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    Case 2 9 Coping With Piracy in China

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    Chin Kit Yee
    Two fake Apple stores were ordered to close in Kunming, China after being discovered by an American blogger. Chinese authorities then inspected 300 electronics stores in the city and found five unauthorized "Apple Stores" operating without a license. While China is known for counterfeit products, the fake Apple stores were selling products at the same price as real Apple stores. Some analysts argued that Apple benefits from the unauthorized retailers increasing brand awareness and sales in China for free. The case highlights the challenge for companies to create partnerships in China while protecting intellectual property.

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    Case 2 9 Coping With Piracy in China

    Uploaded by

    Chin Kit Yee
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    Two fake Apple stores were ordered to close in Kunming, China after being discovered by an American blogger. Chinese authorities then inspected 300 electronics stores in the city and found five unauthorized "Apple Stores" operating without a license. While China is known for counterfeit products, the fake Apple stores were selling products at the same price as real Apple stores. Some analysts argued that Apple benefits from the unauthorized retailers increasing brand awareness and sales in China for free. The case highlights the challenge for companies to create partnerships in China while protecting intellectual property.

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    Case 2 9 Coping With Piracy in China

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    Two fake Apple stores were ordered to close in Kunming, China after being discovered by an American blogger. Chinese authorities then inspected 300 electronics stores in the city and found five unauthorized "Apple Stores" operating without a license. While China is known for counterfeit products, the fake Apple stores were selling products at the same price as real Apple stores. Some analysts argued that Apple benefits from the unauthorized retailers increasing brand awareness and sales in China for free. The case highlights the challenge for companies to create partnerships in China while protecting intellectual property.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    389 views3 pages

    Case 2 9 Coping With Piracy in China

    Uploaded by

    Chin Kit Yee
    Two fake Apple stores were ordered to close in Kunming, China after being discovered by an American blogger. Chinese authorities then inspected 300 electronics stores in the city and found five unauthorized "Apple Stores" operating without a license. While China is known for counterfeit products, the fake Apple stores were selling products at the same price as real Apple stores. Some analysts argued that Apple benefits from the unauthorized retailers increasing brand awareness and sales in China for free. The case highlights the challenge for companies to create partnerships in China while protecting intellectual property.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3
    At a glance
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    Some key takeaways are that fake Apple stores were discovered selling genuine Apple products at official prices in Kunming, China. This highlighted both the demand for Apple products in China and the difficulty of controlling intellectual property given widespread counterfeiting.

    Five fake Apple stores were found selling genuine Apple products at official prices without proper licenses. They were ordered to shut down after being discovered by a foreign blogger online.

    Apple declined to comment on the case publicly. Privately, it was speculated that Apple was aware of the fake stores but had not decided how to handle the situation, as it was benefiting from the increased brand popularity and sales that the fake stores provided.

    CASE 2-9 Coping with Piracy in China

    Read the following two stories about intellectual property theft in


    China carefully, then answer the questions at the end of the case.
    Monday, two fake Apple stores in Kunming were ordered to
    close. But Steve Jobs may have wished otherwise, since the
    Apple wannabes would have benefited Apple Inc.
    Apples glorious success in the Chinese market has to do
    with the scarcity of its products and the difficulty to counterfeit them, adding to the premium consumers are willing
    to pay.
    The Cupertino-based technology giant has a total of four
    official stores in Chinatwo in Beijing and two in Shanghai
    which have become the most heavily trafficked Apple Stores
    inthe world. According to The New York Times, they also generate the most revenue, outselling even the Fifth Avenue Apple
    Store in Manhattan, which is open around the clock.
    Many of you may have not known the actual number of
    real Apple Stores in China until fake ones were reportedly
    spotted in Kunming, the capital of Chinas mountainous
    southwestern Yunnan province.
    The fake Apple Stores in Kunming were outed after an
    American blogger discovered the store and posted her findings onto the Internet.
    This was a total Apple store rip-off. A beautiful ripoffa brilliant onethe best rip-off store we had ever seen,
    the anonymous blogger posted. . . .
    Two days after the revelation, industrial and commercial
    authorities in Kunming launched a sweeping investigation
    not only on the alleged Apple Store, but on all the citys electronics stores, reports a Chinese news outlet Xinhua.
    Business licenses, authorized permits of brand use, and
    the purchasing channels of each store were inspected, said
    Xinhua.
    After inspecting 300 shops in the city, officials found five
    self-branded Apple Stores to be operating without authorization from Apple Inc, the Metropolitan Times report said.

    Fake Apple Store in Kunming, China


    Source: REUTERS

    cat29974_case2_01-031.indd 29

    Among the five, two fake Apple stores were told to shut
    down because they did not have an official business license.
    China is notorious for counterfeited products such as
    watches, clothes, luxury items, electronics, and in this case,
    products from Apple stores. The fake items generally are sold
    for a fraction of the actual cost in retail stores, but the products in the fake Apple Store were selling for the same price as
    the real iPads and iPhones in Apple-authorized stores.
    Interestingly, Apple Inc. declined to comment on the
    case that flooded the media and gave the original whistleblower one million page views within the first 72 hours.
    Are you listening, Steve Jobs? was the title of the original blog post . . . . For sure, Apple, famous for sensitive control on its supply chain, would have been aware of the five
    fake stores.
    After all, how could one foreigner aimlessly strolling
    down the streets of Kunming with her husband find something that an obsessively protective company with hundreds
    of investigators and lawyers could not? said Gordon G.
    Chang of Forbes in a blog post. . . . Moreover, Apple had
    received a complaint about the fakes filed by a major authorized Kunming distributor.
    Chang speculated that more than Apple was taking its
    time to figure out the source of the products sold by unauthorized sellers, the tech giant had not decided how to
    handle the situation. Aside from protecting the companys
    intellectual properties, Apple was benefiting from the renegade stores in Kunming that sell Apple goods at official
    prices.
    To be honest, Apple is the biggest winner in the current
    situation, Yunnan-based intellectual property lawyer Zhang
    Honglei was quoted by Forbes as saying. It has many Chinese companies willing to help it sell products and increase the
    popularity of its brand for free. Why would Apple sue them?
    Why would Apple punish them for helping it sell more?

    Exterior of the fake Apple Store in Kunming


    Source: REUTERS

    15/10/12 5:45 PM

    Part 6

    Supplementary Material

    For Apple to build up China market share swiftly before


    counterfeiters enter the field, even the unauthorized retailers
    could help achieve that objective by gearing up the sales speed.
    Especially now that Apples presence seems to be outgrown by the development of the middle class in China, no
    wonder China has taken rip-offs to a new level, pirating
    Apple Stores themselves, Charles Wolf, a securities analyst

    cat29974_case2_01-031.indd 30

    who follows Apple for Needham & Company, said. It speaks


    to the demand for Apple products throughout China.
    What a happy worry for Steve Jobs. Finding a sweet spot
    to take over the Chinese market, Apple now faces a challenge of creating the best synergy with Chinas state-owned
    companies while avoiding competition.
    Apples invasion into China seems to have no end.

    15/10/12 5:46 PM

    Cases 2

    The Cultural Environment of Global Marketing

    QUESTION
    Assume you are the CEO of a new firm that has perfected a package
    of software applications for medium- and large-sized companies
    to help manage intellectual property applications (patents, trademarks, copyrights). Licenses for companies in the United States
    have sold briskly, at $2,000 per company for more than a year. Now
    you have heard rumors that your software is being pirated inChina.
    Ironic, isnt it?

    cat29974_case2_01-031.indd 31

    Write a briefing for your board of directors with a specific plan


    of action to address this leakage of your intellectual property into
    the Chinese market.

    Source: Why Fake Apple Stores in China Can Make Steve Jobs Happy, IBTimes New
    York, July 25, 2011.

    15/10/12 5:46 PM

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