Electronics Industry

Consumer electronics range from televisions and computers to smartphones and tablets, these are purchased for personal use rather than commercial, hence the term consumer. This industry has seen major

growth since the turn of the century, growing to an estimated $211.3 billion in 2014 in the U.S. alone. This large industry has many stakeholders all operating in different and often overlapping consumer segments, product segments, and other business solution segments. For this reason it is very difficult to describe the generic business model for a firm operating in the electronics industry, these firms however generally operate with a linear business model. Most consumer electronics producers follow a take-make-use-dispose model, and with the rate of advancements in technology and electronics, it is not surprising that the average lifecycle of a consumer electronics product is short.

The electronics industry is one that puts heavy importance on intellectual property and patent management. This is often an area for competitive advantage, until competitors develop innovations for a different technological advancement achieving the same purpose. The market is one which incentivises short development times, and fast times to market as a competitive strategy. This means that firms invest heavily into R&D and tend to create innovative iterations on successful products, in turn further shortening the useable life span of their own products. This fast time to market creates heavy investment costs meaning that electronics brands often disregard the EoL of their products, often also overlooking CBM’s due to their costs, and/or difficulty to implement.

The typical business model for a smartphone brand is outlined in figure 11. This shows the linearity of the strategies being employed to create a value proposition and deliver this to consumers. It should be noted that the model is an overview of the generic model being employed, and specifics behind a brands strategy are not included. This overview simpily outlines the product life cycle from raw materials to consumer. Suppliers, channels, retailers, manufacturers, and brands each have independent strategies by which this process is achieved but figure 11 hopes to aid in a firm overview of the linear cycle that can be attributed to most consumer electronics.

It is noticeable that the consumer electronics industry exists of many stakeholder and various types of business model, each positioned to create a value proposition for the firm employing it. In order to create a good comparison between the case study (Project ARA) and a linear business model from the electronics industry, this paper will examine Samsung’s business model canvas for the manufacture and sale of their smart phones. This is a firm that will be in direct competition with other smartphone manufacturers, including the disruptive circular model created by Project ARA. Samsung employs a similar business model to most of the stakeholders who deliver to the smartphone customer segment, therefor making it a comparable base from which to draw conclusions in the disruptiveness of the circular business model being conceived by Project ARA.

8.4.1. Business Model Canvas ‘Samsung Mobile Phones’

The business model canvas being analysed is one that is being successfully employed by Samsung to bring smartphones as a mass market product onto the consumer electronics market. The firm focuses on research and development to create incremental innovations in their products and to efficiently integrate the innovations into new product iterations. It is common for consumer electronics brands to release new product iteration on a yearly and/or bi-yearly basis, often only providing minor advantages over current models. This often incentivises users to purchase new iterations due to older models not being able to keep up with software and graphical updates, this is especially true in the smartphone segments.

The infrastructure employed by Samsung is similar to that of a manufacturing firm. This is due to the consumption of raw materials to manufacture electronics, this is done both in house and as parts from suppliers. Further activities include R&D and intellectual property management, both of which are cost heavy endeavours especially in the ever changing technology sector. Advancements are put into the process of manufacture efficiently through the use of techniques such as SIX SIGMA, statistically ensuring the quality of every product manufactured. Samsung has worked hard to create an infrastructure which easily allows for product iterations, and can incorporate innovations found through R&D into the products they produce.

Samsung’s value proposition consists of bringing the newest technology to the consumer electronics market. This is done while keeping to certain design principles for consumer appeal. By often iterating products Samsung re-enforces its position as a front runner in the technological race, however this marketing strategy increases e-waste and continuously shortens the life cycle of previous products. Samsung has put some effort into creating a green corporate image by including recyclable materials into its product designs, however this is not an innovative strategy and is often done as more of a marketing/publicity stunt to gain favour in the eyes of consumers.

In order to create a positive customer interface environment Samsung has created traditional channels and relationships with consumers. These relationships are often tethered to after sales support and marketing where the firm stands distant from consumers and is rather seen as an impersonal or unapproachable organization. The smartphones that Samsung produces are target at the mass consumer market, often for current users of smartphones as well as users who are new to the industry. This broad, mass market target has created a broad, global customer base making disruption to their business model as major risk for the business.

The financial aspects consist of product sales for a strong revenue stream, and heavy investments for R&D to stay ahead of the competition. This creates a linear system where costs are used to generate value and competitive advantage for the product, and revenues are later gained by the consumer purchasing of the products. This model is often consistent with the wider range of consumer electronics stakeholders. Creating a market place which fills with under-utilized products, mass disposal of older models, and the constant shortening of the lifecycle of products in the market, creating a volatile environment for consumers where choice between brands is become ever limited, and larger corporations are setting trends for smaller businesses which are trying to stay competitive.