INTRODUCTION

Smartphone, a device which is no longer a strange thing to majority of people since it has gradually
entered people everyday life. Smartphones are mobile phones with computers abilities and internet
search, the only difference could be the size and its mobility. In another word, it has become a source
of entertainment, a communication tool, a search engine and so much more. This has led to the
decision of choosing smartphone industry as the main topic for this thesis. But smartphone itself is
not appealing enough since smartphone is just another artificial item.
However, the brand and the owners are far more tempting. Same device, similar features but each
kind has its own operating system which leads to different experience. Some are opened and
everyone can use, some are closed which means much higher privacy for users but not everybody can
use it. Nevertheless, each brand has its own history, and it is the history development that is the most
fascinating. How the brand was born, what innovation it had to go through, what kind of strategy the
company chose to compete with each other and all led to very different outcomes.

The past, present and future of the smartphone industry.

The first generation of mobile phone

Mobile phones started form PDA (Personal digital assistant) without full features of smartphones. IBM
had launched its first phone called the IBM Simon in 1992. It had a touch screen and a Zaurus OS. In
terms of features, Simon could be used to make calls, send and receive emails and even be used to
send or receive faxes. Besides, it was equipped with applications such as address book, calendar,
calculator, world clock, handwriting recognition on the touch screen.

Nokia 9000 communicator released in 1996 included a number of functions including email,
calender, calculator and address book.

In 1999: Ericsson R380 - the first smartphone officially unveiled. With this mobile phone, users
could contact and work anywhere, at any time. R380 uses the Symbian operating system, a system
designed specifically for wireless communication devices.

Smartphones with android OS were launched in 2008. HTC Dream was the first Android cellphones.
Samsung and Motorola came in October 2009, LG in May 2010, Sony Ericson in August 2010 and
Huawei in October in 2010. According to Trend Force Report, global shipment in 2015 reached 1.29
billion units with the annual growth rate of 10.3%.

In today's technological era, the smartphone is not only growing in popularity but also gives people
a series of new possibilities in all fields such as information exchange, mobile working,
entertainment at anytime, anywhere. Apple is the only company which is still out in race of
configuration and now the camera resolution. Both its latest products remain as 8 megapixel
resolution compare to its predecessor. However, the image quality of iPhone has always been
appreciated by users. However, improving resolution camera on the smartphone will provide better
image quality, and the high camera resolution can get a lot of the attention from consumers.
Technology Wars

If in the past, smartphones hadn’t had much distinguishable than the normal telephone but since
the iPhone came out, the boundaries between feature phone smartphone is becoming clearer
nowadays. And thus, a series of smartphone devices from many different manufacturers have been
created to compete with the iPhone. Finally the results is something inevitable, to be able to
compete with Apple, some other manufacturers have good sales like Samsung, LG, Xiaomi have to
improve themselves which lead to a fiercely race of upgrading hardware and software features.

Hardware

The screen size on smartphones are growing and the one initiated this race is none other than the
Samsung. The product with its large screen such as Samsung Galaxy Note 1 showed that large
screen smartphone is very useful. Even Apple cannot ignore the pressure of why the iPhone still
does not have the big screen since other firms strong competition by the phablet has made great
influence to Apple’s sales. This led to Apple also have to increase the screen size on their iPhone
from 3.5 to 4 inches, or more recently as 4.7 inch and 5.5 inch on the iPhone 6 and 6 Plus (Yoshikazu
2014).

Although powerful processors will bring a better experience for users. The race configuration is not
necessarily indicative negative connotations. The development of microprocessors with amazing
speed has helped the mobile devices gradually catch up with products such as Laptop, PC

3.1.2 Software
The race among smartphone manufacturers is not limited only on developing hardware, it is also
happening in software development. The two biggest application stores for users are Google Play (for
Android users) and App Store (for Ios users). Google Play (previously known as the Android
Market) is an international online store where users can download all kind of applications which are
developed by Google for any devices that run Android. App Store is a digital distribution 10

platform for mobile apps on iOS, developed and maintained by Apple Inc. In June 2015, Apple
announced there have been over 100 billion apps downloaded from the App Store. The popularity of
mobile apps has continued to rise, since they are used by more and more people

Design

Smartphone has changed a lot in an extremely contradictory way. The first stage of the mobile
phone era began in 1985 with the Vodafone desktop V1 with 4.9 kg heavy. With 4.9 kg, the V1
depended on telephone line which has made Vodafone V1 only be put in place and cannot bear to
go. The users required a more mobile and smaller device, about one year later, the Motorola 8000X
was presented, but it still cannot be stuffed into customers pockets. Years later, the modern phone
generation appeared. From 1989 to 2010, Nokia - Motorola - BlackBerry's were the big three
markets held at that time.. Until 2007, when Apple released the first iPhone, the market all began
to change gradually, smartphone concept was born, touch screens replace the traditional QWERTY
keypad and of course the phone size from began to become bigger again. HTC Desire with a 3.7 inch
screen, and then the period phablet with 5.3-inch Galaxy Note in 2011.

Operating System

Symbian OS used to be a closed source mobile operating system but it is now an open source
platform. It is widely used by many brands such as Samsung, Motorola, Sony Ericson and above all
Nokia. Nokia remains a giant in the low-end market of mobile phones, and it remained as the most
popular OS until 2012. Though it is still widely used in low-end phones, but there has been a sharp
decrease in demand rate. Overall, the Symbian OS is designed excellently and very easy to use.
Unfortunately, Symbian OS graph is going down today due to the popularity of Android and iOS.

Blackberry OS is the property of RIM (Research in Motion) and was first released in 1999. RIM has
developed this operating system for the Blackberry line of smart phones. Blackberry is quite
different than other operating systems. The brand is famous for its style of interface design. Their
smart phones have a trackball to move on the menu and a QWERTY keyboard

Microsoft operating system since it is used in almost every computers worldwide. One reason for its
success could be that it is operated on very powerful devices made by Nokia. Some of the newest
Windows Phone Nokia Lumia 800, Nokia Lumia 900. Unfortunately, in the race to win the
smartphone OS battle, it’s hard to see Windows Phone or BlackBerry make any inroads into Android
and iOS’ market share anytime soon due to this reason: most smartphone buyers tend to fall into
two categories: those who love Android huge selection of devices and prices or those who prefer a
closed system worked on a premium devices such as IPhone and IPad. Google first released Android
on September 20, 2008 and this operating system quickly gained immense popularity thanks to its
beautiful appearance and a huge amount of applications. Google Play is an official app market
which contains millions of different apps for android devices. Top manufacturers are using Android
in their devices are Samsung, HTC and Sony. Currently Android is one of the top operating systems
and is considered a serious threat for iPhone. As for it wide range of price, Android market share is
strongest in low income countries. Turing to IOS operating system, it was introduced in 29th June
2007 and through many upgrades it has reached IOS 8. It is still exclusive used by Apple and unlike
Android, the company focus on the performance rather than appearance. In another word, Apple
sell experience, not hardware. IOS also has App Store which contains millions of applications. One
benefit over Android is that it is a closed system so its security is much better and at the moment it
is still the best looking phone.
Suppliers

Smartphones have the suppliers of Hardware and Software. Hardware manufacturer produces
memory, processor, display, battery, camera etc. The main OS are Android OS by Google, Windows
Phones by Microsoft ,IOS by Apple and Blackberry OS. Android had 87.6% market share followed by
IOS 11.7% and Windows Phones 0.4%.

The past ten years have seen the rise and fall of SoC suppliers. Traditional PC SoC suppliers such as
Intel,AMD and Broadcom failed one afteranother and newcomers like Qualcomm,
MediaTek.Apple,Samsung, and Huawei have emerged as major designers and suppliers of
smartphone SoC.

Distributors and Buyers

Phone distribution was dominated by telecom carriers and further added by sales channels of
distributors and retailers. Nowadays, in addition to the telecom carriers, smartphone distributin
channel include vendors, dealers, retailers etc. Suppliers vendors include Samsung, Apple and
Huawei have their own offline and online stores. Third party online retailers like Amazon,
ebay,Alibaba etc have changed the distribution system than the older one. In emerging markets
like China and Southeast Asia, smartphones are distributed through smartphone vendors, dealers
and retailers in online and offline stores. While in developed markets, telecome carriers play a great
role in the distribution system.

Substitutes

Substitution for the smartphone include feature phones,desktop PCs, laptops, tablets,cameras,and
multimedia players. The sales of the computers have decreased over a period of time from 157
million units in 2010 to 133.85 million units in 2014.

Entry barriers

Feature phones are simple devices with less technological advancement. While the smartphones
are more technology oriented with wireless connector, camera ,battery, display etc. Smartphone
manufacturer compete on price, design, software and services.
The value of smartphone is based on OS, variety,price and apps.Apple’s entry in the smartphone
industry was helped by its iTunes store apps.Xiaomi’s entry was facilitated by the latest version
of MIUI OS.
Above functionalities create high degree of differenciation, leading to the high level of brand
loyality and switching cost. Samsung leads in display and user experience, while Apple leads in
technology and extensive apps.

New trend in smartphone market

There is a fact that Apple is probably the only brand hasn’t launched any product to compete in the
low - end smartphone market, and perhaps the company does not see the appeal in this market
segment. But on the contrary, Samsung, LG, Sony, Xiaomi ... are to exert its influence in the low -
end segment or even more is the mid-range with price approximately 300$.
In fact cheap products never afraid to lose, and the future for not well known firms which do not
want to risk in the high-end products such as Xiaomi, Asus, Lenovo and LG, the Cheap phone sector
remains a potential market that brings success to them.

FUTURE GENERATION OF SMARTPHONE

Technology Outbreaks

Smart phones have appeared on the market for nearly two decades ago as an alternative to mobile
phones which perform basic functions to enable two-way communication only by text or call. The
smart phones of today have different scalability including the camera lens in building high quality,
portable applications that support productivity, video-streaming and connectivity that allows millions
to remain connected while on the move. And customers have the right to expect many more
breakthrough in technologies in the future. One of them could be augmented reality
‘Augmented reality" or AR refers to what we perceive through our senses (usually sight)
strengthened through the use of the computer-generated sensory input such as sound, video,
images and GPS data. AR makes more information become available to the user by combining
machine data properties with what we see in real life. Using the camera on your phone, you can
point it where it "live" to get an overlay information about where you can find nearest place for
example

 Challenges facing smartphone makers to sustain their competitive advantage.

Phone distribution was done by telecom carriers

Low entry barriers. As most of the international brands especially Chinese (Huawei, Xiaomi) have
entered into the different markets of the world.

Highly differentiated products have generated problems for the other smartphone manufacturers. As
most of the consumers shift to the brands because of its uniqueness. Speech communication, camera
capabilities, self-expression and identity have become the core differentiated elements companies are
focusing on. So, consumers shift towards such elements which create trouble for other brands who
only focus on product features and price.

Patent problem

Patents are not secured in the smartphone industry. As Huawei sued Samsung in china and US for the
infringement of Huawei patents related to wireless communication and smartphone user interface.
Increasing manufacturing cost

Increasing manufacturing cost related to ICs and SoC’s have increased complexities for the
manufactures to control such direct cost.

Software complements

Software complements include various aps, online multimedia, mobile games, and community sharing
services. As smartphone hardware shipments and sales slowdown, developing software capabilities
and complement will prove critical for smartphone makers to maintain a competitive advanyage in
increasingly competitive market.

Threat of rivalry

Low THREAT LEVEL High

1 6 8 11

Few leader Existing competitors Numerous/Balanced

 3

High Industry growth Low

10
High Product differentiation Low

10

High Switching cost Low

Low Exit barriers High

Result: 8+3+10+10+3=34 34/5 = 6.7

Description: The result obtained in the threat of rivalry is 6.7. This shows that intensity of
rivals is above moderate level. Though the growth in this industry has declined reaching to
10% in 2015,but the giants like Apple, Samsung, Huawei and Oppo are competing with each
other based on differentiation, features and prices which represents the competitiveness of
the industry.

Threat of Buyers
Low THREAT LEVEL High

10

Single/few Buyer orders Large volume

 10

Low Buyer Information High

9
Highly differentiated Industry products standardized

High Buyers Switching cost Low

8
Low Overall buyer cost High

High profits Buyer profitability Losses

Result: 10+10+9+9+8+8=54 54/6=9

Description: The result obtained based on information as well as intuition is 9, which depicts that buyers
have high bargaining power. The buyer orders are in large volume and they possess the market
information extensively. Additionally, products are highly differentiated based on display (Samsung),
technology (iPhone), low cost(Huawei). This create high switching cost for the customers to shift to the
other brands

Threat of Suppliers
Low THREAT LEVEL High
 4

Many organization Supplier concentration Few organizations

High Supplier profit Low

Standardized Supplier products Highly differentiated

Low Industry Switching cost High

3
Many viable solutions Supplier substitute No viable option

Result: 4+8+8+3+3=26 26/5= 5.2

Description: Results indicate that the threat of suppliers is moderate level. As the suppliers of
smartphones are not in bulk quantity, they make normal profits. The suppliers do not provide highest
different ion point which create low switching cost for the companies..

Threat of new entrants

Low THREAT LEVEL High
 8

High supply side Economies of scale Low

High networks Demand side benefit of scale Low networks

High Capital requirement Low

3
First mover benefit Incumbency Late mover benefits

6
Limited access Distribution channel Easy access

10
Regulation government policy subsidies

10

Retiliatory Anticipated incumbent response Welcoming

Result: 8+4+9+3+6+10+10= 50 50/7=7.1

Description: The score represents that there is moderate threat of new entrants in the market of
smartphone industry. As most of the Chinese companies like Oppo & Huawei have entered in the
market. The capital requirement for new entrants is not so difficult. They will also have to work on their
intensive distribution network, as the existing smartphone companies have intensive distribution
network across the world. Finally, the government regulation is higher as in America there is restriction
on Huawei to distribute their products. Government consider itself insecure as Huawei may intrude in
the data system.
Threat of substitutes
Low THREAT LEVEL High

More expensive Indirect cost Less expensive

Low Buyer price sensitivity High

7
Lower Performance Higher

High Buyer Switching cost Low

6
Risk avoidance Buyer profile Risk seeking
High

Result: 3+9+7+2+6= 27 27/5=5.4

Description: The threat of substitutes is moderate as per score. The buyers are more price sensitive and
do not heavily rely on the performance. This create low switching cost for the customers to shift to
other substitutes. Customer used to buy smartphone instead its substitute product.
Product/market scope

A company’s product/market scope defines the products and markets on which

it will concentrate

Apple

Apple corporation designs, develops, and sells consumer electronics, computer software, and
online services.. It manufacture hardware and design software. It has also self-designed SoC

Technology

Apple has the cutting edge technology. It has 1.44million apps and games. Operating system is Ios.
Its softwares include iTunes, Safari, I work and I Life. Furthermore it has smart watch and Apple TV

Consumers

The consumers of the Apple are elite class, status quo people,business man and individuals who
like style and innovation

Usage

Communication, sms ,call, internet,entertainment (music,games,iTunes,app store ,icloud), navigation

and comutation

Samsung

Samsung is a South Korean multinational conglomerate headquartered in Samsung

Town, Seoul.[1] It comprises numerous affiliated businesses,[1] most of them united under
the Samsung brand, and is the largest South Korean
Samsung

Technology

Samsung compete strongly on its LCD’s /LED’s/OLED. It has a superior amoled display with 4g
technology. It has Android operating system

Consumers

The consumers of the Samsung are individuals, households, restaurants,hospitals,institutions and

corporations

Usage

Communication, sms ,call, internet,entertainment), navigation and comutation, storage and

information sharing

Google

Google is an American multinational technology company that specializes in Internet-related

services and products, which include online advertising technologies, search engine, cloud
computing, software, and hardware

Technology

Google is a software developer company. It has its own operating system “Android”
Other applications include gmail,google map,google earth and google play store
Consumers

The consumers of the Google are institutes, students, business people.

Usage

Communication,information sharing and storage

Huawei

Google is an American multinational technology company that specializes in Internet-related

services and products, which include online advertising technologies, search engine, cloud
computing, software, and hardware

Technology

Google is a software developer company. It has its own operating system “Android”
Other applications include gmail,google map,google earth and google play store

Consumers

The consumers of the Google are institutes, students, business people.

Usage

Communication,information sharing and storage