Just months after the close of the deal for Microsoft to acquire Nokia’s Devices & Services unit, which made mobile phones and smartphones, Nokia is looking to enter the device market with Nokia-brand devices made by partners using Nokia’s technology assets.
This is an audacious move by Nokia. There will be those at Microsoft who will be startled by the speed and audacity of Nokia’s strategy. They shouldn’t be: Nokia has a long history of bold strategic moves.
This strategy goes far beyond a brand license play. Nokia intends for the resulting Nokia-brand devices to be indistinguishable from a Nokia-made device which means Nokia must ensure ongoing quality management of its partner(s) devices. To deliver on this goal Nokia will license a package of assets, not only the Nokia brand name, to help with product differentiation. This includes extensive imaging intellectual property.
Nokia claims to own 1200 standards essential patents, to have filed 914 patent families in 2013, and for 75% of the total patents it holds to have been created by teams still at Nokia.
For Nokia, the advantages of licensing are considerable. Nokia can enter the mobile device market without needing to worry about manufacturing, supply chain management, stock control or hardware distribution. And, by selling its former devices unit to Microsoft, Nokia has freed itself from historic baggage, restructuring costs, and can start afresh.
But Nokia’s success depends on the partnership strategy. How should Nokia license its assets? There are different potential approaches:
Apple SIM threatens to fundamentally change the relationship between mobile operators and users. Making it easy for users to switch carriers and tariffs from a device user interface removes barriers to consumer switching, makes market competition more efficient, and places pressure on operator revenues and profitability.
The software-managed Apple SIM model moves Apple into a mediation position because for operators to be present on the Apple SIM, operators must negotiate terms direct with Apple, rather than offering their own carrier iPad SIM direct to any end user.
With this initial iPad launch, Apple is testing the business model and technology of software controlled multi-operator SIM cards. If successful, Apple has a number of ways it will look to extend the Apple SIM strategy:
- Extend Apple SIM to the iPhone. IHS forecasts Apple will be the second largest handset maker by shipment volume in 2014. If Apple offers Apple SIM on the iPhone because of this scale it will have enormous impacts on the business models of mobile operators.
- Make Apple SIM the sole embedded SIM option on iPhone or iPad. Apple may choose to remove the SIM card slot entirely, and embed Apple SIM in future iPhones or iPads as the sole way to connect to mobile networks. In this event, operators will no longer be able to offer their own SIM cards to iPad or iPhone owners.
- Lock consumers more into Apple-brand devices. If users have an Apple SIM which either only works with Apple devices, or is non-removable, then it is much harder for users to switch to a Samsung, Sony, Huawei, or HTC cellular device because the user will need to source a new SIM card for their new device. This will reduce churn from Apple device ownership.
Mobile operators’ business models centre on the SIM card. It anchors…
Our Analysis – iPhone 6 and iPhone 6 Plus expands Apple’s reach
The iPhone acts as a critical bridgehead to acquire new customers, and as a foundation for new ventures such as Apple Watch and Apple Pay. The more new customers Apple can win the with iPhone 6, the greater the chance of success with the Apple Watch and Apple Pay. Apple is raising the competitive threat to other smartphone makers with a new stronger portfolio including two new large screen iPhones. By launching multiple products together, Apple is opening multiple fronts to build on the success of the iPhone to date….
Our Analysis – Apple aims to reset the wearable market and make 2014 year zero
Apple aims to reset the wearable market and make 2014 year zero for wearables, as 2007 became the start of the true smartphone market because of the iPhone. But moving into a new category is a bold, expensive and risky effort. This Apple Watch is a first generation device, whether it is successful or not, Apple will aim to iterate and make it a must have companion for every iPhone owner. Apple Watch stands on the shoulders of Apple’s iPhones. Significantly, the addressable market for Apple Watch will…
Samsung has consistently led the market using the large smartphone category, ever since Samsung launched the first Galaxy Note in 2011. Then, no one believed in this smartphone form factor, and yet Samsung created a successful market category. But over the last three years the smartphone market has changed: Mainstream flagships have grown much larger, and as a result the Galaxy Note model is less differentiated than it used to be. Samsung still holds a leadership…
…As Android market leader, Samsung has most to lose from stronger Apple competition. With the Note, Samsung is choosing to emphasize the stylus as a way of countering Apple. This will not be enough. Samsung will have to spend to support its brand and operator distribution channels to maintain its market share.
Amazon’s debut smartphone includes differentiated and technically impressive features, but none represent the game changer which Amazon needs to drive consumer adoption. The launch pricing also places the Fire in direct competition with the flagships of established smartphone market leaders Apple and Samsung.
This is a high risk launch price strategy which is unsustainable for a smartphone market entrant. Simply having a well-known brand on the box is not enough to sell smartphones as Nokia and Motorola know well. IHS expects Amazon will reduce the Fire’s price within months to make the Fire more attractive.
By launching on just one carrier, in just one country, Amazon is artificially capping its addressable market at a very low level: AT&T ships around 8 million smartphones each quarter, which is a tiny fraction of the global smartphone market. This year, over…
Amazon is already a key player in the smartphone market through its widely used mobile apps including Kindle, Instant Video, IMDB, Local, Cloud Drive, and the main Amazon app which supports its retail business. These apps benefit from wide availability on many smartphone makers’ handsets and on different operating systems, including Apple’s iOS, Google’s Android and Microsoft’s Windows Phone.
Amazon’s mobile content has been successful because of this wide device compatibility which makes their content and services convenient for consumers to use. But were Amazon to launch an own-brand smartphone they risk alienating the many existing smartphone makers, which are the platform for Amazon’s current mobile content and services success to date…
…The smartphone market is fiercely competitive with numerous challengers to market leaders Apple and Samsung. It’s very hard to profit from making smartphones as a result. In this challenging smartphone market, Amazon must use both an innovative go-to-market strategy and create a differentiated product. To succeed with an own-brand smartphone Amazon must:- …