Smartphones Strategy: Case Studies
Two companies, Research in Motion Ltd (RIM) and Apple Inc, have made headlines for different reasons. Euromonitor International examines the different paths that these two companies are adopting in their smartphones strategies.
Poison Berry and Tasty Apple
An anonymous letter by a current employee of RIM, the maker of Blackberry, was first published on a technology website before going viral. The letter detailed issues plaguing RIM’s limited success in smartphones, which resulted in it losing share to Apple within global smartphones in 2009. RIM accounted for 14% of global volume sales whereas Apple garnered a stronger 16% share in 2010. Apple’s feat is all the more remarkable as it only has one product family (iPhone).
The latest rumour that has excited Apple fans is the reported replacement of Apple’s current crown jewel, the iPhone 4. Speculation is rampant about the improvements expected to be made to the successor, which is widely expected to be launched in September 2011.
Global Company Shares of Smartphones, 2008-2010
In the competitive landscape, Apple is on a roll, with each iPhone model successfully capturing expanding market shares. On the other hand, RIM is struggling to launch a worthy competitor to iPhone and has seen its fortunes decline.
The Product Lifecycle is typically used to track the duration for which a product is available on the market. When the product is first launched in the market, consumers’ acceptance is low but growth accelerates as the product gains traction. Eventually the market stabilises and the product matures; then after a period of time the product is overtaken by superior competitors, it goes into decline and is eventually withdrawn. However, there are a lot of products that fail to gain traction and never progress it to the growth phase.
Table 1: Product Lifecycle
Mapping the Products
Apple first launched its widely successful iPhone in 2007, and the company is generally credited as being the force that turbo charged the current smartphones craze and related demand for mobile apps. iPhone 4, which was only launched in mid-2010, is the first smartphone within the iPhone family to be launched globally. It has seen remarkable global success, with sales of iPhones exceeding 46 million units in 2010, according to Euromonitor International.
Apple has made minor upgrades in terms of hardware and features with each new version, a classic case of product extension, catering to different consumer segments. Now that iPhone is approaching the maturity phase of its product lifecycle, a low-cost model derived from iPhone 4 without front-facing camera and retina display would still be an attractive proposition to late adopters in emerging markets like China and India. At the same time as this, Apple could also have a technologically advanced model to leverage on its iCloud initiatives and drive revenue from content and services in developed markets like the US and Western Europe.
RIM, on the other hand, had a headstart in the smartphones market and captured a large portion of corporate clients. While Blackberry enjoyed success in selected countries like the US, Canada, the UK, Saudi Arabia and Indonesia, the Canadian company struggled to attract mass consumers. RIM has seen its market share overtaken firstly by Apple and then seen a host of companies like HTC and Samsung hot on its tail.
Table 2: iPhone and Blackberry
Targeting late adopters
Despite the fact that sales of smartphones are expected to record a phenomenal 25% CAGR rise during the forecast period, feature phones are still expected to account for 46% of total mobile phone sales globally by 2015 in volume terms. Smartphones, like iPhones are usually given for free or highly subsidised by the mobile network operators as part of a monthly subscription plan, tied to a 24 months contract. In emerging markets, a significant portion of consumers are buying mobile phones without monthly subscription plans or part of a pay as you go (prepaid) plan. As detailed by the graph below, this clearly contrasts trends in developed countries such as the US and UK. The mobile network operators do not make a lot of profit from prepaid plans and therefore do not subside prices for mobile phones for the consumers. Consumers on prepaid plans, therefore tend to purchase feature phones and are not able to harness full potential from the mobile internet.
Table 3: Mobile Phones by Type of Contract 2010
The next step for Apple and other companies with ambition to dominate the smartphones arena is to work with mobile network operators to convert feature phone users into smartphone users. Apple, having conquered the smartphones market, is more than equipped to launch a low-cost iPhone to entice late adopters. Ominously for RIM, it is still struggling to capture the current pool of iPhone and Android users. To try to capture feature phone users and concurrently regain market share in smartphones would stretch the company and fail on both ends. The bigger issue plaguing RIM beyond the points highlighted in the anonymous letter is that RIM is always two steps behind its rivals.
Back to its roots
RIM has been unsuccessfully courting the consumer market and the company is lagging behind rivals like Apple, Samsung and HTC. RIM may have lost the battle in the consumer market but not the war on smartphones. Blackberry already has robust security and messenger service in its arsenal, which corporations like. Maybe the best strategy for RIM is to return to its roots and focus on corporate sales. This is the same group of customers that made RIM successful in the first place.