Mobile Phones in UK

Mobile Phones in the United Kingdom

Dissertation Writing Help in Mobile Phones in UK

Headlines

·         Sales of mobile phones grew by 6.1% in volume terms to reach 19.4 million units in 2008, and by 0.6% in value terms to reach £1.0 billion.

·         Unit prices fell more sharply than usual, from £56.84 to £53.90.

·         Nokia remains the market leader, with a 25.0% market share in 2007, although this was down slightly on the level of the previous year.

·         Sales of newer and more sophisticated phones with better design and technology – such as the iPhone – will drive growth in this sector during the forecast period.

·         While volume sales are forecast to grow at a CAGR of 4.1% over the period 2008–2013, growth in value sales will remain much flatter, at an average of just 0.2%.

Trends

·         According to Ofcom, 84% of homes now have a mobile phone, up from 81% last year.  While it is encouraging that growth in their volume sales has continued, it can be seen that the UK is fast approaching saturation point in this sector, so it is not surprising that this growth has been so flat in value terms.

·         Replacement cycles were previously fairly short for mobile phones, but this is now likely to change with the onset of the recession as people hold on to their phones to save money. Changing phones was previously seen to be important among some social groups as a way of keeping up with technology and establishing a social identity. Other consumers suggest, however, that the hassle of changing phones prevents them from doing so until it is absolutely necessary.

·         Mobile phone technology is developing apace in many different areas, ranging from the implementation of 3G and even 4G technology, the use of Bluetooth, the integration of other media formats, such as music, video and the Internet, and the never-ending race to make the lightest, smallest phone possible.

·         According to Ofcom, 17% of consumers use a 3G phone (about the same as last year), 4% of adults use their mobile phones to watch video content, 17% use them for audio content, and 20% use them for Internet access. These figures all indicate the increasing convergence across all sectors of the consumer electronics market and the important role of mobile phones in the evolution of that market, and they are all forecast to increase.

·         The monthly subscription business model currently dominates the mobile phone sector and accounted for nearly 58.5% of total sales by volume in 2008. This share is declining, however, with an increasing number of consumers opting for the pay-as-you-go model. These customers, who have not signed contacts with network operators, accounted for 37.5% of the market in 2008.

·         The 3G market is also growing rapidly and is forecast to constitute over 50% of mobile phone sales in 2009. In 2008, 3G phones were drawing almost level with 2G models, with 49.6% of the market as against 50.4%.

·         With the launch of the iPhone, the mobile phone market took an even bigger step onto the terrain traditionally occupied by other consumer electronics products. The iPhone combined multimedia capability – i.e. audio and video – with wi-fi connectivity and a mobile phone with Internet access, as well as a personal organiser, thus providing a device that is as close as possible to a hand-held laptop. In 2008, Apple upgraded the iPhone with the launch of its 3G iPhone. This is far quicker and has a larger memory and greater processing capacity, but it also includes GPS, thus encroaching on the in-car electronics sector as well.

·         Mobile phones have been available across all retail channels for some time, so there has been little movement in distribution shares, where for example hypermarkets already have a surprisingly high share (23.0% in 2008). The only significant movement is a rise in Internet retail sales, in line with the general trend across the consumer electronics market. In the case of mobile phones, there has been a proliferation of third-party sellers in recent years, who broker far cheaper deals for consumers than those offered by the phone companies themselves. With disposable income falling, deals of this type have also become more attractive.

Competitive Landscape

·         Nokia remains the market leader with a market share of 25.0% in 2007, down from 25.2% in the previous year.

·         Sharp, LG and private label sales saw the biggest percentage increases in market share, with respective gains of 0.3, 0.2 and 0.2 percentage points. For the most part, however, this market remains relatively stable.

·         Apple’s arrival in this market in 2007 will clearly have made a difference to the market shares in 2008, but for the time being this is not recorded in this report.

·         The moderate decline in Nokia’s market share is in no way indicative of any general failing on its part. It remains the global leader in mobile phones and its 25.0% share of the market in 2007 remained considerably higher than Sony, in second place, with 20.2%. Whereas Sony’s phones have in the past been aimed at more technologically savvy consumers, Nokia has traded on providing the all-round phone of reliability and choice, covering all parts of the market.

·         In the last year, Sony’s edge in innovation has helped it to chip away at the difference between its market share and Nokia’s, but this is likely to change in the immediate future as budget considerations help the more mainstream Nokia to consolidate its market position.

·         New product development in the sector has focused on introducing and improving features such as video, camera, mp3 and Internet connectivity. Smart phones and multiple-megapixel camera phones have contributed strongly to the growth in sales of mobile phones.

Prospects

·         Volume sales are forecast to continue growing, at a CAGR of 4.1% over the period 2008–2013.

·         Factoring in the forecast continued fall in unit prices, the average growth in market value is expected to stagnate at roughly 0.25% over the period 2008–2013. This clearly reflects a combination of market saturation and the lengthening of replacement cycles, as well as the deepening economic crisis.

·         In the past, mobile phones have been sold on the basis of their novelty value, functionality and convenience. Increasingly, however, with so many of the population now possessing mobile phones, the only room for distinction and innovation in the market is in design, portability or technology, and it is now harder to impress consumers in these respects. The race to make the smallest possible phone will continue at one end of the market, as will the race to make phones with better-quality audio, video, camera and Internet functions and better integration across platforms.

·         The imminent arrival of 4G technology will also play a role. Although this has been talked about for a while, the actual launch of 4G in the mainstream marketplace, in high street retailers, still appears to be a long way off, especially now that all the multinationals have to reconsider their business strategies in light of a global decline in growth. In the longer term, 4G technology cannot be expected to resuscitate growth in sales of mobile phones to the levels achieved as recently as 2003. Market saturation ensures that this sector’s best days for growth are behind it.

·         As in all sectors of consumer electronics, prices will continue to fall at both ends of the market, as suppliers strive to attract more customers and as manufacturing costs decline.

·         3G phones are poised to take over as the majority product from 2G phones from 2009 onwards. Smart phones are also gaining in growth and are expected to constitute about 20% of all sales by 2011.

·         Major players such as Nokia, Sony, Samsung and Motorola will need to continue introducing new, innovative features and stylish designs to capture consumers’ attention. Product reliability and customer loyalty are also important factors in this sector.

·         Google has also just entered the market with the very recent announcement of the T-Mobile G1, which is equipped with Google’s Android software. For most consumers, this is important as a rival to such products as the iPhone, but it is also interesting as Android is open source software. This is one example of where technology is heading in the future. Unfortunately, this release is too recent for any figures or feedback from it to be available as yet.

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