Rachel Yan Temitope Tiamiyu Laura Battaglia Francesco Messina SMARTPHONE INDUSTRY

 How many of you used smartphones 5 years ago? QUICK QUESTION  How many of you are using smartphones now ?

 Amazing product!  Relevant topic for U.S. college students - Smartphones vs Non-smartphones  Past vs Future - Technology - Global trends WHY SMARTPHONES?

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 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  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: PROPRIETARYLICENSABLEOPEN SOURCE Developed in-house by smartphone manufacturers It allows to differentiate and integrate with the hardware High costs and time consuming E.g. iOS (Apple) Any manufacturer can use these OS on his devices Reduced cost of developing an OS Licensing can be expensive also E.g. Windows Phone (Microsoft) Free and freely customizable OS Highly developed OS at no cost E.g. Android (Google)

SALES AND MARKET SHARES OF SMARTPHONE MANUFACTURERS BRAND2012 UNITS SOLD 2012 MARKET SHARE 2011 UNITS SOLD 2011 MARKET SHARE 1.Samsung215.0 M31.4%90.9 M18.7% 2. Apple135.8 M19.8%93.1 M19.1% 3. Huawei55.2 M8.0%20.0 M4.1% 4. Nokia35.0 M5.1%77.3 M15.9 % 5. ZTE34.9 M5.1%12.0 M2.5 % 6. RIM33.2 M4.8%52.5 M10.8 % 7. Sony31.9 M4.6%26.8 M5.5% 8. HTC31.5 M4.6%44.6 M9.2% 9. LG27.6 M4.0 %23.3 M4.8% 10. Lenovo24.9 M3.6%- Others93.2 M8.9%45.5 M9.4% TOTAL686.7 M100%486.0 M100%

WHAT WE CAN SEE.. 1. The smartphone market is a growing market: It grew 41% from 2011 to 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: 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

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

 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 INFORMATIVE ADVERTISING

 Samsung and Blackberry attacks Apple in order to steal market share  Apple doesn’t respond  Blackberry versus Apple COMPARATIVE ADVERTISING

 It comes very often when the ad is bundled with a network provider plan.  Usually it is a sketch or a short story. HUMOUR APPEAL

CELEBRITY INVOLVEMENT

 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” NETWORK CARRIERS

THE TWO MAJOR PLAYERS… captured 50% of all Smartphone sales in 2012

ADVERTISING CAMPAIGN “ THE NEXT BIG THING” “IT’S THE MOST AMAZING IPHONE YET” “FINALLY” " THE BIGGEST THING TO HAPPEN TO IPHONE SINCE IPHONE"

 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 APPLE

 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  Mostly attacks Apple, in order to steal market share. SAMSUNG

INTERBRAND BEST GLOBAL BRANDS, 2012 AppleSamsung 2012 Placement Brand value$75.56M$32.89M 2012 Units sold135.8M215M 2012 Market Share19.8%31.4%

RAW DATA ANALYSIS

 27 TV 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]

APPROACH OF ADVERTISING APPLE

 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. PERSUASIVE OR COMPLEMENTARY?

APPROACH OF ADVERTISING SAMSUNG

APPROACH OF ADVERTISING BLACKBERRY

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

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. HOW MANY CHARACTERISTICS PER AD?

COMPARATIVE ADVERTISEMENTS

 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) WAR OF COMPARISON

BRAND FOCUS

HIGH QUALITY PERCEIVED

 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 LAST REMARKS FROM OUR ANALYSIS

CORNELL SURVEY

DID YOU BUY YOUR PHONE BECAUSE SOMEONE RECOMMENDED IT TO YOU? (FRIENDS, FAMILY, ONLINE REVIEWS, ETC.)

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

HOW WELL DO YOU REMEMBER THE IPHONE ADVERTISEMENTS?

 White  Thin  Simple  Cool  Smart  Innovative  Sophisticated  Brilliant USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM IPHONE ADS?  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?

 Fast  Good  Big  Easy  Fancy USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM SAMSUNG GALAXY ADS? 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?

 Investments  Advertising Strategies  Globalization RECOMMENDATION

APPLE INC. Stock Price (US$) Time

SAMSUNG ELECTRONICS CO. LTD. Stock Price (Korean$) Time

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

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

THE END  Questions?