Apple Market Entry Strategy in Myanmar: Analysis

Global Economic Conditions

Apple operates in over 100 countries, but there are still some markets available for expansion. The market chosen for the next international expansion is Myanmar. Apple already has a presence in most other Southeast Asian countries, but Myanmar has only recently become a democracy. It is a poor country, but relatively large, and is beginning to see strong economic growth as foreign companies start to make their market entry. The trends for Myanmar are all quite recent. Five years ago there was little economic activity in the country, regular brownouts, and a military junta. Today, there are clear signs of economic life. Moreover, where five years ago there was almost no broadband and it was prohibitively expensive, broadband has since been rolled out to most populated areas and is now affordable.

Myanmar's economic story is mostly internal, but global economic conditions exert some influence. The opening of this market has begun to attract foreign companies, and like Apple, many new entrants already have strong presences in other Southeast Asian nations. A move into Myanmar is therefore easy to manage from a corporate office in Bangkok or Singapore, using a satellite office in Yangon.

The current economic statistics for Myanmar are as follows, gathered from the CIA World Factbook. The country's overall GDP is $330.9 billion, ranked 54th in the world. GDP per capita, however, is $6,300, which ranks 163rd in the world. GDP growth rates over recent years are shown below:

2015: GDP $290.8 billion, growth rate 7.0% | 2016: GDP $308.6 billion, growth rate 6.1% | 2017: GDP $330.9 billion, growth rate 7.2%

Myanmar has the 7th-fastest-growing economy in the world. There is little doubt that the vast majority of the country remains poor, with 70% of the workforce engaged in agriculture, but this actually helps Apple, because it can focus market entry solely on the key cities of Yangon, Mandalay, and Naypyidaw. One estimate puts the economic growth rate in Yangon at 11.17% per annum beginning in 2008, which is much stronger than the national average (Fox & Verrucci, 2017). GDP per capita is growing at roughly the same rate as overall GDP.

The World Bank is working actively with the new government of Myanmar to bring about economic reforms, and has projected sustained medium-term GDP growth of 7.1% (World Bank, 2017). Given how far behind Myanmar is compared with other countries in the region, there is considerable reason for optimism. The growth pattern in Myanmar will likely mirror that of other Southeast Asian countries, with strong sustained economic growth focused on key urban areas and rural areas focused more on eliminating overt poverty. For Apple, this means there is good opportunity, especially in Yangon, to build a market as more people are able to afford its products.

Several other economic indicators are worth noting. First, inflation has stabilized. Economic stability can often be an issue in emerging markets, but stable inflation is generally a positive sign for sustained growth. The kyat is a fully floating currency, and the country has maintained stable inflation — a positive sign. The unemployment rate is 4% and stable, though this figure is somewhat misleading since most employed people do not earn enough to afford Apple products. More important are indicators regarding foreign direct investment (FDI), which is a more accurate measure of how many people in Myanmar will increase their wealth to the point of entering Apple's target market. FDI has varied considerably over recent years — which would be considered the economic transition period — ranging from months with $31 million to $2.3 billion (TradingEconomics, 2017). This indicates that the country's FDI picture is still small and somewhat dependent on major projects that bring in a large sum over a short period. The largest source of FDI is the People's Republic of China, and the four biggest investment areas are garments, agriculture, construction, and tourism (Gelb, Calabrese & Tang, 2017).

Type of Economy

Myanmar is a nascent democracy with a nascent capitalist economy. There are many issues facing the country in terms of economic structure. While the central government is working with the World Bank to open the economy, the previous military regime exerted strong control over nearly all aspects of economic life. The process of opening up has really only been underway since 2013. That said, the telecommunications sector is now open to foreign competition, which has spurred a wave of investment. There are no particular restrictions on smartphone providers, and the government appears committed to continuing this trend.

That said, Myanmar is not especially well-endowed with natural resources, and there are very few educational institutions. As such, neither the country itself nor its population is especially prepared to compete on a global scale. Most of the economic opportunity that exists in Myanmar arises specifically from ongoing efforts to open its markets. As each industry opens, foreign investment will help sustain GDP growth. For Apple, the keys to Myanmar as a market will be related to the pace at which central government influence on the economy is reduced, and the form that incoming investment takes. Myanmar's transition to a capitalist economy needs to be managed carefully and quickly in order for the country to realize the sustained growth that has been predicted.

Competitive Landscape

Even in Yangon, by far the wealthiest area of the country, the market for high-end consumer electronics is relatively small. The rollout of affordable broadband has nonetheless led to an explosion in smartphone adoption. By 2015, Myanmar was listed as the fourth-fastest-growing market in the world for smartphones, according to an Ericsson survey (Trautwein, 2015). The country added over 5 million smartphone subscribers in 2015 alone — approximately 6% of the world's total new subscribers that year. This growth began in 2013 when the government removed restrictions on foreign investment in the telecom sector. Since then, players like Norway's Telenor and Qatar's Ooredoo have built out networks, and by 2016 an estimated 90% of the country had signed up for mobile service, up from almost nobody prior to 2013 (Heijman, 2017).

The majority of the market consists of cheap smartphones, some selling for as little as $20 (Heijmans, 2017). Older Samsung handsets represent about as much luxury as the market currently supports. China's low-end manufacturers, such as Huawei, are the major players in the Burmese market at present. Consumers seeking Apple products or recent Samsung flagships typically must acquire them in another country. Samsung does sell its phones in Myanmar, so anyone with sufficient funds can obtain a new model, even if that market is relatively small. Apple, however, does not have retail distribution in Myanmar.

No competitors manufacture in Myanmar, but that is because almost all of the world's smartphones are made in China regardless. China is a major trading partner for Myanmar, and because Apple produces its iPhones in China — which borders Myanmar and is its largest trading partner (CIA World Factbook, 2018) — there is no realistic scenario in which Apple would consider production in Myanmar. Any expansion there will be sales-only, as is the case in every other country Apple enters.