Both Apple and Samsung reported a drop in their market share

Samsung shipped 89 million smartphones worldwide and captured 31 percent marketshare in Q1 2014, dipping slightly from 32 percent a year earlier. Meanwhile, Apple shipped 43.7 million iPhones worldwide for 15 percent marketshare in Q1 2014, falling from the 17 percent level recorded during Q1 2013.

The reason behind the dip could be due to market saturation and competition. While things are slowing down at the high-end of the smartphone market, there is intense competition from the lower-tier smartphone brands.

Saturation – In need of product innovation

Consumers are become more reliant on their smartphones as days go by. While both Apple and Samsung have been launching new models, each new model comes more as an “enhancement” rather than with “ground-breaking technology”. This lowers the motivation to upgrade or switch to another phone.

Consumers are seeking for a better entertainment experience – for viewing and gaming. Perhaps a 3D experience (be it in area of viewing or printing) would create a big buzz. Also, the society is moving towards a cashless society. Hence, it will be beneficial if the smartphone which they are holding could allow consumers to experience easier in-store transactions, example “scan to pay” or “click to pay” within premises. Wearable gadget is also another area to explore.

Consumers are expecting a lot more and companies that pursue innovations will thrive in this smartphone war.

Competition – Price factor

While smartphones are common in our everyday life, smartphone adoption is very much still on the rise in fast growing emerging markets like China, India and Latin America. There are many consumers who will be shopping for their first-ever smartphones. Hence, a lack of presence in the entry-level category continues to cause both Apple and Samsung to lose volumes in this area.

Strong competition in the emerging markets include Huawei and Lenovo. And Lenovo continues to grow aggressively outside China into new regions such as Russia. If the recent Lenovo takeover of Motorola gets approved by various governments in the coming months, this will eventually create an even larger competitive force that both Samsung and Apple must contend with in the second half of this year."

Strong support for operator subsidies in these markets is also important as this will determine the price factor for smartphones. Having low-priced smartphones are particularly critical for generating growth in the market and fuelling a switch from even lower-cost feature phones.

How to make a cheese wall?

When you walk into a DIY shop and you are looking for “that thing that has a handle and that screw thing that spins and goes grrr grrrr” Search Marketing is the salesman that will tell you: “drill ah! Power or Hammer?” You reply with a “make hole in my wall” and he will tell you “power drill”. He continues to ask you what type, how often you are going to drill etc” 

Source: ergoemacs.org

The salesman continues to bombard you with questions and provides a more specified type of drill catered to the cheese wall you have planned for your wall. He is your Search Marketing. He is trained to know what you are looking for in your simple terms. This is the benefit of search marketing. The salesman would not waste your time showing you the hammer or the toolbox. After you buy your drill, he shows you the drill bits expansion set, or even another set that can double as a hammer drill known as the combo drill. This is another benefit of Search marketing; it tries to predict what else you might look for as well.

In the first place, for all the above to happen, the salesman has to be trained. He has to know the products that he is selling well. All of this is time and money invested. The shop would have to spend resources training the salesperson in order to secure sales. Just like search marketing, he has to know which drill would make holes in walls and which drills would drive the screw in. This constant updating and monitoring of new products is time-consuming. But changes would last a long period of time and often producing a long term result. And if the customer is happy with the service and product, it would return as a customer, hence driving free traffic just like how search engine optimization works.

Of course a shop must exist for the customer to walk in. Just like how businesses must have online presence tied it with a good website to drive people to their site. The advantages of SEM can outweigh the disadvantages, but every company is different. It all boils down to meeting the needs of the customers. The “thing that has a handle… and make holes” etc are all search keywords for search engines to drive these people to websites that sells drills. Business will need to know the language of the customers and this could prove to be the most difficult yet most essential.

And now, I have two drills at home, feel free to borrow!

Impact of Loss of Market Share

Today, the advancement in technology and its influence is so salient that social media plays a significant role in helping consumers decides between competing brands. The level of competition is so stiff, that the idea of brand loyalty or monopolizing market shares becomes a thing of the past. For instance, Nokia from Finland was once the leading brand for mobile phones, in the early stages of mobile phones but in this day and age where smart phones has become the norm, Nokia's market shares has since then taken a beating to the likes of the dominating Samsung of Korea and Apple from the United States of America. Once the loss of competitive attractiveness, consumers will lose interest in the products and it will make it more difficult to win back customers when you lose them.

Both Apple and Samsung are being squeezed as Apple and Samsung wins high-end users from one another and Xiaomi, Lenovo, HTC, Huawei and others pack advanced features into inexpensive models. They are not growing as fast as the global market, especially in emerging mid-market.

Even though Apple increased sales over year-over-year, but due to lack of innovation and loss of Steve jobs' leadership in Apple, competitors have chance to gain market share if they have new and innovated products. Apple has not shown new innovation in the pipeline and hence lost its shares to cheaper Android sets such as Xiaomi, Huawei in China. Apple needs to have product differentiation rather than a low cost product (iPhone 5C – a blotched case). A low cost product is not a good long term strategy for Apple.

Samsung too is facing slumping profit growth, even though the percentage of loss of market share is smaller as compared to Apple. Samsung is trying to make its mobile unit less dependent by shifting strategy. It will make an all-out effort to make the most of the lower-end market as it is the biggest and fastest maker of the cheap handsets as many competitors are able to mimic the newest and latest technology. Importance of a product specification is not as important as a differentiated marketing strategy for Samsung.

Competitors such as Xiaomi, it's strategy is to increase market share and hence designs its phones with high-end specs and sells them at midrange prices. Even though Xiaomi phones are not of the same quality category as Apple & Samsung yet, but the company entices its consumers at an affordable price, the principal factor for many consumers in China and emerging markets. However Xiaomi is still weak in terms of sales in the conventional market and through telecom channels and it will lose its pricing advantages if it has to share its profits with retailers.

With more competition from either ends, this could lead to lower pricing for consumers. The cost in production could increase for the fear of infringement of copyrights and hence lowering profits. An example would be the case of Apple and Samsung lawsuit case that’s ongoing.

Apple and Samsung both announced a decrease of market share recently, what are the consequences of this loss of market share for themselves, competitors??

Year 2014 is expected to cause a lot of stir in the Smartphone market for the manufacturers and users for several reasons:

1.       The number of smartphones shipped will go up to 1.2 billion in 2014 from 1 billion in 2013 – a YOY (year-on-year) growth of 19.3%, down from 39.2 % in the previous year. In Q1 of 2014, Samsung and Apple have seen their market shares slide down by 1.7% & 1.6% respectively, whereas brands like LG, Huawei, Lenovo and Others are gaining market shares in the range of 0.3% to 2%, as compared to Q1 of 2013 (Source: IDC)

2.       Last year saw 322.5 million smartphones under $150 being shipped. Many smartphone announcements in this Price Range have been made for this year, with some prices going as low as $25.

3.       Microsoft’s acquisition of Nokia last week for $7.2 billion has made marketers wonder on their strategy. Microsoft’s initial strategy while acquiring Nokia was to change its ‘horizontal’ strategy of selling software to hardware makers to ‘vertical’ strategy like Apple’s, to manufacture software as well as hardware

4.       Lenovo acquired the Motorola Mobility business from Google at $3 billion earlier this year

The consequences of these developments are following:

1.       6 countries are contributors of 50% of the mobile phone market. Even though their total mobile phone penetration is high, there is a large opportunity in the Smartphone market. As worldwide growth slows and mature markets become saturated, the price of the smartphones will be the primary driver to gain market shares in these emerging markets. Average smartphone price has fallen from $443 in 2011 to $335 in 2013 and is expected to reach $260 in 2018 (Source: IDC)

	Country	Mobile Phones	Population	Penetration (%)
		Total		Mobile Phone	Smartphone
-	World	6,800,000,000	7,012,000,000	97.00
1	China	1,227,360,000	1,349,585,838	89.20	46.90
2	India	1,104,480,000	1,220,800,359	90.47	16.80
3	United States	327,577,529	317,874,628	103.10	56.40
4	Brazil	273,583,000	201,032,714	136.45	26.30
5	Russia	256,116,000	142,905,200	155.50	36.20
6	Indonesia	236,800,000	237,556,363	99.68	14.00
	Total	3,425,916,529
	% Contribution	50.38

2.       Local manufacturers will pose a threat to the international giants – Samsung & Apple in the emerging markets. This is an interesting graph showing how 7 Local Smartphone manufacturers in China & India together (Huawei, ZTE, Lonovo, Coolpad, Xiaomi from China and Karbonn, Micromax from India) have had their market share go up continuously to achieve 11 times growth in 3 years’ time, thus overtaking Apple’s share and closing in on Samsung’s share.

3.       Sony, Xolo, Micromax and Archos are set to enter the Windows Phone smartphone market starting this year. Considering the fact that Nokia is already under Microsoft, it would be interesting to see if Windows Mobile leverages on these brands with an enhanced OS.

4.       Lenovo is growing aggressively into new markets outside China such as Russia. Its acquisition of Motorola mobility would give its market share a major boost, as Motorola is no. 3 manufacturer in USA.

So, what should Samsung and Apple do to maintain their foothold in the Smartphone industry:

1.       Work with network operators to offer bundle deals in emerging markets like they do in mature markets.

2.       Breakthrough in OS – to retain their edge and position of leadership

3.       Enter the Phablets market with a bigger screen size – Iphone started off as a large screen device but features nowhere now in the Phablets market with screen sizes ranging from 5.5 to 7 inches

4.       Low end products – While Samsung has a full range of smartphones, Iphone may need to launch a low priced smartphone to maintain its market share in emerging markets in long run.

5.       Smartwatches and other wearable devices may be the right way to go to upset the balance in the smartphone market.