Inside the Smartphone
Industry
Ashley Campion
Wes Kincaid
Stephanie Lanter
Michael Riggen
John Hutchens
Nathan Frost
Claudia Martinez
What is a Smartphone?

A Smartphone is a mobile device offering
highly developed features beyond a classic
mobile phone
◦
◦
◦
◦
Computer-like functionality
Applications for entertainment
Access to the Web
Personal data processing
The first Smartphone

In 1992, IBM created the first Smartphone
which they named “Simon”
◦ Shown as a concept product at COMDEX, a
computer industry trade show in Las Vegas
◦ It was released to the public in 1993 and sold
by BellSouth
More about Simon…
Other than being a mobile phone it contained
such features as a calendar, address book, world
clock, calculator, note pad, e-mail, sending and
receiving faxes, and games
 Customers used a touch-screen to select phone
numbers

◦ Text was entered with a unique “predictive” keyboard
• Although it sounds similar to our Smartphone's
today, the Simon would be considered fairly lowend
The Industry today
The Smartphone Industry has earned
revenues into the billions of dollars and
has become extremely competitive
 Apple is the leader in the industry today,
with a few competitors behind them

◦
◦
◦
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Microsoft
Sony
Dell
Google
Market size

Over 168 million customers
◦ Market expanding to teens and even pre teens
◦ Older generations are also acquiring
Smartphones for work purposes
Over 1200 companies
 4 major Smartphone providers

◦
◦
◦
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Verizon
T-Mobile
AT &T
Sprint
Scope of rivalry

Three contributing factors
◦ 1: Cost of plan
◦ 2: Speed of network
◦ 3: Phones
Life cycle

In the mature stage

Only way to gain an advantage over other
companies is by making the three factors
better than others.
Problems

Cost of plans
◦ Cancelation fees
◦ Long term contracts

Speed of networks
5 Forces Model

Rivalry within the industry
Main Competitors
- RIM, HTC, Palm, Motorola, Samsung, Nokia
U.S. Market Share of Smartphones
5 Forces Model
 Threat
of Potential New Entrants
- The threat of new entrants is low since start up costs
for a cell phone service provider are extremely high. A
great sum of money must be invested to attain the
economies of scale, and it is difficult to enter the market
with existing firms already operating on cost and
differentiation strategies.
 First
Mover Advantage
- Releasing a product early will enable one to capture
the largest market share, establish partnerships, erase
barriers to entry, and dim the chances of competition.
Bargaining Power

Buyers
Customers Buying Power
- Phones are changing dramatically and what consumers want is
cheap and efficient. Buyers have high bargaining power and will
usually pay for what the consumer’s value the most.
 Buyers Willingness to Switch
- Will switch for innovative products and good ratings

Suppliers
Suppliers end up being in a low bargaining position because cell
phone operators provide such high volume orders that they have
to be cautious not to temper with the relationship.

Threat of Substitute Products
Cost and Innovation
- Companies within the industry compete on innovation and new
applications.
High switching costs with servers/phones
- Consumers would more than likely not switch between a new
product due to contract fees and the cost of purchasing a new
product.

Intensity of Rivalry Among Competitors
Innovative (Blue Ocean)
Applications (GPS, Google, Email, Video/Camera, Bluetooth,
Games etc.)
New target market
- Price reduction attract more customers
Establish Mobile
Manufacturers:
LG, Samsung
Software Giants:
Google, MSFT
Threat of
New Entrants
Bargaining Power
Of Suppliers
1. Carriers – AT&T
2. OS providers – Linux, WM
3. Hardware makers - Intel
Existing
Rivalry in
the Industry
1. Consumer Market
2. Corporate Market
Bargaining Power
Of Buyers
Threat of
Substitute
Products
1. Skype 2. PDA phone palm
3. Features phones – Nokia, LG
What to learn

Companies need to learn from this what buyer’s value
in the industry. How to add value to the customers.
Know what they like and strive to achieve this.

Who are my loyal buyers and suppliers and try to build
a strong relationship.

Know what your company is best at and learn how to
go from there in making it even better.
Drivers of Change

Long term growth rate
◦ People are taking more of an interest in the
Smartphone
◦ Every quarter more people buy or plan to buy a
Smartphone

Who buys the product
◦ College students
◦ Business professionals
Drivers of Change

Product innovation/technological change
◦ Started as any phone that could text or play
games
◦ Now it is any phone with a built in operating
system
 Internet
 GPS
 Downloads
Drivers of Change

Diffusion of technological know-how
◦ New generation
◦ Need to upgrade
◦ Need for new technology

Globalization
◦ Strong sales worldwide
◦ Companies on different continents
◦ Constant lines of communication
Drivers of Change

Emerging buyer preferences
◦ Not just for phone calls anymore
◦ High demand for multiple features
 Send/receive e-mail
 Access to Internet
 Purchase I-Tunes, ringtones, and games

Social concerns, attitudes, and lifestyles
◦ Driven by technology
◦ People don’t NEED Smartphones but they WANT
them
◦ Keeping up with the Jones’s
Competitive Forces
Global economy
 Price
 Product Features
 Product quality
 Design innovation

Strategic Positions

Sony can’t compete
◦ Sales are down
◦ Lack of innovation to compete with Apple

Dell
◦ Cutting operating costs
◦ Just trying to survive economy, not thrive
Strategic Positions

Google
◦ Becoming key player in software development
◦ Numerous “Apps” for iPhone
◦ On top of innovation

Microsoft
◦ Expects double digit revenue increase
◦ Came off of 18% growth in revenue in 2007
◦ Very strong position
Competitive Moves

Microsoft
◦ Look for Microsoft to continue with same
results
◦ With double digit growth expected, no reason
to let up

Google
◦ Watch for Google to become a key player in
software development
◦ Possible product line in the future
Key Success Factors

Technology:
Replacing
Communication
- Internet prediction in
2004
Tools:
- As consumers increase
the demand for more
features offer in the
service, also, the
network capacity
- Fixed line phones being
replaced
- Emergence of
Smartphone as a viable
tool for many
businesses
- No real substitute
product, therefore,
people become
dependent on them
Key Success Factors

Next Generation
Experience:
- Companies raising their
research to meet
consumers needs
-Example: battery runningoff and still having 4hrs of
talk time, lighter in weight
and thinner

Marketing:
- Quantitative research on
mobile phone users
reveals that there is
currently no such thing as
a Smartphone market
- The assumption that the
mobile market will
develop in the same way
as the personal computing
market did
Key Success Factors

Pricing:
- About half of the sales of Smartphone are through
employers (as opposed to retail channels)

Skill & Capability:
- Manufacturers adding multimedia and other
entertainment features to compete
- but segmentation suggest to add communication
services like, advanced voice and video e-mail,
white-boarding etc.
Key Success Factors

Design & Innovation Expertise:
- Example: Super-smart Smartphone mated into a
desktop cradle that hooks up to peripherals like a
common all-garden PC. An intelligent dock that
would have networking built-in, a USB hub, some
sort of communications hook-up, and its own
processor, memory, and operating system. It could
be connected to an external monitor and keyboard,
and would react when a Smartphone was placed
into it. The “Smart Interface System for Mobile
Communications Devices”, would work as much as
a desktop PC does now.
Industry’s Attractiveness and
Prospects for Long-Term Profitability
Growth Potential
 Impact of Competitive Forces
 Unattractive Forces in the Smartphone
Industry
 Is This an Attractive Industry in Which to
Participate?

Growth Potential

Since 1998, 30% increase in the number of
people in United States who own cell
phones
◦ Innovation played big part
◦ Progression: (brick phone flip phone
Smartphone)
Average life of a cell phone is only about
18 months
 Probably not skyrocketing levels of
growth, but still growth potential

Impact of Competitive Forces

Apple
◦ The iPhone’s release put Apple ahead in Smartphone
industry (327% growth) the year it came out

Research-in-Motion (BlackBerry)
◦ Frontrunner in Smartphone industry until Apple
released the iPhone

HTC
◦ Hopes to pick up speed with new Google phone
Android

Nokia
◦ Known for brick phone
◦ Has Smartphone, but hasn’t seen successful growth in
Smartphone industry
Impact of Competitive Forces
Worldwide: Preliminary Smartphone Sales to End Users by Vendor
Company
3Q08
Sales
3Q08
Market
Share
(%)
3Q07
Sales
3Q07
Market
Share
(%)
3Q083Q07
Growth
(%)
48.7
-3.1
9.7
81.7
42.4
Nokia
Research
In
Motion
15,472
15,964
5,80
0
15.9
Apple
4,720
12.9
1,104
3.4
327.5
HTC
1,656
4.5
1,315
4.0
25.9
Sharp
1,239
3.4
1,535
4.7
-19.3
Others
7,626
20.9
9,643
29.4
-20.9
36,515
100.0
32,753
100.0
11.5
Total
3,192
Source: http://www.gartner.com/it/page.jsp?id=827912
Unattractive Forces in the Smartphone
Industry
“BlackBerry Thumb”
 Florida teen sent over 35,000 text
message in a month- twice
 Texting While Driving
 Health hazards

◦ Electronic Magnetic Fields Can Cause Tumors
(preliminary research)
Is This an Attractive Industry in Which
to Participate?

Red Ocean
◦ Competing on innovation
◦ Big players like Apple and RIM BlackBerry have huge
lead

Blue Ocean
◦ Smartphone companies could differentiate by Dell
style customization of cell phones
◦ Or reduce the amount of EMF’s emitted from phone
*Apple’s success in one year could happen with any
company