Market Share v. Profit Share: A false dichotomy

  • Posted: 31 October 2010 01:43 PM

    Aysmco has prepared a very nice chart showing the third quarter?s profitability of eight top phone vendors as a measure of phones sold multiplied by profit per phone. It is a must view.

    http://www.asymco.com/2010/10/31/making-it-up-in-volume-how-to-view-unit-profitability-vs-volume-in-handsets/

         
  • Avatar

    Posted: 31 October 2010 01:59 PM #1

    Very informative.  This should be pretty clear instantly to all.

         
  • Avatar

    Posted: 31 October 2010 02:51 PM #2

    I wonder how long Apple will maintain this huge disparity?  The iPhone pricing has remained consistent throughout it’s life.  It seems the other hardware manufactures are willing to sell many phones at a loss.  What they lose on individual phones they make up for in volume :wink: It baffles me that a phone manufacture would price their hardware so low that they can’t make a profit.  At least Motorola learned that it was a no win situation and have cut their portfolio of phones to concentrate on the most profitable segment.  Apple has wisely chosen to concentrate their effort on the portion of the market where value is more important then lowest price.

         
  • Posted: 31 October 2010 03:03 PM #3

    Tetrachloride - 31 October 2010 04:59 PM

    Very informative.  This should be pretty clear instantly to all.

    Unfortunately this just gives the naysayers the ability to say - “look the sheeple are paying too much for their crap”

    Signature

    .

         
  • Posted: 31 October 2010 03:43 PM #4

    Market analysis must segment between makers of commodity-grade phones and makers of smartphones. Lumping all handsets and handset makers into the mix will lead to unbalanced results. This is not a criticism of Horace’s work. His graph clearly illustrates the divergence in outcomes for manufacturers successfully delivering smartphones to the market and those locked into the commodity-grade segments of a global market.

    It’s solid work. But the global market is too large to lump all handset and handset makers together. Nokia needs to make some tough choices concerning survival and manner in which it must revamp its products (and perhaps the corporate culture) to compete effectively in a fast-changing market.

         
  • Avatar

    Posted: 31 October 2010 06:03 PM #5

    DawnTreader - 31 October 2010 06:43 PM

    Market analysis must segment between makers of commodity-grade phones and makers of smartphones. Lumping all handsets and handset makers into the mix will lead to unbalanced results. This is not a criticism of Horace’s work. His graph clearly illustrates the divergence in outcomes for manufacturers successfully delivering smartphones to the market and those locked into the commodity-grade segments of a global market.

    It’s solid work. But the global market is too large to lump all handset and handset makers together. Nokia needs to make some tough choices concerning survival and manner in which it must revamp its products (and perhaps the corporate culture) to compete effectively in a fast-changing market.

    I guess when all the pundits say Apple will fail in the phone market and then say they only have a tiny market share, they are missing the metric which this graph focuses on. The companies which choose to provide phones to the masses with a profit margin of let’s say 5 per handset, have to worry about the folks trying to build a new business with a razor thin 3 dollar margin.  The problem IMO is there is very little brand loyalty at the low end.  Folks buying the cheapest handset are not paying for a particular brand, they are buying what is available at the cheapest price.  To survive in this pricing environment you need huge scale.  Nokia & Samsung are being hit at the bottom by the likes of ZTE, or Pantech.  Who is Pantech?  I have no idea but it was the cheapest feature phone for a teenager.  Guess what phone they really wanted.  iPhone but I didn’t want another data fee.  Apple realizes they don’t need to play in the low end they will build brand loyalty and be price competitive in the segments which make the most sense and are profitable.

         
  • Avatar

    Posted: 01 November 2010 12:47 AM #6

    rattyuk - 31 October 2010 06:03 PM
    Tetrachloride - 31 October 2010 04:59 PM

    Very informative.  This should be pretty clear instantly to all.

    Unfortunately this just gives the naysayers the ability to say - “look the sheeple are paying too much for their crap”


    Baaaaaaaaah, gimme more. tongue laugh

    Signature

    Adversity does not just build character, it reveals it.