Russian market. To paint a clearer picture of the proposed market penetration strategy, the paper develops the strategy using Apple as a case study.

Russia’s PESTEL Analysis

One of the political factors that are likely to affect Apple’s entry into the Russian market is corruption. The country is ranked among the most corrupt countries around the globe, implying that businesses operating there may lose their money to irresponsible public officers (Adamkasi). According to the author, this finding is unlike the West countries such as the US in which corruption is intolerable (Adamkasi). The other political factor likely to affect multinational companies in Russia revolves around diplomacy rows. Currently, the US has imposed sanctions on Russia over allegations of interfering with the US elections. If such sanctions continue to be imposed, diplomacy row between the two countries may be inevitable, hence negatively affecting the US multinational firms operating in Russia.

In terms of economic factors, Russia is speedily resuming its initial financial status after suffering a big blow during the 2008 global economic recession. The country has some of the largest oil deposits around the globe. Such resources are central to its economic growth. Based on the government’s projections, the country’s economy is expected to hit $3.18 trillion by 2018 (Adamkasi).

Such speedy economic growth facilitates the expansion of businesses since it increases the overall earning per capita. However, the country has a high unemployment rate, which could affect customers’ purchasing power. Countries with high unemployment rates may not be a good investment option, especially for premium-priced goods. Additionally, the country’s taxation laws seem to be shaky and that they may go up in the future.

In terms of social factors, following the 1990s economic recession, the country slowly moved from the communist to a capitalist culture, which created a huge gap between the rich and the poor. The rich people tend to live luxurious lives and are likely to spend huge amounts money on quality products (Khan et al. 956). On the other hand, the poor have little money to spend on such goods. Consequently, they often spend on the lowly priced ones. Education levels for the entire population are high to the extent that most people in the country achieve at least an O-level certificate. HIV and alcoholism are the two major issues that have led to the weakening of the country’s population (Khan et al. 956).

In the recent past, Russia has made substantial investments in technology, mainly focusing on areas such as chemistry, mathematics, and aerospace. The country is also making investments in digital technology by upgrading analog systems in the public sector. Besides, the country is investing heavily in Internet connectivity. It plans to ensure that 90% of its citizens access the Internet (Adamkasi). Businesses operating in the area of technology stand to gain immensely from the technology improvements. However, the country does little to protect innovators by failure to enact strict patent laws. Consequently, technology is easily stolen and used by local business, a situation that limits the profitability of multinational firms.

One of the environmental factors that are likely to affect multinational corporations in Russia encompasses changes in the environmental laws. In 2010, the country enacted an environmental conservation policy that would see businesses operating in the country reduce their overall emissions (Christiansen 76). However, the policy has not been effective in combating the vice apparently due to the lack of commitment from the current regime. The increased campaign against environmental pollution may prompt the country to enact strict environmental legislations in the future. The increased oil explorations in the country may also speed up the process of enacting such legislations in the future.

In terms of legal factors, the independence of the judiciary in Russia is compromised and largely controlled by the executive. The rampant corruption in the country is also blamed for injustices exhibited by the prevailing courts. The situation is likely to affect operations in the land since certain business disputes must be resolved in a court of law. However, the government is striving to control the situation by enacting policies that are likely to guarantee the judiciary of its independence. However, the country has fewer product regulation laws relative to its peers, although the situation may change in the future (Adamkasi). Changes in such legislations may affect the businesses operating in the country in the end.

Apple: SWOT Analysis

Other than the macroeconomic factors, multinational companies need to consider their strengths and weaknesses to assess their ability to counter the challenges that may be present in the foreign business environment. A firm may assess its strengths using the SWOT analysis tool. In this section, an example of Apple Inc’s SWOT analysis is used to illustrate the how multinational companies should assess their strengths and weaknesses before penetrating foreign markets.

Strengths
  • Strong brand equity
  • Great customer experience
  • Innovation
Weaknesses

Perceived high prices

Opportunities
  • Evolution of the middle-class
  • Internet marketing
  • Globalization
  • Mergers and acquisition
Threats
  • Competition
  • Changes in legislations

One of Apple’s major strengths lies in the company’s strong brand equity. Since its inception, the company has maintained a good name among its customers. Consumers tend to buy the company’s products just because they are Apple-branded (Khan et al. 958). Therefore, Russian customers may quickly embrace the products due to the company’s strong brand equity. The other strength is that the company is highly innovative and that it continuously increases its customer experience (Khan et al. 960). This strategy may work for it in the Russian market since customers are increasingly concerned about quality, as opposed to the quantity.

The greatest weakness of Apple’s products is the perceived high prices. The company currently operates under a premium pricing strategy, implying that customers are charged high fees (Ahmed). Given that a large percentage of Russian consumers are unemployed, its products may not be affordable to them.

In terms of opportunities, Apple stands to gain a considerably high market share across the world due to the rapid evolution of the middle class. The mentioned group of people is ready to pay a premium price for a quality product (Khan et al. 956). Next, the rapid embracement of the Internet across the globe is a great strength for the company. The Internet allows businesses to market their respective products at a reduced cost. Lastly, the company may partner with various industry players across Russia to ease its penetration into the market.

However, the company faces great competition from other smartphone businesses in Russia. Reputable companies such as Samsung, Palm, Sony, and Blackberry own smartphones in the market, hence posing a great challenge for Apple. Changes in the Russian legislations may also influence the company’s turnover in the future. Concerns have been raised that smartphones contribute to environmental pollution if poorly disposed (Ahmed). This situation may prompt the Russian government to enact stricter legislations to control pollution, which may negatively influence Apple’s sales.

Proposed Market Entry Strategy to Russia

Christiansen defines a market entry strategy as the approach adopted by a business in an effort to expand its market share (39). Generally, new markets present numerous challenges. Hence, businesses must devise the most appropriate strategies to be successful. For Apple, it would be advisable for it to employ the franchising strategy in its initial days. Although competition in Russia is not very stiff, the process of setting up a store may be a challenging one due to corruption and bureaucracies evident in the country.

The rampant corruption in the country may limit the ability of Apple to acquire the relevant fixed assets, not to mention that it may present a major roadblock to the acquisition of a business license. The problem of corruption is compounded by the fact that the perpetrators of the vice often target the less connected businesses such as SMEs and new entrants. Therefore, Apple may encounter great challenges in its attempt to establish stores in the country. A franchising strategy will ensure that the company does not lose money to corrupt officials. It will also ensure that it starts business immediately.

In addition to franchising, Apple should set up online stores from which prospective Russian customers can obtain the company’s goods. Stores should be designed in a way that they exclusively target the Russian consumers. Customers should be able to place orders online and/or receive the ordered goods via the franchisers. The company can also partner with Russian electronic companies to have their goods sold in the market without structural stores. Online stores coupled with such partnerships will ensure that the company’s products are available in the market before the company opens structural warehouses (Khan et al. 956).

This strategy will help it to achieve savings in terms of advertisement costs when it eventually establishes Apple stores in the country. Customers will have tested the products. Hence, it will be easier for them to distinguish the goods from those of the rivals. The use of franchise and online stores to penetrate the Russian market will avert the risk of possible failure of the company’s entry strategy to Russia. The view is informed by the fact that the company will not make any investment in fixed assets in its initial days, as it would be the case if it opened Apple stores.

However, the franchising strategy and online stores should only be applied in the initial period before establishing the structural ones. The turnover realized by franchisers should inform the company on whether to open stores in the country. If the sales are high, the company may go ahead and open several stores in the country since it will be guaranteed of enough sales in the end. However, given the rapid growth in the country’s population, the available businesses are currently to satisfy the demand for electronic products. This situation provides an opportunity for Apple to open up structural stores in the country to effectively exploit the market. In this regard, Apple should establish several stores in different places across the country to facilitate direct sales.

The Proposed Marketing Mix (4Ps)

In terms of products, the company’s mainly specializes in the following line of products: Mac, iPad, iPod, iPhone, Apple TV, Apple Watch, and Software (Ahmed). The Russian market presents an opportunity for the company to introduce its entire products. The country has a high population, which is composed of people with different levels of income.

Thus, it has varying tastes and preferences. Since Apple has varied types of products, which retail at different prices, it would be important to introduce all goods to sufficiently serve the market. Additionally, Apple’s smartphones are Internet-supported, a situation that makes them attractive to the young population in the land. Besides, the country is speedily embracing technology in the public sector, implying that Apple will find a ready market for its computers and software.

With reference to place, the company needs to utilize a mix of distribution channels to acquire a sufficient market share for its products. The goal is to ensure that customers obtain its goods at the most convenient selling points. As it stands now, the company uses Apple Stores, Online Stores, App Stores, Authorized Retailers, Telecom Companies, and Fulfillment Services as the main distribution channels (Ahmed). The listed channels can equally be applied in Russia to ensure that the company acquires a good market share within the shortest time possible.

To exploit the full potential of the listed channels, the company should open structural stores in the densely populated areas. Permanent service employees should serve customers from such areas. In addition to the structural warehouses, the company needs to have online stores to facilitate Internet-enabled procurement and payment of items. Lastly, the business needs to partner with reliable Russian distributors who it can license to sell the products on behalf of the company. This plan will ensure that the products are readily available to all customers.

In terms of promotion, to achieve speedy acquisition and expansion of the company’s market share, the corporation needs to use the following promotion tactics: advertising, personal selling, sales promotion, and public relations (Christiansen 45). The contemporaneous use of the four elements of promotion will ensure that the company informs customers about its presence in the country. The company should advertise its products via the local media in addition to the Internet. Social media should be selected for the youthful persons among the population. Such young people have massively embraced social, implying that the company may easily reach them through social networks. On the other hand, the local media will help the company to reach the old people, including the less educated ones. Besides, the company needs to employ personal selling as a marketing technique for customers served from Apple stores.

Generally, the prices of Apple’s products are high compared to those of similar products produced by other companies in the industry (Ahmed). The high price is attributed to the perceived excellent quality. Such pricing plan has worked for the business in many markets. The premium pricing strategy may equally be applied in Russia since its products are recognized internationally. The high pricing of the products will ensure that the company makes good returns in its initial days of operations. The Russian economy is speedily growing, implying that people have a lot of money to spend in luxurious products. Additionally, the country is experiencing the emergence of the middle class that is willing to spend higher for excellent quality goods.

Conclusion

The stiffening competition among businesses has prompted companies to go global in an attempt to maximize their market shares and to diversify risks. However, as companies penetrate the global market, they face numerous challenges, which threaten their triumph. Given the differences in the macro-economy of different countries around the globe, it is important for companies to study the business environment of the concerned country to make informed decisions regarding investment. To demonstrate the importance of considering the business environment of a foreign country, this paper has explored the macro-environmental factors of Russia. Additionally, the paper has developed a penetration strategy for Apple into the Russian market.

Works Cited

Adamkasi, Sharon. “PESTLE Analysis of Russia.” PESTEL,

Ahmed, Gulzar. “SWOT Analysis for Apple Corporation.” Management.

Christiansen, Bryan. Handbook of Research on Effective Marketing in Contemporary Globalism. IGI Global, 2014.

Khan, Usman, Mohammd Alam, and Shabbir Alam. “A Critical Analysis of Internal and External Environment of Apple Inc.” International Journal of Economics, Commerce and Management, vol. 3, no. 6, 2015, pp. 955-961.