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

S T R U C T U R E

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 • LICENSABLE Any manufacturer can use these OS on his devices • OPEN SOURCE Free and freely customizable OS • It allows to differentiate and integrate with the hardware • Reduced cost of developing an OS • Licensing can be expensive also • Highly developed OS at no cost • E.g. Android (Google) • High costs and time consuming • E.g. Windows Phone (Microsoft) • E.g. iOS (Apple)

SALES AND MARKET SHARES OF SMARTPHONE MANUFACTURERS BRAND 1. Samsung 2. Apple 3. Huawei 4. Nokia 5. ZTE 6. RIM 7. Sony 8. HTC 9. LG 10. Lenovo Others TOTAL 2012 UNITS SOLD 215.0 M 135.8 M 55.2 M 35.0 M 34.9 M 33.2 M 31.9 M 31.5 M 27.6 M 24.9 M 93.2 M 686.7 M 2012 MARKET SHARE 31.4% 19.8% 8.0% 5.1% 5.1% 4.8% 4.6% 4.6% 4.0 % 3.6% 8.9% 100% 2011 UNITS SOLD 90.9 M 93.1 M 20.0 M 77.3 M 12.0 M 52.5 M 26.8 M 44.6 M 23.3 M - 45.5 M 486.0 M 2011 MARKET SHARE 18.7% 19.1% 4.1% 15.9 % 2.5 % 10.8 % 5.5% 9.2% 4.8% 9.4% 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

4.6% MARKET SHARES OF SMARTPHONE MANUFACTURERS: 8.9% 4.0% 3.6% 31.4% 4.6% 4.8% 5.1% 5.1% Samsung Apple Huawei Nokia ZTE RIM Sony HTC LG Lenovo Others HHI (of the first 10 players): 1668 19.8% 8.0%

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

S T R A T E G I E S

TYPES 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.

CELEBRITY 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

“FINALLY” “IT’S THE MOST AMAZING IPHONE YET” ADVERTISING CAMPAIGN

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         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 2012 Units sold $75.56M

135.8M

$32.89M

215M 2012 Market Share 19.8% 31.4%

RAW DATA

A N A L Y S I S

RAW DATA ANALYSIS  27 TV ads analyzed (source YouTube)  1.

Players taken into account: Apple (11 ads) 2.

3.

Samsung (10 ads) BlackBerry (6 ads)  Products advertized: 1.

iPhone 5, iPhone 4/4S 2.

3.

Samsung Galaxy S3/S2, Note II, Nexus BlackBerry Z10, Torch 9800, Curve Q8350

CODING TEMPLATE

APPROACH OF ADVERTISING [INDUSTRY] 40.7% 59.3% Informative Persuasive Complementary Memory jamming

APPROACH OF ADVERTISING APPLE

Highly Persuasive

72.7% 27.3% Informative Persuasive 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

10% 90% Informative Persuasive 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

16.7% 83.3% Ads explaining phone characteristics Ads with no phone characteristics

HOW MANY CHARACTERISTICS PER AD?

1,5 1,0 0,5 0,0 3,5 3,0 2,5 2,0 2.27

Apple 3.1

3.5

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 20 27 ads 7 5 Direct 2 Indirect Comparative 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  1.

2 indirect ads where: 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)

BRAND FOCUS 60% 50% 40% 30% 20% 10% 0% 54.5% Apple Mean 20.0% Samsung 50.0% Blackberry

HIGH QUALITY PERCEIVED 80% 60% 40% 20% 0% 45.5% Apple 70.0% 50.0% 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 90 80 30 20 10 0 70 60 50 40

Do you have a smartphone or non-smartphone?

Smartphone Non-smartphone

20 10 0 60 50 40 30 DID YOU BUY YOUR PHONE BECAUSE SOMEONE RECOMMENDED IT TO YOU?

(FRIENDS, FAMILY, ONLINE REVIEWS, ETC.)

Yes No

IF NO PEOPLE AROUND YOU ARE USING SMARTPHONES, WOULD YOU STILL BUY THEM?

80 70 20 10 0 60 50 40 30

Yes No Only at a cheaper price

HOW WELL DO YOU REMEMBER THE IPHONE ADVERTISEMENTS?

16 14 12 4 2 0 10 8 6

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

18 16 14 12 10 8 6 4 2 0 HOW WELL DO YOU REMEMBER THE SAMSUNG GALAXY ADVERTISEMENTS?

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

10 5 0 30 25 20 15 WHICH SMARTPHONE REPRESENTS HIGHER SOCIAL STATUS TO YOU?

iPhone Smartphone Samsung Galaxy Non-smartphone

RECOMMENDATION  Investments  Advertising Strategies  Globalization

APPLE INC.

Time

SAMSUNG ELECTRONICS CO. LTD.

Time

ADVERTISING STRATEGIES  Search attribute - features  Persuasive advertising - product differentiation  - slogans Better execution of advertisements (e.g. Blackberry)

GO GLOBAL!

 Successful story: Samsung  Aim for places with low brand loyalty  Intense advertising efforts

 Questions?

THE END