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In tough economic times, the consumer electronics industry has taken a hit, but the demand for wireless phones remains stable. Although sales for regular mobile phones decreased slightly last year, the world-wide demand for mid - high range feature phones and smart phones increased significantly This demand for mid–high range phones is forcing carriers to offer competitive prices and improved services, but also clearly indicates that exclusive product control is no longer the primary way to ensure profitability or innovation.
The Idea that Exclusivity Ensures Market Share is Open to Debate
According to Yuki Endo (August 2009) , in a LIMO Foundation Blogs article titled " Metcalfe's Law applied to Mobile Communications and Social Networks," Metcalf’s law, the theory that defines the estimated worth of social networks, may be used to justify exclusive marketing of cell phones. The relative value of a network increases proportionally to its size so therefore controlling the highest market share ensures growth and competitive advantage and sets the basis for competition.
There are two primary ways to manufacture and distribute cell phones. Exclusive marketing is a vertically integrated model, relying mainly upon risk sharing and subsidies. In-line with Yuki Endo’s hypothesis, the ability to take risk is essential to the equation. In the early days of phone technology user dynamics was an evolving science. Exclusive marketing is strictly a carrier-centric idea where a single phone manufacture and telecom share the inherent risk associated with selling products with never seen before features.
The idea that exclusivity ensures growth and competitive advantage is much harder to accept today when phones are designed for clearly defined user markets and user dynamics is a highly evolved science. Winning manufacturers produce enhanced lower-end feature phones and consistently better high-end smart phones for niche consumer groups. Horizontal marketing and distribution is the key to increasing volume sales.
Smart Phone Demand is Fragmenting the Market
Since 2008 some very specific trends have established themselves in the cell phone market. Chris Forseman who writes for ars technia.com (February 23, 2010), reports that between 2008 and 2009 manufacturers sold 11million less mobile phones but 33 million more smart phones. The same period saw what amounts to a collapse of the mid-range feature phone market with two notable exceptions: Samsung and LG. According to Guy Agin (Jan 24, 2010) in "Behind the Smart phone Craze: redrawing the map of mobile platforms," both Samsung and LG managed to buck the smart phone trend and collectively gained a total 30% market share by turning their low-end phones into smart phone-like, advanced multimedia phones.
Gartner (August 12, 2010), released their 2Q 2010 sales data. Gartner’s V.P. of Research Carolina Milinesi credits one factor contributing to 2nd quarter growth to be a non-exclusive selling strategy across multiple service providers which has been inducing price competition. The new competition forced LG, who once dominated the low-end market in 2009, as noted above, to loose market share, while Samsung survived by aggressively marketing a more diverse open-platform portfolio of phones.