Analysis on global smart phone market and strategy of major players
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- FIGURE 3 Current smart phone market
- 2.2.1 Hardware manufacturers
- 2.2.2 The big three 8
- 2.2.3 Content developers
- FIGURE 4 The formation of the mobile internet device industry
- 3.1 The strategy of the first competitive markets -Smart phone hardware manufacturing
- CHART 2 Q1 2010 global smart phone market share by manufacturer (Unit: million)
- 3.2 The strategy of the second competitive market -operating system market
- CHART 3 Q3 2009 Global Smart phone market by operating system (Unit: million)
2.2 Current market analysis The newly formed competitive structure of the smart phone market can be divided into three market segmentations: (1) hardware manufacturing, (2) operating system, (3) contents (see Figure 3). The first market is the hardware manufacturing market. This is the fiercest part of the three market segmentations for the big five traditional brands6 and new entrants including Apple, RIM, HTC. The second market of the smart phone market is operating system market. As the core value of smart phone is transformed from hardware to software, Google, Apple, RIM, and Nokia become the leader in this market for developing and providing an operating system to cell phone manufacturers. The third market, for newly emerging players, is content development. Content developers form another competitive axis as contents are provided to application stores. These three market segmentations consist of the entire smart phone market, and they show vertical integration and strategic cooperation in the long-term. FIGURE 3 Current smart phone market 
2.2.1 Hardware manufacturers It is the big five that takes a direct hit from the expansion of the smart phone. Nokia who is the leading manufacturer among the big five has experienced constant drop in sales volume since Q3 2008 when the I-phone appeared. Recently, Nokia carries out aggressive marketing to shift from hardware technology to software development. Up until now, Nokia has disclosed API7 to third party application developers. However, as part of its new marketing strategy, they plan to disclose their every source code as well. In addition, Nokia is cooperating with Intel and announces another operating system, MeeGo in the smart phone market. However, except for Nokia, the four manufacturers still do not have their own operating system, or they just start to develop their operating system in recent years. Samsung, a Korean brand, developed its own operating system, Bada, and used it with Google’s open operating system, Android. The four manufactures will struggle to survive in the fierce smart phone market because of their unsatisfactory software technology and know-how about contents service compared with their successful hardware manufacturing. 2.2.2 The big three8 As the Blue Ocean9 in the global cell phone market is moving from hardware to software, RIM, Apple, and HTC gain the lead in a smart phone race. RIM already released the Blackberry series with its own operating system. RIM is expected to hold high market share supported by wide distribution channels and its professional image. The computer software giant, Apple, broke into the emerging market by launching the I-phone which has its own operating system as well. Apple emerged as the new potential market holder in the North American market utilizing the vertical integration of a closed platform and application services. While the 2G phone is only released to AT&T in North America, the 3G phone is provided in 21 countries and continuously increases its global market share. On the other hand, the Taiwanese brand, HTC, chases RIM and Apple by releasing Nexus One that is based on Android in Q1 2010. 2.2.3 Content developers Content service businesses emerge as the most important part of the smart phone competition. In the established traditional phone market, a portal service provided by telecommunications was the only source of contents. However, as the smart phone allows its users to build their own interface, securing high-quality contents emerges as a crucial issue in making or breaking the success. Apple already has developed and managed an application store with its strong contents service know-how accumulated by I-tunes10 development. Apple’s current application store has about 200,000 applications, more than in any other application shop. Other software developers such as Google, Nokia, and RIM have their own application shop and rush into the smart phone market. 2.2.4 PC makers The development of the smart phone which combines the traditional phone and access to internet is also influencing related-markets that incorporate the internet technology. The marketability of laptops, net books, smart books, e-books, and tablet PCs is dependent on the level of popularization of the smart phone. Looking at the current market situation, customer’s preference varies in regards to the price-value trade-off, portability, and amount of electricity used, but the smart phone holds the dominant position in that users can enjoy high-quality voice communication as well as use the mobile internet connection. Improved WIFI technology and high quality applications have helped the smart phone overcome major disadvantage such as poor contents and infeasibility of real-time wireless networking. Being threatened by the erosion of the smart phone into the PC market and the stagnancy of PC market growth, PC makers are gradually joining the competition. As customers’ options are changing from cell phone + note book, net book, or e-book to the smart phone, PC makers have no choice but to enter the smart phone market. In June, 2010, Dell, the second ranked PC maker, released its first smart phone, Dell Streak based on Android. The third ranked PC maker, Acer also launched Android Liquid A1 in 2010. In the long run, the continuous growth of smart phone blurs the boundary of the PC market and finally causes a huge integrated mobile internet device market (see Figure 4). FIGURE 4 The formation of the mobile internet device industry 
3. COMPETITIVE ANALYSIS As discussed, the smart phone market has features of the three particular markets: Hardware manufacturers, Operating systems, and contents. Established cell phone manufacturers and new smart phone makers compete in the manufacturer market, operating system developers duel over in the operating system market, and lastly, content developers compete with each other to get the leadership in the application service market. Ironically, however, those three markets are not an entirely exclusive market each other, but they are mutually interrelated because the smart phone is a joint effort between cell phone manufacturer, operating system developer, and high-quality content developers. Moreover, as PC makers enter the market, the smart phone market would be a fierce battlefield where the very existence of giant IT companies is determined. In the next part, I will discuss strategy of each player in the three market segmentations, and ultimately find a way to create a competitive advantage. 3.1 The strategy of the first competitive markets -Smart phone hardware manufacturing According to the latest IDC research in Q1 2010, the current leading company in manufacturing is Nokia. It has developed its own operating system and released the very first form of the smart phone before it was popularized. Nokia holds the first place in the smart phone market with a share of 39%, and RIM, Apple, and HTC chase after Nokia (see Chart 2). Competing for the first place, RIM and Apple have made great strides in hardware manufacturing, operating system and application service CHART 2 Q1 2010 global smart phone market share by manufacturer (Unit: million) 
-Source: IDC One noteworthy point is that the big five that once led the traditional feature phone market is not seen on the chart, except for Nokia. Why do these manufactures, who have formed the leading group in the market share of traditional phones, struggle in the smart phone market? That is because they were not able to anticipate the shift of market structure from hardware to software in timely manner. In this part, I will discuss the four hardware manufactures that do not have their own competitive operating system: Samsung, Motorola, LG, and Sony Ericson. Next, I will cover each strategy of Nokia, Apple, RIM, and HTC within the operating system market, which is the second market for the smart phone. The four hardware manufacturing brands: Samsung, Motorola, LG, and Sony Ericson have two strategic cards they can play to survive in the current smart phone market. The first one is to focus on continuous hardware development while maintaining hardware competitiveness of traditional phone to the smart phone market. Samsung electronics has a world-class LCD and LED panel, and ultra-light/mass-storage memory chip as well as various display technology. In terms of continuous lightweight, mass-storage, and high definition of the smart phone, constant hardware-focused competitiveness can be a comparably good strategic card. However, it still seems to have a risk of compatibility between the existing hardware technology and smart phone-only technology. The second card the four hardware manufacturers can play is to begin the development of a new operating system. At present, Samsung, LG, and Sony Ericson seek to develop their own operating system in various ways. Samsung prepares to develop a multi operating system combining the smart phone, smart TV, tablet PC, and other different mobile devices. In 2009, Samsung spurred the development of its own operating system, Bada. LG and Sony Ericson also gradually turn their strategy away from using an android-based platform to developing their own operating system. However, this strategy has an inevitable risk in overcoming the high entry barrier of software giants. In conclusion, hardware manufacturers having no competitive operating system have nothing to do but choose between maintaining continuous competitive advantage on hardware and developing their own operating system with tremendous opportunity cost. 3.2 The strategy of the second competitive market -operating system market The reason why Apple, Google, and MS stand out in the smart phone market is the increasing significance of the operating system. It is a core part of the new market, and plays a pivotal role in connecting the general function of hardware that is controlling input, output, and allocating memory, and the availability of various applications. Naturally, software makers who have a competitive advantage in the PC operating market now jump into the smart phone market as an extension of operating system market. Research conducted by Canalys in Q3 2009 shows that of the overall market share in operating systems, Nokia’s Symbian holds first place, and RIM, Apple, and Google follow (see Chart 3). According to Gartner’s research in 2009, while the market share of Apple has significantly increased by 8.2% from 9.6% in 2007 to 16.6% in 2008, Symbian’s has decreased by 6.8% from 63.5% in 2007 to 52.4% in 2008. Canalys also observed that Symbian’s market share has decreased from 68% to 47% during those two years. CHART 3 Q3 2009 Global Smart phone market by operating system (Unit: million) 
-Source: Canalys The constant decrease in market share of Symbian and the remarkable performance of Apple, RIM, and Android imply a crucial possibility in the operating system market, whether to manage the operating system in a closed platform11, like Apple, or in a completely open platform, like Google. As for the Apple I-phone operating system, it operates in a fully closed system. Closed platform system is strong in regarding to security issues even though it possibly fails to the increase market share. However, Apple overcomes with its numerous applications in terms of market share. Likewise, I-phone is the representative model of a successful closed operating system. On Apple’s stance of possessing competitive applications and manufacturing technology, it is not necessary to stick to an open operating system that is vulnerable to security issues. As a result, it is essential for software makers who operate in a closed operating system to cultivate an echo system with a high-quality application store and appealing hardware competitiveness. That is because the amount of their contents and the quality is a competitive edge itself in managing the closed operating system. Customers are naturally attracted to certain operating system and hardware in order to take advantage of high quality contents. Apple’s strategy of a closed operating system comes from its strong applications and hardware manufacturing technology. On the other hand, unlike a closed operating system, on open operating system has much more potential in that it can create more profitability models than the profit generated from a closed operating system. Google’s Android creates a synergic effect, integrating its powerful searching engine: Google map, U-tube and other web services. For this reason, many global cell phone manufacturers adopt Android as their operating system. Accordingly, web portal sites prefer Android in order to expose their services to as many customers as possible, and especially enter into the mobile web advertising market. Hence, Google makes a variety of profitable models based on its open operating system. It dominates the content market and the mobile web advertising market by giving content makers more opportunity in their service. Likewise, there are various possibilities and strategic options in a smart phone operating system. However, operating system developers should consider one threatening element. Smart phone operating system market is actually a winner-takes-all market where only one or two players take a victory in the long run. Although there were many PC operating system makers, ultimately only the Win-Tel system was established in the end. In the same way, only a couple of players of the four software giants: Apple I-phone operating system, Google Android, RIM blackberry operating system, and Nokia Symbian will take the entire smart phone operating system market in the long run. In conclusion, hardware manufacturers or PC operating system makers need to brainstorm whether to start developing their own operation system or to open and expand the existing operating systems. Otherwise, they will avoid the operating system business and focus on different competitive parts, adopting operating system free on the current market. Directory: files -> journals files -> Hanban – asia society confucius classrooms network 2010 request for proposal files -> Northern England’s set-jetting locations journals -> Conceptualisation of Rights and Meta-Rule of Law for the Web of Data journals -> The effect of positive end-expiratory pressure on inflammatory cytokines during laparoscopic cholecystectomy: a randomised controlled trial journals -> Effects of Moxibustion on Weight Loss and Abdominal Obesity in Young, Asian Females journals -> Bacterial contamination of ultrasound probes and coupling gels in a university hospital in turkey journals -> Investigation of Corpus Callosum by Planimetry Methods in Patients with Temporal Lobe Epilepsy journals -> Objectives: The clinical features of stroke of a cardiac myxoma origin have not been sufficiently described. Debates remain concerning the options and timing of treatment and outcomes journals -> Analysis of the global smartphone market and the strategies of its major players Download 202.79 Kb. Share with your friends:
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