Sunday, February 21, 2016

Porter's 5-Force Analysis of the Smartphone Industry

An Industry can be best analyzed using Porter five force analysis. Porter five forces analysis is a tool to analyze the different forces acting within an industry. These forces may affect all the organizations functioning  within the industry. This framework may be used to determine the attractiveness of the market. The smartphone industry is analyzed below.


Competitive Rivalry

The industry has huge customer base of 968Million worldwide. The Industry is growing at rate of 28-30% worldwide and at 168.8% in India.It is to be noted that all the major players of the industry have been backed by the Tech giants, who's revenue(2013) is given below.

Ex: Apple ($170.910 Bn) ,Samsung($268 Bn), Microsoft($77.85 Bn), Google($59.82 Bn ), Nokia ($40.176 Bn), RIM ($ 11.073 Bn), LG  ($45.246 Bn), Lenovo ($29.57 Bn)

This means that every vendor is a strong contender in the battle. And also all the vendors are Tech Giants with high Technological Competitiveness. Thus it can be said that the competitive rivalry within the Smartphone Industry is high. 


Consider the table below table of market share. 


 Period     Samsung    Apple      Huawei    Lenovo     Xiomi        LG   Others
Q2 201424.90%11.70%6.70%5.20%5.10%4.80%46.70%
Q2 201332.20%13.00%4.30%4.70%1.80%5.10%40.70%








Source : IDC

Clearly the top players are Samsung, Apple, Huawei, Lenovo, Xiomi and LG. Samsung is a dominant player in the smartphone market with nearly 25% market share in the second quarter of 2014. This share has come down from 32.2% from a year before. Apple has lost 2% from previous year to settle down at 11% in the second quarter of 2014. Xiomi has emerged as a new leader in the smartphone market which has seen increase in market share from 1.8% to 5.10% in just one year. 

From the above table it seems that Apple and Samsung are tough competitors to each other for number 1 position. Both run different Operating Systems and have different technologies to offer yet compete for the similar customer base.

Is apple's loss Samsung's gain ? Does Samsung compete with Apple or it targets other android hardwares ? Will apple's culture of tight integration between hardware and software pay off in the long run ?  Is this a zero sum game ?  Answer is unclear.


Quarter Android iOS Windows BlackBerry Other
2014 Q2 84.73% 11.68% 2.46% 0.50% 0.63%
2013 Q2 79.27% 13.20% 3.68% 2.88% NA
Source : IDC
Consider the above global smartphone market share. Samsung is the dominant player from last four years.  


Power of Suppliers


The important suppliers of smartphone Industry are The SOC manufacturers, i.e System On Chip. There are more than 80 SOC Manufcaturers including Qualcom, Samsung, AMD, NVIDIA Intel etc. There's high competition among SOC suppliers and hence bargaining power of suppliers is low.

Power of Buyers

There is a huge consumer base (of 968Million in 2013) for smartphone industry. This consumer base is not concentrated and hence cannot exert any threat in terms of bargaining power to the Industry.

On the other hand, there are many alternative options to consumers like Phablets, Tablets etc which are available at similar prices compared to smartphones. From this point of view, it can be said that, the bargaining power of buyers is moderately high.

Power of Substitutes

There are many alternatives to consumers like Phablets, Tablets etc. which are available at almost similar price compared to smartphones. Consumer may switch to these products any time. From this point of view it can be said that, the bargaining power of buyers is moderately high. As we can see from the following projection, the share of Phablets  in the Smartphone Industry is increasing. This means that there is a possibility of users switching to Phablets in the future.


The tablet Industry has been growing at CAGR of 36% with 233Million units sold in 2013. It can be projected that by 2017 a total of 1.093Billion units of smartphones could be sold. Thus smartphone Industry has threat from both Phablets and Tablets.

Again this need not be true always because, the history reveals that IT Products are highly perishable and Innovation keeps happening. This means that a new Product might suddenly pop up and pose threat to all the Industries discussed above.

Power of New Entrants

The New Entrant need not be a new Company; rather it can be an established firm entering a new firm. In the smartphone Industry there are well established players like Apple, Samsung, Nokia, LG, Lenovo etc. New entrants need to have sufficient Technology and Patents to fight in the Industry. The new entrants also need to have Brand value to fight with the established Firms. Thus the threat of new Entrant in Smartphone Industry is relatively low.

From another perspective, the Indian Smartphone vendors like MicroMax, Karbonn etc had no brand value when they entered the market. They were like Chinese cheap products in the Indian market. But today these brands are posing sever competition to global brands like Samsung. 





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