The mobile phone war
Few years ago, the biggest mobile devices companies were Nokia, Ericsson, Sony, Samsung, RIM, and Motorola. Today the biggest are Apple and Google. No one could have predicted the rise of these two software companies in the mobile area. This is how a technology strategy is applied to compete and win in this highly global competitive market.
Although cellular network concept was invented in the U.S during 1940s but not until 1973 when Motorola came up with a mobile phone the market began to emerge. At that time mobile phone was very expensive and had limited range. Motorola did not think that it would be good business to be in. However, Nokia and Ericsson seized the opportunity to work on this technology and the first generation (1G) mobile technology was created. This started the race to build a better mobile phone among several companies although no one was sure that there will be a demand for it. By 1990s a better technology or second generation (2G) was created by Motorola and the mobile market exploded. In the beginning, Motorola dominated the mobile market but as more people began to use mobile phone, Nokia, and Ericsson entered the market with a business strategy of lower price to compete for a part of the mobile market. The strategy of having lower price allowed Nokia to grab a larger part of the mobile market away from Motorola during the 1990s.
Both Motorola and Nokia were consider the top phone makers in the mobile industry but as they enjoyed their success, new competitions from Asia such as Sony, Samsung, and HTC also entered the market. Traditionally, a phone’s life-cycle from concept to production was approximately 18 to 24 months. But Asian companies were able to reduce the cycle to less than a year. They also developed several models so newer models entered the market every few months. The business strategy of having multiple models at lower price for every type of users won. Samsung, Sony and HTC were able to grab a larger share of the phone market from Nokia and Motorola. However the reduction in the phone creation has reduced the differentiating features among phones. In just few years, almost all mobile phones have the same features and functions.
The war on mobile phone market was fought mostly on hardware technology with the third generation technology (3G) where Asian companies such as Sony, Samsung, and HTC dominated. No one predicted that Apple, a computer company would enter the market with a well designed iPhone. Apple changed the rule of the competition by having a technology strategy where software operating system IOS was introduced. By controlling both the software and hardware and allowing people to write mobile apps to increase its functionality, Apple started a new direction and new rule that most mobile phone companies were not prepared with the introduction of the smart-phone.
Steve Jobs’ vision is to develop a device that work both as a phone and a computer that allows users to have additional functions including web search, camera, music, games, and many new functions that a typical mobile phone cannot do. The iPhone completely changed the mobile market and became the most successful mobile phone in history. In just a short time the iPhone captured a majority of the phone market with over 45% of phone sold in 2008. The success of iPhone prompted another software company to enter the market: Google with the Androids phone. The launch of Apple’s iPhone and Google’s Android has created an unprecedented double-impact on the mobile phone industry.
Apple’s iPhone is considered the “Gold standard” with an “inspirational value” among users. Apple‘s technology strategy is offering applications and content to its users through the Apple’s App store and iCloud service where Apple controls everything. In contrast, Google’s technology strategy is not to control the hardware but allows other phone makers to use its Android platform to ensure availability of smart phones at affordable prices to all. Google’s open system platform makes it more popular with phone users and apps developers. A Wall Street analysts summarized the two strategies as follow: “If mobile phone is a car than Apple is considered as the Mercedes, Lexus or BMW of mobile phone where Google is the Toyota, Honda or Ford. One is luxury and fully integrated with well design and total control and the other is lower price, more popular and open to all.”
As the smart-phone becomes more popular with users, the technology strategy of control the platform that powering the phone is becoming more critical. Thirty years ago, Microsoft applied this strategy with the MSDOS and Window operating system to control the Personal Computer. In this highly competitive world, the technology strategy reigned supreme over the typical low cost business strategy. Whoever controls the technology will control the market and win. That is why last month, Google brought Motorola and intended to have fully integrated technology system to compete with Apple.
Today both Apple and Google control the mobile phone market but another software company announces that it also enters the phone market: Microsoft with a new platform Window 8. As a late comer, Microsoft’s strategy is created a new alliance with phone makers and allows them to use the new Window 8 platform to compete with Google’s Androids. Nokia who has seen its market share declining immediately move quickly to collaborate with Microsoft. Soon other phone makers will probably take side in this mobile war.
The competition become a war of patents where Apple sued Samsung and HTC for billion dollars and forbid Samsung to sell smart phone in some countries. In the past patent disputes have been resolved quietly but it will be different this time as the market is huge. It is estimated that with over 3 billion users and still growing, the mobile phone market is worth trillions of dollars. With the on-going cases and Apple’s recent successful patent lawsuit, it is clear that the patent war is not going to subside anytime soon.
In order to survive, phone makers like Sony, Ericsson, Samsung, HTC etc. must work with technology company such as Microsoft or Google to fight Apple. Currently Apple has maintained the leadership with its loyal customers but will Apple be able to stay competitive with new innovative offerings every year? There is a rumor that Apple will move to be a network service provider and create an even tighter vertical integration and provide everything from handsets, network access, TV, music, radios, and games content to storage for its users according to Steve Jobs’ last wish.
With the power of the mobile industry has shifted away from the phone makers to technology providers the mobile market will change and encourage more innovations, more mobile apps in the near future. Who will be the leaders is still unknown but due to the dynamic nature of this industry, any company with better technology will change the mobile market. With all the changes and challenges, mobile phone users can expect more features, more functions, better phone come up in the near future. Mobile apps developer can expect higher demand for their skills as they will be needed to develop more innovative solution in the next few years.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
