Cole Bardreau John Knisley Laila Judeh Teemu Tiitinen Smartphone Industry

 Brief History  Industry Analysis  Apple vs. Samsung  Advertising Strategies  Raw Data Analysis  Recommendations Agenda

Why Smartphones?  Use the product everyday  Global growth of 23.6%  High Global competition; Mature US market.  Global industry of over $265 Billion  In 2015, 1 Billion Smartphones will be sold globally

 "a handheld device that enables users to store and retrieve , contacts, appointments, tasks, play multimedia files, games, exchange text messages, browse the Web, and more“  Mobile phones with advanced PC-like capabilities  Independent operating systems and allow for installation of software applications by third parties  Android, Windows Phone, and iOS What is a “Smartphone”?

 “Mr. Watson, come here. I want to see you”- Alexander Graham Bell (March 10 th 1876)  Motorola introduced 1 st handheld mobile phone on April 3 rd 1973  “Smartphones” came around in the 1990s Brief History

 Credited as 1 st “Smartphone”  Sale to public August 16 th 1994  Touchscreen &  Only sold 50,000 units in 6 months of being on the market  Led the way for future… SIMON

 Term “smartphone” first coined by Ericsson in 1997  Apple is credited for making it a mainstream product  Growing due to increased income in emerging markets The Evolution

Industry Analysis

About the Industry The Supply Chain  Key Economic Drivers  Disposable income  Supply Industries  Parts and manufacturing  Demand Industries  Consumers tastes and preferences  Related Industries  Telecommunications (Verizon, AT&T, T-Mobile etc.)  Smartphone App Industry

The Supply Chain

Global Market Share  Samsung – 25.2%  Apple – 11.9%  Huawei – 6.8%  Lenovo – 5.4%  Xiaomi – 5.1%  Others – 45.5% Who are the players?

 HHI  Global  US  CR 4  Global-49.3%  US-85.3%  Fragmented so extremely competitive globally  US dominated by few firms Competition

Around the World

SWOT Analysis

 Apple- 42.5%  Samsung-29%  LG-7%  Motorola-6.8%  HTC-6.1%  Blackberry-2%  Nokia-2%  Others-3.4% Market in the U.S.

 After closer examination, it is the Android products that is majority  Much closer in US than globally  Clearly dominated by 2 players U.S. Market

 Innovators (2.5% of market)  Early Adopters (13.5% of market)  Early Majority (34% of market)  Late Majority (34% of market)  Laggards (16% of market) Industry Growth in the U.S.

 The number of new smartphone users added each year will be fewer  The next million users will be older and have less disposable income  Sales will become driven by replacement and upgrade sales  Importance of innovation and advertising adding utility! Future of Industry in U.S.?

Advertising Strategies

 This type of advertising redistributes consumers among brands but does not shift consumer preferences.  Very common when two main competitors are competing for market share. Combative Advertising

 Prisoner’s dilemma  Advertising could also be used to keep out new firms when they enter Combative Advertising Market shares 25.2%, 11.9% Samsung would steal market share from Apple Apple would steal market share from Samsung ??,??

Persuasive Advertising informative persuasive reminder  Characteristic of mature markets.  Does not increase the size of the “pie”.  Ads are not informing people about what smart phones are.

Comparative advertising

 Advertising is a means of conveying information to consumers.  Reduce consumers’ search costs  Reduce price dispersion  Direct vs indirect signaling Informative view

 Leads to more consumers demanding the product  more profit. Informative view$Quantity MC Demand with low advertising Profit Demand with high advertising

 Price references imply value  People will not search for better deals  People will assume it is the best Direct advertising (Samsung)

 Advertising can be used to signal quality  Only high quality companies can afford to advertise a lot.  Dominantly experience goods  3 Reasons for indirect info:  1) signaling efficiency  2) match products to buyers  3) repeat business effect Indirect Signaling (Apple)

 Advertising creates product differentiation  Demand becomes more inelastic, consumers have higher WTP.  Can lead to higher prices  more profit. Persuasive View Profit Demand with high advertising $Quantity MC Demand with low advertising

Apple vs Samsung

 Stable preferences  May value prestige  Product Placement Complimentary View

Raw Data Analysis

 Analyze Primetime Advertising Data 2014  Industry’s Primetime Advertising  Investigate Apple vs Samsung  Similarities  Differences Overview

Two Major Players – United States Apple & Samsung 58% of Advertisements Consistent with smartphone users Nearly 70% Apple: Nearly 900 Primetime ads Samsung: Nearly 800 Primetime ads Primetime Advertisements: Industry

 Apple  IOS operating system  Apple iPhone  Lifestyle  Samsung  Android operating system  Samsung Galaxy  “Be Different” Apple vs. Samsung

 Samsung Expenditures  Total $ Spent  $124 M  Average $ per Ad  $174,788  $ per second  $4,956 Primetime Advertising Expenditures  Apple Expenditures  Total $ Spent  $162 M  Average $ per Ad  $193,107  $ per second  $4,214

Apple IPhone 6 release September January, February, March –Dormant 2015 trends Samsung Consistent Samsung Galaxy S5 release April Similar advertising during release Monthly Analysis

Apple Beginning of week Decrease Friday & Saturday Increase Saturday & Sunday Samsung Consistent Weekend increase Day of Week Analysis

Apple & Samsung similar strategy Target 8PM – 10 PM Weekly shows After dinner Time of Day Analysis

Apple Consistent Advertising CW – Targets weekly audience Samsung Targets 4 major networks Popular shows Network Analysis

Apple Targets: Drama Documentary Advertising Samsung Targets: Drama, Reality, Comedy Documentary Advertising Type of Show Analysis

In Depth

Apple Leads every spending category Sports, Reality, Comedy High CPM Drama Spending Documentary Spending Samsung Sports High CPM Consistent with number of ads Average Spending: Type of Show

Apple dominates the primetime advertising Both similar time of day strategies Apple’s spending is not consistent with number of ads per type of show Samsung's advertising is consistent Advertising war lies within the commercial content What can we conclude?

Recommendations

 Samsung could increase product placement to become more “prestigious”  Global growth will continue but North America market share is dwindling (compared to rest of world) Recommendations

 Smartphones need to expand to emerging markets  Focus on persuasive in US  Focus on informative globally  App industry (development) Recommendations