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LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, NEW DELHI

Managerial Economics End Term Project Report

Study of factors determining demand and supply of Samsung Smart Phone

Submitted to: Prof. Shikha Singh

Submitted by: Group no. 11 131 Umashankar Joshi 132 Ravish Kapoor 133 Ruchi Gupta 134 Archana Madhu Kumar

TABLE OF CONTENT

1. Introduction 2. Smart Phones 3. Smart phone market in India 4. Top five smart phone vendors 5. Key Indian smart phone trends in 2012 6. Porters analysis 7. Analysis of supply 8. Analysis of demand 9. Conclusion 10. Appendix 11. Bibliography

TABLE OF FIGURES
1. The concept of smart phone 2. Worldwide smartphone units sold in 2011 3. worldwide smartphone units sold in 2nd quarter 2012 4. Indian Market share for 1st quarter in 2012 5. Porters five forces analysis 6. Feature Preferences based on gender 7. Customer preferences of different age groups on the basis of their gender 8. Feature preferences on the basis of age group 9. Feature preferences based on marital status 10.Customer preferences of different age groups based on their marital status 11.Customer preferences of different age groups on the basis of their income
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1. Introduction
The project undertakes the study and analysis(economics) of the utility of Samsung Smartphones among customers . A smartphone is a mobile phone built on a mobile computing platform , with more computing capabilities and connectivity as compared to other phones with features like High speed internet access, Wi-Fi , GPRS and many other applications . The demand and supply analysis of the product is done to find out the determinants of demand and how the supply is affected by demand and other business environmental factors . A comparative study will be done by comparing the sales of the Samsung Smartphones with that of the others viz.a.viz. Nokia , HTC and Micromax. The key focus area would be the consideration and speculation of the factors of distinction between the former and the latter, in the same segment of study.

Objectives
To ascertain the determinants of demand for the Samsung smartphones and to understand the supply aspect by taking into consideration the demand factor and business environment . The study will target the features that are offered by the Samsung phones and what role they play in order to capture the smartphone market. The study will conclusively establish the determinants of demand and carry out a comparative analysis with other phones by different companies of the same segment which are currently positioned in the consumer market. Another aim of the study would be to determine effectively the prevailing trends in the consumer market.

Methodology
To study the demand side factors, primary survey was conducted with a sample size of 70 customers using Smartphone and a questionnaire was given to them highlighting the features that led them to buying the Smartphone . To study the factors affecting supply, primary survey was conducted with a sample size of at 15 retailers of Samsung Smartphone by providing them with a questionnaire and analyse the factors influencing the supply of this product in the market . The samples were taken from Dwarka region, New Delhi. Judgemental sampling was done to choose the customers using Smartphone and the age group of the sample customer base was kept from 18 to 50 years, bearing in mind the pragmatic framework of consumers and their probability of purchasing and using the modern day Smartphone.
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2. Smart Phones
A Smartphone is a new form of mobile Internet device that combines the traditional features of a phone and a PDA.2 Another noteworthy definition of a Smartphone is that it is a mobile phone that offers more advanced computing ability and connectivity than a basic current mobile phone does.3 The common aspect of the two definitions is that a Smartphone is an integrated device with mobile telephone technology and the ability to access the Internet. The Smartphone first achieved both the functionality of a traditional phone and technology of a PC (see Figure 1). Unlike traditional phones, which are produced as finished goods, a Smartphone enables users to install, add, and delete hundreds of applications. Through various applications, users can also personalize the interface. Hence, because smart phones allow free access to the Internet regardless of time and location, users of smart phones are entering an era of ubiquitous information.

Source of information Printed source Desktop Laptop TV, radio E-book

Communication tools Messenger Social network E-mail Voice Text message

Smart phone 1. Extension and unlimited sharing of information 2. Changing lifestyle with numerous applications sss 3. Improvement of social communication

FIGURE 1: The concept of the smart phone

3. Smart phone market in India


3.1 Market definition: The Indian smartphone market consists of all firms throughout the world that manufactureand sell smartphones to indian consumers. A smartphone is a mobile electronic device which runs anadvanced operating system that is open to installing new applications, is always connected to
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theinternet, and which provides very diverse functionality to the consumer, including phone, text,email, calendar, address book, games, music, video, camera, maps and GPS, etc.51 A smartphone ismore than a typical feature phone in that it provides significantly greater functionality than just acalling and other basic functions, and it typically has a large screen. 3.2 Market Participants The participants in the Indian smartphone market include all manufacturers of smartphones that sell smartphone devices in India. The major participants include Samsung Electronics Co. Ltd. (a subsidiary of the Korean corporation Samsung Group), Apple Inc. (a U.S. corporation), Research in Motion Limited (or RIM, a Canadian corporation), Nokia Corporation (a Finnish corporation), and HTC Corporation (a Taiwanese corporation). Smaller participants include LG Corp. (a Korean corporation), and 3.3Market Shares/Value Pool Samsung and Apple dominant more than half of the worldwide market share for smart phones.

worldwide smartphone units 2011 %age share


17% 36% 19%

samsung Apple Nokia HTC corp. ZTE Corp. others

2%

11%

15%

Figure 2 Worldwide smartphone units sold in 2011

worldwide smartphone units shipment 2Q2012 %age share


samsung 33% 33% Apple Nokia HTC corp. ZTE Corp. 5% 6% 6% 17% others

source: IDC

FIGURE 3 worldwide smartphone units sold in 2nd quarter 2012

Indian Market share for 1st quarter in 2012


0% 0% Indian market share for smartphones vendors 40% 12% samsung nokia blackberry 26% others

22%

FIGURE 4 Indian Market share for 1st quarter in 2012

4. Top five smart phone vendors


4.1 Samsung Korean electronics giant Samsung was once a manufacturer that simply made products that were cheaper than its rivals, such as Sony and Panasonic. Now, however, the manufacturer is reaping the rewards of a serious focus on much higher quality. While it continues to make some 60 phones each year, it now has the flagship models to cater for every market and the scale to make sure that innovative features quickly show up in cheaper models. Its success has seen itself caught up in in a host of lawsuits over patents, most famously last month when it lost a $1bn case to Apple. But Samsung is also Apples supplier for many of its chips, and it makes televisions, excellent audio equipment and much more besides. In that sense its an example of the mega-corporations that we are seeing more and more of its grown rapidly while Sony, Panasonic and HTC have struggled and often failed to stay profitable. For now, Samsung is Apples biggest rival. Galaxy S3 The Galaxy S3 is the best phone on the market to use the most popular operating system, Googles Android. Its also the first phone to come close to generating the level of excitement that Apple enjoys. Key to the S3s appeal is a combination of lovely design, a beautiful 4.8 screen and a fast processor. Highlights include Smart Stay, which uses the front-facing camera to track your eyes as you look at the phone - as long as you're looking, the display won't go to sleep. As yet, its not quite consistent, but this seems like a feature that will be standard soon. The camera offers decent quality, a burst mode and integrates with Facebook to automatically recognise the people in your pictures. And the huge battery (2,100mAh) will get most users easily through the day.Fans of the iPhone dislike the size of the S3 the screen is enormous, even if the device is thin and for feeling plasticky compared to the iPhones glass-and-steel solidity. But the sales figures speak for themselves. Though when the new iPhone comes out users will have a proper point of comparison

4.2 Apple Critics of Apple will be quick to tell you that the company did not invent the smartphone or the touchscreen but there is little doubt that the iPhone set a standard that the competition has been trying to reach ever since. Apple has innovated plenty of smartphone features but they've borrowed some, too. The addition of Notification Centre to iOS last year was seen by many as a lift from Android. The operating system is acquiring a degree of tweeness, too, with fake leather and 'torn' pages adorning almost every new official app. In industrial design, however, the company remains light years
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beyond Samsung in delivering handsets that feel meticulously crafted, with enormous attention to detail. Their biggest threat in this area is not Samsung, but Nokia. iPhone: It won't be called the iPhone 5 because, among other reasons, it isn't the fifth iPhone. Apple's sixth iPhone model, which we expect to be called simply 'the new iPhone', is likely to be significantly redesigned, with a thinner, metal, case and a taller, but not wider, screen. Part of the reason the phone is expected to be thinner is a new screen design that integrates the touch layer of the phone with the display itself. In a move that is likely to exasperate those with a lot of docks, chargers and other accessories, Apple is also thought to be ditching the familiar dock connector from this handset, in favour of a smaller version.

4.3 BlackBerry A BlackBerry mobile functions as a personal digital assistant and encompasses address book, memo pad and a list of other personal management features. BlackBerry India has garnered much popularity in the recent past and is every smart and tech savvy user's preferred choice. Smartphone BlackBerry phones are primarily known for their ability to send and receive Internet e-mail. This is particularly important in places where the network service is available via the wifi connectivity. The BlackBerry mobile is thus immensely popular across the world. To name a few famous BlackBerry models are BlackBerry Bold 9900, BlackBerry Bold 9930, BlackBerry Torch 9810. 4.4 Nokia Smart Phones For years Nokia was the largest phone manufacturer in the world. Even as it slipped behind the technological curve, customer loyalty and huge sales of cheap devices, especially in the developing world, sustained it and even saw it grow. But no longer. The company is struggling as never before, with its title as largest manufacturer snatched by Samsung and its reputation for innovation in tatters.For Nokia Corp., the new phones are especially crucial. They're the first to run Windows Phone 8. Nokia's smartphone, the Lumia 820, equipped with Microsoft Windows Phone 8, has been displayed. Nokia revealed its first smartphones to run the next version of Windows, a big step for a company that has bet its future on an alliance with Microsoft. Nokia's new flagship phone is the Lumia 920. The lenses on its camera shift to compensate for shaky hands, resulting in sharper images in low light and smoother video capture. It can also be charged without being plugged in; the user just places it on a wireless charging pod.Nokia also unveiled a cheaper, midrange phone, the Lumia 820. It doesn't have the special camera lenses but has exchangeable backs so you can switch colors.

4.5 HTC Smart Phones They have a wide range of android phonee namely HTC Droid Incredible 4G LTE, HTC EVO 4G LTE, HTC One X etc. The third generation Droid Incredible by HTC may be smaller than the 4.8" Samsung Galaxy S III and other big boys on Verizon Wireless, but it has plenty of top notch
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features. A sharp 4" Super LCD display running at qHD resolution, a 1.2GHz dual core Snapdragon S4 Krait CPU and a sharp 8 megapixel camera with BSI sensor and simultaneous 1080p plus still photo recording grace the feature list.HTC EVO 4G LTE This is the phone to beat on Sprint. Like the original EVO years ago, it has the right combo of good looks, high quality materials and top off the line features that makes for a true flagship smartphone. As you can guess from the name, this 4.7" Android ICS smartphone has LTE 4G.

5. Key Indian Smartphones trends for 2012


Emergence of multiple SIM Smartphones Samsung has already launched Dual-SIM Smartphones such as Galaxy Pro Duos and Wave Y Duos and is expected to launch Dual-SIM capability on its more popular lineup such as Galaxy Y and S II. As more India OEMs launch Smartphones, we expect to see more Dual-SIM smartphones in the market through them. We also expect devices that support both GSM and CDMA, especially in high end smartphones. Global players to capitalize their strengths in India While OEMs such as Nokia and Blackberry have traumatic global challenges, they are expected to continue to be significant in India given their strong brand presence, distribution network and consumer affinity in India. Carriers to continue experimenting with contracts for Smartphones In 2011, MTS launched a Smartphone (HTC Pulse) on contract for the first time with moderate success. This initiative has opened up the potential for other players and we expect a few other carriers to experiment with this model on an opportunistic basis to improve their competitive edge.

6. Porters Analysis

FIGURE 5 Porters 5 forces model


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Threats of new entrants (Medium) A high amount of capital is needed to do the research work , hence it is not easy for companies to invest in this research and come up with new technologies . It is hard to bulid loyalty in the industry . If a company has enough resources to start up then its easy to attract customers . Theres no switching cost involved in changing the brand of a cell phone company . For Samsung the new entrants are Micromax and Karbonn who are new in the segment of smart phone and are offering these phones at low prices .

Degree of Rivalry (High) Competition is fierce in the smartphone market . Major competitors like Nokia , Samsung , Apple . Sony are continuosly coming with new models . Companies need to be ahead of each other in terms of technology and features offered in the Smart phone in order to retain or capture new customer base . In india the major rivalry is between Nokia and Samsung . Both brands are offering Smartphones with many features and are continuously introducing new models with extra features and new software platforms .

Bargaining power of Suppliers (low) Samsung is dependent on suppliers for the cellphone parts like chips , batteries(mostly lithium) . As the number of suppliers are large they dont have much power in influencing the purchase decisions of the company . Samsung can easily switch to other supplier if the supplier raises price or the products offered by them is of inferior quality.

Bargaining power of Customers (High) Customers are enjoying a variety of products in the market when it comes to smartphones . The major competitors in the market are trying their best to catch up with the demands of customers . The loyalty is very low and the only thing the customer looks for is quality of the product . A customer can easily switch to some other brand if they like as there is no switching cost involved
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Number of Substitutes (Low) The number of substitutes is very low . People are now preferring the wireless mode of communication over fixed telephone connection as there is mobility associated with mobile phones . With the existence of Wi-Fi and features of handheld computers products like tablets may become substitute for the mobile phone . But companies have already strted integrating the features of a computer in a mobile phone and hence the Smartphone industry is heading towards a new direction with the possibility of introduction of new substitute becoming more and more remote .

7. Analysis of demand
The most preferred feature by the smartphone users are the applications that it supports like GPS, IM and other apps available on the Android market.The most preferred Samsung smartphone is Samsung Galaxy Ace as found in the survey.

7.1 Gender Featured Price


The mean for men for pricing is 3.5 on a 5 pointlikert scale and the corresponding value for female is 4.27. Therefore, women are more price conscious as compared to men.

Memory
The mean and mode for the data show that males look for memory more as compared to womens

Processor speed
Given more importance by men while purchasing the product

Battery Backup
A good battery backup is preferred more by women as compared to men

Camera
This feature is preferred more by men

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5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

Mean values of variables based male Mean values of variables based female

FIGURE 6 Feature Preferences based on gender

35 30 25 20
Female

15 10 5 0 18-25 25-30 30-35 40-45 45-50

Male

FIGURE 7: Customer preferences of different age groups on the basis of their gender

7.2 Age Group


The most preferred feature is the speed of the processor as most people use the internet and other applications which require higher processor speed.Though as the age group increases people start giving more importance to features like battery backup and less importance like price and camera

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25 20 camera 15 10 5 0 18-25 25-30 30-35 40-45 45-50 battery backup processor speed memory price

FIGURE 8: Feature preferences on the basis of age group

8. Marital status
For both married and unmarried peoples the most important feature is the processor speed but unmarried people give more importance to the price of the smartphone and for other features they give almost the same importance.

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

Mean values of variables based married Mean values of variables based unmarried

FIGURE 9: Feature preferences based on marital status

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50 45 40 35 30 25 20 15 10 5 0 18-25 25-30 30-35 40-45 45-50


Married Unmarried

FIGURE 10: Customer preferences of different age groups based on their marital status

9. Income Group
People in the higher income group who earn greater than 8 lacs are very less bothered about the price and buy expensive smartphone whereas people in the income group 4-6 lacsare more price conscious and tend to buy low priced smartphone.

35 30 25 20 15 10 5 0 age 18-25 years 25-30 years 30-35 years 35-40 years 40-45 years 45-50 years income

FIGURE 11: Customer preferences of different age groups on the basis of their income

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10.Analysis of supply
Supplier sell on an average around 200 smart phones in a month out of which approx. 100 are Samsung smartphones. Samsung is the most popular brand among the customers as informed by suppliers in the questionnaire. Companies give many offers during festive season like fast track watches, sratch card and other different gift offers to attract the customers. Average profit margin for retailers is around 5- 10% for most of the retailers. Mode of payement offered by dealers in mostly cash and credit card. Distributers /company delivers the phones to retailers within 2 or on the same day as and when the order is placed.

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BIBLIOGRAPHY

1. Research and Markets: India Smartphone Market & Operating System Analysis Forecast,Business Wire, January 13, 2012 2. Indian Smartphone Market Overview Android to dominate, Arun Prabhudesai on February 16, 2012
3. www.mobiletechreview.com/smartphone.htm

4. Smartphones in the U.S.: Market Analysis, Scott Cromar, Business Strategy for Lawyers , by Professor Amitai Aviram

5. Samsung leads in smartphones marketshare in India in Julty 2012: Cybermedia Study www.wirelessduniya.com, July 12, 2012

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