Entry of New Handset Vendors

Entry of New Handset Vendors

- Hong-Kong stock exchange-listed China Wireless Technologies’ Indian subsidiary, Cool pad Communications has announced partnership with Reliance for its dual sim phone, i.e. GSM and CDMA and is setting up its mobile handsets in the Indian market. 

1. 
   SUPPLIER POWER:
   

1. 
   Differentiated Input – Since basic type of input (keypad, screen) required for handset manufacturing is more or less same so they don’t create much of the differentiated input. However for high end premium mobile phones, material and technology required is of very different type for different manufacturer. Companies could switch suppliers for non critical components but are closely tied to them for critical components and sub-systems. Thus strength of this parameter is medium and attractiveness of industry is given 4 points.
   
2. 
   Forward Integration – Suppliers do not pose any credible threat of forward integration even though they are outsourced. Thus strength is low and rating is 4 points.
   
3. 
   Importance of quality/cost – Due to increased competition in the industry, quality is becoming a necessity for any player to survive. Indian people are becoming more quality conscious day by day and they want good quality phone at low cost. Thus strength of this factor is high and it can decrease the attractiveness of the industry hence rating given is 2 points.
   
4. 
   No Substitute inputs – Due to availability of large number of substitute supplier for non critical components, the strength of this factor is low and attractiveness rating is 5.
   
5. 
   Supplier Size - Manufacturers are much larger companies than suppliers and therefore they have the ability to influence supply contracts. For example, Nokia carry out assessments on their suppliers to make sure they meet standards. . However this is partly because market players are so heavily reliant on the quality and efficiency of the software and products provided. Moreover, some of the software, such as integrated circuits, can be specific to the company, which again increases dependence upon suppliers. Thus the strength of this medium and rating given is 3.
   
6. 
   Switching Costs – Since requirement of high quality supplies and huge volume requirement, it is very tough for any manufacturer to switch its suppliers easily. Also due to requirement of specific technology for particular handset, switching costs are very high. Thus the strength is medium and attractiveness rating given is 2.
   

2. 
   BUYER POWER:
   

1. 
   Buyer Size – Since there are so many small and different buyers, they are source of attractiveness for new players. Thus the strength is high and rating given is 5.
   
2. 
   Low cost switching – Switching cost is very low for buyers as there are so many different handsets available at different prices. Thus the buyers have power to switch easily. Hence the strength of this factor is high and it decreases the attractiveness to some extent. However due to brand loyalty they might not switch easily which result in rating of 2.
   
3. 
   Price sensitivity – Since India is growing at an average rate of 8% since last decade, income level has gone significantly. Lifestyle of people has changed to a great extent. Status is one of the desirable factors in the handset. But still much of Indian population lives in rural and semi-urban population, people are somewhat price sensitive. Thus the strength of this factor is medium and rating given is 3.
   
4. 
   Tendency to switch – Since the switching cost is not so high, people tend to switch mobile phone if they are unsatisfied with the current phone or if some other phone with better feature is launched. Thus the strength of this factor is high and rating given is 2 as buyer has some power.
   
5. 
   Undifferentiated product – Majority of mobile phone provide all the basic facilities like calling, texting, alarm, calendar, camera, radio etc. Thus point of differentiation lies mainly in price and other special feature like GPS, Music player quality, WiFi etc. Thus if we look across different segments, we can see many differentiated product and also some phone are highly differentiated. Thus the strength of this factor is medium and rating given it 3.
   
6. 
   Financial Muscle – Since the wholesale buyers and distributors are in good financial position, mobile manufacturer need not worry much about the business with them. Hence the strength of this factor is medium and rating given is 5.
   
7. 
   Background Integration – Since it requires very high investments and high expertise, small retailers and distributor cannot background integrate easily. Also as of now we have not seen any backward integration. Thus the strength is low and rating given is 4.
   

3. 
   NEW ENTRANTS:
   

The overall threat to mobile handset industry due to new entrants is moderate. The reason for moderate risk is due to the fact that companies in electronic equipment manufacturing can easily venture into mobile industry owing to similar technology. Examples are success of Blackberry, HTC and other smart phones. All of the established mobile phone manufacturers are now following suit by launching their own smart phones, which suggests that this section of the market is likely to see significant growth over the next few years, luring newcomers with revenue perspective.

1. 
   For entirely new entrants, the scenario is difficult because they have to compete in technology with already established big players like Nokia, Samsung, and Motorola etc. They will require huge capital outlay not only in production facilities but also in research and development.
   
2. 
   There are stringent laws relating to science-based regulation and the adoption of emission guidance by the International Commission on Non-Ionizing Radiation. Furthermore mobile manufacture is closely monitored with studies being conducted on the possible side effects of electromagnetic fields produced by mobile phones.
   
3. 
   Though buyers may have good disposable income and youngsters may have fad to change their handsets very frequently but they rely on established players who in recent times are coming up with new, fancy and cost effective models catering to the needs of the consumers. So new entrant will find it difficult to establish itself and compete at the same level of innovation by creating not only a share of market but also share of mind.
   

In Indian handset industry, the number of new entrants has almost doubled to 68 and market share which they now hold is around 45 percent. New entrants include Indian manufacturers like micromax, spice,Karbonn, Chinese player Bird, Taiwan-based DBTel and Taiwan-based BenQ etc.

1. 
   Market growth: The mobile handset market is growing at a very fast pace. “India’s mobile handset market touched 100.9 million units in the year ended June 2009, recording a growth of 6.7% from 94.6 million units in the previous year ended June 2008, according to IDC India.”
   

2. 
   Low cost switching: Since there are huge number of mobile handset providers with similar features and similar price range, it poses threat with new entrants as market share of existing players might come down.
   
3. 
   Little Regulation: Very few regulations like “International Commission on Non-Ionizing Radiation” check that harmful radiations and environmental norms are followed by the manufacturers thus making their entries easy.
   
4. 
   Undifferentiated product: Since products offered by this large gamut of providers differ very less in terms of features, style, price and durability, they make entry of new players fancy and attractive.
   
5. 
   Weak Brands: If we look at the mobile handset industry, brands are very strong. Nokia, Samsung, LG, Motorola etc command respect because of their quality, affordable prices, availability and variety thereby making new entrants think twice before entering this arena.
   
6. 
   Low Fixed costs: Though fixed costs are low in setting up of the industry but continuous investment in R&D and other marketing related expenses make it difficult for entrants to invest freely or venture into mobile handset industry.
   
7. 
   Distribution Accessible: it is quite attractive because number of mobile dealers in India had grown manifolds. Opening of stores like ‘Mobile store’, ‘Nokia priority centre’ and other stores owned by RPG and Virgin makes it attractive for entrants because they do not need to setup their own distribution centres.
   

4. 
   SUBSTITUTE:
   

Threat from substitutes is very low because potential substitutes are landlines, e-mail, networking sites, messengers (skype, gtalk, yahoo messenger) etc. But it can be said that threat from such substitutes is quite low. Landline, once dominant player is in declining stage. E-mails and networking sites can never be perfect substitutes for mobile phones. Many mobiles now provide their users with the internet, TV, GPS and mp3 functions. With these features in offering and complete mobility at affordable prices, any significant threat from the substitutes is ruled out.

• 
  
  Directory: uploads
  uploads -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10
  uploads -> Department of science and humanities department of mathematics part-a questions and answers
  uploads -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It?
  uploads -> For want of a nail
  uploads -> Ownership Models There are two different types of ownership models
  uploads -> Police Militarization
  uploads -> City of rising star regular meting thursday, july 14, 2016
  uploads -> Township of winfield
  uploads -> Stop Militarizing Law Enforcement Act of 2014
  uploads -> The Black Panther Party’s Ten-Point Program What We Want Now!
  
  
  
  Download 199.47 Kb.
  
  Share with your friends: