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Running head: GLOBAL MARKETING OF APPLE IN INDIA 1
Global Marketing of Apple Product: iPhone in India
By:
Ahmet Celebi
Christina Cecil
Wayne Fortin
An assignment submitted in partial fulfillment of the requirement for MKT 631
School of Business Management
National University
Richard Hopkins
1/30/16
GLOBAL MARKETING OF APPLE IN INDIA 2
EXECUTIVE SUMMARY
Performed in the present, this particular case study provides insights into Apple’s global
market strategy of their product in India since its launch. With explanation of a few successful
marketing strategies that the company used to ensure major success in other significant countries,
this study is used to provide assessment on the enriching strategies that Apple as a company used
to spread their product universally. Further, this study provides an assessment of on the Indian
market that provided the Apple Company with a suitable entry into the global market amidst
high competition in the present industry of telecommunication. The product was launched was
introduced in the United States in the presence of much enthusiasm and fanfare from the public
and this further attracted the high anticipation of the product in India and universally as well.
This case also provides a devolvement into the company’s pricing policy, product policy, timing
of global launch and ultimately the company’s market strategy policy in India.
It highlights the strengths, weakness, opportunities and threat of the company in their
struggle to make apple product global. With the SWOT analysis, this study mentions the
successful factor of making a product enthusiastic in a new market when launched. There is a
rise of a global debate in this particular study of the impact of iPhone success and failure on the
Indian market in relation to other products existing in the Indian market both in the present and
in the future market in terms of trade. This study sheds light into the preliminary assessment on
how the Apple industry has managed to be in a better competition to compete in the existing
market. To offer complete understanding of the product price performance levels of the Apple
Company, this analysis compares the strategies used by Apple in comparison to other
telecommunication businesses. To provide a further critical analysis and assessment of the Apple
GLOBAL MARKETING OF APPLE IN INDIA 3
iPhone market and its strategies for entry into the Indian market, this study develops statistical
discussions to interpret the successes and failure of the Apple Company in India.
Apart from performing critical analysis on the Apple industry, the study digs deep into a
critical analysis of India; its Gross Domestic Product, its position in the global market, the
present reaction of its population to newly launched products in relation to software products. An
overview of telecommunication industry and the smartphone industry at large is analyzed in this
study showing all the technological innovation that occurred since the inception of mobile use
and how the industry has taken a different turn with the introduction of Apple phones.
Additionally, this examination looks critically as the ultimate success factors of Apple Company
in selection of targeted markets, targeted age, targeted concentrated markets, the marketing
patterns, advertising patterns and the best trade regions for the product.
To back up the research further, this examination provides figures and statistics in
attempts to communicate about the possible effects that had come with the introduction of Apple.
With the constant rising and growth of the middle class, statistics have concluded that handset
ownership India and in general has increased over the past few years and therefore Apple found a
huge ground to make successful entries into the Indian market. In the case of Apple, the pricing
strategy has been a huge weakness for the penetration of Apple into the existing market.
Statistics have proven that since its launching, the product has suffered reduced sales and low
saturated market places because of its pricing strategy that the market thinks is not pocket
friendly. The study concludes that Indians and the general market calls for a reduction of prices
for the Apple product for them to continue being successful in the present market and therefore
GLOBAL MARKETING OF APPLE IN INDIA 4
in comparison to other mobile devices, Apple pricing strategy is weaker and thus low penetration
in the market.
INTRODUCTION
As one of the so-called BRIC nations, India belongs to one of the fastest growing
economies in the world “in India, there are 240 million mobile users, where the majority of
mobile users are of young age” (Jain & Pant, 2015, p. 5). Therefore, from a marketing
perspective India has the largest customer base of mobile consumers. “Though software and
product lines, Apple emphasize high quality and accessibility” (Gupta & Prinzinger, 2013, p.
216) which represented a promising target market for Apple in the course of its global expansion
plans.
CULTURAL ANALYSIS
“India’s GDP is the third largest in the world and the median age of the Indian population
is 26 years, making it among the youngest in the world” (Bhadra, 2013, p. 59). Urban Indian has
over 27 million smartphone users. The number of smartphone users is higher in metros with
more than 4 million people. “The average household income in India is just US $7,700” (Prins,
2014, ¶ 8).
SECTION 1: BACKGROUND ANALYSIS
1.1 Internal Analysis (Company)
Apple, Inc. is the leading technology company across the globe. On April 1, 1976, Steve
Jobs and Steve Wozniak founded Apple Company in a California. These two entrepreneurs were
GLOBAL MARKETING OF APPLE IN INDIA 5
able to the entire technology industry as witnessed in our contemporary world through
innovation and effective marketing strategies. Initially, Apple was basically competing in PC
(personal computer) industry.
Apple experienced rapid growth during high growth in the PC industry in the early
1980s. During this time, IBM was the key player in the industry. In 1984, Apple introduced its
Macintosh graphical user interface, which signaled the company’s ability to revolutionize
technology industry. Between 1985 and early 2000s, Apple experienced numerous challenges,
especially due to increased competition in the market. Apple’s renaissance commenced in 2001
after it launched its iPod (portable digital MP3) and online store iTunes (which enables
customers to download the preferred music online) 18 months later. This did not mark the end of
its innovation. It penetrated into mobile industry when it introduced iPhone and iPad in 2007,
devices that revolutionized the entire industry around the world.
The company currently offers variety of innovative products and services such as iPhone,
Apple TV, iPad, iPod, Mac, and Apple Watch. It has a portfolio of professional and consumer
software apps to including Apple watch, Apple Pay, iOS, operating systems, as well as a variety
of technology services and solutions (Apple, Inc., 2015, p. 3). Apple Inc. has over 350 retail
stores worldwide and it employs circa 110,000 full-time equivalent employees (Sheer, 2012, ¶
2). “In 2014 Apple announced its highest annual revenue to date with 182.8 billion U.S. dollars
generated in revenue. Over 100 billion U.S. dollars of this was generated by sales of the iPhone,
meaning that the smart device was responsible for an average of 56.2 percent of the company’s
total global revenue throughout the year” (Statista, 2016, ¶ 2).
GLOBAL MARKETING OF APPLE IN INDIA 6
Apple’s strategy focuses on leveraging its exceptional ability to integrate hardware and software,
as well as services in an innovative manner that creates outstanding experience and value to the
customers. The company’s structure is basically based on geographic basis.
1.2 External Analysis (Industry)
Smartphone industry has been growing and is expected to continue expanding. After
China, India’s mobile handset market is the second biggest globally. India’s mobile handset
market has been growing over the past several years, and is expected to experience steady
increase in the next five years. Between 2010 and 2011, the market grew from US$5.88 billion to
US$6.75 billion, an increase of 15% (Pandey & Nakra, 2014, p. 8). This trend, which is expected
to persist, is attracting many players who are seeking for higher margins.
The market offers an appealing opportunity for companies offering smartphones since
many people are substituting basic mobile technology with smartphone technology. This is
because people are seeking for innovative applications and features incorporated in mobile
devices that can enable them to carry out numerous additional functions. Apart from
functionality, there are other factors that influence consumer purchasing behavior including
properties, brand, interface design, price, and physical appearance of the product.
1.3 International SWOT Analysis
Strengths
Resources: Apple has sufficient resources in terms of cash and human resources. The
company’s net sales have been increasing for the last five years. “Apple's revenue came to a total
GLOBAL MARKETING OF APPLE IN INDIA 7
of 13.9 billion U.S. dollars. In 2013, revenue was up to more than 170 billion US dollars”
(Statista, 2016, ¶ 1).
Established brand: Apple’s brand is highly recognized across the globe. The company
has been able to offer high quality products that deliver unique value to the user. This can help
the company to influence consumers’ purchasing behavior (Muzumdar, 2015, p. 15).
Weaknesses
Pricing: The inability to match other rivals’ pricing strategy is a core weakness at Apple.
Android-based smartphones, which dominates major market share, are available at low-costs
(Pandey & Nakra, 2014, p.10).
Threats
Competition: One of the threats in the market is fierce competition from existing players
in the market. Apple will face increased competition from existing players in the market that are
offering Android-based devices including Samsung, HTC, LG, Motorola, Windows Phone, and
Nokia, among others (Pandey & Nakra, 2014, p. 7).
Legal issues: Apple is not immune against legal issues associated with violation of
intellectual property rights including trademarks, copyrights, and patents. Other rivals in the
market could copy Apple’s design and/or features, thus leading to legal disputes.
GLOBAL MARKETING OF APPLE IN INDIA 8
Opportunities
Expanding market: the mobile market in India has been expanding. According to Bhave,
Jain, & Roy, (2013), the market value increased from INR 1.1 trillion in 2012 to INR 1.2 trillion
in 2013, which is equivalent to 8% increase. The subscription of smartphones in India has
experience a dramatic increase. For instance, in 2013, number of smartphone users reached 40
million.
Potential market share: Half of smartphone users in India are people under 25 years,
which accounts for 50% of the total population in the market.
High adoption of mobile phone: most people in the country are highly adopting mobile phones to
download apps since they are eager to learn about novel areas and domains. This is an appealing
opportunity in a sense that mobile phones are appropriate marketing media.
Changing consumer behavior: smartphone users are mainly young people and the often
change their devices. This implies they are curious to test new products available in the market
(Patel, 2014, p. 75).
1.4 Preliminary Assessment
The Indian smartphone industry offers potential market for Apple’s iPhone. There are
potential customers who are willing and able to purchase new brands that deliver unique value to
them. These customers are people born between 1977-1994 this group is known as generation Y.
GLOBAL MARKETING OF APPLE IN INDIA 9
The market also consists of many potential competitors; however Apple is in a better
position to compete effectively in the market. Since Apple has a unique core competence that
helps it deliver the value that potential customers anticipate to gain. Furthermore, Apple has
established strong brand recognition and brand loyalty that will aid in persuading customers to
purchase their brand.
SECTION 2: MARKET SELECTION
2.1 Concentration vs. Diversification
Apple can apply either concentration strategy or diversification strategy. In this case,
however, diversification is more appropriate than concentration. If the company decides to use
concentration strategy, it would acquire sufficient competitiveness. Since it may lose
opportunities related to low transaction cost, skilled, labor, as well as access to know-how,
among others things. With the diversification strategy the company can take full control over the
production of required inputs and/or distributions channels of its products. Additionally,
diversification strategy can help the company create more business units by offering new
products/services in the market.
2.2 Best Trade Areas
Although the entire market offers promising future for Apple’s iPhone, some trade areas
are better than others. Before focusing on the entire market, Apple should target urban areas
(both small and big cities). Urban Indian has over 27 million smartphone users. The number of
smartphone users is higher in metros with more than 4 million people. According to report by
GLOBAL MARKETING OF APPLE IN INDIA 10
Nielsen Informate Mobile Insights, even smaller cities having a population of 1 lakh to 10 lakh
also offers an appealing opportunity for smartphones (Singh, 2012, p.1).
Apple should specifically target urban areas in North and West zones. North zone leads
with 11% of smartphone users followed by West zone with 8%. Later, Apple should target
Southern and Eastern zones which each have 6% of smartphone users in India.
2.3 Target Market Identification
Most users of smartphones are people below 25 years of age. This group accounts for
about half of the Indian population. These people are hardworking, open-minded, confident, and
are eager to purchase new brands available in the market. They are seeking smartphone devices
that can help them to perform more activities such as connecting with friends, searching
information, and accessing social media networks. They also highly embrace new technology
(Bhave, Jain, & Roy, 2013, p. 62).
2.4 Selection of Target Market
In order to capture potential market share, Apple should target people aged between 18
and 30 years. This segment covers people below 25 years, who are described as the most users of
smartphones in the market. According to study by Pandey & Nakra, (2014, p. 8), people between
18 and 30 years are more attracted by core-technical features, valued-added features, and
physical appearance. They are also less price-sensitive compared to other segments in the
market. Since Apple’s iPhone are somewhat more expensive when compared to other
GLOBAL MARKETING OF APPLE IN INDIA 11
smartphones so Apple should target this market segment. Later on Apple can target other
segments using the same product or new products.
SECTION 3: MARKET ENTRY
3.1 Market Entry Strategies
Entry into the market in India is faced with several restrictions. Rules of tariff change
every year along with the government’s budget compilation so determining this is impossible to
do however Apple is fighting “the mandatory 30% sourcing clause as it uses minimal hardware
for its products” (Basu, 2014, ¶ 8). Initially the FDI policy for single-brand retails “involving
foreign equity in excess of 51 per cent, it is necessary for the company to source 30 percent of its
contents from the country’s micro, small and medium enterprises” (Basu, 2014, ¶ 9). This has
prevented Apple for being allowed to open its own retail stores in India. With recent changes in
the laws in FDI policy Apple will now be able to “touch the customers directly. Having full
control of the customer presales, during sales and post-sales experience is what Apple aims for
and this is welcome news, aligning well with Apple’s vertical integration strategy,” Neil Shah of
Counter Point Research told International Business Times” (Gilbert, 2005, ¶ 5).
3.2 Method of Market Entry
While there are many different forms of marketing entry such as licensing which could be
a great strategy for Apple to employ however with tariffs changing each year this strategy isn’t
the best option. “Apple currently runs stores modelled on its global retail outlets through
franchisees” (Basu, 2014, ¶ 8). Franchising seems to be the best strategy for Apple in entering
into India.
GLOBAL MARKETING OF APPLE IN INDIA 12
3.3 Selection of Clients, Distributors, and Partners
Since “a large portion of Apple’s sales is made through third parties that sell many of its
products directly to customers and businesses” (Gupta & Prinzinger, 2013, p. 216). Partnering up
with Indian telecom providers allows for Apple to sell the iPhone paired with the provider’s data
services. By also partnering with independent mobile phone retailers and specialized distribution
companies Apple should be able to reach a wider audience. With “semi-official stores in India --
Apple Shops [would] operate as stores-within-stores to circumvent the rules, [be] staffed by
employees partially trained by Apple and offer an experience comparable to a typical Apple
Store” (Gilbert, 2015, ¶ 20).
3.4 Negotiating Conditions
Negation conditions are done on the basis of franchising fees, sales territory, royalty fees,
contracts, and governmental development fees. This allows for Apple to work with the
government in order to establish their brand in India while still maintaining the regulation that
the government has.
SECTION 4: PRODUCT AND PRICE STRATEGY
4.1 Product and Service Selection for Target Market
Since our target market in India comprises of generation Y or those between 18 to 30
years of age. “They have high disposable incomes and excellent economic growth, and are well
traveled and dynamic consumers” (Schultz & Jain, 2013, ¶ 6). This part of the market views
luxury goods such as iPhones should be “high-quality and provide good value” (Schultz & Jain,
GLOBAL MARKETING OF APPLE IN INDIA 13
2013, ¶ 7). Since the market for luxury goods in increasing products like the iPhone and iPad is
what Apple should focus its sales efforts on.
4.2 Standardization vs. Adaptation
Apple uses a standardization strategy. This allows for easier planning and control for
Apple. However by keeping the price relatively the same from country to country Apple is losing
out on sales in the market in India. Apple’s “current business strategy is to bring the best user
experience to its customers with superior ease-of-use, seamless integration, and innovative
design” (Gupta & Prinzinger, 2013, p. 2).
Apple needs to change its strategy to an adaptation model to better meet “consumers’
preferences, product perception, intensity of competition and country-of-origin affect” (Alon &
Jaffe, 2013, p. 317) since emerging markets such as India can cause issues for distributors in
developing countries. With “adaptation [the company] can be evaluated not only [its] relation to
the final listed price, but also the entire transaction” (Alon & Jaffe, 2013, p. 317).
4.3 Pricing Strategy
With the market in India still growing and consumers being somewhat price sensitive
“Apple’s iPhone 6 starts at $649 (without contract) and tops out at $949 [makes it] impossible
[to] purchase when the average household income in India is just US $7,700” (Prins, 2014, ¶ 8).
In India “the top vendor in a market where up to 70 percent of smartphones sold cost under
$250” (Gilbert, 2015, ¶ 11). This means that Apple needs to re-think its pricing strategy in order
to be competitive in the Indian market. Apple will need to “look to focus on incremental
GLOBAL MARKETING OF APPLE IN INDIA 14
increases by offering cheaper, lower-storage models than in other countries and keeping older
models on sale for longer” (Gilbert, 2015, ¶ 16).
SECTION 5: COMMUNICATION STRATEGY
5.1 Brand
Last year in 2015 Apple has retained its standing as most valuable brand, holding the
highest brand equity with a brand value of $170.3 billion which is a +43% change from the prior
year (O'Reilly, L. 2015, ¶ 1). Branding at Apple Inc. is a standout when it comes to technological
vision for the future and innovation. During the much-anticipated annual World Wide
Developers Conference consumers, developers and competitors tune in globally for Keynote
presentations delivered by Apples design and engineering teams where nothing short of
innovation and lifestyle advantages are anticipated. Such innovation stirs excitement for products
you never knew you needed until Apple creates them. “iPod turned into a strong brand because
of a number of advantages over Walkman player, iPhone and iPad turned into even stronger
brands as a result of multiple advantages over competing mobile devices” (Mourdoukoutas,
2013, ¶ 4).
As innovation develops so does value, seduction and image. All at the same time driving
customer loyalty and filling in the gaps in consumers lives when it comes to entertainment,
education, production and development. “The company has established a ‘heartfelt connection’
with its customers. This can take several forms from building trust to establishing a community
around a product” (Kahney, 2002, ¶ 20). With the current saturation of iPhones in developed
markets such as parts of Europe and the United States Apple will need to turn its focus on rapidly
GLOBAL MARKETING OF APPLE IN INDIA 15
developing countries. In the past few years Apple has already planted corporate owned stores in
Brazil, Russia and China, now it’s time to look into what it would take to bring the iPhone to
India.
5.2 Positioning in Target Market
Apple tends to position itself in areas that have qualities of high urbanizing to consumers
with a high propensity to consume especially within the luxury brands market. According to the
Central Intelligence Agency world fact book, 37.2% of the total population is urbanized, 25-54
year olds account for 40.74% of the population age range, which for the most part aligns with
Apples targeting. Although Hindi accounts for 41% of the language, as it’s the primary tongue
spoken by the people, English is considered a subsidiary official language and is the most
important for national political and commercial communication (Central Intelligence Agency,
2016, ¶ 4).
Running Apple Inc. retail store as well as any other business in India is about creating
and sustaining relationships as opposed to solely fostering metric based standards. Apple Inc.
must also be careful in pricing their products too high since average per capita income and
marginal propensity to consume is lower than in Apples United States domestic market where
consumers in India are likely to seek a Price-Averse decision making process. Therefore a
proposed “market-based method” of costing would be more appropriate which incorporate the
factors of competition and demand.
GLOBAL MARKETING OF APPLE IN INDIA 16
(The Hofstede Center, n.d., ¶ 1).
One of the largest disparities that could have a great effect on Apple’s success on
Hofstede’s framework of dimensions is indulgence, as we can see above India is ranked at a 26
while the United States is ranked at a 68 meaning as a society India is a culture of restraint due to
the fact that consumer expenditures and purchasing power is relatively low compared to the
united states. Thus meaning, Apple price points and positioning will have to be one of the same
overall standardized quality but of lower cost to the end consumer in India.
It is recommended that Apple alter India iPhones in their supply chain and development
projects to do without features the consumers of India could unnoticeably do without that
Americans are fine tuned to such as the exclusion of LTE, Camera image stabilization,
fingerprint sensors, retina displays and a select mode of colors. Apple incorporated low line
GLOBAL MARKETING OF APPLE IN INDIA 17
stretching in China and United States with the release of the iPhone 5c to target a different
segment of consumers that had lower spending power or restraint to indulge. Incorporating this
strategy would limit the chances of creating an iPhone gray market out of India since the iPhone
would be adapted to localization.
5.3 Communication tools
A localized communication strategy will be required in India that adheres to local values
and norms as well as to reach consumers that read and speak Hindi. As development rises so
does literacy “According to India’s Ministry of information and broadcasting 4,852 new
periodicals including newspapers were registered in 2011 in addition to the existing 80,000 plus”
(Patil, 2012, ¶ 7) thus hinting to the fact that printed media would be one of the best ways to
communicate with the masses in India. With the large population in India Apple will need a
widespread and aggressive marketing campaign to increase visibility among its citizens. So
called multi layered distribution can play a big role in reaching the masses via magazines and
newspapers in India, since modern networks and channels are not as abundant in the developing
country. “Most entrepreneurs find it tough to reach Indian consumers because thousands of small
vendors are responsible for handling the last mile in the delivery chain” (Patil, 2012, ¶ 4).
5.4 Communication budget
According to public filings In 2014 Apple Inc. had an advertising operating budget of 1.2
billion, which 48 million used to spread the word about iPhone 6 and 6 plus for five months’
worth of Television Advertisements (Sherman, 2015, ¶ 3).
GLOBAL MARKETING OF APPLE IN INDIA 18
SECTION 6: BUSINESS PLAN
6.1 Sales forecast
“Indian consumer spending are expected to grow four times to USD 4.2 trillion by 2017”
(Capital Market, 2015, ¶ 1) all due to a rising influence of social media and increased spending
power which is especially true in the technology and luxury markets. As interest rates in India
have been cut in late 2015 Economic growth has been steadily growing since the global financial
crisis and foreign direct indicators have been below potential but have been growing steadily due
to the efforts of Prime Minister Narendra Modi to encourage Foreign Direct Investments. “The
FDI ceiling for insurance and manufacturing nearly doubled from 26%-49%” (Kissi, 2015, ¶ 3).
As we draw a comparative analysis in another developing country such as China we can
determine that for the Apple generates an income of around $20 billion annually from the region.
6.2 International overhead expenses
International overhead expenses in India can include variable costs such as potential
changes to the exchange rates, dealing with construction permits, registering property, marketing
expenses, export charges etc. Foreign companies operating in India make multiple tax payments
on an annual basis. “Duty rates in India can be ad valorem which means it these rates can be a
certain percentage of value, where the average duty rate is around 11.9%” (Pintey Bowes, 2016,
¶ 2). Minimizing price escalation by lessening the distance from the home market in terms of
involved intermediaries would be an important objective to consider lowering all involved
marketing cost to still be able to make a profit margin on each iPhone developed for India.
GLOBAL MARKETING OF APPLE IN INDIA 19
6.3 Financials and Performance
Being a 100% equity company Apple’s strong financial background and performance has
helped the company expand into global markets. Apple’s iPhone has 47.5 million units of global
vendor shipments and 10.9% of the global market share in Q2 2015 behind Samsung who is the
world’s largest mobile phone vendor at 89.0 million shipments with 20.5% of the global mobile
phone vendor market share (Mawston, 2015, ¶ 6). Apple’s current market capitalization stands at
530 billion according to Yahoo Finance (2016).
SECTION 7: SUMMARY/RESULTS
In summary with the emergence and expansion of a rising middle class and wealth in
India paired up with its mass population, it would be advisable to enter into the India’s arena.
Since statistics indicate that mobile handset ownership will go up, we can only assume that a
healthy percentage of such handsets will be smartphones from the likes of Android or Apple if
such a market entry occurs. A 15% increase in 2010 to 2011 is a strong indicator that the cell
phone market will continue to grow. As sales have slowed and become saturated in the domestic
market Apple must find and pursue core, augmented and actual product categories.
It is recommended that Apple still abide and heed the weaknesses of its own pricing to
cater to the purchasing power of the consumers in India. One cannot expect to spend 1/8th of
their entire salary on a singular device that will only need to be replaced in a few short years.
Lowering the price escalation and constructing a phone with less intermediary mark ups and
premium components that still cater to the needs of the land will be vital when it comes to
winning over the public who has more restraint when it comes to indulging on luxury or
GLOBAL MARKETING OF APPLE IN INDIA 20
premium products is a must especially if it plans to compete with the likes of the Samsung and
Android.
GLOBAL MARKETING OF APPLE IN INDIA 21
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reference to Android operating system. The IUP Journal of Marketing Management,
13(4), 7-22. Retrieved from
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accountid=25320
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Patil, S. (2012, August 17). In India, Distribution is God. Harvard Business Review.
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Pitney Bowes. (2016). DutyCalculator Country guides: Import duty & taxes when importing into
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Prins, C. (2014, Sept. 19). Apple just lost the global smartphone war to Google. LinkedIn Pulse.
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Schultz, D. E. & Jain, V. (2013). The Young and the Upwardly Mobile. Marketing News, 47(11),
26-27. Retrieved from
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Sherman, E. (2015, April 10). Apple Watch $38M ad spend a drop in the bucket. CBS News.
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Sherr, I. (2012, June 21). Raises in Store at Apple. The Wall Street Journal. Retrieved from
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Singh, P. (2012). Smartphone: The emerging gadget of choice for the urban Indian. Nielsen
Media. Retrieved from
GLOBAL MARKETING OF APPLE IN INDIA 26
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%20Insights_Smartphone-%20The%20Emerging%20Gadget%20of%20Choice.pdf
Statista. (2016). Apple's revenue from 2004 to 2015* (in billion U.S. dollars).Retrieved from
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Yahoo Finance. (2016). Apple Inc.-NasdaqGS. Retrieved from http://finance.yahoo.com/q?
s=AAPL

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Global Marketing of Apple in India

  • 1. Running head: GLOBAL MARKETING OF APPLE IN INDIA 1 Global Marketing of Apple Product: iPhone in India By: Ahmet Celebi Christina Cecil Wayne Fortin An assignment submitted in partial fulfillment of the requirement for MKT 631 School of Business Management National University Richard Hopkins 1/30/16
  • 2. GLOBAL MARKETING OF APPLE IN INDIA 2 EXECUTIVE SUMMARY Performed in the present, this particular case study provides insights into Apple’s global market strategy of their product in India since its launch. With explanation of a few successful marketing strategies that the company used to ensure major success in other significant countries, this study is used to provide assessment on the enriching strategies that Apple as a company used to spread their product universally. Further, this study provides an assessment of on the Indian market that provided the Apple Company with a suitable entry into the global market amidst high competition in the present industry of telecommunication. The product was launched was introduced in the United States in the presence of much enthusiasm and fanfare from the public and this further attracted the high anticipation of the product in India and universally as well. This case also provides a devolvement into the company’s pricing policy, product policy, timing of global launch and ultimately the company’s market strategy policy in India. It highlights the strengths, weakness, opportunities and threat of the company in their struggle to make apple product global. With the SWOT analysis, this study mentions the successful factor of making a product enthusiastic in a new market when launched. There is a rise of a global debate in this particular study of the impact of iPhone success and failure on the Indian market in relation to other products existing in the Indian market both in the present and in the future market in terms of trade. This study sheds light into the preliminary assessment on how the Apple industry has managed to be in a better competition to compete in the existing market. To offer complete understanding of the product price performance levels of the Apple Company, this analysis compares the strategies used by Apple in comparison to other telecommunication businesses. To provide a further critical analysis and assessment of the Apple
  • 3. GLOBAL MARKETING OF APPLE IN INDIA 3 iPhone market and its strategies for entry into the Indian market, this study develops statistical discussions to interpret the successes and failure of the Apple Company in India. Apart from performing critical analysis on the Apple industry, the study digs deep into a critical analysis of India; its Gross Domestic Product, its position in the global market, the present reaction of its population to newly launched products in relation to software products. An overview of telecommunication industry and the smartphone industry at large is analyzed in this study showing all the technological innovation that occurred since the inception of mobile use and how the industry has taken a different turn with the introduction of Apple phones. Additionally, this examination looks critically as the ultimate success factors of Apple Company in selection of targeted markets, targeted age, targeted concentrated markets, the marketing patterns, advertising patterns and the best trade regions for the product. To back up the research further, this examination provides figures and statistics in attempts to communicate about the possible effects that had come with the introduction of Apple. With the constant rising and growth of the middle class, statistics have concluded that handset ownership India and in general has increased over the past few years and therefore Apple found a huge ground to make successful entries into the Indian market. In the case of Apple, the pricing strategy has been a huge weakness for the penetration of Apple into the existing market. Statistics have proven that since its launching, the product has suffered reduced sales and low saturated market places because of its pricing strategy that the market thinks is not pocket friendly. The study concludes that Indians and the general market calls for a reduction of prices for the Apple product for them to continue being successful in the present market and therefore
  • 4. GLOBAL MARKETING OF APPLE IN INDIA 4 in comparison to other mobile devices, Apple pricing strategy is weaker and thus low penetration in the market. INTRODUCTION As one of the so-called BRIC nations, India belongs to one of the fastest growing economies in the world “in India, there are 240 million mobile users, where the majority of mobile users are of young age” (Jain & Pant, 2015, p. 5). Therefore, from a marketing perspective India has the largest customer base of mobile consumers. “Though software and product lines, Apple emphasize high quality and accessibility” (Gupta & Prinzinger, 2013, p. 216) which represented a promising target market for Apple in the course of its global expansion plans. CULTURAL ANALYSIS “India’s GDP is the third largest in the world and the median age of the Indian population is 26 years, making it among the youngest in the world” (Bhadra, 2013, p. 59). Urban Indian has over 27 million smartphone users. The number of smartphone users is higher in metros with more than 4 million people. “The average household income in India is just US $7,700” (Prins, 2014, ¶ 8). SECTION 1: BACKGROUND ANALYSIS 1.1 Internal Analysis (Company) Apple, Inc. is the leading technology company across the globe. On April 1, 1976, Steve Jobs and Steve Wozniak founded Apple Company in a California. These two entrepreneurs were
  • 5. GLOBAL MARKETING OF APPLE IN INDIA 5 able to the entire technology industry as witnessed in our contemporary world through innovation and effective marketing strategies. Initially, Apple was basically competing in PC (personal computer) industry. Apple experienced rapid growth during high growth in the PC industry in the early 1980s. During this time, IBM was the key player in the industry. In 1984, Apple introduced its Macintosh graphical user interface, which signaled the company’s ability to revolutionize technology industry. Between 1985 and early 2000s, Apple experienced numerous challenges, especially due to increased competition in the market. Apple’s renaissance commenced in 2001 after it launched its iPod (portable digital MP3) and online store iTunes (which enables customers to download the preferred music online) 18 months later. This did not mark the end of its innovation. It penetrated into mobile industry when it introduced iPhone and iPad in 2007, devices that revolutionized the entire industry around the world. The company currently offers variety of innovative products and services such as iPhone, Apple TV, iPad, iPod, Mac, and Apple Watch. It has a portfolio of professional and consumer software apps to including Apple watch, Apple Pay, iOS, operating systems, as well as a variety of technology services and solutions (Apple, Inc., 2015, p. 3). Apple Inc. has over 350 retail stores worldwide and it employs circa 110,000 full-time equivalent employees (Sheer, 2012, ¶ 2). “In 2014 Apple announced its highest annual revenue to date with 182.8 billion U.S. dollars generated in revenue. Over 100 billion U.S. dollars of this was generated by sales of the iPhone, meaning that the smart device was responsible for an average of 56.2 percent of the company’s total global revenue throughout the year” (Statista, 2016, ¶ 2).
  • 6. GLOBAL MARKETING OF APPLE IN INDIA 6 Apple’s strategy focuses on leveraging its exceptional ability to integrate hardware and software, as well as services in an innovative manner that creates outstanding experience and value to the customers. The company’s structure is basically based on geographic basis. 1.2 External Analysis (Industry) Smartphone industry has been growing and is expected to continue expanding. After China, India’s mobile handset market is the second biggest globally. India’s mobile handset market has been growing over the past several years, and is expected to experience steady increase in the next five years. Between 2010 and 2011, the market grew from US$5.88 billion to US$6.75 billion, an increase of 15% (Pandey & Nakra, 2014, p. 8). This trend, which is expected to persist, is attracting many players who are seeking for higher margins. The market offers an appealing opportunity for companies offering smartphones since many people are substituting basic mobile technology with smartphone technology. This is because people are seeking for innovative applications and features incorporated in mobile devices that can enable them to carry out numerous additional functions. Apart from functionality, there are other factors that influence consumer purchasing behavior including properties, brand, interface design, price, and physical appearance of the product. 1.3 International SWOT Analysis Strengths Resources: Apple has sufficient resources in terms of cash and human resources. The company’s net sales have been increasing for the last five years. “Apple's revenue came to a total
  • 7. GLOBAL MARKETING OF APPLE IN INDIA 7 of 13.9 billion U.S. dollars. In 2013, revenue was up to more than 170 billion US dollars” (Statista, 2016, ¶ 1). Established brand: Apple’s brand is highly recognized across the globe. The company has been able to offer high quality products that deliver unique value to the user. This can help the company to influence consumers’ purchasing behavior (Muzumdar, 2015, p. 15). Weaknesses Pricing: The inability to match other rivals’ pricing strategy is a core weakness at Apple. Android-based smartphones, which dominates major market share, are available at low-costs (Pandey & Nakra, 2014, p.10). Threats Competition: One of the threats in the market is fierce competition from existing players in the market. Apple will face increased competition from existing players in the market that are offering Android-based devices including Samsung, HTC, LG, Motorola, Windows Phone, and Nokia, among others (Pandey & Nakra, 2014, p. 7). Legal issues: Apple is not immune against legal issues associated with violation of intellectual property rights including trademarks, copyrights, and patents. Other rivals in the market could copy Apple’s design and/or features, thus leading to legal disputes.
  • 8. GLOBAL MARKETING OF APPLE IN INDIA 8 Opportunities Expanding market: the mobile market in India has been expanding. According to Bhave, Jain, & Roy, (2013), the market value increased from INR 1.1 trillion in 2012 to INR 1.2 trillion in 2013, which is equivalent to 8% increase. The subscription of smartphones in India has experience a dramatic increase. For instance, in 2013, number of smartphone users reached 40 million. Potential market share: Half of smartphone users in India are people under 25 years, which accounts for 50% of the total population in the market. High adoption of mobile phone: most people in the country are highly adopting mobile phones to download apps since they are eager to learn about novel areas and domains. This is an appealing opportunity in a sense that mobile phones are appropriate marketing media. Changing consumer behavior: smartphone users are mainly young people and the often change their devices. This implies they are curious to test new products available in the market (Patel, 2014, p. 75). 1.4 Preliminary Assessment The Indian smartphone industry offers potential market for Apple’s iPhone. There are potential customers who are willing and able to purchase new brands that deliver unique value to them. These customers are people born between 1977-1994 this group is known as generation Y.
  • 9. GLOBAL MARKETING OF APPLE IN INDIA 9 The market also consists of many potential competitors; however Apple is in a better position to compete effectively in the market. Since Apple has a unique core competence that helps it deliver the value that potential customers anticipate to gain. Furthermore, Apple has established strong brand recognition and brand loyalty that will aid in persuading customers to purchase their brand. SECTION 2: MARKET SELECTION 2.1 Concentration vs. Diversification Apple can apply either concentration strategy or diversification strategy. In this case, however, diversification is more appropriate than concentration. If the company decides to use concentration strategy, it would acquire sufficient competitiveness. Since it may lose opportunities related to low transaction cost, skilled, labor, as well as access to know-how, among others things. With the diversification strategy the company can take full control over the production of required inputs and/or distributions channels of its products. Additionally, diversification strategy can help the company create more business units by offering new products/services in the market. 2.2 Best Trade Areas Although the entire market offers promising future for Apple’s iPhone, some trade areas are better than others. Before focusing on the entire market, Apple should target urban areas (both small and big cities). Urban Indian has over 27 million smartphone users. The number of smartphone users is higher in metros with more than 4 million people. According to report by
  • 10. GLOBAL MARKETING OF APPLE IN INDIA 10 Nielsen Informate Mobile Insights, even smaller cities having a population of 1 lakh to 10 lakh also offers an appealing opportunity for smartphones (Singh, 2012, p.1). Apple should specifically target urban areas in North and West zones. North zone leads with 11% of smartphone users followed by West zone with 8%. Later, Apple should target Southern and Eastern zones which each have 6% of smartphone users in India. 2.3 Target Market Identification Most users of smartphones are people below 25 years of age. This group accounts for about half of the Indian population. These people are hardworking, open-minded, confident, and are eager to purchase new brands available in the market. They are seeking smartphone devices that can help them to perform more activities such as connecting with friends, searching information, and accessing social media networks. They also highly embrace new technology (Bhave, Jain, & Roy, 2013, p. 62). 2.4 Selection of Target Market In order to capture potential market share, Apple should target people aged between 18 and 30 years. This segment covers people below 25 years, who are described as the most users of smartphones in the market. According to study by Pandey & Nakra, (2014, p. 8), people between 18 and 30 years are more attracted by core-technical features, valued-added features, and physical appearance. They are also less price-sensitive compared to other segments in the market. Since Apple’s iPhone are somewhat more expensive when compared to other
  • 11. GLOBAL MARKETING OF APPLE IN INDIA 11 smartphones so Apple should target this market segment. Later on Apple can target other segments using the same product or new products. SECTION 3: MARKET ENTRY 3.1 Market Entry Strategies Entry into the market in India is faced with several restrictions. Rules of tariff change every year along with the government’s budget compilation so determining this is impossible to do however Apple is fighting “the mandatory 30% sourcing clause as it uses minimal hardware for its products” (Basu, 2014, ¶ 8). Initially the FDI policy for single-brand retails “involving foreign equity in excess of 51 per cent, it is necessary for the company to source 30 percent of its contents from the country’s micro, small and medium enterprises” (Basu, 2014, ¶ 9). This has prevented Apple for being allowed to open its own retail stores in India. With recent changes in the laws in FDI policy Apple will now be able to “touch the customers directly. Having full control of the customer presales, during sales and post-sales experience is what Apple aims for and this is welcome news, aligning well with Apple’s vertical integration strategy,” Neil Shah of Counter Point Research told International Business Times” (Gilbert, 2005, ¶ 5). 3.2 Method of Market Entry While there are many different forms of marketing entry such as licensing which could be a great strategy for Apple to employ however with tariffs changing each year this strategy isn’t the best option. “Apple currently runs stores modelled on its global retail outlets through franchisees” (Basu, 2014, ¶ 8). Franchising seems to be the best strategy for Apple in entering into India.
  • 12. GLOBAL MARKETING OF APPLE IN INDIA 12 3.3 Selection of Clients, Distributors, and Partners Since “a large portion of Apple’s sales is made through third parties that sell many of its products directly to customers and businesses” (Gupta & Prinzinger, 2013, p. 216). Partnering up with Indian telecom providers allows for Apple to sell the iPhone paired with the provider’s data services. By also partnering with independent mobile phone retailers and specialized distribution companies Apple should be able to reach a wider audience. With “semi-official stores in India -- Apple Shops [would] operate as stores-within-stores to circumvent the rules, [be] staffed by employees partially trained by Apple and offer an experience comparable to a typical Apple Store” (Gilbert, 2015, ¶ 20). 3.4 Negotiating Conditions Negation conditions are done on the basis of franchising fees, sales territory, royalty fees, contracts, and governmental development fees. This allows for Apple to work with the government in order to establish their brand in India while still maintaining the regulation that the government has. SECTION 4: PRODUCT AND PRICE STRATEGY 4.1 Product and Service Selection for Target Market Since our target market in India comprises of generation Y or those between 18 to 30 years of age. “They have high disposable incomes and excellent economic growth, and are well traveled and dynamic consumers” (Schultz & Jain, 2013, ¶ 6). This part of the market views luxury goods such as iPhones should be “high-quality and provide good value” (Schultz & Jain,
  • 13. GLOBAL MARKETING OF APPLE IN INDIA 13 2013, ¶ 7). Since the market for luxury goods in increasing products like the iPhone and iPad is what Apple should focus its sales efforts on. 4.2 Standardization vs. Adaptation Apple uses a standardization strategy. This allows for easier planning and control for Apple. However by keeping the price relatively the same from country to country Apple is losing out on sales in the market in India. Apple’s “current business strategy is to bring the best user experience to its customers with superior ease-of-use, seamless integration, and innovative design” (Gupta & Prinzinger, 2013, p. 2). Apple needs to change its strategy to an adaptation model to better meet “consumers’ preferences, product perception, intensity of competition and country-of-origin affect” (Alon & Jaffe, 2013, p. 317) since emerging markets such as India can cause issues for distributors in developing countries. With “adaptation [the company] can be evaluated not only [its] relation to the final listed price, but also the entire transaction” (Alon & Jaffe, 2013, p. 317). 4.3 Pricing Strategy With the market in India still growing and consumers being somewhat price sensitive “Apple’s iPhone 6 starts at $649 (without contract) and tops out at $949 [makes it] impossible [to] purchase when the average household income in India is just US $7,700” (Prins, 2014, ¶ 8). In India “the top vendor in a market where up to 70 percent of smartphones sold cost under $250” (Gilbert, 2015, ¶ 11). This means that Apple needs to re-think its pricing strategy in order to be competitive in the Indian market. Apple will need to “look to focus on incremental
  • 14. GLOBAL MARKETING OF APPLE IN INDIA 14 increases by offering cheaper, lower-storage models than in other countries and keeping older models on sale for longer” (Gilbert, 2015, ¶ 16). SECTION 5: COMMUNICATION STRATEGY 5.1 Brand Last year in 2015 Apple has retained its standing as most valuable brand, holding the highest brand equity with a brand value of $170.3 billion which is a +43% change from the prior year (O'Reilly, L. 2015, ¶ 1). Branding at Apple Inc. is a standout when it comes to technological vision for the future and innovation. During the much-anticipated annual World Wide Developers Conference consumers, developers and competitors tune in globally for Keynote presentations delivered by Apples design and engineering teams where nothing short of innovation and lifestyle advantages are anticipated. Such innovation stirs excitement for products you never knew you needed until Apple creates them. “iPod turned into a strong brand because of a number of advantages over Walkman player, iPhone and iPad turned into even stronger brands as a result of multiple advantages over competing mobile devices” (Mourdoukoutas, 2013, ¶ 4). As innovation develops so does value, seduction and image. All at the same time driving customer loyalty and filling in the gaps in consumers lives when it comes to entertainment, education, production and development. “The company has established a ‘heartfelt connection’ with its customers. This can take several forms from building trust to establishing a community around a product” (Kahney, 2002, ¶ 20). With the current saturation of iPhones in developed markets such as parts of Europe and the United States Apple will need to turn its focus on rapidly
  • 15. GLOBAL MARKETING OF APPLE IN INDIA 15 developing countries. In the past few years Apple has already planted corporate owned stores in Brazil, Russia and China, now it’s time to look into what it would take to bring the iPhone to India. 5.2 Positioning in Target Market Apple tends to position itself in areas that have qualities of high urbanizing to consumers with a high propensity to consume especially within the luxury brands market. According to the Central Intelligence Agency world fact book, 37.2% of the total population is urbanized, 25-54 year olds account for 40.74% of the population age range, which for the most part aligns with Apples targeting. Although Hindi accounts for 41% of the language, as it’s the primary tongue spoken by the people, English is considered a subsidiary official language and is the most important for national political and commercial communication (Central Intelligence Agency, 2016, ¶ 4). Running Apple Inc. retail store as well as any other business in India is about creating and sustaining relationships as opposed to solely fostering metric based standards. Apple Inc. must also be careful in pricing their products too high since average per capita income and marginal propensity to consume is lower than in Apples United States domestic market where consumers in India are likely to seek a Price-Averse decision making process. Therefore a proposed “market-based method” of costing would be more appropriate which incorporate the factors of competition and demand.
  • 16. GLOBAL MARKETING OF APPLE IN INDIA 16 (The Hofstede Center, n.d., ¶ 1). One of the largest disparities that could have a great effect on Apple’s success on Hofstede’s framework of dimensions is indulgence, as we can see above India is ranked at a 26 while the United States is ranked at a 68 meaning as a society India is a culture of restraint due to the fact that consumer expenditures and purchasing power is relatively low compared to the united states. Thus meaning, Apple price points and positioning will have to be one of the same overall standardized quality but of lower cost to the end consumer in India. It is recommended that Apple alter India iPhones in their supply chain and development projects to do without features the consumers of India could unnoticeably do without that Americans are fine tuned to such as the exclusion of LTE, Camera image stabilization, fingerprint sensors, retina displays and a select mode of colors. Apple incorporated low line
  • 17. GLOBAL MARKETING OF APPLE IN INDIA 17 stretching in China and United States with the release of the iPhone 5c to target a different segment of consumers that had lower spending power or restraint to indulge. Incorporating this strategy would limit the chances of creating an iPhone gray market out of India since the iPhone would be adapted to localization. 5.3 Communication tools A localized communication strategy will be required in India that adheres to local values and norms as well as to reach consumers that read and speak Hindi. As development rises so does literacy “According to India’s Ministry of information and broadcasting 4,852 new periodicals including newspapers were registered in 2011 in addition to the existing 80,000 plus” (Patil, 2012, ¶ 7) thus hinting to the fact that printed media would be one of the best ways to communicate with the masses in India. With the large population in India Apple will need a widespread and aggressive marketing campaign to increase visibility among its citizens. So called multi layered distribution can play a big role in reaching the masses via magazines and newspapers in India, since modern networks and channels are not as abundant in the developing country. “Most entrepreneurs find it tough to reach Indian consumers because thousands of small vendors are responsible for handling the last mile in the delivery chain” (Patil, 2012, ¶ 4). 5.4 Communication budget According to public filings In 2014 Apple Inc. had an advertising operating budget of 1.2 billion, which 48 million used to spread the word about iPhone 6 and 6 plus for five months’ worth of Television Advertisements (Sherman, 2015, ¶ 3).
  • 18. GLOBAL MARKETING OF APPLE IN INDIA 18 SECTION 6: BUSINESS PLAN 6.1 Sales forecast “Indian consumer spending are expected to grow four times to USD 4.2 trillion by 2017” (Capital Market, 2015, ¶ 1) all due to a rising influence of social media and increased spending power which is especially true in the technology and luxury markets. As interest rates in India have been cut in late 2015 Economic growth has been steadily growing since the global financial crisis and foreign direct indicators have been below potential but have been growing steadily due to the efforts of Prime Minister Narendra Modi to encourage Foreign Direct Investments. “The FDI ceiling for insurance and manufacturing nearly doubled from 26%-49%” (Kissi, 2015, ¶ 3). As we draw a comparative analysis in another developing country such as China we can determine that for the Apple generates an income of around $20 billion annually from the region. 6.2 International overhead expenses International overhead expenses in India can include variable costs such as potential changes to the exchange rates, dealing with construction permits, registering property, marketing expenses, export charges etc. Foreign companies operating in India make multiple tax payments on an annual basis. “Duty rates in India can be ad valorem which means it these rates can be a certain percentage of value, where the average duty rate is around 11.9%” (Pintey Bowes, 2016, ¶ 2). Minimizing price escalation by lessening the distance from the home market in terms of involved intermediaries would be an important objective to consider lowering all involved marketing cost to still be able to make a profit margin on each iPhone developed for India.
  • 19. GLOBAL MARKETING OF APPLE IN INDIA 19 6.3 Financials and Performance Being a 100% equity company Apple’s strong financial background and performance has helped the company expand into global markets. Apple’s iPhone has 47.5 million units of global vendor shipments and 10.9% of the global market share in Q2 2015 behind Samsung who is the world’s largest mobile phone vendor at 89.0 million shipments with 20.5% of the global mobile phone vendor market share (Mawston, 2015, ¶ 6). Apple’s current market capitalization stands at 530 billion according to Yahoo Finance (2016). SECTION 7: SUMMARY/RESULTS In summary with the emergence and expansion of a rising middle class and wealth in India paired up with its mass population, it would be advisable to enter into the India’s arena. Since statistics indicate that mobile handset ownership will go up, we can only assume that a healthy percentage of such handsets will be smartphones from the likes of Android or Apple if such a market entry occurs. A 15% increase in 2010 to 2011 is a strong indicator that the cell phone market will continue to grow. As sales have slowed and become saturated in the domestic market Apple must find and pursue core, augmented and actual product categories. It is recommended that Apple still abide and heed the weaknesses of its own pricing to cater to the purchasing power of the consumers in India. One cannot expect to spend 1/8th of their entire salary on a singular device that will only need to be replaced in a few short years. Lowering the price escalation and constructing a phone with less intermediary mark ups and premium components that still cater to the needs of the land will be vital when it comes to winning over the public who has more restraint when it comes to indulging on luxury or
  • 20. GLOBAL MARKETING OF APPLE IN INDIA 20 premium products is a must especially if it plans to compete with the likes of the Samsung and Android.
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