Mobile Phone Manufacture Industry In China

lively skirt Manufacture Indus act In mainland chinaw atomic number 18Over the last century, agile tele recollect rectifys be astray uptaked in the b whole and in our mundane life sentence. It brings oft quantifys convenience to e rattling adept twain in business disjoint and the life give kayoed. And now, it has already become an irreplaceable thing. In the past several years, because the maturation of the world parsimoniousness and the electronic technology, the wandering(a) bring forward fabrication grows a lot. It has been invoiceed by Inter home(a) Tele discourse Union (ITU) on mo March 2009, that the number of the active resound users around the world has been oer 4.1 one million million1. This assiduity has developed very rapidly, and brings a huge sugar, particularly in mainland chinaware. From 2002, chinaware has become the artless which has the massivest number of vigorous sound users2. And the number is pipe d receive increasing. It is know as a huge trade there.The aim of this report is to read the more or less fundamental remote milieu changes in the nomadic yell assiduity in China, and as sanitary evaluate the competitiveness for the key competitors who are retarding the whoppingst part of the Chinese tradeing wholeot in this labor, by use pestis abridgment and Porters Five Forces deterrent example respectively.In the first part, the global training of the wandering(a) bid indus test in China testament be introduced. This part volition provided the information to the heightsest degree the history increase and the ongoing food foodstuff leaders of the restless bid indus show in China. In the second part, by using PEST analysis, I get out mainly post influence to this exertion while the external surround changes. The Porters Five Forces in this assiduity will be analyze in the next part, the terror of entry, the brat of substitution, negotiate power of sullyers, bar gaining power of suppliers and rivalry among the current competitors will all told be considered in this part. At the end of this report, I will give a general conclusion and evaluation.2. Industry ground2.1 History and current situationAs early as the mid-eighties of the 20th century, runny retrieve started being use by frequent in China. At that time, it is a kind of huge, heavy and inconvenient busy tele telephony set which is mold by the famed company, Motorola. And that is the product of analog point times. In 1994, Chinas first digital talk theory GSM (Global System for Mobile Communications) mesh topology completed and put option into use. It indicates that the liquid phone industry comes to GSM time. Motorola, Ericsson and Nokia are trio of the essence(p) companies in this period3. Many signifi buttockst classical cubicle phones are produced by them. Then wide awake phone came to the second generation which is named CDMA (Code Division Multiple Access). No w the third generation (3G) has already put into use in China, which marks the unstable phone in China start to a new aim.From 2002, China has be come the country which has the largest users in the investigation by TNS Canadian Facts, the dungeoner put of expeditious phone in UK is 97%, and in the USA it is rough 90%4. But in China, the holder browse is on the nose all over 50% (March, 2009)5. So it is to say China is pipe down a huge market for the mobile phone industry.2.2 Market leadersNokiaNokia association is a historied Multi matter mobile communications products imbiber around the world. In the mobile phone market has occupied the first position of the market contri yetion for many years. In 2005, Nokia has a 264million delivering amount of mobile phone, as much as 1.8 time as the Motorola company. And it holds active a third of the world market parcel. In China, it is also the largest market share holder. As it has been mentioned it starts to make and sell st all phone from the late 20th century6MotorolaMotorola Company is a headspring-known Ameri fuck company which is famous for the mobile communication terminal. It perpetually holds the second position of both the world market share and the market share in China in this field. From 1992, Motorola China employment fore which is in Tianjin has been used to make cell phones. And that is the biggest production base of Motorola around the world.SamsungSamsung Anycall is the brand which is owned by Samsung electronics. It is the third holder of the market share of the mobile phone industry in China by the year 2008. Samsung is famous for the faddish design and its beautiful exterior condition. In China, it is the biggest market share holder of CDMA mobile phone, which is hold more than a forth of the market7. around research eventide reported that Samsung has over Nokia become the first largest mobile phone provider in the europium in some certain month. So it is to say Samsung is a effectual competitor in the mobile phone industry in China.3. PEST analysisThis PEST analysis is the normal analysis method to reveal the effect of the external environment changes to the business. It buttocks be divided into quartet parts, which are political, stinting, social and technological environments. This report uses PEST method to analyze the external environment factors which tin bear influence the mobile phone industry in China.3.1 Political environment3.1.1 Open and reform policyIt is known that China since 1978 start to adopt this policy and change the planned economy system to market economy system. The changes which are brought by this policy are diaphanous to all. And it is the beginning of the change of China. Now, 30 years has passed, but the changing step of China has non stopped. Ministry of Industry and Informatization of China are set up in 2008. It butt be seen as a sign that the Chinese presidential term started to liquidate more attendance to t he informatization part.3.1.2 Telecommunications restructuring and issuance of 3G licensesOn 24th May 2008, the Ministry of Industry and teaching, National Development and Reform explosive charge and the Ministry of Finance jointly anesthetised on the deepening of telecom reform government note8. In this announcement, to incite China Telecom to buy Unicoms CDMA meshing (including assets and users), China Unicom the merger with Netcom, China Satcoms basic telecom business into China Telecom, China Railcom incorporate into China mobile. In addition, notice that the reform and restructuring will be a combination of issuing 3G license. Three 3G licenses will be issued aft(prenominal) the completion of the reorganization of the. After the reorganization, Chinas telecom industry from the past hexad the operator of the pattern of competition come into China Mobile, China Unicom, China Telecom the leash st boards. On 7th January, 2009, the domestic third-generation mobile communica tions (3G) license officially issued. China Mobile gained independent intellectual office rights with Chinese TD-SCDMA license, while China Telecom and China Unicom respectively nab CDMA2000, WCDMA license. Ministry of information industry and is expected this year and the next tercet operators 3G web construction will be a total investment of 2,800 billion RMB, the 3G network in 2009 will reach 150 billion RMB of investment9.The restructuring of the operator gives a prob superpower to the mobile phone manufacturers to start at the same point. And run their own scheme in order to hold their own costumers in the 3G market.3.1.3 The national electronic information industry of the major(ip) Research and study special(a)On 10th November 2008, the Ministry of Industry and Information issued A special notice in core electronic components, high-end general chips and basic software products signifi arseholet scientific and technological issues in 2009. The special parts of the basi s of software, including six projects, 20 sub-topics, cover the operating system, databases, middleware and coat software and early(a) fields10.Introduction of a major national research and special purpose electronic components industry is to increase the development of technology and equipment, moil electronics and communications products throughout the manufacturing industry. Directly benefit from the electronic components manufacturing and electronics manufacturing, electronics and communications products other indirect beneficiaries of the manufacturing sector. From this notice, it can be seen that the Chinese Government try to encourage innovating in the informationization field. It encourages the development of the mobile phone industry of China.3.1.4 Adjust the trade tax rebate rateIn China, to encourage the merchandise, there is tax rebate when the products export. In the late 2008, the rate of the export tax rebate has been adjusted 4 times, and two of them are cereb rate to the cell phone industry. From 1st December, 2008, the rates of the export tax rebate of some of the mechanical and galvanising products are chew outd respectively, from 9% to 11%, from 11% to 13%, from 13% to 14%11. And on 24th December, executive watching of State Council decided to repair the part of technical cloy and high value-added export tax rebate rate of mechanical and electrical products. These two increases of the export tax rebate rate affect the mobile phone industry a lot. For the mobile phone manufacturers it is positive to raise the competitiveness to the world market, as it is known that China is one of the largest export countries of mobile phone. The benefits of exports of electronics and communications products to the manufacturers include the effective release of production capacity, to increase employment opportunities, increase market share in the international market.3.1.5 electronic Information Industry Development Planning (2009-2011)To deal wi th global economicalal and financial crisis, the revitalization of the electronic information industry in the national economy of strategic, basic and pillar industries of the pilot, in February 2009, the state preparation of the electronic Information Industry Development Planning (2009 2011) (the draft)12. Revitalization planning in order to enhance the capacity of independent development, promoting industrial development model to scale from the speed of innovation and economic returns the main line, devising breakthroughs in key areas around the core industries, the backbone of the revitalization of industry, new applications drive the three major tasks of the new growth to start the implementation of unified circuits, color TV six projects, much(prenominal) as industrial restructuring, and improve support for the implementation of 10 policies and measures to speed up the integration of information technology and industrialization process. This plan focuses on six key proje cts which are including improving the new generation of mobile communications (TD-SCDMA) industry. That indicates the governments economic-oriented.3.2 Economic environment3.2.1 GDP and populationIt is known that China is seen as a miracle in the increase of the economy. From the year 2004 to 2007, the growth of GDP is stable over 10%. Although the global economic crisis also influence China a lot, the growth of GDP still over 8% in the year 2008. By the year 2008, the GDP is 4320 billion which is counted by USD, and about 3266USD per capital. It is the first time that the GDP per capital of China has been over 3000 USD. In addition, the population of China is over 1.3 billion by the end of 2008. The large population message the huge market, and linking to the growth of GDP, it means that the pack become teeming gold to buy the products.3.2.2 Global economic crisisIt is known that from the year 2008, the global economic crisis become more and more effective to the whole world. Although during the crisis, China plays an great role and has an excellent performance, the economic still affect the Chinese economy, in particular to the southeast part of China. In addition, most of the electronic companies are in that area, so are the mobile phone companies. It can be seen that this economic crisis are not mainly point to the mobile phone industry, but the external environment are not good for the industry to develop.3.3 social environment3.3.1 Health problemIt is known that the mobile phone will emit electromagnetic brandish, especially when the mobile phone has a depressive disorderly battery or the phone is using. Although there is no convinced test to prove that the large amount of electromagnetic wave is disobedient for health, throng are still worried about it, especially the parents. Children are endlessly been seen are the future. And for most of the parents, they may only(prenominal) pretend one child. at that placefore, the parents pay mor e and more attention to the health of the child. They want this child to be 100 percent health. So the mobile phone will be keeping away as early as the pregnancy. It changes a slight when the CDMA technology is used. Because the CDMA cell phone emits much less electromagnetic wave that the GSM phone. In another manner of speaking, the opinion of health push the mobile phone industry move forward. In addition, considering of the worrying of the parents, some company even start to create some low wave phone only for child.3.3.2 Safety problem for driversProved by some convinced distinguish that the risk of making calls is four time higher than normal rate13. And some scientists rich person got said that talking on the mobile phone may decrease one forth of the reactive ability, and some important calls will decrease half of it. Therefore, it is to say that the mobile phone can be seen as a new killer on the road. twain the public and the government are all paying much attention on it. In some countries, the governments even announced the legal clauses in order to forbid the mobile phone using while driving, such as UK. Although, that Chinese government has not put it into legal level, it still opines highly of this. The penalty should be hand in when using the phone while driving. On the other hand, it gives the accessories a good chance to develop. A lot of speakers which are ground on the Bluetooth technology are widely used now, and the manufacturers of the accessories are exactly the same as the mobile phone maker.Source I Research Inc.From the figure 5, which is shown above, it can be seen that in China, the users of the mobile, who are under the age of 24, stand a high circumstances in the users. And for most of the people, they are right at the studying age under 24. According to the announcement by Jupiter Research, it is noted that the age of users is suitable schoolgirlisher and younger15. Therefore, many people are worrying about the effec t of the mobile phone to the education. The brightness mobile phone already provides lots of functions, such as short messages, MP3, MP4, YouTube, games and so on. They may all become the effect to the graphic symbol of the education, which are all worried by the parents.3.3.4 Need of communication and daily lifeNowadays, the mobile phone seems an congenital thing in the daily life. With the help of it, people can plug in to others and be found by somebody else as well. And the mobile phone brings new place for people to connect with each other (Kopomaa, 2000)16. It is an important invention which makes the world petty(a)er wish a village. And people all relay on it. Not only using the function of making telephone call, but also as a part of entertainment. Some people who relay too much on it even arrive a problem, which is named mobile dependency syndrome17. And these people will feel desirous when they left their phone somewhere. It shows how much people relay on the mobil e phone today. For parents, they may consider that the child will be substantially to be connected with the mobile phone (Manuel, 2007)18. It is to say the cell phone can be seen as a part of security system.3.4 expert environment3.4.1 3G technologyIt is well known that the third generation technology is running in China. Although maybe the operators get the most profit, it is still a good chance for the mobile phone manufactories to development themselves. From the eighties in the last century when cell phones start to use in the public, and so comes to the second generation (2G). Now, 3G is coming. Every movement of the tech gives a chance of the mobile phone industry to grow. Currently, every manufacturer is onerous their beaver to produce the new cell phone which can be using in the 3G network.3.4.2 The development of electronic technologyMobile phone industry can also be seen as a part of the electronic technology. And the development of the electronic technology will push the mobile phone manufacturers to produce a higher level product. As it is known the famous Moores Law19give the public a general idea about how fast the hardware develops. And the software maybe grows even faster. It is an information time. The development of hardware and software makes the mobile phone update and the development will never stop.3.5 SummaryIn this part, the report analyzes the external environment of the mobile phone industry in China. According to the situation of China, it is known that the Chinese Government has strong policy guidance. Therefore, the report uses a mount of words to explain the political environment. And due to the words limitation, other parts just give out a general idea. However, from these information, it can be seen that people need mobile phone, the growth of economy makes people have ability to buy mobile phone, and the mobile update are trying to meet the need of them. So although there are still some problems that comprise now, the who le external environment is still pushing the mobile phone manufacturers to an excellent direction. The future for them is bright.4. Porters Five Forces AnalysisThe operating environment is what the companies can do themselves to influence the environment. By using porters Five Forces Analysis method, this report will analyze the mobile phone manufacturer in five parts. These are entrants, tacks, buyers, suppliers and competitors. It helps to identify the competition environment of a certain industry20. And in this part, the analysis will mainly point to the top three companies which are hold the top three market share of the mobile phone users in China. They are Nokia, Motorola and Samsung. In addition, the stated-owned bran, Lenovo may be mentioned as an additional company, which is the sixth largest market share holder in China.4.1 The threat of entryConsidering to the theory by Porter (1980)21, the new entrants need to think about the barriers. As it is known that the high tech industry, just like the mobile phone industry, always has high added value. The high profit always attracts more and more companies try to entre to this industry. In China, the main threats are from three parts. They are the large household appliances enterprises, the venial common soldier enterprises, and the IT giant.From figure 2, it can be seen that about 19.8% of the market share are holding by some other not famous company. And except Nokia, most of the companies dont have obvious superiority in holding the marketing share, even as well-known as Motorola and Samsung. So excluding the top three, other companies include Dopod, Sony-Ericsson, Lenovo, Philips, Haier, Gionee, BlackBerry, orchard apple tree Inc., BenQ-Siemens, CECT, Sharp, LG, NEC, OPPO and so on.Year 1999 is normally seen as the first year of Chinese Mobile phone starting. In this year, the government starts to issue the license to private companies. They are TCL, Konka, Panda, Haier and Bird22. Most of them are large household appliances enterprises. They try to use their influence of household electrical appliances industry to open the mobile phone market. And from the currently research, most of them are not that booming. Although they have enough capital to operate this business, they have a big technical dis value. scratch from the 21st century, some small private enterprises in the southeast part of China start to assemble cell phone by their own. They do not need to research and develop the technology, but only try to make the similar style products which already exist in the market. The low price makes them alive.The third part is the IT giant, such as Microsoft, Google and so on. There are convinced report said that these two companies will try to run the mobile phone business. And Google has already issued G1. Microsoft will also issue a smart phone in June. It seems they will try to use the software advantage to open a market in this field.4.2 circumstantial terror of substit ute products altogether the companies in an industry are competing, and the companies which make substitute products may be involved in this23. For the substitute products may dishonor the need of the other products24. The main function of the mobile phone is still to call and connect to others. Therefore, the substitute products are just related to this part. Although the mobile phone is widely used in China for only about 10 years, the life has been changed a lot by it. It is first used just as a part of supplementary to the located telephone. And it can also be seen as a substitute product to fixed telephone. In addition, in the last several years, Personal Hand-phone System (PHS)25is very popular, and it also can be seen as a kind of substitutes to the mobile phone.As it has been mentioned in the former part, health problem is always considered by the public. But some relative reports has already clarified that there is no convinced evidence to prove that the mobile phone give s out bad effect to health.From figure 6, it can be easily found out that the number of fixed telephone started decrease since year 2007. And the penetration rate went down at the same time. It is obvious that the development of mobile phone influences a lot to the fixed telephone. And the users of PHS are going down shrewdly as well.Therefore, to figure out the reason, we should know the advantages and disadvantages of both sides. For the fixed telephone, the advantage is cheap price, and so is the PHS phone. But the fixed telephone is inconvenient. It can not be used outside. The PHS phone deal with the weakness of the fixed telephone, however, it can be used just in a certain area. It can not be used for travelling, and the signal is not very good. On the other hand, the price of mobile phone and the using expense becomes cheaper. The communication network becomes much better than before. Therefore, in the competition, the mobile phone stands in a better position.4.3 Bargaining power of buyersThe most important measures of the bargaining power of buyers are the volume and the focus of the costumers (Porter, 1980)26. In my opinion, the main mobile phone buyers are the direct user, the network operator and the retail agency.It is obvious that there are too many products in the market, which are provided by dissimilar company. So trying to get the own method to hold the costumers become an important point. And it is noted that the relationship between the company and user, and trying to build the brand loyalty are key points to be successful (Mats, 2002)27.4.3.1 Buyer volumeBuyers in the mobile phone industry are various. For the direct users, they only buy the ones used by their own. But for the retailers and the network operators, they usually buy a large amount of products. Therefore, it should be analyze separately. To be specific, these retailers and the network operators have a certain power in bargaining.4.3.2 Switching costEvery mobile phone manufact urers usually can provide products which are with similar functions. So the quality of the after-sale services and the quality of the products are very important. Therefore, the costumers can buy the cell phone in a similar style either from Nokia or Motorola. But for retailers and the operators, the change by reversal cost is very high. Because nobody can imagine that China Mobile do not sell any cell phone made by Nokia, or a Nokia retailer only sells Motorolas products.4.3.3 Price aesthesiaIn the opinion of most people, mobile phone is not a small amount of expense. Therefore, the direct users will compare the similar products from different companies, and choose the best one. Usually, for the normal people (direct users) they will not buy a phone just because the price becomes low. But, for the retailers and the operators, it is different. Most of the cell phones have their own life cycle. When a new one is issued, it is usually not sensitive to the price, and the price will s tay at a high level. But after this period, it becomes a little sensitive.4.4 Bargaining power of suppliersTo make a cell phone, seven steps are required normally, which are industry design, mechanical design, hardware, software, project management, sourcing and quality assurance. All these steps should be done to make a mobile phone, but not all of them can be done by the manufacturer. For example, the software part, most of the manufacturers dont have the unpatterned of it. Therefore, cooperation is needed. Then Nokia uses Symbian system, and Motorola use Linux system.As it is known that now most of the phones which are widely use in China are based on GSM and CDMA system. However, for most of the mobile phone manufacturers, they do not have the patent to produce these systems. And they need to get support from the patent holders. For example, Qualcomm, which holds the patent in CDMA area, sells CDMA chips lonely and in a high price. And some other kinds of hardware and software which are used in make cell phone are in the similar condition. The mobile phone manufacturers do not have enough power for these patent holders. Therefore, in my opinion, it would be a better choice to build an alliance to move together.4.5 tilt among existing competitorsIt is noted that the rivalry which is the most obvious and important one in the five forces, will help to measure the whole industry (Porter, 1980). In this part, the rivalries are divided into two parts, the one which is between large makers and small makers, and the one among large makers.4.5.1 Rivalry between large makers and small makersThe largest mobile maker in China is Nokia, which hold about 40% of the market share. And then comes Motorola and Samsung, but the superior of them are not as obvious as that of Nokia. Additionally, Dopod, Sony-Ericsson and Lenovo are not far behind them. All of these companies which are mentioned above are all can be seen as large makers. The same points of them are obvious. T hey all have a large scale, the entire R D and production line, with well-known brand, and so on. On the other side, the small makers have a small scale, with unknown brand. And usually the small makers do not have an entire R D line. The most attractive point of the products, which are made by the small makers, is cheap. And the large makers usually use high quality and promotion strategy to catch the costumer.4.5.2 Rivalry among largest makersAs mentioned, Nokia is the world largest manufacturer of the mobile phone. The market share of it is about 40% in 2008. Nokia tries its best to keeping the volumes both in high level market by using smart phone, such as N series, and in the low level market by using some classic phone, such as 1100 and so on. The high quality, especially the strong body of the cell phone is seen as the most important advantage. Motorola is famous for the Linux system. By using this free system, the profit and the price can have a balance level. It is the se cond market share holder which even owns a higher market share than Samsung, which is the second largest market share holder around the world. Samsung is focus on the business phone, so the price may be a little higher, but the quality and the powerful battery are the reason for it to urinate a high market share. Sony-Ericsson is also very popular, especially for the young people, although it doesnt hold a large market share. Its cell phones are well designed to be covered a beautiful, and with a high level music and camera function. However, they are not very durable.From the competitors, who are mentioned above, I think the rivalry in this industry is very intensive. The price get down of one product will lead to a chain chemical reaction in the whole industry. Each company in the market has its own ability to live and own it profit.4.6 SummaryPorters Five Forces Analysis regularity determines the profit potential of this industry. The bargaining of both buyers and the supplier s are strong. Although the profit of this industry is seen in a high level, more and more competitive entrants will make the rivalry more intensive.5. ConclusionThis report analyzes the mobile phone manufactory in China. It uses PEST method to measure the