The Apple iPhone idis 619 Capstone Assignment By
Part A – Handset Manufacturing Industry
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- II (B) 1 2: Level 1 Level 2 Analysis
Part A – Handset Manufacturing IndustryII (B): Five Forces AnalysisThe Level 1 and 3 analyses below use the following framework: Each factor in each force, is scaled from 1 through 5, with 1 having a favorable impact on the profits of the industry while 5 having an unfavorable impact on the profits of the industry. All the factors for each force are prioritized and assigned a % weight with regards to its perceived importance, and then a sum of weighted averages is taken for all factors to come up with an overall rating between 1 and 5 for each force. This process is repeated for the Level 3 analysis to come up with an overall attractiveness of the industry. II (B) 1 & 2: Level 1 & Level 2 AnalysisPlease see Exhibit II (B) 1 & 2 – Part A for a detailed Level 1 & Level 2 Analysis II (B) 3: Level 3 analysisFrom the levels 1 and 2 analyses, we conclude that the handset industry is in a mature phase in established markets such as US and Europe while it is in a growth phase in emerging markets like India and China. Overall, the handset industry is commoditized in the US and Europe in the low-end segments and firms are increasingly competing on the basis of product differentiation in the high end handset segment. In India and China, the infrastructure is still being established to gain a higher market penetration. There is also an increasing role of complements in the overall value proposition for the handset industry. Due to shrinking profit margins, increased buyer power, availability of substitutes, and increased commoditization (especially in the high volume handset segment), the overall handset industry is moderately unfavorable, with an overall rating of 3.4 out of 5.
II (D): Competitor Analysis II (D) 1: Firm’s Competitors With the introduction of the iPhone as a new product in an existing industry category of smartphones, Apple adds new competitors to its existing list of competitors. In his keynote speech, Steve Jobs indicated that Apple plans to get 1% of the worldwide market share of the 1 billion cell phones which equals to 10 million units by 2008. Several players exist in the handset manufacturing industry. Based on data (Exhibit 2D – Worldwide Handset Manufacturer Market Shares (Yr. 2006 – By number of phones sold) from various sources, Nokia holds the number #1 position worldwide, followed by Motorola, Samsung, Sony Ericsson and LG. The CR5 ratio is 80.6% while CR3 is 67%. Please see Exhibit II (D) 1 for the market share and the number of handsets sold by these handset manufacturers. II (D) 2: The firm’s primary competitors Using the utility framework, the handset industry can be segmented as follows:
Based on this segmentation, we can now place the handset manufacturers in different segments (Please see Exhibit II (D) 2 for this information). Based on the exhibit and the market share information discussed earlier, Apple’s main competitors are:
II (D) 3: Business Level & Corporate Level Strategies & II (D) 4: Value and Cost Drivers, Resources and Capabilities, Products and Number of Product Markets served a) Nokia Corporate and Business Level Strategy: Nokia has 11% of the cell phone market share in USA. Nokia’s 9300 smartphone differs from the Apple iPhone in that it has a hard keyboard, operates on the Symbian operating system and does not provide integrated features such as Google maps. In order to maintain, protect and grow its market share, Nokia is known to respond well to its competitors by coming out with products that are comparable to competitor products. When Motorola introduced the RAZR, Nokia lost 12 percentage points market share to Motorola. In response Nokia introduced its N76xx which was comparable with Motorola’s RAZR. It is unclear yet if Nokia has been successful in capturing some market share from Motorola in the thin phones segment. As Apple’s iPhone enters the Cingular stores, Nokia’s smartphone is bound to lose some sales. With Apple’s iPhone introduction, since it will be available only with Cingular service, Nokia will likely look into strategies to maintain its market share. From Nokia’s annual report, its business level strategy is articulated as: “Nokia’s strategy to be the most customer-focused product company is defined by four main imperatives”:
Nokia’s corporate strategy is ‘Related Constrained’ since less than 70% of the revenues come from any single business unit and each of these business units combine to give a complete end-to-end solution. As such, these units share numerous links between them. For example, the mobile phones unit is dependent on mobile networks and multimedia as an add-on functionality and all these combine together to form an enterprise solution. Value drivers: Nokia’s value drivers include its brand, broad range of products, tailored network solutions and devices, geographical presence and Well Developed Logistics Cost drivers: Its cost drivers include the cost of maintaining relationships with limited number of service providers, cost of recruiting and retaining skilled employees, costs of 3rd-pary intellectual licenses, etc. Resources and capabilities (Please see Exhibit II (D) 4 – Part A (a) VRIO Analysis for Nokia): Products and Number of product markets served: Nokia has 4 business groups: Mobile Phones, Multimedia, Enterprise Solutions and Networks. It provides a wide range of products and services in each of these different categories b) Motorola: Corporate and Business Level Strategy: Motorola is the #1 cell phone manufacturer in the US and #2 worldwide with market shares of 44% & 21.3% respectivelyxxii (based on number of handsets sold). 2006 year-over-year number of handsets sold globally represents a 49% growth rate over 2005 (compared to 31% for Nokia) demonstrating a strong growth trend for Motorola worldwide. The Mobile Devices business accounts for 66.2% of Motorola’s FY 2006 sales (compared to 60.9% in 2005). Motorola’s business level strategy in the Mobile Device Business is one of broad differentiation. Although Motorola had a phenomenal two-year streak of success with the RAZR, lowering of prices of this product portfolio hit the company margins significantly. Motorola is countering this by aggressively funding in new R&D Value drivers: Motorola has a strong brand value. It continues to be an innovative firm that has demonstrated increased spending in R&D and has won numerous awards and patents. It provides complementary services such as the distribution of content through WiFi hot spots and kiosks, and the iRadio service (radio via mobile phones). It exhibits strong commitment to corporate governance and business ethics. Cost drivers: Motorola continues to focus on its Supply Chain Management initiatives to drive cost reductions with increased focus on procurement process improvements, reduced number of suppliers, and increased inventory turnover. Motorola has reduced its facilities cost by means of site consolidation, improved its account payables from 51 days in 2004 to 49 in Q2 ’06, increased operating cash flow from $3.1B in 2003 to $4.4B in 2005, reduced debt from $7.6B in 2003 to $4.3 in Q2’06 and improved Return on Net Assets (RONA) from 8% in 2003 to 48% in. As of 2006, approximately 35% of all mobile units shipped were manufactured by Electronics Manufacturing Suppliers (EMS) and Original Design Manufacturers (ODM), with most of the manufacturing done in Asia, China, Singapore and Malaysia. Resources & Capabilities (See Exhibit II (D) 4 – Part A (b) VRIO Analysis for Motorola) Products and number of product markets served: Motorola is organized around 3 key business segments – Mobile Devices Business, Network and Enterprise, and Connected Home Solutions. Each of these business units provides a very wide range of products and services targeted at multiple market and price segments. c) Palm: Corporate and Business Level Strategy: As of 2006, Palm held 31% of the US smartphone market and 5.3% of the global smartphone market. Of its two product lines, smartphones and PDAs, the former accounts for 70% of its revenue, and therefore, indicates that Palm’s corporate strategy is a ‘Dominant Business’. Its business level strategy of broad differentiation is evident from its desire to “deliver a powerful computing experience in a simple and intuitive manner” xxiii for a variety of end-user segments - “consumer, professional, business, education and government users around the world” xxiv, and at the same time, seeking to differentiate its products through complementary offerings like software and solutions. Value drivers: Palm’s has several value drivers which enhance the value of its smart phones and PDAs to its customers. Some of these values drivers are its smart phone and PDA technologies which have improved the features and usability of its phone in the subsequent versions of its devices; its large worldwide distributor network (100 distributors covering Europe, Latin America, Canada, Asia Pacific, the Middle East and South Africa) which makes its devices accessible to its customers worldwide; dedicated carrier account teams which provide sales, training, marketing and technical support to help carriers sell Treos . Cost drivers: Palm’s cost drivers are its economies of scale and scope between its two product lines; its cost advantages via use of Original Design and Manufacturers (ODMs) to design, develop and manufacture its products after internally completing product definition; and its policy of not carrying backlog and fulfilling orders upon receiving orders from customers. Resources & Capabilities (see Exhibit II (D) 4 – Part A (c) VRIO Analysis for Palm) Products and number of product markets served: Palm offers the following products and services: Treo smartphones, Handheld Computers, and Add-on Accessories d) Research in Motion, Ltd. Corporate and Business Level Strategy: “Research in Motion (RIM) is a designer and manufacturer of integrated hardware, software and services that support multiple wireless network standards”Error: Reference source not found. RIM holds 55% of the US smartphone market and 4.5% of the global market. With its products and services centered around its BlackBerry devices, “RIM provides platforms and solutions for access to information including email, phone SMS, messaging, internet and intranet based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity to data” xxv. RIM’s initial business level strategy was focused differentiation since it sought to serve corporate users in North America via its Blackberry devices and allied services. However, it has been recently making attempts to alter its strategy to Mass Differentiation by targeting its blackberry based products and services towards retail prosumers in addition to enterprises in various regions of the world with its solutions. RIM aims to make this business level strategyxxvi shift by “broadening its strategic alliances, promoting development of third party software, expanding the global reach of its blackberry platform into enterprises as well as prosumer markets, and pursuing its strategic relationships with industry leaders”. RIM’s corporate level strategy is a ‘Single Business’ since most of its products and services revolve around its blackberry smartphone. Value drivers: RIM’s value drivers include its Blackberry technology which is has used to it enhance the usability of its devices: its large (1000 strong) R&D which allows it to continue to improve its technology; its partnership with 500 independent software vendors (ISVs) which helps it provide more functionalities and features to its customers; its customer care facilities which provide customer support; and its carrier relationships which make its devices available with multiple carriers thereby providing its customers choice of phone service providers. Cost drivers: RIM’s main cost driver is its vertical integration into software, enterprise solutions, and services: This increases its ability to control its costs, and thereby increase the firm’s surplus. Resources and capabilities (see Exhibit II (D) 4 – Part A (d) – VRIO Analysis for RIM) Products and number of product markets served: RIM’s products and services are BlackBerry, BlackBerry Business Solutions, BlackBerry Connect, Internet Service and BlackBerry® Enterprise Server and Smart Card Reader e) Samsung: Corporate and Business Level Strategy: Samsung Electronics is the world’s leading manufacturer of CDMA handsets and the world’s third largest mobile phone manufacturer, with a 11.6% market shared in 2006. Its other business segments include Digital media business, Digital appliance business, Semiconductor business and LCD business, it and follows a ‘Related Constrained’ corporate strategy with complementary business segments that leverage the R&D and cost advantages. Samsung follows a business strategy of focused differentiation, by targeting the high end handset market, releasing innovative products and diversifying models of mega pixel phone, slim phone and W-CDMA phonexxvii. Samsung has established a Venture Investment Team to focus on identifying, investing and partnering with start-ups, university research departments, and established firms, whose technologies are of critical importance to Samsung’s future growth. Please see Exhibit 2 (D) 3e for Samsung’s strategic alliances and investmentsxxviii: Value Drivers: Samsung positions itself as a leading brand name in the wireless handset industry, especially in the emerging markets of India and China, and seeks to leverage this position of advantage to establish a strong market position. It is striving hard and investing heavily in R&D and technology innovation to define a unified platform of some of its in-house wireless technology like WiBroxxix with emerging global wireless technology like 4G in order to provide better products to its customers. It continues to focus on R&D with about 2,600 patents, ranking second in the US patent filings in year 2006xxx. It has 2,700 PhD’s working in its R&D facilitiesxxxi. Cost Drivers: Samsung is complementing its focus on R&D by investing about 8.3% of its sales in 2004, amounting to about $4.6 billion and with a headcount of about 32,000 associated in its R&D organizationxxxii. It is investing and partnering with firms and university research centers to gain access to leading technology research. It also continues to focus on implementing an information management system, for its supply chain management initiative. It also recently initiated a share buyback in Jan, 2007 with 2,800,00 common shares and 400,000 preferred shares being bought back between Jan 16th 2007 and April 15th 2007xxxiii Resources and Capabilities: (see Exhibit II (D) 4 – Part A (e) VRIO Analysis for Samsung) Products and Number of product markets served: Samsung’s business segments are Digital media business, Digital appliance business, Semiconductor business, and LCDs. It serves several product markets in each of these categories. f) LG: Corporate and Business Level Strategy: LG Electronics is a Korean consumer electronics company that comprises 4 business units: Mobile Communications; Digital Appliance; Digital Display and Digital Media. Although LG considers that they have one Design Center with four departments aligned with each business domainsxxxiv, there is no evidence of constraints between the business domains. They may share resources, but each R&D and design department really concentrates within their business domain. This suggests that LG’s corporate level strategy is one of ‘Related Linked’. LG holds the 5th largest mobile handset market share worldwidexxxv. LG has a vision of being the top 3 electronics / telecommunications company by 2010xxxvi. To get there, it has been focusing heavily on brand marketing. LG seems to be following Apple’s footsteps in becoming the “creator of digital lifestyle.xxxvii” However, it is more focused on style where as Apple is focused more on Human Engineering. This is evident from LG’s luxurious line of mobile handsets starting from their small slim handset that is branded as “Chocolate Bar” to its recently announced handset co-designed with fashion designer PRADAxxxviii that has a very close resemblance to Apple’s iPhone. Because of the similarities, a lot of press coverage has been received that compares the two phones. This may lead consumers to believe that the PRADA Phone by LG is in direct competition with Apple iPhone. However, when we examine the two phones closely, there are several significant differences (please see Exhibit II (D) 3f – Part A). First, the target markets do not overlap until late 2007 when Apple iPhone gets introduced into Europe. Although there was no mention of when the PRADA Phone by LG will be available in the U.S., the phones may have to be unlocked for the European market due to requirement from some local laws. Therefore, it is conceivable that users can purchase the PRADA Phone by LG in Europe to use it in U.S. as soon as it is available in Europe. Although LG is likely to tout that they have a head start on Apple in getting their phone out to the market firstxxxix, the fact is that the PRADA Phone by LG will be sold next to PRADA designer hand bags while the Apple iPhone will be sold in Apple stores, Cingular outlets and retail stores. These distribution channels target two very different kinds of consumers. The PRADA Phone by LG is aimed at people with wealth, who don’t mind spending over $700 for a designer phone. This doesn’t suggest that the Apple iPhone is inexpensive (it will cost $499 to $599 with a 2 year contract). However, technology enthusiasts are the ones that are interested in the Apple iPhone. Based only on the information released from both Apple and LG press releases, the Apple iPhone seems to have more technological advances and features than the PRADA Phone by LG. Also, LG did not design the PRADA Phone in response to Apple iPhone. This was part of LG’s overall business strategy of differentiating itself from other mobile phone makers. LG wants to enhance their brand image. In doing so, it decided to partner with a fashion designer; in this case, it was PRADA. And PRADA did not want to just brand an existing product; it wanted to give the new phone “a very strong character and unique stylexl.” So, in looking at LG’s luxurious mobile handsets such as PRADA Phone by LG or Chocolate Bar, it seems that LG’s business strategy is 'focused differentiation’. However, when we look at the complete line of LG mobile handsets, the business strategy seems to be more of ‘broad differentiation’ since they have a complete line of inexpensive mobile phones. Value Drivers: LG targets the premium market segment through the use of fashionable designsxli. It has consistently strived to improve its brand image by promoting itself as a high-quality manufacturer. It has striven to avoid brand dilution by selling its low-cost products under its old Goldstar brand name. It is a leader in 3G technology and offers several complementary products Cost Drivers: When LG partners with Prada, this adds additional cost structure to the development of the Prada mobile handset. This is because of the additional coordination required between the two companies on various activities including design, sales, etc. However, the partnership also brings in additional resources from Prada as well. Resource and Capabilities (see Exhibit II (D) 4 – Part A (f) VRIO Analysis for LG) Products and Number of product markets served: LG is organized along these 4 business units: Mobile Communications, Digital Appliance, Digital Display and Digital Media. Each business unit produces multiple products. g) Sony Ericsson Corporate and Business Level Strategy: Sony Ericsson Mobile Communications is a 50/50 joint venture (based on Sony’s superior capabilities in consumer electronics and Ericsson’s leadership in technologyxlii) that was established in 2001xliii and is focused on providing mobile solutions for customers worldwide. As of Q4 FY06, Sony Ericsson’s units shipped numbers were up 46% to 74.8 million units in 2006xliv with an estimated global market share of about 8%xlv. Out of these 74.8 million units, 60 million handsets were music phones while 21.6 million were camera phonesxlvi. Sony Ericsson is leveraging Ericsson’s excellence in GSM and WCDMA mobile networks in these emerging markets, with increasing levels of market penetration. Ericsson also holds over 20,000 patents and is a major contributor to the GSM and WCDMA technology standardsxlvii. As of FY05, 45% of Ericsson’s sales are from these emerging marketsxlviii. Its corporate strategy is one of ‘dominant business’ (with Sony’s expertise in handset design and Ericsson’s in establishing wireless infrastructure) with an array of products targeted at focused differentiation due to their unique walkman style handsets with high resolution cameras. Value Drivers: Sony Ericsson has a strong presence in the GSM and WCDMA technology market. The 50-50 partnership between Sony and Ericsson brings together the two complementary skills of consumer product design from Sony and telecommunication and mobile network infrastructure technology from Ericsson. Ericsson’s focus and presence in developing infrastructure in the emerging markets is also a value driver as it creates a company focus in areas which promise great potential growth in the coming years. Cost Drivers: Ericsson continues to invest in an all-IP network for faster data access in established markets such as Europe and in wireless infrastructure in emerging markets such as India. Sony continues to invest heavily in R&D to develop products in high, mid and low price segments to meet needs for established and emerging markets. Resources and Capabilities (Exhibit II (D) 4 – Part A (h) VRIO Analysis for Sony Ericsson) Products and Number of product markets served: Sony: Numerous products and services in the following business segmentsxlix: Electronics, Games, Entertainment, Financial Services, and others (Sony Communication Network, Sony Music Entertainment, etc.) Ericssonl: Numerous products and service in the following business segments: Telecommunication and wireless networks, Global Services, Multimedia and Sony Ericsson Mobile Communications h) Apple: Corporate and Business Level Strategy: Apple has announced its plans of launching the Apple iPhone in June 2007. It plans to capture 1% of the worldwide market share in cell phones by 2008 which equates to 10 million units. Apple’s corporate strategy is “Related Linked” since less than 70% of its revenues come from any single business and different business units share only a few components and technology between them. Apple introduces its products in niche markets and charges a premium for its innovative product design and look-and-feel. Apple’s business strategy in its Macintosh and iPod units is focused differentiation with a new product launch. However, as the product moves into the mainstream market, Apple introduces lower-end versions of the product with limited features (such as shuffle in portable music players and MAC mini with support for common peripherals) and moves towards broad differentiation. Its other offerings such as its iTunes music related products also follow focused differentiation since iTunes can only be used with Apple’s products. Its software services and peripherals complete the product portfolio and can also be classified as focused differentiation since they are unique to Apple’s products. It is vertically integrated and designs and develops its own operating system, hardware, application software, and services. Apple also provides its customers with quality sales and after-sales support service. Apple sells many of its products directly to its customers through its own website or company-operated stores. Once a customer buys an Apple product, the customer is locked in during the life of the product, since many of parts compatible with Apple’s computers or iPod are available only through Apple’s stores/website/support services. Value drivers: Technology: Apple has the breadth of technology and delivers competitive products into the marketplace. It is vertically integrated and produces its own hardware and software and focuses on delivering on “user experience”. Quality: Apple aims at providing high-quality products, sales and after-sales support service Breadth of line- Apple has a very broad line of products Geography – Apple does not have wide geographic presence and has limited its presence to Americas, Europe, Japan, UK and has its retail outlets open in these countries also. Brand/reputation – High. Apple takes the industry in which it is operating by a buzz purely because it comes out with innovative and cool products that are easy to use and intuitive. Apple’s products generate a “wow” effect among consumers. Network externalities – With the integration of iPhone with iTunes, greater usage of iTunes will result in making iTunes a defacto standard in delivering media. Complements – MAC OS, iPod and iTunes, iPhone and iTunes, iPhone and Cingular Retail store outlets: Apple has retail store outlets in malls to show off its products. When it generates foot traffic into the stores, consumers look into other products and consumers have a one-stop shop for all of Apple’s products thereby leveraging sales across products. Directory: groups groups -> What is ascaa? groups -> Tiger Leaps Progress Update from Tenafly High School March 28, 2012 English groups -> Personal Data: Name : Prasanna. S educational Qualification groups -> Traffic alert and Collision Avoidance System or tcas groups -> 1980s Type Card Master List from Standard Catalog 1980 Burger King Phillies groups -> Lima Site 85 Personnel List groups -> General knowledge groups -> Kenneth pomeranz the great himalayan watershed groups -> Christina Maria Bergqvist Download 7.3 Mb. Share with your friends:
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