International and Asian Business iPod China Case Study Prof. Dr.

Gert Bruche

Question 4: What is the competitive situation in the smart phone market, which strategies did
incumbents pursue and what challenges do they face?

Since Chinas mobile market is one of the biggest and most promising markets in the world, there has
always been a strong competition between mobile companies, foreign and local. Even though local
brands tried to gain market share by developing sales channels and offering brands at low prices,
foreign players took control once again by revising their strategies.
With the local brands losing market shares, the foreign players have still to face not only competition
amongst them but also competition from counterfeiters and unlicensed mobile phones, produced and
sold in Chinas Grey market.
In order to be able to maintain their market shares, almost all foreign players are trying, beside the
common used strategies, to come up with something that will either differentiate them or enhance their
market position. All of the foreign players produce handsets with more and more fitures, trying to meet
the design preferences of the Chinese consumers. Many firms have even widened their product range
to cater for the low end of the market, where some of them, like Nokia, use an effective pricing
strategy to cater all consumer segments.
Choosing and partnering with the right telecom operator is also a very important step to maintain or
gain market share. Among telecom operators, China Mobile is leading with 480 million subscribers,
followed by China Unicom with 136 million and China Telecom with 37 million. China mobile entered
into deal with several major handset brands - Motorola, Samsung and HTC – where on the same time,
Apple in order to penetrate into the Chinese mobile market partnered with China Unicom.
Since Nokia has seen herself loosing market share and falling from around 70% to 40% in 2010, new
strategies are now being followed. Although Nokia is proving slow in launching a smartphone to rival
the iPhone, Blackberry or Gphone, it is being quick in its efforts to bring new services to low-end non-
smartphone users. By providing low-end users with services that previously were only available on
expensive smartphones, these users will take longer to mirage to the high-end market where Nokia no
longer has an advantage, thus giving the company extra time to defend its position in the high-end
market. Nokia announced the launch of its new Life Tools Service in China, which provides users in
rural areas with customized services in the fields of agriculture, education and entertainment.
In China, where cellphone users have surpassed 700 million, smartphones are still used mainly by city
dwellers. In the country's vast rural areas, most users still have handsets that cost less than 1,000
yuan, meaning that they are unable to surf the Internet as conveniently as smartphone users. But
since users' migration to smartphones is just "a matter of time", Nokia now is trying to differentiate
from the rest and tries to launch innovative products in the high-end market. In order to do so, Nokia
announced on February 11th that it would abandon the Symbian operating system and license
Microsoft’s (N/R) new Windows Phone 7 operating system. If the alliance is successful, it has the
potential to reshape the competitive landscape in the smartphone market.