Global launches can be rocky, as Apple knows well. Last year, the company introduced its iPhone in India, but instead of the throngs of consumers seen at launch events in the U.S., the journalists assigned to cover the rollout reportedly outnumbered the customers. According to experts, the problems included a lack of marketing and a price tag set too high for Indian consumers. Now, as Apple prepares for an October launch of 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.

"I don't think Apple or Unicom should assume it's going to be a slam dunk," says Wharton management professor David Hsu .

China Unicom, the country's second-largest mobile phone operator, officially announced on August 28 that it had signed a three-year, non-exclusive agreement with Apple to sell the iPhone 3G and 3GS models in China. Company chairman Chang Xiaobing 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.

Excitement about the launch is building. In image-conscious China, the iPhone is considered sleek and fashionable. BDA China, a Beijing-based advisory firm that covers China's telecom and technology sectors, forecasts the iPhone will take 10% to 15% of the Chinese smartphone market in the next few years.

Still, Apple has considerable obstacles to overcome in China, Wharton experts say. Unlike its U.S. 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first batch to come out in October will reportedly have no Wi-Fi function, the result of government mandates that were rescinded in May after production had already begun.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.

Source: Knowledge@Wharton