Case Study: Smartphone Industry

Case Study: Smartphone Industry Name Institution Due Date Case Study: Smartphone Industry Introduction A smartphone can be defined as a mobile Internet device that operates under a combination of features from a traditional phone as well as a PDA. This kind of mobile phone offers an advanced computing ability alongside connectivity as compared to the operations of the basic current mobile phones. It can be referred to as an integrated device with mobile phone technology with more advanced abilities to access the Internet. The major difference with the traditional phone is the smartphone has the capability of allowing users to install, add or delete applications and at the same time allow users to personalize the interface. In this case, the smartphones allow users free access to Internet irrespective of time and location making users enter the period of ubiquitous information. The focus of this paper is actually on three smartphone companies within the mobile phone industry; Apple, Samsung, and Huawei (Dinsmore, 2016). Evolution of the Smartphone Industry The cellular handsets have integrated with additional functions since their inception. There has been the development of communications technology from large integrated companies that have enabled cellular connectivity as well as making key components including appropriate infrastructure equipment. These companies are also involved in designing, manufacturing as well as the distribution of their handsets. They include Nokia, Ericsson, Motorola amongst other mobile companies. However, the industry displays some level of vertical integration whereby companies such as Samsung produces smartphones, memory as well as other components while on the other hand, Apple designs their own operating systems including the application processor chips. Notably, the production activities take place within a wide global network that encompasses computers, communications, semiconductor, software markets as well as consumer electronics. The various new entrants in the smartphone industry such as Oppo and Huawei can take advantage of the liberal nature of the cellular as well as wireless telecommunication standards and incorporate the ubiquitous Android operating system for the purposes of entering the market and obtaining substantial market share for handsets. The last two decades have seen the evolution of cellular telephones from analog to digital as well as from basic to smartphones having the capability of communications from data and applications. The major shift within the industry happened in 2007 following the introduction of the Apple iPhone that set the standards in the design of phones (Dedrick et al., 2015). Interestingly, the evolution of the iPhone coincided with that of cellular connectivity for the purposes of providing efficient wireless transfer of data that made possible the use of smartphones. This reveals the level of complementarity that occurred between smartphones and other technologies. The smartphone industry recorded significant growth from approximately 123 million units of sales in the year 2007 to over $ 1450 million sales nine years later (IDC, 2016). There was considerably slow growth in the year 2016 in the value of shipments owing to the saturation of the market. The past experiences in the growth of the market were eminent in developed economies such as Europe and the United States. However, the current growth is being experienced in developing countries with India in the lead. The average selling price for smartphones has declined considerably within the last decade. In the earlier years, the performance from other associated technologies contributed to the improvement of the smartphone capabilities amidst stability in their prices. The increase in competition levels within the industry has contributed towards low prices and margins while the capabilities increase. The market share for the initial leaders within the industry such as Nokia and Blackberry continued to diminish from the market with Apple and Samsung emerging as dominant players. However, their pricing mechanism seems higher as revealed in their revenue shares almost double the share of shipments (Kharpal, 2016). Moreover, the consolidation within the smartphone industry has become low with the major 20 players recording approximately 85% of unit shipment in 2016. This is owing to the presence of many producers entering the market, therefore, leading to shifting in market share for the top 20 such as the entrance of Chinese based companies Oppo and Vivo that sold more units in 2016 as compared to other producers (IDC, 2016). Industry Analysis The various technological and business innovations in the recent past including aspects on trade liberalizations have necessitated the reorganization of global value chains (GVC) within different industries. Some of the key elements punctuating such reorganizations include the unbundling of the different value chain activities. While the nature of organization of GVCs is well understood due to numerous studies conducted in the same field over the past decade, the aspect and the role of intangible assets such as software, innovative design and technological knowledge is generally less researched. Such intangible assets influence the functioning of the GVCs. For instance, the current use of intangible assets helps in the shaping of the various successes in the marketplace thus determining the nature of distribution of value within GVCs. The smartphones provide different abilities that enable the running of different software applications. The smartphones are portable and readily available in the market which makes important the value of their functionality. Consequently, there are numerous companies that make and sell smartphones with few dominating the market such as Apple, Huawei, and Samsung. Samsung and Huawei are known to be some of the largest producers as well as suppliers of smartphone within the phone industry (Dinsmore, 2016). The two companies contribute towards the development of the various connectivity standards including Apple Inc. Branding and nature of demand The growth being experienced within the smartphone industry is being influenced by the nature of volatility amongst the top players in the market. For instance, the leading brands in the market a decade ago, Nokia and Blackberry, are no longer the top players as per statistics in 2016. The newcomers command a good percentage share of the market in terms of shipments and revenues. For instance, Huawei came into the market in the year 2010 and made a significant impact in shipments and revenues within the world’s largest markets such as China and Europe. Between the years 2007 to 2012 the Android dominated the smartphone market owing to the fact that the operating system was the most used for smartphones. However, Google had also introduced android which was an open source phone operating system that also dominated the Ssmartphone mobile market (Song, 2010). The smartphone has increased its popularity in the current technological era since it provides people with convenient options such as information exchange and entertainment all the time. There was a high expectation of the growth and adoption of smartphones between the years 2014 and 2017. Several manufacturers developed a series of smartphone devices for the purposes of competing with the iPhone within the market. The existing competition, especially in upgrading hardware and software features, made some brands such as Samsung, LG, Xiaomi experience improved sales (Dedrick and Kraemer, 2017). In the traditional mobile phone market, the hardware technology was a key factor of competition. This dimension proved unprofitable in the market since consumers were not exposed to contents. During this period, the only operating system developer that was involved with software was Nokia and the supply could not still satisfy the smartphone market. This was due to the fact that customers were so much obsessed with the quality of sound, camera, display as well as the external design that were all results of hardware technology. In the traditional era of hardware, the leading competitors in the market included Nokia, Motorola, Sony Ericsson, LG, and Samsung. The current market analysis of the smartphone industry can be based on a competitive structure divided into three market segments: operating systems, hardware manufacturing and the content. The hardware segment presents the fiercest as compared to other segments based on the traditional brands as well as the new entrants. Then the segment of the operating system represents the core value of the current smartphone market since there is a shift from hardware to software. Then...