SMARTPHONE INDUSTRY
Rachel Yan
Temitope Tiamiyu
Laura Battaglia
Francesco Messina
QUICK QUESTION
 How many of you used smartphones 5 years ago?
 How many of you are using smartphones now ?
WHY SMARTPHONES?
 Amazing product!
 Relevant topic for U.S. college students
- Smartphones vs Non-smartphones
 Past vs Future
- Technology
- Global trends
INDUSTRY STRUCTURE
A SHORT HISTORY
1992: IBM developed “Simon”, the first
mobile phone to incorporate PDA (personal
digital assistants) features
•
1996: Nokia released Nokia 9000, a
palmtop computer-style phone
combined with a PDA from HP
•
1997: Ericsson released the GS88,
first device to be labeled as
“smartphone”
•
A SHORT HISTORY
2000: The touchscreen Ericsson R380
Smartphone was released. First to use an
open operating system, Symbian Os
•
2002: RIM released the first
BlackBerry, which was the first
smartphone optimized for
wireless email use
•
2007: Apple released the first
generation of iPhone, the first
mobile phone to use a multi-touch
interface
•
… New Smartphone Generation
WHAT IS A SMARTPHONE NOW?
A smartphone is a mobile phone built on a mobile operating
system, with advanced computing capability connectivity.
In addition to digital voice service, it usually provides:






Text messaging and e-mail
High-speed data access through Wi-Fi and
mobile broadband
Web browsing
Video cameras
MP3 player and video playback and calling
Possibility to run free and paid applications
HARDWARE VS. SOFTWARE
Smartphone hardware manufacturers compete primarily based on one of
two models:
1. manufacturing their own hardware and licensing the software that runs
on the smartphone from another firm
E.g. Nokia (Windows Phone)
2. manufacturing the hardware and developing the proprietary software
that runs on the device
E.g. Apple (iOS), RIM (Blackberry)
OPERATING SYSTEMS (OS'S):
Three forms:
PROPRIETARY
•
•
•
•
Developed in-house by
smartphone
manufacturers
It allows to
differentiate and
integrate with the
hardware
High costs and time
consuming
E.g. iOS (Apple)
LICENSABLE
• Any manufacturer can
use these OS on his
devices
• Reduced cost of
developing an OS
OPEN SOURCE
• Free and freely
customizable OS
• Highly developed OS at
no cost
• E.g. Android (Google)
• Licensing can be
expensive also
• E.g. Windows Phone
(Microsoft)
SALES AND MARKET SHARES OF
SMARTPHONE MANUFACTURERS
BRAND
2012 UNITS
SOLD
2012 MARKET
SHARE
2011 UNITS
SOLD
2011 MARKET
SHARE
1. Samsung
215.0 M
31.4%
90.9 M
18.7%
2. Apple
135.8 M
19.8%
93.1 M
19.1%
3. Huawei
55.2 M
8.0%
20.0 M
4.1%
4. Nokia
35.0 M
5.1%
77.3 M
15.9 %
5. ZTE
34.9 M
5.1%
12.0 M
2.5 %
6. RIM
33.2 M
4.8%
52.5 M
10.8 %
7. Sony
31.9 M
4.6%
26.8 M
5.5%
8. HTC
31.5 M
4.6%
44.6 M
9.2%
9. LG
27.6 M
4.0 %
23.3 M
4.8%
10. Lenovo
24.9 M
3.6%
--
Others
93.2 M
8.9%
45.5 M
9.4%
TOTAL
686.7 M
100%
486.0 M
100%
WHAT WE CAN SEE..
1. The smartphone market is a growing market:
It grew 41% from 2011 to 2012
2. Smartphones accounted for 39% of all mobile handsets sold
3. There are 1.31 billion active smartphones in the world
4. Samsung and Apple are the major players
5. Huawei makes strong gains and is World's #3
MARKET SHARES OF SMARTPHONE
MANUFACTURERS:
8.9%
3.6%
4.0%
31.4%
4.6%
Samsung
Apple
Huawei
Nokia
ZTE
RIM
Sony
HTC
LG
Lenovo
Others
4.6%
4.8%
5.1%
5.1%
8.0%
19.8%
HHI (of the first
10 players):
1668
BARRIERS TO ENTRY
Relatively high:
1. ECONOMIES OF SCALE
2. INTELLECTUAL PROPERTY
3. BRAND LOYALTY
4. NETWORKING
BUT THE DEGREE OF RIVALRY IS HIGH:
1. DIFFERENTIATION: significant between home and business users
2. ECONOMIES OF SCALE: almost no scalability to create more software
3. PRICE: consumers generally value quality significantly over price
4. PLAYERS: switching from traditional cellphone industry
ADVERTISING
STRATEGIES
T YPES OF ATTRIBUTES
 Search attributes
 Online reviews
 Experience attributes
 Online reviews
 Our focus is on these three players:
 Apple
 Samsung
 Blackberry
PERSUASIVE ADVERTISING
• Advertising strategy deployed is to attract and retain their clients, building long
term relationships with customers through “differentiation”
• Ads emphasize on the perceived quality of both the phone and the brand
INFORMATIVE ADVERTISING
 Based on the company’s competitive advantage
 Samsung: Size, Ease of transferring files
 Apple: “Incredible design”, “thin”, “smart”. iPhone trend
 Blackberry: Culture, Diversity, Business
 Product attributes:
 Also via ads
COMPARATIVE ADVERTISING
 Samsung and Blackberry attacks Apple in order to steal
market share
 Apple doesn’t respond
 Blackberry versus Apple
http://www.youtube.com/watch?v=LwxNNsmGhVI
HUMOUR APPEAL
 It comes very often when the ad is bundled with a network
provider plan.
 Usually it is a sketch or a short story.
CELEBRIT Y INVOLVEMENT
NETWORK CARRIERS
 Bundling with network carriers
 Ad is about a story or a sketch, at the end the smartphone is
shown along with the details of the plan .
 Direct Competition
 All compete on price: Samsung and Blackberry
 Advertising based on quality and reliability of network service:
More so, true for the iPhone:
 AT&T: “the iPhone downloads fastest on AT&T’s 4g”
 Sprint: “truly unlimited data for your iPhone…only on Sprint”
THE TWO MAJOR PLAYERS…
captured 50% of all Smartphone sales in 2012
ADVERTISING CAMPAIGN
“FINALLY”
“IT’S THE MOST
AMAZING IPHONE
YET”
APPLE
 Powerful brand: goes after the mainstream market
 Top rising brand of 2012
 According to Interbrand, the Apple logo is now valued at
$75.56million.
 Advertising expenditures: $333M
 Hardly responds to commercial attacks from competitors
 Market share of 19.8% in 2012 vs. Samsung’s 31 .4%
 Huge sales in developed regions like North America
 Limited presence in high-growth emerging markets such as Africa
SAMSUNG

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
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

Rated second in phones
Top technology brand of 2012
Advertising expenditures: $401M
Speed in launching new products
Of 700 million units shipped, Samsung shipped a record 215
million smart phones worldwide
Became more assertive with carriers – to distinguish itself
from other android phones.
Captured 31 .4% market share in 2012.
Mostly attacks Apple, in order to steal market share.
INTERBRAND BEST GLOBAL BRANDS,
2012
Apple
Samsung
2012 Placement
2
9
2012 Brand value
$75.56M
$32.89M
2012 Units sold
135.8M
215M
2012 Market Share
19.8%
31.4%
RAW DATA ANALYSIS
RAW DATA ANALYSIS
 27 T V ads analyzed (source YouTube)
 Players taken into account:
1. Apple (11 ads)
2. Samsung (10 ads)
3. BlackBerry (6 ads)
 Products advertized:
1. iPhone 5, iPhone 4/4S
2. Samsung Galaxy S3/S2, Note II, Nexus
3. BlackBerry Z10, Torch 9800, Curve Q8350
CODING TEMPLATE
APPROACH OF ADVERTISING [INDUSTRY]
Informative
40.7%
59.3%
Persuasive
Complementary
Memory jamming
APPROACH OF ADVERTISING
APPLE
Highly Persuasive
27.3%
Informative
Persuasive
72.7%
Complementary
Memory jamming
Extreme strategy
PERSUASIVE OR COMPLEMENTARY?
Apple’s approach is sometimes
complementary rather than persuasive.
Maybe it could be arguable, but we think
that the persuasive approach is
prevalent since the aim is to charge a
very high price and change consumers’
preferences.
APPROACH OF ADVERTISING
SAMSUNG
Highly Informative
Informative
10%
Persuasive
90%
Complementary
Memory jamming
Extreme strategy
APPROACH OF ADVERTISING
BLACKBERRY
More balanced strategy
Informative
33.3%
Persuasive
66.7%
Complementary
Memory jamming
PRODUCT FEATURES DESCRIBED IN THE
ADS
Apple
36.4%
63.6%
Ads explaining
phone
characteristics
Ads with no phone
characteristics
PRODUCT FEATURES DESCRIBED IN THE
ADS
Samsung
An ad without phone characteristics is not an
ad for this player!
Very hard to find a Samsung ad with no
features presented.
Reason: Samsung wants to communicate the
technological superiority of its products.
PRODUCT FEATURES DESCRIBED IN THE
ADS
BlackBerry
Ads explaining
phone
characteristics
16.7%
83.3%
Ads with no
phone
characteristics
HOW MANY CHARACTERISTICS PER AD?
# of characteristics
per ad (average)
3.5
3.5
3.0
3.1
2.5
2.0
2.27
1.5
1.0
0.5
0.0
Apple
Samsung
Blackberry
HOW MANY CHARACTERISTICS PER AD?
Why BlackBerry on average shows more
product characteristics in its ads?
Because it mainly addresses the target
market segment of business people, who
demand apps relevant to their daily job.
Here is the incentive to show in detail
many applications of the phone.
COMPARATIVE ADVERTISEMENTS
7
5 Direct
2 Indirect
27 ads
Comparative
20
Non-comparative
WAR OF COMPARISON
 5 direct ads where the competitor product is:
1. Mentioned
2. Shown
3. Criticized
Ex: “iPhone 5 has a sketchy battery” by Samsung
 2 indirect ads where:
1. They allude to distinctive characteristics of the
competitor.
Ex. Size of the screen between iPhone 5 and Galaxy S3
Apple claims (proportionate is good)
Samsung argues (big is good)
% of ads with an emphasis on
the brand
BRAND FOCUS
60%
50%
54.5%
Mean
50.0%
40%
30%
20%
20.0%
10%
0%
Apple
Samsung
Blackberry
% of ads with a strong
emphasis on the quality of the
product
HIGH QUALIT Y PERCEIVED
80%
70.0%
60%
40%
50.0%
45.5%
20%
0%
Apple
Samsung
Blackberry
LAST REMARKS FROM OUR ANALYSIS
 Price is never mentioned in the ads, except for
bundled ads with network providers
 In the U.S. contracts make people less aware of the
cost of the phone
 No tricks in the ads: long-term relations with
customers
CORNELL SURVEY
Do you have a smartphone or non-smartphone?
90
80
% of Respondents
70
60
50
40
30
20
10
0
Smartphone
Non-smartphone
DID YOU BUY YOUR PHONE BECAUSE SOMEONE
RECOMMENDED IT TO YOU?
(FRIENDS, FAMILY, ONLINE REVIEWS, ETC.)
60
% of Respondents
50
40
30
20
10
0
Yes
No
IF NO PEOPLE AROUND YOU ARE USING
SMARTPHONES, WOULD YOU STILL BUY THEM?
80
70
% of Respondents
60
50
40
30
20
10
0
Yes
No
Only at a cheaper price
HOW WELL DO YOU REMEMBER THE
IPHONE ADVERTISEMENTS?
16
14
# of Respondents
12
10
8
6
4
2
0
Don't remember at all
Remember company and
product but not ad
Smartphone
Non-smartphone
Remember ad
USE ONE WORD TO DESCRIBE WHAT YOU
RECALL FROM IPHONE ADS?
 White
 Thin
 Simple
 Cool
 Smart
 Innovative
 Sophisticated
 Brilliant
 Persuasive advertising:
- All positive attributes and impressions
 No comparative advertising
- Do not compare itself to other brands
HOW WELL DO YOU REMEMBER THE
SAMSUNG GALAXY ADVERTISEMENTS?
18
16
# of Respondents
14
12
10
8
6
4
2
0
Don't remember at all
Remember company and
product but not ad
Smartphone
Non-smartphone
Remember ad
USE ONE WORD TO DESCRIBE WHAT YOU
RECALL FROM SAMSUNG GALAXY ADS?
 Fast
 Good
 Big
 Easy
 Fancy
Humor
 Humorous
Slogan:
 Evolution
 The next big thing is already here
Comparative advertising
 Everything the iPhone does and more.
 Apple
WHICH SMARTPHONE REPRESENTS
HIGHER SOCIAL STATUS TO YOU?
30
# of Respondents
25
20
15
10
5
0
iPhone
Smartphone
Samsung Galaxy
Non-smartphone
RECOMMENDATION
 Investments
 Advertising Strategies
 Globalization
Stock Price (US$)
APPLE INC.
Time
Stock Price (Korean$)
SAMSUNG ELECTRONICS CO. LTD.
Time
ADVERTISING STRATEGIES
 Search attribute
- features
 Persuasive advertising
- product dif ferentiation
- slogans
 Better execution of advertisements (e.g. Blackberry)
GO GLOBAL!
 Successful story: Samsung
 Aim for places with low brand loyalty
 Intense advertising efforts
THE END
 Questions?