Inside the Smartphone Industry

Ashley Campion Wes Kincaid Stephanie Lanter Michael Riggen John Hutchens Nathan Frost Claudia Martinez

What is a Smartphone?

A Smartphone is a mobile device offering highly developed features beyond a classic mobile phone
Computer-like functionality Applications for entertainment Access to the Web Personal data processing

The first Smartphone

In 1992, IBM created the first Smartphone which they named Simon
Shown as a concept product at COMDEX, a computer industry trade show in Las Vegas It was released to the public in 1993 and sold by BellSouth

More about Simon

Other than being a mobile phone it contained such features as a calendar, address book, world clock, calculator, note pad, e-mail, sending and receiving faxes, and games Customers used a touch-screen to select phone numbers

Text was entered with a unique predictive keyboard

Although it sounds similar to our Smartphone's today, the Simon would be considered fairly low-end

The Industry today

The Smartphone Industry has earned revenues into the billions of dollars and has become extremely competitive Apple is the leader in the industry today, with a few competitors behind them

Microsoft Sony Dell Google

Market size

Over 168 million customers

Market expanding to teens and even pre teens Older generations are also acquiring Smartphones for work purposes

Over 1200 companies 4 major Smartphone providers

Verizon T-Mobile AT &T

Scope of rivalry

Three contributing factors 1: Cost of plan 2: Speed of network 3: Phones

Life cycle

In the mature stage Only way to gain an advantage over other companies is by making the three factors better than others.

Problems

Cost of plans
Cancelation fees Long term contracts

Speed of networks

5 Forces Model

Rivalry within the industry Main Competitors - RIM, HTC, Palm, Motorola, Samsung, Nokia U.S. Market Share of Smartphones

5 Forces Model
Threat

of Potential New Entrants - The threat of new entrants is low since start up costs for a cell phone service provider are extremely high. A great sum of money must be invested to attain the economies of scale, and it is difficult to enter the market with existing firms already operating on cost and differentiation strategies.

First

Mover Advantage - Releasing a product early will enable one to capture the largest market share, establish partnerships, erase barriers to entry, and dim the chances of competition.

Bargaining Power

Buyers Customers Buying Power - Phones are changing dramatically and what consumers want is cheap and efficient. Buyers have high bargaining power and will usually pay for what the consumers value the most. Buyers Willingness to Switch - Will switch for innovative products and good ratings Suppliers Suppliers end up being in a low bargaining position because cell phone operators provide such high volume orders that they have to be cautious not to temper with the relationship.

Threat of Substitute Products Cost and Innovation - Companies within the industry compete on innovation and new applications. High switching costs with servers/phones - Consumers would more than likely not switch between a new product due to contract fees and the cost of purchasing a new product.
Intensity of Rivalry Among Competitors Innovative (Blue Ocean) Applications (GPS, Google, Email, Video/Camera, Bluetooth, Games etc.) New target market - Price reduction attract more customers

Establish Mobile Manufacturers: LG, Samsung

Software Giants: Google, MSFT

Threat of New Entrants

1. Consumer Market 2. Corporate Market

Bargaining Power Of Suppliers

Existing Rivalry in the Industry

Bargaining Power Of Buyers

1. Carriers AT&T 2. OS providers Linux, WM 3. Hardware makers - Intel

Threat of Substitute Products 1. Skype 2. PDA phone palm 3. Features phones Nokia, LG

What to learn

Companies need to learn from this what buyers value in the industry. How to add value to the customers. Know what they like and strive to achieve this.

Who are my loyal buyers and suppliers and try to build a strong relationship.
Know what your company is best at and learn how to go from there in making it even better.

Drivers of Change

Long term growth rate

People are taking more of an interest in the Smartphone Every quarter more people buy or plan to buy a Smartphone

Who buys the product

College students Business professionals

Drivers of Change

Product innovation/technological change Started as any phone that could text or play games Now it is any phone with a built in operating system Internet GPS Downloads

Drivers of Change

Diffusion of technological know-how New generation Need to upgrade Need for new technology Globalization Strong sales worldwide Companies on different continents Constant lines of communication

Drivers of Change

Emerging buyer preferences Not just for phone calls anymore High demand for multiple features Send/receive e-mail Access to Internet Purchase I-Tunes, ringtones, and games Social concerns, attitudes, and lifestyles Driven by technology People dont NEED Smartphones but they WANT them Keeping up with the Joness

Competitive Forces
Global economy Price Product Features Product quality Design innovation

Strategic Positions

Sony cant compete

Sales are down Lack of innovation to compete with Apple

Dell
Cutting operating costs Just trying to survive economy, not thrive

Strategic Positions

Google
Becoming key player in software development Numerous Apps for iPhone On top of innovation

Microsoft
Expects double digit revenue increase Came off of 18% growth in revenue in 2007 Very strong position

Competitive Moves

Microsoft
Look for Microsoft to continue with same results With double digit growth expected, no reason to let up

Google
Watch for Google to become a key player in software development Possible product line in the future

Key Success Factors

Technology:

Replacing Communication - Internet prediction in 2004 Tools:

- As consumers increase the demand for more features offer in the service, also, the network capacity - Fixed line phones being replaced - Emergence of Smartphone as a viable tool for many businesses - No real substitute product, therefore, people become dependent on them

Key Success Factors

Next Generation Experience: - Companies raising their research to meet consumers needs -Example: battery running-off and still having 4hrs of talk time, lighter in weight and thinner

Marketing: - Quantitative research on mobile phone users reveals that there is currently no such thing as a Smartphone market - The assumption that the mobile market will develop in the same way as the personal computing market did

Key Success Factors

Pricing:
- About half of the sales of Smartphone are through employers (as opposed to retail channels)

Skill & Capability:

- Manufacturers adding multimedia and other entertainment features to compete - but segmentation suggest to add communication services like, advanced voice and video e-mail, white-boarding etc.

Key Success Factors

Design & Innovation Expertise:

- Example: Super-smart Smartphone mated into a desktop cradle that hooks up to peripherals like a common all-garden PC. An intelligent dock that would have networking built-in, a USB hub, some sort of communications hook-up, and its own processor, memory, and operating system. It could be connected to an external monitor and keyboard, and would react when a Smartphone was placed into it. The Smart Interface System for Mobile Communications Devices, would work as much as a desktop PC does now.

Industrys Attractiveness and Prospects for Long-Term Profitability

Growth Potential Impact of Competitive Forces Unattractive Forces in the Smartphone Industry Is This an Attractive Industry in Which to Participate?

Growth Potential

Since 1998, 30% increase in the number of people in United States who own cell phones
Innovation played big part Progression: (brick phone flip phone Smartphone)

Average life of a cell phone is only about 18 months Probably not skyrocketing levels of growth, but still growth potential

Impact of Competitive Forces

Apple
The iPhones release put Apple ahead in Smartphone industry (327% growth) the year it came out

Research-in-Motion (BlackBerry)
Frontrunner in Smartphone industry until Apple released the iPhone

HTC
Hopes to pick up speed with new Google phone Android

Nokia
Known for brick phone Has Smartphone, but hasnt seen successful growth in Smartphone industry

Impact of Competitive Forces

Worldwide: Preliminary Smartphone Sales to End Users by Vendor
3Q08 Market Share (%) 3Q07 Market Share (%) 3Q083Q07 Growth (%) 3Q08 Sales 3Q07 Sales

Company

42.4
Nokia 15,472 15,964

48.7

-3.1

Research In Motion Apple

HTC Sharp Others

5,80 0 4,720
1,656 1,239 7,626

15.9

9.7

81.7 327.5
25.9 -19.3 -20.9 11.5

3,192
12.9
4.5 3.4 20.9 100.0

1,104
1,315 1,535 9,643

3.4
4.0 4.7 29.4 100.0

Total

36,515

32,753

Source: http://www.gartner.com/it/page.jsp?id=827912

Unattractive Forces in the Smartphone Industry

BlackBerry Thumb Florida teen sent over 35,000 text message in a month- twice Texting While Driving Health hazards

Electronic Magnetic Fields Can Cause Tumors (preliminary research)

Is This an Attractive Industry in Which to Participate?

Red Ocean
Competing on innovation Big players like Apple and RIM BlackBerry have huge lead

Blue Ocean
Smartphone companies could differentiate by Dell style customization of cell phones Or reduce the amount of EMFs emitted from phone *Apples success in one year could happen with any company