3Qs: China overtakes U.S. in smartphone market

June 21, 2012 by Kara Shemin, Northeastern University
Fareena Sultan, professor of marketing in the College of Business Administration, explains how and why China has become the king of the mobile-phone market. Photo by Christopher Navin.

In 2011, China sur­passed the United States to become the world’s biggest smart­phone market, selling an esti­mated 23.9 mil­lion units in that year’s third quarter. Ear­lier this month, Microsoft’s Win­dows Phone was intro­duced to the Chi­nese mobile market, which has already begun to out­sell Apple’s iPhone. Northeastern University news office asked Fareena Sultan, pro­fessor of mar­keting in the Col­lege of Busi­ness Admin­is­tra­tion, to explain how and why China has become the king of the mobile phone market.

How did China become the world's biggest smartphone market?

The sheer size of China’s pop­u­la­tion is a dri­ving force in this growth. More­over, the first time many con­sumers in China and other emerging mar­kets will access the Internet will be on their mobile phones. There is also a thriving gray — or legal but unof­fi­cial — market of unlocked smart­phones that impacts this growth.

How did companies alter their marketing, branding and advertising strategies in order to compete in the Chinese mobile phone market?

The iPhone was not com­pat­ible with the Chi­nese net­works and Wifi was banned in China in the early stages of the intro­duc­tion of the iPhone. Apple tried to pursue a monop­o­listic revenue-​​sharing model as it had done in the U.S. with AT&T. How­ever, state-​​owned mobile com­pa­nies did not approve and nego­ti­a­tions with China Mobile, the largest telecomm provider, were not suc­cessful. Ulti­mately an agree­ment was made with China Unicom, which offered a one-​​time pay­ment for 5 mil­lion units without any revenue-​​sharing program.

In terms of appli­ca­tion devel­op­ment, there is a huge market in China. But there are also exten­sive intellectual-​​property-​​rights issues. Suc­cessful apps get copied quickly in China and mobile app devel­opers have to come up with newer and more updated apps on a con­tin­uous basis in order to remain successful.

In terms of adver­tising, Emar­keter pre­dicts that mobile ad spending in China will grow from $223.2 mil­lion in 2010 to $1.16 bil­lion in 2014, although the rate of growth is expected to slow down in the future.

Mobile mar­keting research that I have con­ducted with North­eastern col­leagues in the Col­lege of Busi­ness Admin­is­tra­tion, which we call “Brand in the Hand” mar­keting, explains how the mobile medium offers the ability for mar­keters to do branding and trans­ac­tions via mobile devices on a 24/​7 basis. Mobile also offers unique ben­e­fits to con­sumers such as location-​​based offers and higher inter­ac­tivity and engagement.

Addi­tional mobile mar­keting research that we have con­ducted found more accep­tance of mobile mar­keting in devel­oping mar­kets such as Pak­istan com­pared to more estab­lished mar­kets such as the U.S. In many emerging mar­kets, there is a nov­elty factor related to mobile mar­keting. Con­sumers in these coun­tries are more recep­tive to mar­keting and pro­mo­tional offers on mobile phones. This is also true for those Chi­nese con­sumers who are accessing such offers for the first time on their mobile phones.

How did Microsoft shift consumer perception to help the Windows Phone inch past the iPhone in China?

The market share of the Win­dows Phone is around 15 per­cent higher than that of the iPhone. One reason for its market share supe­ri­ority could be that Microsoft is working with China Mobile, which has 70 per­cent of the sub­scriber base in China. Apple’s iPhone, it should be pointed out, does not work with China’s own 3G system, but China Mobile is inter­ested in con­tin­uing to talk with Apple to work on com­pat­ible net­works. This interest could be attrib­uted to the dom­i­nance of Apple and its iPhone among urban Chi­nese, who view the company’s prod­ucts as status sym­bols, as well as the poten­tial for data-​​intensive apps that have become Apple’s spe­cialty. As of now, Apple receives 58 per­cent of ad impres­sions among all mobile devices in China. The com­pe­ti­tion will inten­sify between Win­dows phones and iPhones if Apple can also estab­lish a rela­tion­ship with Mobile.

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1 / 5 (1) Jun 22, 2012
The extensive intellectual-property-rights issues are present not only in China. Northwestern University has its own professor-bandit which is still "plagiarizing researching" with a united italian research gang from the Italian Institute of Technology (IIT) and Joint Research Centre, universities of Ferrara and Genova: http://issuu.com/...saivaldi

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