Tablet computers are portable devices, smaller than laptop or netbook computers, which allow users to surf the web, listen to music, read e-books, play games and purchase applications which can add more features to the tablet. Engineers have been in the process of developing tablets for the past forty years, the first of which came out in the 1980’s creating a major buzz in the computer world. The tablet had the potential to revolutionize the tech industry and many companies hastened to create the first accessible tablet. There are only a few key players in this industry because there are high fixed and variable costs involved. The fixed costs include initial research and development, creation and maintenance of production facilities, and machinery. Variable costs include marketing and the costs of parts and raw materials. This industry experiences economies of scale and scope. As the company expands, the long run average costs decrease. Similarly, if a company already produces computers or smart phones it is more appealing and less expensive to create tablets since they already have many of the main components developed such as touch screens, computer chips and batteries. For these reasons, a company will be successful if they have a strong influence in the technological industry and control of resources needed to create tablets. It comes as no surprise that Apple’s launch of the original iPad in April 2010 was the first effective introduction of a tablet aimed at consumers. The iPad has a 9.7 inch display that is 0.5 inches thick and weighs 1.5 pounds with an expected battery life lasting 10 hours. It operates on the Apple iOS and gives users access to the iTunes Store for purchasing Apps and other media that can also sync with other Apple devices such as iPods and iPhones. Starting prices for the 16 GB model were US$499 or US$629 with 3G connectivity. Apple is a company that has achieved market power by advanced innovative technology, branding and social status. The International Data Corporation or IDC Canada released a report this month analyzing consumer choice regarding tablet purchases, identifying purchase location, price, and content as the the main influences on consumer perceptions. Consumers are more likely to purchase tablets at specialty retail stores. It noted Apple’s leading brand power and market share, saying that other companies will end up competing on price with each other to gain market share. The customer’s ideal price range was specified to be under $500. A third influence on consumers is the content of the product versus the hardware, such as the user experience and availability of Apps. The report forecasted a price war between newer tablet manufacturers, saying “in the media tablet market, there is Apple, and then there is everyone else”. Apple has maximized on the three key influences. iPads are sold only at Apple stores and select authorized resellers. Although their lowest price is $499, the content and brand power justifies Apple as the leader in tablet market share. iPad users have access to the iTunes store which carries a variety of media and applications that can also sync with the many other Apple products available. This advantage also indirectly segments the market, as consumers who previously own Apple products have an incentive to buy more. This “background ecosystem” and Apple’s expertise in the electronics field makes them more trustworthy to the consumer as well – making it a luxury good compared to the later variations. After the intense success of the iPad, Apple’s rivals such as Blackberry, Hewlett-Packard Company or HP, Motorola, Amazon and others, quickly started releasing their own models to compete with the Ipad. There are a few noticeable trends among the non-Apple tablets. The display size tends to be between 10 and 7 inches, the thickness is usually between .45 inches and .5 inches, and the average weight is 1 pound. The battery life ranges from 6 hours to 10 hours, the memory ranges from 16GB to 64GB, and most have front and rear-facing cameras. The average price range is $500. Consumers are mostly concerned with portability, long battery life, and user-friendly interface, choosing tablets that contain those qualities above others. Additionally, there are other ways manufacturers distinguish themselves and compete with Apple’s dominance in the market, including market segmentation. Hewlett-Packard launched the HP Slate 500 and indirectly segmented the market by designing the Slate 500, targeting this product mainly to business users who can afford the higher price of $799. Many businesses use Windows 7, and the Slate is designed to connect to their servers using Microsoft Office products for recording data securely on a Virtual Private Network. The Samsung Galaxy Tab operates on the Android system and was the first competitor to offer front and rear facing cameras to consumers. Motorola offered the new Motorola XOOM in a Family Edition, a more affordable option that includes $40 of popular apps and Zoodles, which locks the home button and allows parents to control what content their children can access. The iPad 2 is thinner, lighter, and has a faster processor than the original. Front and rear-facing cameras were added to it and the starting prices for the 16 GB model were the same as the debuting prices of the first generation iPad. The Blackberry Playbook connects to the internet through wifi, Bluetooth tethering or by bridging it to a Blackberry smartphone. Like the iPad, the Playbook also allows the user to sync email, calendar, and Blackberry Messenger from their Blackberry smartphone to the Playbook. Amazon released the Kindle Fire, a tablet with considerably less features and at a lower cost than most. It indirectly targets previous Amazon customers since its focus is mainly on reading e-books than other media, and opened the market to people who want a less expensive, simpler tablet. IDC recently reported that the move by Amazon to differentiate their product from the iPad rather than copy it has sparked developer interest in the Kindle Fire. Kindle Fire users receive a free month of Amazon Prime, which offers unlimited streaming of movies and TV, access to thousands of books through the Kindle Lending Library and free two-day shipping on purchases made from the Amazon store. The Fire allows an internet connection through wifi only, and does not have a camera. At the end of the second quarter of 2011, the Google Android OS used with the Kindle Fire, Motorola XOOM, and Galaxy Tab accounted for 30% of the tablet market. The Apple iOS accounted for 61% of the tablet market. Although Apple’s share has significantly decreased with the introduction of new operating systems, it still holds the majority of the market share and is expected to keep it; however, the competition is presenting interesting options and many players in the war are putting up a strong fight. After analyzing the war between the tablets it is clear that this is a non-cooperative game. There aren’t any binding commitments or communication between the companies, who can use different technology without informing others and can price their products at their own discretion. For instance, Apple’s technological advances can be kept from their competitors at least until their products hit the market, at which point the competition can only imitate its features to the best of their ability. Furthermore, the resources available to these companies are imperfect. Amazon and Apple have advantages when it comes to tablets. They have their own online stores (i.e. Amazon.com and iTunes) that sync perfectly with their devices, which encourages, and in some cases, limits their customers to purchasing products from these stores. Additionally, the companies use different operating systems: Apple uses iOS, the Blackberry Playbook uses QNX, and HP, Motorola and Amazon use variations of the Android system. The technology available to each company is different, which is why they are producing different levels of tablets that vary in success and price. Apple first initiated the tablet obsession and they are continuing to experience success. The iPad and iPad 2 offer the most applications and technology at a reasonable price, and the Apple brand is held in high regards in the eyes of consumers. Some of the alternative tablets will gain popularity and cause the amount of tablet market share that Apple currently has to dwindle in the future; however, it is certain that overall, Apple will continue to hold the largest share among its competitors.
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