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Dominant Economic Characteristics of The Smartphone Industry

Smartphone Industry

Nowadays Smartphone has the advanced computing capabilities, as there is various software installed in the Smartphone. There are various uses of Smartphone example SMS, social networking, e-mail, web browsing, games, news, mobile TV, mobile banking, mobile wallet etc. Long ago Smartphone is introduced to the public, modern people cannot think their lives without Smartphone. The industry seems to be growing in the recent years, as people across the world are taking benefits from the Smartphone.

Market Size And Growth Rate 

If we talk about the market size, there are about 4.55 billion mobile phones in the world. The 1.75 billion means 38.4% of smartphones and 2.8 billion means 61.6% featured phones are there in the world, it is estimated that market has reached to $150 billion from $55.4 billion from 2009 to 2014 (Emarketer, 2014).

Regarding the history, the first Smartphone was introduced in 1995 by the IBM Simon and after that in 1996 Nokia launched it’s 9000 (Nokia 9000), which proved a great success at that time. Ericson released its R380 in 2000, then in 2001, RIMs blackberry series after that in July 2008, Apple introduced its iPhone series in the Smartphone industry (Wallis, 2011). All the companies are there tried hard to compete in the Smartphone industry as in 2010, window phones OS are released, in 2013 Google released Android KitKat and 2014 Apple and Microsoft released their new phones with iOS and window phone 8.1 (Wallis, 2011). Across the world, the market of Smartphone is still growing and it is expected to grow at the rate of 16% compound rate, the estimated years are, from 2015 to 2020. The low-cost Smartphone are also expected to grow in the market.

Dominant Economic Characteristics of The Smartphone Industry

Stage In Industry Life Cycle

If we talk about the life cycle stage of the Smartphone industry, then the life cycle shows that it has start with the introduction stage and then reaches through the growth to the maturity. The graph shows that the revenue of the industry has gone through the different stages and now it is at the maturity stage (Psu.edu, 2012). However, from the introduction, stage consumers have information about the Smartphone’s and they are fully aware now that what they are using. In the growth stage, the profit of the Smartphone industry has been increased, there are still growths in the revenue. Moreover, the industry can reach to the declining stage, if there is no innovation in the products because people are expecting much more from the Smartphone industry.

Dominant Economic Characteristics of The Smartphone Industry

Numbers And Sizes Of Competitors

There are number of competitors in the Smartphone industry, however, in 2015, the main competitors in the industry are Samsung with 21.4% market share, Apple with 13.9 % market share, Huawei with 8.7% market share, Xiaomi with 5.6% market share, Lenovo with 4.7% market share and others with 45.7% market share (IDC, 2015). The industry is full of competitor’s powers; it is hard for the one new company to succeed in the market.

Average Profitability And Projected Profitability (Over 5 Years)

Average And Projected Profitability

Dominant Economic Characteristics of The Smartphone Industry

            In this table comparison of five years, average profitability growth is provided for Apple Inc, industry, sector and S&P 500. Five years average growth in net income for Apple Inc is 30.67%. Average profitability growth for the industry is 11.61%. This table is showing that industry is showing high profitability (Csimarket.com, 2016).

Dominant Economic Characteristics of The Smartphone Industry

Five years average growth for Apple Inc is higher than the average industry growth for five years. Five years average growth in revenue for the industry is 7.5%.

Forward Comparisons

Dominant Economic Characteristics of The Smartphone Industry

Five years forecast for the industry is given and growth percentage is expected to be 8.8%. Forecasted growth for Apple Inc in the industry is 8.9%. It is higher than the industry (Financials.morningstar.com, 2016).

Potential And Long-Term Profitability For Growth

The industry is showing the high potential for growth. In the future, electronics equipment industry will improve its profitability. The potential for long-term income is due to high demand from the customers. High technological demand from the customers is providing the potential for growth to the industry. Long-term profitability would be higher than the expected or forecasted profitability for five years. The industry is growing continuously. This industry will dominate in the future due to development in research and development.

Driving Forces Affecting The Industry

  • Analysis Of General Environment

In the U.S market, Smartphone’s are there; smartphones are designed by the different companies, in order to fulfill the customers’ demands. U.S customers are satisfied from the Smartphone applications, however, most of the consumers are expecting more. The market today is trying to make the advance operating system or new application, so the customers could be attracted. The internet is providing the diverse functions phones to the customers and customers are getting benefits of the new applications. Customers are using GPS, maps, camera, books etc. according to the need of the time. There is competition in the market, and there are a number of worldwide sales of Smartphone’s, some of the manufacturers of the smartphones are highly misleading, as companies are influencing on the purchasing behaviors of the customers (Woyke, 2014).

Influences Force

Influencing forces of the Smartphone’s industry is based on the characteristics of the product, with the technology advancements, customers are willing to buy better technology, and the industry has the maximum amount of the products or the services that could be chosen by the customers. Companies are motivating the customer to buy the product through setting the higher prices of the phones. The device, the application, and the network are the focus of the companies; the companies, which are focused more on these features, are earning maximum profitability in the market (Kauerhof, 2015). Customers pay more attention towards the features of the Smartphone’s; the customers are attracted to the digital technology, camera phones are very popular, the more the clear picture is, the more customers will be attracted.

Opportunity Or Threat To Industry

Smartphone’s Industry has the opportunities and threats, as the market is growing and there are quick changes in the technology and designs it is the indication towards the short life cycle. The pricing of the products have become aggressive and technological advancement customers are becoming more price conscious. There are barriers to entry for the new company, cross-elasticity, and self-elasticity of the product is becoming high. There is the strong revelry in the market no firm has control over the prices and the market share (NAKAGAWA, 2013).

There are no sufficient results regarding the control on prices the competition is becoming high. The customers have the brand loyalty, this is the reason that customers will not shift to the new brand, as Samsung and Apple have customers that are more loyal across the world. Based on the product differentiation company can get opportunities and can be successful, some customer or some companies have loyal customers, some of the companies are more successful because they ate focused on differentiation. If we take an example of Apple, due to differentiating iPhone, the company is more successful in making the differentiated product.

Growth Opportunities

The smartphone industry has the growth opportunities, if company become successful in managing the customers relationships and if it is able to grasp the customer attention to buy the more products or Smartphone’s then company can gain more profit and can grow in the market. The company can focus on the most existing feature for the clients and can get benefits for the future. There are significant opportunities in the market if our company has the sufficient capital, and then there could be the success. However, there are competitors in the market but through sufficient capital and existing corporation, any company could be successful and make profitability in the market.

Analysis Of Competitive Environment

  • Five Forces Analysis (Dziri, 2013)
Threats Of New Entrants (Low)

The smartphone industry is highly concentrated, the startup cost, to enter into the market is extremely high so there is less fear of the new entrants. There is need of large revenue or the great sum of money to enter the market. To attain the economies of scale and for the customer’s attraction, there is the need to operating to cost efficiently or other differentiation strategies.

Bargaining Power Of Suppliers (Moderate)

Bargaining power of suppliers have less influence as the suppliers or operators are provided the high volume order by the companies; the bargaining power has less influence on the companies, however, the suppliers are pressurized to supply the reserve e-auction. The vendors are in benefits, if they do contract with the companies, they can build trust towards the companies and can be successful. Through doing the innovation, more companies could be attracted.

Bargaining Power Of Buyers (Low)

The buyers have the little bargaining power because the companies in the market have the maximum customers, the companies cannot focus on the one customer. However, the company’s tries to give maximum benefits to the customers, if any customer faces the problem; companies try to resolve the issues (Dziri, 2013). Moreover, fewer companies in the Smartphone industry the customers, have the fewer bargaining power, but good name companies like Apple and Samsung customers have the no or very less bargaining power.

Threats Of Substitute (Moderate)

For the successful survival of the organization, the organization need to focus on its substitute product, there are substitute within the mobile phone industry, example if the consumers are not getting the phone they can use an ipad mini, tablets, laptop to communicate or in performing any tasks. Threats of the substitute are moderate, there are few market leaders in the industry.

Intensity Of Rivalry (High)

There is rivalry within the Smartphone industry, due to the intense competitors, the profitability is less. Nowadays rivals are using techniques to succeed in the market and for the profitability, they are competing with each other regarding pricing, advertising, new product, technology etc. The market is oligopoly market; this is the reason that competition is high in the market. The major competitors like HTC, Samsung, and Apple are focused on the innovation and striving for competition to succeed in the market so that the profitability could be there (Dziri, 2013).

Forces Of Competition Affect The Level Of Profitability

After doing the analysis of the industry, with the five forces, we come to know that industry is at a stronger position; the industry has the strong and competitive position in the market. The companies who are treating their customers well and have the relevant or proper strategies for the satisfaction of the consumers are getting better profitability or market share within the industry or market. Through the analysis, for the new companies, it is difficult to survive in the market because there are a number of competitors and have the good brand names. The companies like Apple and Samsung have the loyal customers, who will never shift to the new brand in the market. If any new companies want to get success in the market, then there is, need to think of various aspects like those that the given technological product needed to be better than others in the market.

Opportunities Lead To Profitability

There are opportunities for the companies to grow in the market, as the companies can focus on the innovation, better services and they need to manage the prices for the consumers. To achieve the profitability and competitive advantages in the market, companies need to improve their Smartphone. Smartphone industry can attract the customers through improving their new Smartphone’s, through complaints and dissatisfaction of the customers; companies can try to improve itself.

Overcome Threats

To overcome the threats within the industry, companies need to focus on the products they are giving in the market. However, we are going to start the new product range so we need to focus on the technology that can give benefits to the human life. The new service provider to the customer needs to combine the most current technology, the services need to be faster and prices need to be lower down.

Critical Success Factors Of The Industry

  • Critical Success Factors (Most Critical)

The consumers across the countries are relying heavily on the mobile phone communication; the market is growing fast because the customers are willing. In the countries, customers prefer the Smartphone’s with the higher or advanced technology, consumers wants to see innovation in the products. For the success of this industry or if any company want to resist in the market, then it must keep on focusing on the innovation as innovation in technology is the most important or critical factor. The companies are focused on adopting the level of new technology, so the consumers can be inspired example, companies are giving high-speed internet through 3G, and so the profit or revenue could be generated.

Core Competencies Of Successful Firm In Industry

All the firm or companies in Smartphone industry are striving hard to get success in the market; however, Samsung and Apple are the most successful brands or firms that are present in the industry. In 2015, Samsung has earned the large or maximum market share with 21.4%. Therefore, Samsung has best core competencies among all other firms in the industry. The core competencies are strengthening to get the competitive advantages in the industry. The core competencies of Samsung are to be creative, innovative culture, technology leadership, customer value creation etc. by focusing on four competencies Samsung is getting the competitive analysis in the market (Meyer & Peng, 2016).

Cost To Acquire Or Build Competencies

Strategies are important to focus on by every firm, through building the competencies firm or companies can evaluate itself, strategies lead the organization toward the development. For our organization, we also need to focus on the development of the future through making the strategies and competencies for the profitable growth. For the reasonable future, building the competencies is important. The cost is required to build the core competencies, firm first need to evaluate its cot or do the financial testing so the perfect strategies could be made.

Competencies are not easy to copy because every company has its own competencies and the companies have managed their competencies in their own ways. Actually, competencies are skills, knowledge or a sum of behavior, which can also be acquired by accessing others, the companies can know about the other companies competencies through noticing that they are getting success in the market. Like in Smartphone industry, Apple and Samsung are successful, so the new companies can target them and acquire their competencies.

Business-Level Strategies Successful In The Industry

  • Top Firm Strategies

In the Smartphone industry, firms have managed their strategies very well. The most important strategy of the top firm is technology, the company that is able to manage its technology well become successful in the market. Technology is being focused on the companies because in cellular industry everything is related to the technology.

The companies are also focusing on the designs of their phones so that something beautiful could be given to the customers. Another strategy is the justification for the prices as if Apple is selling most expensive phones because they have a recognizable brand and good brand name in the market. To sell the phone at the higher prices is the strategy of Apple; they have targeted niche and business class market by setting higher prices. Companies are communicating with the audience or customers so that the strategies could be more improved and there could be profitability.

Establish Strong Competitive Position

In the Smartphone industry, there are brands or firms, which are already established, for the new companies it will be difficult to compete in the market (Hiriyappa, 2013). However, through focusing on the strategies new companies can strive in the market. For the new competitive position in the market, a company can focus on the market growth that on what plans or strategies, other companies are working and on what plans a new company can work or focus.

To establish the strong competitive position in the market, the company need to have the knowledge about the competitors, and should know about a cost that what prices competitors are offering or at what price you will be able to match the competitors. Before entering in the industry, we need to sustain the strategies for the maximum profitability or for the competitive edge.

Distinct Competitive Position

Many firms in the Smartphone industry are focusing on a distinct product for the competitive products in the market. It would be difficult for any organization to create a distinct position in the market because there are already companies or firms that are earning the highest market share because their consumers or trades are satisfied (Song, 2010). Striving to low-cost producer could be our distinct competition position in the market because there are companies in the industries giving cellular phone at higher and lower prices, we can also focus on providing the services to middle and lower middle-class consumers so the profitability should be there.

Critical Success Factors And Competitive Strategy

For the success in the Smartphone industry, we need to strengthen our strategies; we can reduce the cost of our products, by outsourcing the manufacturing, low-cost producer or supplier could be hired to make the effective or efficient technology. In a case of improving the supply-chain efficiency, there is, need to collaborate with the suppliers.

We as a new company in the Smartphone industry can focus on the strategic target like low-cost leadership. We cannot target the upper class or niche market because companies like HTC and Apple has already targeted them. Our firm can also focus on differentiation as we can launch products different from the existing products in the market (Kenney & Pon, 2011). Before doing variation we need to think that customers are willing to pay that new product or not, in this case, we can communicate with the customers.

Executive Summary

Smartphones are becoming the necessity of modern world, in the industry, the companies has set their core competencies to strive in the market, dominant designs of the products are emerging, which are motivating the customers to buy the Smartphone. Technology has overtaken, in the recent years it seems that people will buy the Smartphone’s or the Smartphone of recognizable companies, for the status symbols, the companies in the Smartphone industry are earning a lot of profit. There are the companies that are focus more on the profitability. There is no space for the new company or firm in the industry because companies are focused on retaining the customers. However, with the help of the effective strategies, new companies can be successful in the market.

While doing the analysis of the industry, it has been concluded that overall firms in the industry are focusing on the customers preferences. The companies are trying or striving hard to compete in the market, the firms are focused on creating the new model of Smartphone is while focusing on the variety and profitable models. There is much focus on the technology and innovation, as the companies know that they will be successful in the market if they bring something existing for the customers. There are companies like Apple and Samsung with the great market share; they are more focused on the customer’s preferences because they have the loyal customers. If a new company wants to get advantages in the market then they have to do analysis and research that at what position competitors are there and what strategies are being used.

While doing analysis, I have discussed the external environment of Smartphone’s industry.  Any firm is currently working in the Smartphone industry. Due o external environment, that is technology and trends are bringing in the change in the Smartphone industry. People preferences for the technology and features are also the driving force to change, and innovation in the industry. In the report, I have also discussed the influence forces of the Smartphone industry. Influence forces are the advancement in the technology, prices and willingness of customers to buy the product. In the part of opportunity and threats, I have discussed the threats that the Smartphone industry is facing along with the opportunities that the Smartphone industry has. The major threat is the small life cycle of technology that is making difficult for the firms working in an industry to bring in innovation advancement in less time according to the demand of customers. Opportunity for the firms in the Smartphone industry is the loyalty of customers to buy a product even with the high process because they cannot take a risk with the quality. I have also discussed the growth opportunity that increases in demand. The demand of customers is increasing day by day regarding technology that is providing an opportunity to firms to bring in innovation and advancement that could help company working in the industry to get a competitive advantage, large market share and a lot of profits.

Porter five forces are important to model for analyzing the industry. Electronics equipment industry has analyzed in this report with the help of Porters five forces analysis. In this paper, this model is also included. Porter five forces model has suggested the threat of entrance in the industry is low due to high costs of starting the business. The low threat is due to high technological advancements in the industry. Suppliers have a moderate power they can affect somehow to the industry due to their technological products. There are only a few good suppliers. Buyers in the industry have low bargaining power. Individual buyers cannot force an industry to adjust prices according to their demand. It is included in this report that threat of substitute products is moderate.

There are many competitors in the industry and they are competing in providing products with similar characteristics and features. Smartphones are facing the moderate threat from the available substitutes. Apple, Samsung, Q-mobile, Huawei, Google etc, LG etc are competitors in the industry. There exists high rivalry in the competitors. They are competing by providing high quality and stylish smartphone in the market. Porter five forces model suggested growth for the industry. Porter five forces model has identified opportunities for growth and lower risk. The industry is having strong competitive existence in the market. Competitors are targeting the customers with their effective strategies.

To get success in the Smartphone industry, a company need to access the market from all the point or aspects, example, to establish the strong market position, there is the need to introduce the products, which are better than the competitors are or at least able to compete the competitors. There are products in the market with various prices, the firms in Smartphone industry are targeting customers from almost every class, however, before getting in the market we need to make sure that to whom we are going to target and what prices we can set. Apple is taking advantage of the good brand name in the market, phones are becoming the status symbol now, and based on this reason apple is managing or setting higher prices so that maximum profitability could be achieved.

Recommendation

  • After doing the analysis, I need to recommend that before entering the market; new companies need to have the full knowledge of the competitors so strategies could be design according to them or in a better way. It is not possible to get the competitive advantages in the industry because some companies have higher market share in the market.
  • For the new company we have to hire the right people for the right job, there is a need to ensure that employees are sincere to the organization.
  • We have to focus on establishing the revenue, before entering the market, the example for the core customer’s direct attention is needed and we need to establish the proper core competency, in which we will work to attain our objectives. Example, Samsung is doing or focusing on competencies.
  • We have to focus on the customer’s experiences, as the customers are using good Smartphone already present in the market. Therefore, we need to do the interview with them, in order to know about our product.
  • After doing the assessment of our product, we need to bring the changes to the product; the product or cell phone need to design in a way, what customers prefers to use.

Also Study,

Factors Affecting Smartphone Purchasing Decision Research Paper

References
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