Mobile Industry

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As the company is having high cost of R&D and high fix cost, they then can enlarge their portfolio by increasing the diversity of the products. It gives customers choice of their needs and also give the company economy of scale in term of common parts such as iphone5 and iphone5c are using the same component. Some companies such as Motorola and Samsung modified their outdated phone models for lower-end using discrete components and inexpensive integrated circuits. Giachetti C. and Marchi G. claimed that in 2000s, the company such as Alcatel and Siemen closed down their handset department due to failing to offer both high end and low end phones. As these companies mainly serve the low-end market as the result, their shake-out was not initiate by the firms’ convergence around dominant design. “…..” also added that the most of the firms is either lost money or barely pass the breakeven point in the low end market. Thus the low-end phones are needed as it also used to subsidize in order to generate high volume to bring the cost down and also generating a barrier of entry to other firms. Hence most of the firms gain their revenue by selling hi-end phone. Apple has lower volume sales than Samsung, but due to selling only hi-end phones, as a result in having the most revenue among all the handset firms.

Apple, Samsung, LG and Nokia successfully generated a robust brand-image in high-end phone differentiate themselves from other companies such as Xiaomi. This help them to avoid the price erosion in the hi-end phones and carried their high-end image over to their low-end segment phones. Hence this allow them to charge the price slightly higher than other firms.

The economic recession in 2000 caused the customers to change their buying behaviour to cheaper phones. As the result, the firm gave discount on their phones. The firms that unable to compete, faced the loss in their market shares. This causing an increase in the barrier of entry.

Hence the firms has to be diversify and create a strong brand image for their hi-end segment phones. As the Chinese phones such as Xiaomi and Huawei are now able to produce a similar functionality to complete. The customer then will have to choose over price, fashion, and brand recognition. As when the Chinese brand able to build their brand recognition. The problem for these firms will arise.

Apple can make a shift the line, and the rest follower