1Introduction 1.1 Why choose the Smartphone industry ?

The convergence of mobile telephony, Internet services, and personal computing devices is resulting in the emergence of a mobile Internet (Ishii 2004; Funk 2001).In the present society, smartphone is the key device that could provide the mobile Internet service as well as some other fundamental functions like the traditional mobile phone s. The main features of the smartphone can be summarized as owning one operating system such as Symbian, SIM, Android and iOSand software along with the keyboard and some others.Nowadays, the functions and usages of the smartphones are increasing gradually. In 2010 smartphones made up almost 20% of that total (Gartner, 2010; Ahonen, 2010). Sales of smartphones are increasing almost 100% per year, and total global sales volume is expected to surpass that of PCs by 2012 (Gartner, 2010). The smartphone industry is undergoing some huge opportunities as well as some fierce competitions among several competitors such as Apple, Blackberry, Nokia and Motorola. 1.2The introduction of this report This report aims to analyze the smartphone industry mainly focus on the Chinese

market.Basicallyfour main competitors in China which are Apple, Blackberry, Nokia and Google will be discussed. In this essay, it will provide both the external and internal factors and use two different tools to identify these elements which are PEST analysis and Porters five forces analysis. Besides these, this report will attempt to predict the near future of the development of the smartphone industry based on the current situation and Chinese market. 2Overview of the Smartphone industry and the four main competitors 2.1 The development of Smartphone industry in China In China, smartphone industry is growing rapidly and an increasing number of customers tend to use smartphone in their daily life. In 2010, Chinese smart phone market has witnessed fundamental changes and now it has 11million users of the smartphone and it has grown 70% in the last year according to the marketing analyst comScore (2010). In terms of brand, there are several brands which are popular in China and they have established their customer loyalty. The brand value for each manufa cture in smartphone industry is vital. Regards the framework of the smartphone industry in China, the most potential one is 3G

smartphone with high competitive power compared with GPS and Music phone. The competition is vigorous among different manufactures with various operating systems. The most popular operating systems which are Symbian, Android, iOS and RIM can be seen in the following diagram They have taken up a large market share in the smartphone market and the smartphone industry in China is largely influenced by the manufactures that adopt the above operating systems.

Figure 1 2.2 Main players in the Chinese smartphone market  Nokia with Symbian System

Nokia, a Finnish mobile phone giant, has become the worlds No.1 ma ker of mobile phones. In terms of the Operating System, the Symbian system is in the leading position in 2010 and the market share of it is 44%. The main features of Nokias smartphone are as following: first, the price is reasonable. For Nokia, its smartphones have various prices for different customers including the high -level and low-level. Next, the network of Nokia is relatively broad because it has been in the Chinese market for years and has established thousands of outlets to sell its phones.  Iphone with iOS system

Iphone is owned by Apple Company which lau nched the new smartphone in 2007 with the system of iOS. Iphone is known for its high quality and simple design which is unique and popular. In the first half year of 2010, it is estimated that there are 570,000 iphone that have

been sold which makes iphone the most pop ular smartphone among Chinese customers. With its special design and high quality, more and more customers are attracted and it holds a large part of the market by having a large fan base.  Motorola with Android system

Motorola is the second biggest market player in Chinese market and its phone adopt the system of Android, launched mainly by Google, which is popular in China. There are more and more supporters.  Blackberry with SIM system

The blackberry is a powerful phone targeted towards business and the sy stem of blackberry is called SIM system. In China, the market share for blackberry is relatively small compared with other competitors but it has drawn large amount of peoples attention with its specialty.  Windows mobile with Windows system

The windows mobile phone is launched by Microsoft and it has been divided into two parts: PPC and smartphone. In China, the phones based on the windows phone systems do not increase very rapidly 2 PEST analysis of the Chinese smartphone market

PEST plays a pivotal role i n analyzing the external factors of the industry. PEST analysis is used to describe the macro environment that affects an industry which stands for Political factor, Economic factor, Social cultural factor and Technological factor. (SvendHollensen, 2006).The following are the PEST analysis of the Chinese smartphone market. Political factor:  The political stability of China attaches great importance for the development of smartphone industry. This stable environment provides a good trading opportunity for the manufactures especially for companies like Nokia, Iphone, Blackberry and Motorola and reduces the risk for them to do business with Chinese. In order to make the smartphone industry run smoothly, the Chinese government puts plenty of efforts in invest igating the illegal smartphones and limits them into market. In 2007, the total sale of illegal phones was 2343 and accounted for 25% of the whole domestic market, which to a certain extent affect the normal market; therefore, the Chinese government is str ongly against this way of doing smartphone business and has made some policies to make sure that the

smartphone industry has run successfully.  After entering into WTO, the tariffs for the importing products is decreasing gradually which is beneficial for t he organization to purchase the raw material and lower the cost, in this case, the organization could have more money to invest into the technological area and do more product research and development. On the other side, this policy would result in more foreign corporations into Chinese market such as Blackberry which has entered into Chinese market recently; consequently, with more suppliers the competition in this field would be boosted. In 2007, the State of Council has passed the planning the revitaliz ation of the culture industry, in which it puts the mobile phone and television industry as the first one to promote in the whole country which is useful for the development of the smartphone industry. In this case, both for the foreign companies and dome stic companies, they could design and put some new phones with some latest programs into market.  In China, there are totally 12 big foreign smartphone suppliers and they take up over 70% of the total sales of the smartphone (Chinese smartphone industry rep ort, 2010). The Chinese government now has made some policies to limit the overproduction problem of the phone industry based on the fact that the smartphone industry has been saturated to some extent. This would kick some manufactures out of the Chinese m arket, but for the suppliers mentioned here , they would be still in the Chinese market for the following reasons. For Nokia and Motorola, they are the most important suppliers in this market and their operating systems which are Symbian and Andriod are ver y acceptable. For Iphone, it has signed some contract with one of the Chinese telecommunications ---China Unicom---which could make sure they have their customers. For Blackberry, it becomes one of the competitors recently and receives a warm welcome from the businessmen in China; therefore, this policy would affect some corporations but not all of them. Economic factor:  Based on the statistics from the National Bureau of Statistics of China, in 2010, the GDP of economic in China has increased 10.3% and the CPI has an increase of 3.3% compared with 2010. Figure 1 is the growth of economy from 2003 to 2007 which proves that Chinas economy undergoes a steady period. With the stable growth of Chinese

economy, people have more disposable money. Under this circumstance, they would spend on the things that they are interested in such as technological products. Based on the research conducted by the phone users in China, the average phone users have at least 4 phones, among which one or two are smartphones

(http://tech.chinawin.net/mobile/article -2167.html).

Figure2: Chinas economic growth

The income and wealth of China are increasing gradually. In China, the new five year planning would have a huge influence on the global economy. Chinese focus would shift from investment in other countries to expand its own market and stimulate the consuming power, in this case, the income have been undergoing an increase especially for the country area and suburb area in China. The average income in the middle cities in Chin a is around 1800 RMB and 2200RMB in some big cities such as Shanghai, Guangzhou . (http://iask.sina.com.cn/b/6043.html ).This income level changes could help the

manufactures to understand the purchasing power of customers which provide a vial opportunity to the industry manufacturers to gain more profit from the enormous potential market.  The interest rate in China is relatively complicated compared with other countries in the world. In 2011, the interest rate has the tendency to decrease which is beneficial for the enhancement of the consumers buying power. Because the instability of the interest rate, consumers would be mentally worried about putting money in the band, therefore, they are willing to spend them. In this case, the smartphone indust ry has more chances to sell the phones to them and with the powerful functions of smartphones; it has drawn an

increasing amount of peoples attention. Social factors:  According to Maslow's hierarchy of needs, there are five needs which are physiological needs, safety needs, needs of love, affection and belongingness and needs for esteem. When one is satisfied by one need, he goes to the next stage.

(http://honolulu.hawaii.edu/intranet/committees/FacDevCom/guidebk/teachtip/maslow.ht m). Therefore, this theory could be adopted when people in China pursue the smartphones when one traditional mobile phone cannot meet their needs and they would like to have a higher-level of using phone which could provide them the functions of helping their work and entertainment. With the development of smartphone with more and more functions such as Nokias N95, Iphone and Blackberrys 9750, consumers would have the need for them based on the Maslows hierarchy of needs theory which explains why smartphone industry develops rapidly. In the present society, mobile phone is not only a communication tool but also be regarded as an entertaining tool.  In China, people concentrate on the effectiveness of purchasing products and emphasis the mental satisfaction that is brought by shopping. After entering into the new century, real estate, telecommunications and its products and automobile have become the highlights of the consumers attention. Smartphone is one important element in telecommunications; therefore, these consumption concepts would be helpful to the development of the smartphone industry. The telecommunications always corporate with the smartphone industry. For example, Iphone in 2009 coordinated with China Unicom in order to promote Iphone and raise consumers awareness.  Apart from the consumption concept, the renewal of the mobile phone especially smartphone is at an accelerated pace and it is faster than Japanese. Based on the research done by sociologists in Peking University, the appearance, functions and changes are the fastest in Asia and once the new phone is seen to the public with refresh appearance and rich functions, it prevails ra pidly in China. Iphone and Nokia C6 are the persuasive examples to prove this. (http://zhidao.baidu.com/question/133171086.html ) On the other hand, Chinese consumers require the smartphone is su pposed to be equipped with some practical functions. To be specifically, the phone could help them

both in working and entertaining.  According to the calculation of the Chinese Academy of Social Sciences (CASS), the middle income class in China accounted f or 15 percent in 1999. It is expected that the middle income community would amount to 40 percent of the whole society by 2020 . Chinas cities can be divided into three Tiers. Tier -1 refers to the cities like Beijing, Shanghai, and Guangzhou, Tianjin, Shen zhen, and Dalian belong to the Tier 2 and Tier-3 cities include Wenzhou and Guilin and so forth. The popularizing rate of these three levels of cities is 28.1%, 14.0% and 10.8% separately in 2002 . In these cities, they would like to pursue a fashion and en joyable life especially for the young generation. Smartphone has become a fashionable thing and offer both joy and leisure to people. Technological factor:  The convergence of communication technologies is the real excitement in IT over recent years. The convergence includes the telephony, television and the internet. The merging of these three make people enable to choose to have only one piece of equipment w ith one network doing all. Therefore, smartphone is researched by plenty of corporations who are willing to follow this trend and increase the profitability of its own. They put large amount of money in researching and developing new smartphones which shal l meet the customers wants and needs. For example, the average money that is required when design and launch a new smartphone is 5 million. In terms of designing and developing a collection of phones, majority of the mobile phone companies would put a lar ge amount of money every year in order to using the latest hi -tech and making the phone smart enough.  In China, manufactures are attempting to make the smartphone smaller and more fashionable as well as using more steady operating systems. They devote ever y effort in putting more added values to the smartphone for instance, accessing to the Internet and being compatible with plenty of software programs. In 2009, Nokia launched the N95 with both trendy appearance and powerful functions which could be compati ble with some websites which were not accessed before. In order to meet the desire of Chinese young people, Iphone designed the Apple QQ which is in accordance with Chinese young generation. Blackberry could send and reply emails freely just like with a la ptop at hand.

All of these bring large amount of revenue and stimulate the manufactures to combine more high technologies with the smartphones.