Battle of the Form Factors: Tablets vs. Ultrabooks

A glance at the headlines over the past several weeks makes clear the battle of computing form factors continues to rage. HP announced it will sell or spin off its PC division, including its struggling TouchPad. Meanwhile, in India, Lakshmi Access Communications announced the launch of a new US$99 tablet computer. The tablet, which runs Google's Android OS and connects to the Internet using both Wi-Fi and 3G networks, comes only a few weeks after Bharti Airtel and Reliance Communications launched tablets to compete with Apple's iPad and Samsung's Galaxy Tab. In the United States, Intel said it would invest US$300 million in companies that develop new technologies for Ultrabooks, a class of thin and light laptops, signaling that the company believes there is still a market for the notebook form factor.


These announcements recall the debut of OLPC's ultra-low-cost XO laptop several years ago and the subsequent netbook craze. The netbook category, which took off and then promptly fizzled, was a response to demand for low-cost computing devices that were lighter, consumed less power and accessed most functions and content via the Internet. Yet its demise illustrated that fickle consumer preferences and technological convergence, especially coupled with the rise of mobile networks, can cause a category to stall just as quickly as it rose. Companies, like Intel, may be hoping that snazzy devices combining the best features of the tablet, smartphone and laptop form factors might help drive demand for devices packing its higher-margin processors. This is especially true in emerging markets where consumers may own just one or two devices and demanding more functionality from each device. 


While it may be impossible to predict device trends with any accuracy (few foresaw the tablet boom), it is fair to say that only categories that address both a deep consumer need and align with market characteristics will have staying power. Purchasing power, evolving tastes and ICT infrastructure will continue to drive consumer decisions in both developed countries and emerging markets. A differentiated device strategy that caters to local market characteristics and needs can help multinational firms capitalize on convergence trends in diverse markets.

Undercut on the Low End: Rethinking Strategy in the Mobile Handset Market

The huge and rapidly growing Indian mobile handset market once seemed like a boon to developed-country manufacturers, but lately it is starting to cause them some sleepless nights.  Formerly the dominant player with over 70% of the market, Nokia has seen its share slide to 31.5%.  Samsung, meanwhile, recently lost the number-two spot to the relatively unknown Chinese brand G'Five, which now holds a 10.6% share to Samsung's 8.2%.  Although Nokia and Samsung still make up the largest share of the market, fierce competition from domestic and Chinese companies is quickly changing the market landscape.  Last year alone the number of Indian domestic handset manufacturers grew from five to 28. These companies have learned that they can score by addressing rapidly changing consumer preferences, such as longer battery life and feature-rich phones with low price points.

The shake up in the Indian handset market points to the challenges Western companies are having in maintaining a strong presence in emerging markets as new players offer value products in the low- and mid-markets with rock-bottom prices and novel features.  While not alone in struggling in the Indian market, Nokia stands out because it is being squeezed on the low and high ends, and in both emerging and developed markets.  In the global smartphone market, rising competition from such large players as Apple, Research in Motion, and Motorola has eaten away at Nokia's market share.  Commentators note that Nokia's market share loss is due in part to an insufficient focus on consumer needs and the emphasis consumers place on style and design, which rings similar to what is driving its loss in the Indian market - a lack of understanding the demand the Indian consumer has for cheaper, feature-rich products.  The fierce competition in markets such as India means that companies like Nokia need to find a way to stand out in the crowd, as they risk losing their competitive edge in low-cost device markets to homegrown emerging-market players.

One potential strategy is for multinational companies to move into solutions that require more than just the ability to manufacture cheaply, such as offering ancillary or end-to-end services that bind consumers and business customers more tightly to certain brands.  Nokia is pursuing this path with its Ovi suite of mobile services, with some success so far. Focusing on offerings that go beyond hardware can help shield companies from competition in low-end device categories by increasing customer loyalty and providing a new revenue stream.  Learning how to do this requires an understanding of evolving local preferences and trends, but it can help companies hold their own as competition intensifies.

Addressing the Value of WiMax to Emerging Market Consumers

Late last week, Motorola announced an agreement with Vietnam Data Communications to launch WiMax testing in Vietnam later this year. This announcement came just days after Ericsson spoke publicly about their refusal to put their weight behind WiMax, claiming it lacks a business model. While Ericsson continues to remain focused on cellular broadband, building upon existing infrastructure instead of transferring over capabilities to WiMax, others like Motorola and Intel believe that WiMax is a cost-efficient way to boost broadband adoption in developing countries. Motorola, Intel, Samsung, and others are clear about their interest in this emerging technology. Yet, widespread WiMax adoption in developing countries is not guaranteed.

Investors bear the risk that governments may choose not to support WiMax in their spectrum allocation policies favoring homegrown technologies. In addition to spectrum policy issues, WiMax success or failure rests on its true addressable market and its value proposition against available options in developing countries. Once established as a viable technology, the addressable market for WiMax will depend on customers’ eagerness to have and ability to afford broadband access and devices. With price-sensitive consumers, the value (or net utility) of broadband has to be carefully weighed, and recent studies show that, for new users, access to high-speed connections is not necessarily a priority.

The opportunity for corporations banking on WiMax is to focus on the value proposition of the technology in this market. The technology alone will not automatically induce adoption. Essential to WiMax success are service offerings, devices and go-to-market plans that maximize the net utility offered by the technology to the price-sensitive customers of emerging economies. This can be done, in part, through the introduction of services and applications via strategic relationships. Key partnership areas will include financial institutions to facilitate electronic payments and remittances, health professionals for delivering and collecting health-related information, and advertisers who are willing to supplement WiMax service costs in return for access to these new markets. With a great value proposition for the customer and reliable market data about where to focus their efforts, MNCs will be better equipped to benefit from the potential of the WiMax market.

Also in the news:

• Cisco shows link between economic development and broadband penetration
• Laptop industry eyes emerging markets
• MNC business execs know little about business in emerging markets