Device manufacturers and mindboggling moves in emerging markets
Movements of major tech players are exciting and device manufacturers continue to wow the world with stunning new tech in the smartphone arena. But right alongside this, sometimes decisions are made that make us stop and wonder – what on earth’s going on?
The most recent news on the grape vine is that Microsoft and Nokia are essentially going to be winding down their efforts to innovate in emerging markets. This comes on the back of an all singing and dancing launch of the X2, a handset that promised so much for emerging market users. Then, no sooner had the device been announced, we hear that this will be the last phone to be released from the X-series, a range that was designed specifically to cater for this parts of the world.
So why is this flabbergasting? Mobile commentators Fitch recently stated that developed markets' smartphone profitability will decline, as market saturation and the lower incremental benefits of new models has lengthened the replacement cycle and slowed growth. They also rightly said that competition has intensified as more manufacturers have been able to produce devices which exceed most consumers' design and technical requirements. A focus on Windows Phones certainly positions Microsoft amongst the other big smartphone OS players in the western world, instead of developing a cutting edge service for emerging markets.
In the meantime, their response to emerging markets is to launch a backward £15 phone that will run the Series 30+ operating system – pushing tired technology in the developing world.
The West is saturated with manufacturers, where consumers are spoilt for choice but typically hold allegiance to a brand of choice. So surely the business opportunity for manufacturers to innovate and tap into a billion new customers lies in emerging markets? Consumers here are crying out for a tech giant to create innovative mobile solutions that better reflect their wants and needs – instead of those of the western world.
Mobile is an incredibly important device in emerging markets, where consumers are less concerned about a multi-screen world and instead want all services and content run through one phone. It therefore makes sense that consumers are calling for more inventive ways for content to be dissemintated to them over their mobile.
But that said, the existing smartphone world has not been set up to cater for emerging markets. Once consumers have reached the App Store, rich with thousands of applications, they need banking facilities to access the content. This is a big stumbling block given the low penetration of financial services (credit and debit cards) in regions such as sub-Saharan Africa. Data from the Worldbank shows that the US has a penetration of 72% whereas Nigeria has 19% and Ghana only 11%.
So for people that don't have credit or debit cards, it’s not possible to readily access content through the ‘App Store’ model that has become so prevalent in the West. An opportunity instead lies with mobile manufacturers to work with mobile network operators to open the door to a new world of content. Our data shows that MNOs are more trusted than third parties in developing regions and are best placed to offer content and services which do not require credit or debit cards - as part of their existing post- or pre-paid agreements with customers.
Whatever the approach, there is a great opportunity for a tech giant to crack the emerging markets with a completely new model that better reflects these visions. As the leading players scrabble to secure incremental growth in emerging markets, it will be interesting to see who seizes the initiative on a much more exciting proposition - captivating consumers in emerging markets on their terms by innovating way they access mobile content and services.
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