Analysis of Phone Industry
With the growth of the technology, the phone industry is transforming to be one of the competitive industry and industry with most successful companies. Thus, this study focuses on analyzing the phone industry, by the review of the marketing strategies employed by different cell phone companies. The analysis also looks at the pattern of cell phone consumption, nature of competition in the phone industry, trends within the industry, and innovations, influencing companies within the phone industry. For a detailed analysis, relevant data is reviewed with the consideration of key companies in the industry. The analysis is done through extending the findings of the existing study, especially the ones examining the industry contexts and the innovation adopted by different companies in the phone industry.
Phone Industry Market Structure and Organization
The phone industry market has evolved considerably over the last few years, thus, making the industry more complex (Cricelli, Grimaldi, and Ghiron 2011). In 2010, the industry made a sale of 250 million mobile phones, and this portrayed a 67 percent increase in comparison to the sale that was made in 2009 by different companies within the industry (Cromar 2010).
The major companies that are recognized as the major participants include Apple Inc., Research in Motion Limited (RIM), HTC Company, Motorola Company, and Samsung Electronics. Although not popular with the major companies in America, other market participants include LG Corporation, HP Company, and Nokia Corporation (Cromar 2010). Although some of these companies are not identified as the key participants in the U.S market, in some countries, they are regarded as major businesses. For example, in some countries, Nokia Company is a market leader in China. A study done by Jia and Yin (2015) notes that Nokia has become a major participant in the Chinese phone industry market, with the company using professional tactics to expands its sales and increase the rate of sales volume globally. As a result, Nokia has become a key company in the phone industry market, in which it is now the world largest mobile communication manufacturers. According to Jia and Yin (2015), in 1998, Nokia produced more brands, which made the company become the world’s most competitive mobile phone manufacturers worldwide. Consequentially this gives Nokia an opportunity to overcome Motorola Company, as one of the phone industry that was viewed as the best in the market.
With Nokia Company succeeding to outdo its competitors in 1998, this changed the Chinese phone industry market, as this exceeded the market share of the company (Jia and Yin 2015). Nokia Company has taken its chances in the phone industry market, whereby in 2007, the company reached a market share of 40 percent in China, and this was recorded as the largest market share in the phone industry (Jia and Yin 2015). Similarly, within the phone industry market, Nokia had made adequate sales volume as the company recorded a net sale of 5.3 billion in 2006 in the global market.
Figure 1- Sales share of different mobile phone brands in 2012. (Source: Cromar 2010)
Competition Nature in the Phone Industry
Competition increases the performance of the companies within the industry, since it triggers the actions that firms need to carry out different actions successfully. Giachetti (2013) asserts that in the technology industries, especially cell phone industry, the nature of competition is complex because it involves many competitive actions. For example, in 2008, Apple and Samsung Company were engaged in a competing business action when the two company wanted to be the market leader in the sale of smartphones (Giachetti 2013). As such, with the two companies using the action of manufacturing the smartphones to become competitive, in 2011, Samsung become the leading smartphone vendor by capturing 23.8 percent of the phone industry market share (Giachetti 2013). On the other hand, through competitive actions, in 2011 Apple become the second from Samsung, in which the company grabbed 14.6 percent of the market share globally (Giachetti 2013). From the action of both companies, it is clear that the phone industry is populated by rivals and due to such reasons, the competitors feel that both its competitive position and profitability are under the threat from the other companies.
Figure 2- Competitive focus in the phone industry (Source Giachetti 2013)
Trends and Innovations in the Industry
Currently, the mobile and wireless markets experience rapid development, as companies within the phone industry use the available resources to come up with ideas that will make them competitive in the global market. Zhang and Prybutok (2005) reveal 3G technology is one of the innovation ideas that is in the phone industry. The term 3G means the third generation of mobile phones, in which the handset can provide a range of new functionalities. This feature is not only important for competitive advantage, but also relevant to the consumers (Zhang and Prybutok 2005). In fact, 3G and 4G technology gives people an opportunity to carry out simultaneous tasks with their mobile phone including the transfer of speech, data, messages, recordings, pictures, and videos. With some of the companies within the phone industry becoming innovative, there is the introduction of smartphone operating system that comes in three forms (Cromar 2010). As such, in the industry, there are smartphones devices that have an OS with a trademark, open source, and it is licensable. Cromar (2010) point out that Apple, RIM, and HP/Palm Company are among the companies that have taken the approach of manufacturing devices with an OS that comes in the three forms. These innovative ideas are utilized in the phone industry with the purpose of getting potential competitiveness and outdo rival companies in the market (Scott, et al., 2015). The OS allows manufacturers to differentiate their smartphones from the other companies.
Pattern of Consumption
In the phone industry, the consumption pattern is based on the innovation that companies are bringing to the market. This implies that when companies in the industry bring new products, the market switch, as the customers view this as a reform in the market. Jai and Yan (2015) argue that in 2008, Google introduced a brand that changed the taste and preference of the customers, thus effecting other companies such as Nokia. In the same year, the consumption pattern in the industry was arranged according to the features of the phones in the market, of which 43 percent of the customers choose the Android system introduced by Google Company and 29 percent picked the phone with the IOS system (Jai and Yan 2015). Within the market, 28 percent of the products were purchased under the category of other forms of phone products, which led to the drop in the phone market for companies such as Nokia (Steinbock, 2010). Jai and Yan (2015) assert that through the change of the consumer consumption in 2008, in 2011 Nokia market share decreased from 33 percent to 14 percent in 2010, and this was lower than the market share for Apple and Samsung.
Figure 3- Nokia users’ future choice of mobile system (2008-2011). (Source Jai and Yan 2015)
The Marketing Strategy in Phone Industry
In the phone industry, the implementation of marketing strategies is often referred to as the stage of strategic management (Cromar, 2010). Apparently, due to competitiveness factor in the industry, most of the company uses BCG matrix model to market their product. In this technique, companies are required to group products low or high performance depending on the market growth and market share. In the phone industry, Apple Company is recognized for the use of this technique, with the company employing the strategy as a useful tool to identify the product line in the global market.
Figure 4- Apple BCG Matrix (Source: Ali, Alam, and Alam 2015)
According to Ali, Alam, and Alam (2015) Apple Company uses BCG matrix technique to make timely and efficient marketing decisions. The strategy is essential in the phone industry because it brings modified marketing version that aims at increasing the market size and competitive advantage. Ali, Alam, and Alam (2015) opine that for Apple Company, the BCG matrix strategy is not only necessary because of decisions and market share, but also to help the company cope up with the sales of smartphones and computers.
PESTEL Analysis for the Phone Industry
PESTLE framework is an acronym for political, economic, social, technological, environmental, and legal, in which the model is used to analyze the macro-environment of a company (Cadle, Paul, and Turner, 2014). Importantly, it is necessary for industries to understand each factor in the PESTLE framework so that the companies within the industry can understand the major drivers of change and the way PESTLE can influence the market. Therefore, to understand the way different factors under how the PESTLE framework affect phone industry, a brief analysis of these factors is highlighted in this study. The analysis of PESTLE framework and the way it influences the phone industry will first look at the political elements within the industry. First, the impact of political factors on Nokia, Samsung, Apple, among other companies in the industry are hard to ascertain. For example, Nokia Company has experienced the problem with political factors and the company was forced to get into the uneasy alliance with Microsoft.
Economic factors affecting the phone industry include components such as economic downturn and turmoil and this may limit the buying power in the market. For instance, unlike Apple, Nokia had encountered difficulties in tapping into the fast-growing Asian market, especially the Chinese market (Nagpal and Lyytinen, 2013). Some of the phone companies also face economic problems, as they do not have vast economic resources to deal with competitors such as Google, Apple, and Samsung Companies. Social/cultural factors are major issue hurting the phone industry, as most of the social factors affecting the industry have been extensive in the adoption of smartphone brand. Income distribution and attitude are some of the social factors that are affecting phone industry. In the U.S, Apple has been associated with smartphones, which has profoundly affected the market of Nokia since the generations are buying only brand from Apple Company (Nagpal and Lyytinen, 2013).
Technological factors affecting the phone industry include the operation system, such as Android and other innovation apps. The innovation and open sourced OS has radically changed the mobile phone market (Cecere, Corrocher, and Battaglia, 2015). Technological innovation has seen companies such as Samsung, HTC, and LG make an average of 26, 18, and 15 new products each year (Cecere, Corrocher, and Battaglia, 2015). In the case of environmental factors, the phone industry is faced with the problem of safety and economically positioning of its used product in the environment. Besides, due to the issue of climate change created by global warming, it is likely for the companies in the industry to face the challenge of environmental laws on damping and recycling. Major legal factors are affecting cell phone industry the regulation set by the European Union (Department of Culture Media & Sport 2015). For instance, cases of the effects of 4G transmissions on terrestrial television services have sparked controversies and the need to regulate800Mhz licenses (Department of Culture Media & Sport 2015).
Table 1
PESTEL Analysis
| Factors | Issues |
| Political | Taxation policies and international trade |
| Economical | Inflation, unemployment, stock market, and interest rate |
| Social | Society attitude and income distribution |
| Technological | Innovations and product development |
| Legal | Government regulations and European Union |
| Environmental | Environmental laws and global warming issues |
Ansoff Matrix Analysis
Ansoff Matrix is a business analysis technique that gives a company the framework it needs for growth opportunities through the existing or new products (Cadle, Paul, and Turner, 2014). For the case of the phone industry, the Ansoff Matrix gives the companies in the industry a structured way to assess potential strategies for growth and development. As an important part of the Ansoff Matrix framework, business in the phone industry get an opportunity to review technological advances and the way the advancement can affect the current and future products.
Figure 5- Ansoff Matrix showing the two dimension that considers product (Existing and New) and the market (Existing and New).
From the framework, it is clear that the Ansoff Matrix is made up of four sequences that phone industry should reflect when considering placing its product in the market (Cadle, Paul, and Turner, 2014). First, market penetration for new entrants remains a risky venture given the stiff competition in the industry and already developed brands such as Apple and Samsung (Crespo, Suire, and Vicente, 2016). However, for new entrants, product differentiation through technological development remains the best strategy to attract new markets. Most companies continuously invest in product development and research as strategies to remain relevant in the market and ensure customer loyalty (Gunnarsson and Ljungwaldh, 2015). Diversification of products has continuously complemented product development, with most market players increasing the number of products they offer including diversification in aspects of the same product such as color (Page, 2015). The inherent competition between Samsung and Apple through the galaxy series and iPhone series has greatly led to diversified products in the market, attracting strong market performers like Techno. Nonetheless, with stiff competition, marketing through social media, advertisements, and celebrity product endorsement has become a norm in the phone industry. Product launches have in the recent past been highlight publicized and used as the strong marketing ventured for new products (Cricelli, Grimaldi, and Ghiron, 2011).
Fig. 6 Percentage of smartphones with different characteristics (vertical product innovations) and (b) Coefficient of variation of weight (vertical product innovation) (Source: Cricelli, Grimaldi, and Ghiron, 2011).
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