APPLE, iPHONE, CHINA, SEGMENTATION, SUPPLY CHAIN

Very interesting.  From GT Nexus--

Why the iPhone 5C Missed the Mark in ChinaJuly 22, 2014By Amanda Hinton

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Recently I read a review about a new smartphone from Chinese manufacturer OnePlus. The new phone, called the One, costs $300 yet delivers the same screen and internal components of top-of-the-line phones, many of which run $500 or higher. After the article was published, the reviewer was inundated with requests for information and access to the device. While the author was surprised at the level of interest, I’m not. China is the world’s largest smartphone market, and as the market matures prices have dropped and expectations have risen.
Today, companies like Xiaomi, Coolpad, and Oppo capture as much or more of China’s mobile device market than the top-of-mind heavyweights. This increased competition, as well as other manufacturers like Huawei offering break-even priced phones, has Samsung profits in decline. As the mobile landscape develops, it seems that billions of people are discovering that paying less doesn’t lead to an inferior experience.
This has me thinking back to September 2013, when Apple announced two new iPhones, the 5S and its cheaper, colorful plastic sibling: the 5C. Apple’s careful market research provided confidence that the company could finally capture emerging markets like China and India. But consumers didn’t react as predicted.
Many manufacturers have a similar inside-out model where they attempt to impose their own needs onto customer segments. This backward approach rarely ends well because out in the real world, customers don’t make purchasing decisions based on the name you have given the bucket you’ve put them in. An outside-in approach prioritizes the needs and desires (such as innovation, price, agility, service, etc.) of each customer segment from design to delivery.
Companies forget that they don’t have the infinite opportunity to create markets and, more specifically, new segments of customers. Customers tend to segment themselves according to their needs. In Apple’s case, the price of the 5C was likely too high with too few features. In fact, Apple was rumored to have chosen the 5C price based on a desired profit margin, completely ignoring customer expectations. Providing several color options to entice consumers wasn’t enough to overcome their basic customer requirements. In short, Apple tried to create a customer segment that didn’t exist. Though Apple has recently announced a cheaper, lower storage iPhone 5C in limited markets, the small price difference may not be enough to capture the market they are chasing, particularly as the Chinese manufacturers mentioned above penetrate further.
Getting segmentation right does not stop with the product portfolio. The 5C miscalculation had an impact on Apple’s sterling supply chain as the company had to build and deliver the product mix that customers actually demanded – production of the 5S was ramped up while production of the 5C was quietly scaled back. Once companies understand the needs of different segments, including price, they have to develop multiple supply chains that enable them to effectively and profitably fulfill demand.
A one-size-fits-all supply chain forces manufacturers to choose between high-service/high-cost and lower-service/low-cost strategies regardless of the variety of products flowing through. Supply chain segmentation aims to align the movement of goods with the needs of the target customer. For example, the supply chain for a stable, high-volume segment focuses on efficiency whereas the supply chain behind a volatile segment requires more agility. The rules for luxury goods should differ dramatically from those products requiring basic replenishment at the lowest possible cost. Relying on a singular supply chain strategy to meet an ever-widening spectrum of customer values will have the same outcome as poor market segmentation – you won’t be able to get the right product to the right place at the right time for the right price.