Apple Needs to Expand Further in China , with caution

It's no secret that Apple is one of the few hottest companies in the world right now. Their products are praised around the globe, and they are declared as a leader in design and innovation.

So it makes sense that some smart financial folks on Wall Street have Apple pegged to do some serious damage in China, and I think they could dominate. However, I think they must be careful about how they do this, as expanding too fast could be dangerous.

That said, China is a gold mine for Apple; this is true for all companies. The country is developing quickly and dripping with opportunity, and if a brand isn't present in China, its future is certainly questionable (yup, we're talking about Google).

That brings us back to Apple.

There is a distinct correlation between Apple stores and Apple market share. Over the past seven years, Apple has opened over 120 stores, and, with that, their market share grew by several percentage points.

This correlation is even more apparent in Western Europe, where over 30 stores were opened and market share grew from 1.5% to 5% within a few years. While appearing insignificant, these numbers huge in terms of growth — this is why we have Apple constantly breaking new all-time highs on Wall Street.

Good for Europe and America, but how many stores should Apple plan for China? Well, I believe Apple should open 12 additional stores: one for each of China's largest cities to serve as a test of market interest. That would add up to 100,000,000 potential consumers in those 12 cities alone — that is around a third of the entire U.S. population. Apple would then have a pretty decent idea of where to expand next.

It should be noted, however, that Apple already has two stores in China: one in Beijing and one in Shanghai. Furthermore, the company has plans to open 25 stores throughout China within the next two years.

Unfortunately, I think that is a mistake. I would have been much happier if they cut that number in half, and the reason is that there are many uncertainties about the Chinese and American economies (both of which rely on each other so heavily). The threat of an economic failure is still apparent, and political struggles are growing in both countries as well.

With that in mind, if Apple turns out to be a hit, it could have a dramatic impact on the competition.

For example, Microsoft is already heavily embedded in China, yet Microsoft operates at a loss with in the country. The reasoning for this is that Microsoft has been unable to adapt to Chinese consumer and enterprise behavior.

Apple, on the other hand, is a much smaller company with a more distinct focus — consumer electronics, mobile, and computer technology — and with those specific niches, Apple can better target their products for Chinese consumption. This could allow Apple to build up in China slowly, and eventually expand with better a much better understanding of Chinese culture.

Either way, Apple has a golden opportunity here. China is the market that every company in the world wants to be invested in, and I think it is time for Apple to make its presence felt. That said, Apple should tread lightly at first, as the Chinese market is a tricky place — American companies are struggling to adjust. But if Apple properly adapts, it could make the Apple investors very happy and very rich.