a market essay about cell phones market
Cell Phones Market
The cell phone gadget was traditionally invented for use as an alternative to landline telephones. However, in the 21st century, the cellphones have grown in significance and now form a major part of human lives. Inventions and innovations in the telecommunications industry have been credited for the recent craze. However, modernity and the changing lifestyles continue to fuel the increasing influence of the cell phone. Just like other markets, the cell phone market is controlled by forces of supply and demand (Cecere t al. 165). However, the cell phone market has shown a high degree ofperishability and short shelf lives as the rate of technological change increases.In the last decade,the cell phone market has shifted focus from the use of ordinary gadgets to the use of smart phones.Smartphones use advanced technology and offer a multi-purpose alternative to users. While the traditional cell phone could only be used for making calls and receive messages, the smartphone is capable of accessing the internet, read and send mails, read, edit, and download documents, and a host other features that are continually being added into the recent smart phones (Lenhar 1). This essay will, however, focus on the cell phone market globally and will focus on the United States market. In this paper, the term ‘mobile phone’ will be used alternately with the term ‘cell phone’
Competition in the global cell phone market is stiff with many companies trying to outdo each other in terms of sales and sophistication of gadgets. While other firms have maintained their identity throughout the competition, others have been taken over while others have since been declared bankrupt and stopped production. Initially, the cell phone market firms used to compete on two levels, the software level as well as the hardware level. This scenario has since changed. The cell phone market underwent a transformation in recent years with global players standardizing the equipment such as chargers and other utility items. The move shifted the war to the software level (Troianovski andGrundberg 1).In this paper, the market will be discussed in two levels, the hardware level and the firms that are competing at this level will be discussed, while the software level will also be discussed. The US market will be analyzed in the process in terms of competition and the features that set the market apart from Europe or the Chinese market will be discussed as well.
The software level has two main competitors in the form of Android and Ios. The Android smart phone operating system is developed by Google and is available for purchase and use by other cell phone companies. However, the Ios is developed by the Apple Corporationfor its products, namely the iPhone. Apple and Google have been fighting supremacy battles in the recent past with each firm trying to beat the other in terms of sales and market shares. While the Ios is the market leader the United States, Android leads in the global market. The market model in this case could be regarded as a duopoly market with both Android and Ios controlling more than 90% market share of the smartphone industry in the US and for the rest of the world (Post 1). While the rest of the world uses agents and other retailers to sell the gadgets to the consumers and to increase sales, the US market sales are controlled directly by the firms involved. Heavy subsidies are, therefore, possible in the US market with firms using this option to increase their sales and to compete with each other (Troianovski andGrundberg 1).
While the software level has two competitors competing for the US market, hardware manufacturers have competition, especially on the global scale.However, in the US market, there is still a duopoly market structure in place with the two major players represented by Apple and Samsung. The marketing efforts can be credited for most of the sales that these firms make. Most of the marketing is done via online sources such as movie streaming sites, YouTube, newspapers, and other social media sites such as Facebook, Twitter, and Instagram (Post 1). Distribution channels are an important aspect as it helps in marketing a product as well as in determining its end ice to the consumer. While the US market is predominantly known to have their firms sell directly to the consumers through their agents, it is important to not that some sales are obtained through the use of retailers. Even though the retailers will increase the price to the consumer, they offer a further reach that can helpincrease the level of sales made (Kenney, Martin, and Bryan Pon 250).
Research and development have been identified as a major factor that determines the profitability in the cellphone market. To this end, the major players have heavily invested in research and development departments. The research and innovation capabilities directly influence the sales of cell phones globally and in the US market. For instance, the Apple Corporation is renowned for its quality products. Even though they are often pricey, the company has been able to cut a niche for itself and can make salesand expand its market due to the inherent quality factor in its products. The design and the features also directly affect the price of the products. The competitors have invested in innovators that are responsible or designing new models that are trendier and that can increase the sales to either maintain the market they already have or gain more ground in the cell phone market.
Porter’s five forces model
According to Porter,a market can be analyzed using the following five forces; the bargaining power of the suppliers, the bargaining power of the buyers, threats of new entrants entering the market, threat of substitute products in the market, as well as the level of competition in the industry. In terms of the level of substitutes, the mobile phones do not have direct substitutes. Initially, the cell phones were an alternative to landline telephones, but the telephone companies have since collapsed. However, in the recent past, the emergence of tablets is a cause for worry among the cell phone manufacturers. The emergence of tablets and Ipads may not affect their profitability because these firms also produce these gadgets and the uses of these two gadgets are more or less the same.Threats of new entrants is not significant in the US market. The Apple and Google companies control a market size of over 90%. However, other players such as Windows phone produced by Microsoft is a distant third, but it does not form a major cause of concern to the two firms.
Regarding the bargaining power of buyers. The technology and the market demand usually combine to set the market price. Therefore, the buyers do not have much bargaining power. In any case, in the US, the firms mostly sell their products directly to their consumers and these products are heavily subsidized (Goasduff, Laurence, and Christy Pettey 1).The intensity of industrial rivalry, however, is the main force driving the competition in this market. In the hardware level, companies competing for the market include Apple, Samsung, Lenovo and Huawei. In the software section,the big two companies competing for the US market include Google with its Android operating system and Apple with its iOS. The competition drives all aspects of the industry, including the prices set, the advancements in technology and the features designed into the phones.
While government intervention is normally discouraged in the free market, it is essential in some aspects for the government to step in and intervene. These government interventions sometimes help steer companies in the right direction while protecting the citizenry from exploitation. For instance, the Samsung company, that is a major player, both in the US market and globally for the manufacture of cell phones, received a lot of government credit and befitted from government regulations and policy (Troianovski andGrundberg 1). However, the same cannot be said of the US market. The main players are private entities that do not directly benefit from government help. However, liberalization of the market by the government opens doors for free competition that usually benefits the end user of the products. The government also has a direct influence on the networks through which communication of these gadgets is possible. The government has invested heavily on the infrastructure that has enabled the acceleration of technological advancements in the US. The government also funds research institutions and Universities where the human resource, a major component in the success of this market gains their education. In this respect, the government intervenes to ensure that innovation and development in the cell phone industry goes on smoothly.
In the last ten years, the cell phone industry has faced major transformations.Over 10 years ago, Nokia was the leading cell phone manufacturer in the world. Presently, the company does not exist as it was bought out by the Microsoft company (Humphreys et al. 500). The cause of this collapse underlines he major changes that have happened to the cell phone industry. While the market changed, Nokia did not. It was left behind. The cell phone industry transformed and smartphones became the fashion. Firstly, people demanded smaller and sleeker phones. The slide phones and the flap designs were invented (Puttonen, Vesa, and Michael Ståhle 280). Secondly, the touch screen phones took over. People no longer wanted smaller phones, but bigger phones with bigger screens that could enable them to do more with their phones than just calling and receiving texts. Presently, the average smartphone can be compared to a personal computer with their processing powers also increasing to handle their many features and requirements (Miller 225).Advancements in mobile telephony,fueled by advancements in technology have made possible the changes that cell phones have experienced in the recent past. Social media has definitely played arole in the last ten years with people needing gadgets to connect with the rest of the world. While the need to connectand to share increased, so did the cell phone to accommodate the new demands.
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