Mobile Apps Market - Essay Example

Name Instructor Course Date Mobile Apps Market Industry Analysis The mobile app industry has experienced immense growth in the recent past. The mobile app industry was estimated to worth $53 billion in 2012 and was projected to worth $143 billion by the end of 2016 (Rakestraw, Eunni and Kasuganti 2). Industry analysts project that the industry will continue to experience significant growth in the next decades due to the growing demand for mobile apps worldwide. Revenue from mobile app comes mainly from in-app ads, in-app purchases and big data accumulation. However, industry analysts feel that utility, social networks, productivity and advertising are the most promising with the largest growth in mobile app demand expected to occur in the Latin America and Asia-Pacific. Estimates indicate that app downloads will reach 200 billion while revenue generated from mobile app will reach $77 billion by the year 2017 (Clifford par.3). The value of transaction for worldwide mobile payments in forecasted to rise to $721.3 billion in 2017 up from $235 billion in 2013. The growth of the mobile app industry is driven by the growing sales of mobile devices, such as smart phones and tablets. The major players in the mobile app market at present include Apple, Samsung, Google, Nokia, China Mobile, Palm, LG, Microsoft, GetJar, NTT DoCoMo, Handster, Handmark, Mplayit, PocketGear, and Research in Motion (RIM) just to name but a few (Rakestraw, Eunni and Kasuganti 4). The major players in the industry have focused in developing advanced mobile apps that are user-friendly, and cost-effective with more features that improve customer experience. Analysis of the industry indicates that the major players in the industry follow pre-launch strategies that include the social media creation to improve visibility and effectiveness. Porter’s Five Forces Model Intensity of Rivalry The intensity of competition in the mobile app industry is high. The industry has experienced a huge increase in the number of mobile app developers over the recent past and this has resulted in high competition in the industry. Current estimates put the number of mobile app developers at about 2.3 million. This translates to one in every eight developers dealing with mobile apps. Apple reveals that it has more than 1.25 mobile apps in its App store (Clifford par.4). The intensity of rivalry is high because the market for mobile apps has reached saturation stage with the mobile app developers currently competing mainly on prices instead of differentiation. Threat of Entry The threat of new entry is high. The mobile app market experience high threat of new entry because it requires very little capital to come up with a mobile app. Besides, the industry experience high threat to entry because the major players in the industry have not created strong barriers to new entrants (Rakestraw, Eunni and Kasuganti 14). It is for these reasons that the mobile app market has reached a saturation stage as the industry has seen many new players enter the industry to grab a share of the market. Thereat of Substitution The threat of substitution for mobile apps is high. Mobile apps have a lot of substitutes that can be used as alternatives among them being droid. At the same time, the internet allows a person to surf for information directly and faster without necessarily having to use an app (Rakestraw, Eunni and Kasuganti 12). For advertising, there are numerous companies that provide a platform for advertising directly through pop-ups and on the site without having to rely on a mobile app. Bargaining Power of Suppliers The bargaining power of suppliers is medium to high. Although the number of companies providing an app store, where developers can list their apps for download by users has been growing, the number of suppliers of app stores still remains relatively low and this gives the few suppliers in the industry a medium to high bargaining power over the prices. This implies that app developers have to pay relatively high commission to the app store suppliers to have their apps listed for download by app users. The major suppliers of app stores include Apple (iTune), Google Play Store, Samsung App Store, Nokia Ovi Store, China Mobile, Palm, LG, Microsoft, GetJar, NTT DoCoMo, Handster, Handmark, Mplayit, PocketGear, and Research in Motion (RIM) app stores among others (Rakestraw, Eunni and Kasuganti 4). Bargaining Power of Buyers The bargaining power of buyers of mobile apps is high. The mobile app industry has reached a saturation stage and currently has more than 2.3 million app developers from which customers can purchase their mobile apps or get the apps for free. For instance, Google has more than 150, 000 app developers, Apple 235,000 while Microsoft has 45,000 and Samsung and other suppliers of app stores also have numerous developers (Clifford par.6). The fact that these app developers compete on prices rather than differentiation with the number of developers providing free apps gives buyers a high bargaining power over prices. B2B, B2C, B2G Pricing Strategy Mobiles apps falls under two main categories namely business-to-Customer (B2C) and business-to-business (B2B). However, B2B apps are the most popular with about 99% of mobile apps falling under the B2C category. However, because of the high intensity of competition in the B2C category, most users tend to download only those apps that have good user rating and few updates and ads. To attract customers to the apps, app developers in the B2C category have become very keen on pricing strategy adopted because competition in this app category is based mainly on price wars. However, analysis indicates that apps are charged affordable prices that range from $0.99 to $1.99 to appeal to users to download the apps (Innovate People par. 5). However, there has been a huge increase in free mobile apps in the B2C category that allows users to download apps for free and this has increased the intensity of competition in the mobile app industry. Like B2C mobile app category, B2B apps have also been experiencing significant growth as reports indicate that up to 70% of marketers are currently looking for mobile apps to simplify their business (Innovate People par. 3). However, because of the high cost incurred in developing B2B mobile apps, the app developers usually adopt premium pricing strategy because of relatively low competition and the fact that users of B2B apps are willing to pay a higher price to get quality B2B apps. The other mobile app that is gaining popularity is the business-to-government (B2G) mobile apps. In 2005, B2G revenue was estimated at $6.2 billion and has grown since them due to increased demand for B2G apps (Innovate People par. 9). Because the governments demand quality apps and have the ability to pay for an app, the prices charged are usually high compared to those charged for B2C apps. Works Cited Clifford, Catherine. By 2017, the App Market Will Be a $77 Billion Industry (Infographic). Web. 19 September 2016 https://www.entrepreneur.com/article/236832 Innovate People. B2B Vs B2C Mobile Apps – Where Should You Invest In 2016. Web. 19 September 2016 https://innoppl.com/blog/b2b-vs-b2c-mobile-apps-where-should-you-invest-in-2015/ Rakestraw, Thomas L., Rangamohan V. Eunni and Rammohan R Kasuganti. The mobile apps industry: A case study. Journal of Business Cases and Applications (2012): 1-26. Print. Read More