With the invention of phones, our lives have been changing drastically. Now there are 5.3 billion cell-phone users and 90% of the world’s population is covered by a commercial wireless signal (Aylward, 2011). 82% of the United States population owns a smartphone (Deloitte, 2017). Consumers are now not only using their phones to communicate but also to make payments, keep track of their schedules, meet new people, book tickets, listen to music and do much more… The mobile phone industry is a massive industry that has branches nearly all over the world. The global market is currently dominated by huge multinational companies such as Apple, Samsung, Nokia and Huawei(Badenhausen, 2017). This paper will examine the external environment of the mobile phone industry in the United States by using a PESTEL analysis. PESTEL is a framework that helps analyse the external factors that are affecting the industry. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal. The mindset behind PESTEL is that the enterprise should be reflective to the external changes and in order to be reflective, enterprises need to be aware of the external environment (Gupta, 2013).
Political
One of the biggest issues mobile phone companies face in United States is the federal corporate tax rate. The corporate tax rate in United States is one of highest in the world. The current rate is 35%, and jumps to 39.2% when state rates are considered(IDA Ireland, 2017). This factor pushes companies to move their headquarters or their production base to other countries like Ireland, where the corporate tax rate is (12.5%) a lot lower when compared to the US (IDA Ireland, 2017). Big mobile phone companies like Apple and Samsung produce components of their phones in China because it is more profitable for the company due to the low labour costs and cheap production prices. If the company successfully manages to produce in China, they can save approximately between 30% and 50% (Evans, 2014). Besides tax regulations, current politics also affect the industry. The president of the United States, Donald Trump is blaming China of “taking advantage of US”. He said that the trades between China and US are “very unfair and one-sided.”(BBC, 2016). According to Guardian, Trump is planning to create new global trade agreements between China and US for the benefit of American economy(Phillips, 2017). This argument amongst the politicians create political instability for the future trades between United States and China. Current regulations that allow companies to trade may be in danger of a possible change. This creates an uncertain environment for mobile phone companies which outsource to China.
Economic
The mobile phone industry is one of the most globalised industries in the world. Apple, the biggest phone company in the United States, operates in many countries such as Ireland and they also outsource to China (Business Insider UK, 2012). There are lot reasons why mobile companies outsource in China. As elaborated above, one of them is the cheap labour costs. The minimum hourly wage in the United States is $7.25 (Dorfman, 2014) and it is $3.60 in China (Worstall, 2017). This huge difference between the hourly wages attracts United States-based companies to manufacture in China. However, outsourcing has its disadvantages. Outsourcing may cause loss of managerial control and lack of communication, because outsourcing occurs off-site. The time zone differences may also have adverse effects on general communications and coordination.
Social
One of the social factors that affects the mobile phone sales in United States is the concept of brand image. A positive brand image builds a certain credibility and equity. It also creates recognition- with iPhone’s unique design features, this recognition is bound with aesthetics(Timothy, 2016). Brand image is a major asset for Apple and this is open to interpretation but one of the ways they keep their brand image may be by keeping the R&D department in California in order to maintain the ‘Californian’ style/image in their products. In 2017, addiction is not only limited to substance abuse. There is a new type of addiction called the behavioural addiction. Within the wide array of behavioural addictions, smartphone addiction has secured its place over the last decade. This new addiction is caused by rapid developments in the media and IT (Kwon, 2013). The social networking websites that can be accessed via smartphones which allows its user to create a profile, interact with real-life friends, and meet other people is one of the main causes and implications of smartphone addiction. The networks can create a certain dependence on mobile phones after constant usage(Kuss, 2011). These social networking websites include Facebook, Instagram and Twitter. The stimulating and visual content that can be found on these social networks are rather egocentric and image-focused than allocentric. This materialist and self-centering environment may cause increased materialism, mild depression and feeling of loneliness(O’Keeffe, 2011).
Technological
Everyday, mobile phone users come across with technological innovations. Now, mobile trends are one of the highly effecting factors of mobile phone industry. Major mobile phone companies strive to be innovative and up to date with new technologies and trends in order to attract customers. Smartphones now come with their own unique social networking, messaging apps, as well as other softwares and services which makes it easier to communicate with people who has the same brand smartphone. This incentivise people to buy the same brand as their close circle, friends or family. For example, Apple has ‘Facetime’ and ‘iMessage’ and Blackberry has ‘BBM’. These services provide free, efficient and easy way to communicate. ‘Cloud computing’, also known as ‘Cloud’, is an online data storage service that works on a pay-for-use basis. This service allows its customer to store his data online and does not require its customer to have space in his device. This online storing method is a convenient way to store data and information because the data is securely stored and can be accessed from other devices. iCloud and Google OneDrive are fine examples of cloud computing. Companies should be investing in technologies like cloud, because according to the Business Insider UK, approximately 90% of global internet users are already on the cloud, and that number will remain steady as internet usage spreads globally(Danova, 2014). Another growing trend is digital wallets. Now thanks to this innovation smartphones can be used to make in-store payments. This innovation makes it possible to make payments without carrying cash or credit card. You simply use your Touch ID and present your mobile phone to the swipe machine. Samsung, Android and Apple has their own version of this technology. This new trend is really convenient and easy to use. The American financial services corporation Visa inc. states that Apple pay is a simple and secure way to make payments. This trend has become such a phenomenon that now over 1 million merchants accept Apple Pay. This trends are highly followed by smartphone users and the companies should be investing in new mobile trends.
Environmental
Mobile phones pose a serious threat to humans’ health and the environment. Components of mobile phones are being made out of toxic materials such as mercury, nickel and zinc (Williams, 2010). Mercury for example, is a natural element that is found in air, water and soil. Specifically, batteries in mobile phones consist Mercury. Even small amounts of exposure to mercury may cause serious health problems(WHO, 2017). According to the World Health Organisation, Mercury is considered as one of the top ten chemicals of major public health concern. Upgrading mobile phones frequently can result in high exposure of mercury to the environment. Organisations such as CleanUp motivates people to think twice before they upgrade their mobile phones to protect and save the environment. This kind of eco-friendly organisations may decrease the smartphone sales.
Legal
3Monday, 18 December 20177Mobile phones’ industry has a lot of issues regarding to data confidentiality, there has been a lot of arguments whether the information and data in smart phones are being kept confidential or not. Mobile phones in them: email addresses, personal photos, financial information, calendar appointments and most importantly smartphones can continually track locations of its user. Outsourcing can have adverse effects on data confidentiality because outsourcing means sharing proprietary company data and knowledge such as formulas, drawings as well as customer information. It can be beneficial if companies that outsource take precautions before signing a legal contract with the manufacturer company regarding to the data confidentiality. Mobile phone industry is highly affected by legal aspect regarding to the health issues. Mobile phone users are exposed to radiation, and radiation has been proven to have carcinogenic effects which means that it has potential to cause tumour development and cancer (Lönn, 2005). When we look at this from a broader prospective this makes the problem a public health issue. However, United States government does not fully provide health regulations on this matter. According to the laws, the American Food and Drug Administration does not review the safety of radiation-emitting consumer products such as cell phones and similar wireless devices before they can be sold, as it does with new drugs or medical devices (U.S. Food and Drug Administration, 2014).
In conclusion mobile phone industry in United States is a massive, and innovative industry that rapidly changes. The industry is dominated by major companies like Apple and this factor can make it harder for small smart-ups to become a competitive brand in the industry. When compared to other countries the average wages and the tax rates are really high in US, that is one of the reasons why companies are choosing to operate and outsource in different parts of the globe. The ongoing political arguments between China and US and creates instability to the future trades. If the government creates new policies on trades between China and US, it may not be profitable option anymore to outsource to China. It can be a good precaution if the companies start searching on different options rather than outsourcing in China such as producing in US or different countries. R&D is a really important department in mobile industry. Companies may choose to invest in R&D related improvements such as new mobile trends as mentioned before in order to make more sales and attract new customers. Companies which takes the data confidentiality seriously and improves its security, can earn the trust of its customers and increase its sales. However, data confidentiality and R&D improvements are not the only affecting factors. The unique and aesthetic design of the mobile phones also affect the sales and the popularity, high investments on R&D is needed in order to stay relevant to the market. Mobile phone industry is highly affected by external factors. However, technology and politics are the most affecting ones.