Smartphone Industry - courses.cit.cornell.edu Bardreau John Knisley Laila Judeh Teemu Tiitinen Smartphone Industry

Cole Bardreau

John Knisley

Laila Judeh

Teemu Tiitinen

Smartphone Industry

Brief History

Industry Analysis

Apple vs. Samsung

Advertising Strategies

Raw Data Analysis

Recommendations

Agenda

Why Smartphones?

Use the product everyday

Global growth of 23.6%

High Global competition; Mature US market.

Global industry of over $265 Billion

In 2015, 1 Billion Smartphones will be sold globally

"a handheld device that enables users to store and retrieve e-mail, contacts, appointments, tasks, play multimedia files, games, exchange text messages, browse the Web, and more“

Mobile phones with advanced PC-like capabilities

Independent operating systems and allow for installation of software applications by third parties

Android, Windows Phone, and iOS

What is a “Smartphone”?

“Mr. Watson, come here. I want to see you”-Alexander Graham Bell (March 10th 1876)

Motorola introduced 1st

handheld mobile phone on April 3rd 1973

“Smartphones” came around in the 1990s

Brief History

Credited as 1st

“Smartphone”

Sale to public August 16th

1994

Touchscreen & email

Only sold 50,000 units in 6 months of being on the market

Led the way for future…

SIMON

Term “smartphone” first coined by Ericsson in 1997

Apple is credited for making it a mainstream product

Growing due to increased income in emerging markets

The Evolution

Industry Analysis

About the Industry

The Supply Chain

Key Economic Drivers Disposable income

Supply Industries Parts and manufacturing

Demand Industries Consumers tastes and preferences

Related Industries Telecommunications (Verizon, AT&T, T-Mobile etc.)

Smartphone App Industry

The Supply Chain

Global Market Share

Samsung – 25.2%

Apple – 11.9%

Huawei – 6.8%

Lenovo – 5.4%

Xiaomi – 5.1%

Others – 45.5%

Who are the players?

HHI

Global- 902.07

US-2787.7

CR4

Global-49.3%

US-85.3%

Fragmented so extremely competitive globally

US dominated by few firms

Competition

Around the World

SWOT Analysis

Apple- 42.5%

Samsung-29%

LG-7%

Motorola-6.8%

HTC-6.1%

Blackberry-2%

Nokia-2%

Others-3.4%

Market in the U.S.

After closer examination, it is the Android products that is majority

Much closer in US than globally

Clearly dominated by 2 players

U.S. Market

Innovators (2.5% of market)

Early Adopters (13.5% of market)

Early Majority (34% of market)

Late Majority (34% of market)

Laggards (16% of market)

Industry Growth in the U.S.

The number of new smartphone users added each year will be fewer

The next 60-70 million users will be older and have less disposable income

Sales will become driven by replacement and upgrade sales

Importance of innovation and advertising adding utility!

Future of Industry in U.S.?

Advertising Strategies

This type of advertising redistributes consumers among brands but does not shift consumer preferences.

Very common when two main competitors are competing for market share.

Combative Advertising

Prisoner’s dilemma

Advertising could also be used to keep out new firms when they enter

Combative Advertising

Market shares

25.2%, 11.9%

Samsung would steal

market share from

Apple

Apple would steal

market share from

Samsung

??,??

Persuasive Advertising

informative

persuasive

reminder

Characteristic of mature markets.

Does not increase the size of the “pie”.

Ads are not informing people about what smart phones are.

Comparative advertising

Advertising is a means of conveying information to consumers.

Reduce consumers’ search costs

Reduce price dispersion

Direct vs indirect signaling

Informative view

Leads to more consumers demanding the product more profit.

Informative view

$

Quantity

MC

Demand with low advertising

Profit

Demand with high advertising

Price references imply value

People will not search for better deals

People will assume it is the best

Direct advertising (Samsung)

Advertising can be used to signal quality

Only high quality companies can afford to advertise a lot.

Dominantly experience goods

3 Reasons for indirect info:

1) signaling efficiency

2) match products to buyers

3) repeat business effect

Indirect Signaling (Apple)

Advertising creates product differentiation

Demand becomes more inelastic, consumers have higher WTP.

Can lead to higher prices more profit.

Persuasive View

Profit

Demand with high advertising

$

Quantity

MC

Demand with low advertising

Apple vs Samsung

Stable preferences

May value prestige

Product Placement

Complimentary View

Raw Data Analysis

Analyze Primetime Advertising Data 2014

Industry’s Primetime Advertising

Investigate Apple vs Samsung

Similarities

Differences

Overview

• Two Major Players – United States

• Apple & Samsung

• 58% of Advertisements

• Consistent with smartphone users

• Nearly 70%

• Apple: Nearly 900 Primetime ads

• Samsung: Nearly 800 Primetime ads

Primetime

Advertisements:

Industry

Apple

IOS operating system

Apple iPhone

Lifestyle

Samsung

Android operating system

Samsung Galaxy

“Be Different”

Apple vs. Samsung

Samsung Expenditures

Total $ Spent

$124 M

Average $ per Ad

$174,788

$ per second

$4,956

Primetime Advertising Expenditures - 2014

Apple Expenditures

Total $ Spent

$162 M

Average $ per Ad

$193,107

$ per second

$4,214

• Apple

• IPhone 6 release

• September

• January, February, March –Dormant

• 2015 trends

• Samsung

• Consistent

• Samsung Galaxy S5 release

• April

• Similar advertising during release

Monthly Analysis

• Apple

• Beginning of week

• Decrease Friday & Saturday

• Increase Saturday & Sunday

• Samsung

• Consistent

• Weekend increase

Day of Week Analysis

• Apple & Samsung similar strategy

• Target

• 8PM – 10 PM

• Weekly shows

• After dinner

Time of Day Analysis

• Apple

• Consistent Advertising

• CW – Targets weekly audience

• Samsung

• Targets 4 major networks

• Popular shows

Network Analysis

• Apple

• Targets: Drama

• Documentary Advertising

• Samsung

• Targets: Drama, Reality, Comedy

• Documentary Advertising

Type of Show Analysis

In Depth

• Apple

• Leads every spending category

• Sports, Reality, Comedy

• High CPM

• Drama Spending

• Documentary Spending

• Samsung

• Sports

• High CPM

• Consistent with number of ads

Average Spending: Type of Show

• Apple dominates the primetime advertising

• Both similar time of day strategies

• Apple’s spending is not consistent with number of ads per type of show

• Samsung's advertising is consistent

• Advertising war lies within the commercial content

What can we

conclude?

Recommendations

Samsung could increase product placement to become more “prestigious”

Global growth will continue but North America market share is dwindling (compared to rest of world)

Recommendations

Smartphones need to expand to emerging markets

Focus on persuasive in US

Focus on informative globally

App industry (development)

Recommendations