Analysis of ‘Smartphone market’

Topics: Supply and demand, Profit, Economics Pages: 10 (2749 words) Published: September 26, 2014

Analysis of the competitive process that takes place within ‘Smartphone market’

Table of Contents

Executive Summary3
Detailed Discussion4
Market Share4
The nature of the product5
Composition of the market, demand growth, and elasticity5
Economies of scale and technology6
Market structure6
Market dimensions7
The principal dimensions of competition and business rivalry7 Other Generic strategies applied by firms in this market8
Analysis of oligopoly with Porter’s five forces framework8 The financial performance of competitors9
External References14

Executive Summary
This report is an analysis of the competitive processes that take place within the industry of 'High End Mobile Phones/Smart phones' in the global market. It shall cover the nature of the products, demand characteristics, cost characteristics, and size distribution of sellers among other factors from an economist's point of view. The nature of competition and market structure will be analysed against well-established frameworks of economics academic discipline. With this background, the comparative financial performance of the big players in this market shall be critically evaluated against their strategies.

The smartphone industry is one of the most dynamic industries and has been witnessing unprecedented competition and changes over the past few years. Given the fact that the lion’s portion of the market is in the hands of a very few large corporate companies (The Economist Online, 12 September 2012), it would be worthwhile analysing the competitive processes within this industry. The emergence of a few small but potential players, mainly the companies operating in developing countries, make the case more compelling for an in depth analysis. (Financial Times, 28 November 2012), (BBC, 15 May 2012.) We will start off with a look at the market share and then analyse the nature of the products. Further this report will take a critical look from an economist’s perspective of the composition and structure of the market, nature of demand and its change, dimensions of competition and financial performance of the competitors, with theoretical frameworks inferred from text books and real world data derived from online resources. We will figure out why this market is an 'oligopoly' and apply the framework of Porter's five forces to analyse the dynamics of it. Based on the geographical differences, for the discussion we shall divide the global market into three broad groups, the American, the European and the Asian markets.

Detailed Discussion
Market Share
As of June 2012, while Samsung is the clear leader in this industry with respect to unit sales, apple is the clear leader in terms of operating profit, and the two majors engage in a stiff war among themselves and with many other relatively smaller players as shown in the diagram.

(Diagram Source: The Economist, 12 September 2012)

From 2007 till the observation date, Nokia and RIM seems to be steadily losing out their customer base and thereby their sales have declined steeply.

The nature of the product
The products in this industry can be regarded as highly differentiated, because of the obvious bunch of differentiated technical features they come with. Though the products are technically substitutable as eventually they all do more or less the same thing, customers usually tend to stick with one brand or at least on platform (out of iOS and Android).

Composition of the market, demand growth, and elasticity
The market has generally seen growing number of buyers over the years because of the increase in the dispensable income, among other factors. From the supplier side, the market has three to four big organisations and a handful of other smaller organisations. IT can be observed that the cutting edge trends have...

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