The rapid development of science and technology lead to the
growth of high functional and varieties of smartphones. From the earliest day,
mobile phone is just a device to make and receive phone calls over a radio
link. Now, there are many features and functions covered in the smartphone. It
not only use to text messaging, MMS and email, it offer more general computer
capabilities such as sharing or exchanging information in a smartphone which is
only four inches long. Android, iOS, Symbian and more mobile operating system
can be installed in different type of smartphones. The functions in the
smartphones including access to the internet, take photos or record videos in
higher quality, and run a large amount of applications. The speed of
information processing is accelerating and real time communication is becoming
universal and no longer constrained by time and location. Thus, the smartphone
market is growing rapidly today.
From the graph above, we can see that the amount of people
who owned a smartphone are getting higher compare to the people who using other
cell phone and no using cell phone between 2011 to 2013 (Weissmann, 2013). In
economics, we can observe why the demand of smartphones are getting higher.
- · Determinants of Demand
Other than price of the good itself
affected the quantity demanded and the demand curve, there are other
determinants affecting the demand of the smartphones such as price of related
goods, consumers income, preferences and so on.
Price of related goods divided into two groups, which are substitute goods and complimentary goods. These goods will affect the demand of smartphones.
The substitutes of android’s smart phones can be iOS’s smart
phones, Window’s phone and more are shown on the graph above. For example,
iPhone and Samsung Galaxy, there are substituted to each other due to the price
offered by Samsung is lower then iPhone. When the price of iPhone rises, the
demand of Samsung Galaxy will increase. People will tend to buy Samsung Galaxy
smartphone due to the iPhone is more expensive (Yang, 2012). Thus, the demand curve of Samsung
Galaxy S4 shifht to the right.
For complementary goods, telecommunication company such as
Maxis, Celcom, U-Mobile and more telecommunication companies in Malaysia
provided data packages for consumers, it will attract more people to sign up
the package on smartphone due to consumers can afford it and also pay by
installment. So, it increase the demand of smartphones. For example, T-Mobile
have introduced a cheaper iPhone data package to increase the ability of
consumers to purchase iPhone in the US, it cause the demand curve of iPhone
shifting to the right (Mott,
2013).
Graph
above shows the owner of smartphone in different income and age groups (Weissmann, 2013). Income is
the money consumer gets to buy goods and services. As consumer’s income increases,
the demand for goods and services will also increase. For luxury goods like
smart phone, the higher the income, the higher the demand of smartphones.
In the information age, everyone
will tend to have a smartphone rather then a normal cell phone. It is because
smartphone can access to the Internet anytime and anywhere, all the information
at your fingertips, people have faster communication and greater functionality
with a smartphone. Thus, people will switch their demand from a normal cell
phone to a multi functional smartphone.
In Malaysia, government giving out RM200 rebate for people
to convert non-smartphone users to bridge the digital divide this year. The
rebate allowed for Malaysian ages between 21 to 30 to get a smartphone. The
rebate could increase the ability of people to purchase a smartphone. Thus,
they will have a higher demand on smart phones (Lee, 2012).
The
price of substitute and complimentary goods, consumers income, preferences and
others factors above effected the demand curve of smartphones shifting. The
increase in demand will lead to the shifting of demand curve to the right side,
it similar as the graph above. The other factors change the demand of
smartphone to increase from Q0 to Q1. The table below
shows that the worldwide smartphone sales in first quarter of 2012 and
2011, total units of smartphone sold were increased by 44,616 units and it forecasted
the sales will be increasing in the future (Bishop, 2012).
The graph above is related to
the demand of smartphone increases, affect the sales revenue in the mobile
application stores such as Apple App Store and Global Android Market increase
in 2009 to 2010. The continuous progress and expansion of
applications allow people to obtain the particular information they want. According
to McMillan (2011), todays
people are fewer make phone call compare to the pass due to the high usage and
demand of smartphone and its applications. Texting, emailing and chatting on
social networks are more popular then phone call now. The reason is due to
smartphone’s applications such as Viber, WhatsApp, Skype and more messaging applications
are actually free to save the money on phone call. This is the impact due to
the demand of smartphones are getting higher. However, non-smartphone users
will follow up this trend gradually and smartphone users will also demand for
more advance’s smartphones and the applications.
In the smartphone’s industry, there are few large firms are
competing with each other. According to Bishop (2012), Apple’s IOS, Google’s Android
and Nokia’s Symbian are the largest firms at 1st quarter 2012
worldwide.
These firms produce differentiated products, smartphones.
They selling smartphones with different products characteristics, packaging and
advertising. There are some characteristic differences between iPhone 5 and
Samsung Galaxy S4. For example, iPhone 5 is made from glass and aluminum;
Samsung Galaxy S4 uses a large plastic
build with a removable cover. Samsung Galaxy S4 have a higher resolution of
camera compare to iPhone 5. These characteristic differentiated their products.
Furthermore, their advertising are also using different strategy to promote
their products. These are the advertisement video for iPhone 5 and Samsung
Galaxy S4.
Advertisement of Samsung Galaxy S4 [video]
Advertisement of iPhone 5 [video]
In the smartphone industry, Apple and Samsung are price
maker, they set their price and output levels to maximize their company’s
profit. Although both companies are price maker, more or less they will
consider each other’s react to change their price, output level, product
characteristic, advertising and so on. It is due to they want to compete with
their rivals to gain bigger share in the industry. Obviously, include all the
characteristics above, smartphone industry is consider as an oligopoly market
structure.
Lastly, smartphones are just a phone that assist us to communicate anytime or anywhere to importance one, notepad to note down important dates, fill up some free time with interesting games or use to set an alarm waking us up in our daily routine. However, people should not be too rely on technology and lost the purity of living in this world. Can these people live without smartphones? Or can they just sit down have a cup of tea and talk to each other? It would be better.
References
Apple (2013) Apple - iPhone 5 - TV Ad - Photos Every
Day. Youtube [video]. 25 April.
Available from: http://www.youtube.com/watch?v=NoVW62mwSQQ [Accessed 6 June 2013].
Bishop, T. (2012) Microsoft
stuck behind Samsung Bada in smartphone sales [online]. Available from: http://www.geekwire.com/2012/microsoft-samsung-bada-smartphone-sales/ [Accessed 1 June 2013].
Lee, R. (2012) RM200
rebate for smartphones worth not more than RM500 next year [online].
Available from: http://thestar.com.my/news/story.asp?file=/2012/12/28/nation/12511709&sec=nation [Accessed 30 May 2013].
McMillan, G. (2011) Study:
Fewer than 50% of Smartphone Users Make Calls [online]. Available from: http://techland.time.com/2011/07/21/study-fewer-than-50-of-smartphone-users-make-calls/ [Accessed 30 May 2013].
Mott, N. (2013) T-Mobile’s
iPhone is the first “cheap” smartphone to make sense in the US [online].
Available from: http://pandodaily.com/2013/03/26/t-mobiles-iphone-is-the-first-cheap-smartphone-to-make-sense-in-the-us/ [Accessed 30 May 2013].
Samsung Mobile (2013) Introducing Samsung GALAXY S4. Youtube [video]. 14 March. Available
from: http://www.youtube.com/watch?v=2LHv1FPd1Ec [ Accessed 6 June 2013].
Weissmann, J, (2013) Our National Smartphone Addiction Is Just Getting Started [online].
Available from: http://www.theatlantic.com/business/archive/2013/06/our-national-smartphone-addiction-is-just-getting-started/276620/ [Accessed 6 June 2013].
Yang, J. (2012) Samsung
Quarterly Profit Beats Estimates on Galaxy Phones [online]. Available from:
http://www.bloomberg.com/news/2012-10-04/samsung-3rd-quarter-profit-beats-estimates-on-galaxy-phones-1-.html [Accessed 1 June 2013].
