Strategies for Avoiding Loss of Market Share Due to Fierce Competition at Apps for The Future Inc.

◎周宸宇

Strategies for Avoiding Loss of Market Share Due to Fierce Competition at Apps for The Future Inc.

◎周宸宇

The quickly growing development and fierce competition in technical industry make Apps for The Future Inc. (AFF) has risk of losing market share and their customers' trust. Therefore, after the examine of three solutions which used by Nokia, Motorola and China Unicom based on the selected criteria, the suitable solutions that the AFF managers should follow are creating new flagship product with low price, finding development direction and keep investing. Those solutions could allow companies to keep creating, keep motivating and care their customers, and allow this company to be successful and regain customer trust.

Introduction

The Competition in Technical Industry

Apps For the Future (AFF) is a new company within the Professional,Scientific, and Technical services industry, (NAICS code 54143), which was founded by Mr. Brooks in 2013 and is looking to bring innovative new apps into the market. In this industry,the quickly growing development and fierce competition bring companies opportunity and disaster at the same time. The quickly growing development had started since 2007. Based on the Ante Sven Grundberg and Stoll's report,the reason why mobile industry's development is so fast is because Apple set a high technical bar to smartphone and will upgrade significantly every 12 mouths (Ante Sven Grundberg & Stoll,2015). However, Apple's iPhone not only provide fast development in its industry, but also increased the level of the competition. According to Ovide and Wakabayashi's article, "the results demonstrate the rapidly shifting fortunes in the smartphone business, which Apple transformed with the iPhone in 2007. By 2012, Apple and Samsung essentially split industry profits 50-50. Now, Apple stands far above the others" (Ovide& Wakabayashi, 2015).However, based on Porter's Five Forces Model opinion, the competitive rivalry and the threat of substitution is the reasons why the competition is so fierce in the technical industry. In this article, "customer can easily switch to a competitor offering for little cost"(Arline, p. 4). So, if the technical industry wants to survive, lower prices will be one key to be success. Also, customers could decide whether to switch product if there is a better-quality substitute product. Thus, technical companies'product should be updated frequently to provide customers high quality products.

Purpose & Scope

This report examines the three different dispositions, which were mentioned in Nokia, Motorola and Chinese Mobile carriers' cases, to provides the key steps which the technical companies like AFF should follow to avoid losing market share which indicate lost customers' trust when facing the fast development and fierce competition growing in the technical industry. Therefore, those criteria need to be met when technical companies like AFF plan solutions to face the competition in this industry:

Do more surveys to know and follow customers' needs.

Keep creative and always plan for next-generation products.

High-ranking executives need to make the suitable choice and lead the whole company against the pressure.

Parallel Cases

The problems which lead Nokia to lose its leader position

Before 2007, Nokia was the leader of the mobile industry. However, when Apple's iPhone came out, Nokia lost its market share and leading position really fast. In The New York Times,Kevin J. O'Brien reported in "Nokia Post $1.36 Billion Loss as Sales Fall 20%" that the world's largest cellphone maker Nokia lost $1.36 billion money and 6% market share during the third quarter of 2009 (O’Brien, 2009). The report also illustrated that companies like Apple and R. I. M., which have big developments in easy-to-use and fun smartphones, started to overpower Nokia's market share. (O'Brien, 2009).

What is Nokia's solution?

BBC Business reported "Nokia Losses Deepen to 1.4bn Euros in Last Quarter," confirming that even in 2012,Nokia kept on losing their revenue and market share because of the irresistible and fast growing competition (Business,2012). Nokia's chief executive said their company was facing a challenge which was greater than their expectation.So, they created a new flagship called Lumia 900 phone which using Windows Phone system and selling as a low price for challenging their competitors,such as Apple and Samsung. After this initiative, their investors took comfort in that decision and improved their investments. According to an analyst,after encountering so much bad news in a row, Nokia finally made a good move through which they doubled their sales and got hope (Business, 2012).Thus, the high-rank executives of Nokia’s solution for facing the problem is creating a new flagship called Lumia 900 with Windows Phone system and low price, which allow them to compete with their rivals like Apple and Samsung.

If managers of AFF were to follow the steps Nokia executives took when facing fast development and fierce competition, they should do more surveys because Nokia needed to know what the customers' needs to create the next flagship phone called Lumia.The criterion of keep creative and always planning for next-generation product would be met because when iPhone came out, Nokia needed to create a next-generation phone, which is a smartphone, to compete with Apple. The High-ranking executives'need to make the suitable choice and lead the whole company against the pressure would be met because Nokia's executives needed to make the choice to drop down their flagship phone's price to compete with other mobile companies like Samsung and Apple.

What problems were Motorola facing?

According to the article "How Motorola Fell a Giant Step Behind"which reported by Rhoads and Yuan on The Wall Street Journal, Motorola was growing fast after they published Razr, but they failed to create a success phone and started to lose market share in technical industry (Rhoads & Yuan,2007). Due to the big success of the Razr, Motorola was satisfied with its design of Razr, but fell behind on developing the next generation of technology, which could take 2-3 years for a mobile company to make up.

What is the solution which Motorola used to solve the problem?

When facing those problems,Motorola's executives made a brilliant move to solve them. In The New York time, Laura M. Holson mentioned in"Cellphone Pioneer Struggles to Stay Relevant" that as an employee who worked for Motorola, Mr. Choubey said that he received a lot of negative information of Motorola's current situation from his old colleagues(Holson, 2008). In 1983, Motorola created the first commercial portable cellular phone. But in recent years, many employees (even some executives) chose to leave Motorola, because they felt hopeless with a company without any plan about creating new products. Also,Motorola's market share dropped more than 12 percent in the first quarter of 2008 which compared with the record in 2006. However, Motorola’s executives accepted Wall Street’s suggestion about differentiate itself better like what the Apple and BlackBerry do,which could allow Motorola find the direction of designing and selling(Holson, 2008). Therefore, the solutions that the Motorola's executive had were to differentiate itself for finding the direction of designing and selling.

If managers at AFF were to follow the steps Motorola's executives took when facing the quickly growing development and fierce competition,the criterion of doing more surveys to know and follow customers' needs would not be met because “differentiate itself” means to find out and meet the market’s need rather than majority customers’ need. The criterion of keeping creative and always planning for next-generation products would be met because developing next generation products always need a right direction. The criterion of high-ranking executives need to make the suitable choice and lead whole company against the pressure would be met because Motorola's high-ranking executives chose to accept the Wall Street’s suggestion which is the suitable plan for their companies’ future.

The Problem that China Unicom meet in mobile carriers'competition

According to the report, "Cut-Throat Competition Leads to Unicom Gloom", which was published on China Daily, as the second- largest mobile carrier, China Unicom lost 68 percent plunge in net profit, which was under the pressure of third-generation mobile network competition (China Daily, 2010).Due to the higher revenue and the needs of customers, as the mobile carriers of the biggest mobile market, China Unicom and other two rivals, China Telecom and China Mobile, spent about$21 billion to build their 3G cellular network in 2009, which lead to a big fell of revenue in Chinese mobile market.Meanwhile, China Unicom was facing another challenge when they wanted to upgrade their network and sign up customers, and provide 3G handsets user a better experience (China Daily,2010).

How the China Unicom facing challenge?

Fletcher's article on the Wall Street Journal, "China Unicom Profit Falls 86%", reported that China Unicom posted an 86% drop in first-quarter net profit because of the big number of subsidies it provided to customers for earning more market share and competing with rivals (Fletcher, 2011).Due to the development in mobile services, the 3G cellphone network has come out; China Unicom started to compete with other rivals by increasing the investment on developing. This move caused the company's net profit to fall to $25 million. However, the executives of China Unicom decided to keep investment on 3G mobile network,so that more 3G handsets like iPhone 4's users could get the 3G network when they chose China Unicom. Eventually, it had turned out that the monthly mobile average revenue per user had grown from 41.5 yuan to 45.5 yuan, and the benefits rose from 22.29 billion yuan to 30.65 billion yuan, which allowed China Unicom earn more profit than a year before (Fletcher, 2011). Thus, China Unicom’s solution for facing challenge is to keep investing for providing customers subsidies and upgrading equipment to provide 3G network

If managers at AFF were to follow the steps which China Unicom executives took when facing the quickly growing development and fierce competition, the criterion of doing more surveys to know and follow customers' need would be met.Because China Unicom need to know what the customers' need from the 3G mobile network and how much subsidy the customers need for upgrading their handsets to 3G smartphone. The criterion of keeping creative and always planning for next-generation product would not be met because China Unicom need not to create the 3G network; all they need to do is to invest more money for upgrading the equipment to provide the next generation of network to their users. The criterion of high-executive needing to make the suitable choice and lead whole company against the pressure would be met because China Unicom's executive need to make the choice of keeping investments in developing of the next-generation of mobile network under pressure of losing profits.

Conclusion

By implementing the above-mentioned solutions,managers at AFF will be able to increase customers’experience, keep providing best productions, and lead company getting rid of dilemma. These solutions permit AFF’s managers to be contrite, committed and compassionate which are the key points for companies to keep creating, keep motivating and care their customers,and allow this company to be successful and regain customer trust.

Arline, K. (2015, February 18). Porter’s five forces:Analyzing the competition. Business News Daily. Retrieved from http://www.businessnewsdaily.com/5446-portersfive-forces.html

Ante Sven Grundberg, S. E., & Stoll, J. D. (2012,September 6). Nokia, Motorola race Against Apple. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB10000872396390443819404577633352198554784

Brien, J. K. (2009, October 15). Nokia Post $1.36 Billion Loss as Sales Fall 20%. The New York Time. Retrieved from http://www.nytimes.com/2009/10/16/technology/companies/16nokia.html?_r=1

Business. (2012, July 19). Nokia Losses Deepen to 1.4bn Euros In Last Quarter. BBC News. Retrieved from http://www.bbc.com/news/business-18898121

Cut-Throat Competition Leads To Unicom Gloom. (2010,May 4). China Daily. Retrieved from http://www.chinadaily.com.cn/bizchina/2010-05/04/content_9807106.htm

Fletcher, O. (2011, April 26). China Unicom Profit Falls 86%. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB100014240527487037781045762864825746484 32

Holson, M. L. (2008, May 24). Cellphone Pioneer Struggles to Stay Relevant. The New York Time. Retrieved from http://www.nytimes.com/2008/05/24/technology/24motorola.html?_r=0

Ovide, S., & Wakabayashi, D. (2015, July 12). Apple's Share of Smartphone Industry's Profits Soars to 92%. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/applesshareofsmartphoneindustrysprofitssoars to921436727458

Rhoads, C., & Yuan, L. (2007, April 27). How Motorola Fell A Giant Step Behind. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB117763905320884365

（作者單位：University of Oklahoma）