BUS3005 Strategic Management: Global Issues in Smartphone Industry

The Smartphone industry has kept on engaged people across the globe with its various innovative thoughts that reflects on the advancement of the industry and the end user experience. The industry had gained in momentum when it first entered the market on different OS platform. Since then it continually witnessed high fights for the top slots among different brands with different OS. However, the biggest issue, which the Smartphone industry is facing today, is the rapid rise in data demand (Wagner, Rice and Beresford 2013). Rapid rise in data demand have enhanced the sales of Smartphones; however, the growth has also reduced the basic use of the phone such as making calls. The issue has captivated the entire world with its dominance. New Zealand is no other name in this regard. The country is also witnessing a huge usages shifting from basic calls to the data usage. According to a report, the mobile data usage has grown by more than 600% in the last four years (Mobile industry in New Zealand, 2014). According to the global network company Cisco, the next four years would see an increment of 50% in the data usage in New Zealand (Mobile industry in New Zealand, 2014). The issue has posed some challenges to the Smartphone companies such as to produce low budget Smartphone that meets every requirements of an average user. This is creating problematic scenarios for the different countries, as they are now required to bring cost-effective phones in the market. The main purpose of this assignment is to analyze the findings on the issues, which the global Smartphone industry is facing today.

 There are some reasons behind the rapid changing picture of the Smartphone industry such as product innovation, service innovation, process innovation and marketing innovation (Zangbar et al. 2014). Innovation in products has been brought by various new handsets of different brands such as Samsung, Xiomi, Lenovo, IPhone, Oppo etc. Different companies for the sake of acquiring the competitive edge are coming up with various new offerings. It has brought about a rapid transformation from just a Smartphone to a high-end Smartphone that has newest technologies as its core features. The transformation of mobile network operator from 2G to 3G and then to 4G has innovated the services. This is playing a vital role in attracting bulk participation because the newest incepted technologies are faster than its predecessors are. The process, which is involved in the manufacturing of phones have also reached to a new level. The marketing of the products are coming up with innovativeness attached to it. Different companies are using different kinds of marketing innovation such as TV ads with the celebrities. Irrespective of all the innovation process, which the Smartphone industry is facing it has also created some challenges such as production of low budget phones (Zangbar et al. 2014).

 External factors are highly influencing and driving the dynamic innovation in the Smartphone industry at the global level. PESTLE analysis would give a better idea on the driving forces behind the rapid inception of innovative ideas. New Zealand is a very small but more or less equally developed in the Smartphone usage. This is not surprising because the awareness, which the social media is generating on the youths, is attracting their participation towards the Smartphone purchase. However, the external environment of a country is extremely required to drive innovation and receive acknowledgement. The political and the legal environment of New Zealand are very unstable, which designs new rules and policies every three year. The changed policies may be good or bad for the industry. The labour force is also very high in the country; however, the rate of production of the products is at par with many other countries of OECD (Marsh and Miller 2012). Companies are required to pay high amount of interests to the government, which is good for the local government but not for the companies or industries. They would see a drop in their marginal profit. However, the country offers high freedom to the different business and trading practices. The supporting legal and political environment in the country is attracting different brands with their innovative thoughts. Unarguably, Samsung and IPhone are the top two choices for the people in New Zealand.

 The economy of the country is continually witnessing a significant growth. It has high economy. The economy is expected to touch the $207 mark by the end of 2018 (Kelsey 2015). The growth of the economy is driven by both the domestic and international demand. The country has less advancement on the R&D department, which is one of the reasons behind their dependence on the external agents (Kelsey 2015). This is because of such reason that different international brands are successful in this country. The lower interest rate and the increasing purchasing power parity of the country is another factor, which is driving much external innovation. The social environment of the country is one of the safest in the world for different kinds of business. The country has many religions but being largely dominated by the Christian. This is one vital reason for high Smartphone sales as numerous people purchase different kinds of electronic gadgets during the festive season. It is also engaged in free trading with China. The social development of the country is posing ample requirements to the development of Smartphone industry. This is actually giving place to innovation, which could suffice the requirements of the local people demands (Naidu et al. 2012). The technological advancement of the country is another door to the dynamic innovation in the Smartphone industry. OECD’s Programme for International Student Assessment (PISA) has positioned New Zealand at the seventh position in reading, science and maths (Brown, Campbell and Crook 2014). The literacy rate of the country is approximately around 99%. The political, legal and social stability of the country has welcomed many innovative works from different Smartphone brands. A stable economy of the country and a healthy FDI inflow is a healthy indication to the different Smartphone brands that they experiment with their offerings. These all high supporting factors are influencing the dynamic innovation in the Smartphone industry in New Zealand.

The CAGE Distance Framework is an acronym for the cultural, administrative, geographic as well as economic aspects that assists the managers in identifying as well as assessing the influence of distance on different industries. The application of the CAGE framework is requiring the managers in identifying attractive locations depending upon raw material expenses, accessing markets or customers, or other major criteria for decisions. The four dimensions of CAGE are mentioned as under,

• Cultural Distance – This is associated with the probable differences that exist concerning the way individuals from various countries are observing specific values as well as behavioural aspects. Specific cultural differences take into consideration the aspects such as power distance, uncertainty avoidance, individualism, predominant values as well as long-period or short-period orientation.
• Administrative Distance – Administrative distance is reflecting the historical as well as current political as well as legal relations amongst trading partners. Laws can majorly influence trade practices amongst countries as well as the regulations performed at the national or global stage. They are influencing the primary business practices, and often influencing the firms’ competitive position (Hill 2014).
• Geographic Distance – Geographic distance are regarded as complete regarding the miles or kilometres that are separating an organization from a different market or supplier. Technology as well as the Internet, on the other hand, has reduced distance regarding time for transportation as well as currently with digital products as well as services, has completely did the elimination of geographic distance as a restraint of trade amongst certain markets.
• Economic Distance – Economic distance is capturing the primary differences in relation to income, wealth distribution, as well as relative purchasing power of geographic market segments (Morschett 2015).

For application of the CAGE Distance Framework concerning smartphones, there is the requirement for identifying the locations that are offering reduced raw material costs, accessing markets or consumers or other significant decision criteria. There is the requirement for applying CAGE framework for considering certain first-order distances, i.e. physical distance within an organization’s home markets as well as the new global market or cultural differences i.e. the differences amongst home-market as well as global-market consumer preferences. This can be applied for identifying institutional differences, which includes differences relating to political processes as well as within the financial markets. When the distance will be more, it will be considered more challenging in operating in a specific country (Peng 2016). The markets that are emerging specifically will be having a greater distinguishing aspect since such countries are lacking majority of the specialized mediators that are making establishment such as financial markets to function. When an establishment is lacking these specialized mediators, there occurs an institutional void, which is referring to the lack of essential specialized mediators available in the markets relating to finance, managerial skills, as well as products that otherwise would be reducing the cost of transaction (Goetsch 2014).

In context of analyzing the potential in respect of the smartphones industry in New Zealand for connecting with the Chinese customers, the CAGE Distance framework needs to be evaluated.

Cultural Dimension

• Customer Behaviour – China’s younger generations might be more interested to purchase quality at a costlier price from abroad. These customers are considered being more global and having traditional Chinese traits. Organizations are required aiming towards having a global image for being successful in the Chinese market. Therefore, the smart-phone organizations must be specifically having the awareness of the target market demographics when selling to China (Rothaermel 2015).
• Language barriers – Obviously, the language barrier within the New Zealanders as well as the Chinese is considered being a major one. There is the frequently repeated assertion that the Chinese are having more learners of English language in comparison to individuals in the US. There are approximately 400 million students in China but the standard of the students that are speaking in a fluent manner is very less. Even though, English is considered compulsory in the schools, majority of the students are not able to speak in that language in a fluent manner. Therefore, this aspect is presenting a natural hurdle regarding the smart-phone companies from New Zealand that are interested in reaching the market in China directly (Morden 2016).

Administrative Dimension

The administrative distance within China as well as New Zealand is enormous. China is a communist country, even though the country is having capitalistic propensities.

• Government transparency and discrimination: Local protectionism is considered being a challenging aspect in respect of global smart-phone organizations that are trying to make an entry in the market in China. Irrespective of its entry in the WTO in 2001 as well as giving consent to the various demands in respect of equal treatment, China is still maintaining a huge penchant in respect of local organizations. According to a recent study, in China 60% of foreign-owned organizations are having a feeling that they are targeted in an unfair manner by the government policies in China. This takes into consideration the aspect of discrimination as well as absence of transparency.
• Intellectual property rights – The scenario of intellectual ownership is uncommon in China and collective ownership regarding ideas is considered being the custom. Therefore, in China counterfeiting is not considered being unethical. Therefore, there is the possibility that the smart-phone organizations in Canada being faced with challenging issues to compete in opposition to fake versions of their own products, when they are trading with China (Frynas 2015).

Geographical Dimension

A strong geographical challenge is the duration it will be taking in respect of the freight for reaching China. On an average, shipping goods from China to New Zealand or vice versa will be taking almost 16 days. This excludes any transit time that is needed as well in both these countries. Therefore, it might be challenging for a smart-phone company towards responding in an appropriate manner to changing aspects regarding demand or shortages in inventory. Moreover, the loading or unloading processes as well as sea transport could be considered perilous in respect of fragile products (Hubbard 2014).

Economic Dimension

The economic disparities within China as well as New Zealand are considerably enormous, but it is essential in analyzing the information for understanding the prospective that exists amongst the two. Firstly, the economic development of China is taking place at a massive pace. According to a report, there has been an increase in the middle class percentage from 4% of urban families in 2000 to more than 68% in 2012. In this regard, it can be stated that, there is a vast quantity of shoppers that are having the awareness regarding quality and are having the power to spend for looking towards global brands. The economic base of both the countries is very much different. China is considered being the largest manufacturer in the world and is majorly focusing on low priced products. This is occurring because of the exceptionally cheap labour, effective transport infrastructure as well as manufacturing abilities of China. There is a huge scope in respect of the smart-phone companies trying to do the sourcing of their products or materials from the Chinese market (Stead 2013).

In conclusion, it can be stated that, there is the requirement for identifying the locations that are offering reduced raw material costs, accessing markets or consumers or other significant decision criteria. There is the requirement for applying CAGE framework for considering certain first-order distances, i.e. physical distance within an organization’s home markets as well as the new global market or cultural differences i.e. the differences amongst home-market as well as global-market consumer preferences. This can be applied for identifying institutional differences, which includes differences relating to political processes as well as within the financial markets. When the distance will be more, it will be considered more challenging in operating in a specific country. The markets that are emerging specifically will be having a greater distinguishing aspect since such countries are lacking majority of the specialized mediators that are making establishment such as financial markets to function.

References

Brown, D.A., Campbell, K.S.W. and Crook, K.A., 2014. The Geological Evolution of Australia & New Zealand: Pergamon International Library of Science, Technology, Engineering and Social Studies. Elsevier.

Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Hubbard, G., Rice, J. and Galvin, P., 2014. Strategic management. Pearson Australia.

Kelsey, J., 2015. Reclaiming the future: New Zealand and the global economy. Bridget Williams Books.

Marsh, I. and Miller, R., 2012. Democratic decline and democratic renewal: political change in Britain, Australia and New Zealand. Cambridge University Press.

Mobile industry in New Zealand. (2014). 1st ed. New Zealand

Morden, T., 2016. Principles of strategic management. Routledge.

Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management. Springer.

Naidu, R., Kookana, R.S., Oliver, D.P., Rogers, S. and McLaughlin, M.J. eds., 2012. Contaminants and the Soil Environment in the Australasia-Pacific Region: Proceedings of the First Australasia-Pacific Conference on Contaminants and Soil Environment in the Australasia-Pacific Region, Held in Adelaide, Australia, 18–23 February 1996. Springer Science & Business Media.

Peng, M.W., 2016. Global business. Cengage learning.

Rothaermel, F.T., 2015. Strategic management. New York, NY: McGraw-Hill.

Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.

Wagner, D.T., Rice, A. and Beresford, A.R., 2013, December. Device analyzer: Understanding smartphone usage. In International Conference on Mobile and Ubiquitous Systems: Computing, Networking, and Services (pp. 195-208). Springer International Publishing.

Zangbar, B., Pandit, V., Rhee, P., Aziz, H., Hashmi, A., Friese, R.S., Weinstein, R. and Joseph, B., 2014. Smartphone surgery: how technology can transform practice. Telemedicine and e-Health, 20(6), pp.590-592.