Forecasting the Changes for the 3 Years from 2013-2016 - Mobile Sector - Case Study Example

Company Analysis Table of Contents Part 3 Overview of technology sector 3 Quantifying the sector 4 Main segment 5 Main strategic drivers 6 Structure of the sector 7 Forecasting the changes for the next 3 years from 2013-2016 8 Part 2 11 Nokia Mobile 12 Samsung Mobile 13 Apple Inc. 15 Motorola 16 Reference List 18 Part 1 Overview of technology sector The technology sector has been growing rapidly for the past few years and has evolved as a dynamic part of the economy, which has brought in new exposures globally. It has contributed largely to the present development of the global economy. However, the global economic crisis in 2009 had an extensive effect on the sector. The technology sector is observed to be dynamic and is undergoing modifications at a rapid pace. The sector is subject to constant development that emerges from high-level research and invention. It has also encountered dramatic changes in the management practices followed by the sector. The trend is such that the businesses and consumers expect to communicate with each other instantaneously. Information Technology has brought huge increase in the level of productivity in the last few decades. There has been a union between the telephony sector and IT, which was driven by altering the voice traffic from the analogue signal to a digital packet. The union is indistinguishable from the rest of the data packets, which travel via the computer network (Graduate Prospects Ltd., 2013). The sector has encountered a number of problems, in the recent past and the biggest of them is the economy. The conditions of the sector can be enumerated through examples, so that a clear picture of the same is obtained. The economy of United States (US) has been in an inflationary path. After elections, the technology sector has encountered a huge decline. The scenario in Europe has been the same. The Euro collapse had decreased the demand in European consumer technology. When the European Union countries experience an increase in commodity prices and tax hike, the US export, availability of credit and corporate profitability are bound to suffer. So, all these factors have affected the sector to a large extent. Despite the euro crisis, European demand for consumable technology has not hampered and technological companies are seen to invest in more and more new products that are invented by them. The technology sector demands for huge cash in dollars and euro, so that the sector continues to flourish in the future. The vital part of the technology sector is insurance coverage, which is designed in order to maintain same pace with potential growth of the individual business (Private Sector Development, 2009). The mobile segment of the technology market had encountered drastic changes, along with potential growth, in the past few years. It is also expected to enjoy further growth in the future. According to certain reports, in recent times, the global mobile market has earned about $850 billion, which accounts for about 57% of the global technology market. The mobile market is expected to increase up to 62% of the global tech market in the future (Arghire, 2010). It has been observed that the market has faced an upward drift, which had resulted from the growth of subscribers. It is expected that there will be more than 1.3 billion new subscribers for the sector (Arghire, 2010). In addition to that, there will be more exciting development and attractive trends, which are essential for the expanding demographic of smart gadgets. Besides that, further expansion in the mobile broadband offers and wider range of mobile applications will result in increased demand of the same (Arghire, 2010). Quantifying the sector In the mobile device sector, price had been the main factor to contribute in the purchasing decision. However, the trend has encountered a drastic change and quality has become the key contributing factor for making a decision of purchase. The information, regarding quality of services, is hard to acquire, even if it is available. Few governments, globally, are planning to alter information pertaining to the quality of services. In a sense, the mobile sector can be quantified with comparison of the prices of mobile devices, among the carriers. However, the sector had never concentrated on the fact that it should publicize its quality of services. Therefore, for addressing the quality of services provided by the sector, the national regulatory agencies of countries have introduced the Quality of Services programs. The concept will be clear by elaborating the same with an example. The regulatory agency of Poland, for the telecom sector, had investigated the programs and had identified that the best quality of services program will be new schemes. The scope of such regulations is limited in other countries and they are measured in the following ways: Figure 1: Quality of Service qualified (Source: ATKearney, 2013) From the above figure, it is evident that few countries have developed regulations to measure the quality of services in the mobile sector. The standards that are set by the countries, in form of regulations, in the particular sector, assist to offer high quality of services in the mobile communication network, next generation network and also, for the digital technologies. Regardless of the types of services, operators around the globe absolutely need to verify the quality of services that they provide to customers. Main segment There are three main segments of the mobile devices sector: entertainment, communication and information. The following are users of each of the segments: 1) Entertainment: The users are interested in iPod, iPhones and Nokia NGage. 2) Communication: The users are interested in Motorola Q, RIM BlackBerry, Nokia E61/2, 9500 and WindowsMobile Smartphones. 3) Information: The users are interested in Windows Mobile Pocket PC. Figure 2: Response of the mobile services (Source: IBM, 2008) The figure identifies preferences of users of the three segments, which can be further elaborated into minute services, provided by the mobile devices. The intention of the users is taken in form of interested and somewhat interested scale. The figure, thus, elaborates that users are more interested in utility services provided by the mobile devices than entertainment services. Main strategic drivers The mobile device sector had enjoyed remarkable moments in the history of business, for the past few years. The strategic moves that are taken by inventors of new cell phones and smartphones have been the main drivers of the market. The sector has been a hotbed for innovation, since the earlier days of internet. The swift growth of the sector has led to the prediction that in the recent future, everyone in the world will be a mobile customer. It is also noticed that drivers, which are driving the sector, are threatening the existence of the same. There are two macro trends which have brought fear to the sector. The first trend is a relentless demand of the mass and need for infrastructure that is quite expensive, when the revenue growth is slow. The second trend is the comodization of devices and applications that has brought success to the sector (Times Inc., 2014). The challenges that are encountered by the sector indicate the end of vertical integration, which had characterized the sector once. The new companies, who are penetrating the market, possess different cultural characteristics from that of mobile operators, who already exist in the market. The existing companies are slow moving and stress a lot on the status quo. The high cost paid by the mobile companies to stay in business is leading to a new junction in the industry, where there are two to three handset makers and carriers, while the other handset makers fall behind the outlook that is prepared for the long-term uncertainty. The remarkable growth in revenue in the mobile industry has led to an increase in profit in Unites States and Europe. It has been observed that the current revenue per user in a month is an about $50, compared to $30 in Europe. The same measure has been observed to be $5 in India. It is identified that mobile operators, which are providing the low calling cost, have achieved high profit. It can be observed that the profit is definite, since several Indian companies pool their resources to build networks, particularly in the rural areas. The same idea has been adopted by European countries and thus, offering lower calling cost in rural areas has increased subscribers of the company as well as their revenue. This is one of the strategic business moves, which had been adopted by the companies. The mobile operators had been responding to different situations by employing varying strategic efforts in order to distinguish their brands from their competitors. The advertising battles prove the situation. It has been identified that network quality in the US is not as good as expected, in comparison to that in other countries (Times Inc., 2014). The smartphone has taken command over the present market scenario. It has not only been confined to US and Europe, but has also spread its existence in all other countries. It has been predicted that, with rise of the high-end iPhone or Android, developing countries will avail them at $50 (Times Inc., 2014). Structure of the sector Smartphones have become the centre of attraction for all companies that are serving the global mobile market. The sales of smartphones have increased about 55% of the mobile phones sales globally. In Latin America and China, old phones were swiped off by the new range of gadgets and phones, which provide the mass with the latest technology. The worldwide sales of smartphones had increased 46% from the last years whereas only 6% increase was seen in the overall sales of the mobile phones. The sales of normal handsets have faced a serious decline because of the reasonable price of smartphones and the advanced technologies that they offer to customers. According to surveys conducted by the different institutions, it has been observed that Samsung has positioned themselves the highest in the smartphone segment. The market share of the company has been recorded to be 32.1% and its smartphones sales amounted to about 80.36 million (Wolde, 2013). On the contrary, the sales of its competitor, Apple, are about 30.33 million and its market share had decreased from the previous year, from 14.3% to 12.1% (Wolde, 2013). The sale of new iPhone 5S and iPhone 5C of Apple have imposed modest impact on overall sales of the company, during the last quarter of 2013. Lenovo has acquired 5.1% of the market share in the smartphone business, whereas Huawai and LG Electronics have acquired about 4.7% and 4.8%, respectively. The companies are in fierce competition with each other as customers are replacing their old handsets with the new range of smartphones (Wolde, 2013). It has been observed that about 81.9% of the smartphones are running on Google’s platform, Android, whereas 12.1% on Apple iOS. It is quite noticeable that the sale of BlackBerry had dropped to 1.8% from 5.2%, in the third quarter of 2013 (Wolde, 2013). Forecasting the changes for the next 3 years from 2013-2016 The irony regarding the mobile sector, which relates to the huge demand from customers and growth of the sector, had questioned many companies in the value chain about the future of the industry. The companies are struggling to identify the main driver of the sector, which has shaped up the whole industry. The new world has brought them new opportunities as well as challenges, which make them nervous and worried about the future performance of the sector. They all aim at achieving the winning strategy, which would render their way of business in the new world as successful. The major interruptions and strategic inflections are altering the environment of the mobile industry. Few interruptions have been encountered in the last couple of years, which have brought uncertainty to the sector. The following are seven interruptions, which will be encountered by companies in the future: 1) The extensive demand for the mobile data, which will face a 13 fold increase (during the phase 2013-2016) 2) The rise in more advanced software platforms. 3) There will be availability of fast mobile networks, which will support all apps and prove useful to the users to a great extent. However, companies are bound to face the competition in order to stay ahead in the market. 4) The strict regulations in countries have ensured consumer protection. 5) The structure of the industry is changing very fast. 6) The further growth of devices to connect different parts of the world through its network. 7) The move towards adopting the cloud delivery model has made companies more cautious in their actions (Taylor, 2013). The disruptions have given an indication regarding how the mobile industry will look in the future as well as operate in this challenging scenario. At present, the large players dominate the mobile industry, which have helped the industry to make winning strategies for success of the business. It is quite impossible to predict the future of the industry, but certain current trends acts as indicators, which suggest the future condition of the sector. The players in the mobile value chain are trying to find solutions to key challenges, which they are going to face in future. It has been pointed out that there are four trends, which will build the mobile industry. The following are the trends: 1) The compression of price and decline in revenue growth of mobile devices has shed light on the importance of mobile data and mobile broadband and applications. 2) The smartphone has become the main driver for the mobile market, globally. The other key drivers of the market have emerged in form of embedded laptops and industrial machine-to-machine devices (Taylor, 2013). The sector has encountered huge transition in the past few years. The prime focus is on growth of the subscribers. The strategies are undertaken to increase the customer base of companies as well as to facilitate a healthy business environment. The expanding business of smartphones and new operating systems has resulted in an increase in expectations of customers and users. The arrival of the mobile broadband and extensive growth in applications have brought in new content and reshaped the infrastructural landscape of the mobile telecom sector. Thus, it can be well understood that it is essential for companies to identify the development and changes that are taking place globally, in order to remain competitive in the market. The strategic moves that are undertaken by the companies, form parts of the tools themselves, which are required to increase sales. If the sales increase, companies will encounter profit, thereby making the company successful in the long run. Part 2 Mobile phones have taken an important place in everybody’s life today. Ten years back, these devices were only used to communicate, but at present, the device offers a number of functions to users, apart from the basic uses. The devices are used for entertainment purposes as well as internet. The sales of mobile devices all over the world have increased, over the years, with the rise of new mobile companies and operators. The mobile users now seek those applications that these devices provide and it has gradually become a fashion statement to carry the best one in the market. The demand of users has changed down the years with the advent of newer and advanced technologies. Thus, mobile companies have modified their devices to give shape to requirements of the users. It has been recorded that there was a total sales of 435 million units of mobile devices, till the end of the second quarter of 2013. The amount indicated a rise of 3.6% from sales of the last year (Dawson, 2011). Recently, the smartphone has become the most dominating device in the world market and its sales unit has reached 225 million, thereby encountering an increase of about 46.5% from sales of the last year. With an increasing number of mobile companies, the main players of the mobile industry seem to concentrate on their strategic sales. The threat of new entrants is felt by every dominant player of the market, but they have kept on pioneering their product and have differentiated them from their rivals’ product. The sales of iPod and iPhone were captured by none other than iPad, which made Apple Inc. stronger in the field of innovation. The figure given below portrays the rapid success of iPad, which made the company richer. Figure 3: Sales of iPad, iPod and iPhone (Source: Dawson, 2011) The main players of the global mobile market are Nokia Mobile, Samsung Mobile, Apple Inc. and Motorola mobile. These companies are chosen to be the main players of the market since they earn the highest revenue globally. The following section elaborates the strength, weakness, threats and opportunities of these companies in brief to access the capabilities and weakness of the companies. Nokia Mobile Nokia, operating in Finland, had earned the highest revenue of $66 billion in 2013 and has positioned them in the top of list. Strength Largest distributor of mobile devices in the industry. The employees are highly qualified and skilled. The mobile devices are user-friendly and provide various accessories. The re-sale value is higher than other brands of mobile. Weakness The company did not undertake any promotion plan to target the lower class of the society. Gives poor after sales services. Opportunities The company has the opportunity to expand its wide range of products, as it is capable of making investment in new inventions due to its profit margin. Threats Entry of new entrants and powerful competitors like, Samsung and Motorola, are a big threat for the company. The imitation of their devices by smaller companies, to sell them at a cheaper price, is another issue, which is creating problem for the company. Samsung Mobile Samsung, operating in South Korea, had earned revenue of $38 billion in the last year and holds the second position, after Nokia. Strength The company focuses on the integration of hardware with many other sources of Operating System and software. The company has excelled in producing hardware parts and consumer electronics. The main focus of the company is on innovation and design. The company also takes care of the environment and aims at producing eco-friendly devices. The main strength of the company is that they enjoy low production cost. They market their brand strategically and innovatively (Strategic Management Insight.com, 2013). Weakness They have violated many patents. They have low profit margin. They focus on too many products and thus, lack in their operating system and software development. Opportunities The company has penetrated the global market through its sale of smartphones. Samsung has sold the highest units of smartphones till date. Thus, it has the opportunity to expand its customer base by modifying the smartphone with respect to the needs of users. There is a growing demand for the highest quality of application processor, now-a-days. So, the company has the opportunity to hook needs of the users and change application of the devices as per the consideration. The company has the opportunity of obtaining patents through acquisition (Strategic Management Insight.com, 2013). Threats Entry of new entrants and powerful competitors like, Nokia and Apple Inc., are big threats for the company. The sales of smartphones have become saturated in the developed nations. The rapid technological changes taking place create problems for the company as it possesses low profit margin to invest in new technological modifications. The breached patents have imposed threat on existence of the company. Apple Inc. Apple Inc. operating in United States had earned $42 billion in the last year. Strength The main strength of the company is their ability to produce innovative products, unparallel to other brands. The users who buy their brand devices remain loyal, since they are quite satisfied with the company’s products. They have closed product ecosystem. The company have gained promising reputation and have created good brand value for customers. The company has undertaken successful marketing and advertising plans to elevate their position in the industry. Weakness The gross margin of products is expected to fall in the long run. There have been defects in the new products. There have been huge changes in the management, which created chaos in the departments. Opportunities The company has gained huge exposure from the tablet and smartphone market. They have the opportunity to obtain patents through acquisition. There is a strong demand for iPhone 5 and iPad mini. There is also rising demand for cloud network services (Tech Analysis Blog, 2013). Threats Entry of new entrants and powerful competitors like, Samsung and Nokia, have threatened their existence for a quite time now. The growth of Android OS has been a great threat to the company. There has been huge price pressure from Samsung in 2013 for the smartphone (Tech Analysis Blog, 2013). Motorola Motorola operating in United stated had earned revenue of $21 billion in the last year. Strength The company has the capability to react to changes that are taking place in the internal and external environment. They have the zeal to lead the market by introducing new products. Weakness The management style of the company is quite out-dated and also, affects the decisions taken by managers, which arise due to the lack of knowledge. When compared to its competitors, the product quality of the company is not up to the mark. The company lacks in after-sales services and the main complaint, which is observed from users, is that the executives do not respond to their queries, after the product is sold. Opportunities The company has the opportunity to involve themselves in new ventures and alliances. They have the ability to introduce new products in the market in order to remain competitive in the industry (Article World, 2012) Threats The quality of products is the main threat for the company. Nearly all competitors of the company are providing users with high quality products, thereby making their brands more competitive in the market (Article World, 2012). Thus, from the above SWOT analysis of the four main players in the mobile industry, it is evident that the mobile device market has been growing at an increasing rate, along with an increase in competition among the abovementioned players. The demand of users is seen to influence smaller companies to emerge and make their place in the industry. These often threaten the existence of main players, as they imitate the same models and offer the same features, at a lower price, in order to penetrate the lower class of the society. It is quite clear that local brands have provided the lower class with mobile devices, which have helped them to satisfy their basic need as well as have considered their purchasing power. Nokia, Samsung, Apple and Motorola, being the highest earners in the industry, have acquired their respective places in the market by serving customers. Thus, it can be concluded that the mobile device industry has seen many variation, in terms of new products and competitors and is predicted to grow even faster in future, with advancement in technology. Reference List Arghire, I., 2010. Mobile Sector, the Fastest Growing Market in Telecoms. [online] Available at: < http://news.softpedia.com/news/Mobile-Sector-the-Fastest-Growing-Market-in-Telecoms-134678.shtml > [Accessed 25 January 2014]. Article World, 2012. SWOT Analysis of Motorola. [online] Available at: < http://123articlesworld.blogspot.in/2012/03/swot-analysis-of-motorola.html > [Accessed 25 January 2014]. ATKearney, 2013. Telecommunication: Measuring Quality of Service. [online] Available at: < http://www.atkearney.com/public-sector/ideas-insights/article/-/asset_publisher/LCcgOeS4t85g/content/telecommunication-measuring-quality-of-service/10192 > [Accessed 25 January 2014]. Dawson, R., 2011. The Global State Of The Mobile Industry. [online] Available at: < http://rossdawsonblog.com/weblog/archives/2011/10/the-global-state-of-the-mobile-industry.html > [Accessed 25 January 2014]. Graduate Prospects Ltd., 2013. Overview of the IT and information services sector in the UK. [online] Available at: < http://www.prospects.ac.uk/IT_and_information_services_sector_overview.htm > [Accessed 25 January 2014]. IBM, 2008. IBM Study Finds Consumers Prefer a Mobile Device Over the PC. [online] Available at: < http://www-03.ibm.com/press/us/en/pressrelease/25737.wss > [Accessed 25 January 2014]. Private Sector Development, 2009. What Are The Economic And Social Impacts Of The Mobile Phone Sector In Developing Countries? [online] Available at: < http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDUQFjAA&url=http%3A%2F%2Fwww.proparco.fr%2Fwebdav%2Fsite%2Fproparco%2Fshared%2FELEMENTS_COMMUNS%2FPROPARCO%2FRevue%2520SPD%2520vraie%2FPDF%2FSPD4%2FRevueSPD4_Mobile_Phone_UK.pdf&ei=5V7jUunQIOrR0QWN1YHoBA&usg=AFQjCNGrKDioPgShBgT-yOiLEirebYEnhw&sig2=t_8paT8o8KmdOIE-jg4Yug&bvm=bv.59930103,d.d2k > [Accessed 25 January 2014] Strategic Management Insight.com, 2013. SWOT Analysis of Samsung. [online] Available at: < http: //www.strategicmanagementinsight.com/swot-analyses/samsung-swot-analysis.html > [Accessed 25 January 2014]. Taylor, S., 2013. Trends in Mobility #2: The Future of the Mobile Industry. [online] Available at: [Accessed 25 January 2014]. Tech Analysis Blog, 2013. Apple SWOT Analysis. [online] Available at: < http://techanalysisblogger.wordpress.com/2013/11/27/apple-swot-analysis/ > [Accessed 25 January 2014]. Times Inc., 2014. How Forces That Drive the Mobile Industry’s Growth Also Threaten Its Future. [online] Available at: < http://business.time.com/2012/06/28/how-forces-that-drive-the-mobile-industrys-growth-also-threaten-its-future/ > [Accessed 25 January 2014]. Wolde, T., 2013. Smartphones 55 Percent Of Global Mobile Phone Sales In Third-Quarter. [online] Available at: < http://news.yahoo.com/smartphones-55-percent-global-mobile-phone-sales-third-105501937--sector.html > [Accessed 25 January 2014]. Read More