Glass Phone Market Prospects - Case Study Example

Global Business Context AND ID: SEMINAR In this box briefly remind the reader what your chosen industry and product/service is from Task 1. Also state whether you are concentrating on production or sales of the product/service: The project is based on production of “Glass Phone” which falls under mobile phone industry. The purpose of this project is to provide an industry analysis of mobile phone industry. This part focuses on the socio economic requirements, buyer characteristics, and internal & external factors of mobile phone industry which can impact on Glass Phone. The idea of Glass Phone was developed by the huge spending and expansion of mobile phone products and demand of innovative features of expensive mobile phone within people. The Glass Phone will be marketed in the emerging markets of Asia which has shown enormous potential of growth in the mobile phone market. Industry/Product Checklist Comments Source of Evidence (Reference) Socio Economic Requirements Potential market size: GDP Population size/growth Population structure e.g. ageing Purchasing power (GDP per head) The purchasing power is significant consideration for Glass Phone. As Glass Phone is costly thus, per capita income of prospective customer is expected to be in between 5,000 USD to 15,000 USD or above. Future Potential (economic growth) The cell phone industry has strong potential for growth. It is recognized as one of the fastest growing industries globally. In the year 2004, almost 58.5% of telephone subscribers used cell phone which is almost 1,752 billion globally. Only Asia comprised of 709 million of global cell phone users. In the year 2004, China which was recognized as “low and middle income nation” had 335 million mobile phone subscribers and the rate is growing rapidly. In present day, society is living with innovative technology and everybody desires to keep pace with latest technology. This is the reason for the new Glass Phone to have great future potentials in the Asian market. (Goggin, 2006). Are high literacy rates required? Using cell phone need not require high level of education. Customers irrespective of literacy have already recognized the necessity of having a cell phone. But literacy level can influence the perception and utilization of cell phone. Availability of skilled labour important? Mobile phone industry has low necessity of infrastructure compared to landline telephone industry, but it has high necessity for skilled labour. Only skilled labours can deliver quality products and services which led to higher customer satisfaction. Mobile phone manufacturing company requires high level of reliability and unskilled employees are less dependable which can impact on the performance of the organizations. (Fagan & Munck, 2009). Or is abundance of cheap labour more important? As Glass Phone is high tech instrument, the cheap labour is ineffective as it can lead to defective products. Highly qualified employees are appropriate which might call for greater expenses, can provide positive results by minimizing number of faulty products. Demand/buyer characteristics Does your product sustain or require: A mass market The Glass Phone is an expensive product and thus it would require increased marketing initiatives to attract mass market. This product is affordable for medium and high income customer segments. People desire to spend much on mobile phone as it has become a status icon. Researchers suggest that, youth customers spend almost 13.5% of their disposable income on mobile phone products. (ITU, 2004). A niche market Affluent buyers Buyers with modest purchasing power Government contracts or big corporate Orders Any special distribution requirements e.g. proximity of ports; malls; mass retail outlets The Glass Phone distribution needs to be more expanded and cohesive. The distribution channel must be flatter so as to ensure operational efficiency. In metropolitan cities where retail chain is highly developed Glass Phone will be distributed through mass retailing and shopping malls. Aston Martin can distribute the Glass Phone by developing its own sales network. (China Business Solutions Ltd, 2003). Are there any particular social or cultural factors which might influence the consumer? The cultural factor can influence the purchasing behaviour of customers. In present day, the cellular phone has moved from being technological item to social item. The reason for purchasing a cellular phone is to communicate with others. Cell phone can influence on social relations. The usage of cellular phone has resulted bigger electronic connections between friends, relatives and thus are altering the cultural standards and principles. In the cultural context, the “Individualism” and “Collectivism” can impact on the purchasing of Glass Phone. (European Conference on Information Systems, 2009). Are there any potential ethical issues that you need to take account of? In cellular phone industry, there are several violations of patent issues which need to be considered by Glass Phone. For example, in the year 2010, Apple had filed a suit against mobile phone manufacturer company HTC for patent infringement regarding Android handsets. These factors can harm the competitive environment of mobile phone market. (Schonfeld, 2010.) Is demand for the product sensitive to recession? Does it do well or badly in recession? The Glass Phone product will certainly be vulnerable to economic recession. But electronics manufacturing companies have better prospect to recover quickly compared to other industry through recession. In the year 2009, the two leading cell phone manufacturing companies named Nokia and Sony have projected losses of income and reduction in quantity of sales due to recession. The sales of Nokia and Sony had dropped by 10% and 43% respectively in 2009 compared to 2008. In 2010, the cellular phone industry had shown positive indication of recovery. (IT News Africa, 2009). Is demand for the product income elastic (do people purchase more of it when there incomes are rising)? Is it a luxury or a necessity or neither? The income elasticity of Glass Phone is very high. As it is a semi luxury product, more people will purchase it if the income increases. (Afridi & Et. Al., 2010). At what stage of the Product Life Cycle is it? New, Growth, Mature, Decline? The mobile phone industry falls under mature stage of product life cycle. Almost every possible customer is using cell phone products in present days. The profitability of cell phone relies on the marketing ability of company to attract new customers. Do buyers of the product show high levels of brand loyalty or are they readily able & willing to buy substitute products? The mobile phone customers are characterized by low level of brand loyalty. Customers in cellular phone industry always seek for attractive deals and certainly switch to other brands if they get opportunity of better facility. According to survey conducted by Oracle in the year 2010 on 3000 cellular phone customers, it can be observed that there was inadequate customer loyalty. Customers consider the prices as well as the new features in the cellular phone and on condition that customers’ get value for money, they pay attention to the offerings of new product or services. (Needle, 2010). Does the product have to be produced close to the consumer? Is after sales service important for the product? After sales service is vital for Glass Phone because it can result in higher customer satisfaction and greater brand loyalty. In this increasing competitive business environment, after sales service is inarguably one of the major conceptions for customer satisfaction. Only innovative technology and attractive features cannot help to sustain in the market. In present days, it is usually assumed that the secret of gaining sustainable competitive advantage lies in providing quality after sales service which can result is satisfied customers. (Mokhtar & Et. Al., 2011). Barriers To Entry: Obstacles Facing New Entrants into the Market Does the product require a high level of financing to get off the ground? Glass Phone manufacturing requires huge investment to enter and stay in the market successfully along with other competitors. There will be huge cost for Glass Phone to create the new innovative product and appeal to the customers for purchasing it. As technology is evolving daily, customers will be eager to purchase the new product. Is production of the product labour or capital intensive The Glass Phone product is very much capital intensive as the success depends on using advertising technology, advanced marketing tools, monetary resources and information & communication technology. The product will also develop its website as a marketing activity. (Hernández & Et. Al., 2007). Are economies of scale important in the industry? Does the company have to attain a very large size to compete? Economies of scale is much important consideration for cell phone industry. Cell phone manufacturing companies use two kinds of scales which are internal economies of scale and external economies of scale. In internal economies of scale, organizations use large production so that per product manufacturing expenses become less and company can gain cost advantage. External economies of scale are used by cellular manufacturing organizations where they perform faithfully with service exporters and communicate directly with industrialists, which can help to provide better and fast services and thus increase the productivity. Might existing companies retaliate against a newcomer? As the market of mobile phone is highly concentrated, the existing companies such as Nokia, Motorola or Sony will react to the new product (Glass Phone). The existing companies can reduce the cost of their best selling products, provide attractive deals to customers, increase spending on advertisements, or might make a joint venture with other companies as a step against new comer. Do companies in the industry face protectionist policies in the kind of countries they expand into? Supply Issues Are there any critical raw materials or other inputs that are necessary for this product? Manufacturing Glass Phone will require glass, circuit board, display materials, camera, speaker, and other materials for producing battery and phone. There will be sufficient suppliers for making Glass Phone globally as it does not require any critical raw material which is very much limited. Does the product rely on Just In Time methods of production? Can materials/components be sourced from many countries? The components for Glass Phone does not require to be sourced from other countries, besides there are several restrictions on exports from foreign countries and the taxes imposed on materials can also increase the production cost. Do companies in this industry rely on a few big suppliers or many small ones? Who has the greatest bargaining power: companies in the industry or their suppliers? The suppliers of cell phone manufacturing companies receive high volume orders from many others corporations. As there are several suppliers of the components of cell phone, the bargaining power of suppliers is moderate. The cell phone manufacturing companies need to generate faith with the suppliers as well as network operators for prospering innovation and carrying worth to the industry. The Importance of Technology Does the product need high levels of technology for production? The Glass Phone product is a high end technological innovation made with glass and platinum. Besides usual mobile functions, this product will have many more attractive features such as GPS system, integrated camera, and several car functions which require high level of technology. Is it a high tech consumer product? Glass Phone is much more than normal cellular phones with lots of existing benefits which makes it a high tech consumer product. Does it require high spending on Research & Development? As businesses are spreading internationally and commercial innovation strategies are charming, the cellular phone companies are spending substantial amount on research and development. For instance, Nokia the leading brand of mobile manufacturing had invested almost 7,727 USD in the year 2007 which is 9% more than 2006. The amount represents almost 11.1% of total sales. The spending is mainly concentrated on innovation. Researchers suggest that 50% of total spending on R&D is allotted for innovation. Though Glass Phone is innovative product but it also requires high spending on R&D, because other competitors will soon develop similar products to maintain their strong presence in the mobile market. (Jaruzelski & Dehoff, n.d.). Does it require highly skilled technical workers? Competitors What type of market structure is the industry? Oligopoly or other? Previously, telecommunication industry comprised of landline connections only which was a monopoly market, but as the market liberalized and mobile phone industry emerged, several new players started business. Thus, this industry is perfect completion in nature where there are many big players such as Nokia, Samsung, LG, Sony, Motorola and the products are marginally differentiated from each other. This industry is characterized by few barriers to entry like high capital requirement and intense competition from rivals. Who are the main competitors? Do they operate in global markets? The major competitors of mobile phone industry are Nokia, Motorola, Sony Ericson, LG, Samsung, etc. Are the main competitors Multinational Corporations? How large are they? The operations of the competitors are expanded internationally and have large customer base all over the world. These competitors are characterized with high financial growth and high level of innovation. How do companies compete? Price competition Non price competition (brands, advertising, innovation of new products; etc) Cartels Price wars The competition among cellular phone companies are closely related with the way of differentiation. Companies attempt to differentiate the products in terms of identification and recognition of product diversity which satisfy the requirements and desires of target customer segments. Organizations also use branding strategy to enhance the brand image towards customers. (Economics Web Institute, n.d.). Other Important Factors These may be related to other PESTLE influences and will vary from industry to industry Continued next page SUMMARY OF ESSENTIAL AND DESIRABLE CHARACTERISTICS Based on your research summarised above, in this box you must now identify the essential and desirable characteristics you will now be looking for when you select a country in Task 3 to launch your product/service idea in. Do this as a series of clearly written but concise bullet statements (not too vague, but not too wordy): ESSENTIAL CHARACTERISTICS Requirement of high skilled labour who can provide quality services and reduce faults in production. A mass distribution of product is required primarily in metropolitan cities through shopping malls, retail outlets and websites. The cellular phone industry is characterized by high level of capital requirement and high economies of scale. As Glass Phone is a semi luxurious product the income elasticity will be high and the product will face massive competition from industry giants such as Nokia, Motorola, Sony Ericson, etc. DESIRABLE CHARACTERISTICS As the demand for innovative mobile device is large thus, Glass Phone has high prospect for growth in future. Country with per capita income of 5000 USD or above is suitable for this product. Effective marketing and branding can help to attract potential customers to purchase Glass Phone as it is one of the innovative products in the mobile industry. References Afridi, S. A., & Et. Al., 2010. The Analysis of Cellular Services and Estimating Fixed to Mobile Price Elasticities-A Case Study of United Kingdom. European Journal of Scientific Research. [Online] Available at: http://www.eurojournals.com/ejsr_40_3_11.pdf [Accessed November 22, 2011]. China Business Solutions Ltd, 2003. An Overview of Mobile Phone Distribution Channels in China. Overview of Handset Distribution Channels in China. [Online] Available at: http://www.chinabusinesssolutions.com/dbimg/overview_of_handset_distribution_channels_in_china.pdf [Accessed November 22, 2011]. European Conference on Information Systems, 2009. The Impact of Culture on Mobile Phone Purchasing: A Comparison between Thai and British Consumers. Scholar One. [Online] Available at: http://www.ecis2009.it/papers/ecis2009-0515.pdf [Accessed November 22, 2011]. Economics Web Institute, No Date. Levels of Product Differentiation in the Global Mobile Phones Market. Essays. [Online] Available at: http://www.economicswebinstitute.org/essays/levelsdifferentiation.pdf [Accessed November 22, 2011]. Fagan, G. H., & Munck, R., 2009. Globalization and Security: Social and cultural Aspects. Introduction to Volume 2. ABC-CLIO. Goggin, G., 2006. Cell Phone Culture: Mobile Technology. Routlge. [Online] Available at: http://irm.bc.edu/reserves/mh100/keel/mh10006.pdf [Accessed November 22, 2011]. Hernández, M. G., & Et. Al., 2007. Information Communication Technologies And Human Development: Opportunities And Challenges. Idea Group Inc. ITU, 2004. Mobile Phones And Youth: A Look At The Us Student Market. Future Mobile. [Online] Available at: http://www.itu.int/osg/spu/ni/futuremobile/Youth.pdf [Accessed November 22, 2011]. IT News Africa, 2009. Mobile Companies Feel The Effects Of Global Recession. Africa’s technology News Leader. [Online] Available at: http://www.itnewsafrica.com/2009/07/mobile-companies-feel-the-effects-of-global-recession/ [Accessed November 22, 2011]. Jaruzelski, B., & Dehoff, K., No Date. Beyond Borders: The Global Innovation 1000. Strategy + Business. [Online] Available at: http://www.strategy-business.com/media/file/sb53_08405.pdf [Accessed November 22, 2011]. Mokhtar, S. S. M., & Et. Al., 2011. The Relationship Between Service Quality and Satisfaction on Customer Loyalty in Malaysian Mobile Communication Industry. School of Doctoral Studies (European Union) Journal. [Online] Available at: http://www.iiuedu.eu/press/journals/sds/SDS_2011/BME_Article4.pdf [Accessed November 22, 2011]. Needle, D., 2010. Survey Reveals No Customer Loyalty in Mobile Market. The Network for Technology Professionals. [Online] Available at: http://www.internetnews.com/mobility/article.php/3905061/Survey+Reveals+No+Customer+Loyalty+in+Mobile+Market.htm [Accessed November 22, 2011]. Schonfeld, E., 2010. The Complaint: Apples Patent Lawsuit Against HTC Is All About Android. AOL Inc. [Online] Available at: http://techcrunch.com/2010/03/02/the-complaint-apples-patent-lawsuit-against-htc-is-all-about-android/ [Accessed November 22, 2011]. Read More