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How Completely Apple Has Humiliated The Cellphone Industry
- Thread starter JustinSaneV2
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When companies pursue market-share instead of profitability, they damage themselves.
It's not difficult to slash prices and achieve market share by unit. But the consequence is long-term harm to the business.
By analogy it is like competing in a "punching yourself in the face" competition. It's easy to win, but not very smart.
Achieving market-share by revenue is a much more worthwhile goal.
C.
In the "cheap dumb phone" market, Nokia has the largest market share, and also makes a profit. Are you saying they should walk away from this profit and only produce expensive smartphones?
Are you saying for that all industries, the only company that deserves to exist is the one that sells the most expensive, most profitable model?
So, you are saying the likes of Nokia, Toyota, Dell etc should shut up shop tomorrow for the majority of their products, and only concentrate on the high end of the market? Because that is how I am reading your comments. Maybe you should stop being so elitist.
No. I am not saying that at all.
But all three companies you cite, are in difficulty because they went after units rather than profits.
C.
haven't looked at blackberries lately but i remember they had $299 models as well as a bunch of $199 ones. about time the 3GS came out they came out with a $199 EDGE blackberry for T-Mob
in 4 years Apple went from 0 to double digits in the smartphone segment which is what matters since dumb phones are going the way of the dodo bird. in the same time they sold over 100 million idevices combined. that's pretty impressive.
i remember looking at smartphones around 2007 or 2006 and not caring since none of them looked appealing. and the first few years the competition looked the other way
And it's a good thing they did.
There are many more people on this planet who need inexpensive cell phones, than who need high-end smartphones that create huge profits for their maker and carrier.
People talk about the "billions of GSM" users as potential iPhone buyers, without thinking that most of those cannot afford the phone or its data plan. For example, when the iPhone went to India, only .04% of the people with its carrier got one, because it's 1/3 the price of a new car to them.
Excellent analogy.
Good point. Once it levels off to 1/5 the price of a car I would expect to see sales volume increase significantly.
I am NOT arguing that companies should go after the "top end" or the "bottom end" - That is irrelevant.
It is obviously better in commercial terms to sell a billion items - and make a dollar on each one. That sell a thousand items - and make a $1000 on each item.
But within the consumer electronics space there are a number of companies that have taken the pursuit of market share too far.
Nokia have failed to produce compelling products in the most lucrative part of the cellphone market - and are left with the bottom end, not by choice.
Dell make tens of dollars per PC sold. Their only innovation is "cheap" - which is why in the last five years the share price has collapsed from $40 to $12.
Toyota grew based on exceptional build quality. But it's push for more share has resulted in much poorer products and this has seen the disastrous recalls and a collapse in confidence in the brand.
C.
Apple market share dropping:
http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0710.gif
And the profit figures above were estimates for 2010 and 2011, not real data.
http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0710.gif
And the profit figures above were estimates for 2010 and 2011, not real data.
nokia and RIM stagnated their software. all blackberries for the last few years are essentially the same no matter which one you get. same with nokia smartphones. and they let the dev kits stagnate. i've read a comparisson of developing for the iphone compared to blackberry and RIM makes it hard to code for their phones. and they didn't change when Apple came on the scene.
it's not about profit per unit but giving customers what they want. to this day i still can't figure out how Apple makes more profit per iphone when it's same price or cheaper than the competition and the specs are better a lot of times
A lot people were waiting for the iPhone 4 in Q2, especially with all the leaks this time around. It's bound to go back up again in Q3.
I think the two are pretty much the same thing. Profitability comes about as a direct consequence of meeting a consumer need.
In my opinion that's how value is created.
Dell has razor-thin margins because it is just re-selling components. It adds hardly any value.
C.
Apple market share dropping:
You labelled this wrong.
It should be "Nokia intensifies punching-itself-in-face activity"
EDIT: Here's another article. This one by Tomi Ahonen - upset that Apple ruined everything.
http://www.mobileindustryreview.com/2010/07/nokias-fall-from-grace-the-background-story.html
C.
If Android didn't have any app developers then it wouldn't anywhere near as successful as it is now either.
That's because people were getting ready for the iPhone 4. It does this every year.
Actually I think you will find the three companies I quoted are actually selling to the general and high end of the market. They may not do as well as others in the high end, but they are all in the high end as well.
Maybe you should do some research before posting. In the last quarter Nokia sold 111 million devices, to which 24 million were smartphones. So 87 million "dumb phones" were sold in the last quarter, remember that is in the last 100 days.
Now remember, the majority of the people cannot afford a smartphone, cannot afford a voice plan, cannot afford a data plan. Now unless a phone manufacturer can produce a low cost smartphone then there will always be a significant number of "dumb phones" sold.
That was your choice. I have been using smart phones since 2002, with MMS, camera, video, application support.
They ARE overpriced. The reason sales are not suffering is because they are OVERHYPED, and people keep buying into the hype. This is a shocker because they are still buying them despite the issues with the iPhone 4. Personally, I don't think the growth is sustainable.
People are buying them because they are a good product. I've had no issues with my iPhone 4 at all. Most people are happy with it. I'd have been the first in line to return mine if I noticed anything wrong with it, but I haven't, and don't personally know anyone who has. The growth doesn't need to be sustainable, but there is definitely still plenty of room for expanded marketshare.
Why not post a direct link to Tomi's site, rather than give advertising dollars to someone just quoting it...
http://communities-dominate.blogs.com/brands/2010/07/obituary-for-opk-wall-street-is-a-cruel-mistress-nokia-searching-for-ceo.html
Please point me at my post which suggested they go after the high end.
The problem has nothing to do with high or low.
It's to do with adding value and thereby creating profit.
Blindly chasing market share in the belief that large volumes automatically will lead to profits is the problem that has undermined a lot of businesses.
C.
So what you are saying is, that Samsung and Windows Mobile and Nokia can achieve an identical level of sales (along with super high prices) if they simply hype their products more?
I wonder why they don't do that?
You'd expect that these misled Apple customers, having been fooled by Apple into over-paying for such a poor device, would swear never to go back to the same brand for a replacement.
From this article on CNN
http://money.cnn.com/2010/07/23/technology/iphone_4_att/index.htm?section=money_latest
C.
Maybe you should go back and read your own posts, you are all over the place and changing your story every couple of minutes.
There are a large number, in fact the majority of people, that cannot afford iPhone like devices. They need low cost devices, someone has to supply these low costs devices, these devices don't have the profit margin of the high end devices. Nokia are in the position that they can product low cost devices at a profit, and they sell a very large number of these devices. Again, I have taken from your post that this section of the market is a useless place for a business to be, thus the people who purchase in this part of the market don't deserve to own them. Maybe you should get down from your almighty high horse and think of other people, and remember that not everyone is as well of as you are.
Economics 101: The iPhone 4 is underpriced. Demand is far exceeding supply.
'overhyped' is very subjective. Experts would place the iPhone's value in its design, user interface, applications, and product support. In most of these categories Apple has the lead on the competitors.
I can see why you would call the iPhone 'overhyped' if you looked purely at it on sheet of paper, but thankfully this isn't a PC world. Yes it doesn't have a 4.3" screen or a 8MP camera (which performs worse than the 5MP in the 4), but a grandma could use it. You won't find 'most intuitive mobile OS' on a spec sheet.
So you think Nokia is selling lower priced goods for the good of society? Did you forget they have a board of directors along with furious stockholders? Yeah and Wal-Mart loves helping the community by pricing their products lower!
Next ridiculous argument please.
You seem to be reading the posts of someone else. I am having difficulty being heard over the deafening level of your own interpretation.
So please read my last post again. Not about high-end or low-end. It's about adding value instead of a stupid land-grab for customers.
I am sure Nokia are gratified that you consider them to be the humanitarian creators of the one-cellphone-per-child project. But I am not sure they chose that strategy.
Or put another way. Well done for selling 97 phones in every 100! Now, how come you can't make any money doing that?
C.
No I'm not saying that. I am saying it is pretty ignorant for someone to say that a business shouldn't target a particular group of consumer, especially when they can make a profit off it.
And maybe using Wal-Mart wasn't a good example for you to use, have you looked at their income levels?
I read you post. Remember affordability is a value.
That isn't what I said, and you are playing at games trying to say that. Your words were
Companies can have both, sure Nokias profit isn't as fancy as Apples, they are mostly in different target markets. Nokia can produce a cheap phones, and make a profit off it, what is the issue with that. You seem to have one.
No one company is currently selling 97 out of 100 phones. But a company that is selling 3 out of each 100 phones is making a profit, and a company that sells 41 out of every 100 phones is making a profit. So what is your point?
My point is that if the company selling 41 phones is making LESS than the company selling 3 - then I think it is worth considering that perhaps ... just perhaps ... they are doing something wrong.
It's not surprising that people are calling for a new CEO before the situation at Nokia gets even worse.
He needs to...
- Stop Nokia's death spiral. Change the corporate habits which are undermining the brand.
- Reduce the number of SKUs.
- Clarify the Nokia brands and make better products which have greater appeal to each of their market.
- Reduce the manufacturing cost, while improving value.
- and it would be helpful if Nokia could create a product that was competitive in the most lucrative sector of the market.
You are forgetting that most of the people in the world cannot afford an expensive phone, the majority of the people in the world need a cheap phone. The iPhone, N900 priced devices are worthless to the majority of people, what part of this problem are you missing?
I think you need to go read some of the postings on Tomi's blog, some of your thoughts are a little off.
Nothing.
There is a huge market for affordable handsets. There is nothing wrong with going after them.
But I don't see Nokia innovating in that space either. Perhaps a great African handset would have a solar power panel. Or a built-in winder.
I tried to buy a handset for my elderly parents. And there were no handsets I could find with large buttons, a clear display and an interface designed for someone older than 60? Why not? Because if you are chasing market share, you assume that one product fits all.
Design innovation is not always about cramming in more features, its about making the device more valuable to specific customers. And by increasing value, you create profitability.
Customers can buy assembled components from anyone. They will pay the lowest price for that. But they will pay more for solutions which give real value.
I posted Tomi's blog shows just how out-of touch the thinking at Nokia has become. He sounds like a spoiled child who does not realise he in no longer entitled to his wealth he once had. Instead of realising the mistakes, he tries to push the blame onto outsiders.
If you read Risku's interpretation, it sounds like someone gets what the problem is.
http://www.theregister.co.uk/2010/07/22/nokia_manifesto_risku/
C.