Apple shipped 1.3 million fewer iPhones to Europe in the second quarter, analysis of the smartphone market has revealed, a fall of 17% year-on-year, meanwhile Android-based rivals Xiaomi and Samsung are seeing considerable shipment growth over the same period.
iPhone XS Max (left) with an iPhone XS
For most of the year 2019, the European smartphone market has been stable. Shipments for the industry were at 45.1 million units for the 2nd quarter, compared to 45.2 reported for the previous quarter, indicating the market has been relatively stable versus the rest of the world. Overall, Apple, Samsung and Huawei seem to drive the race of competitive advantage. They have a strong brand image, high profit margins and effective rapid innovation processes. Their two most prominent sources of competitive advantage can be found in their business’s cost structure and their ability to differentiate the business from competitors. Businesses that create competitive advantages from one of both of these sources usually experience above-average profitability within their industry.
Apple, however, has seen its sales decreasing. For the second quarter of 2019, data from Canalys claims Apple shipped 6.4 million iPhones, a drop of 17% from the 7.7 million shipments seen in the same quarter in 2018. For the market in general, Apple manages to remain in third place in terms of shipment volume, but occupies 14.1% of the market compared to the 17% it held last year. Its high selling prices and dependence of sales on high-end market segments are major weaknesses. At the same time, Apple’s Mission Statement seems to be mostly about what it achieved so far, rather than its future direction:
Mission Statement: Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad.
Samsung, on the other hand, saw its sales going up. For the competition, Samsung is in the top spot with 18.3 million shipments, year-on-year growth of 20%, and a market share that swelled from 33.9% for Q2 2018 to 40.6% in Q2 2019. Canalys credits the improvement to a shift in Samsung’s product strategy from focusing on operating profit to winning back market share, as well as capitalizing on Huawei’s problems with the U.S. government.
Huawei was ahead of Apple, which saw shipments drop 16% to 8.5 million and market share go from 22.4% to 18.8%. Behind Apple is Xiaomi, which saw annual growth of 48% to achieve 4.3 million units shipped, giving it a market share boost from 6.5% to 9.6%.
Apple does appear in the list of top five smartphone shipments for the quarter, with the iPhone XR in fifth place with 1.8 million units. Samsung takes the first, second, and fourth place with the Galaxy A50 (3.2 million), Galaxy A40 (2.2 million) and Galaxy A20e (1.9 million,) while Xiaomi’s Redmi Note 7 was third with 2.0 million units.
The top five list highlights the pricing issue of market share, as Apple is fighting against considerably cheaper devices. While the fifth-place iPhone XR costs from 749 GBP ($905) in the UK, the Samsung Galaxy A50 can be acquired for 288 GBP ($348), the A40 for 219 GBP ($264), the A20e for 158 GBP ($191), and the Xiaomi Redmi Note 7 for 123 GBP ($149).
However, the mobile industry joins countless others that have taken a massive hit due to the COVID-19 pandemic, with shipments dropping 13% in 1Q of 2020. Samsung regained the top spot, while still losing significant numbers. Both it and the number two company, Huawei, were down 17% for the quarter. Apple, at number three, dropped 8%.
Despite the setbacks and uncertainty, Huawei launched a new line of flagship smartphones last month. The P40 handsets don’t include Google services such as Youtube, Google Assistant, and the Play Store due to a US trade ban, which will limit their popularity outside of China.
Covid 19, of course, also had an impact on consumers and their behaviour. According to Global Web Index’s findings, 80% of consumers say they have consumed more smartphone content since the outbreak. Broadcast TV and online video streaming platforms like YouTube and TikTok are winning more screen time as primary mediums for all generations and genders. Consumers seeking pandemic-related updates are at a predictable 68%. The most preferred media consumption across Gen Z, Gen X, and boomers was online videos, music streaming, and online press. Clearly, a disaster, like Covid 19 has influenced the smartphone market positively rather than negatively.
7 Revision Questions
- Based on the case-study, conduct a PESTLE analysis for the Smartphone market in Europe
- Name and explain 15 Grand Strategies? Based on the case-study, in your opinion, what is Apple’s iPhone XR and Xiaomi’s Redmi Note strategies towards achieving competitive advantage.
- Based on the case study, why should a customer pay €1800 for a smartphone and not €300? What else is there beyond the price, offering to Apple or Samsung competitive advantage?
- Using SWOT analysis, name one Strength, one Weakness, one Opportunity and one Threat for Apple’s iPhone. Also, discuss the advantages and disadvantages of the SWOT analysis tool.
- Explain what a mission statement is and what it includes. What elements can you identify in Apple’s Mission Statement in relation to iPhones? Would you suggest any changes to make it better?
- ‘The leadership challenge is to galvanize commitment among people within an organization as well as stakeholders outside the organization to embrace change and implement strategies intended to position the organization to succeed in a vastly different future’ (Pearce and Robinson, 2010:359). Following this statement, explain the differences between vision and mission as well as the responsibilities of the board of directors.
- After discussing the Stakeholder Theory of the Firm in the class, name the inside and outside stakeholders of Samsung. Explain what each stakeholder group expects by Samsung.
- This form of assessment is a closed book exam.
- Based on these revision questions, you will have to answer 5 set questions.
*Article developed for the purposes of BADM after adaptation of several articles as follows:
Malcolm, O. (2019) Apple loses ground to Samsung in European smartphone market. Apple Insider’ Published on 12 August 2019. https://appleinsider.com/articles/19/08/12/apple-loses-ground-to-samsung-in-european-smartphone-market
Byford, S. (2020) Coronavirus causes worst smartphone market contraction in history. TheVerge.com Published on 30 April 2020 Online at https://www.theverge.com/2020/4/30/21243685/coronavirus-smartphone-market-impact-q1-2020-covid-19
Heater, B. (2020) Smartphone shipments dropped 13% globally, and COVID-19 is to blame. Thecrunch.com. Published on 1 May 2020. Online at: https://techcrunch.com/2020/04/30/smartphone-shipments-dropped-13-globally-and-covid-19-is-to-blame/
Kalsi, K. (2020) Effect of COVID-19 on consumer behavior. Published 11 April 2020. Online at: https://www.clickz.com/key-insights-effect-of-covid-19-on-consumer-behavior-the-worlds-more-video-content-savvy-and-apple-shakes-up-ar/261203/
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