Nov 17 2007

Does Apple stand a chance?

35 Responses to “Does Apple stand a chance?”

1. # jacqueszhangon 17 Nov 2007 at 4:13 pm

   The market for mobile phones, being an oligopolistic market, are probably rather high. To release a mobile phone product, it probably takes a lot of money to design and perfect the phones itself alone. Manufacturing something like the iPhone probably took hundreds of thousands, if not millions. This is probably why there are so little firms producing mobile phones.
   Apple’s strong product differentiation HAS allowed it a small share of the mobile market, but knock-offs create competition through products that are similar, and cheaper. Also, I read recently and Apple’s iPhone was found to be built of certain contents prone to causing infertility

2. # Alex Goldmanon 17 Nov 2007 at 11:49 pm

   I think that apple might still be OK because in China it seems that more Chinese with money spend it on western goods. For instance, I find that at least half of the customers at the new Coldstone on Hong Mei are Chinese. I think the fact that the iPod is a genuine western product contributes to its non-price competition, and people would rather buy the real thing than the knock off. The imitation iPhone could be successful, but I essentially see the real iPhone and the fake as appealing to two entirely different consumers. I don’t think that a Chinese person truly interested in buying an iphone will go for the imitation, while a Chinese person just looking for a sweet phone will.

3. # Chan Min Parkon 18 Nov 2007 at 1:14 am

   The barriers of entry in this cell phone market is the fact that the four name cell phone produces have about 75% of the market share. In order to start competing in the phone industry, it will take a firm a long time to actually make consumers stop buying cell phones from the top 4 firms. That will take lots and lots of money, and it is not even guaranteed that they will be able to compete. The 4 major firms have cell phones targeted towards everyone, expensive phones and cheap phones. I think Apple will actually be quite successful in China. However many companies such as LG are starting to build their own phones that can compete with it, so Apple will have a hard time. “knock-offs” of the apple iphone will be a great threat. They now sell fake iPod’s in those new xiang yang places, and it seems like people actually buy them because fakes are so good now.

4. # Chris Seahon 18 Nov 2007 at 11:02 am

   Apple does, in fact, stand a chance to become one of the top possessors of cell phone market share. Brand loyalty may be both an obstacle and bonus for Apple; it just depends on whether you like your current Sony Ericsson on your iPod more. I belong to the latter. The mobile phone market is extremely competitive and this can clearly be seen in the small number of existing firms. Larger phone companies could easily develop similar products to the Apple iPhone, as Nokia is already doing.

   I firmly believe Apple definitely stands a chance in penetrating the phone market because its product is so radically differentiated and because Chinese customers would enjoy the status they would attain in owning one, not to mention the many iPods I see on the streets. I am one to believe that the cheap knock-offs in China do not pose as much a threat as they are made out to because people will know they are not the real thing i.e. they are a uglier and tackier, plus the people who buy them will know they are not the real thing and I hope they feel guilt for blatantly ripping off a product that Apple has spent years designing and perfecting.

   Here’s hoping that the iPhone comes to China.

5. # julie.linon 18 Nov 2007 at 2:50 pm

   barriers to enter mobile phone industry include the technology and machines to create phones, also answers part of question 2. one of the reasons that so few firms produce phones is because of people’s brand loyalty. people dont trust unknown brands and therefore new firms will have a MR lower than MC because no one wants to buy unknown brands, otherwise they will have to spend lots and lots of revenues on advertising to gain their popularity, but not a lot of firm owners have so much money to start with. Apple will definitely successfully penetrate the cell phone market because of product differentiation. i’ve played with an iphone and it is just amusing… totally different from any other phones with great huge screens great graphics and awesome touch screen functions. it collects message in a chat-room kinda way so it is easier to read thru all the conversations with another person. its really convenient.

6. # jenniferchoion 18 Nov 2007 at 5:42 pm

   Because the market structure of mobile phone is that of an oligopoly, there are significant obstacles for new firms to enter the industry.
   That being the reason why, so few firms produce mobile phones; the industry is already occupied by a few but strong companies. I am not really sure how Apple will penetrate the mobile market becuase in my case, i don’t really feel the need of mp3+phone combo, which is what iPhone is like, since i already have a pretty looking mp3 and a pretty looking phone. Apple has done an amazing job bringing those two function together along with great design and convenience, but since the two realm of mp3 player and cell phone are clearly distinguished, it will be pretty hard for Apple to compete in this oligopolistic mobile phone industry.

7. # Jessica Ngon 18 Nov 2007 at 6:03 pm

   As proven in the article with the 4 firm ratio test, the market for mobile phones is an oligopoly. One of the characteristics of oligopolies is pretty high barriers of entry. In this mobile phone market, with the four main cellphone firms dominating the industry, I would say that there is a certain economies of scale in this industry that acts as a barrier of entry, as these four main companies have minimum ATC at a very large output. This also explains why there are so few firms in this industry.
   However, like Apple, firms sometimes produce differentiated product in order to get into this oligopoly. This is really important, especially for firms like Apple who have big competition in the industry. In the advertisement posted above, Apple sends a message to viewers that it is innovative, new, something that nobody has ever seen before. This appeals to viewers and consumers, as something different, something “cool”, a “must-have”. I would say that their advertising campaign was extremely successful. The past summer when the iPhone came out in June, I was in San Francisco, and around three days before the iPhone even came out, the lines waiting for it went down almost 6 or 7 streets. It was quite shocking.
   China, however, is a different story, especially with the forged iPhone-”wanna bes” coming out. In order to break into the mobile phone industry in China, iPhone has to appeal more to the Chinese customers, who many prefer buying a fake look-alike rather than a real one.

8. # Sharon Lion 18 Nov 2007 at 6:15 pm

   1. What barriers to entry exist in the market for mobile phones? Barriers to entry in the market for mobile phones include economies of scale and the large expenditure for capital. New cell phone companies would have such a small market share, as opposed to the existing cell phone companies, that production will be too costly to survive. Another barrier to entry is customer loyalty since these cell phone brands are the “tried and trusted,” and new brands may not be so popular at first. I think Apple’s iphone will be successful in the cell phone market because the iphone is so unique. Knock-offs could threaten Apple’s iphone as a source of competition, but there is an aesthetic difference between the two. Apple’s iphone advertising and the appearance of a real iphone make it much more appealing than an iphone knockoff that looks like a plastic toy with chinglish writing.

9. # Jack Loon 18 Nov 2007 at 6:53 pm

   Although the cellphone market is that of an oligopoly, I believe that the Iphone still has a chance to survive and maybe even perhaps triev well. Apple certainly isn’t affected as much by the barriers considering economies of scale. Since Apple is already a well established brand in the eletronics market, people might be willing to buy this new product.
   Apple has done something really smart. They introduced a product that is VERY different from the existing cellphones. It’s innovative and it’s new and different. Every product has a unique selling point (USP). The USP is a concept that explains how successful advertising must offer the consumer a logical reason to buy their product because of what differentiates it from other products in the market. Apple has done this but showing the world the new combination of a MP3 player, a phone, a web browser, and a touch screen.
   In China, the Iphone wanabes may cause a minor problem for the sales, but in the long run I think that Apple can still generate a lot of revenue from the Chinese market. Sooner or later customers will realize that their fake Iphones break down after a month or two.

10. # emilyyehon 18 Nov 2007 at 7:11 pm

    I think the iPhone certainly stands a chance. It has a really powerful advertising campaign, especially built off the iPod craze there’s a pretty good image of apple products being new and different - hence the increase in sales of macbooks and such in the past couple of years. Pirating might be a problem, but I think with the advanced technology there will be differentiation when the real iPhone enters the market. The barriers to entry in this industry are certainly the costs of developing technology to fit in the tiny space, alongside innovative design and increasing functions that consumers demand.
    But unlike many clothing companies such as GAP that don’t enter China for fear of piracy, I don’t think a large share of iPhone sales will be undermined by the pirated versions. After all, the iPhone would become a new sign of status- and who wants a fake phone that may lose its color or quality easily representing themselves?

11. # robertwangon 18 Nov 2007 at 7:13 pm

    Personally, I think Apple has a good chance of creating its own small or large (depends how successful they are in the future I suppose) in the cell phone market. I think that in addition to its product differentiation, it’s the brand name loyalty that will help Apple.

    We’ve seen Apple enter a product market and be very very successful - The iPod. Up until the iPod was created, MP3s made by other companies like iRiver dominated the market, but once the iPod came, through product differentiation and its warranty offer that Apple provided, the iPod skyrocketed. Soon, they started to create new modifications, video, nano, touch, etc.

    The iPhone is quite different from other cell phones out there, so I think Apple’s product has a good chance. People unsure of the phone will be swayed by brand name loyalty or the warranty offers. =) In the first few months the iPhone came out, kids all over America were asking their parents to buy it. Eventually, Apple will be able to decrease their prices of the phone and thus sell more.

    On a side note, for band people last year, we played the song in the iPhone ad. =D And we also watched that scene with the bone smashing. Pound-five!

12. # Conrad Liuon 18 Nov 2007 at 8:56 pm

    Apple indeed has a chance to enter the cell phone market, and might even dominate in it; only in the short run, however. Because it has differentiated its product and actually introduced/merged new designs and applications, it’s appeal to consumers has skyrocketed; most other cell phones companies such as Nokia and Motorola have differentiated their products, but have not introduced a new, innovative design or mechanic. It is for this reason that these such companies haven’t had huge rises in demand.

13. # Richard Tuon 18 Nov 2007 at 10:18 pm

    I think Apple does have a great chance. When the iPod came out, it was also very expensive compared to others. However it was very successful and therefore I think iPhone will be quites successful too. They will mainly try to target a specific group of people, since its so expensive. Overall, I just believe that Apple has a great chance.

14. # Richard Tuon 18 Nov 2007 at 10:48 pm

    To talk more about the article, it is interesting how China Mobile is negotiating with iPhone. If China Mobile successfully does negotiate, I think that could have a tremendous influence too. China Mobile is very influential, and therefore not only the iPhone itself is important in becoming successful, but negotiating with companies such as China Mobile could help. The iTouch seems to actually be pretty successful right now. Although it is expensive, people who have it seem to be ‘cool.’ I think that could be a large factor and help Apple in selling more iPhones.

15. # Christina Huon 19 Nov 2007 at 12:44 am

    I think Apple will be just fine. It’s currently one of the most popular, well-liked companies, and, what’s more, it’s well-liked by teens. People seeking to buy an iphone are most likely NOT buying it for the phone- they’re buying it for the prestige of owning something so expensive- it screams, “look at me! I’m a luxury good and normal people can’t afford me!” Most people are going to buy the phone with the big name- not an unknown knock-off with the same functions and cheaper price. For this same reason, there are only a few cellphone makers. The established ones have prestige, they have class and loyal customers. It would cost too much (advertising, developing new ideas, etc) for new firms to break in, and they probably wouldn’t succeed anyway.

16. # Hansen Guon 19 Nov 2007 at 3:09 am

    The costs of entering the cellphone market are extremely high. From idea to conceptualization to actual product realization costs millions of dollars. Once in the market, more money is needed to finance advertising to show consumers the product differentiation. However, Apple, being a successful company does have the fiscal ability to cover these costs. We’ve all seen the advertisements of the iPhone and its unique design and capabilities. Plus, Apple brand loyalty is evident as many consumers see Apple as a forerunner in inventive, easy to use, and aesthetically pleasing electronics. The success of the iPod will lend much weight to the Apple and the iPhone. Furthermore, the idea of a multi-touch screen phone combined with proper software for the hardware is rare, almost unseen. The closest software would be the new up and coming Google Android. Thus in the area of usability and new design, Apple has the upper hand in functionality over many other phones running Symbian or Windows Mobile operating systems. These are all advantages that make the iPhone geared toward some degree of success.

17. # Dana Yeonon 19 Nov 2007 at 9:27 am

    Apple has done well through advertising; it has established its dominance in not only the MP3 and computer market, it has successfully incorporated its brand image to its advantage to promote their new iPhones. Apple’s advertising successfuly reflects both efficiencies and inefficiencies as it can lessen the opportunity costs of consumers to search for the best cellphone that is avaiable in the market, thus achieving efficiency. However, it also reflects inefficiency as by establishing brand image and brand loyalty, it will gain significant market shares and become more monopolistic.

18. # Howard Jingon 19 Nov 2007 at 1:27 pm

    The main barrier to entry in the cell phone industry is the high levels of technology you need in order to design the thing in the first place. Especially considering that nowadays cell phones can do all sorts of cool tricks like take pictures or play your music. The iPhone takes all these things and adds another feature, the touch screen. As far as I know, no other cell phone makes use of a touch screen (except for the iPhone knock offs), and until a legitimate company comes along and designs a phone that uses a touch screen too, if you want a cell phone with a touch screen, you have to buy an iPhone. I don’t really think that iPhone knock offs will threaten the iPhone’s sales, because knockoffs generally have a bad reputation of being very poor in quality. However, if another company comes along and designs a cell phone that can do everything an iPhone do, and then adds another feature of its own, I can definately see that cell phone threatening the iPhone’s future.

19. # Jeff Yeon 19 Nov 2007 at 4:20 pm

    One of the barriers of entry that might present an obstacle to Apple is the economies of scale. Nokia, Motorola, Sony Ericsson, and Samsung have been producing cell phones for a while now, and can do it a lot more efficiently than Apple, who just entered this industry, can. These high economies of scale also prevent many other companies from entering this industry because they can’t produce at a low enough cost to really compete. Apple might eventually be able to “penetrate” this market because it was originally a huge company to begin with, so they have the resources to continue producing until they are finally able to compete with the other companies without losing money. There might be a little competition between Chinese rip off phones and the iPhone, however, most people would rather buy the real thing if they’re going to buy something like that at all. This might be because Apple will offer better quality products, as well as warranties that regular Chinese phones won’t offer.

20. # kevinchiuon 19 Nov 2007 at 7:43 pm

    I believe Apple has the captial and financial resources to overcome the economies of scale, because it has already proven itself as a successful company in the industry of Operating Systems and MP3 players. However, Apple may be entering the multiple industries with one product; that is, the iPhone is a multi-functional PDA, phone, MP4 player, thus will surely high demand because there was nothing like it at the time it came out. However, like we learned in class, the high profits Apple would recieve acted as an incentive for other industries to enter the market as well! Thus, the Chinese knockoffs, which may have a lower ATC curve than Apple (or Apple just was able to charge a high price due to being the only one in that type of multi-function phone market), will be able to reap a bundle of economic profit. However, consumer loyalty is still in effect, as well as consumer preference and taste for a genuine good, so Apple may not suffer that much.

21. # Trevor Sunon 19 Nov 2007 at 8:20 pm

    I guess the reason why people don’t try to enter the mobile phone market is due to the big name brands. As that pie chart shows Nokia has the biggest market share and relating to what I learned in class today about oligopolies, it is likely that the other firms set prices according to the Nokia prices. This creates a barrier to entry as other companies might not be able to set their phone prices at the same level. Also the brand loyalty is huge in the mobile phone market. Apple’s new iPhone, I believe, will do successful due to its product differentiation; The touch screen and mp3/video capabilities is pretty cool. Plus, since its Apple, there are tons of people out there already loyal to the brand which will make sales easier. Cheap Chinese knockoffs might attract buyers in China if it is cheap but how cheap are they willing to go. I doubt that they will be able to sell a similar product with the same capabilities, such as the touch screen, for any cheaper.

22. # calvinluon 19 Nov 2007 at 9:35 pm

    Eventhough economies of scale may be a barrier for Apple to enter the cell phone industry; there are several of factors that allow it to bypass this barrier. Apple had been known for producing unique and quality products, such as the MacBook and iPod, which differentiate itself from others. Moreover, the success on launching and promoting the iPod had brought apple numerous of loyal users; and, some do not see iPhone as cell phone, but as an iPod with cell phone function. So the net thing when a Apple, especially iPod enthusiast wants to get a new iPod, he would think: “oh, why don’t I just get a iPhone, so I get a new iPod and a new cell phone at once.”
    Also, iPod is famous for its complementary products, such as speakers, FM transmitter, earphone, even shoes that are specially designed for iPod. I believe it would be the same case for iPhone as well.
    Oh and another little note. Over the years, I’ve realized Chinese, especially those with medium or low income, are willing to pay for new phones, especially top notch ones. I’ve seen my driver changed like 4 cell phones in 3 months, and each cost over 5000 kuai on the market. Today, when I was eating noodle (3 kuai per bowl) off campus, the cook is banging music on his fancy Motorola cell phone. With such demand for top notch cell phones, I believe the success of the iPhone is just a matter of time.

23. # Jo Loon 19 Nov 2007 at 10:18 pm

    Apple’s doing fine at the moment mainly because of its new iphone, which increases profits a lot. The iphone has many new features that makes it easier to perform functions than on a phone made by Nokia, Samsung, or Song Ericcson. Because of its ipods, Apple will survive at least for the moment. Eventually the other big name companies will put out new phones and gadgets that will have the added features, which would then cut into Apple’s profits. Even though the cell phone industry is an oligopoly, Apple was able to enter the market because its products were differentiated. Even so, it remains to be seen whether or not the big companies will deliver.

24. # Jessica Chiangon 19 Nov 2007 at 11:45 pm

    Haha. Chinese people can copy anything. And when i say anything, I mean ANYTHING. I think the barriers to enter the mobile phone market are relatively high, because a lot of money and technology are needed to create all the parts of the phones. Very little firms create phones because the already existing firms, such as Nokia and Motorola, have such a large share of the market. Also, consumers are loyal to these already existing brands. These companies spend a lot of money on advertising, which is another thing that new or small firms cannot compete with. I believe that the iPhone will do well because Apple is such a popular brand, and there really isn’t any other phone that is like the iPhone. Personally, I don’t think fake phones will harm Apple much. How many of us would actually buy a fake iPhone? Fake bags, yes. But fake iPhones?…

25. # timothysunon 20 Nov 2007 at 12:27 am

    As much as I dislike Apple, I can’t refute the fact that they are increasing in popularity. My parents don’t believe me, so they’re not putting any stock into it.

    Anyways, it is obvious that “economies of scale” prevent the cellphone industry from becoming close to purely competitive.

    I personally think that brand loyalty is a good reason for why new Apple products succeed, along with product differentiation. Of course, p.d. started it with the iPod, which lead to the Mini, Photo, iPhone, etc.

26. # howardlinon 20 Nov 2007 at 1:41 am

    A very noticeble threat may be china’s fake good market. Fake Ipones and fake i touchs starts appearing in the market looking exactly the same, however, only a fraction the price. This would have to make Apple company, either lower it’s price or to product defrenciate even more in order to compete.

27. # Jonathan Lauon 20 Nov 2007 at 12:23 pm

    I do not think cheaper “knock-offs” of the Apple iPhone will pose much of a threat to Apple’s attempt to compete in China’s mobile market. Even if it is half the price, the imitation will not have the Apple logo on it and thus, the utility derived from it will not be the same as from purchasing a real iPhone. Sure, the Xiang Yang Market that existed a few years ago was a big attraction to tourists because it sold fake merchandise, but in the end, what most people care about today is the quality of a product. Most people will be willing to pay that extra $15 for a product that works more efficiently and lasts for a longer period of time. This sense of quality is an example of non-price competition; if the quality of an iPhone is better than that of other cellphones, more people will want to buy it. In addition, just the brand name of Apple is appealing to consumers because it is a big name that is known for producing successful products (iPod). This can be seen as brand loyalty in an economic sense. Apple will undoubtedly be able to penetrate China’s mobile market, but how successful it will be, only time will tell.

28. # kevin maon 20 Nov 2007 at 8:46 pm

    1. The barriers to entry would be pretty strong because this is an oligopoly marktet structure. However, Apple has its strength as a recognized brand and is very strong in other markets. It is very appealing to the people for their iPod and cell phone to be together.

    2. Few firms produce cell phones because of the barriers to entry. Whenever a new firm comes in, the bigger more dominant firms such as Nokia, Moto, and Samsung will kick them out of the market.

    3. I think Apple will be successful in this market because they provide a whole new type of cell phone. Their idea is very appealing to anyone who likes the iPod and wants a phone.

    4. I don’t think they pose much of a threat.

29. # Drew Venkatramanon 20 Nov 2007 at 9:49 pm

    1. The barriers to entry are high due to the nature that it is an oligopoly market. But Apple has power in other markets and is well known as a brand and has great money to spend.
    Apple has spent a lot on advertising which is a crucial aspect to oligopolies, apple also has spent a lot of money to ensure that its phone is more technologically advanced than other giving it an upper hand. Apple also has a great amount of customer loyalty which is why its still in business.

30. # Annie Sungon 21 Nov 2007 at 10:13 am

    I agree Apple has more power with its iPhone, as it stresses the differences it has compared to other phones. This gives Apple an advantage over others in attracting a certain pool of consumers who would most likely be loyal to the brand. Thus, I don’t think knockoffs would pose a significant issue to Apple - consumers would most likely buy the real iPhone for it’s gadgets and function, and the quality would not be as high in knockoffs.

31. # Claire Moonon 22 Nov 2007 at 1:49 am

    Oligopoly is a market structure which is mostly very hard to get in due to the economies of scale, however, for Apple, I think it is a different case. Apple is a industry big enough to afford the whole price barriers to get into a new market. Also, since its brand name is well-known, even though it could give them a bit loss at the short-run, still it would be able to gain a lot later in the long-run, because the product differentiation and a lot of strategies they use will probably appeal to many people.

32. # Caleb Liaoon 27 Nov 2007 at 8:17 pm

    1. What barriers to entry exist in the market for mobile phones?
    2. Why do you think so few firms produce mobile phones?
    3. Do you think Apple will be able to successfully penetrate the mobile market?
    4. What threat do cheaper “knock-offs” of the Apple iPhone pose to Apples attempts to compete in China’s mobile market?

    Barriers to entry in the market for mobile phones lie in the area of knowledge. There is imperfect knowledge and on top of that, the market is an oligopoly and there for collusion may also create barriers to entry as collective price battling may nudge smaller competitors out of the market. So few firms produce mobile phones because of the high costs associated to the technology required to produce and update cell phones. There are also so few firms because of the relatively high barriers to entry, with it being an oligopoly and all. I Apple will penetrate the mobile phone market, but not to the degree some think it will. I think that Apple as a brand has generated enough credit that it will do reasonably well, or at least as can be expected, for a new phone providing new capabilities, but I think that the reliability of the phone and the battery life will be observed initially by consumers before the masses go out and buy them. Knock-offs present a huge threat to the iPhone in China because well the publicity and use of the iPone may be high, the actual sales would suffer and therefore, Apple would incure large losses.

33. # Welker’s Wikinomics Blog - for students and teachers of AP and IB Economics » Is Nokia in denial?on 05 Dec 2007 at 9:23 pm

    [...] Does Apple stand a chance? [...]

34. # kxc.024on 11 Dec 2007 at 2:00 pm

    The advertisement for Apple’s iPhone is basicallys stating that it’s a whole new generation of cell phones, something so advanced that people will be awed by it. Although Apple probably realized that the cell phone market is an oligopoly, they felt confident about their product that they still risked the chance of producing it. Despite not being part of the oligopoly, it’s reputation for the iPod and its great new features enticed thousands to buy the iPhone. The fact that it has a touch screen, internet, cell phone and iPod all mixed into one small hand device gives it great strength in the limited market.

    There aren’t that many firms in the cell phone market because there are great economies of scale associated with it. Not only does it require machinery to put together such an intricate piece of technology, in order for a company to survive in this market, it also needs to continually come up with new ideas. Thus, there is great demand for entrepreneurs. However, that resource isn’t very easy to find.

    Looking at the cheap knock off of the iPhone, there are some small differences in this product and the real one. However, it’s functions and it’s overall look is the same. This may be a great threat to Apple, seeing as how some people probably won’t mind the small differences and are willing to pay a lot less for a product that looks a lot like an iPhone. This means that Apple is losing a lot of its consumers, which may result in not as large of an amount of profit as previously hoped.

35. # Welker’s Wikinomics Blog - for students and teachers of AP and IB Economics » Where have all the iPhones gone?on 17 Feb 2008 at 9:00 pm

    [...] I wonder if the real iPhones in China outnumber the fake ones  [...]

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