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2009     International MarketingAssignment 4- Android Mobile OS                   Annabell Lee Satterfield (2013718)      ...
This marketing plan will delineate the international expansion plan for the world’s first Google-AndroidOS-based smart pho...
Android’s competitive advantage is Google’s well-known brand 1 and technical expertise, andAndroid’s open source capabilit...
analysis are (in random order): South Korea, United States, Japan, United Kingdom, China, India, Canada,Taiwan, Malaysia a...
with its own standard, WIPI (Wireless Internet Platform for Interoperability). It can be predicted thatthese regulatory ch...
Mobile phone application usage in the UK is high—most British phone owners report using mostof the features available on t...
The Sell or License Decision          Android should enter the Korean market itself rather than through licensing. The pro...
Entry Strategy- Joint Venture        The Korean handset and mobile service provider markets are dominated by a small numbe...
of its positioning as a dynamic, exciting new product, Korean consumers are more interested in design,trendiness and popul...
support to maintain close relationships with its venture partners. Its business model is based onadvertising, so Android c...
The UK mobile service provider market is divided among many players-- taking this fragmentedmarket into consideration, it ...
Android can work with handset makers and service providers to be put in branded packages like T-mobile package called “Lif...
Appendix 1- Android and Potential AdaptationsThe Android operating system (OS) is Google’s base software that runs on a “s...
The Android is expected to become a worldwide leader for mobile phone operating systems. Itwill be carried on multiple cel...
21keyboard, and an operating system to be released in laptops by 2010), digital camera (3.2 Mpixels)and cellphone.In the d...
Unfortunately, this dependence on local developers for applications will limit Android’s expansion tonations that (China a...
Appendix 2- Determination of Global Markets for Expansion, RankingThis model used to establish the top countries to enter ...
Smartphones like Android phones (at present) are purchased primarily by users in wealthy nations. Icalculated GDP per capi...
Minimum population of 20,000,000Minimum GDP per capita of $3,000Internet usage per capita of .42I chose a minimum populati...
and their wealth disparities could house a sizeable niche of individuals wealthy and educated enough tocreate sizeable dem...
Exhibit A: Initial Screening         a. PopulationMarket SizeRaw                                                       Scr...
Colombia:        45,013,672   Malaysia:              25,274,132Spain:           40,491,052   Mexico:               109,955...
Mali:                    12,324,029Zambia:                  11,669,534Cuba:                    11,423,952Zimbabwe:        ...
Finland:                    5,244,749Turkmenistan:               5,179,571Norway:                     4,644,457Georgia:   ...
Fiji:                               931,741Qatar:                              824,789Cyprus:                             ...
Grenada:                                     90,343Northern Mariana Islands:                    86,616Antigua and Barbuda:...
Average:                            27,825,154.20 Median:                                 4,467,937 Minimum (border)      ...
Morocco:              $1,668.65   Median:        7,632Mozambique:            $357.45    Minimum:   $3,000.00Nepal:        ...
c. Internet Usage Per CapitaLikelihood of Purchase (Internet Users/Population)        Likelihood of Purchase (Internet Use...
Median:                            0.415576903Minimum:                                  0.42Exhibit B: Normalized Data, We...
Likelihood of Purchase (Internet Users Per Capita)   Final List of Countries                                              ...
Appendix 3- Market Descriptions-Korea and United KingdomKOREAWho are the c          ?Smartphone phone users in Korea can b...
security. Retail consumers demand a bundle of attributes including design, price, and function andpopularity of the phone....
If the market is changing, how?The worldwide mobile market is in flux. The global financial crisis has been leading demand...
The largest mobile phone service provider is SK Telecom, which has more than 22 milion subscribers andmore than 50% market...
feeling of belonging (collectivism) is very important to Koreans, so consumer communications ofteninclude celebrities in a...
to the SaaS model used by the Android system compels Google to focus on retail buyers and smallbusiness buyers in the shor...
UK mobile phone buyers purchase most (61% of all phone sales volume) phones in a fragmented groupof specialty mobile phone...
that they would switch networks for a cheaper service plan and only 4% planned to switch from acontract to a pay-as-you-go...
service provider and try to get it installed in phones sold by as many mobile network providers aspossible.The mobile phon...
What are the political restrictions/regulations?There are very few political restrictions that would affect a foreign mobi...
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International Marketing- Plan for Global Rollout of Google Android Mobile OS

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I wrote this international expansion plan for the world’s first Google-Android OS-based smart phone. I define potential adaptations, create a quantitative model to determine global markets for expansion and rank these markets according to their market potential. Finally, two of these markets, Korea and the United Kingdom, are described in some detail and a marketing plan is defined for these markets.

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Transcript of "International Marketing- Plan for Global Rollout of Google Android Mobile OS"

  1. 1. 2009 International MarketingAssignment 4- Android Mobile OS Annabell Lee Satterfield (2013718) Cornell University 4/28/09
  2. 2. This marketing plan will delineate the international expansion plan for the world’s first Google-AndroidOS-based smart phone. First, this paper will define the product and its potential adaptations (moredetailed analysis in Appendix 1). Then, this paper will discuss the quantitative model used to determineglobal markets for expansion and to rank them according to their market potential (more detailedanalysis in Appendix 2). Finally, two of these markets, Korea and the United Kingdom, are described insome detail (more detailed analysis in Appendix 3) and a marketing plan is defined for these markets.Part 1- Product Definition and Adaptation: Summary Android is Google’s operating system for “smart” mobile phones, defined as a mobile phonewith PC-like functionality. Android has several global competitors in the smartphone OS category:Symbian, iOS/iPhone, RIM/Blackberry and Windows Mobile (See Exhibit 1: Mobile OS WorldwideMarket Shares). The Mac OS/iOS phone is themost similar in target customer, interface, Exhibit 1: Mobile OSand capability to the Android G1- the first Worldwide Market Sharesphone released with the Android OS. The Android is expected to become 15% 16% Symbiana worldwide leader in mobile phone 50% MAC OS/iOSoperating systems. It can be carried on 19% RIM/Blackberrymultiple cellular networks and used in Windows Mobilephones built by the most popular Source: Fortune Magazine; http://apple20.blogs.fortune.cnn.com/category/market-share/ November 7, 2008manufacturers. However, there are threelimitations to its ability to expand to the mass market internationally: its business model depends onadvertising and its market is therefore limited to regions attractive to advertisers, the distribution modelrequires that the G1 be made available for sale where most consumers purchase handsets: retail stores.Finally, Android’s potential is limited by its target customer; the target customer could be defined asthose that would purchase a “smart phone”—higher-income, educated consumers with interest intechnology as well as productivity or entertainment applications. Also, because Android, like iOS,has yet to be accepted by industry as a business productivity tool, Android target customers are notbusiness users. They are likely to buy this phone for his or her own personal use (the primary targetcustomer is a retail consumer). More detail about this target customer can be found in Appendix 2.
  3. 3. Android’s competitive advantage is Google’s well-known brand 1 and technical expertise, andAndroid’s open source capability and easy-to-use Java programming language that makes it markedlymore adaptable than other devices. For example, while the system’s default language is English, users orphone vendors can go online and load their language into the system. Adaptations for regional dialectsor uncommon languages can be made available for download by independent developers. Applicationsdesigned to meet the needs of local populations can be created by local developers and installed-- easilycreating a unobstructed, fast pipeline for applications.Part 2- Quantitative Market Analysis A quantitative model was used to determine which markets to enter. It contained the followingvariables: population, GDP per capita, and number of internet users per capita. Population was chosento explain market size because, as a consumer product, the Android phone could be purchased byanyone. I used GDP Per Capita because smartphones like Android phones are purchased primarily byusers in wealthy nations. The variable ‘number of internet users per capita’ is helpful in explaining thelikelihood to purchase because it represents a nation’s interest in technology. This variable alsocorrelates with a country’s supporting infrastructure. I screened potential markets with the following minimum requirements: minimum populationof 20,000,000, minimum GDP per capita of $3,000, internet usage per capita of .42 I chose a minimumpopulation of 20,000,000 because this is a product that is not widely used and therefore requires a largemarket base to sell to. A Minimum GDP per capita of $3,000/yr would allow Android to be marketed tothe top 23% of earners in the world. Finally, the median internet usage rate of the final list of populousand wealthy nations is .42, so I chose this as the screening minimum for the final screening. After the final screening, I was left with this list of countries: Canada, South Korea, UnitedStates, Japan, United Kingdom, Taiwan, Malaysia, Italy, Romania, Australia, Germany, France, Spain andPoland. Finally, in order to rank these countries from the most suitable to the least suitable, I weightedthe variables by their contribution to overall market demand for the product: market size: 3, wealth: 4,likelihood of purchase: 2 I included (and subsequently eliminated in the screening process) Brazil, Russia, India and China butadded the two larger countries-- India and China-- back to the final list because their large populationsand their wealth disparities could house a sizeable niche of individuals wealthy and educated enough tocreate sizeable demand for an Android smartphone. The final 10 countries recommended for further1 Google is the most powerful brand in the world, according to Millward Brown- BrandZ Top 100 2008 Report
  4. 4. analysis are (in random order): South Korea, United States, Japan, United Kingdom, China, India, Canada,Taiwan, Malaysia and Italy.Part 3- Market Analysis of Korea and the United KingdomKOREA Smartphone phone users in Korea can be divided into two segments: corporate consumers andretail consumers. Corporate consumers place greater emphasis on productivity-enhancing applicationsand security. Retail consumers (Android’s primary target) in Korea demand a bundle of attributesincluding design, price, and function and popularity of the phone. Both retail and corporate consumersdemand standard Korean language features like Korean language input and display. Consumer sophistication in Korea is high and the market is very trend-based where new phonesare introduced frequently, often advertised with celebrity endorsements and new designs (colors, etc.).Service providers and handset manufacturers spend heavily on marketing to create a buzz for newphones and service offerings. Outspending local firms in a race for top-of mind position in Korea wherelocal brands are already entrenched would be very difficult and costly. Korean consumers choose their phones and service as a bundle; price is a factor, but moreimportant is design, applications like games, and popularity. Mobile phones have become an importantpart of everyday life in Korea and are far more integrated into day-to-day activities than people in mostother countries. Koreans use their phones to make payments, watch television, play games and more.New applications and games are always in demand by consumers. Handset price is not as important is because service providers provide handsetsubsidies in exchange for contracts. There is a worldwide trend in mobile phones today-- consumersare demanding specific phones and operating systems (i.e. iPhone, blackberry) from service providers,but this is not the case in Korea where there are not many significant differences in functionality (90% ofsmartphones use Microsoft OS, 80% of handsets are manufactured by two companies- LG and Samsung.77.3% of all mobile phones are serviced by SK Telecom (50% of the market) and KTF (27.3% of themarket). In sharp contrast to the service offerings, the distribution system for mobile phones isfragmented; phone/service bundles can be purchased in many locations including department stores,service provider stores, and temporary street promotion booths. Changes in the industry include the lowering of barriers to entry to foreign operating systems;on April 1, 2009 Korea stopped requiring that mobile phones in Korea contain middleware in compliance
  5. 5. with its own standard, WIPI (Wireless Internet Platform for Interoperability). It can be predicted thatthese regulatory changes will make Korea’s smartphone OS market more competitive and fragmented;Apple, HTC, and Nokia have announced plans for new smartphones to be released in Korea this year. SKTelecom has recently introduced a Blackberry phone 2 that is targeted primarily at businessconsumers.UNITED KINGDOM Mobile phones users in the UK can be divided into two segments: corporate consumers andretail consumers. As stated in the detailed analysis in Appendix 1, suspicions regarding security due tothe SaaS model used by the Android system compels Google to focus on retail consumers as its primarytarget at this time. Retail consumers demand a bundle of attributes including design, price, andfunctionality. The UK mobile phone market is well-saturated. There are 74 million mobile phone subscribers inin a population of 60 million. The smartphone market in the UK is large, contributing to sales of 470,000,000pounds in 2008. The typical phone purchase transaction in the UK proceeds as follows: (1) the consumerdetermines a monthly budget for mobile phone service and selects a service plan accordingly. (2) Theconsumer chooses a handset that fits the predetermined budget (price) based on design andfunctionality (more so design) as well as brand attractiveness. Increasingly, customers are purchasingbranded packages; as mobile phones are increasingly becoming commoditized, branding is becomingmore important to the profitability of firms-they are increasingly bundling phones and Exhibit 2: UK Mobile Phoneservice contracts into branded packages like DistributionT-mobile package called “Life’s for Sharing” Specialty Mobile Phoneand Nokia’s “Comes with Music.” 12% Stores 10% Department/Electronics The UK mobile phone distribution Storessystem is fragmented, divided between 16% Supermarkets 62%specialty mobile phone stores, Internet/Telephone/Maildepartment/electronics stores, and Ordersupermarkets (See Exhibit 2: UK Mobile Phone Source: “Distribution,” Mobile Phones and Network Providers – UK, November 2008Distribution).2 “SK Telecom and RIM introduces the Blackberry solution in Korea,” ENP Newswire, December 16, 2009
  6. 6. Mobile phone application usage in the UK is high—most British phone owners report using mostof the features available on their phones. This may be correlated with the UK’s well-developed mobilephone infrastructure; 90% of the country is covered by high speed 3-G networks. Smartphones are usedheavily for regular emailing (77% of smartphone users), GPS positioning (40%), and instant messaging(38%). 3 A large number of UK consumers, 1 million, now use mobile banking services. 4 Market-shifting trends are beginning in the mobile phone industry. Smartphone sales arerising. This is due in part to planned upgrades of current mobile phones. According to ComputerWeekly, 25% of Brits say that their next phone will be a smartphone. 5 Particular smartphone/OS brandslike the Apple iPhone (iOS) have drawn market share power from the service provider to thehandset manufacturer and the consumer. Consumers are increasingly demanding particular phones(and operating systems) from their service provider 6—and gradually moving away from their traditionalpurchasing decisions model. The UK mobile phone service market is competitive and fragmented between 02 (25% of themarket), Orange (21.3%), Vodaphone (22.1%), and T-Mobile (17.2%). Google’s Android OS’scompetitors in the UK are as varied as the handset manufactures-- and include Symbian OS, Apple’s OS(iPhone), RIM’s Blackberry OS, Windows Mobile OS, and Linux OS. Advertising spend in the mobile handsets and networks sector has been dropping steadily sincethe end of 2006; service providers are branding phone/subscription packages and advertising them ininnovative ways. T-mobile’s “Life’s for Sharing” package and campaign includes integrated marketingtechniques like the hiring of performance artists and training of T-mobile employees to “unexpectedly”dance in London’s Liverpool Station. Advertisers in the United Kingdom do not use celebrities as oftenas Japan, Korea and China (where over 20% of ads feature celebrities). 7 Research firm Millward Brownhas determined that this is due to differences in effectiveness for celebrity endorsements.Part 4- Marketing Plan for Korea and United KingdomKOREA3 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,20094 “Monolink aligns with the growth of smartphones,” M2 Presswire, February 6, 20095 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,20096 Ibid7 http://www.millwardbrown.com/Sites/MillwardBrown/Media/Pdfs/en/KnowledgePoints/358D2249.pdf
  7. 7. The Sell or License Decision Android should enter the Korean market itself rather than through licensing. The product, theoperating system, has already been manufactured and can be adapted for the Korean market at a lowcost (R&D). The Korean mobile phone user is sophisticated and accustomed to making onlinepurchases—the advertising model can be applied to generate profit for Google. Another reason whyGoogle should enter this recently-opened 8 market is to prevent its major competitor, the iOSfrom gaining an unshakable competitive advantage. Third, becoming a part of the cutting-edge Koreanmobile phone/application market will allow it to gain valuable expertise on cutting edge applications,social networks and mobile video games—knowledge that it can apply in other international markets.Pricing Mobile operating systems like Microsoft OS typically create revenue by charging a flat royaltyfee to handset manufacturers. Android, however, charges no royalty and instead generates revenuethrough mobile advertising. This pricing decision gives it a very competitive position in comparison toMicrosoft (90% market share of the Korean smartphone market), which charges a $25 licensing fee per 9handset for what is known critically as “…a clunky, antiquated menu-driven operating system” Googledoes not have strong brand power in Korea— Naver is the number one search engine brand with 70% allsearch queries. 10 However, Android offers a strong product with an intuitive interface and exciting newapplications (like instant lookup of online store prices on products with the scanning of a UPC code,etc.). Charging some royalty fee, while against Google’s current worldwide policy, is possible. Possible competitive reactions are the reduction or elimination of royalty fees by Microsoft orApple, allowing handset providers and service providers to either (a) pass the savings onto consumers or(b) keep the difference. The former is not likely to happen because it is not logical for Microsoft tolower its price to compete with Android because (1) Microsoft’s current target consumers are not retailcustomers but business users; business users are not as price sensitive, and (2) Androiddo not meet business users’ needs regardless of the price. It is possible that Apple, in an effort tocompete with Android for retail consumers, will become royalty free or reduce its fees to service providers.Android could respond by offering advertising revenue share to the handset manufacturers andemphasize its functionality (more games, applications) to consumers to develop more consumer pull forits phones. It could also work harder with application developers to make more games and applicationsfor the phone.8 See reference to recent lifting of WIPI requirements9 Wall Street Journal. August 27, 200810 http://www.nytimes.com/2007/07/05/technology/05online.html?_r=2&oref=slogin
  8. 8. Entry Strategy- Joint Venture The Korean handset and mobile service provider markets are dominated by a small number ofKorean firms that spend heavily to remain top-of-mind with consumers. It would be advantageous forAndroid to joint venture and co-advertise with these firms rather than attempt to enter alone withHTC 11 and attempt to compete for consumer awareness. A joint venture with SK Telecom and NokiaSamsung or LG is recommended. These firms have an established distribution system, are already well-known and trusted by the Korean consumer, and they have relationships with potential advertisers. SKTelecom also owns Korea’s number one social networking site, Cyworld, boasting the registration of 90percent of Koreans in their 20s and 25% of the total population of Korea. 12 A mobile phone app forCyworld could help draw more users to Android-based phones and provide a powerful mobileadvertising platform for Google. Because they are new to the market, an Android-based phone canoffer very little to potential joint venture partners at this point except a share in advertising revenue- apotentially powerful motivator when looked at in the long term.Positioning Google’s Android is the mobile OS that offers innovative technology and, due to itsopen platform, the most flexibility—allowing its customers to enjoy new applications and games beforeanyone else. Proper management of developers would allow Android to fully maximize thisadvantage—particularly if it can influence developers to create scores of applications forAndroid alone. In regards to retail consumers, while Google’s country of origin, the United States, draws 13premium prices for retail products in Korea, this is not the case in technology products. Also, Koreanshave strong nationalist sentiments that flare up occasionally against prominent foreign firms. Android’sUS origin, if handled correctly, is not damaging to the brand. However, it would not be wise toemphasize it in the consumer marketplace.Marketing Strategy for Consumers- Create Consumer Pull Google’s goal at this early stage of introduction to the Korean mobile phone market is to buildawareness and create buzz for the service/handset/operating system bundle. Google’s focus should beon getting accepted in society through co-advertising with its Korean service provider and handset aswell as some of its Korean application advertisers and developers. While it should make people aware11 HTC manufactured the first Android-based phone sold in the United States12 http://news.softpedia.com/news/Android-to-Go-to-Korea-This-Year-107829.shtml13 http://www.koreatimes.co.kr/www/news/special/2008/07/175_18931.html
  9. 9. of its positioning as a dynamic, exciting new product, Korean consumers are more interested in design,trendiness and popularity; using a popular celebrity would be appropriate. The marketing mix (See Exhibit 3) for the Android launch among mass consumers should includetelevision, internet, movies and mobile internet advertising. Popular celebrities can advertise theproduct as well as the most exciting Korean-language applications that you can run on it at the moment-games, banking apps, shopping apps, social networking apps like the Cyworld application mentionedearlier. An advertising budget can be broken down as follows:Exhibit 3: MARKETING MIXAdvertising $ 8,000,000TV $ 4,500,000Internet/Mobile Internet $ 2,000,000Integrated Marketing(Word-of-mouth referral system, Film product $ 1,100,000placement, street teams, etc.)PR $ 400,000 Advertising and PR firms should be Korean and be hired in conjunction with Android’s handsetand service providers in a co-branding effort with handset makers and service providers. Internet andtelevision play an important part in this advertising campaign. The internet campaign should includetargeted (search-based) ads as well as efforts to encourage users to write testimonials of theirexperience with the phone on popular product review sites. Marketing on SK’s Cyworld and on thepopular search engine, Naver, would also be included in this campaign. Integrated marketing efforts caninclude product placement, street teams and a new referral system that encourages Android phoneowners to refer their friends and family to Android in exchange for some free phone service, premiumapplications, or Cyworld virtual currency, “Dotori.”Marketing Strategy for Joint Partners- Service Providers, Handset Manufacturers In regards to marketing to mobile service providers and handset manufacturers, Google shouldconsider following the lead of RIM and Apple and opening a local remote office with Korean staff and
  10. 10. support to maintain close relationships with its venture partners. Its business model is based onadvertising, so Android can offer advertising revenue as well as reduced-cost advertising positions inGoogle search and in Android pre-installed apps. This income stream will incentivize handset makers, andservice providers to work on Android’s behalf to saturate the Korean market.UNITED KINGDOMThe Sell or License Decision Android should enter the market itself rather than through licensing. The product, theoperating system, has already been manufactured and can be adapted for the UK market at a low cost(R&D), especially since user needs are not very different from the US market and Britons speak the samelanguage. The UK mobile phone use is sophisticated—the mobile advertising model can be applied togenerate profit for Google.Pricing While Android charges no royalty and instead generates revenue through mobile advertising, itcould reverse this decision if it chose to. Google is the #1 brand in the world and has presence in theUnited Kingdom. Also, there is a growing trend of consumers beginning to demand specific phones andsystems from their service providers (most recently with the iPhone). It would be possible for Google toask handset manufacturers to pay the royalty fee for the right to carry their operating system and drawconsumers—and therefore service providers to the handsets. Possible competitive reactions include the reduction or elimination of royalty fees by Microsoft,RIM, or Apple, allowing handset providers and service providers to either (a) pass the savings ontoconsumers or (b) keep the difference. As in the Korea case, this is not likely to happen because it is notlogical for Microsoft to lower its price to compete with Android because (1) Microsoft’s targetconsumers are not price-sensitive retail customers but business users and (2) Android currently does notmeet business users’ needs regardless of the price. RIM also charges a royalty fee and competes in the business and the consumer space. ItsBlackberry Storm is a direct competitor to Android for retail customers. In this case, Android couldrespond in the same way it could respond to a competitive reaction by Apple-offer advertising revenueshare to the handset manufacturers and emphasize its functionality (more games, applications) withconsumers. It could also work harder with application developers to make more games and applicationsfor the phone.Entry Strategy-Wide Distribution
  11. 11. The UK mobile service provider market is divided among many players-- taking this fragmentedmarket into consideration, it may be more beneficial to Google to advertise the Android operatingsystem separately from the service provider and try to get it installed in phones sold by as many mobilenetwork providers as possible. It could also work with different manufacturers and service providers tocreate branded promotional bundles that it could advertise to consumers in a co-promotional scheme. The mobile phone handset market is less fragmented than the mobile service market. Thelargest handset percentage share in the UK is owned by Nokia with 43% of the market. Sony-Ericssonhas 18% if the market and Samsung has 21% of the market. The remaining handset market share isdivided among Motorola, LG and others. 14 I would recommend that Android become installed first inNokia phones—and then distribute the OS to other players in the market.Positioning Google’s Android is the mobile OS that currently offers the most innovative technology and, due to itsopen platform, the most flexibility—potentially allowing developers to develop new applications and gamesfor Android before anyone else. Proper management of developers would allow Android to fully maximizethis advantage—particularly if it can influence application developers to create the majority of applications forAndroid. In regards to retail technology consumers, Google’s country-of-origin, the United States, cannotcannot be used to draw more consumers to Android or to demand a premium price.Marketing Strategy for Consumers- Create Consumer Pull There is a gradual change in demand for mobile phones today—UK consumers are beginning todemand specific phones and operating systems from their service providers (O2 profited from this shiftin consumer behavior in 2007 with their exclusive launch of the Apple iPhone; Vodaphone sales werepushed up significantly from their exclusive launch of the Blackberry Storm). I would recommend thatGoogle leverage this shift in consumer power by marketing directly to consumers to develop a consumerpull for their OS. Google’s goal at this early stage is to build awareness of the exciting new functionality of theoperating system and emphasize the design of the phones that it comes on. Design is very important to UKconsumers; Google should make efforts to ensure that its operating system comes equipped on well-designed phones. Celebrities do not have the same impact in the UK as it does in Korea. Instead,14 “Market Share,” Mobile Phones and Network Providers – UK, November 2008.
  12. 12. Android can work with handset makers and service providers to be put in branded packages like T-mobile package called “Life’s for Sharing." The marketing mix for the Android launch among mass consumers should include television,internet, movies and mobile internet advertising. More spend in television and integrated marketingand less spend on internet advertising would be appropriate (See Exhibit 4) to impact consumers wherethey are most accessible.Exhibit 4: MARKETING MIX- ConsumersAdvertising $ 9,000,000TV $ 5,800,000Internet $ 1,000,000Integrated Marketing(Viral marketing, Film product placement, street $ 2,500,000teams, etc.)PR $ 200,000 Television and integrated marketing campaigns play an important part in this advertisingcampaign and should be used to create awareness of the phone—with special emphasis on Android’sapplications and the phone’s design. The internet campaign should include targeted (search-based) adsas well as efforts to encourage users to write testimonials of their experience with the phone on popularproduct review sites. Integrated marketing efforts can include product placement, street teams andviral marketing on Bebo and Hi5- currently the most popular British social networking sites.Marketing Strategy for Joint Partners- Service Providers, Handset Manufacturers In regards to marketing to mobile service providers and handset manufacturers, Google canincentivize handset manufacturers to build Android phones by offering shares in Android advertising revenue.
  13. 13. Appendix 1- Android and Potential AdaptationsThe Android operating system (OS) is Google’s base software that runs on a “smart phone.” A smartphone can be defined as a mobile phone offering advanced capabilities beyond a typical mobile phone,often with PC-like functionality. It is open-platform software, which means that any software developercan access its code to create change it or to create software to run on it. Also, all of Android’s data andsoftware is stored online and on your phone simultaneously. This allows users to access their contactinformation on their computer and also allows Google to study usage habits and to send usersextremely targeted advertising. For example, you can look up a mapped route to a car dealership andAndroid can suggest related products and sales on your way to the location. It can later send you an adfor a new car. Another power feature is the ability to scan a UPC code in a store to instantly pull upcomparison prices. This would be appealing to users that regularly research prices before purchase.Android is designed to run on a 3G (or SCDMA) phone network, but can be modified to run on the morecommon CDMA network type at slower speeds and less functionality. The first Google phone widelyavailable, the G1, sells in the United States for $179.99 dollars with a 2 year contract with T-Mobile.Android has several global competitors in the smartphone OS category: Symbian (46.6% worldwide 15market share), Mac OS/iOS/iPhone (17.3% Market Share), 16 RIM/Blackberry (15.2% market share), 17 and 18Windows Mobile (13.6% market share). The iPhone is the most similar in target customer,interface, and capability to the Android G1. IPhone has the advantage of the Apple brand, intuitiveinterface and enthusiastic customers worldwide (worldwide market Share growth for iOS was 523% 19between Q3 ‘07-Q3 ’08).Because users shop for phones based on the total package the operating system developer andhardware manufacturer have to offer— how important these competitors are is a function of howentrenched the manufacturers are in the market and how much freedom users have in choosing theirphone (in the US, unlike many other countries, the users must choose among phones carried by theirmajor carrier). Android has been the primary draw for the users for the G1, but this is a temporarynovelty until it is carried on multiple phone models. Most users are looking for a complete package offunctionality for phones, and Google has some ability to influence its manufacturers to carry importantadaptations.15 Fortune Magazine; http://apple20.blogs.fortune.cnn.com/category/market-share/ November 7, 200816 Ibid17 Ibid18 Ibid19 Ibid
  14. 14. The Android is expected to become a worldwide leader for mobile phone operating systems. Itwill be carried on multiple cellular networks and used in phones built by the most popularmanufacturers. However, there are limitations to its ability to expand internationally. First, Google’s business model for Android depends on advertising revenue from both local andonline retailers. Its market, therefore, is limited to those regions with populations attractive to theseadvertisers (high discretionary income). These target regions must also contain retailers willing andcapable of paying for mobile phone advertising. Some retailers are already utilizing mobile phoneadvertising this in Europe and Asia, most commonly via SMS text messages. Another limitation for an Android mobile phone is distribution. The G1 can be bought online,but most phones today are bought in retail stores. In order to succeed, Android must joint-venture witha manufacturer (and carrier if following the US cellular market model) that is widely accepted by itstarget customers and that already has a distribution system in the country.Finally, Android’s potential is limited by its target customer. The Android OS can be run on a mass-produced, low-end phone, but the limitations of this hardware would force Android to severely limit itsfunctionality—and thus its differentiation and ability to compete successfully in the market. Therefore,assuming that Android will be run primarily on “smart phone” hardware, the target customer could bedefined as those that would purchase a “smart phone.” Because Android, like iOS, has yet to beaccepted by industry as a business productivity tool, this target customer likely to buy this phone for hisor her own personal use. The most similar phone to the G1 in the United States is the Apple iPhone; thetypical US buyer interested in buying the iPhone early in its life cycle had a household income of$75,000.00 (26% higher than the national average), is more likely to be male than female (72% male),has 58% likelihood to have complete college, and has an average age of 31 years old, with equal 20proportions of buyers between the age brackets of 15-24, 25-34, and 35-45.In the United States, smart phone buyers are relatively sophisticated users that own other internet devicesand computers. They use a smart phone to increase their convenience or productivity. They have ademand for a portable device with more applications than placing calls. However, transferring ourdefinition of the market demand for this product from the developed world to other countries is apotential error. The Android operating system and its associated hardware is capable of replacing thefunctionality of a laptop (dual core processor, 32 GB expandable hard drive, 192 Mb SDRAM, Qwerty20 Digital Life America. Solutions Research Group. http://www.intomobile.com/2007/06/13/chart-iphone-buyer-profile.html. Accessed February 18, 2009
  15. 15. 21keyboard, and an operating system to be released in laptops by 2010), digital camera (3.2 Mpixels)and cellphone.In the developing world, an Android phone like the G1 could be marketed as an all-in-one mobile devicefor users that do not have alternative access to the internet or to home computers. Google intends tosubsidize the price of the hardware (the phone itself) in developing countries with the potential ofgenerating mobile ad revenue. Also, because Android runs simultaneously on Google’s “cloud” and onthe phone, it could potentially be used as a “slim client” – a stripped-down computer that sends itsmajor processing tasks and data storage needs to servers elsewhere. GoogleDocs is an commonexample of such a processing task. A typical Android smart phone can be adapted to run wordprocessing and excel sheet programs and be used as a primary computing device. Regions whereground-based internet infrastructure is lacking but that supports cellular telephones would be goodmarkets for this type of device. The emergence of low-cost wireless broadband internet access throughWi-Max technology (beginning in 2010) would make this all-in-one device practical in parts of the 22developing world.An Android all-in-one device would require additional software adaptation (like word processingapplications) as well as hardware adaptations (ability to add a keyboard or TV monitor hookups).Education of customers (about its practicality and use) and education of local tech support would berecommended. The G1 battery is designed to accommodate 5 hours of heavy use, but creating easyaccess to additional low cost batteries and chargers (conventional and solar) would be helpfuladaptations. The addition of a powerful processor with low power demands like Intel’s halfnium chipcould also reduce its power demands. Android’s open source capability and easy-to-use Java programming language makes it markedlymore adaptable than other devices. For example, while the system’s default language is English, users orphone vendors can go online and load their language into the system. Adaptations for regional dialectsor uncommon languages can be made available for download by independent developers. Applicationsdesigned to meet the needs of local populations can be created by local developers and installed easily.21 “ You can run Android on a netbook, but why would you want to?” Liliputing. January 28, 2009http://www.liliputing.com/tag/android Accessed February 18, 200922 “Cisco Goes Where No WiMax Has Gone Before” The Motley Fool. February 10, 2009
  16. 16. Unfortunately, this dependence on local developers for applications will limit Android’s expansion tonations that (China and India, for example) have an abundance of technical talent. Android has potential for global expansion worldwide. The key to a successful expansion isstudy of the markets based on selling the phone in a westernized smartphone market definition as wellas the all-in-one device. As consumer acceptance of an all-in-one device in the developing world is anunknown factor, primary research here is essential.
  17. 17. Appendix 2- Determination of Global Markets for Expansion, RankingThis model used to establish the top countries to enter with the Android mobile operating system wasdeveloped after determining that its consumers will primarily be retail (non-commercial) buyers.Therefore, the following variables were relevant: population, GDP per capita and number of internetusers per capitaSmart phones devices running the Android operating system are likely to be purchased primarily byconsumers for personal use due to industry’s data security concerns and historical precedence from theiPhone. First, much like Google’s other SaaS application like Gmail and Google Docs, applications anddata used on Android phones are run online on Google’s server cloud. Google is having difficulty withthe adoption of these SaaS applications by industry partly due to the perception that SaaS applicationscould not keep data secure from competitors. 23 This perception is likely to apply to a mobile SaaSOS like Android. Second, iPhone has also been slowed in adoption for business use due tosecurity concerns-- making benchmarking to the iPhone appropriate. According to Nielson Mobile, themajority of iPhone users are personal users. In a Q1 2008 study, 15% of iPhone users said that theircompanies pay their iPhone bills, 24% said that they use the phone for business but pay the billthemselves and 61% said that they were personal users. 24Explanation of VariablesPopulationPopulation was chosen to explain market size because, as a consumer product, the an Android phonecould be purchased by anyone. This data was captured from NationMaster, 25 which uses 2008 datafrom the World Development Indicators database and the CIA World Factbook.GDP Per Capita23 Kulick, Matt. Lecture on Cloud Computing and Google Enterprise Applications. Cornell UniversityPhillips 101. 22 October, 200824 Media Blast. Nielson Mobile.http://www.nielsenmobile.com/html/press%20releases/iPhoneStatistics.html Q1 200825 http://www.nationmaster.com/red/graph/peo_pop-people-population&b_printable=1&ob=ws
  18. 18. Smartphones like Android phones (at present) are purchased primarily by users in wealthy nations. Icalculated GDP per capita from NationMaster data. 26 Most GDP numbers are from 2006; a few smallercountries had 2000 or 2003 data. NationMaster data is from the World Development Indicatorsdatabase and the CIA World Factbook.Number of Internet Users Per CapitaThe variable ‘number of internet users per capita’ is helpful in explaining the likelihood to purchasebecause it represents a nation’s interest in technology. I could have used the rate of adoption of mobilephones, but this would not be a relevant statistic. In some countries with high rates of mobile phoneuse, users buy cellular phones because the infrastructure for standard phones are lacking. Such reasonfor adoption will skew any results for a luxury/convenience product like a smartphone. Number ofinternet users was a statistic from the CIA World Factbook. 27I did not use an additional variable to represent supporting infrastructure statistic because it is highlycorrelated with Internet Usage Per Capita. Also, as mentioned in the previous report, the Androidoperating system can run on any kind of mobile network from CDMA to 3G. The rapid introduction ofWiMax in developing countries to make broadband wireless access affordable and ubiquitous will beginin 2010. Wireless service is available in most populous countries, as reflected in the recent UN report 28that six in ten people in the world now have a mobile phone subscription.Choice of methodThe Screening and Tradeoff technique for data analysis was used because Google has the resourcesneeded to compete for the best markets. The Screening and Tradeoff technique allows one to choosethe best markets regardless of competition.The screens that I chose to use were:26 http://www.nationmaster.com/red/graph/eco_gdp-economy-gdp&int=-1&b_printable=1&ob=ws27 https://www.cia.gov/library/publications/the-world-factbook/rankorder/2153rank.html28 UN: Six in ten people now have a mobile phone subscription. International Herald Tribune. March 3,2009
  19. 19. Minimum population of 20,000,000Minimum GDP per capita of $3,000Internet usage per capita of .42I chose a minimum population of 20,000,000 because this is a product that is not widely used andtherefore requires a large market base to sell to. A Minimum GDP per capita of $3,000/yr would allowAndroid to be marketed to the top 23% of earners in the world. Finally, the median internet usage rateamong the most final list of populous and wealthy nations is .42. I chose this as the screening minimumfor the final screening.Final Multiplying and SummingAfter the final screening, I was left with this list of countries: Canada, South Korea, United States, Japan,United Kingdom, Taiwan, Malaysia, Italy, Romania, Australia, Germany, France, Spain and Poland.These countries’ descriptive variables (Population, GDP Per Capita, Internet Usage Per Capita) werebanded according to their membership in deciles.Finally, I weighted each variable by their contribution to overall market demand for the product: • Market Size: 3 • Wealth: 4 • Likelihood of Purchase: 2Wealth was weighted highest because this product is an currently an expensive luxury product with expensivecomponents. Consumer’s ability to afford the product is fundamental for demand. Market size is alsoimportant because smart phones are marketed to a niche segment that can be proportionally sized tothe larger population. Finally, likelihood of purchase is weighted 2 because it is represented by InternetUsage Per Capita- a data point that can only be loosely correlated with interest in technology and, thus,smart phones.I included (and subsequently eliminated in the screening process) Brazil, Russia, India and China butadded the two larger countries-- India and China-- back to the final list because their large populations
  20. 20. and their wealth disparities could house a sizeable niche of individuals wealthy and educated enough tocreate sizeable demand for an Android smartphone. The final 10 countries recommended for furtheranalysis are (in random order): South Korea, United States, Japan, United Kingdom, China, India, Canada,Taiwan, Malaysia and Italy.Data ProblemsI would have liked to have a variable to explain consumer attitude on data privacy. One of Android’sbarriers to adoption is consumer reluctance to share their phone activities and data online.However, I could not find a representative statistic for all of the countries in the primary list.An additional variable that I searched for was adoption of smartphones on a country-to-country basis. Icontacted the Johnson School Management Library and Robert Roche of the CTIA (an internationalassociation for the wireless telecommunications industry)—but they were also unable to find thisinformation. If this information was available, it would be weighted 5 to reflect its importance inpredicting Android OS’s diffusion.
  21. 21. Exhibit A: Initial Screening a. PopulationMarket SizeRaw Screened Population (1s) Population (20,000,000 minimum)China: 1,330,044,544 Afghanistan: 32,738,376India: 1,147,995,904 Algeria: 33,769,668United States: 303,824,640 Argentina: 40,482,000Indonesia: 237,512,352 Australia: 21,007,310Brazil: 196,342,592 Bangladesh: 153,546,896Pakistan: 172,800,048 Brazil: 196,342,592Bangladesh: 153,546,896 Burma: 47,758,180Nigeria: 146,255,312 Canada: 33,212,696Russia: 140,702,096 China: 1,330,044,544Japan: 127,288,416 Colombia: 45,013,672Mexico: 109,955,400 Congo, Democratic Republic of the: 66,514,504Philippines: 96,061,680 Côte dIvoire: 20,179,602Vietnam: 86,116,560 Egypt: 81,713,520Ethiopia: 82,544,840 Ethiopia: 82,544,840Germany: 82,369,552 France: 61,037,510Egypt: 81,713,520 Germany: 82,369,552Turkey: 71,892,808 Ghana: 23,382,848Congo, Democratic Republic of the: 66,514,504 India: 1,147,995,904Iran: 65,875,224 Indonesia: 237,512,352Thailand: 65,493,296 Iran: 65,875,224France: 61,037,510 Iraq: 28,221,180United Kingdom: 60,943,912 Italy: 58,145,320Italy: 58,145,320 Japan: 127,288,416South Africa: 48,782,756 Kenya: 37,953,840Korea, South: 48,379,392 Korea, North: 23,479,088Burma: 47,758,180 Korea, South: 48,379,392Ukraine: 45,994,288 Madagascar: 20,042,552
  22. 22. Colombia: 45,013,672 Malaysia: 25,274,132Spain: 40,491,052 Mexico: 109,955,400Argentina: 40,482,000 Morocco: 34,343,220Sudan: 40,218,456 Mozambique: 21,284,700Tanzania: 40,213,160 Nepal: 29,519,114Poland: 38,500,696 Nigeria: 146,255,312Kenya: 37,953,840 Pakistan: 172,800,048Morocco: 34,343,220 Peru: 29,180,900Algeria: 33,769,668 Philippines: 96,061,680Canada: 33,212,696 Poland: 38,500,696Afghanistan: 32,738,376 Romania: 22,246,862Uganda: 31,367,972 Russia: 140,702,096Nepal: 29,519,114 Saudi Arabia: 28,146,656Peru: 29,180,900 South Africa: 48,782,756Iraq: 28,221,180 Spain: 40,491,052Saudi Arabia: 28,146,656 Sri Lanka: 21,128,772Uzbekistan: 27,345,026 Sudan: 40,218,456Venezuela: 26,414,816 Taiwan: 22,920,946Malaysia: 25,274,132 Tanzania: 40,213,160Korea, North: 23,479,088 Thailand: 65,493,296Ghana: 23,382,848 Turkey: 71,892,808Yemen: 23,013,376 Uganda: 31,367,972Taiwan: 22,920,946 Ukraine: 45,994,288Romania: 22,246,862 United Kingdom: 60,943,912Mozambique: 21,284,700 United States: 303,824,640Sri Lanka: 21,128,772 Uzbekistan: 27,345,026Australia: 21,007,310 Venezuela: 26,414,816Côte dIvoire: 20,179,602 Vietnam: 86,116,560Madagascar: 20,042,552 Yemen: 23,013,376Syria: 19,747,586 Total 5,996,984,230Cameroon: 18,467,692 Average 107,089,004Netherlands: 16,645,313 Median: 42,752,362Chile: 16,454,143Kazakhstan: 15,340,533Burkina Faso: 15,264,735Cambodia: 14,241,640Malawi: 13,931,831Ecuador: 13,927,650Niger: 13,272,679Guatemala: 13,002,206Senegal: 12,853,259Angola: 12,531,357
  23. 23. Mali: 12,324,029Zambia: 11,669,534Cuba: 11,423,952Zimbabwe: 11,350,111Greece: 10,722,816Portugal: 10,676,910Belgium: 10,403,951Tunisia: 10,383,577Czech Republic: 10,220,911Rwanda: 10,186,063Serbia and Montenegro: 10,159,046Chad: 10,111,337Hungary: 9,930,915Guinea: 9,806,509Belarus: 9,685,768Somalia: 9,558,666Dominican Republic: 9,507,133Bolivia: 9,247,816Sweden: 9,045,389Haiti: 8,924,553Burundi: 8,691,005Benin: 8,532,547Austria: 8,205,533Azerbaijan: 8,177,717Honduras: 7,639,327Switzerland: 7,581,520Bulgaria: 7,262,675Tajikistan: 7,211,884Israel: 7,112,359El Salvador: 7,066,403Hong Kong: 7,018,636Paraguay: 6,831,306Laos: 6,677,534Sierra Leone: 6,294,774Jordan: 6,198,677Libya: 6,173,579Papua New Guinea: 5,931,769Togo: 5,858,673Nicaragua: 5,785,846Eritrea: 5,502,026Denmark: 5,484,723Slovakia: 5,455,407Kyrgyzstan: 5,356,869
  24. 24. Finland: 5,244,749Turkmenistan: 5,179,571Norway: 4,644,457Georgia: 4,630,841United Arab Emirates: 4,621,399Singapore: 4,608,167Bosnia and Herzegovina: 4,590,310Croatia: 4,491,543Central African Republic: 4,444,330Moldova: 4,324,450Costa Rica: 4,195,914New Zealand: 4,173,460Ireland: 4,156,119Lebanon: 3,971,941Puerto Rico: 3,958,128Congo, Republic of the: 3,903,318Albania: 3,619,778Lithuania: 3,565,205Uruguay: 3,477,778Mauritania: 3,364,940Liberia: 3,334,587Oman: 3,311,640Panama: 3,309,679Mongolia: 2,996,081Armenia: 2,968,586Jamaica: 2,804,332Kuwait: 2,596,799West Bank: 2,407,681Latvia: 2,245,423Lesotho: 2,128,180Namibia: 2,088,669Macedonia, Republic of: 2,061,315Slovenia: 2,007,711Botswana: 1,842,323Gambia, The: 1,735,464Guinea-Bissau: 1,503,182Gaza Strip: 1,500,202Gabon: 1,485,832Estonia: 1,307,605Mauritius: 1,274,189Swaziland: 1,128,814East Timor: 1,108,777Trinidad and Tobago: 1,047,366
  25. 25. Fiji: 931,741Qatar: 824,789Cyprus: 792,604Réunion: 787,584Guyana: 770,794Comoros: 731,775Bahrain: 718,306Bhutan: 682,321Montenegro: 678,177Equatorial Guinea: 616,459Solomon Islands: 581,318Macau: 545,674Djibouti: 506,221Luxembourg: 486,006Suriname: 475,996Guadeloupe: 452,776Martinique: 436,131Cape Verde: 426,998Malta: 403,532Western Sahara: 393,831Maldives: 385,925Brunei: 381,371Bahamas, The: 307,451Iceland: 304,367Belize: 301,270French Polynesia: 283,019Barbados: 281,968Netherlands Antilles: 225,369New Caledonia: 224,824Samoa: 217,083Mayotte: 216,306Vanuatu: 215,446São Tomé and Príncipe: 206,178French Guiana: 199,509Guam: 175,877Saint Lucia: 159,585Tonga: 119,009Saint Vincent and the Grenadines: 118,432Kiribati: 110,356Virgin Islands: 109,840Micronesia, Federated States of: 107,665Aruba: 101,541Jersey: 91,533
  26. 26. Grenada: 90,343Northern Mariana Islands: 86,616Antigua and Barbuda: 84,522Andorra: 82,627Seychelles: 82,247Man, Isle of: 76,220Dominica: 72,514Bermuda: 66,536Guernsey: 65,726American Samoa: 64,827Marshall Islands: 63,174Greenland: 57,564Faroe Islands: 48,668Cayman Islands: 47,862Saint Kitts and Nevis: 39,817Liechtenstein: 34,498Monaco: 32,796San Marino: 29,973Saint Martin: 29,376Gibraltar: 28,002British Virgin Islands: 24,041Turks and Caicos Islands: 22,352Palau: 21,093Wallis and Futuna: 15,237Anguilla: 14,108Nauru: 13,770Cook Islands: 12,271Tuvalu: 12,177Saint Helena: 7,601Saint Barthelemy: 7,492Saint Pierre and Miquelon: 7,044Montserrat: 5,079Falkland Islands (Islas Malvinas): 3,140Svalbard: 2,165Norfolk Island: 2,128Niue: 1,444Tokelau: 1,433Christmas Island: 1,402Holy See (Vatican City): 824Cocos (Keeling) Islands: 596Johnston Atoll: 396Pitcairn Islands: 48Total: 6,705,862,170
  27. 27. Average: 27,825,154.20 Median: 4,467,937 Minimum (border) 20,000,000 b. Wealth Per CapitaWealth per capita (=GDP/Population) Wealth per capita (GDP/Population)Raw Screened GDP GDPAfghanistan: $256.55 Algeria: $3,397.34Algeria: $3,397.34 Argentina: $5,287.73Argentina: $5,287.73 Australia: $36,567.16Australia: $36,567.16 Brazil: $5,439.28Bangladesh: $403.53 Canada: $37,680.26Brazil: $5,439.28 Colombia: $3,017.66Burma: $1,560.57 France: $36,546.72Canada: $37,680.26 Germany: $35,288.29China: $2,006.00 Iran: $3,383.51Colombia: $3,017.66 Italy: $31,726.53Congo, Democratic Republic of the: $128.44 Japan: $34,096.84Côte dIvoire: $866.42 Korea, South: $18,355.42Egypt: $1,315.38 Malaysia: $5,893.00Ethiopia: $161.31 Mexico: $7,632.02France: $36,546.72 Peru: $3,196.24Germany: $35,288.29 Poland: $8,798.10Ghana: $551.94 Romania: $5,466.35India: $789.43 Russia: $7,014.39Indonesia: $1,534.48 Saudi Arabia: $11,005.87Iran: $3,383.51 South Africa: $5,227.08Iraq: $446.56 Spain: $30,228.60Italy: $31,726.53 Taiwan: $23,061.88Japan: $34,096.84 Thailand: $3,149.13Kenya: $558.20 Turkey: $5,601.53Korea, North: $1,259.84 United Kingdom: $38,478.25Korea, South: $18,355.42 United States: $43,452.10Madagascar: $274.38 Venezuela: $6,884.84Malaysia: $5,893.00 Total: 455,876Mexico: $7,632.02 Average: 16,884.30
  28. 28. Morocco: $1,668.65 Median: 7,632Mozambique: $357.45 Minimum: $3,000.00Nepal: $272.76Nigeria: $784.15Pakistan: $745.54Peru: $3,196.24Philippines: $1,217.25Poland: $8,798.10Romania: $5,466.35Russia: $7,014.39Saudi Arabia: $11,005.87South Africa: $5,227.08Spain: $30,228.60Sri Lanka: $1,276.30Sudan: $934.01Taiwan: $23,061.88Tanzania: $317.90Thailand: $3,149.13Turkey: $5,601.53Uganda: $297.18Ukraine: $2,307.05United Kingdom: $38,478.25United States: $43,452.10Uzbekistan: $628.21Venezuela: $6,884.84Vietnam: $706.99Yemen: $828.07Total: 480,331Weighted average: 8,577.33Median: 2,157Minimum: $3,000.00
  29. 29. c. Internet Usage Per CapitaLikelihood of Purchase (Internet Users/Population) Likelihood of Purchase (Internet Users/Population)Raw Screened Internet Users Per Capita Internet Users Per CapitaAlgeria 0.10 Canada 0.84Argentina 0.23 Korea, South 0.74Australia 0.54 United States 0.73Brazil 0.25 Japan 0.69Canada 0.84 United Kingdom 0.66Colombia 0.27 Taiwan 0.64France 0.51 Malaysia 0.63Germany 0.52 Italy 0.55Iran 0.35 Romania 0.54Italy 0.55 Australia 0.54Japan 0.69 Germany 0.52Korea, South 0.74 France 0.51Malaysia 0.63 Spain 0.49Mexico 0.21 Poland 0.42Peru 0.26 Total: 8.49Poland 0.42 Average: 0.606545035Romania 0.54 Median: 0.59Russia 0.21 Minimum: 0.42Saudi Arabia 0.22South Africa 0.10Spain 0.49Taiwan 0.64Thailand 0.20Turkey 0.18United Kingdom 0.66United States 0.73Venezuela 0.22Total: 11.30931901Average: 0.418863667
  30. 30. Median: 0.415576903Minimum: 0.42Exhibit B: Normalized Data, Weighting, Final List excluding India and ChinaMarket Size (Population) Wealth (GDP Per Capita)Weight: 3 Weight: 4 Band ID Band ID (Quintile) (Quintile)Australia 21,007,310.00 1 Australia 36,567.16 8Canada 33,212,696.00 3 Canada 37,680.26 8France 61,037,510.00 8 France 36,546.72 7Germany 82,369,552.00 8 Germany 35,288.29 6Italy 58,145,320.00 5 Italy 31,726.53 5Japan 127,288,416.00 9 Japan 34,096.84 6Korea, South 48,379,392.00 6 Korea, South 18,355.42 3Malaysia 25,274,132.00 3 Malaysia 5,893.00 1Poland 38,500,696.00 4 Poland 8,798.10 2Romania 22,246,862.00 1 Romania 5,466.35 1Spain 40,491,052.00 5 Spain 30,228.60 4Taiwan 22,920,946.00 2 Taiwan 23,061.88 3United UnitedKingdom 60,943,912.00 7 Kingdom 38,478.25 9United States 303,824,640.00 10 United States 43,452.10 10Total: 945,642,436.00 Total: 385,639.51Average: 67545888.29 Average: 27545.67906Median: 44,435,222.00 Median: 32,911.68
  31. 31. Likelihood of Purchase (Internet Users Per Capita) Final List of Countries =SUM of Each Band ID xWeight: 2 Weight Band ID RAN (Quintile) KAustralia 0.54 3 United States 86.00 1 UnitedCanada 0.84 10 Kingdom 71.00 2France 0.51 2 Japan 67.00 3Germany 0.52 3 Canada 61.00 4Italy 0.55 5 France 56.00 5Japan 0.69 8 Germany 54.00 6Korea, South 0.74 9 Korea, South 48.00 7Malaysia 0.63 6 Italy 45.00 8Poland 0.42 1 Australia 41.00 9Romania 0.54 4 Spain 33.00 10Spain 0.49 1 Taiwan 30.00 11Taiwan 0.64 6 Malaysia 25.00 12UnitedKingdom 0.66 7 Poland 22.00 13United States 0.73 8 Romania 15.00 14Total: 8.49 Total: 654.00 0.60654503 46.7142857Average: 5 Average: 1Median: 0.59 Median: 46.50
  32. 32. Appendix 3- Market Descriptions-Korea and United KingdomKOREAWho are the c ?Smartphone phone users in Korea can be divided into two segments: corporate consumers and retailconsumers. Corporate consumers place greater emphasis on productivity-enhancing applications and
  33. 33. security. Retail consumers demand a bundle of attributes including design, price, and function andpopularity of the phone. Both retail and corporate consumers demand standard Korean languagefeatures like Korean language input and display.What are their purchase habits (decision-making, location of purchase, etc.)?Consumer sophistication in Korea is very high, as nearly 93% of Koreans carry mobile phones. 29 Primaryresearch has indicated that, while the final decision of which phone to purchase is one of personalpreference, word of mouth and popularity is very important. User reviews online are very influential inthe purchasing process. Koreans consider their phones (denoting a difference in product definition) as afashion accessory and design is key, often eclipsing price and functionality as a criterion. Importance offunctions differ by consumer age- gaming and television viewing is more important to youngergenerations.The market is very trend-based where new phones are introduced frequently with a lot of promotionscelebrity endorsements and advertisements. Handset price is less important than service subscriptionprice (typically $30-40/mo) since service providers provide subsidized handsets in exchange forcustomer contracts.Phones can be purchased in several locations including department stores, service provider stores, megaelectronics stores (100+stores in one building) and temporary street promotion booths. Prices differ atthese distribution points, so people often look for the best product/discount/service bundle.How are products and services being used?Mobile phones have become an important part of everyday life in Korea and are far more integratedinto day-to-day activities than people in most other countries. According to mTrends, 63 percent ofSouth Koreans make payments using their cell phones. In 2006, 30 percent of students sent over 100text messages a day. Koreans watched an average of 129 minutes of television on their cell phonesevery day and 37% have downloaded games onto their cell phones. 3029 “Apple, Nokia eye the Korean market,” The Korea Herald, August 21, 200830 http://www.m-trends.org/2008/10/a-day-in-the-life-of-a-mobile-phone-in-seoul.html
  34. 34. If the market is changing, how?The worldwide mobile market is in flux. The global financial crisis has been leading demand to drop asconsumers are choosing to delay upgrading their phones. 31 Mobile phone sales have been suffering adrop in volume sales year-over-year worldwide. Smartphones, however, are still at the early part oftheir product cycle and their sales have continued to increase despite the economic downturn. Theirsales worldwide are predicted to grow 8.9 percent this year and increase to 24 percent in 2010. 32Korean smartphone sales are increasing rapidly. The first smartphone, the Samsung Ultra MessagingPhone, arrived in 2005 but failed to sell in large numbers due to high prices and problems with theinterface. Last year, smartphones made up 1% of all mobile phone models on sale. However, thesuccessful introduction and preliminary sales of several new models (Blackberry, HTC Dual Touch) leadsindustry experts to expect smartphones to sell increasingly well in the coming years. 33Korea’s mobile data networks are also changing. When Korea chose a 2G network standard to build itsmobile infrastructure, it used CDMA, which differs from the global standard and created a competitivehurdle for other standard phone makers. It is now shifting to 3G networks, thus flattening the playingfield for competitors as well as supporting high-data smartphone usage. Currently, 50% of Korea’smobile phone subscribers have 3G services included in their phone plans.Foreign handset manufactures are likely to be hurt by the drop in value of the Korean won. This drop invalue will likely raise the import prices of foreign goods for domestic buyers and hurt demand for thesephones.What is the distribution system (if relevant) or the entry structure of other foreign competitors (ifrelevant)?31 Joan Ng, “Mobile phone makers find ways to survive hard times,” The Edge Singapore, January 19,200932 Brian Perez, “Smartphones set to weather market decline.” South China Morning Post, December 23, 200833 “Spring is smartphone season, from the iPhone to the Insight,” Joins.com, February 27, 2009
  35. 35. The largest mobile phone service provider is SK Telecom, which has more than 22 milion subscribers andmore than 50% market share. 34 Korea’s second-largest service provider is KTF (Korea Telecom Freetel)with 12 million subscribers.Like in the US, phones in Korea are sold by the service provider, often with a price subsidy applied to thehandset cost in exchange for signing a service contract. SK Telecom is the largest telecommunicationprovider in Korea with more than 22 million subscribers and 50% market share. 35 Korea’s second-largestservice provider is KTF (Korea Telecom Freetel) with 12 million subscribers— the first Korean mobilephone service to offer the Apple iPhone (late 2009). 36Phones sold in Korea are manufactured by local players—Samsung and LG account for 80% of thehandset market. 37 Locals Pantech and Curitel own 18% of the handset market and US-based Motorolahas a market share of less than 10%. 38An operating system trying to enter Korea would be wise to joint-venture with Samsung or LG as well as SK Telecom or KTF. There are four foreign handsetmanufacturers in Korea today-Motorola, Casio and HTC and newcomer RIM (Blackberry). 39Who are your competitors and how are they communicating with customers?Most smartphones in Korea use Microsoft Mobile OS which accounts for 90 percent of the market. 40SK Telecom has recently introduced the Blackberry phone 41 that is targeted primarily at businessconsumers. This is a new entry in Korea’s traditionally closed smartphone market environmentdominated by Korean firms.Korean telecommunications firms (service providers and handset manufacturers) spend heavily onmarketing--often using celebrities in their advertising. Primary research has indicated that image and a34 “SK Telecom and RIM introduces the Blackberry solution in Korea,” ENP Newswire, December 16, 200935 Ibid36 “Spring is smartphone season, from the iPhone to the Insight,” Joins.com, February 27, 200937 “Apple, Nokia eye the Korean market,” The Korea Herald, August 21, 200838 “Can foreign handsets succeed?,” The Korea Herald, March 3, 200939 “Apple, Nokia eye the Korean market,” The Korea Herald, August 21, 200840 http://news.softpedia.com/news/Android-to-Go-to-Korea-This-Year-107829.shtml41 “SK Telecom and RIM introduces the Blackberry solution in Korea,” ENP Newswire, December 16, 2009
  36. 36. feeling of belonging (collectivism) is very important to Koreans, so consumer communications ofteninclude celebrities in advertising.Most Koreans are solely familiar with the larger local firms like Samsung and LG. I would recommendthat a new entrant in the smartphone OS market co-brand with well-known Korean firms to takeadvantage of its top-of-mind position in Korea. It would be very difficult for a multinational to justifyoutspending local firms there in an effort to compete for consumer awareness.What are the political restrictions/regulations?Until late last year, one of Android’s largest stumbling blocks for entry into Korea was its local mobilesoftware standard, WIPI (Wireless Internet Platform for Interoperability), designed to create barriers toentry by foreign handset manufacturers and maintaining market share for LG and Samsung. 42 Thisstandard was middleware (software) that had to be integrated (at great expense) into a phone’soperating system. On December 8, 2008, it was announced that this requirement will be liftedbeginning April 1, 2009, allowing access to the Korean market by foreign systems like Apple OS.Sumsung/RIM’s Blackberry was granted an exception to the rule just prior to the announcement.It can be predicted that these regulatory changes will make Korea’s smartphone OS market morecompetitive and fragmented; Apple, HTC, and Nokia have announced plans for new smartphones to bereleased in Korea this year.UKWho are the customers?As in Korea, mobile phone consumers in the UK can be divided into two segments: corporate consumersand retail consumers. Corporate consumers place greater emphasis on productivity-enhancingapplications and security. As stated in the prior section, suspicions regarding security due42 Cho Jin-seo, “IT regulation prevents Korean access to iPhone,” The Korea Times, June 10, 2008
  37. 37. to the SaaS model used by the Android system compels Google to focus on retail buyers and smallbusiness buyers in the short term. Retail consumers demand a bundle of attributes including design,price, and function. Unlike Korean consumers, popularity of the phone is not as important as theindividual buyer’s decided preference for the phone for him/herself.The UK mobile phone market is well-saturated. There are 74 million mobile phone subscribers with apopulation of 60 million. The smartphone market in the UK is large, contributing to sales of 470,000,000pounds in 2008.Over 85% of adults have a mobile phone. The UK population is also growing—making this an attractivemarket for suppliers. The British population has historically been aging, but those that are beingmarketed to by cell-phone providers (below 45) have grown up with technology and are not predictedto leave the marketplace.What are their purchase habits (decision-making, location of purchase, etc.)?The typical phone purchase transaction in the UK proceeds as follows: (1) the consumer determines amonthly budget for mobile phone service and selects a service plan accordingly. (2) The consumerchooses a handset that fits the predetermined budget (price) based on design and functionality;According to primary research, design is considered more important than functionality for the typicalBritish consumer.Consumers are increasingly purchasing bundles of phones and service contracts in branded packageslike T-mobile package called “Life’s for Sharing” and Nokia’s “Comes with Music.” As other mobilephones are increasingly becoming commoditized, branding is becoming more and more critical to theprofitability of firms in this industry.Smartphones are more costly investments than regular phones, and UK shoppers are researching thesephones online before purchasing. 50% read online customer reviews before buying a smartphone,compared to 30% that read online reviews before buying a cellphone. 4343 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,2009
  38. 38. UK mobile phone buyers purchase most (61% of all phone sales volume) phones in a fragmented groupof specialty mobile phone stores like “The Carphone Warehouse” (13% of specialty store volume),Phones4U (8% of specialty store volume) and O2 stores (7% of specialty store volume). 15% of all phonesales volume is sold in department stores and electronics stores. 10% are sold in supermarkets and 12%are sold via internet/telephone/mail order. 44How are products and services being used?While mobile phone application usage is not as high in the UK as it is in Korea, most British phoneowners report using most of the features available on their phones. 65% of mobile phone users reporttaking pictures on their phone (33% year on year growth between 2007 and 2008). 44% send pictureson their phone (63% growth), 36% use Bluetooth, 35% play games (59% growth), 31% listen to music(72% growth), 31% make videos (24% growth), 24% browse the internet (33% growth), 22% listen to theradio (57% growth), and 14% send video (75% growth). The United Kingdom’s heavy mobile applicationuse may be correlated with its well-developed mobile phone infrastructure; 90% of the country iscovered by high speed 3-G networks.Smartphones are used heavily for regular emailing (77% of smartphone users), GPS positioning (40%)and instant messaging (38%). 45 A large number of UK consumers, 1 million, now use mobile bankingservices. 46If the market is changing, how?The mobile phone market in the United Kingdom, like that in the rest of the world, is being affected bythe global financial crisis. Consumers are reducing their subscription plans by an average of 4 poundsper month. 47 However, a Mintel survey conducted in November of 2008 indicates that the economy willhave only limited impact on Briton’s mobile phone consumption. Only 12% of respondents indicated44 “Distribution,” Mobile Phones and Network Providers – UK, November 200845 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,200946 “Monolink aligns with the growth of smartphones,” M2 Presswire, February 6, 200947 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,2009
  39. 39. that they would switch networks for a cheaper service plan and only 4% planned to switch from acontract to a pay-as-you-go system. 48 Further, a large percentage (60%) of UK mobile users does notexpect the economy to change their mobile phone buying decisions. 49Despite the state of the economy, smartphone sales are rising. 13% of all handset sales in 2007 weresmartphones and 23 % of all handset sales in 2008 were smartphones. This is due in part to plannedupgrades of current mobile phones. According to Computer Weekly, 25% of Brits say that their nextphone will be a smartphone. 50There is another market-shifting trend beginning in the mobile phone industry. The popularity ofparticular smartphone brands like the Apple iPhone have drawn market share power from the serviceprovider to the handset manufacturer and the consumer. Consumers are increasingly demandingparticular phones (and operating systems) from their service provider 51—moving away from theirtraditional decisions model based on price. O2 profited from this shift in consumer behavior in 2007with their exclusive launch of the Apple iPhone. Vodaphone sales were pushed up significantly fromtheir exclusive launch of the Blackberry Storm. I would recommend that Google leverage this shift inconsumer power by marketing directly to consumers to develop a consumer pull for their OS.What is the distribution system (if relevant) or the entry structure of other foreign competitors (ifrelevant)?Like in Korea, mobile phones are sold by service providers as a package under a service contract. UnlikeKorea, however, the UK mobile phone service market is competitive and fragmented. The largestmarket shares in mobile services are owned by 02 with 25.6% of the UK market, Orange with 21.3% ofthe market, Vodaphone with 22.1% and T-Mobile with 17.2%. Also selling mobile phone services in theUK are Virgin Mobile, 3 and Tesco. 52 Taking this fragmented market into consideration, it may be morebeneficial to Google to advertise the Android operating system separately (no co-branding) from the48 “Market in Brief,” Mobile Phones and Network Providers – UK, November 200849 Ibid50 “Smartphone sales are keeping the flagging UK mobile market afload, shielding it…,” Computer Weekly, April 21,200951 Ibid52 “Market Share,” Mobile Phones and Network Providers – UK, November 2008
  40. 40. service provider and try to get it installed in phones sold by as many mobile network providers aspossible.The mobile phone handset market is less fragmented than the mobile service market. The largesthandset percentage share in the UK is owned by Nokia with 43% of the market. Sony-Ericsson has 18%if the market and Samsung has 21% of the market. The remaining handset market share is dividedamong Motorola, LG and others. 53 Due to the fragmented nature of the handset market, I wouldrecommend that Android become installed first in a Nokia phone—and then distribute the OS to otherplayers in the market.Who are your competitors and how are they communicating with customers?Google’s Android OS’s competitors in the UK are as varied as the handset manufactures and includeSymbian OS, Apple’s OS (iPhone), RIM’s Blackberry OS, Windows Mobile OS, and Linux OS.Advertising spend in the mobile handsets and networks sector has been dropping steadily since the endof 2006, dropping 15.7% overall between Q3 2006 and Q3 2008. In response, service providers arebranding phone/subscription packages and advertising them in innovative ways. T-mobile’s “Life’s forSharing” package and campaign includes integrated marketing techniques like the hiring of performanceartists and training of T-mobile employees to “unexpectedly” dance in London’s Liverpool Station.Audience member’s reactions were filmed for use in commercials. 54 Related ads were placed in digitaloutdoor ads, print ads, online ads, and radio advertisements as well as in advertisements in moviepreviews.Is should be noted that--in contrast to Korean advertising—the “Life’s for Sharing” campaign starredregular people, not celebrities. Advertisers in the United Kingdom and the US do not use celebrities asoften as Japan, Korea and China (where over 20% of ads feature celebrities). 55 Research firm MillwardBrown has determined that this is due to differences in effectiveness for celebrity endorsements. Someof these differences could include the emphasis on individuality over collectiveness in Europeancountries.53 “Market Share,” Mobile Phones and Network Providers – UK, November 200854 http://adzilla.blogspot.com/2009/01/t-mobile-lifes-for-sharing.html55 http://www.millwardbrown.com/Sites/MillwardBrown/Media/Pdfs/en/KnowledgePoints/358D2249.pdf
  41. 41. What are the political restrictions/regulations?There are very few political restrictions that would affect a foreign mobile service/handset/OS firm fromentering the UK phone market. To illustrate the openness of the UK mobile phone regulatoryenvironment, look at the dominant players in the industry. The dominate handset manufactures arefrom Finland (Nokia), Sweden and Japan (Sony Ericsson) and Korea (Samsung). The largest mobilephone service providers are from the UK (O2 and Vodaphone), France (Orange) and Germany (T-Mobile).

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