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Monopolistic Competition of Smart Phones Research Paper

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Updated: Jun 2nd, 2019

The number of smart phones devices in the world is set to hit four hundred million by next year. If this is achieved, the rate of growth for this industry will be about twenty per cent. This makes the smart phone industry one of the most lucrative industries today.

Recently, a landmark ruling on a case concerning major smart phone industry players raised concerns about the future of this industry. In the ruling, giant phone manufacturer Apple was granted the rights to some strategic patents. In the flurry of the responses that followed, there was concern whether the smart phone market was becoming monopolistic.

The main competition in the smart phone market mostly concerns the device’s operating system (Kenney and Pon 240). Previously, Microsoft had held the biggest market share of operating systems. This changed when the iPhone was introduced to the market.

It is then that the demand for the Windows Mobile operating system began to decline. The popularity of the Android operating system started to change the direction this industry was taking. This meant Google had entered the competitive smart phone market. Android was also favored by Microsoft’s previous customers like Dell and Motorola.

The rise in demand for Android operating systems has been fast and unprecedented. Statistics indicate that four of the leading smart phone manufacturers will start using Android in the near future. It was indicated that while the number of devices using Android was on the rise, the number of those using Microsoft’s system was on the decline.

This was one of the earliest indicators that the market was becoming monopolistic. The reason for this disparity was mainly the fact that while Google’s product was a free to use open source operating system, all Microsoft products came at a fee. The Android operating system could also be customized by hardware manufacturers.

After Android’s entry into the smart phone market, the stage was therefore set for major competition between these three major players. However, there was the issue of patents. There is a silent partnership between Apple and Microsoft. It is also in the interest of both companies to eliminate Google from the market. This is because Google’s business system goes against that of these companies.

Google does not make money by selling software, instead it gives away its software and depends on advertising revenue. This business model poses a potential threat to the other competitors. This is because it is harder to compete against a free product.

This rise in competition led to Apple improving its new iPhone products to unrivalled proportions (West and Mace 290). The present situation is that Apple has managed to turn around this competition and emerge at the top. The demand for Android products is on the decline while iPhone products are practically flying off the shelves. This year’s Apple end of year results were more than impressive.

What was more impressive was the fact that the company’s iPhone sales accounted for more than 50% of the total smart phones sold in the United States. This would have seemed unlikely just a few years ago. It is also the latest indicator that competition in this market could be turning monopolistic. It is also said that Apple is in the process of becoming a trillion dollar company in the near future.

However while all the above facts point towards a budding Apple monopoly, it is its recent court case against its competitors that has sent the strongest message yet. During this court case, Apple had gone to court seeking to remove competing products from the market. This action was in opposition to that of negotiating favorable licensing terms with the involved companies.

The argument about Apple being a monopoly is supported by the fact that Samsung, the defendant in this lawsuit had not refused to pay licensing fees. Analysts have argued that this lawsuit was not motivated by monetary gains but the need to create a monopoly in the market. By targeting Google’s major partners, Apple can be able to decapitate its main competitor.

While Apple is in possession of major patents in the smart phone industry, Google possesses only the recent acquired Motorola patents. Apple’s gentleman’s agreement with Microsoft also plays a major role in this monopoly plot. It is also in Microsoft’s best interest to have Google’s market share reduced.

The fact that Google is not in possession of major patents it can horse trade with its fellow manufacturers makes the company a weak market leader.

In an indication that Apple and Microsoft were determined to weaken Google, the two companies ensured Google could not purchase strategic patents that were recently being sold by Nortel (Chia 343). This was a clear indication that the competition in the smart phone market was becoming monopolistic.

The stakes are high in the smart phone market. All the companies are determined to cash in on the boom being witnessed in this industry. This has prompted some companies to apply monopolistic tendencies to this competition. This monopoly is not limited to one particular company. All stakeholders seem determined to make sure they end up with the whole market share and nothing less.

Works Cited

Chia, Thomas. “PATENT LAW: Fighting the Smartphone Patent War with RAND- Encumbered Patents.” Berkeley Tech. LJ 27.1 (2012): 209-981. Print.

Kenney, Martin, and Bryan Pon. “Structuring the smartphone industry: Is the mobile internet OS platform the key?.” Journal of Industry, Competition and Trade 11.3 (2011): 239-261. Print.

West, Joel, and Michael Mace. “Browsing as the killer app: Explaining the rapid success of Apple’s iPhone.” Telecommunications Policy 34.5 (2010): 270-286. Print.

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