INDEPENDENT UNIVERSITY, BANGLADESH

“Mobile Handset Industry Analysis to identify it’s Attractiveness”

COURSE TITLE: STRATEGIC MANAGEMENT

COURSE ID: MGT490

SECTION: 5

GROUP NAME: CORPORATE GENIUS

ID NAME

1330265 OMAR SAAD

1320789 MOSFIQUR RAHMAN SHISHIR

1420656 ZOEB HASAN

1421259 ABDUL AZIZ SARUP

1321464 SHUBHA BARUA CHOWDHURY

1330668 MD SHAHIMUL EHSAN ULLAS

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SUBMITTED

TO

MD. RAJIB RAHMAN

Content Name ID page

Introduction: 3

Market information& industry history

Omar Saad &Zoeb hasan

1330265 &1420656

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Rivals and sales figure Md Shahimul Ehsan Ullas 1330668 3-4

Supply chain Abdul Aziz Sarup 1421259 5

Manufacturing process Shubha Barua Chowdhury 1321464 5

Distribution process Mosfiqur Rahman Shishir 1320789 6

Objective of the study: Md Shahimul Ehsan Ullas 1330668 6

Methodology Abdul Aziz Sarup 1421259 7

Short analysis of five force Shubha Barua Chowdhury &Omar Saad

1321464 &1330265

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Analysis of five forces: 9

Competitive force of rivals Mosfiqur Rahman Shishir 1320789 9-10

Competitive force of new entrant

Zoeb Hasan 1420656 10-11

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Table of Contents

Threat of substitute Shubha Barua Chowdhury 1321464 11-12

Bargaining power of supplier Omar Saad 1330265 12-13

Bargaining power of customer Md Shahimul Ehsan Ullas &Abdul Aziz Sarup

1330668 &1421259

13

Conclusion and Reference Mosfiqur Rahman Shishir &Zoeb Hasan

1320789 & 1420656

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IntroductionA mobile phone is a portable device through which we can communicate with each other from various locations. The first mobile was launched by Motorola in 1973.

Mobile phone industry is one of the fastest growing industries in Bangladesh .In 2015 the number of Smartphone users has increased from 5.1 million to 8.2 million. Smartphone sale are expected to be 8 million this year. In 2014 the number of feature phone users was 66 millions whereas in 2015 the number of users is 70 millions. Mobile phone market revenue in 2014 is 840.88 millions whereas in 2015 revenue is 1005.75 million. Therefore we can say that mobile phone market industry’s sales are growing rapidly.

The mobile handset industry in Bangladesh has been dominated by Nokia due to its low cost feature phones. This has kept buyers away from industry giants like Samsung. Today local brands like Symphony dominating the market. Symphony, Walton, Samsung, Huawei, Oppo are the top five cell phone brand in Bangladesh. All the top five cell phone brands are rival to each other. Other brands like Maximus, Apple, LG etc. are also gaining market share. They have successfully competed with international giants like Samsung and Nokia.

The growth in the Smartphone sales in Bangladesh, especially, Dhaka, is much higher than the global average of 20.3%. According to Bangladesh population out of 160 millions, more than 130 millions people in Bangladesh use mobile phone, while 50 million people are access to internet. In Bangladesh there are local phone such as Symphony which operate locally whereas foreign brands like Samsung, htc, iphone operate internationally. Therefore mobile phone industry operates both nationally & internationally.

Usually mobile subscriber’s age range from 15-60 years, they are ultimate consumers who will buy and use the cell phone. Also according to their lifetysle, attitude & interest they select their preferred brands of mobile phone.

About price range, if the price in under 5,000 Tk. then Symphony, Walton and Maximus can provide with some choice. If your price is over 5,000 but under 15,000 Tk. then there are some

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good choices from Samsung, Nokia, Xiaomi, Asus etc. Over this amount almost all brands that are available in Bangladesh offers cell phones.

Mobile phone market trend

Market Shares in Bangladesh

Supply chain of mobile phone industry

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The above diagram is a supply chain of mobile industry. First materials are sourced from different countries like china, United States and then it is assemble & manufactured, after manufacture mobile are deliver kept in warehouse, then it is distributed by many resellers to retail stores & online store and id any defect mobile is found it is returned to the company.

Manufacturing plan

Each piece of the cell phone is created separately. First, the casing for the phone is made. Most cell phones use a simple plastic that is created using a process known as injection molding. Once the casing is created, the printed circuit board is made and loaded with the necessary software/operating system. The circuit board is then placed in the casing, using a series of eyeglass screws. Next, the other components of the phone are added: screen, keypad, antenna, microphone and speaker. After the phone is constructed, it is moved on to testing. During the testing phase, the battery for the phone is added and a worker checks the phone for power, button functionality and reception. Finally, the necessary documentation for the phone is produced and sent to be packaged with the phone. Once all of these components are verified, the phone is packaged and shipped to retail outlets.

Mobile phone component are Motherboard, Screen, camera, housing, battery, other element

Demography of Mobile phone users

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From the above diagram we can say that even as Bangladesh is a low income group where most of the people have the individual cell phone. Compare to other low income countries like Nigeria, Cambodia, the number of mobile subscriber in Bangladesh is high. Most of the mobile subscribers of Bangladesh are aged between 15-60 years old. Almost All income group owned a handset. But who preferred their mobile brand according to personality, lifestyle & social class.

Distribution system of cell phone industry

One of the reasons for rapid growth of local brands like Symphony is strong distribution. That means they have their own retailers throughout the country. Having Retailers Company can provide better after sell service directly to the final consumer.

But all foreign brands doesn’t have that type of official retailers. Brands like Samsung, HTC, iphone may have some office in Dhaka, but they are actually importers.

So we can say that foreign brands are totally depends on independent reseller, which means that the seller buys phone from the country distributor or imports the preferable and profitable brand phones then they sell it in their shop. An independent seller usually sells all kind of phones depending on local demand.

Objective of This StudyThe objective of our study is to identify attractiveness of mobile industry. Through porters five forces we are trying to identify whether competitive environment of mobile industry is attractive or ideal or unattractive. Whether mobile industry is lucrative in Bangladesh market or not. We are analyzing on different component of porters 5 forces to identify the profit potential of the industry. Also we will find the economic traits of mobile industry of Bangladesh to identify whether the attractiveness is poor, average or excellent. In the report we have discuss about the buyers & suppliers bargaining power, threat of new entrant, substitute & competitive rivalry.

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MethodologyMethodology defines the method through which we gather data from any sources. We have used various methods to collect information of mobile industry. Few information about mobile industry we gathered it from secondary sources such as internet, journal, Wikipedia, online news etc. but the tool which we used to identify mobile industries attractiveness is porters 5 forces.

We are using porters 5 forces model to identify industry’s attractiveness. The five forces models are rivalry among competing sellers, substitute products, suppliers of key input, buyers and potential new entrant.

Method tools for industry analysis:

Cell phone industry analysis we go through by Porter’s Five Forces of Models.

1. The Rivalry among Competing Sellers

2. The Potential Entry of New Competitors

3. Competitive Pressures Form Substitute Products

4. Supplier Bargaining Power

5. Buyer Bargaining Power

Short description about Porter’s five forces:

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Rivalry among competing sellers

Competitive rivalry is one the porters 5 forces of competition. It describes the degree of rivalry between companies in the industry. If there are more companies operating in the industry then the industry is competitive industry. In the competitive industry rivals will try to offer attractive price and superior quality to so that customer of other company shifts towards their company. in the competitive industry one who have lowest share , their profit will be squeezed and they might not sustain the market. Whereas if the rivalry is weak company will be freely able to set their prices and profit margin without thinking about what customer find attractive.

New Entrants

Potential new entrant is threat for existing companies in the industries if the existing companies are earning higher profit and buyer demand for product is growing rapidly there is a higher threat for existing companies. Also threat of new entrant depend on other factors as well such as economics of scale of existing brands and if the technology and capital requirement is high in airline industry. Threats are weaker when pool of entry candidate is small and industry outlook is risky.

Threat of Substitutes

Substitute product are product from another industry that offers similar benefit to the consumer as the product produced by the firms within industry. Threat of substitute depends on various factor such as whether substitute are attractively price and available, buyer switching cost etc. threat of substitute is higher when buyers have positive view towards substitute products, substitute are higher price relative to the performance they deliver. Threat of substitute is lower when substitute are higher price then the performance they deliver.

Bargaining Power of Buyers

Bargaining power of buyers is another porter’s force among 5 forces. Bargaining power of buyer depend of various factors such as buyer switching cost, the amount of quantities purchased, buyers demand etc. Bargaining power of customer is high when buyers purchase large quantities of item, when switching cost is low other brands. In the competitive industry buyers have more option therefore they can easily switch to other brands if the switching cost is low and other company provide better benefit than the existing company.

Bargaining Power of Suppliers

Supplier provides raw materials to manufacturer who will produce goods. Bargaining power of supplier will depend on various factors such as buyers switching cost to alternative supplier, the supply of inputs & their quality. Supplier bargaining power is high when Item makes up Large

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Portion of Product Costs and significantly affects product quality. Supplier bargaining power is low when good substitute input exists.

Analysis of Mobile industryHere we will relate five forces with mobile handset industry & analyze how strong or weak are the forces.

Rivalry among Competing Sellers

This is usually the most powerful of the five forces. Rivalry among competing sellers is high in mobile industry due to the launch of new products from already well-known and established brands. It’s almost too hard to keep up with which handset is latest in the market.

There are lots of companies in Bangladesh of who are selling mobile handsets like Symphony, Walton, Samsung, Winmax, Maximus, iPhone, Microsoft, Micromax, Maximus, Oppo, etc.

Their products is not much different, so companies try to differentiate their products giving more applications and design.

Launched in 2008, Symphony started selling smart phones in 2012 and in three years' time, has managed a market share of 40 percent.

Symphony mobile leads by a distance in both Overall and smartphone mobile phone segment with a market share of 46.3% and 40% respectively. It enjoys the maximum brand share on account of its strong distribution and brand presence along with the customized mobile phone offerings relevant to local needs and preferences.

Price competition is very high in mobile market because local brand like symphony, Walton is offering phones at similar prices with similar features. Well-known global brand like Samsung also offering model in lower prices to attract that low to mid income level customers.

When it comes to features & quality local brands facing a huge competition majorly from Iphone& Samsung.

Operating system is a huge factor for smart phones, if a phone is android based or ios or windows. Android is of course most popular right now than others. The popularity is so much that once so much popular brand Nokia is believed to have faced loss because of not switching operating system. Currently windows based mobile also facing same problem.

All the competitors are active in efforts to improve quality & features offered in phones. Rivals racing to offer better performance features. Like from 2gb RAM, now new smart

phones are offering 3gb RAM. Rivals racing to offer better customer service. One of the main reason for local brands

increasing demand is distributor and customer point are throughout the country,

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Lots of advertising/sales promotions. Newcomers like Oppo, Micromax trying to attract customers with aggressive marketing.

When it comes to product innovation local brands are like copying global brands. Where apple is considered to be pioneer in any new innovative features.

As mentioned that in the market there lots of handset models & lots of manufactures available, so buyers have lots of options to choose which fits their needs. Other than smart phones there are basic feature phones which also have significant demand in market.

Market of mobile industry in Bangladesh is growing rapidly as overall income level of the country increasing and network infrastructure is reaching rural areas the numbers of mobile users are increasing day by day.

As company has to invest big amount and they offer after sell about 1 year warranty, so a company can not just get out of business if they are not making profit. They are liable to their customers.

The barriers help establish and emerge local players to grow faster than the international brands, using their local market knowledge, relationships and cost-effectiveness.

In conclusion, competitive rivalry is very Strong and even company like Symphony, who has almost half of the market share, must be aware of the threat like local rival Walton & growing popularity of new phones like Xiomi or Oppo and low priced phone offers from Samsung etc.

Potential threat of new entry

The mobile phone industry is already a well established market and the threat of a new entrant is moderate because new manufacturer will require large investment & technological equipments, so the new entry can be considered low. But at the same time the threat of existing foreign companies, who doesn’t have active presence in Bangladesh, can target this market because of high demand. Seriousness of threat depends on barriers to entry & reaction of existing firms to entry. These are described below-

Capital requirement is very high to compete in the market like huge manufacturing costs, high Research and development costs etc.

As this is a technological industry manufacturing process & required technology is costly & complicated. New company may not have the technology to cope up with the established brand, this is because of existing company having economics of scale.

Barriers like patents make it difficult for new competitors, because the best methods are patented. Like global brand Samsung. Therefore it is major barrier for a new company to enter into mobile industry

Customer’s loyalty towards existing brands is high. Apple, Samsung is top 2 global mobile handset manufacturer, they also have strong presence in Bangladesh. Advanced technologies make it difficult for new competitors to enter the market because they have to develop those technologies before effectively competing.

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All leading companies are fighting a fierce battle to gain more market share, so there will be heavy retaliation towards any new entry. Symphony has started selling cell phones in 2012 & in just 3 years they gained 40 percent market share. Samsung, Walton or Microsoft will try to fight to gain back those customers. There is a constant push to innovate and launch new products. New company with just few products can not just gain customer satisfaction. Young generation is always demanding new features..

Distribution Channel will be difficult for new brands, because retailers & independent sellers will be less interested in new brands, as existing known brands already giving then profits.

Local importers of finished mobile phone have to pay total of 23.75 percent duties and taxes, including customs duty, value added tax and two percent advance income tax.

But, there are always possible threats of new entrants in the Phone industry, not necessarily a threat of a new phone company but of new products from established companies or entry of existing foreign company.

New features can take place older features. Smartphone have taken over basic phone. As there is still market demand for basic phone, so like Symphony any company who has making only Smartphone now can come with low priced basic phones to gain market share.

For related technological industry new manufacturing can be done with little less complexity. Like Asus used to manufacture personal computer components, now they started making Smartphone. Because they kind of require same kind of technology, if they plan to expand their business, they can expand industry.

Existing companies in Bangladesh will know if the any company planning to enter the market in near future, because they have to promote first to give knowledge to the customer about their product. So the existing company can take strategies.

In conclusion, the threat of new entry is moderate. Cell phone industry of Bangladesh is import based, local brands also imports all the necessary parts. So, even the existing market is already established and very competitive with local & existing international brands, still there is always threat that brands like Xiomi, Asus etc who already offer to similar kind of target customer like Bangladeshi market, they can enter in Bangladesh market anytime. So the company has less danger of further new entrants but it has to be focused on the existing rivals.

Threat of substitute

A substitute product is a product from another industry that offers similar benefits to the consumer as the product produced by the firms within the industry.

Good substitutes of cell phone are not readily available. Actually cell phone is considered as the changer of the world. Before cell phone landline, Walkie-Talkie etc. were used to communicate with each other. But cell phone replaced them as a substitute. Those land phone or walkie-talkie

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may still being used, but only for official work that can not provide the features that a mobile phone offers.

Smart phones have two primary functions, communication& access to information sharing using data.

But Landline is not portable & drawback of walkie-talkie is mainly communication between limited distances.

Substitute of cellphone is landline, viber, social networking, e-mail, internet etc. Also substitute of mobile phone has a limited use, such as through digital camera we can

take only photos, but in mobile phone we have multiple features in one device. There are many substitutes if the buyer focuses on one of the functions, like digital

camera can take better photos then smart phones, for official purposes using computer is much better than mobile phone.

For operating system, older java or Symbian phone is being replaced by windows, android, ios. Android is better substitute for Windows operating system.

In conclusion, the threat of a substitute product is low due to the fact a smart phone is no longer just for making calls but for all the other function as well are expected on all smart phones. So, no other product is offering that kind of huge feature in single product. No one knows if in long distant future mobile phone will be replaced by something else. But at this moment it is not possible to think the world without cell phones.

Bargaining power of supplier

Bargaining power of supplier is low. There are mainly two supplier hardware manufactures and software manufacturers. Suppliers can not exercise sufficient bargaining leverage to influence terms of supply in their favor. In mobile industry most of the components are manufactured in China, because of cheap price. As in china lots of company offering the raw components of mobile, so the main cell phone companies gave plenty of options to choose supplier.

As there are lots of suppliers in mobile industry and there are big competition among suppliers to reduce price to manufactures. Manufactures can easily switch to other suppliers if one raises price or quality of materials is not consistent.

In mobile industry raw materials doesn’t makes up Large Portion of Product Costs because it actually up to Brand Company that what specific features they want to give in a specific product..

Supplier cannot bargain over price with them, because they generate supplier’s significant amount of revenue. Without them suppliers profit will be low because they are the big customer who buy supply component in large amount. So, suppliers try to give incentive to protect customer through providing exceptional quality and reasonable price.

For software suppliers there are many open source providers so the bargaining power of software provider is low. Switching cost is low, manufacture can easily switch to other

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supplier because there are plenty of mobile component suppliers and switching cost is relatively lower. Switching cost includes material, time and physic cost.

Brands like Apple or Samsung can choose any supplier they want. Any component manufacturer will agree to their specific requirements if Apple or Samsung asks. Because of their global market share.

Bargaining power of customers

Buyer bargaining power refers to the pressure consumers can exert on businesses to get them to provide higher quality products, better customer service, and lower prices. Bargaining power of customers is high because

In mobile industry customer has a plenty of choice to choose among the brands, since many mobile brands are available in the market. If customer wants to buy high quality phone, they can go for Iphone 7 or Galaxy S7. If they want better feature at low cost they will go for local brands like Samsung and symphony.

In Bangladesh most of the brands are offering cell phone in the same price segment. So customer’s option is increasing. Therefore switching cost to other brands is low.

As a technological industry, new innovation will always increase the demand. So customer won’t go for windows based phone, when android is more flexible & user friendly.

Customer loyalty doesn’t highly exist in mobile industry. Only brands like Apple, Samsung have kind of loyalty, but their market share is low.

Customer is concerned about features, look, function not the brand itself. If they find other phone offering good features at reasonable cost they will shift to other brands. Customer looks for the brand which offers best value for money.

In Bangladesh most people are price sensitive, so they will not buy the product if the product is high price with less feature and function. Therefore mobile company also provide after sales service such as warrantee to retain customer in their brands.

In conclusion, customer bargaining power is high in mobile phone industry. Because people will buy the cell phone when the price come down up to their favorable to them or they will make delay in buying the phone.

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CONCLUTIONMobile handset is one of the most revolutionary products in recent history. How much time it saves in human life its unthinkable. It is more like if you have a cell phone in your hand, you have the whole world in your hand. So definitely it is understandable that this product will have high demand than anything else in the whole market.

The short results of our analysis are: competitive force of rivalry is high, potential threat of new entry is moderate; threat of substitute is low, supplier bargaining power is low, customer bargaining power is high.

So we can say that mobile handset industry is very attractive industry because from the analysis we can see that there is a growing trend of the market, Revenue of mobile phone has increased from the past few years. Like Symphony started selling in 2012 & gained 40% market share in 3 years.

Although it is a competitive industry but there is profit potential because entry barrier is high because of technology and cost constraint and existing brand like Samsung use patent. Also good substitute of mobile phone don’t exist, therefore buyers can’t shift to substitute of mobile phone. If any new company wants to be successful they have to give superior feature, service & reasonable price because of competitive environment. Walton have strong presence in the market, but their market share is low comparing to their local rival Symphony, so if Walton follow some strategy like Symphony, Walton can gain more market share and outnumber the foreign brands like Samsung.

Supplier bargaining power is low, because there are lots of suppliers available and manufacturer has lots of option for purchase. However customer bargaining power is high but as switching cost to other brand is low, because each brand provide similar price and features in mobile phone. Therefore we can say that if the company offers a product based on customer satisfaction the product will be successful and so will be the company.

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References http://businessnews24bd.com/import-duty-discrimination-bars-local-mobile-industry/ http://archive.dhakatribune.com/business/2016/jan/24/smartphone-users-rise http://www.thedailystar.net/smartphone-sales-soar-63707 https://www.linkedin.com/pulse/inside-mobile-industry-bangladesh-malaya-saha-john https://www.statista.com/statistics/528268/bangladesh-mobile-phone-smartphone-share-

by-vendor/ http://www.businessoutlookbd.com/index.php?

option=com_content&view=article&id=1084%3Amobile-handset-war-the-bangladesh-scenario&catid=3%3Adaily-news-head-line&Itemid=65

http://www.lightcastlebd.com/blog/2015/01/market-insight-market-smartphones- bangladesh

http://archive.dhakatribune.com/business/2016/jan/24/smartphone-users-rise http://www.businessoutlookbd.com/index.php?

option=com_content&view=article&id=1084%3Amobile-handset-war-the-bangladesh-scenario&catid=3%3Adaily-news-head-line&Itemid=65

https://www.techwalla.com/articles/how-to-how-are-cell-phones-made http://cnoemphone.com/industry/project-process-schedule/production-process https://www.quora.com/Which-company-manufactured-the-first-mobile-phone https://personal.iroam.com/blog/how-are-mobile-phones-made.aspx

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