Apple's Apology May Have Worked Too Well in China

Apple CEO Tim Cook's public apology and his company's consumer friendly change to its Chinese iPhone warranty policy Monday was met with approval by China's state run media today — along with what sounds like a warning to "other American companies." The Global Times, published by the People's Daily, the official communist party publication, wrote: "The company's apology letter has eased the situation, softening the tense relationship between Apple and the Chinese market ... Its reaction is worth respect compared with other American companies." (Emphasis ours.) Apple's signature silence didn't work in a Chinese market with expectations of iPhone replacements rather than refurbishments, and after a multi-pronged propaganda shaming campaign, Cook caved. And the apology appeared to be all the Chinese state media needed to placate the public: "It is completely normal for the Apple company to apologize to Chinese consumers, and I think such action is commendable," Hong Lei, a spokesman for China's Foreign Ministry, said at a briefing, according to Bloomberg News. And other American companies should take note. 

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"What foreign companies need to pay attention to, is that nobody operates in a vacuum, nobody operates only on the good graces of a brand name," Kent Kedl, Shanghai-based head of Greater China and North Asia for risk consultancy firm Control Risks told Reuters. "Five to ten years ago a report on CCTV would have rippled a little bit, now it goes viral and has a life of its own." In addition to Apple, Chinese state media has also recently targeted Volkswagen, Mercedes-Benz, and BMW, running a similar investigation into their consumer care practices on state run television. Volkswagen had to recall 384,181 vehicles, its biggest ever in China. Carrefour and Yum! Brands went through similar tests of loyalty, which Bloomberg refers to as a "rite of passage for international companies." Silence on customer service from major foreign companies, it has become clear, does not fly with Chinese consumers or its government protectors. 

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While these types of admissions ultimately embarrass a foreign company, the Chinese government realizes that it has the advantage, with its ginormous consumer market share. Last year China made up 13 percent of Apple's sales, a numer that Cook has indicated he wants to make bigger. "China is currently our second-largest market. I believe it will become our first," the enthusiastic CEO said earlier this year. "It's a very, very important country to us." With an emergent middle class, the Chinese market will prove particularly important for many consumer goods companies. 

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And, believe it or not, there appear to be some benefits to the hawkish oversight by the state-run media of outsider companies: The Chinese now have a better iPhone warranty policy than consumers get here in America now. But the focus on overseas competitors underlines a bigger issue — the reason so many Chinese people like Western brands is because, well, the Chinese companies aren't that great.