2.3 Socio-cultural Forces
Socio-cultural forces are the forces that regulate the values, mores, and customs of society. It generally includes population and age structure, average income level, and key concept and value (Wheelen, 2008).
2.3.1 Population and Age Structure
According to the Singapore Statistic in 2010, the total population in Singapore is 5,076,700, and annual grow percentage is 1.8%. The number of residents, whose age is between 15 and 65, is 2,778,900 referring to the age structure of Singapore, accounts for roughly 55% of the total population. These people are the main potential customers in mobile phone industry (Singapore Statistics, 2010).
2.3.2 Mobile Phone Subscribers
Referring to the Singapore Statistic in 2010, there are 1436 mobile phone subscribers in every 1000 population, in other words, every two persons have three mobile phones (1.436 phones per person). These numbers indicate that there are potential opportunities for manufactures and retailers to enlarge their business in mobile phone industry (Singapore Statistics, 2010).
2.3.3 Culture Concepts and Values
‘Kiasu’ – which means fear of losing, is the core concept of Singaporean Culture. It images the social attitude of Singaporean people that they desire to always want to be the best, come first and never lose out. This concept makes Singaporeans pay a lot of attention on competitions and create a strong work ethic. For the new high-tech phones, this is an easy place to launch. Once some people buy the latest products, other people will follow because they ‘kiasu’ and fear losing their faces (Communicaid, 2009).
Diversity – the population in Singapore is combined of Chinese, Malay and Indians as well as guest workers. The diversity of religious, ethic, customs and traditions in Singapore society may bring difficulties for manufacturers and retailers to target their mobile phones in the market (Communicaid, 2009).
2.4 Climate
Climate plays a very important role in driving changes in the mobile phone industry. Due to changes in the environment, it might make the production process slower, which results in a shortage of supply of mobile phone to the market. The most recent case was the effects of earthquakes and tsunami in Japan that forced six of Sony Ericsson’s factories to shutdown due to the damage and that has anticipated disruption to its supply chain operation (Sohrab, 2011). Moreover, many mobile phone factories were closed during this period putting all the industries in shortage of supply as well as the mobile phone industry. Nokia was facing shortage of phones due to the disaster (Isabel, 2011), and this disaster alone, in Japan on April 2011, made sales of smart phones falling by up to 5 percent (Charles, 2011).
Such disaster might cause the difficulties in transportation and distribution channel of the mobile phones. What more? The climate changes and natural disaster might disrupt service signals of mobile phones as well. Therefore, a change in climate might cause changes in the mobile phone industry. It might affect the supply chain of the industry and so that forcing the mobile prices to increase due to the scarcity of the products.
2.5 Economic Forces
The Singapore economy has quickly rebounded from the downturn after the global financial crisis with the high growth rate of the Gross Domestic Product (GDP) as well as the high average household income. Therefore, the purchasing power can be maintained at a high level, consumers tend to be more willing to pay for their expenditure, especially high-tech equipment such as mobile phone or laptop, etc. Certainly, mobile phone industry in Singapore will take more advantages from the upward trend of economy in the term of demand. Moreover, in order to control the high inflation rate, the Monetary Authority of Singapore (MAS) decided to let the value of Singapore dollar rise. Trends in the dollar’s value have significant and unequal effects on companies in different industries and different locations (David RF 2003). Therefore, a strong Singapore dollar makes importing goods cheaper and more affordable to customers.
Table 1: GDP, Average Household Income and Inflation Rate: Singapore
(Source: Singapore Statistics)
Graph 2: USD/SGD Exchange Rate over 2010-11
(Source: Yahoo Finance, 2011)
3. Analysis of the Industry Environment
Figure 1: Force Driving Industry Competition
(Source: Wheelen, 2008)
3.1 Bargaining Power of Buyers
Buyers affect the industry through their ability to force down prices, bargain for higher quality and provide more services (Wheelen, 2008) and as a result this represents cost to the seller. This force affects the competitive environment for the seller and influences the seller’s ability to achieve profitability.
A strong buyer can make an industry more competitive and decrease profit potential for the seller. On the other hand, a weak buyer, one who is at the mercy of the seller in terms of quality and price, makes an industry less competitive and increases profit potential for the seller.
Determining Factors in Singapore Mobile Industry:
- Buyers are more concentrated than the sellers – With a population of 5.08 million (Singapore Statistics, June 2010)
- Buyers switching cost is low i.e. switching from one mobile phone brand to another does not cost a buyer much in this very competitive market, where brands like Apple, Nokia, Sony Ericsson, LG, Samsung, etc provide phones which are similar in nature.
- Buyers are well educated about the products. With a literacy rate of 95.9 % (Singapore Statistics, June 2010) Singaporeans are well aware of new products available in the market with the help of media. The mushrooming availability of product information on the internet is giving added bargaining power to individuals (Thompson et al. 2008, p.70).
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There are 1436 mobile phone subscribers in every 1000 population; in other words, every two persons have three mobile phones (1.436 phones per person) (Singapore Statistics, June 2010). This indicates that the customers are purchasing large volume of mobile phones, thus increasing the buyers’ bargaining power.
- Products are not highly differentiated. Most of the mobile phone providers provide products and services like 3G (email, video chat, social network sites, browsing, etc), music, camera, gaming, etc at a reasonable price. Nor the seller nor the buyer has the upper hand in this category.
- There are no substitutes for the mobile phones; they are the one acting substitutes for PCs and laptops.
From the above analysis, we come to a conclusion that the buyers’ bargaining power is higher than the mobile phone providers. This is a highly competitive market with big players like Apple, Song Ericsson, Samsung, Nokia, LG, Motorola, Blackberry, HTC, etc coming up with new phones and new technology very frequently.
3.2 Bargaining Power of Supplier
Supplier may influence an industry through their power to up or down goods’ prices, or change the quality of purchased goods and services (Wheelen, 2008). Strong suppliers can weaken buyers’ power by increasing prices, lowering product quality, and reducing product availability, which are costs of the buyer. A strong supplier can make an industry more competitive and decrease profit potential for the buyer. On the other hand, a weak supplier, one who is at the mercy of the buyer in terms of quality and price, makes an industry less competitive and increases profit potential for the buyer.
It is known that most of the mobile phones are made in China, due to its low cost of manpower. And most of mobile phones are imported to Singapore market. Therefore, we can determine the factors of suppliers’ power:
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There are hundreds of thousands of suppliers to the mobile phone industry and most of them are set up in China (Made-in-China, 2011), hence, suppliers are not able to charge monopoly or oligopoly prices.
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Suppliers have other customers outside the industry. For example, one of suppliers of Apple, Broadcom Corp, supports Apple with the 54g™ Wireless LAN Technology (Broadcom,2004); however it has many other products, such as broadband carrier access and digital TV, which are not in this industry. Suppliers do not rely on the industry for the majority of their sales.
- Options for buyers to purchase products are abundant because of the number of suppliers are huge; therefore, switching costs for buyers would be low.
3.3 Relative Power of Other Stakeholders
3.3.1 Government
Singapore government plays an important role in the development of the mobile phone industry. The Singapore government is building an island-wide broadband network called the Next Generation National Information and Communication Infrastructure in order to ensure an ‘open system´ with access being available to all operators. Therefore, mobile phone industry will have a large market for its smart phone as well as creating value and satisfaction to customers though using its product. Besides, Singapore government through its policies has successfully built a progressive commercial environment which resulted in a richly competitive market for the mobile phone industry.
3.3.2 Complementors
Complements appear to be a strong force in the mobile phone industry. Any application that works well with the phones is a complement. Especially, Singapore has a dynamic generation and a skilful workforce, therefore the need of using information and entertainment always maintain at a high level. Mobile phone industry provides a large number of such applications such as email, games, maps and GPS, music and other media content, other internet applications, etc. Moreover, social networking such as Facebook, YouTube is becoming a part of human life and the mobile phone industry now makes it all available in the phones.
3.4 The Threat of New Entrants
In the face of the competitions, new entrants pose threats on existing competitors. Such threats include barrier to entry that require additional resources or strategies to overcome (Wheelen 2008, p.83). For existing competitors to sustain the growth, economies of scale can help in reducing the cost of manufacturing for each unit and to supply the incremental demand. Over time, the competitors are able to capture the market segment by offering unique products. Such products required new capital injection and available pole of skilled labour for innovations. In mobile phone industry, the switching cost is considerably low. It is a one-time cost that customers have to pay in order to acquire another type of product from different supplier (Hanson et al. 2008, p. 55).
Graph 3: 3G Mobile Subscription in Singapore 2008-10
The above graph shows number of subscribers in Singapore market. Singapore is an open market country where government allows variety of companies to compete freely. However, with the population of 5.076 million, the market is almost saturated. The goods is highly differentiated which imply high barrier for new entrance. In addition, new entrant(s), such as HTC is able to penetrate barrier by locating market niches, it allows in identifying, served neglected market segment and avoid competition in short run.
3.5 Substitutes
Nowadays, mobile phones have been offering more and more features that serve more purposes of the users. It is not only a device to make phone calls or send text messages, but there are many models of mobile phones that people can use to serve the internet, sending e-mails, and even reading and editing documents on these mobile phones. Moreover, mobile phones are much lighter and convenient to be carried around. In Singapore, 15 percent of total phones sold were smart phones (Amit, 2009). Mobile phones a predicted to be the substitute for many other devices such as computer, and standalone camera (Matt, 2011). Mobile phone is replacing PC because it offers several features such as, it can be used to compose e-mail, web browsing, etc. for cheaper prices compared to PCs (Damon, 2006).
3.6 Rivalry among Existing Firms
In Singapore, the height of exit barriers is considerably low as parts and components are manufactured in different countries. Singapore is used as a platform for mobile phone companies to introduce their new products and to capture regional markets.
3.6.1 Number of competitors
There are number of competitors available in the mobile phone industry, such as Nokia, Song Ericsson, Apple, Samsung, Blackberry, LG, Motorola, HTC, and etc. These are the big players in the market competing for the superior market hold and working towards providing the latest and the best of advance mobile phones to the customers.
3.6.2 Rate of industry growth
The growth rate in mobile phone industry is tremendous. It can be seen from the graphs below. The mobile phone penetration rate almost doubled from 74.8% in 2000 to 143.6% in 2010 i.e. there are 1436 mobile phone subscribers in every 1000 population as of 2010 stats.
Graph 4: Mobile Phone Penetration in Singapore
(Source: iDA, 2011)
The latest thing in the mobile phone industry is the 3G (3rd generation) phones. The market is full of these phones and the competitors are coming up with new technology and applications very frequently thus, adding more and more competition in the market.
From the latest figures as stated below in the last 5years, 3G subscription increased from 175 million in 2005 to 4705 million in 2010, this shows the growth in the Singapore mobile market.
Table 2: Mobile Phone Subscription in Singapore from 2005 to 2010
Source: (Singapore Statistics, 2011)
3.6.3 Capacity
The intensity of rivalry among competing firms tends to increase as competitors become more equal in size and capability (David, RF 2003). Firms in mobile phone industry in Singapore have excess capacity in every segment to supply customers’ demand. For instance, in the smart phone segment, When Apple came up with iPhone, Samsung and Nokia then responded with Galaxy S and N8 respectively.
3.6.4 Product characteristics
In the open market of Singapore, there exists a wide array of mobile phones with different characteristics, which are categorized according to its use and purpose. Diverse types of mobile phone include basic phone, camera phone, mp3 phone, video phone, smart phone and watch phone and so on. In other words, the products in the market are various.
3.6.5 Fixed cost
The mobile phone industry requires a very high fixed cost that includes R&D, salary and many others costs that are faced by the company. A recent research on fixed cost (Strategy Street, 2009) has shown that those fixed costs could be spread among more outputs produced by the firm in order to reduce the amount of fixed cost per unit. Companies that are able to control their fixed costs efficiently are those who have more chance to become more successful in the industry.
4. Strategic Group Mapping of Mobile Phone Industry in Singapore
Figure 2: Mapping strategic group in Singapore mobile phone industry
(Source: Researcher)
According to our analysis of the market, Sony Ericsson, Nokia and Samsung fall within the same group. These mobile phone companies pursue similar strategies with similar resources and thus this helps us in better understanding of competitive environment. They hold a large share of mobile phone market in Singapore, but not larger than Apple. These companies have been classified into “Multi Product Breadth” and on “Higher Average Price Range” categories.
4.1 Sony Ericsson
4.1.1 Product Lines
Sony Ericsson currently concentrates on the categories of music, camera, business (web and email), design, all-rounder, eco-friendly, and budget focused phones.
They are classified into:
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The -branded W series music phones, launched in 2005. The W series phones were the first music centric series mobiles to prompt a new market segment for portable music. They offer 11 types of phones under W series.
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The -branded line of phones launched in 2006 with newer models of the K series phones. They offer 4 types of phones under this series. Cameras ranging from 3.2 to 8.1 megapixels.
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Xperia is the smart phone of handsets. Since 2010 the company’s main focus has been on these devices and now account for 70% of total sales. Currently they offer 12 types of Xperia range of smart phones in the market.
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The of mobile phones are focused on an environmentally friendly theme, but still featured with recent mobile technology and multimedia capability. It mainly uses eco-friendly materials and features eco-apps.
(Source: Sony Ericsson, 2011)
4.1.2 Price
Price ranges from S$110 – S$640 is cited from WhyMobile website (2011) which has an average price at approximately S$375.
4.2 Nokia
4.2.1 Product Lines
Nokia provides a global range of hypercompetitive mobile phones for large consumer segments, and makes mobile phones for all major standards and customer segments in over 130 countries.
Its product lines specific information is as followed:
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Nokia Classic series (series 1000-9000) - the Nokia Classic series phone is range of mobile phones is notable for their conservative, unisex designs, making the family popular with business users.
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- is their core range of products, offering different phones from low-end to high-end to target certain markets.
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Nokia N series - is a product family that includes . These are mobile devices supporting digital multimedia services such as music playback, video capture, photography, mobile gaming, and more.
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Nokia E series - consists of business-oriented smart phones, with emphasis on enhanced connectivity and support for corporate e-mail push services. These phones are aimed at the enterprise market.
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Nokia X series - is targeted at a younger audience. Most of the phones included in the line-up are feature phones and smart phones that include features focusing social entertainment and music with special dedicated keys, inbuilt storage and other facilities. It succeeded the brand of phones.
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N-Gage - is a and by , based on the platform, released in October 2003.
(Source: Nokia Singapore, 2011)
4.2.2 Price
Price range of Nokia’s mobile phone is from S$40 - S$530, which are contributed the lowest price by Nokia 1616 and the highest by Nokia E7, on the basis of series (WhyMobile, 2011). Nokia’s average price is approximately S$285.
4.3 Samsung
4.3.1 Product Lines
Samsung provides 3 different types of mobile devices, which are mobile phone, smart phone and tablet. Under these types, they are classified into many different categories that cater to the needs of various customers.
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Samsung Touch has 4 different products offered which has social hub as basic function to help consumers to synchronise data and keep in touch with people.
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Samsung Non-Touch has 3 different products that tailor to the consumers that prefer physical button and simple function such as phone call, text messaging, and input data for convenient purposes.
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Samsung Dual-Sim is designed to suit multi sim-cards users especially for people who travel around.
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Samsung Messaging designed its product to help business people have an easy connection and networking.
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Samsung Android OS based on modified Linux by Google Inc has largest number of consumers among Samsung mobile phone products. Its sophisticated technology has won many awards. Currently 10 products are offered in the market.
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Samsung Window OS named its product as Omnia makes navigation as easy as running window-based computers.
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Samsung Bada OS developed by own company that has similar function as Android OS and Window OS. Currently there are 5 different products offers.
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Samsung Galaxy Tab has smaller size compare to ipad Apple and ability to functions as mobile phone.
(Source: Samsung Singapore, 2011)
4.3.2 Price
The price ranges from S$95 – S$980 accounted to the available resources in WhyMobile e-commerce (2011) which has an average price at approximately S$537. This average price is highest among their competitors.
4.4 Strategy
These organizations often venture into new market by developing and improving existing products, therefore, considered as Analyzers. The changes in consumer behaviours and fierce competition have emphasized on efficiency and the need of innovation. While maintaining existing market shares, new products offered drive by technology breakthrough become new source of income for these organizations. Failed products often disqualify by market within short period of time. And new products face shorter product life cycle due to competition and changing trend on consumer consumption (Kotler & Armstrong, 2012).
5. Analysis of External Environment Factors and Impact on the Industry
Figure 3: Issues Priority Matrix: Mobile Phone Industry – Singapore
Based on the analysis above, there are some key issues in the external environment that has great impacts on the mobile phone industry are Socio-cultural forces, Rate of industry growth, Government intervention and Economic situation of Singapore etc. Using an environmental scanning tactic, these key issues are discussed and prioritised in the Issues Priority Matrix in order to give readers a better understanding of the implications on the mobile phone industry in Singapore.
One of the most influential factors on the external environment of mobile phone industry in Singapore is the Socio-cultural forces, which generally includes population, age structure, average income level and key concept and value (Wheelen, 2008). These factors are the main forces that affect customers’ tastes and preferences and help them to make their choice whenever they decide to purchase mobile phones.
The age factor is one of the most influential factors in the socio-cultural forces which have high level of occurrence and a great impact on the mobile phones industry. For example, a young mobile phone user would always like to have a mobile phone which offers many functions, such as a built-in camera, music player and games. Based on a recent study by Ethan Bloch on May 4th, 2010, teen’s use their mobile phone much more often compared with other groups of users.
The level of income is one of the important factors in these forces, with a higher level of income; people would have more choices on choosing their mobile phones. For example, people who use iphone are normally having a high income level.
Another force that affects the customers’ decisions in purchasing mobile phones in Singapore is the Rate of Industry Growth. As mentioned earlier, the growth in mobile phone industry in Singapore is tremendous; the mobile phone penetration rate has almost doubled from 74.8% in 2000 to 143.6% in 2010 (Singapore Statistics, 2010). This is a very high level of occurrence, and has a high impact on the mobile phone industry in Singapore.
The mobile phone market in Singapore is a high demand market given the fast growth in the industry and it offers customers various types of mobile phones and services to choose from. Therefore, this factor is also an important factor that makes mobile phone companies to enter into “Hypercompetition”, in which each company has to create a condition of disequilibrium in the market and take advantage of their competitive advantages over their competitors.
Economic forces typically includes the general stage of the economy, monetary policy, interest rate, stage of the economy circle, GDP trends, and inflation rates (Wheelen, 2008). These factors are the standard measurement tools to examine the health of a nation’s economy and how it affects individual firms and industries. A recent study on Singapore Gross Domestic Product (GDP) growth rate has shown from 2007 until 2011, Singapore's average quarterly GDP growth was 6.29 percent and enjoys a per capita GDP higher than that of most developed countries (tradingeconomics).
Whenever, there is a launch of new phone model, Singapore is always the one of the first market in the world that has the new product due to the high affordability of consumers. And, the probability of stabilization in Singapore economy is quite high, which makes it become more attractive to the mobile phone companies, and it would have a very high impact on them.
Power is the most critical criterion in prioritising stakeholders (Hanson D et al, 2008). Singapore government has strong power through regulation and intervention to affect the mobile phone industry. Hence, Singapore government has high probability of occurrence and high impact on Singapore mobile phone industry. By giving lower corporate tax rate (17%) and signing free trade agreement about conformity assessment for mobile phone industry, Singapore government encourages mobile phone companies to expand their business and benefit them with cost saving.
Therefore, government plays a very important role in the development of the industry, which make it more priority compare with others external factors that affect the growth of the mobile phone industry.
6. Conclusion
Singapore being an open economy with high growth rate, stable economy, and government support is an ideal place for any mobile phone company to operate. It has relative small size market in comparison to many other countries but has emerged to be an information and communication hub in South-East Asia.
The industry is affected by many forces (as discussed with the help of Porter’s force) which required firms to take different approaches in strategy to capture market shares. There is a high amount of competition among the existing firms and they are coming up with new products to capture the large part of the market share.
There has been tremendous growth in the Singapore mobile phone industry over the years and it’s still growing, if the company that wants to enter this competitive market they should be coming up with something superior to beat the competition.
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