Essay: Marketing Plan for a Mass Customized Smartphone

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Marketing Plan for a Mass Customized Smartphone

Smartphones have revolutionized how people and organizations communicate and collaborate globally, completely reordering the software, services and cloud computing platforms of entire industries. Despite the rapid growth of the iPhone and its competing Google Android, Microsoft Windows and various mobile operating system-based devices, the majority of the global market is underserved. The need for a build-to-order smartphone is apparent from the millions of requests Apple gets for customizing their iPhone for the specific needs of corporate clients (Apple Investor Relations, 2013). Providing customers with the ability to self-design their own devices, from PCs to cars, have shown to continually improve gross's margins while significantly increasing the size of the total available market size globally (Franke, Schreier, 2010). When a build-to-order strategy is executed consistently and with a series of standardized processes, the products produced achieve economies of scale quickly, further reducing costs over time (Hardy, 2010). For the global smartphone market, this translates into a market sizing multiplier of two to three times the market estimates today, given Apple's internal estimates and their released research through their filings with the U.S. Securities and Exchange Commission (SEC) (Apple Investor Relations, 2013). Apple has considered moving into a build-to-order smartphone model, yet has resisted going in this direction strategically given their significant gains based on economies of scale with standardized production processes (Apple Investor Relations, 2013). Apple cannot launch and profitably sell a build-to-order smartphone given the constraints of their highly automated, standardized production process. This opens up a significant market opportunity for a smartphone startup that relies on contract manufacturing to produce the device while investing heavily in a highly visible, successful new product introduction.

II. The Business Challenge

With Apple unable to address the market for build-to-order smartphones and smaller competitors following their lead by relying on lean manufacturing-based strategies, the potential to be the first to market with a build-to-order smartphone is significant. The most significant business challenge is in creating a unique brand that speaks to the customers' need for freedom of expression while also providing them with an exceptional selection of features as well. Freedom is a very powerful motivator and has consistently shown to be highly effective as a marketing strategy. The proposed build-to-order smartphone is called Libertad (Spanish for freedom). As this is a unique business model, a separate business unit will be created with the mission statement; Freeing Your passion to communicate.

III. The Market

This section of the marketing plan covers the customers, company analysis, collaborators, competitors and business climate.

a. Customers

The dominant customer base for the Libertad will be the 18- to 45-year-old men and women, as this segment is historically the most active in terms of smartphone adoption, purchase and use. The subsegment of 18- to 24-year-old men and women are early adopters of new smartphone features and platforms and is the primary audience for the Libertad smartphone. Apple has shown in their analysis that the 18- to 24-year-old segment of smartphone users generates 30% of all profitability for iPhone phone and data plans through their carrier partners globally (Apple Investor Relations, 2013). The most intensive users of advanced scheduling and time management applications are the 30- to 45-year-olds who are often managing multiple roles of parents, employees, caregivers and leaders (Apple Investor Relations, 2013). The Libertad needs to be designed to give these customer segments the necessary flexibility they need to customize the build-to-order smartphone to their specific needs.

b. Company Analysis

A SWOT analysis has been completed for the proposed new business unit which will be producing, marketing and servicing the Libertad, which is provided below:

Strengths

Alliances with contract manufacturers who can quickly and inexpensively produce the Libertad platform.

Stable supply chain for the accessories and components sold as part of the build-to-order strategy in place.

Alliances with at&T, Verizon and repurchasing agreement with Virgin America to resell the phones.

Website including product configurator and catalog in place and tested to support build-to-order sales of the smartphone.

$10M in financing from venture capitalists who see Libertad being the Dell of smartphones.

Weaknesses

Name awareness and building the brand is going to be critically important; so far the brand is not known.

Manufacturing processes to support build-to-order workflows have not yet had thousands of units per day produced yet.

Supply chain links for the more expensive components need to have third and fourth-source strategies to ensure availability of these items over the lifecycle of each smartphone model.

Opportunities

Broaden the product lien to include build-to-order tablet PCs and an iPad Mini class of device that can be sold at a price point of $150, 50% of the Mini price point today.

Grow global distribution through two-tier distribution, partnering with the leading mass merchandisers in each regional area.

Original Equipment Manufacturer (OEM) sales to leading telecom providers globally, customizing for their specific needs.

Threats

Supply chain disruption and the continual cost increases of components could completely redefine the business model.

Churn of trained personnel in the areas of production and build-to-order manufacturing.

Apple decides to get into build-to-order smartphones to gain 67% of the market now underserved by mass production.

c. Collaborators

For the Libertad to succeed in the market it will need a very scalable, strong ecosystem of partnerships and alliances. The success of the iPhone is a direct result of the many strategic alliances and partnerships the company has with its global base of telecommunications partners and service providers. Figure 1: Landscape of Strategic Alliances and Partnerships: Libertad Series, shows a conceptual map of the key alliances and partnerships necessary for the Libertad to succeed.

Figure 1: Landscape of Strategic Alliances and Partnerships: Libertad Series

Source: (Apple Investor Relations, 2013)(Kwak, Kim, Kim, 2009)(Gill, Lei, 2009)

d. Competitors

Google reported three years ago that there are over 60 different smartphones and tablet PCs in production using their Android operating system (Hardy, 2010). As of 2013 there are over 180, and the growth of the Microsoft partnership with Nokia continues to drive even greater competitive pressure into the smartphone market (Apple Investor Relations, 2013). Across the many competitors that the Libertad has, none offer a build-to-order option for customizing the smartphone to customers' unique requirements. This is the strongest differentiating feature of the Libertad. The dominant competitors of the baseline unit include HTC, Motorola and Samsung, three of the top partners Google is relying on for the success of the Android operating system. Figure 2, Best-Selling Smartphone Competitive Comparison shows the dominant models available today.

Figure 2: Best-Selling Smartphone Competitive Comparison

Source: http://www.phonearena.com/news/HTC-Rezound-against-the-world-spec-comparison_id23478

e. Business Climate

The political, economic, social & cultural and technological factors pertaining to the product concept of a build-to-order smartphone are favorable for the development and launch of the Libertad. A PEST (Political, Economic, Social (and cultural) and technological) analysis is shown in this section.

Political Climate -- the deregulation of the telecom industry continues to favor new ventures. There are also initiatives in place to reward companies who operate in trade-free zones across the U.S. And globally. These areas would trim tax costs from the new division and contribute to Libertad profitability.

Economic Climate -- Economic uncertainty makes a smartphone even more critical as many members of the target segment and audience are working two or more jobs,. And often use the smartphone to keep all aspects of their life coordinated. The economic climate will also drive the development of a more effective pricing strategy over time.

Social & Cultural Environment -- Social and cultural factors are the strongest factors favoring a build-to-order smartphone, as ethnographic studies completed by Apple have shown more iPhone customers are looking for greater individuality in their devices

(Apple Investor Relations, 2013).

Technological Factors - the continual advances in EVDO chipset technology, which allows a smartphone to be attached to the Internet from literally anywhere., so significant potential for redefining the smartphone market (Lee, Kwak, Kim, Kim, 2009). The accumulated effects of iPhone and iPad demand have pushed prices for advanced display technologies low, making it possible for an entire industry to embed these into their next-generation devices (Apple Investor Relations, 2013).

IV. The Strategy

a. The Strategy

The Libertad is specifically designed to serve as a revenue-producing platform over the lifetime of its use as a communications device. Figure 3, Five Forces Smartphone Analysis uses Dr. Michael Porter's Five Forces Model to analyze the smartphone industry today and its direction fro the future. What emerges from this analysis is the need for defining a flexible smartphone platform that can quickly be customized to the requirements of alliance partners while at the same time providing customers with the wide variation of option selections. The Five Forces Model also shows how the industry itself is under tremendous price pressure, which equates to the need for second- and third-tier sourcing of suppliers, a strategy Apple has perfected with its mass production systems and advance forecasting techniques (Apple Investor Relations, 2013).

Figure 3: Five Forces Smartphone Analysis

Sources: (Apple Investor Relations, 2012) (Bernoff, Li, 2008)… [END OF PREVIEW]

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