The market structure for IPhones is an oligopoly, this market structure is characterized by few players that control a huge market and the other players in this high end smartphone market include Samsung, Research in Motion, Nokia and HTC. The products in this market are homogenous meaning that they are all high end smart phones there are however slight differentiations in terms of software seeing as IPhones use iOS, Samsung and HTC use android and Nokia uses Windows. Competition is very high in this market structure which is evidenced by the new innovations that keep occurring in this industry. Since 2007 Apple has released 6 types of IPhones and the new IPhone 5S was released recently, Samsung has also released various types of phones such as the Galaxy, S3 and S4.
When Apple launched the IPhone in 2007 their biggest rival was Research in Motion’s BlackBerry phone which was popular with company executives. However by 2010 Apple had sold over 70 Million IPhones and even defeated BlackBerry, they held a market share of about 12.4% of the American smart phone market according to ComScore in 2012. Their main competition right now is from Android devices especially from Samsung with their large screens and longer battery life though IPhones are credited with reshaping the industry through pioneering features such as the front facing camera and video calling. IPhones still have a high competitive advantage due to their App store which has a lot of Apps, Apple is also a luxury brand that is associated with prestige and many analysts see this as the reason why it has a large market share despite its higher price compared to other similar smart phones.
The substitutes for IPhones right now in America are Android devices which offer the same type of services but at cheaper prices, there is also the fact that the Android operating system can be personalized to a higher level compared to iOS. Globally the main controller of foreign markets is China due to its huge population, in China smart phone users prefer Android devices because of their cheaper prices, local Chinese manufacturers like Gionee, Yulong and Meizung are also starting to manufacture smartphones that are priced competitively. Other International brands such as ZTE, HTC and Huawei are producing smart phones and this may eat into Apples foreign market share.
Being an oligopoly, the barriers to entry in the smart phone market are very high; this is mainly due to the small number of firms that control the prices together so as to even the playing field. The main barriers to entry include existing patents, customer loyalty, control over raw materials and the high cost of switching from one manufacturer to the other. Apple and Samsung enjoy a lot of customer loyalty and trust which will be very hard to change. The main players in the market are most likely to gang up so as to prevent the entry of a new player.
As is with any other market the most effective entry strategy is looking for a niche and filling it. In the case of the smart phone market the issue of the complexity of existing operating systems especially Android has been mentioned by many first time users. The aim of a new industry player should be first to look for their own customers especially non smart phone users through creating simpler operating systems and also offering competitive prices.
In the highly competitive industry the need for the production of new phones has never been higher; however smart phone companies can take advantage of economies of scale by maintaining a particular phone design and only changing the phones features slightly as time goes by. Apple has made use of this by sticking to one phone model and tweaking it over the years ,they also produce a new model once a year which allows them to produce up to 16 million units while making a lot of savings using the economies of scale.
Rapozi, Kenneth. “Competition Getting Tougher in China for Apple IPhones” Forbes. Web. 17 January 2013
“A view on the smartphone market - An Oligopoly” Econs101. Web. 30 June 2013