Changing The Competitive Landscape Of The Smartphone Market Marketing Essay

Abstract

Innovation can be defined as a process of converting chances into new ideas and of the extensive application of the ideas in practice (Tidd, Bessant, & Pavitt, 2005). Days gone by decade saw regular innovations in ICT aimed at increasing self-efficacy of the end users of communication gadgets. Elements such as for example miniaturization and ubiquitous computing (Open Handset Alliance, 2007a) have literally brought the non-public laptop to the palm of the buyer, in the form of a smartphone. The smartphone can be rich with features such as for example internet browsing, touch displays, mobile-camera, improved connection and entertainment with the ability to adopt fresh applications (Burgelman, Silverman, Wittig, & Hoyt, 2009). Modern times witnessed an explosive progress in mobile subscribers, where in 2008 only global shipments rose 28%, as the smartphone obtained momentum in the mobile phone industry (Canalys, 2008). The next few years are predicted showing a compound gross annual growth rate of 13.5% in handset shipments leading to 1.9 billion handsets at the conclusion of 2012 compared to 1 billion in 2007 (DataMonitor, 2008). Today, because of its portability and versatility the smartphone is a key person that facilitates the integration of technology with modern day consumerism as the finish user is given the ability to engage many computational units and systems concurrently (Tsai, Wang, & Hwang, 2008). Mark Weiser (1991) identifies this as Ubiquitous Processing.

The demand for smartphone provides been the main element driver for innovations (such as the touchscreen, internet browsing, Wi-Fi) in the mobile industry in the past decade and the Start Handset Alliance and the Android os platform are recent goods of such pursuits. This research analyses how the OHA and Google android has and can alter the terms of competition in the mobile industry, with relation to Porter’s five industrial forces.

The Smartphone Industry

Industry Participants

Analysing the industry worth chain of the smartphone the key components can be determined as chipset manufactures (Intel) , infrastructure developers and system manufactures (Microsoft, Palm, iPhone) who provide the hardware and software parts for handset manufactures. Application developers develop the applications that run on the operating platform whereas content providers such as for example Google provide the information for these applications. Cell operators such as AT&T and T-Cell distribute handsets and offer the subscribers with network connectivity.

In 2006 the global handset market was an oligopoly dominated by 5 companies which accounted for 85% of the market where Nokia and Motorola collectively accounted for 58%. Traditionally manufacturers competed through design and style. The access of iPhone 3G to the marketplace in 2008 created a fresh standard by combining design and style, performance, utility and efficiency (Burgelman, Silverman, Wittig, & Hoyt, 2009). It is considered by some industry analysts to be a blockbuster where Apple’s market share increased from 3.6% in 2007 to 17.3% in 2008, which makes it the now second greatest player.

Google’s Entry into the Smartphone Industry

Established in 1996 as the brainchild of two Stanford University computer science graduates, Google is currently considered to be a blockbuster concept which has expanded beyond its main business as search engines to a portfolio of products (Bhattacharya, Gopal, & Samad, 2009). Today, a the greater part of Google’s income is generated through the business’s advertising items, Adword and Adsense (99% in 2007 and 97% in 2007) (Burgelman, Silverman, Wittig, & Hoyt, 2009) that provide targeted advertising on its search webpages, by placing advertisements relevant to a search on the results page.

Google’s entry to the smartphone sector was facilitated by its acquisition of the start-up open source application firm, Android in 2005 (Organization Week, 2005). This event was a result of Google identifying the near future growth potential of the smartphone and its capacity for mobile advertising. Eric Schmidt, the Chairman and CEO of Google stated ‘You carry your phone everywhere. It knows about you. We can execute a very targeted ad. Over time we will make additional money from mobile advertising and marketing.’ (Schmidt, 2010).

Open Handset Alliance and Android

In November 2007 Google unveiled the Open up Handset Alliance, a consortium of 34 companies in the mobile industry representing the industry value chain (Fig 1), comprising multinational companies such as for example T-Cell, HTC, Intel, Qualcomm and Motorola. The objective of the alliance was to create an ‘Open Program, Open Device and an Start Ecosystem’ (Start Handset Alliance, 2009b) fostering open innovation for development of mobile technology predicated on the open source system. Today the OHA possesses extended its membership to 65 companies.

Fig. 1: The Wireless Value Chain (Hendrix, 2009)

In November 2007 OHA released Android, a built-in software pack comprising the Operating System, middleware, user-friendly user interface and applications and the Android os SDK absolve to the development community.

Open Innovation and Open up Source

Open innovation is certainly innovating through the collective innovative input and knowledge of internal and external resources (Chesbrough, 2003). Open origin technology is one method of open invention (von Hippel & von Krogh, 2006). It grants the developer the ownership of the foundation code without a cost of license charge or royalties providing them with the freedom to further develop and distribute the merchandise free or at a cost (Open Source Initiative, 2010). The openness of the program creates more advance and cheaper innovations with shorter time-to-value, bettering R&D efficiency and creating better value for money for the end user (Open up Handset Alliance, 2009b). The OHA was a value network fostering open invention by pooling of knowledge and Intellectual Home of the members. Android, was its first item made on the Linux wide open source kernel (Open Handset Alliance, 2007a).

The Competitive Industry Forces

Michael Porter (1979; 2008) defines five forces define the competitive dynamics of an industry by shaping the interactions within that market. These forces can be explained as bargaining electric power of suppliers and clients; the threat if brand-new entrants and substitutes and set up sector rivals (Fig.2). These are the figures that travel the profitability of the sector in the short and long conditions (Porter, 2008). Analysis of these competitive forces and their drivers will provide insight into the basis of the industry’s profitability and foreseeable future growth potential.

The entry of Android and Google into the smartphone industry has significantly affected its competitive landscape. Through the creation of an available ecosystem and a broad developer community it has created a sustainable competitive gain against non-Andriods.

Fig 2: The Five Forces that Shape Sector Competition (Porter, 2008)

The Five Forces of the Smartphone Industry

Bargaining Power of Suppliers

There are a amount of players in the smartphone OS’S (OS) industry, led by Nokia’s Symbian, accompanied by Apple’s iPhone OS X, RIM’s (Research in Motion) Blackberry, Microsoft’s Windows mobile, Linux and Palm (Hashimi & Komatineni, 2009). These OS developers charged a license payment from handset manufactures, which was usually a variable expense of $0.50 to $25.00 per handset shipped. Further, so that you can build applications on a particular OS, developers required SDK (Software Creation System) and an API (Application Developer Interface), important support tools that they paid expensive qualification and sometimes high membership fees (Burgelman, Silverman, Wittig, & Hoyt, 2009). Due to the high bargaining power of the OS developers the cost to handset suppliers was substantially high.

Porter (2008) identifies standardization as an avenue of reducing the bargaining vitality of suppliers, and it is needed for innovation in the portable telecommunication industry (Tilson & Lyytinen, 2006). Before collaborative R&D and sharing of intellectual home were method of standardization in this market (Bekkers, Verspagen, & Smits, 2002). Android was developed to accomplish an industry-wide standard in open resource code rendering it freely available to all. By establishing OHA for this function creates a host for open development reducing development, distribution and period costs of parallel innovation. The open mother nature of the Android platform makes it totally adaptable on any handset which triggers thesis defintion a higher demand for the Android os OS, which in turn reduced the bargaining ability of the suppliers of OS.

Bargaining Power of Distributers

In the smartphone sector the distributers mainly consist of the network carriers who promote the phones

to subscribers as a part of a mobile service system. The bargaining vitality of the distributers is certainly high since they have a large selection of handset manufactures with cool features to pick from. Although the failure of the ANDROID OS may be due to a variety of factors one key explanation was their decision to sell the phone within their own web store independent of a carrier, so that they can ‘shake up’ handset retailing . They changed this plan by introducing the Nexus One in Vodafone (UK) in April 2010 (Parker & Waters, 2010).

Handset manufactures make an effort to gain leverage through branding, networking and advertising to create brand loyalty. iPhone for instance has a quite strong brand community. Nevertheless the entry of the Android phone has created a new ‘buzz word’ among clients, which gives participants of the OHA a higher bargaining power over various other handset manufactures.

Another key element that affects carriers may be the new avenue of voice communication that is available in the smartphones as a result of Wi-Fi capabilities and applications that are provided such as for example Skype and Google Tone of voice. With time this might reduce talk time over the carrier’s network impacting their revenue. Recently iPhone blocked Google Voice on its system (Menn, 2009).

Through collaborative advancement OHA has built a standard platform (Cusumano, 2010) and reduced R&D costs of parallel invention and increased period efficiencies. These economies will finally flow to the end user creating higher value for money giving Android phone makers a better bargaining ability over their subscribers in comparison to their competition.

Rivalry between Incumbents

Within a couple of years of entering into the market the cellular phone became a commodity due to the competition available in the market and the fast innovations that led to similar phones competing on price tag. When the smartphone entered the market it required a premium price for the added functionality of the phones. Now the creation of a standardized OS program through Android has the potential to commoditize the smartphone.

Since it was introduced to the market Google android has emerged as a solid manufacturer controversial topics list whereby every smartphone running on the Android platform is co-top quality as an Android os phone. The 1st Android the T-Cell G1, Motorola Droid and the most recent HTC Magic will be few such illustrations. This creates a convergence in branding between your people of the OHA additionally consolidating the smartphone sector through the alliance.

The worth network and wide open ecosystem that is OHA has a huge potential for future advancements in the smartphone market because of the knowledge pool area they have created. That is a critical asset for the people of the OHA over the other players in the market. Even more, having Google as a strong leverage with regards to branding, information and recruiting adds to the benefit for the OHA.

By introducing a typical platform for smartphones Android os has lowered any competition between handsets over the OS, starting a fresh avenue of competition, which is usually applications.

One of the key conditions that arise between incumbents in the industry is the Intellectual Home violations. Apple recently sued HTC for 20 patent infringements over HTC’s Android mobile phones (Gelles , 2010).

Barriers to Entry

The primary barrier for the smartphone sector for a fresh entrant was the significant predetermined costs of R&D and advertising and marketing. The introduction of Android os has decreased these barriers significantly. First, by freely featuring the SDK to the advancement community any brand-new entrant may use this OS with out a cost. Further more the applications that happen to be developed for the Google android phones are remarkably adaptable and wide open. Therefore they may be adapted by any different entrant. Very similar Apple’s Apps Store, right now there are multiple applications that are available with no cost.

Further the Android manufacturer is a powerful platform upon which fresh entrants can leverage their advertising.

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