The Smartphone Industry Analysis 2012 - Essay Example

?The smartphone industry consists of the all firms that manufacture smartphones and sell it to the entire world. Smartphone is defined as a mobile electronic device which runs an advanced operating system and can also install new applications and is always connected to the internet which results in a variety of functions available to the consumer. It has been a decade since the first smartphone was launched and there has been no going back. Similar is the case with the tablet, first launched by Apple in 2010. The major companies competing in the smartphone industry are namely Google, a U.S corporation, Nokia, a Finnish corporation, Apple Inc., a U.S corporation, Research in Motion Limited, a Canadian corporation, Microsoft, a U.S corporation and HTC, a Taiwanese corporation. (Cromar, 2010) The smartphone market is characterized by perpetual innovation and constant new product development. No one company has considerable market share so all the companies are constantly evolving technology in order to remain competitive and not to be driven out. (Brownlow, 2012) Smartphones and tablets have very short product life-cycle due to constant improvement in technology, aggressive pricing and rapid imitation. The barriers to entry in this industry are very high due to patents, high start-up cost, regulations and economies of scale. In the smartphone industry there are many drivers which deliver success and in order to stay in business and maximize value for the company it is important to know what factors guide the company towards excellence. The smartphone industry is very fleeting, therefore companies need to be on their feet and constant research and development is needed to come up with the most innovative features that would appeal to consumers. This should be in line with the market demand, but innovation is a key competitive force in the smart phone industry. Secondly, the product needs to be reliable and should deliver on its promises. Having a reasonable battery life is important along with good reception. This would make the consumer brand loyal if their expectations are met. Also, good customer support service is mandatory to be competitive. Thirdly, the product created needs to expandable such that it allows third party applications to run and is not very restrictive in nature. Timely software updates also reinforce a brand’s image. Another competitive force would be that the product should be user friendly, and the interface should be designed in order to facilitate consumers and should not be time consuming. Lastly for a company to remain competitive they should have great financial capability in order to respond to the fleeting market demand and have the finance for product development shifts, marketing and acquisitions as well. (Gartner, 2010) One of the best ways of evaluating the attractiveness of an industry and gauging its performance is through the Michael Porter's five force model. This model ensures that a holistic analysis is performed which considers all the possible threats and provides a true picture of the external environment of an industry. The industry according to this model is quite profitable as only two threats are strong and can be removed via good coordination. The smartphone industry is marked with the threat of rival sellers. All the major competitors have pretty much the same strategy and use innovation to excel and make promising products. Also, these companies are financially strong and stable and have immense budgets for promotional campaigns and intense research and development. Another common feature of this industry is the greater ability for acquisitions which dirty dig the share quickly off the android. Because the industry is progressing at a fast rate, some shifting in market share without long term results can exist. (Analysys Mason, 2012) The threat of new entrants is moderate because the barriers to entry are many. The global distribution of technology is limited to the leading technology companies and they have patented their hall of fame products. The only viable option for smaller firms entering into the smartphone industry is by selling smartphone operating system to existing manufacturers like Google has done. (TheAnniston, 2011) The threat of substitutes to the smartphone is quite weak because the smartphones are greatly in demand, and they themselves are the best substitutes for laptop computers, netbooks, and basic cellular phones. As the smartphone itself serves the purpose of many different devices, the threat of it being substituted is quite negligible. The threat of supplier power is quite strong in the smartphone industry as suppliers play a crucial role in providing the materials at a low cost. Qualcomm and Marvell are the two most important companies manufacturing smartphone processors, so maintaining good relationship with them is of immense importance. The threat of buyer’s power is fairly reasonable. In today's world, smartphones are extremely important because the world has condensed and become a global village so the need to connect is crucial to a business’s success. The substitutability of smartphones with other products is negligible however switching from one brand to another is a great threat for individual companies. (Brustein, 2011) According to the Industry lifecycle theory, which mainly focuses on the growth, maturation and decline of industries, the smartphone industry is currently in its growth stages, and because of its heavy reliance on technology development and keeping in mind the needs of our current business environment, huge interest is vested in the development of the smartphone industry. However ILC theory doesn’t predict any pattern however we see positive growth in the smartphone industry. Briefly evaluating the internal threats within the smartphone and tablet industry, the threat of substitution is critical because rapid technological innovation results in imitation, and low cost for competitors who greatly drive down profits and there is greater cross-elasticity. (esr, 2011) Secondly, though some companies are getting their innovations patented but weekly cases are filed in the court regarding the infringement of these patents leading to very high costs. There is greater threat of competition, as even HP recently bought Palm. As the number of smartphone users is expected to reach one billion by 2013, any company with a good budget is thinking of delving in the smartphone industry as of recent. This all provides greater competition for the existing companies. (Wasserman, 2012) Conclusion: The smartphone industry is constantly changing with rapid product developments. There are great opportunities and it is indeed one promising industry however the threats need to be monitored in order to remain competitive. The smartphone industry with all the recent developments can be expected to be significantly different in the next 1 to 5 years. Bibliography Analysys Mason, 2012. The Home Will Be The Centre Stage of Mobile Innovation In 2012, s.l.: Analysys Mason. Brownlow, M., 2012. Smartphone statistics and market share, s.l.: Email Marketing Report. Brustein, J., 2011. Rivals to the iPad Say This Is the Year, s.l.: New York Times. Cromar, S., 2010. Smartphones in the U.S: Market Analysis , s.l.: s.n. esr, 2011. The Smartphone Wars: Signs and Portents. [Online] Available at: http://esr.ibiblio.org/?p=3894 [Accessed 12 April 2012]. Gartner, 2010. Gartner Says Worldwide Mobile Phone Sales Grew 35 Percent in Third Quarter 2010; Smartphone Sales Increased 96 Percent, s.l.: Gartner Newsroom. TheAnniston, 2011. Google Android Case Study. [Online] Available at: http://www.infobarrel.com/Google_Android_Case_Study [Accessed 12 April 2012]. Wasserman, T., 2012. Google's Amazing Growth, By The Numbers. [Online] Available at: http://mashable.com/2012/04/13/googles-growth-infographic/ [Accessed 13 April 2012]. Read More