The evolution of the smartphone markets Essay Example | Topics and Well Written Essays - 1500 words

The evolution of the smartphone markets - Essay Example This paper aims to discuss the evolution of Smartphone markets with reference to the model of monopolistic competition as it deals with the differentiated products. On the other hand discussion will cover the theory of network externalities because different Smartphone companies are offering entirely different operating platforms. More specifically the paper will discuss questions pertaining to the current competition in the Smartphone market and its potential to evolve in future. How Smartphone manufacturing firms will be competing over the time, what would be their business strategies, which of the firms are expected to rule the Smartphone market and how firms will generate profits in the long run? Markets of differentiated products are primarily dominated by competition over simple features and functions. However, over the time the nature of competition transforms and hence the competitors have to advance the operating platforms so as to gain competitive edge (Barrows, 2009:110). In broader terms it can be said that the evolution of Smartphone markets underwent two phases, for instance, the competition started with variations in the physical features and then it led to the significant changes in operating systems. Thus it is important to analyze this subject with respect to the above mentioned questions. In order to do this secondary data sources are used including books, journals and websites. Initially the type of market for which Smartphones are manufactured is specified. This is followed by the critical analysis with the help of economic models. The Monopolistic Competition Model It basically defines the first stage of the evolution of Smartphone market. It refers to particular economic setting where companies manufacture similar products with slight variations (Barrows, 2009:110). For instance, Smartphones are differentiated on the basis of functions, features, color, design etc. however, their fundamental purpose is to connect people and smooth the com munication channels. Hence in this way the consumers are given an advantage of using the comparable products with some differences (Himmelsbach, 2013:3). One of the factors influencing monopolistic competition is elasticity which actually plays a major role in the overall evolution of Smartphone market. The demand cross price elasticity of two unrelated products is either zero or near to zero, for example, the increase in demand of water will have no impact over the demand of shoes. But when the nature of products is differentiated then the cross price elasticity has significantly positive results (Barrows, 2009:110). For example, the demand of Android phones impact the demand of iOS Smartphones. This can be further substantiated on the basis of the fact that differentiated products can be used as substituted and therefore the demand of one product directly influences the demand of its close substitute. The Theory of Network Externalitie