As I see it, Nokia's decision to expand in the netbook market is a proof of two things. The first is that the boundaries between the two main product categories (mobile phone and PC) are becoming blurrier by the day. The second is that companies are starting to make their bets on which of the two will end up being the ultra-device.
Let's take a deeper look at this. To help visualize the current market situation, I put together a graph showing the main manufacturers of mobile phones, smartphones, PDAs, netbooks and PCs.
From a categorization point of view, the delimitation between mobile phone, smartphone and PDA (a product that is slowly disappearing) requires breaking these categories down into features and functionalities. The same can be said about the netbook and the PC, or even more, portable computers. The increasing convergence occuring in the mobile industry is providing mobile phones with functionalities bringing it closer and closer to a computer. The mobile industry has been growing substantially, while the PC industry has been flat for some years now.
Perhaps the phone's biggest advantage lies in its constant presence with the user. In today's fast paced environment, ease of reach and quick accessibility can be important factors in deciding which of the two devices is the master. As Anssi Vanjoki, Nokia VP of New Markets puts it: "There is a false thought that the master is the PC and the phone is the slave. The roles are vice versa. The master is the device that is closest to me, and the slave is the one that is used to manage it."
This takes us back to Nokia. They are by far the largest handset manufacturer worldwide. So their bet is obviously on the phone at this point in time. Many people perhaps don't know that Nokia used to produce computers before, but divested the unit in 1991, when they decided to focus entirely on mobile phones.
Looking at the graph I put together, you can see that there are two strategic directions that can be followed. Nokia chose to follow the opposite direction compared to Apple: start from phones and extend into netbooks and ultimately PCs.
Other players that decided to 'put their eggs in several baskets' are Dell and HP. HP followed a similar strategy to that of Apple, by extending from computers to PDAs. However, as previously said, the PDAs have been severely hit by the increasing number of smartphones and HP is currently not reported to launch a smartphone. Not the same can be said about Dell, who has been rumored since the beginning of this year to launch its own smartphone model.
I think these moves show several things: firstly, as already said, these categories are converging at a fast pace, making it easier for companies to extend their core capabilities in new markets. Secondly, PC manufactureres have identified the increasing potential of the mobile phone and the threat it poses to their core market. Thirdly, there is no clear winner in this battle and as a result, the safe bet for the big guys is to invest in both categories.
Ultimately, the question that arises is: which of these two strategies is more inclined to be the successful one? At this point in time, it is perhaps too early to answer it, since there are (still) only few cases of companies entering both categories. What can be said is that Apple has so far done a great job in extending its know-how and capabilities from the PC world into the mobile world and it will be interesting to see if the other way around will generate the same results.
PS. I chose to put Microsoft as a potential entrant in the smartphone market because many expect that its announced Zune HD is the base for a future smartphone. As a second remark, the players portayed in the graph have not been selected based on market share.
I just realized I left out a category out of the graph: the tablet. The rumors regarding Apple's tablet have been swarming in the last couple of weeks, with no official confirmation from the company. The tablet is most similar to netbooks, as a stripped-down version of a PC.
ReplyDeleteWhile reading your post and looking at the image with the product categories, another idea stroke my mind.
ReplyDeleteGiven that it's clear from your explanation that all the big players have/ are rapidly developing the competencies for moving in the adjacent product categories (as in your structure), a new strategy develops:
- The product portfolio structure seems to shift away from the well known product category division a consumer centered solution. In other words, companies will re-segment their consumers according to a set of connectivity, mobility and function dimensions and on this basis will develop new products, which are basically hybrids of the current product categories.
Does it seem plausible in mid term?
Ligia, I actually find your comment very interesting. Companies will definitely have to rethink their segmentation. During my marketing classes, I was introduced to a concept called job-based segmentation, which was basically saying that consumers expect products to perform a certain job. Using such a segmentation obviously increases the market you have to consider and the competitors you have to watch out for.
ReplyDeleteIn this case, the jobs that the phone and the PC are performing are still slightly different, but the differences are narrowing down. We want the phone for mobility and connectivity, while we expect the PC to perform certain more elaborate functions. From this perspective, I think on the long term, the phone is better positioned, because it is already starting to include the functionality features, while it is more difficult to incorporate the same mobility and connectivity in the PC.