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Consumer Electronics Industry

In: Computers and Technology

Submitted By gauravhal
Words 2408
Pages 10
Consumer Electronics Industry: Tablets Over the next Decade 1. Introduction
A tablet PC is a wireless, portable personal computer with a touch screen interface. The tablet form factor is typically smaller than a notebook computer but larger than a Smartphone. Bigger and Brainier than a smart phone but smarter and sleeker than a net book, tablet computers have revolutionized the way in which modern day consumers experience and fulfill their computing and communication needs. The credit of pioneering this field and creating the market segment goes to Apple with launch of i-pad in 2010 and once again proving its capability of a leading innovation driven firm which redefines the course of overall computer industry as a whole from time to time. Since then the tablet sales have seen unexpected momentum in terms of growth in sales figures worldwide with apple emerging as the largest supplier till date as compared to all others. However, Android based tablet PCs are expected to take over Apple’s share in the coming years. The world has seen aggressive competition among tablet PC manufacturers after the launch of iPad from Apple. Within five months of the release of iPad, Samsung launched its Samsung Galaxy Tab to compete with Apple. Since then, the tablet PC manufacturing industry has seen the emergence of numerous players. Most tablet manufacturers such as Asus, HP, and Lenovo among others released their models of tablet PCs in quick successions, but none of them could surpass Apple’s share. 2. Industry Dynamics
The “consumer electronics” (CE) category of products includes Smartphone, tablets, computers, televisions, video game consoles, automotive technology, and many other home products as well as emerging product categories such as wearable’s and 3D printers. It is a rapidly changing, dynamic industry that is highly competitive and influenced by technological developments. Manufacturers are under enormous pressure to bring unique and differentiated products to market. Any successful product quickly attracts copycat products from competitors, resulting in rapid commoditization and falling prices. Recently the two prevailing trends have been convergence – combining the functionality of many products into one – and the shift toward mobile, connected devices such as smart phones and tablets. Rapid adoption of tablets disrupted and severely cannibalized demand for notebooks, but the decline in demand appears to have bottomed as tablets still cannot perform all functions of the computer. From a distribution perspective, online retailing has been a major trend and has become much more prevalent within the industry. If there is one constant feature of the rapid pace of change across technology, it must be the consistent outstripping and surpassing of all expectations and expert projections. By 2017, there will be a global social network audience of 2.55 billion. alongside this surge in habitual social networking use has caused a change in consumer habits. Mobile devices, tablets, even brand new innovations such as wearable technology are amongst the drivers that are re-defining how people access products and make purchases. Rapid technological change, combined with increased production efficiency, has resulted in falling retail prices for industry products, making them more attractive and affordable for consumers. Over the next five years, improving per capita disposable income and rising consumer confidence about the convenience and security of online purchases will likely secure repeat sales. In addition to improving economic conditions, product innovations and new technologies will further bolster industry growth. 3. Tablet Market Analysis using Porter’s Five Forces Model
Porters Model analyzes an industry with the aim of helping develop a business strategy. The five forces in the model have been identified to categorize industries as intensely not competitive or competitive. The categorization helps determine the attractiveness of the market. Industries have many features in which a companies compete and this features are vital in determining the level of competition the company faces and the expected profits.
Porter’s Five Forces in Tablet Industry
Threat of New Entrants * Threat of new entrants to the tablet industry is weak. The market is currently dominated by other major competitors who have nearly the entire market share. This market domination discourages new companies with potential from entering the market. * Another barrier to entry is that the tablet market requires significant investment in research and development. The investment will help in developing innovative products, as well as large fixed start-up costs for customer service, employees and manufacturing. The new entrants into the market will not only experience high prices, but they will likely acquire less innovative products. This situation arises because the new entrants do not enjoy equal funding for research and development as the other established brands. They will have to overcome the customers that are loyal and have trusted the existing players in the industry for many years. New entrants should focus investments more on marketing and advertising than the existing brands. * There is the likelihood of new players into the tablet market not faring well as the larger companies are likely to develop innovative products more rapidly due to their many competitive advantages.
Bargaining Power of Suppliers * Apple has developed an ecosystem to obtain the best possible value and benefit to their customers and stakeholders. * Moreover, since Apple is the leader technology company which has large demand of raw material there are a plenty of suppliers which have been registered in order to be the Apple's suppliers. Then, when there are more competitive among large number of suppliers, the bargaining power of them will be decreased. * Apple has a high bargaining power over their suppliers because they are able to outsource much of their manufacturing and they also have been able to vertically integrate, which means produce some of their own supplies, which has allowed Apple a great advantage in the competitive market.
Bargaining Power of Buyers * Large business, governments and educational institutions along with household consumer which buy tablets in large volumes have the power to bargain on price, technology quality and service. * However, buyer’s power is lessened due to high switching costs and also due to the brand loyalty. Thus, threat of buyer power can be moderated with highly differentiated product. * Apple’s unique features in tablets and sleek contemporary design places it as a lucrative product and combining it with brand loyalty make it difficult for consumer to choose competitors product. * But despite several ways in which the ipads have been segregated as different customer still views all the options alike on some parameters of technology and performance and hence the price could be decisive factor for purchase.
Hence, it can be concluded that buyer power is fairly strong
Rivalry among competitors * The other major players in the tablet industry viz Samsung, Lenovo, amazon are continuously striving to outpace the sales growth of apple ipads by constantly introducing cost effective and heavily loaded products in the market. * Infringement on intellectual rights and much famous litigation between Samsung and apple clearly indicate towards a fierce struggle to grab market share. * While apple used to set rules of the game Samsung is trying hard to change the game altogether with its hybrid range of tablets along with continuously upgrading hardware and software platforms. Similarly taking a cue from Samsung other players have also strengthened their position and presence in the market. * The tablet industry therefore continues to witness intense rivalry among the competitors as the fight for market share in this segment moves to next level. Threat of Substitutes * Almost all the products of consumer electronics industry of PC’s from a reasonable substitute for tablets. Smartphone’s, net books as well as conventional PC’s are a viable choice for consumers to opt over tabs as latter suffer from several performance disadvantages. * Hybrid product category of recently launched devices called as phablets which combine the ease of handling like smart phones and large screen multimedia applications like tablets are rapidly becoming popular and a constant endavour of experiments in variety, configuration and comparable price range is proving formidable substitutes for tablets. * Samsung with already having a strong presence in the tablet industry is constantly promoting its note series of smart phones which serve dual purpose and has positioned the product ass ultra premium segment choice. * It is therefore imperative to conclude that a wide range of potential substitutes are present for tablets which pose a significant threat to the sale growth.

Apple in the Tablet Industry: Current Position
Apple continues to rank among the world's top tablet manufacturers both in customer satisfaction and shipments, although the company is showing some signs of weakness as lower-cost competitors gain momentum and consumers look for more innovation in Apple's tablet lineup. Apple fell slightly behind Amazon while the company's lead in worldwide tablet shipping volume continues to shrink.

Apple remains the global tablet market leader, despite a 12.8 percent decline in quarterly shipments year-over-year. Apple shipped 12.3 million units in Q3 2014, edging out both Samsung, which shipped 9.9 million units, and coming in well ahead of Asus, which climbed to the number three spot with 3.5 million units shipped.

SWOT Analysis of AppleTablets

* High Demand. * Quality of Superior Design. * More Functional than other tablets. * Strong Brand Image. * Innovative Marketing and Advertising. * Customer Loyalty. * App stores


* High Price keeps out some consumers. * Product Limitations in calling features. * Technology Replication and imitation. * Product Recalls. * Not so popular and incompatible operating system as compared to android. *

* Declining Sales and Gross Margins. * Death of Steve Jobs


OPPURTUNITIES * Leverage of Cloud Technology. * Constant and Steady Market Growth. * Ability to adapt and innovate from time to time. * Established Ecosystem of all the necessary ingredients of success. * Latest range of tablets launched gaining widespread attention.


* E-readers from other brands especially kindle from Amazon. * Superior hardware configuration in competitor brands. * Declining sales and gross margins. * Intense Rivalry in the industry and low cost similar products.

Challenges over the next Decade The past decade saw apple’s growth in leaps and bounds. It surpassed all technology brands in the world and increased its customer penetration in every corner of the world. Tablets had a fair share of contribution in this feat. But the key questions that arise at this point are; 1. Sustainability: Is the Apple story sustainable in the next decade? Will the sale of tablets continue a steady growth trajectory?

A detailed analysis of apple revenue structure reveals the dominance of contributions from sale of smart phones. Tablets contribute a modest 13% of the total revenue even lagging behind Macs. The steady decline in the market share of tablet sale, lost to competitors like Samsung, Lenovo and Amazon is a cause of concern as it signals that the competitors are catching up. Moreover, inability to introduce a radical feature based technology over the years in the tablet segment, market saturation for premium brand based sales and presence of low cost devices have adversely affected the sales. 2. Maintaining Competitive Edge
Since its advent apple has been setting the rules of the game, but it is not its forte anymore. Powerful brands such as Samsung are now creating products so hybrid yet differentiated that identity of tablets as conceived by apple has begun to fade. They are infact making a combination of tablets and notebooks known as ultrabook which is being perceived as the device to cater the needs of a wider customer base while overcoming the limitations of tablets over laptops and yet providing all the same advantages. Samsung has already carved a niche for itself with introduction of phablets and continues to experiment with series of Galaxy note devices. Amazon a totally unlikely rival of apple has launched kindle, the android based tab which is selling at the lowest cost in the segment, and is building its newer configurations at par or even better than apple’s ipads.

Strategic Recommendations: The way forward 1. Focus on Supply Chain
Apple’s strategy for the future should keep intense focus on its supply chain through which it has demonstrated its cost effectiveness and obtained consumer satisfaction. Exploring newer market territories in the developing countries which still offer an immense potential and increasing the access of sales and distribution network. 2. Cost Effectiveness and Affordability
Despite continuously being perceived as the brand of rich and affluent a dynamic change in pricing strategy and cheaper products could turn the tables for apple in terms of it sales for tablet as the major chunk of market currently marks the sale of low cost substitutes. The company can win back the customers lost to other cheaper brands which used its high price to their advantage and this could result in a major blow to rivals. 3. The Game is not yet over! Innovation is the key to growth
Apple has proven its ability to innovate beyond any "reasonable" multiple. As the premium-priced option in each of its categories, it's by far the most profitable among its competitors. Apple can still retain and broaden its competitive sphere by once again remodeling its range of ipads with respect to following features; * Better Hardware configuration with increased processing speed and longer battery life in tablets. * Integration of versatile media devices and applications suited for modern lifestyle and consumer needs. * Diversification of screen sizes available along with compatible applications and softwares. The demand for phablets, is so high that Apple would do better to launch them sooner than later.
Initiatives already taken in this direction like Apple University and the One Infinite Loop of Apple campus can be the cornerstones for success in future. 4. Acquisitions and Partnerships
Expansion of the digital ecosystem of tablets, though not exclusive will provide the required impetus for future growth. Google has already proved it with the android’s organic growth structure and acquiring Motorola as its strategic intent to establish itself in hardware segment of the industry. This is a move which can significantly help apple to chart its course of future in the tablet industry if it can acquire relevant businesses in its portfolio to create a more robust architecture of software and hardware compatibility.
Apple should also look to form meaningful partnerships and joint ventures not only to contradict the market dynamics of Apple Vs others but to benefit from the core competencies of its partners. This can result in product variety in the tablet segment and while any such partnerships with mobile network operators can provide a leverage in terms of sales by offering attractive plans and promotional offers.


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