Analysis on global smart phone market
and strategy of major players
Hee-Chan Song
Hanyang University, University of Texas at Dallas1
Business Administration, Philosophy
Tel: (214) 635-8148
E-mail: dasein.heechan@gmail.com
Acknowledgment
The author would like to acknowledge and thank the valuable assistance of UT Dallas in the
preparation of this manuscript, in particular the assistance of Professor Lee at management
department in UT Dallas. He always offered positive feedback and suggestions for the
improvement during the whole processes of this paper.
1
The author is technically a student at Hanyang University in South Korea, but most works
of the research has been done on an exchange program at University of Texas at Dallas.
<Table of Contents>
Abstract
Introduction
1. Definition of the smart phone
2. Effect of the smart phone popularization
3. Radical transformation of IT industry and changed competitive situation
1. Market growth of the smart phone
1.1 History
1.2 Market growth
2. Market analysis
2.1 Shift of Core value in IT industry: Hardware  Software
2.2 Current market analysis
2.2.1 Hardware manufacturers
2.2.2 The big three
2.2.3 Contents developers
2.2.4 PC makers
3. Competitive analysis
3.1 Smart phone hardware manufacturing
3.2 Operating system market
3.3 Content development and distribution market
3.4 Consolidated analysis on player’s strategy in the smart phone market
4. Conclusion
ABSTRACT
The smart phone has opened up a new generation of mobile internet. A small smart phone of
four inches allows the sharing of real-time information and knowledge, and can transform life
styles. By using smart phones, people obtain, share and exchange information whenever they
desire. The speed of information processing is accelerating, and real-time communication is
universalizing without hindrance of time and space. A ripple effect of the smart phone makes
it possible for contemporary people to realize a genuine ubiquitous life in a variety of areas
such as business, education, society, and leisure. In this paper, I will illustrate the global
smart phone market through analysis of market growth, industry and competitive situation.
Based on these analyses, I will discuss the possible strategy of each player on the market.
INTRODUCTION
1. Definition of the smart phone
A smart phone is a new form of mobile internet device that combines the traditional
features of a phone and PDA.2 Another noticeable definition about a smart phone is that it is
a mobile phone which offers more advanced computing ability and connectivity than a
contemporary basic mobile phone.3 The common aspect of two definitions above is that a
smart phone is an integrated device with mobile telephone technology and the ability to
access the internet. It is the smart phone that achieved both the functionality of traditional
phone and technology of PC (see Figure 1). Different from traditional phone produced as
finished goods, a smart phone enables users to install, add and delete hundreds of various
applications. Through various applications, users can personalize the interface as well. Hence,
with the introduction of smart phones realizing free access to the internet regardless of time
and place, users of smart phones are reaching a genuine ubiquitous era.
FIGURE 1
The concept of the smart phone
Source of information
informainformation
 Printed source
 Desktop
 Laptop
 TV, Radio
 E-book
Communication tool





Messenger
Social network
E-mail
Voice
Text message
Smart phone
1. Extension of information and its unlimited sharing
2. Changing lifestyle with numerous applications
3. Improvement of social communication
Ki-Duck, Kown. 8, Feb. 2010 “Smart phone shaping the future.” Samsung Economic
Research Institute.
http://www.seriworld.org/01/wldContL.html?mn=B&mncd=0201&pagen=3.
3
Andrew Nusca. 20, August. 2009. "Smartphone vs. feature phone arms race heats up;
which did you buy?". ZDNet. http://www.zdnet.com/blog/gadgetreviews/smartphone-vsfeature-phone-arms-race-heats-up-which-did-you-buy/6836.
2
2. Effect of the smart phone popularization
The continuous progress and expansion of applications allow people to obtain particular
information that they want. Users can acquire almost all types of information such as weather,
location, food, attraction spot, transportation, medicine, education, game, fashion, sports, and
scientific research, without difficulty of time and place. Users can also create a new form of
social community, take the lead in public opinion, and significantly improve the infrastructure
and speed of social communication. Due to such a mobile generation having strong
information power and networking capabilities, the consumption pattern is rapidly changing
from the producer-driven pattern to the consumer-based pattern. Accordingly, the need for
customized information is expected to keep pace with the changing IT environment.
3. Radical transformation of IT industry and changed competitive situation
The overall structure in the IT industry is reorganized, and the competition is expanded and
diversified. The introduction of smart phones creates boundless IT-related markets such as ebook, tablet PC, and net book. New entrants struggling to penetrate a market are faced with
an urgent problem to overcome functional and technical conversance. On the other hand, new
competitive structure is formed to gain leadership by cell phone manufacturer, operating
system provider, telecommunication distributer, and new application developer. New business
models are imperative for existing companies to survive in the reorganized IT industry and its
new competitive structure.
1. MARKET GROWTH OF THE SMART PHONE
1.1 History
Since Nokia launched its groundbreaking product, Nokia 9000 which was the first type of
smart phone introduced in 1996, the smart phone market has been rapidly growing. Nokia
9000 Communicator is a combination of HP-made PDA and Nokia-made traditional phone.
Consecutively, Nokia released the Communicator 9210 equipped with the first color screen
and open operating system. The 9500 model is the first camera phone by Nokia and genuine
form of mobile internet phone with access to internet via WIFI4. Since then, Nokia has led the
global mobile phone market by combining its competitive cell phone and Symbian which is
an operating system5 developed by Nokia.
4
Wi-Fi (pronounced /ˈwaɪfaɪ/) is a trademark of the Wi-Fi Alliance that refers to a range of
connectivity technologies including wireless local area network (WLAN) based on the IEEE
802.11 standards.
Wi-Fi Alliance. http://www.wi-fi.org/wp/wifi-alliance-certification. Retrieved 2009-10-22.
5
An operating system (OS) is software, consisting of programs and data, that runs on c
omputers and manages the computer hardware and provides common services for efficie
nt execution of various application software
Wikipedia. http://en.wikipedia.org/wiki/Operating_system.
The first catalyst of the expansion of the smart phone market is the release of RIM’s
Blackberry series in 2001. With a self-developed Blackberry Internet System, the Blackberry
series gained sensational popularity in the North American business world by offering
business-related services such as pushing e-mail system, internet faxing, web browsing, and
navigation. The Blackberry series launched in 2002 began an epoch of the convergent phone.
Since then, it has led the market with Nokia, attracting 800 million customers until in 2007.
The second historical spark of the smart phone is the release of Apple’s innovative I-phone
in July, 2008. Apple led an innovative transformation of smart phones with the cutting-edge
technology of multitasking, high resolution, wide screen, and customized web browsing
based on its own software technology. It is an enormous progress for the mobile internet
device. Later, Google introduced its operating system named Android to companies such as
HTC, Motorola, and Samsung electronics.
1.2 Market growth
While the global traditional phone market is faced with a continuous recession due to the
global economic downturn, the smart phone market continues its rapid growth. Since 2007, a
portion of the smart phone market for the global cell phone industry is becoming larger in
terms of sales volume as well as sales price. According to research conducted by Credit
Suisse in Dec. 2007, while a rate of global cell phone market growth will repeat slight up and
down cycle during four years, the smart phone market will record a huge growth. A striking
point is that a portion of the smart phone market will consume nearly 50% of the entire cell
phone market in terms of sales price in 2010.
The prospects of global smart phone market
(Unit : Million, Currency : One hundred million US dollar)
2007
2008
2009
2010
1274
Sales(unit)* 1178
133
123
ASP($)**
*CAGR: Compound Annual Growth Rate
**ASP: American Selling Price
-Source: Credit Suisse
1203
112
1308
102
The prospects of global smart phone market
(Unit: Million, Currency: One hundred million US dollar)
2007
2008
2009
2010
2007 ~ 2010
CAGR
4%
-9%
2007 ~ 2010
CAGR
20%
122
105
187
254
Sales(unit)
10.4
11.9
15.6
19.4
Ratio(%)*
387
464
550
671
20%
Sales($)
29.6
40.8
50.3
Ratio(%)** 24.6
317
306
294
264
-6%
ASP($)
* The ratio of smart phone sales (unit) to the entire phone market sales
** The ratio of smart phone sales (price) to the entire phone market sales
-Source: Credit Suisse
In the first fiscal quarter of(Q1) 2010, the latest research of sales volume of smart phones
reaches from 56% to 67% growth with variance depending on research institutes. An IDC
report indicates that 54 million units are sold, and a Canalys report presents 55 million units
sold in Q1 2010. According to Coda Research Consultancy, total sales volume of the smart
phone is expected to be 234 million units in 2010 and 619 units in 2015 (see Chart 1).
CHART 1
The smart phone market sales flow (Unit : Million)
700
619
600
533
500
456
400
380
305
300
200
236
173
100
0
2009
2010
2011
2012
2013
2014
2015
-Source: Coda Research Consultancy
Popularized WIFI configuration and 3G telecommunication are considered the largest
components behind an optimistic forecast of growth in the smart phone market. The
disadvantage of previous smart phones is limited due to unstable wireless internet
environment, slow mobile internet connection, and limited content. However, as WIFI mobile
internet is widely constructed, and a variety of operating systems and software are developed,
a genuine mobile internet environment is realized.
2. MARKET ANALYSIS
2.1 Shift of Core value in IT industry: Hardware  Software
Hardware technology was a major competitive factor in the traditional phone market, and
telecommunication companies offered content service through their own portal service.
However, it is not profitable because there is no stable route to expose contents. Nokia was
the only operating system developer involved in the software market, but still not enough to
make a sensation (see Figure 2). For this reason, the demand of the smart phone is
unmarketable. Customers’ desire laying emphasis on sound quality, camera quality, display,
and external design was determined by hardware technology itself rather than contents in the
traditional phone market. Naturally, Nokia, Motorola, Samsung, LG, and Sony Ericson who
have accumulated hardware competitiveness lead the traditional phone market. Based on IDC
research in 2006, before the smart phone was noticeably popularized, Nokia sold 347 million
units, Motorola sold 217 million units, and Samsung sold 118 million units. On the contrary,
only 10% of units sold were smart phones.
FIGURE 2
The traditional cell phone market
Manufacturers
Contents
The Big Five Manufacturers
 Nokia
 Samsung
 Sony Ericson
 Motorola
 LG
Web portal service
Operating system
Nokia: Symbian
However, as the level of hardware technology is standardized, and stable wireless internet
configuration is developed, the market structure of cell phones encounters an extensive shift.
First of all, the core value to success in the cell phone industry has moved from hardwareoriented competitiveness to software-oriented competitiveness. Compared with the existing
traditional phone, which is operated in limited and fixed interfaces, the smart phone allows its
users to make their own interface. Customers are now able to get a customized service based
on their own needs. Hence, operating system and high-quality contents become vital part of
smart phone.
2.2 Current market analysis
The newly formed competitive structure of the smart phone market can be divided into
three market segmentations: (1) hardware manufacturing, (2) operating system, (3) contents
(see Figure 3). The first market is the hardware manufacturing market. This is the fiercest part
of the three market segmentations for the big five traditional brands6 and new entrants
including Apple, RIM, HTC. The second market of the smart phone market is operating
system market. As the core value of smart phone is transformed from hardware to software,
Google, Apple, RIM, and Nokia become the leader in this market for developing and
providing an operating system to cell phone manufacturers. The third market, for newly
emerging players, is content development. Content developers form another competitive axis
as contents are provided to application stores. These three market segmentations consist of
the entire smart phone market, and they show vertical integration and strategic cooperation in
the long-term.
In this paper, ‘The Big Five’ refers to major hardware manufacturing companies: Nokia,
Samsung Electronics, Sony Ericson, Motorola, and LG electronics in the traditional feature
phone market.
6
FIGURE 3
Current smart phone market
Traditional phone market
New entrants
market
Manufacturer
Big Five
Big Three:
Operating system
Symbian
Apple
Contents
Portal service
Apple RIM
RIM Google
Win
HTC
Palm
Individual application developers
2.2.1 Hardware manufacturers
It is the big five that takes a direct hit from the expansion of the smart phone. Nokia who is
the leading manufacturer among the big five has experienced constant drop in sales volume
since Q3 2008 when the I-phone appeared. Recently, Nokia carries out aggressive marketing
to shift from hardware technology to software development. Up until now, Nokia has
disclosed API7 to third party application developers. However, as part of its new marketing
strategy, they plan to disclose their every source code as well. In addition, Nokia is
cooperating with Intel and announces another operating system, MeeGo in the smart phone
market.
However, except for Nokia, the four manufacturers still do not have their own operating
system, or they just start to develop their operating system in recent years. Samsung, a
Korean brand, developed its own operating system, Bada, and used it with Google’s open
operating system, Android. The four manufactures will struggle to survive in the fierce smart
phone market because of their unsatisfactory software technology and know-how about
contents service compared with their successful hardware manufacturing.
2.2.2 The big three8
As the Blue Ocean9 in the global cell phone market is moving from hardware to software,
7
API is an abbreviation of Application Programming Interface that is implemented by a
software program that enables it to interact with other software. It facilitates interaction
between different software programs similar to the way the user interface facilitates
interaction between humans and computers.
Wikipedia. http://en.wikipedia.org/wiki/API.
8
In this paper, ‘The Big Three’ refers to major new entrants: Apple, RIM, and HTC in the
smart phone market.
9
‘Blue Ocean’ refers to new demand in an uncontested market space in creating the high
growth and profits, which is first appeared in ‘Blue Ocean Strategy” published in 2005.
Kim, W. C., & Mauborgne. R. 2005. Blue Ocean Strategy. Boston: Harvard Business School
Press.
RIM, Apple, and HTC gain the lead in a smart phone race. RIM already released the
Blackberry series with its own operating system. RIM is expected to hold high market share
supported by wide distribution channels and its professional image. The computer software
giant, Apple, broke into the emerging market by launching the I-phone which has its own
operating system as well. Apple emerged as the new potential market holder in the North
American market utilizing the vertical integration of a closed platform and application
services. While the 2G phone is only released to AT&T in North America, the 3G phone is
provided in 21 countries and continuously increases its global market share. On the other
hand, the Taiwanese brand, HTC, chases RIM and Apple by releasing Nexus One that is
based on Android in Q1 2010.
2.2.3 Content developers
Content service businesses emerge as the most important part of the smart phone
competition. In the established traditional phone market, a portal service provided by
telecommunications was the only source of contents. However, as the smart phone allows its
users to build their own interface, securing high-quality contents emerges as a crucial issue in
making or breaking the success. Apple already has developed and managed an application
store with its strong contents service know-how accumulated by I-tunes10 development.
Apple’s current application store has about 200,000 applications, more than in any other
application shop. Other software developers such as Google, Nokia, and RIM have their own
application shop and rush into the smart phone market.
2.2.4 PC makers
The development of the smart phone which combines the traditional phone and access to
internet is also influencing related-markets that incorporate the internet technology. The
marketability of laptops, net books, smart books, e-books, and tablet PCs is dependent on the
level of popularization of the smart phone. Looking at the current market situation,
customer’s preference varies in regards to the price-value trade-off, portability, and amount of
electricity used, but the smart phone holds the dominant position in that users can enjoy highquality voice communication as well as use the mobile internet connection. Improved WIFI
technology and high quality applications have helped the smart phone overcome major
disadvantage such as poor contents and infeasibility of real-time wireless networking.
Being threatened by the erosion of the smart phone into the PC market and the stagnancy
of PC market growth, PC makers are gradually joining the competition. As customers’
options are changing from cell phone + note book, net book, or e-book to the smart phone,
PC makers have no choice but to enter the smart phone market. In June, 2010, Dell, the
second ranked PC maker, released its first smart phone, Dell Streak based on Android. The
third ranked PC maker, Acer also launched Android Liquid A1 in 2010. In the long run, the
continuous growth of smart phone blurs the boundary of the PC market and finally causes a
huge integrated mobile internet device market (see Figure 4).
10
I-tunes is Apple’s computer application enabling users to download music on online.
FIGURE 4
The formation of the mobile internet device industry
Smart phone market
PC market
Traditional phone
market
Manufacturer
Dell
Operating system
Acer
Contents: Application, web service
3. COMPETITIVE ANALYSIS
As discussed, the smart phone market has features of the three particular markets:
Hardware manufacturers, Operating systems, and contents. Established cell phone
manufacturers and new smart phone makers compete in the manufacturer market, operating
system developers duel over in the operating system market, and lastly, content developers
compete with each other to get the leadership in the application service market. Ironically,
however, those three markets are not an entirely exclusive market each other, but they are
mutually interrelated because the smart phone is a joint effort between cell phone
manufacturer, operating system developer, and high-quality content developers. Moreover, as
PC makers enter the market, the smart phone market would be a fierce battlefield where the
very existence of giant IT companies is determined. In the next part, I will discuss strategy of
each player in the three market segmentations, and ultimately find a way to create a
competitive advantage.
3.1 The strategy of the first competitive markets
-Smart phone hardware manufacturing
According to the latest IDC research in Q1 2010, the current leading company in
manufacturing is Nokia. It has developed its own operating system and released the very first
form of the smart phone before it was popularized. Nokia holds the first place in the smart
phone market with a share of 39%, and RIM, Apple, and HTC chase after Nokia (see Chart 2).
Competing for the first place, RIM and Apple have made great strides in hardware
manufacturing, operating system and application service
CHART 2
Q1 2010 global smart phone market share by manufacturer (Unit: million)
2.3 (4%)
Nokia
8.9 (16%)
RIM
21.5 (39%)
2.6 (5%)
Apple
HTC
8.8 (16%)
Motorola
10.6 (20%)
Others
-Source: IDC
One noteworthy point is that the big five that once led the traditional feature phone market
is not seen on the chart, except for Nokia. Why do these manufactures, who have formed the
leading group in the market share of traditional phones, struggle in the smart phone market?
That is because they were not able to anticipate the shift of market structure from hardware to
software in timely manner. In this part, I will discuss the four hardware manufactures that do
not have their own competitive operating system: Samsung, Motorola, LG, and Sony Ericson.
Next, I will cover each strategy of Nokia, Apple, RIM, and HTC within the operating system
market, which is the second market for the smart phone.
The four hardware manufacturing brands: Samsung, Motorola, LG, and Sony Ericson have
two strategic cards they can play to survive in the current smart phone market. The first one is
to focus on continuous hardware development while maintaining hardware competitiveness
of traditional phone to the smart phone market. Samsung electronics has a world-class LCD
and LED panel, and ultra-light/mass-storage memory chip as well as various display
technology. In terms of continuous lightweight, mass-storage, and high definition of the smart
phone, constant hardware-focused competitiveness can be a comparably good strategic card.
However, it still seems to have a risk of compatibility between the existing hardware
technology and smart phone-only technology.
The second card the four hardware manufacturers can play is to begin the development of a
new operating system. At present, Samsung, LG, and Sony Ericson seek to develop their own
operating system in various ways. Samsung prepares to develop a multi operating system
combining the smart phone, smart TV, tablet PC, and other different mobile devices. In 2009,
Samsung spurred the development of its own operating system, Bada. LG and Sony Ericson
also gradually turn their strategy away from using an android-based platform to developing
their own operating system. However, this strategy has an inevitable risk in overcoming the
high entry barrier of software giants. In conclusion, hardware manufacturers having no
competitive operating system have nothing to do but choose between maintaining continuous
competitive advantage on hardware and developing their own operating system with
tremendous opportunity cost.
3.2 The strategy of the second competitive market
-operating system market
The reason why Apple, Google, and MS stand out in the smart phone market is the
increasing significance of the operating system. It is a core part of the new market, and plays
a pivotal role in connecting the general function of hardware that is controlling input, output,
and allocating memory, and the availability of various applications. Naturally, software
makers who have a competitive advantage in the PC operating market now jump into the
smart phone market as an extension of operating system market.
Research conducted by Canalys in Q3 2009 shows that of the overall market share in
operating systems, Nokia’s Symbian holds first place, and RIM, Apple, and Google follow
(see Chart 3). According to Gartner’s research in 2009, while the market share of Apple has
significantly increased by 8.2% from 9.6% in 2007 to 16.6% in 2008, Symbian’s has
decreased by 6.8% from 63.5% in 2007 to 52.4% in 2008. Canalys also observed that
Symbian’s market share has decreased from 68% to 47% during those two years.
CHART 3
Q3 2009 Global Smart phone market by operating system (Unit: million)
5 (3%)
1.4 (3%)
3.6
Nokia Symbian
(9%)
18 (7.4%)
RIM O/S
19.1 (46%)
Apple iPhone O/S
MS Mobile
Google Android
21 (8.5%)
Others
-Source: Canalys
The constant decrease in market share of Symbian and the remarkable performance of
Apple, RIM, and Android imply a crucial possibility in the operating system market, whether
to manage the operating system in a closed platform11, like Apple, or in a completely open
platform, like Google. As for the Apple I-phone operating system, it operates in a fully closed
system. Closed platform system is strong in regarding to security issues even though it
possibly fails to the increase market share. However, Apple overcomes with its numerous
applications in terms of market share. Likewise, I-phone is the representative model of a
11
In this paper, I use a platform as synonym with operating system although these terms are
slightly difference depending on how to definite. General definition of platform is a
framework on which applications run. Therefore, there would be no confusion in
understanding platform and operating system as the same meaning in this paper.
successful closed operating system. On Apple’s stance of possessing competitive applications
and manufacturing technology, it is not necessary to stick to an open operating system that is
vulnerable to security issues.
As a result, it is essential for software makers who operate in a closed operating system to
cultivate an echo system with a high-quality application store and appealing hardware
competitiveness. That is because the amount of their contents and the quality is a competitive
edge itself in managing the closed operating system. Customers are naturally attracted to
certain operating system and hardware in order to take advantage of high quality contents.
Apple’s strategy of a closed operating system comes from its strong applications and
hardware manufacturing technology.
On the other hand, unlike a closed operating system, on open operating system has much
more potential in that it can create more profitability models than the profit generated from a
closed operating system. Google’s Android creates a synergic effect, integrating its powerful
searching engine: Google map, U-tube and other web services. For this reason, many global
cell phone manufacturers adopt Android as their operating system. Accordingly, web portal
sites prefer Android in order to expose their services to as many customers as possible, and
especially enter into the mobile web advertising market. Hence, Google makes a variety of
profitable models based on its open operating system. It dominates the content market and the
mobile web advertising market by giving content makers more opportunity in their service.
Likewise, there are various possibilities and strategic options in a smart phone operating
system. However, operating system developers should consider one threatening element.
Smart phone operating system market is actually a winner-takes-all market where only one or
two players take a victory in the long run. Although there were many PC operating system
makers, ultimately only the Win-Tel system was established in the end. In the same way, only
a couple of players of the four software giants: Apple I-phone operating system, Google
Android, RIM blackberry operating system, and Nokia Symbian will take the entire smart
phone operating system market in the long run.
In conclusion, hardware manufacturers or PC operating system makers need to brainstorm
whether to start developing their own operation system or to open and expand the existing
operating systems. Otherwise, they will avoid the operating system business and focus on
different competitive parts, adopting operating system free on the current market.
3.3 The strategy of the third competitive market
-content development and distribution market
Due to ever changing customer preference from hardware to high-quality contents, the
content development and distribution market become important market within the overall
smart phone market. Customers gain access to free content services on mobile web sites and
application stores due to the stable mobile internet environment. Such accessibility of smart
phone to web mobile service and applications also make it possible for the content-making
business to create a variety of profitable models. Mobile searching, mobile web advertising,
e-commerce, LBS12, SNS13, and data traffic management are potential smart phone-related
12
LBS is an abbreviation of Location Based Service. GPS is one of the representative
services of LBS. Searching traffic jam, close gas station, famous restaurant, and friends in
businesses that will generate unlimited profit.
Above all, the popularization of the smart phone and personalized internet device is the
innovative opportunity for mobile search services and web advertising businesses. Google
connects Android operating system to its powerful web services, providing them to smart
phone manufacturers. Customers use various web contents by Google at their leisure.
Understanding the changing preferences of the customers, Google expects to profit in
numerous areas such as online gaming, advertising, education, LBS, SNS, business and so
forth. As the trend of the smart phone is personalized, customized subscription-based content
services are expected to increase. SNS and LBS related business such as social media and
social gaming will grow and traffic control business will increase as a new business model
for the smart phone.
3.4 Consolidated analysis on player’s strategy in the smart phone market
As discussed, there are three market segmentations within the overall smart phone market:
hardware, operating systems, and content. Operating systems and content are classified as
software as opposed to hardware. Major players can be grouped by their internal
competitiveness in three of these market segmentations. In this part, I will discuss the specific
strategies of each player and how it works based on the consolidated analysis in table 3 (see
table 1).
------------------------------Insert Table 1 about here
-------------------------------
Currently, there is no single player with superior competitiveness in all three market
segmentations. Even though Nokia, Apple and RIM seem to succeed in integrating all three
segmentations in a single device, this is still not enough to dominate all three markets. Nokia
has its traditional hardware technology and proprietary operating system, but is weak in the
content market. Apple and RIM have strong operating systems and content markets, but have
relatively weak hardware technology.
Likewise, in the smart phone market, players differ in strengths and weaknesses from each
other. Some players are strong in hardware manufacturing, but others have competitiveness in
software market. The major reason is that, in the past, the players could not predict radical
growth in the smart phone market. Hardware manufacturers continuously invested in
hardware R & D, and software developers focused only on software development. They
might not have needed to launch new business in entirely opposite areas, experiencing high
opportunity cost and risk before the smart phone appeared.
Although importance of software is growing, the smart phone is still thoroughly a
composite of cutting-edge hardware technology and software. Now, the combination of
hardware and software technology is imperative to compete in the market. The best way to
certain area are possible services provided by the smart phone users.
13
SNS is an abbreviation of Social Networking Service. It grows with LBS technology and
is one of the most profitable services with the introduction of the smart phone.
succeed is to strengthen specific competitiveness in all three market segmentations and
integrate the three smart phone aspects without technological problems. For the long-term,
one who truly succeeds in both hardware and software will dominate the smart phone market.
In the current situation, however, it takes a lot of time and cost to overcome financial and
technological barriers. Therefore, the long-term strategy should be to strengthen both
hardware and software technology.
Finally, key advantages to succeed should be achieved by exercising each player’s internal
competitive edge. All players should enter the market while maintaining their established
competitive advantage. High technology know-how will be a strong entry barrier and stable
cash cow to support new businesses. Therefore, in order to successfully enter the new market,
businesses should not be completely new one, but begin from established competitiveness. In
other words, based on technology advantage and stable financial support from the established
competitiveness, direction to new market should start from internal strength.
To be specific, looking at table 3, we can see that there are two directions from which to
enter the new market. The first direction is toward the software market from hardware
strength. Manufacturers can choose this direction. Conversely, the second direction is toward
the hardware market from software strength. Software developers would choose this direction.
The players who have two cash cows or two core competitive advantages can be flexible in
setting a strategy. Otherwise, they can implement a duel-track strategy simultaneously.
Competitive operating system developers can maintain both directions because the
operating system developers play a pivotal role in connecting hardware and contents. They
have few technological issues in content development and can develop proprietary content
more easily than manufactures because the smart phone contents should be operated on a
stable and secure operating system. Operating system developers have their own know-how
in developing content that is appealing to customers and operating in their operating system.
In this respect, the major operating system developers: Apple, RIM and Google have more
opportunities. They can generate various profitability models by integrating operating
systems and contents. Hence, they have two cash cows and direction starting from operating
system and content power. They can create synergistic effect by mutual technological
exchange, managing two software areas.
Hardware manufacturers should make use of their competitive hardware technology and
launch software businesses. Their strategic direction is solely toward software. As discussed,
they are limited to maximize profits with hardware technology only. Therefore, even though
they have no competitiveness in the software market at present they should launch a longterm software development. Nokia has know-how in operating system development, and is
able to smoothly move forward into the content market. It is inevitable that the other
manufacturers: Samsung, LG, Motorola, and Sony will take a high-risk to move into the
software market.
Good news for Samsung, LG, Motorola, and Sony is that they can take advantage of
Google’s open operating system, Android, and its high-quality contents. The four
manufacturers and HTC create a strategic alliance with Google. Google offers an operating
system and contents to manufacturers, and the manufacturers provide Google with the
opportunity to expose its applications and web services to customers. It is a perfect
interrelationship model between big manufactures and software developers. They would be
able to continuously profit if their unbalanced competitiveness between hardware and
software is continued in the smart phone market.
Otherwise, PC makers entering the smart phone market are noteworthy in that they actually
have little or no competitiveness in any of the three market segmentations. They may have no
choice but to enter the market because of serious stagnancy in the PC market. In the same
way with the other players, their strategic direction should come from its internal
competitiveness that they accumulated in PC market. In order to increase market share, they
should maintain a low-cost strategy and form strategic alliances with manufacturers or
software developers. Successful PC operating system developer, Windows Mobile, is worth
notice. One critical obstacle is technical compatibility between the smart phone and PC
operating system. If Windows Mobile overcomes technical problems and succeeds in
developing a smart phone operating system, it can compete with Google’s position as a
provider of software services.
The final winner will be the one who has a competitive advantage in all three market
segmentations. In other words, the one who succeeds in having a hardware production line,
operating system, and high-quality contents through a vertical integration in three market
segmentations will take all the winnings from the smart phone market. RIM and Apple have
great potential in this respect. Based on their software strength and medium level hardware
technology, they can create a synergistic effect in all three markets. However, they need to
form strategic alliances with telecommunication companies in individual countries to offset
weakness in the global market. They might finance for global marketing rather than
technology at this point.
4. CONCLUSION
The smart phone is no longer the exclusive property of early adopter. Streamlining mobile
internet and 3G mobile communication opens the unlimited possibility for the smart phone,
and the innovative idea toward the mobile internet world leads this generation to the genuine
ubiquitous world by the innovativeness of the smart phone. Users are now able to handle
almost all of the activities in everyday life with small mobile internet solutions in their hands.
If the development of the internet made the world a big community, the popularization of the
smart phone will return the world to a multipolar internet world, which is much more
diversified and personalized. Numerous customized-internet worlds will emerge. Regardless
of popular opinion, it is evident that smart phones have brought a new era in IT industry.
IT business should find new ways to keep pace with the changing IT environment. As the
core value of cell phone is transformed from hardware to software, existing cell phone
makers who possess powerful hardware competitiveness in traditional phone manufacturing
market are required to invent a new surviving equation. New entrants of software makers
need to target an operating system and contents market at the same time, developing their
unique distinction. Finally, related-IT business in the smart phone will make win-win strategy
by seeking a strategic partnership or merger. In the long-term, one or two players who
succeed in consolidating manufacturing, operating system, and contents market will be the
winner of the smart phone market.
Until now, I have discussed the history and ripple effect of the smart phone, market
analysis, and competitive analysis. Based on these analyses, I have also looked at the strategy
of major players. Indeed, the popularization of the smart phone has a great influence on our
life and IT ecosystem. If the smart phone is going to be successfully popularized now and
forever, it would be a continuous issue for our society. Even though this journal is for the
field of business and community, because the smart phone has had a great effect on every
corner of our society, I try to illustrate possible issues related to the popularization of the
smart phone regardless of business issue.
It seems to me that smart phone-related research can be largely distinguished to three areas:
technological aspect necessary for smart phone, business viewpoint on IT industry, and lastly
socio-human approach in a sense of the beginning of the mobile internet life. This paper
focused on business viewpoint rather than technological and socio-human analysis.
Especially, it seems that the life change from the popularization of smart phone is a
meaningful research topic. In this topic, macro-social research can be done in terms of social
transformation due to the opening of mobile internet era. The pros and cons of popularization
of the smart phone in various areas of society such as administration, education, the mass
media, crime, and information can be one of the important topics in macro-social research of
the smart phone effects.
In ubiquitous era, human approach is also necessary. In the viewpoint of humanity, value
change, subordination of human intelligence, and cognizance problem by simplified life style
with the smart phone are thought to be meaningful to research in the future. Personally, as a
student majoring in management and philosophy, I am very interested to compare three
important dimensions in modern society: technology, management, and humanity.
Technology brings the seed for innovative change in our life. Exceptional management skills
realize technology throughout the everyday life. Humanity warns of the negative possibility
resulting from those two aspects. I think it is the smart phone that makes modern people think
of these three perspectives.
The smart phone has overcome the previous limitations on IT technology. While we still
observe whether the smart phone is of benefit to us, we are living in the IT world, and are
given no choice but to receive IT benefits. Ultimately, we anticipate how smart phone will
transform our lives even more, and what will be the next innovative IT device waiting us.
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