Rivalry Strategy Tool Essay

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Intensity of Rivalry within the Smartphone Manufacturing Industry



1. Number and Relative Size of Competitors

1 2 3 4 5 Top 4 competitors combined industry market share <40% (X 40-50%) 50-60% 60-70% >70%      



The worldwide smartphone manufacturing industry is significantly competitive. The top four competitors in the smartphone manufacturing industry comprise of Samsung, Apple, Huawei and OPPO. In accordance to statistics from the 3rd Quarter of the 2016 fiscal year, Samsung was number 1 in the industry with a market share of 21 percent. Second was Apple with a market share of 12.5 percent. The third competing company was Huawei with a market share of 9.3 percent, and lastly OPPO with a market share of 7.1%. The fifth company is Vivo, which boasts a market share of 5.9 percent. The other smartphone manufacturing companies around the globe account for a combined market share of 44.2 percent. The combined industry market share of these top four competitors amounts to 49.9 percent (IDC, 2016).



2. Degree of Industry Product Standardization

High   Medium   Low

Difference between competitors in price of similar products <2% 2-5% 5-10% 10-15% (X>15%)



One of the key marketing strategies used by Samsung is having low-priced products. In turn, comparing the price of their similar products against those manufactured by Apple is apparent and significant. For instance, when the Samsung Galaxy S6 was launched in the market, it retailed at a price of £410 whereas the iPhone 6s was launched in the market at a price of £539. The price variance between these two products that are similar, technology wise is about 23 percent. Therefore, this indicates that the difference between competitors in price of similar products is greater than 15 percent (Rogerson and Peckham, 2015).



What % of industry's products is sold at discount? 100% 75% 50% (X 25%) 0%                                              

 

About a quarter of the products sold to consumers are not at the exact retail price but rather at a discount price.

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Customers' ability to recognize brands from industry Low Medium (X High)



The consumer’s ability to identify and recognize brands from industry encompasses brand awareness. In delineation, brand awareness is the magnitude to which consumers are able to easily remember the brand when they opt for a product. According to research undertaken about 50 percent of consumers are able to identify the Apple brand whereas 25 percent of the consumers are able to acknowledge Samsung products. This indicates that the capability of consumers to ascertain different brands in the smartphone industry (Eom and Cho, 2015).



Degree of switching costs Low Medium (X High)

 

With respect to the smartphone industry, one of the key considerations in switching cost is the operating system. If the operating system and the app store are owned by the smartphone manufacturer, it increases the switching costs. The degree of switching costs are high in the smartphone industry. The top two manufacturers, Samsung and Apple, which have the highest number of consumers use two dissimilar operating systems and therefore the cost of switching becomes high (Cromar, 2010).



Industry Growth Rate <0% 0-1% 1-3% (X 3-5%) >5%



Statistics show that, in the past fiscal year, there was a significant slowdown in global smartphone shipments from 27.8 percent in 2014 to 10.5 percent in 2015. In particular, the shipments are anticipated to get to about 1.48 billion and later expected to grow to 1.84 billion by year 2020 (Framingham, 2016). The forecasted growth rate in the worldwide smartphone industry was 3.1 percent in 2016.



Unused Industry Production Capacity % of industry wide production capacity currently in use (X<70%) 70-80% 80-90% 90-100% >100%



The percentage of industry wide production capacity that is presently in use is less than 70 percent. This can be perceived in the recent entry and growth in production by Chinese smartphone manufacturing firms. Companies such as Huawei, OPPO, Vivo, Lenovo, and Xiaomi have entered the market and increased the production capacity......

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References

Beheshti, H. M. (2004). Gaining and sustaining competitive advantage with activity-based cost management system. Industrial Management & Data Systems, 104(5), 377-383.

Cromar, S. A. (2010). Smartphones in the US: Market analysis.

Eom, J., Cho, Y. (2015). Exploring Brand Awareness and Purchase Intention on Complete and Ingredient Brands of Smartphone. Journal of Marketing Thought, 2(2): 73-84.

Framingham, M. (2016). Worldwide Smartphone Growth Forecast to Slow to 3.1% in 2016 as Focus Shifts to Device Lifecycles. International Data Corporation. Retrieved from: http://www.idc.com/getdoc.jsp?containerId=prUS41425416

International Data Corporation (IDC). (2016). Smartphone Vendor Market Share, 2016 Q3. Retrieved from: http://www.idc.com/promo/smartphone-market-share/vendor;jsessionid=4FEF1AE2A2536FA2DFA0F869920EEA6F

Kang, J. (2016). Samsung Will Be Apple's Top Supplier For iPhones Again In 2017. Forbes. Retrieved from: http://www.forbes.com/sites/johnkang/2016/12/16/samsung-will-be-apples-top-supplier-for-iphones-again-in-2017/#277f27077ce3

Manzella, J. (1997). Assessing Foreign Markets: Selecting the Right Markets Can Make Your Company a Fortune. The Manzella Report. Retrieved from: http://manzellareport.com/index.php/strategies-section/311-assessing-foreign-markets-selecting-the-right-markets-can-make-your-company-a-fortune

Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.

Rogerson, J., Peckham, J. (2015). iPhone 6S vs. Samsung Galaxy S6. Tech Radar. Retrieved from: http://www.techradar.com/news/phone-and-communications/mobile-phones/iPhone-6s-vs.-samsung-galaxy-s6-1302630/2

Wu, A. (2016). Global Smartphone Production Volume Rose 8.9% Between First and Second Quarter to Reach 315 Million Units. Trend Force. Retrieved from: http://press.trendforce.com/press/20160720-2551.html

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