Mobile Phone Industry and Its Value Chain

Mobile Phone Industry And Its Value Chain

Professor Alina M. Chircu

GR 606D.1DA.

Bentley University

By Pyi Thein Kyaw

February 13th, 2015

Abstract

Managing and designing the value creation of a company in the mobile industry is extremely challenging. Due to its rapidly evolving technology of mobile industry, short product lifecycles, globally linked suppliers and distributors, combined with frequent spike in global demand for new mobile products created the problems to manage supply chains. Simultaneously, the mobile phone industry’s market is increasingly segmented, and the demand for the specialized phones skyrocketed.

Due to the highly competitive nature of the industry, mobile phone companies are forced to cut down the price of the newly developed phones. Therefore, complexity of highly connected network of original equipment manufacturers (OEMs), suppliers, facilities and distribution channels has increased. This complexity also challenges the supply chain industry to accommodate the quick change in demands and preferences of consumers. Thus, efficiency and flexibility of supply chain are the only possible alternative to stay competitive, and meet the demand of the market.

In the following essay, two mobile phone companies will be presented along with their value chain, their suppliers, and distribution networks, and how they create value to meet the opportunities and challenges in the mobile phone industry.  

Blackberry

Blackberry was once the world leader in Smartphone and a pioneer in mobile industry that established by 23 year old University of Waterloo’s student Mike Lazaridis on 1984. The company used to has loyal customers that will wait years to witness the new range of mobile phones. However, Blackberry, itself, has gone from world leader to the bottom of the mobile phone industry. Blackberry’s case highlights the important of product life cycle as well as importance in the management of supply chain.  

Blackberry does R&D in Waterloo, Canada and outsources the production to different facilities around the world. By having five major suppliers for its production, Blackberry can lower production cost, investment cost and instead focus on the functionality of the new products which are the main driving force for customers.[pic 1]

Exhibit 1: Blackberry’s Value Chain (RIM Annual Report, 2007), (Carr, 2011)

Exhibit 2: Blackberry’s Torch 9800 value creation and teardown estimates which is US$171.05 (iHS Technology, 2010) [pic 2]

Lenovo

Lenovo’s parent corporation, Legend Holdings, was founded in 1984 in Beijing, China with the intention to sell PC to the Chinese consumers. As the company grew to be the largest PC Company in China, Lenovo acquired PC Division of IBM and Motorola Mobility from Google. Lenovo has two corporate headquarters, one in Beijing, China and another in North Carolina, US (Lenovo, 2013). Since its Motorola Mobility acquisition, Lenovo has gained rich patents on mobile technology as it propels the quality of the Lenovo’s new mobile products in future.

The company has its own in-house production facilities around the world from China to Brazil, to Mexico and the US. The advantage of having in-house production facilities in the US reduce the production cost as the smaller US workers can perform different functionalities compared to Chinese workers who are only trained to perform one. Over time, onshore production also reduces the transportation cost to the US. [pic 3]

Exhibit 3: Lenovo’s Value Chain (Lenovo, 2013)

[pic 4]

Exhibit 4:Lenovo’s Moto X teardown estimates which is US$213.65 (Electronics360, 2013)