1. Describe the mobile telecommunications industry in 2008. What are the main drivers of revenue for the different players?
In 2008, the 3G system gradually substituted original 2G (GSM) system and some companies in developed centuries also provide 3.5G (HSPDA) for their customers to enjoy faster transmission speed (3.6 Mbps). The main revenue from carrier most came from voice service but the percentage of data communication is increasing. By the success of iPhone, there were various companies provided smartphone for customers and people abandoned their PDA and switch to smartphone. The mobile manufacture market turned into a M-style market, smartphone and low-price cellphone. And there was also an interesting event appeared in China and India, that was the non-licensed cellphone, what we called 山寨手機. The 9th IC design house, Media Tek (MTK, Taiwan), provided a total solution for handset manufacturers. The completely solution shortened develop period from 6 month to 1 month and spread to mainland China quickly. The success of MTK also announced the end dynasty of TI GSM product line which was around 70% marketing in GSM.
2. What is your opinion about the entrance of Apple into the industry?
For Apple's iPhone marketing strategy, we can do it by Porter 5 force analysis.
For bargaining power of customers, they use charter sale to choose only one carrier for iPhone sale which ensure reasonable profit.
For the bargaining power of suppliers, they construct a fancy image of iPhone to EMS companies which force them cut price to earn the order. Besides, the component vendors also view it is a glory if they can put their components into iphone. The various cause help Apple to lower their BOM cost which is around 30% of price. ($ 174 from iSuppli analysis, but the retail price is $599)
For the threat of new entrants, such as Nokia, SE, and Samsung, also provide their smartphone recently, Apple always run before their enemies and provide fancy function. Their Apple store provide a platform for programmer to sale their program in the internet which also help to make iPhone become funny and meaningful. The support of various application program enrich the flexibility of Apple's iPhone.
For the threat of substitute products, the only one handset that could substitute iPhone is the next generation iPhone because there is no other company provide as product which integrate software and hardware as well as Apple. But the other company also can occupy the market where customers only want to use simple content or familiar with windows system.
For the intensity of competitive rivalry, they emphasize their distinct operation and plentiful content in iTunes. The biggest smartphone manufacture company, HTC (Taiwan), also provide same quality, even superior smartphone, but they still can't beat iPhone in single model because of content. People who use iPhone will utilize iTunes to manage their music and download various meaningful speech, radio, and teaching program for free or little charge. The content helps iPhone to distinguish from other manufacturer and stand in a higher place.
3. Do you think it is a good idea for the carriers to share part of their revenue with a handset manufacturer? Why?
In my point of view, it is not a good idea to ask money from Telephone Company because it will shrink their profit. But Apple did it! The unique of Apple and fancy operation make it become reality. In fact, most of handset manufacturer don't like this marketing strategy because they want the customers substitute their cellphone frequently rather than share part of carriers' revenue. They make more money in manufacture a new type of cellphone than share the revenue for carriers.
4. Do you think contracts like the one between Apple and O2, described in the case, will be pursued by other handset manufacturers, such as Nokia and Sony-Ericsson?
The other companies also want to share the revenue from the telephone company but they can't because of various product lines. The charter sale can help Apple to acquire profit from O2 but limit its market share in other carrier. Because Apple only has one model, they only focus one specific, niche market. When you sign the contract with one specific carrier, it means that you loss opportunity in other company. The only reason is iPhone has its uniqueness, but other handset doesn't. If Nokia or SE can provide a unique model, they also can authorize sale to specific carrier.
