This always starts a fairly good argument, but there is a widely held belief that Wharton is the best business school in the world. An MBA from Wharton can be taken as a passport to success. So when Wharton publishes a paper, it is well worth paying close attention. At least, that is the position of this writer (who did NOT go to Wharton) and he is sticking to it.
The current paper queries the future of the iPhone in China.
It points out that last year, the company introduced its iPhone in India, but instead of the throngs of consumers seen at launch events in the US, the journalists assigned to cover the rollout reportedly outnumbered the customers.
Problems included a lack of marketing and a price tag set too high for Indian consumers.
In October, Apple will launch the iPhone in China in cooperation with service provider China Unicom, many are wondering if it will face similar hang-ups in the world’s largest cell phone market, which has more than 700 million subscribers.
Wharton management professor David Hsu said, "I don’t think Apple or Unicom should assume it’s going to be a slam dunk." That last phrase is American slang coming from basketball and suggests that something that is a sure to occur; a foregone conclusion.
China Unicom told reporters in Hong Kong that China Unicom would subsidize the device, but neither Apple nor China Unicom has released specific details about price or terms of service. The company did say it would forego Apple’s traditional revenue-sharing model and would instead pay on a wholesale basis.
Wharton experts say Apple has considerable obstacles to overcome in China. Unlike its US launch in June 2007, the iPhone faces stiff competition in China from a variety of touch-screen devices. The Chinese version of the handset is also somewhat crippled: The first batch to come out in October will reportedly have no Wi-Fi function, the result of government mandates that were rescinded in May after production had already begun.
Perhaps the iPhone’s biggest hurdle is China’s thriving grey market, which has already smuggled more than a million iPhones into the country. Experts say the trick will be to price it right: low enough to drive sales, high enough to maintain its exclusive edge.
Philip M. Nichols, a Wharton professor of legal studies and business ethics, noticed on recent trips to China that the hype was starting to build. He said, "You cannot go into [French supermarket chain store] Carrefour in Beijing right now without getting iPhone advertising right in your face. They are really advertising the heck out of it." But, he added, "We think of China as a never-ending fountain of revenue, but there are far more people in China who cannot afford this technology than there are those who can."
The iPhone will likely appeal to well-heeled Chinese, says Wharton management professor Marshall Meyer: "There’s this upper crust of people who have a lot of money and they want the latest accessory. The iPhone is the latest accessory."
Wharton marketing professor John Wesley Hutchinson, speaking of an earlier computer experience, said, "One of the big lessons that came out of the project was that in the Chinese market, while functionality is important, style is actually more important."
Much, much more on this fascinating subject in Knowledge, which suggests that the iPhone’s success will be somewhere between the United States and India.