Apple Apology

Apple CEO Tim Cook has issued a rare and full apology in response to accusations by Chinese state-controlled media of ‘arrogance’ and ‘greed’. The attacks related to Apple’s after sales policy of repairing not replacing defective products, unlike the rest of the world.

Apple in China

Apple in China

Apple rarely apologises. (Last year’s apology by Tim Cook over the Apple Maps debacle was highly unusual for the company.)

This time however the stakes may be even higher.

China is Apple’s third biggest market, its fastest growing market, and Cook has said he expects China to replace North America as its largest source of revenue in the foreseeable future. Apple made sales of $6.8 billion in China in the last quarter of 2012.

So, in a statement issued last week, Tim Cook said:

“We recognize that we have much to learn about operating and communicating in China, but we want to assure everyone that we bring the same deep commitment and passion to China as we do to any other part of the world. This commitment, a desire to delight all of our customers and provide them with an extremely high-quality experience, is deeply rooted in the culture of our company. And we will not rest until we achieve this goal.”

What is going on here?

Firstly Apple products benefit from Chinese manufacturing – and the Chinese want their pound of flesh. Any sense that they are getting second best, from an iconic global brand such as Apple is not going to be acceptable.

Secondly the speed and power of the Chinese state controlled media, carefully coordinated and unleashed with tremendous force is not to be underestimated. Near-daily media assaults over the period of a fortnight, and the threat of penalties from two Chinese government bureaus, left Apple reeling.

Thirdly the impact of a brewing fight with the government was felt almost immediately as Apple’s largest active shareholder, Fidelity Contrafund, reduced its holding by 10pc. Apple shares lost 2pc in New York on the news and have fallen significantly this year.

Foreign companies who are adept at managing reputations at home find it much tougher to navigate China where state media outlets often have opaque agendas and intentions.

Tim Cook, unlike Steve Jobs who never set foot inside China, understands the region well, having been responsible for building Apple’s supply chain in Asia. So he knows a thing or two about how things operate there.

Other brands have been targeted in a similar way over recent months – and include Yum Brands (KFC and Pizza Hut), Volkswagen, McDonalds and Carrefour. Hewlett-Packard was famously targeted in 2010 and apologised for faulty laptops.

But…

In a curious twist the attacks backfired almost as soon as they began.

The attacks were mocked by increasingly sophisticated Chinese consumers who saw through what might appear a rather basic attempt at economic nationalism.

Apple and its products command tremendous loyalty in China, as they do elsewhere in the world.

And this furore has inadvertently revived complaints over shoddy service by Chinese companies, the very companies the government is presumably attempting to protect.

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