Industry Investigation

In the mobile phone industry, smartphones are the most promising gadgets to consider in terms of market growth. Firstly, smartphones are cell phones that are more technologically sophisticated than traditional mobile receivers. The technological advancements include increased computing abilities, connectivity, and enhanced multimedia features (Woyke, 2014). Besides, most smartphones tend to have a feature that enables users to install third-party programs.  This paper analyses the most significant business factors that determine the suitability of entry into the smartphone industry. It also examines Porters’ five major factors and socio-economic features as a basis for determining the smartphone industry’s feasibility status (Pride & Ferrell, 2014). Notably, the Smartphone industry is segmented into various sections such as cell phones, tablets, and palmtops, to name but a few. Thus, this segmentation provides a vast array of products. Nonetheless, the industry comprises some limitations such as the high number of producers of smartphones. An analysis of the phone industry reveals that it faces significant threats in today’s rapidly-changing technological world. However, in spite of the threat, it is still a lucrative field to venture into.

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To begin with, there are many socio-economic factors that have contributed to current developments in the smartphone industry. Without a doubt, consumers’ attitudes and perceptions of traditional phones is considerably have changed. These types of phones are associated with past generations. On the other hand, demand for smartphones is growing since they reflect the modern lifestyle (Yayici, 2013). As a matter of fact, they are the best communication gadgets in the mobile phone industry for most people today. However, from an economic perspective, these phones are more expensive than normal types (Woyke, 2014). Markedly, the price margin reduces with time; consequently, some people do not regard phones as expensive. Based on the reality of socio-economic trends concerning the gadgets, it is practicable to assert that they are highly feasible products.

Considering Porter’s first prime factor in the business analysis, competition would serve as a major propeller in the industry.  Many companies have ventured into this industry due to its lucrativeness. Some of the most popular brands include Samsung, Apple, Lenovo, and Blackberry. Despite the presence of many competitors in this industry, its growth remains unmatched. Research projections indicate that every company in this industry exhibits a considerable annual growth rate (Yayici, 2013). Since product differentiation is high, new players can distribute the risks much efficiently among different types of smartphones (Karjaluoto et al., 2008). It is imperative to note that the many players in this industry have contributed to the emergence of a market structure characterized by considerably fair competition conditions that encourage investment into this industry. Notably, high initial investment requirements bar new entrants into this industry while substantially fair competition helps new investors to enter (Karjaluoto et al., 2008).

Owing to the high initial capital required, competition in the smartphone industry has been leveled up. For companies to thrive, there is a need to build strong distribution networks (Weese& Wagner, 2011). Apparently, the high costs involved in developing these channels bar many people from venturing into this industry. That said, there is a need for a company to build strong brand names to thrive. Still, patent regulations prevent many prospective players from investing in the industry (Woyke, 2014). While there are minor technological requirements in other phone industries, the smartphone industry thrives on technological advancements. This factor discourages many people from venturing into it. Apparently, entry-level barriers make the smartphone industry an ideal business to venture into.

Suppliers’ bargaining capability determines the overall profits of every entrant in the smartphone industry. Vendors also serve as determinants of product prices and intermediaries between the consumers and actual producers (Farrell, 2015). On the production side, suppliers determine the prices of inputs. Meanwhile, there is a large number of substitutes in the industry, Thereby lowering the cost of production. The law of demand states that high supply leads to low prices (Pride & Ferrell 2014). More often than not, costs reduce owing to increased supply arising from high competition among suppliers. Besides, the main input materials are similar among suppliers. On the consumers’ side, the high number of vendors leads to an increase in the marketing agents available for the promotion of products. Therefore, the nature of vendors is an advantage since it encourages many investors to venture into the smartphone industry.

Moreover, buyers are very significant players in any industry. Notably, many business approaches towards expansion plans are geared towards increasing the customer base. This means that consumers are the primary determinants of any thriving business (Woyke, 2014). In the smartphone industry, it is evident that a large number of buyers enhance feasibility. Notably, most consumers of smartphones are price-sensitive; hence, any changes in prices, by competing firms leads to a massive shift in consumer preferences (Zhou, Rau, &Salvendy, 2014). This makes the industry very competitive and one that is characterized by price wars. Furthermore, there are low dependency rates on the distributors, and this makes the smartphone industry quite an ideal market for investors to venture into.

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Substitution rates constitute one of the main limiting factors in the industry.  (Pride & Ferrell, 2014). Although substitutes are relatively low among smartphone buyers, customers in this industry do not switch to new brands easily owing to uncertainty over quality assurance in those products (Hass, 2008). However, other smartphone users are keen to adopt the most trending brands in the market; thus, the more familiar a brand is among consumers, the more confidence it receives. Besides, there are high switching costs involved on the side of producers, and this is a limiting factor for new entrants in the market.

To conclude, the advantages of entering this market are more than the disadvantages. For instance, there are many buyers and suppliers to support entry into the market. Besides, the monopolistic marketing structure prohibits the entry of many other competing firms. In other words, once an investor ventures into the industry, he or she is highly likely to make profits. Besides, socio-economic factors add to the advantages listed in this analysis. Currently, many people perceive smartphones as a symbol of modernity, and almost everyone is switching to their use. All the aforementioned factors demonstrate that it is profitable for investors to venture into the smartphone industry. 

References

Farrell, C. (2015). Global marketing: Practical insights and international perspectives. New York, NY: Sage Publications Ltd.

Hass, K. B. (2008). Professionalizing business analysis: Breaking the cycle of challenged projects. Vienna, VA: Management Concepts.

Karjaluoto, H., Karvonen, J., Kesti, M., Koivumäki, T., Manninen, M., Pakola, J., …&Salo, J. (2008). Factors affecting consumer choice of mobile phones: Two studies from Finland. Journal of Euromarketing14(3), 59-82.

Pride, W. M., & Ferrell, O. C. (2014). Marketing. Sydney: South-Western Cengage Learning.

Weese, S., & Wagner, T. A. (2011). CBAP / CCBA: Certified business analysis study guide. Indianapolis, IN: Wiley Publishers.

Woyke, E. (2014). The smartphone: Anatomy of an industry. New York, NY: New Press.

Yayici, E. (2013). Business analyst’s mentor book: With best practice business analysis techniques and software requirements management tips. London: EmrahYayici.

Zhou, J., Rau, P. L. P., &Salvendy, G. (2014). Older adults’ use of smartphones: An investigation of the factors influencing the acceptance of new functions. Behavior & Information Technology33(6), 552-560.

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