Title – Strategic Competition: How Companies Thrive?
Excerpt – The fierce competition between existing smartphone companies as well as new entrants have led to the evolution of the mobile communications market. explore the economic implications of this development to understand how firms operate and adapt to the changing conditions.
Assessing the situation: Oligopoly
2018 has been an eventful year in the smartphone industry as world renowned tech giants, like Samsung and Apple, are faced with emerging competitors that threaten their market dominance. As illustrated by Counterpoint Research Market Monitor, Samsung takes the lead by occupying 19% of the market share in Q3 2018. By Q2 2018, Huawei (15%) has surpassed Apple (11%) as the second largest smartphone company. As such, Apple’s gradual decline followed by a corresponding rise of a new competitor demonstrates the volatile nature of smartphone leadership. In general, the report revealed that the top 10 firms in the market holds nearly four-fifths of the market share, showing the oligopolistic market structure.
Play catch-up: Understanding Huawei’s meteoric rise
It is imperative to examine the varying strategies employed by smartphone companies to understand the above-mentioned market trends. In this case, Huawei’s remarkable growth can be explained by the emphasis on market segmentation and expansion.
First, the firm targets potential consumers by their income level: low, mid and high. For example, Counterpoint Research identified Huawei’s sub-brand known as ‘Honor’ that focuses on the mid-income consumers. Contrastingly, high-end Huawei phone models are sold to the more affluent group. As such, Huawei enjoyed brisk sales as shown in the first quarter of 2016, in which it sold 28.8 million phones, whereas Apple experienced a fall in sales volume.
Second, Huawei’s success can be understood from its willingness to explore new markets, like Europe, to expand its market influence. Although Huawei was considerably an unfamiliar brand outside China, the company’s sound strategy to engage in partnerships with notable brands has raised its credibility. For example, German lens and camera manufacturer collaborated with Huawei to develop the P9. Besides, the company engaged in high-profile advertising to build brand awareness in Europe, such as the use of billboards along major highways in Berlin and Poland.
Hence, it may not be surprising that three-fifths of Huawei’s revenue in 2015 was from outside China, like Germany and Italy.
Marketing Blunders: Absence of Innovation
On the other hand, Apple is facing a crisis as its minimalist designs have failed to captivate the target audience. In the first quarter of 2018, observers have found that Apple intends to discontinue the iPhone X due to the slow and low levels of sales growth by the Chinese market. Furthermore, Apple’s pricing strategy has backfired as its focus on maintaining high profit margins has cost them substantial market share.
Critics believe that Apple’s flagship known as iPhone X was a marketing disaster due to the lack of innovation. The iPhone was the brainchild of the late Steve Jobs, whose vision has inspired other tech companies to emulate his persistent focus on creative designs.
Yet, some argue that Apple has lost its initial impetus to revolutionise mobile technology. For example, the iPhone X featured an ‘edge-to-edge screen’, which was found in Samsung Galaxy S8 that was released much earlier. Even the face recognition technology bore a striking resemblance to the Samsung S8’s iris recognition feature. More importantly, the heavily-marketed similar features were used to justify a hefty price of the iPhone X, in which cheaper substitutes could offer the same features. Hence, Apple’s inaction may become the cause of their eventual demise in the highly competitive smartphone industry.
Finding the right balance
Given the observations made between Huawei and Apple, it can be concluded that companies should be consistent in their efforts to innovate and improve in order to stay relevant in this fast-paced and ever-changing economic landscape. While Apple was recognised as the pioneer in the smartphone industry, the complexity of existing and upcoming challenges is bound to diminish its market influence, thereby necessitating appropriate responses.
Students who are interested to learn more, you can join our GCE A level preparation class. Please call Simon Ng @ 96890510 for more consultation.