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To preface, in 2019, there were approximately 269.44 million smartphone users in America, and the value is estimated to reach up to 275.66 million in 2020.

Reference:  S. O'Dea. Smartphone Users in the United States 2018-2014. Retrieved from 9 May 2020, from https://www.statista.com/statistics/201182/forecast-of-smartphone-users-in-the-us/

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Team 1 - Brian Michael Fong Jing Wen, Hazel Teo, See Guo Sheng Edison, Low Kar Mei Sharlene, Chua Eve

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Some manufacturing phone companies like Samsung and Apple face competition from other growing phone companies especially those from China such as Huawei and OPPO. With these growing companies from China which are passionate on expanding their products into the market, it is has established price competition in the phone industry.

From the article, it is said that with the rise of Chinese companies, Apple has to not only face problems with buyers’ demands and delaying of buying their goods but also dealing with “compelling high-price and mid-price smartphone alternatives from Chinese vendors”.

Huawei’s “Honor series smartphones start at $199; even the flagship Honor 10 series smartphone retails for about $468 compared with the iPhone XR, which goes for $749.” This shows that price competition has been established since Huawei offers a cheaper pricing than Apple even though both phones are substantially similar (in terms of features).

Now especially with customers feeling Apple is not giving them the desired features as Apple promised(stated above), moreover with the expensive cost of their phone, it would be natural for customers to search for alternatives such as from the Chinese companies to get the phones with sufficient features they will use plus the unique features which want sets apart from Apple,  at a cheaper price. With this availability of substitutes that Chinese vendors offer, the taste and preference in consumers change and would divert towards the Chinese companies . Not only that, with the cheaper price these companies offer, it would take up less proportion of buyers’ income. Buyers would be more interested in buying something more affordable and since the product uniformity is almost similar, the buyers would be able to look for suitable substitutes. Demand for Apple will drop subsequently. The price elasticity for Apple products becomes higher, Apple will start to drop in its degree of market power and market share (as shown in table below, from 18.2% to 17.3%). In this case, Apple will be losing out to Chinese companies in the market because of this competition.

Having said that, though these firms generate products that are close yet different substitutes (because if product differentiation), they are still fighting for the same buyers. They would try to differentiate and add values to their products and branding of it such that it distinguishes their products from other companies so they can have lesser substitutes and attract more attention from potential buyers. This would decrease the price elasticity of their product hence total revenue increases, obtaining a higher market power. Market share for Chinese vendors such as HUAWEI and OPPO (as shown in the table below for Huawei from 10.8 % increases to 14.8%) increases This shows how companies thrive in a monopolistic competition.

In this monopolistic competition, this smartphone market has firms that have small market shares.

https://study.com/academy/answer/classify-the-smartphone-market-as-perfectly-competitive-monopolistic-or-monopolistically-competitive.html

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Hello Team!
Wow feel like out of this world when I view your padlet wall. Thank you for putting so much effort in conducting prelim analysis. Both in terms of your research and the depth of your analysis. I must also applaud your team for remembering to identify the Market Structure in stage 1 analysis too! *clap *clap!

I gathered that you are keen to do smartphone industry in the U.S, with special focus on Apple iphone?

Please refer to my specific feedback for your prelim analysis under the respective column.  Do continue to work on your points further, either finding more evidence to support it or new points to be added into your report.

Just a heads up, in Stage 2, you will move on to look at how growth in the smartphone industry impacts the U.S. economy and how the U.S help (or otherwise), the smartphone industry to grow.

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The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. Price elasticity of demand for smartphones are slightly price inelastic.

TraQLine, the Stevenson Company’s survey of over 200 consumer durable categories and 500,000 consumers suggests yearly that when it comes to particular goods, price may not be the key factor in consumers’ decision to buy the good.  An example TraQLine provided was on smartphones.

When it comes to smartphones, price is hardly the deciding factor for consumers. It ranks a distant third behind features and brand loyalty. Consumers value greatly items that offer the features they want or expect; and if a brand they have used or supported in the past is able to provide them with their desired features on the product, they are likely to be willing to spend more, so as to continue supporting the same brand. iPhones is an example of this brand loyalty (habit -> demand for habitually consumed goods are price inelastic). Consumers who have used iPhones are almost always more receptive to paying a higher price to stay with the Apple rather than purchase a less expensive Android model.

Reference:

PRICE ELASTICITY: IT’S NOT ALWAYS ABOUT THE MONEY.  (2016, January 28) Retrieved from https://stevensoncompany.com/price-elasticity-its-not-always-about-the-money/

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This shows the degree of market shares each smartphone companies hold in the market based on quarterly WORLDWIDE.

Reference :

Author: Lucas Mearian  Year: 21 Feb 2019 . Title: Smartphones markers and pricing themselves out of the market. Date retrieved: 5/9/20. Link:https://www.computerworld.com/article/3342478/smartphone-makers-are-pricing-themselves-out-of-the-market.html

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Market power refers to the extent to which a commercial enterprise can influence the price of a product or service by exercising control over its supply, demand, or both. Market power is a company’s ability to profitably increase the market price of a product or service over marginal cost.

Market share is the percent of total sales in an industry generated by a particular company.

https://www.investopedia.com/terms/m/marketshare.asp

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According to the article, “Less innovation in top-of-the-line smartphones coupled with steep price increases are pushing consumers to wait longer to replace older handsets”. Consumers are also finding themselves rarely using the new features in the new phones, thus making it a waste of money for them to get new phones. Not only that, with the increasing variety of devices like tablets and smart TVs, the amount of focus on mobile phones is less.

The bar chart shows that in the countries stated, there is an obvious decrease in the sale of phones between 2017 and 2018.

References:

Title: How regularly do people upgrade their smartphones? Website title: DeviceAtlas Date retrieved: 9/5/2020 Link: https://deviceatlas.com/blog/how-regularly-do-people-upgrade-their-smartphones

Author: Lucas Mearian  Year: Feb 21 2019. Title: Smartphones markers and pricing themselves out of the market. Date retrieved: 9/5/2020 Link: https://www.computerworld.com/article/3342478/smartphone-makers-are-pricing-themselves-out-of-the-market.html

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In the 4th quarter of 2019, “The US smartphone market declined 1% YoY due to weak upgrades and increase in the average holding periods, especially in the premium segment. Flagship sales have remained sluggish especially for Samsung and LG which faced tough competition from Apple.”

“Apple increased 7% YoY with the help of the new iPhone 11 series. The iPhone 11 was the best selling device for Apple during the quarter.”

From the table above, about half of US smartphone shipments market share is made up of Apple, an American phone brand, with 51% of the share from brands of other countries (LG and Samsung from South Korea, Lenovo from China, Motorola from US).

In U.S ‘s case, though it does seem that US hold a certain large number of shares, the market structure in the US is still a monopolistic competition. It is most probably that they hold the biggest share in the market mainly because of advertising, brand loyalty and also the production of their newer model which has its unique features that what sets part from other competitors. Despite apple having the most market share, the other companies still hold a significant market share in the smartphone industry in the US. Each company holds a substantial market share in the company and what's more, there is a relatively number of sellers in this industry which showcases the characteristic of a monopolistic competition.

In the short run, the firms may have economic profits or losses while in the long run, the firms may only obtain normal economic profits due to the little barriers that are preventing them from entering and leaving the industry.

Reference: Title: US smartphones market share by quarter: counter point

Year: 16 Feb 2020 Date retrieved: 9/5/20

Link:https://www.counterpointresearch.com/us-market-smartphone-share/

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Reiterating the previous point, demand for smartphones is generally slightly price inelastic. Apple, for example, has been slowly raising the prices of their smartphones. with the price of the iPhone X at $999 to the current price of the iPhone 11 Pro Max at $2000 - a 100% increase in price from 2017 to 2020.
However, people are still buying iPhones. Why is that?
People are also paying for the brand that comes with the phone, Apple is "not trying to reach everyone" but it is trying to establish itself as more of a "luxury brand". This is a non-pricing strategy that caters to the taste & preference of consumers -the good is popular and of the customers are influenced by the branding)

On the other hand, recently, Apple has released a new, cheaper iPhone, the iPhone SE, at a lower price of $549 and has also come up with a new marketing campaign to raise their sales in this COVID-19 situation.

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In essence, the smartphone industry is a monopolistically competitive market as it exhibits traits of both perfect competitive and monopoly structure. Buyers and sellers have imperfect information. More sellers are entering the market, adding to the already relatively large quantity of sellers in the market. Moreover, the ease of entry into smartphone markets is relatively simple since firms produce products that are closely similar and they primarily target the same audience. Consequently, buyers are able to look for close substitutes of different brands and models in the market. This thereby causes firms to have to focus more on finding ways to differentiate their goods via improved physical or qualitative attributes, and quality to attract buyers by distinguishing their product in the large market and maximise their profits. Through that, firms establish some degree of varying market power, depending on non-pricing or pricing strategies such as branding and strategically adjusting prices of products. Lastly, firms generally control the price of their own products, as each firm owns a small percentage of the total market - with the exception of larger firms like Apple and Samsung - if a firm changed the price of their product in accordance to upgraded features, there would not be much of an effect on the market. All firms will have to constantly step up their game by innovating more unique and useful models and be more strategic in adjusting the price of the goods so as to stay at top of the smartphone market hierarchy.

Reference

https://www.ukessays.com/essays/marketing/a-monopolistically-competitive-market-marketing-essay.php

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While consumers are willing to purchase newer models, they rarely make use of the new features that come with newer models. Brands like Apple manufacture iPhones of newer models which are similar to its predecessor. For example, the iPhone XS, the newer counterpart of the iPhone X is an iterative upgrade of the iPhone X instead of a complete overhaul in terms of feature, functionality and design. For example, only one meter of water resistance separate the two models, and only 30 minutes differentiate between the two in terms of battery life from reaching full charge. However, due to the taste and preferences of buyers, they may still opt for iPhones as it has been a more established brand. Furthermore, buyers would expect the price of the iPhone XS to be higher than the iPhone X as Apple tends to release their phones with a starting price than the previous model released. When iPhone released the iPhone XS with a same starting price as its older counterpart, it positively defies their expectations so they would be more willing and able to purchase the newer model even though they are released only a year apart.

Link: https://www.businessinsider.sg/iphone-xs-vs-iphone-x-comparison-2018-11?r=US&IR=T

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Many smartphone brands use economies of scale such as making use of technology as a cheaper capital to produce their products and goods such that lesser resources and even manpower for the production. For example, iPhone keeps innovating different and new models every year and also set their factories in China where labour, land and capital is cheap. This will decrease the cost of production and increase the quantity of supply as well, increasing the total revenue. Not to mention, these smartphone companies such as Samsung, iPhone and OPPO, being known for being tech savvy and trendy and are big firms, they are able to reduce the cost in promoting their goods through advertisements, development and research. Additionally, these companies also innovate and try to come out with products of their companies’ unique features. With this, the product uniformity in this smartphone market will drop as each company would have its own special features that are attractive to potential buyers. Hence, there will be lesser variety of substitutes to replace them and their degree of market power will increase, enabling themselves to rise and keep prices high while retaining market share. With the right allocation of their manpower, land, capital and ideas, companies are able to decrease their average cost and increase their profit.

Due to the current trade tensions, industries like the technological industry, and the food and agribusiness industry are impacted. In the food and agribusiness industry, since China decided to cut off certain imports like corn and soybeans, the American farmers now struggle to find a place to sell their produce, which then affects their productivity. In the tech industry, America has many shops open in China, and on the other hand, China relies heavily on American semiconductor suppliers to run their businesses. Hence, an increase in trade tensions will impact tech traders from both countries negatively. The American producers in smartphone industry would be negatively affected too, since America mostly relies on China for major exports and manufacturing. As mentioned above, most of Apple’s factories are based in China. If trade war escalates, Factories might close down and taxes may impose heavy taxes, the production of apple products might be affected since the ease and efficiency of manufacturing in China is gone.

However, note that the competition in this smartphone industry is monopolistic and fierce such that companies would need constant efforts and improvement to upgrade their goods so as to keep it attractive in the industry and for them to thrive on in this industry, not losing out in terms of being original and trendy.

https://www.businessinsider.sg/apple-iphone-manufacturers-look-outside-of-china-amid-coronavirus-2020-3?r=US&IR=T

https://www.forbes.com/sites/greatspeculations/2019/08/27/whats-the-worst-that-could-happen-for-apple-as-trade-war-re-escalates/#24da09396596

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Apple products manufacturing is based in China. This is because  China is the only location that's able to meet Apple’s needs: which is to produce the greatest number of Apple products within the shortest possible time.  China has a rich supply of labour. One particular example would be the release of the iPhone. There is a huge demand for it, and Apple knew it needed to be finished as fast as possible. Apple was aware that it wasn’t attainable in US manufacturing, and that it would result in inefficiency. Thus, they sought out the service of Chinese factories, and they were able to efficiently finish the tasks.

This is because in China, manufacturers can get a large number of engineers to work on the required manufacturing overnight. As they have an abundant supply of labour force, it enables them to complete a large capacity of workload quickly. On the other hand, it is impossible for the US to employ 250000 workers overnight. This makes China a more flexible and capable supplier. Moreover, these China workers have a starting pay of $3.15, which is less than half the U.S. minimum wage of $7.25 per hour. Hence, Apple enjoys economies of scale. They enjoy lower average costs, and at the same time highest possible productivity in workers. However, with recent developments of tension between USA and China, with US President Donald Trump has urged American companies that move jobs overseas, particularly Apple, by implementing punitive tariffs on goods they sell back at USA. Chinese President Xi Jinping has grown less tolerant and more suspicious of Western influence in China; a state-owned publication even claimed that Apple may pose a threat to security. China is no longer content with being the world's factory floor and is moving swiftly towards developing their own technology giants such as HuaWei and Oppo. As a result, in 2016, Apple’s iTunes Movies and iBooks Store were shut down in China, just six months after the services were introduced. The Chinese authorities fined the Apple for failing to pay its taxes in full. Apple also went through a national security review in China for the iPhone 6, delaying its release in the country.

Reference:
Giovanni Pino, (2018). Why does Apple manufacture in China? Retrieved 18 May 2020, from https://www.sourci.com.au/why-apple-manufacture-china/
Terence P. Jeffrey, (2019). Workers Making Apple iPhones Start at $3.15 Per Hour--in China. Retrieved 18 May 2020, from

https://www.cnsnews.com/commentary/terence-p-jeffrey/workers-making-apple-iphones-start-315-hour-china
https://www.nytimes.com/2016/12/29/technology/apple-iphone-china-foxconn.html

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With the market share of Apple slipping, it is planning to release a low-cost iPhone in 2020 in order to win back customers in emerging markets and retake ground in China lost to Huawei Technologies and other rivals. The iPhone SE 2020, successor to Apple’s first low-cost smartphone since the release of the iPhone SE in 2016 with the starting price of $399 is scheduled to be launched in the Spring of 2020.  In 2019, Apple reported its first-ever decline in iPhone shipments, and lost its title of the no.2 smartphone maker to Huawei. Thus, the decision to resurrect the lower cost models came amid that rough patch. Other reasons for Apple’s shortcomings are its pricing strategy, for example the iPhone XS Max retailing for as high as $1099, which lead to weaker sales in emerging markets. This shows that the price elasticity demand becomes higher as customers were responsive to the change in price. Another reason why Apple is lagging behind is due to its competitors launching 5G phones, which is why the new iPhone SE 2020 could he a help in Apple securing its user base by including the 5G function. By doing so, Apple can attract many consumers who are looking for a cheap yet up to date version of the smartphone would be interested in buying such models from Apple, thus giving Apple a boost to its market share.

Reference:

Apple to launch new low-cost iPhone in 2020 to halt sales decline Retrieved 26 May 2020, from https://asia.nikkei.com/Business/Technology/Apple-to-launch-new-low-cost-iPhone-in-2020-to-halt-sales-decline

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1. The survey shared has a small sample size so this might not be that representative of the entire population. With similar good effort, try to see if you can find a research on a larger scale and by an established research firm or publisher. Alternative ways of proving law of demand could be opinions or statements you found in articles/interviews. [Optional]

2.Good point about outsourcing. i.e. production is based in China. This point could be expanded by linking it to international trade and how the two countries used to facilitate this. Might consider checking out a little on the impact on the firms due to the current trade tensions. This would be value-add point for stage 2 Macroeconomics analysis!

3. Market Structure of smartphones in the U.S. identified to be Monopolistic Competition
I like the good research on non-pricing strategies to product differentiate. Along with this, and the the good data found under "Price Competition", last table, on market share of the US smartphone industry, please discuss if the market structure identified is most suitable.

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1. Identify the specific determinants described in your analysis, when consumers don't love iphone as much as before. This can be merged with consumer behavior (demand).

2. With the increase in number of competitors/increasing popularity of other phone brand, how would this impact the price elasticity of demand for iphone? Which determinant are we looking at?

3. Using the good data on market share, please identify the market structure of the smart phone industry in the U.S. Talk a bit more about the key characteristics of this market structure.
4. ur padlet is dogwater

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1. Aha! And one more on non-pricing strategy so one more clue on the market structure. AND if team wants to explore further, any news you read where price battles between competitors led to negative outcome?
2. This is not in your syllabus, but to unleash your team's potential further, think about this. Why is Apple trying to come up with a more affordable phone model? In economics, this is classified as one form of strategy firms use to capture different groups of consumers. This is similar to why students and children have discounts for movie tickets while others pay normal price.

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Similar comments for the other columns so pls check out the comments on your left.