overview of Smart Phone industry i am not a pro in analysis

1. SMART PHONES
Industry analysis
MOHD MOHSIN
PG 20173049
BATCH 2017-19

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INTRODUCTION
Today Smart phones have moved beyond their primary role of voice communications and
become an essential entertaining device for Smartphone users. We are in an era where users
buy mobile phones not just to be in touch, today‘s youth use it to express their thoughts, for
social networking, to show their interests in playing games, reading news, surfing on the
internet, listening to music, chatting with friends & families and even check their bank
balances. There are various phone manufacturers providing handsets.
The Indian Mobile industry is fastest growing in world, Total growth of 15% smart phones
annually and mid range smart phone sees highest growth and Top contributing company are
Samsung, Xiaomi, Vivo, Oppo, and Lenovo.
Fact about Indian Smart Phones Market-
- Smart phones user in India Till 2017 are 299.24 million which expected to grow 442 million
in 2022.
-Range of Smart phones In India – High Range 40k to 70 K mid Range 12 k To 25 K low
ranges 7k to 10k.
NATURE OF MARKET-
The Smart phones Industry Is Oligopoly, it is one of largest and most profitable market in
world. The most identifying characteristics of an oligopoly is the number of sellers. In the
case of smart phones industry the number of sellers are small, each of them holding a sizable
percentage of the market share with Samsung and xiaomi being Dominant Players in India.
28%
14%
11%
10%
9%
28%
Market share of smart phones
samsung
xiaomi
vivo
lenovo
oppo
others

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When the firm working within an oligopoly, the number of sellers are so small that they must
anticipate their competitors reactions before making pricing decision. Being an Oligopoly the
barriers to entry for the smart phones market is very high. It is extremely difficult for new
firms to enter the market as a barriers such as existing patents, control over customer
switching cost and strong brand image block access to new firm.
Example- Samsung existing loyal customer would less chance of inclined to switch to start-
up Mobile company because they have strong customer loyalty and trust in brand which they
are using.
Characteristics of Oligopoly Market-
 Interdependence – like vivo launches new model which capture market it may
provoke war between companies to capture market.
 Advertising- under oligopoly major policy change in one firm likely to have
immediate effect on others companies, so advertising is key tool in hand of an
oligopolistic.
 Competition- Every seller keep watch on their Rivals moves
 Barriers to entry- For long run of companies there is some barriers.
 Group Behaviour – There is competition between companies but they have different
common goals. example- Vivo and Oppo both are trying to maximise the profit but in
different way like vivo selling phones with tag camera and music phone and oppo by
selling tag selfie camera phones.
Demand - Supply Analysis-
When firms work within an oligopoly they have joined control over the price of the
product
(Smart Phone). Thus there exists a mutual Interdependence between companies to
strategically price their Product in order to mutually enjoy the highest profit. In case
of smart phones industry firms are forced to comply with the prices that are set in
market, or risk losing demand of their product. When one firm lower the price of their
smart phones the demand will increase and thus profit will increase. This increase in
profits cannot be enjoyed for long because other firms will decrease the prices of their
smart phones as well, in order to even the playing field.

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Merger also exists within the smart phones market. When firms see danger of new
firm entries, they merge and create joint policies in product pricing and production in
order to discourage the entry of new firms. Example- Microsoft and Nokia, Lenovo
and Motorola, Le’eco and coolpad.
Nature of elasticity of Demand- (Price elasticity) Price Elasticity of demand can be
defined as the measurement of responsiveness of the quantity demanded of good due
to change in price.
Price elasticity of demand= (%change in qty demanded) >1 or <1
% change in price
The demand For SMART PHONES is quite elastic small change in price Have huge
impact on demand.
Income elasticity- = (%Change in qty demanded)
(%Change in income) If Income Of person
increase qty demanded for smart phones also increase and maybe person start
buying one or more high range phones.
Cross price elasticity- (Complimentary Goods) as we seen in from previous year due to
price war between telecom companies cause more demand in smart phones. When Jio enter
in market providing free 4g sim then we seen increase in demand of smart phones, other
companies also decrease tariff plan which increase demand of phones.
Govt. Interventions- Indian Government always Play an important Role in economy by
intervening, in smart phones industry Government always Try To make Business friendly
through its Scheme for manufacturer and user both.

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 Indian Govt always trying to bring more manufacturing jobs in India, Govt want that
Technology Company invest more in India because of growth in smart phones
industry.
 Making India is a programme launched by the government of India to encourage
national as well as international companies to manufacture product locally in India.
 Indian Government always trying to encourage Companies By giving them extra
Benefit On setting up plants in India.
 In India only 3% smart phones manufacture and Government target for 30% in next 5
years.
 Xiaomi is One of Company who starts manufacturing phones in India under make in
India initiative.
 Currently 11 Billion worth of components required in manufacturing if Government
successfully raise share to 30% in 5 year then 80 billion worth of components required
which can lead domestic’s contribution to 32% By 2022.
 Govt restrictions- Indian Government start imposing basic custom duty on imported
phones 10% which make them more expensive than local phones from July 2017.
 Govt of India Make new foreign investment rules for Smart phones retailers exempt
the company for three years to source 30% of the products sold in company locally
owned stores.
 Companies which are manufacturing phones in India and selling at High range from
14k to 25k they must need to build R&D in India.
Investment needed- To start Smart phones industry in India it need huge investment if
manufacture in India. To setup one manufacturing plant here it needs 500cr. There is other
ways also to start company by directly import from china with own given configuration. But
make in India imitative Help in many case by providing levied on Tax, lease land, and other
benefits from government for 5 years.
Price - quantity determination- (Determination of Price)
Price determination in Smart phones industry depend upon various factor from cost of
production, technology use, to competitor behaviour, which give a manufacturer to set a price
of smart phones at given price that it can easily sell out in market, and manufacturer wanted
to earn maximum profit .

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Some factor which affect the price of smart phones-
 Cost of Production- cost of production plays an important role in smart phones
industry because setting up a manufacturing plant can cost more that’s why many
time companies assemble their phones from outsourcing which can increase or
decrease the cost of phones.
 Price fix By other sellers- In smart phones industry competitor play major role in
fixing price of the smart phones. for example- In 2014 when budget smart phones
revolution happened by xiaomi in India By setting price of his first phones mi 3 in
India 14 K which effect the price of Asus zenfone price which is also planning to
launched in same year, from that year the price setting start depending on others
player move.
EFFECT OF CHANGE IN DEMAND ON EQUILIBRIUM PRICE AND QUANTITY
In smart phones industry demand play an important role because when the demand of smart
phones increase and company don’t have enough supply of phones then equilibrium price
still same due to high in demand. For example- when Samsung launch his most anticipated
phones Note 8 in market then price set by Samsung is 67 K and they know that demand for
note 8 do not decrease so they may charge higher price than 67 k due to high demand and low
in supply.