Until recent changes in the Chinese law, China was seen as one of the largest contributors to piracy and product counterfeiting. Apparently, even with changes within the legal structure of the country, it is hard to prevent copycat products from being developed like Meizu’s M8 phone.4 It is not just the iPhone itself that can be a target for counterfeiting, components that make up the iPhone may be a targeted as well, such as batteries.
Apple has decided to address this issue in the US the same way it has addressed many of its products in the past, via authorized dealers; in this case that ‘dealer’ is Cingular. However Cingular as a broad band provider will only hold the exclusive rights from mid-2007 to end of the year. Additionally, Cingular does not support GMS networks nor operates outside the US, thus it is expected that Apple will be forming exclusive provider rights to others come 2008 in the US, Europe and other regions/countries that are tentative launch sites.
Regardless of measures taken by Apple (counterfeit prevention site for Apple: www.apple.com/legal/contacts.html), with the benefits of the symbol of ‘ownership prestige’ that Apple wishes to project for devices (like the iPod), there will also be a continual market for counterfeit or copycat products. In many cases it may not even be possible for the common consumer to afford to pay for legitimate Apple products given the tariffs7. This can also add to Apple’s image which is brought out by India Editor of Jam magazine “The fact that iPods are unaffordable makes them iconic.”
There is little that Apple can do presently with counterfeit issues in international countries and in some cases it makes little economic sense to pursue costly legal options with uncertain outcomes. Many issues regarding piracy and counterfeiting can only be settled by adopting a grey market scheme where legitimate products are sold under cost values by grey market supply chains. Legal Differences – between countries and how they impact the international marketing plan of Apple’s iPhone.
Legal differences such as prior use (whoever can establish first use is considered the rightful owner) or registration (in trademarks and patents), differ from country to country and need to be addressed before market entry. Additionally, the cultural differences regarding how intellectual property is viewed may vary. For example, if IP is seen as ‘adding to innovation and provides for individual rewards’ or ‘should be the benefit of all and shared’ changes the decisions on how markets and competitors may react to patents, trademarks and IP. When deciding upon market entry it is important to address these types of legal issues with corporate attorneys or consultants whom have prior experience in international IP laws rather then rely on past experiences or assumptions of how laws may apply.
Additionally, marketing laws also have a huge impact on a corporation’s plans to promote, develop and distribute a product. Marketing laws that effect labeling, pricing, channels of distribution and even advertising must all be considered prior to developing a marketing plan or entry. Even once all these items are addressed, there must be continuous understanding of laws that might prohibit certain types of sales promotions or special offers. Cultural differences in how products are advertised also play a key role in understanding the legalities of doing business in a foreign country. An example of this is China, who heavily censors advertising and bans any advertising that might unfavorably reflect upon government or China.
Law violations in one country can also lead to further legal battles in other countries. In 2003, an unhappy US iTunes user filed an anti-trust case against Apple because he stated it forced the consumer to purchase an iPod to use iTunes. Apple filed a motion to dismiss the case and was denied by the US courts. Subsequently, in early 2005 a consumer group in France filed a similar suit along with several other Nordic countries. Apple, even if successful in it’s US battle given the number of business hosting downloadable audio content, may face different circumstances in European countries who have limited hosting possibilities.
Some headline news excerpts and links are provided: “Some European countries claiming Apple’s DRM policies violate contract ; copyright laws; Claim Apple’s FairPlay DRM locks consumers into owning iPods because not compatible with rival music/players; Norway began campaign in June 2006 to persuade Apple to change DRM policies; France, Germany, Netherlands joined; all claim Apple’s DRM policies violate their laws; Sweden, Denmark, Finland expressed support for Norway’s campaign, but not officially claiming Apple violates their laws; Norway threatened legal action unless Apple changes policies to allow compatibility with competing players/music by Sept.
US Laws Applying to US Companies Operating Outside US Apple Inc. (aka Apple) is a US publicly traded corporation subject to the laws of the United States. Thus, in evaluating its role in marketing the iPhone product, it is necessary to understand the implications of US laws on US companies that operate outside of the US. Several laws prohibit the taken of bribes, trading with countries that constitute a threat to national security and participating in commercial ventures that negatively affect the US economy are just a few. Apple must comply with the objective theory of jurisdiction when dealing with consumers or companies outside the US. The ‘objective theory of jurisdiction’ means that Apple must comply with US laws even when doing business outside the US territory.
Therefore, not only does Apple have to contend with issues regarding various countries for which it intends to market the iPhone, in this case the EU, but also the laws outlining its business practices with other companies and governments of foreign countries. These issues involving the anti-trust case in several European countries will need to be settled not only for iPods but also iPhones which rely heavily on the backend technology of the iPod for it use as a music player as well as a phone — one of its largest selling features. As of April 2007, the European Commission has opened an anti-trust probe into the iTunes case.9 Apple will have several EU cases as time continues to battle regarding its decision to limit iTunes to iPods only.10
Another case that is involving iTunes and European Commission regulations that of breaking the EU competition laws — charging different prices for the same product, such as iTunes downloads. Apple also must comply with European laws regarding competition and pricing and continues to find itself in hot water over territorial restrictions. In response to investigations of Apple violating EU Law, “A spokesman for the European Commission — the EU’s executive body and top competition regulator — expressed concern Monday that Apple might be infringing the law by imposing “territorial restrictions” on music downloads.
European consumers are only able to download music from the iTunes site in their country of residence and prices differ from country to country within the 27-nation European Union.” Anti-trust issues will continue to plague Apple, not only in the US, but also in the EU, with Apple have to face both battles on two different fronts. It is noted that the outcome of these possible future litigations could have a large impact on the image of Apple’s products and the iPhones acceptance in the EU market.
When conducting our research we have narrowed down the major markets or market groups where we will introduce iPhone. These markets are: South Africa, Europe and China. Factors such as total population, new units sold per year, market maturity and income levels. On the global scale in 2004 there were 1,752 million cell phone users globally.
Economic Environment Europe European Union is the world largest economy. It is responsible for 30.3% of World GDP. As of 2006 there are 492 million European13. The average GDP wroth rate in 2006 was 2.8%. An average inflation was 2.2%. In 2003 the EU has widen its membership to additional 10 new member states having now total count of 27 states. In January 2007 the EU was joined by two additional states: Bulgaria Romania with now the total count of 29 member states.
The EU has a very developed mobile phone market. 63% of the population currently uses mobile phones. According to www.itfacts.biz 27% Europeans buy a new phone every year15. Taking in count the population this makes 132.84 million new devices sol per year. Economic Environment Latin American The population of Latin America is 548.5 million in 20 different nations. GDP per capita for 2006 was 3.8%16. Brazil is the largest country in population and also the largest market. In Latin America 46% of the population uses mobile phones. There were 115 million units sold in Latin America in 2004. The predicted sales for 2010 are 126 million.17 The expected mobile phone usage for 2010 is 65.5%.