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1. Analysis of Five Forces
Cell Phone Industry
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2. Cell Phone Industry
• There are over 110 cell phone manufacturing companies
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Source: www.GSMArena.com

3. Apple Inc.
• Our focus of study is Apple Inc.
• American multinational technology company from California,
that designs, develops, and sells consumer electronics,
computer software, and online services
• Launched first generation of smart phones named iPhone in
June 2007
• iPhone contributes 62% revenue with 17.7% of market share
in smartphone industry
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Source: www.Wikipedia.com

4. Apple Inc.
• Apple has successfully launched 14 models/variants of iPhone
series
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5. Apple’s Brand Worth
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Net Worth: $ 170 billion
Source: www.interbrand.com

6. Five Forces Model
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7. Competitors
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8. Competitors
1. Who are the main competitors?
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Companies Market Share
Samsung* 24.8%
Apple 17.7%
Huawei** 8.4%
Xiaomi** 5.6%
Lenovo 5.4%
LG 5.3%
* Strong Competitor **Emerging Competitors
Source: www.smartphonemarketresearch.com

9. Competitors
2. How would you group remaining competitors?
Strategic Group Map
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Price
Performance/Specifications
High
Low
Low High
Ultra
Premium
Premium
Mid-Range
Basic
Low

10. Competitors
3. What are the key value propositions of the
main competitors?
Key value proposition of Samsung:
• Quality high technology products at a reasonable price
• Quality: reliable, fully featured, good products
• High Tech: TVs, cell phones, camera, etc.
• Reasonable Price: they are not the cheapest but also not
expensive
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Source: www.Qoura.com

11. Competitors
4. What customer segments do they focus on?
Samsung is focusing:
• Upper-middle and upper class technology savvy customers are
target of high-end phones
• People between ages of 15-25 because their spending power
has increased during last decade
• People between ages of 26-50 because they have the ability to
purchase high-end phones 11

12. Competitors
5. What do you think their cost structure looks
like?
• Samsung is spending considerable percentage of profits on
R&D
• Samsung is also spending on various advertising and
marketing activities
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13. Analysis
According to our analysis, competition in smartphone industry is
a strong force based on following reasons:
• High aggressiveness of firms (strong force)
• Low switching cost (strong force)
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14. New Entrants
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15. New Entrants
1. Who are the new entrants in your market?
• Xiaomi, a Chinese cellphone manufacturing company
• Producing cellphones, android smartphones and tablets
• Became world's 4th largest smartphone maker in 2015 by
selling 70.8 million units
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Source: www.smartphonemartketresearch.com

16. New Entrants
2. How are they different?
• Xiaomi is producing high quality phones at much cheaper
costs than major players of the industry by making use of:
• Cheaper factors of production
• Low advertising costs
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17. New Entrants
3. What competitive advantage or disadvantage
do they have?
• Cost advantage is the main competitive advantage of Xiaomi
• Brand recognition is the main disadvantage of Xiaomi
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18. New Entrants
4. Which barriers must they overcome?
• Customer preferences, brand recognition are the main
barriers in smartphone industry
• Xiaomi needs to focus on brand development
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Source: www.Wikipedia.com

19. New Entrants
5. What are their value propositions?
• Xiaomi wants to provide high quality products to its
customers. This involves improving product value and lower
customer cost.
• Unique Features:
• MIUI System
• Big Screen
• CPU
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Source: www.justforfans.wix.com

20. New Entrants
6. Which customer segments are they focused
on?
• Currently, they are focusing on low-end technology savvy
customers
• Most of its sales are in China and the developing countries
• However, with high quality phones at low prices, they can
challenge major players of the industry
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21. New Entrants
7. What is their cost structure?
• Xiaomi’s cost structure includes low R&D costs, low
advertising costs
• Xiaomi is taking advantage of cheap factors of production
because it is based in China
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22. Analysis
According to our analysis, entry of new players in smartphone
industry is a moderate force based on following reasons:
• High capital requirements (weak force)
• High cost of brand development (weak force)
• Capacity of potential new entrants (strong force)
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23. Substitutes
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24. Substitutes
1. Which products or services could replace the
products or services of this industry?
• Within same industry, best substitutes of iPhone include:
• Samsung Galaxy S6
• HTC One M9
• LG G4
• Samsung Galaxy Note 5
• Motorola Moto G3
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25. Substitutes
1. Which products or services could replace the
products or services of this industry? (continued)
• Outside this industry, potential substitutes of smartphones
include:
• Wearable devices e.g. smartwatches
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26. Substitutes
2. How much do they cost as compared to
products of our industry?
• Current versions of smartwatches are relatively inexpensive
(but used as bundled product with smartphones)
• In future, standalone smartwatches are expected to be
cheaper
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27. Substitutes
3. How easy is it for customers to switch to these
substitutes?
• 2015 has been a year of popularity for wearable devices
• Standalone smartwatches developed with same specifications
and performance as of smartphones can gain popularity
• Behavioral change might take a decade to completely replace
smartphones
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28. Analysis
According to our analysis, threat of substitutes in smartphone
industry is a weak force based on following reasons:
• High availability of substitutes (moderate force)
• Low performance of substitutes (weak force)
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29. Suppliers
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30. Suppliers
1. Who are the key players in your industry value
chain?
The 10 major companies in Apple’s value chain are:
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Company Components
Analog Devices, Inc. Provides the capacitive touch screen
Glu Mobile, Inc. Provides iOS apps and mobile games
Jabil Circuit Inc. Provides phone casings for Apple
Micron Technology, Inc. Supply various memory modules
Murata Manufacturing Co. Ltd. Ceramic capacitors
Source: www.Investopedia.com

31. Suppliers
1. Who are the key players in your industry value
chain? (continued)
The 10 major companies in Apple’s value chain are:
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Company Components
Nidec Corp. Provides various sensors
Qualcomm, Inc. Multiple electronic components
Samsung Provides flash memory
STMicroelectronics Provides gyroscope and accelerometer
Texas Instruments, Inc. Touchscreen controller
Source: www.Investopedia.com

32. Suppliers
2. Which are most profitable?
• Samsung and Texas Instruments are most profitable partners
of Apple’s value chain
• Samsung is a vertically integrated business with expertise in
electronics
• Texas instruments is a global semiconductor design &
manufacturing company
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33. Analysis
According to our analysis, bargaining power of suppliers in
smartphone industry is a weak force based on following
reasons:
• High number of suppliers (weak force)
• High overall supply (weak force)
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34. Buyers
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35. Buyers
1. What customer segment is your company
focusing on?
• Upper Middle and Upper class technology savvy customers
• High school, college and graduate students
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36. Buyers
2. What is the bargaining power of your
customer?
• Low bargaining power because of high customer loyalty
• Although, switching costs are low and individuals buyers are
smaller in number, buyers replace old iPhone with new and
expensive models
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37. Buyers
3. How likely is your customer to switch to
competitors/substitutes?
• Customers are less likely to switch to other brands because of:
• Product differentiation
• High customer loyalty
• Apple’s customers are conscious about image and recognition
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38. Analysis
According to our analysis, bargaining power of buyers in
smartphone industry is a moderate force based on following
reasons:
• Customer loyalty (strong force)
• Low switching cost (strong force)
• Small size of individual buyers (weak force)
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39. Questions and Answers Session
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