Smartphones In Mexico

Jun 14, 2019
folder_opencategory: Technology

Introduction

The number of mobile phone users in Mexico grew from fewer than 60 million in 2011 to more than 70 million in 2013. Furthermore, projections predict that the statistics should rise to more than 90 million consumers in 2018 (Statista n.d.). The figures depict an ideal market and a lucrative business opportunity for a mobile phone company. Interestingly, smartphone usage in Mexico (as compared to other Latin American countries) appears to be relatively low. However, a company deliberating on venturing into the market must acknowledge the fact that penetration is at an impressive level. In 2012, smartphone use doubled and expanded to further 50% in 2013 (Statista n.d.). Therefore, speculation postulates that 6.1 million individuals will join the Mexico Smartphone fraternity. The demographics represents a signal of growth in the Mexican smartphone market. Therefore, a smartphone company cannot ignore the potential for success in the country. However, there are central issues that the company should assess before launching their venture. The following essay encompasses a critique envisaging business operations in an emerging market. To that end, the thesis seeks to explore the potential of a smartphone company doing business in Mexico. Thus, the paper will identify and explore key issues that the company will encounter in the target market. Finally, the paper will endeavor to offer expert advice designed to attain smartphone business success in Mexico.

Key Issues

Mexico could actualize an approximate 33.3 million of smartphone users. The figure represents an impressive quarter of the country’s population. Furthermore, 41.2% of the projected 90 million mobile phone users could buy smartphones. By 2016, more than half of all mobile users in Mexico could own a smartphone (GSMA 2014). For a company to tap into this bridling potential, a watertight strategy is a requisite move. The formulation of such an approach would require a thorough assessment of Mexico’s operational risk

(Blunden & Thirlwell 2012). To achieve this, a smartphone firm should assess the country’s political, economic, and social environment.

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Political Environment

Arguably, Mexico is an attractive country for investors. The statistics and subsequent market projections show a country on the verge of smartphone ubiquity. However, there are some risks that may complicate entry, inflate the cost of doing business, and impede profit margins. Core threats emanate from the government’s apparent inability to enforce the rule of law. Rampant violent crime and endemic corruption have a debilitating ripple effect on the industrial sector and business environment (GSMA 2014). Powerful drug cartels reproduce widespread criminal gangs. Furthermore, a lucrative drug market created by Mexico’s geographic position fuels the gangs. Despite accruing significant investment and training from the United States (US), the Mexican police force remains arguably ineffective in battling these gangs. Pervasive bribery, corruption, and extortions decimate political will and the force’s possible triumph. As a result, murder and abductions are not singular events. Mexican cartels and gangs use stolen phones (including smartphones) to demand ransom without being traced. The political environment causes an extremely unsafe operating landscape with little relief from the administration in the event of falling victim to crime. Therefore, as a part of the company’s operative strategy, the business will have to incorporate exhaustive security measures

(Blunden & Thirlwell 2012). This will inevitably elevate operating costs and may reproduce feeble fiscal ratios. Security efforts may not wholly preclude the political risk, which is a noteworthy fact.   

Social Environment

Adults aged18 to 34 form the bulk of Mexico’s core smartphone audience (GSMA 2014). The demographics remains impressionable to the allure of urbanization and technology. Urbanization recreates changes in lifestyles, buying habits, culture, and social classes

(Eyring, Johnson, & Nair 2011). Thus, these factors change consumer behavior and form external social environment. It is an imperative policy to adapt to the society’s social preferences concerning its needs and wants. Mexicans display an intense loyalty to their preferred brands. They are also keen on customer experiences with a preference for promotional prices. Due to being neighbors with the US, the contemporary Mexican is aware of brand names and demands a sound cost-benefit ratio. Therefore, a smartphone company would try to influence social values through marketing, advertising, and targeted public relations strategies (Eyring et al, 2011).

Economic Environment

However, from a purely economic perspective, Mexico appears to be promising. As it relates to business and market risks, it has robust investment openness and dynamic financial sophistication. Additionally, Mexico features a practical, fluid, and streamlined bureaucratic mechanism central to its economic potential. The country offers a substantially vast and liquid economy with a plethora of opportunities for investment in its manufacturing and production sectors. As it relates to the smartphone business, Mexico’s mobile market finds itself plagued by high mobile data rates and device prices (GSMA 2014). Furthermore, urbanization pressures and amplified unemployment rates preclude the smartphone landscape. These fiscal factors generate consumers with low purchasing power. However, a visionary business strategy could reap benefits of a fundamentally untapped market. The business could develop more economical smartphones with requisite technological specifications (GSMA 2014). The years 2013 and 2014 witnessed the advent of new generation smartphones subsequent to the launch of iPhone 5s and Samsung Galaxy S5. Apple and Samsung (some of the competitors) released downgraded versions of these coveted phones. They maintained useful functionality and their brand reputation in an ingenious effort to seize a superior portion of operators.

Competitors

Samsung Mexico, Nokia Mexico, and LG Electronic Mexico are the mobile phone market leaders. Respectively, they have 21%, 19%, and 13% of the market share (GSMA 2014). Apple and AT&T have ventured into the competitive arena. AT&T has recently completed an aggressive 4.4 billion dollar acquisition of Mexican networks Lusacell and Nextel. Their strategy mimics the example set by such leaders as Samsung and iconic Apple (Marek 2015). While it is a valid idea to follow the leaders’ lead, a winning policy would pivot on innovative products and customer-oriented campaigns.

Expert Advice

A smartphone business has an excellent chance at succeeding in the Mexican market. According to Competitive Intelligence Unit (a Mexican analyst firm), Mexico ended the year 2014 with 53.3 million smartphones in service (GSMA 2014). The figure captures 50.7% penetration. Hence, there is an unexploited smartphone penetration gap. In Q2 of 2015, the market experienced an upsurge of smartphone users with a consumer base of 62.5 million operators. 59.8% of the entire mobile landscape is now the forte of smartphones. The figures confirm the speculation that 90 million people could own smartphones by 2018. The demographics surpasses its 2016 target and postulates the infiltration rate as the highest in Latin America (GSMA 2014). Smartphones are increasingly becoming a way of life and the primary medium of internet access, which corresponds to the overall growth of the internet in Mexico.

Infiltration levels appear to dissipate among the topmost earners, leaving room for growth in the low-income consumer purview. Consequently, a business targeting this demographic group would be poised to reap substantial benefits from a market that requires cost-effective devices. LG and Motorola witnessed an increase in their respective market segments of 3.4% and 2.3%, to attain market shares of 14.7% and 11.4% respectively in Q1 2015. They offered entry-level devices with price tags that fell squarely in the range of low-income consumers (GSMA 2014). Samsung, Nokia/Windows phone, and Blackberry lost significant market share percentiles. Blackberry, a market leader until Q3 2013, lost 9.1% of its market share in Q2 2014. In fact, Blackberry has managed to remain relevant due to the obstinate loyalty that Mexicans display to their preferred brands. Customers have passed down Blackberry devices to their next of kin and this has elevated the Blackberry longevity. However, with the entry of innovative products and diminished prices for devices and data services, the firm has consistently lost its consumer base. Thus, it would be a wise venture to learn from the mistakes of other smartphone firms such as Blackberry.

The Mexican mobile market is a dynamic landscape. Its consumers are increasingly online savvy and driven towards high-quality products at an economical price. For a sustained success, a smartphone enterprise needs to realize that the market now hinges on the lower rungs of the socioeconomic ladder

(Eyring et al. 2011). Marketing campaigns fashioned to create trends toward the equilibrium of cost-effective, but inventive products. In addition, campaigns should factor in the fact that Mexicans appreciate customer service and remain undeterred in their loyalty to a brand. The company facing established firms such as Samsung and remarkable LG as competitors must venture into the competitive landscape primed to fight for a share (Eyring et al. 2011). The only way to win would be to incorporate a policy encompassing satisfactory customer relations, low-cost devices and data fees, and innovative services. Therefore, the company could prosper if it follows the articulated plan and pursues the emerging demographic trends.

Moreover, as it relates to expert advice, the first step for molding an efficacious operational plan lies in formulating a risk-management system. The system entails an understanding of qualitative distinctions between risks that the corporation will face. There are internal risks that emanate from the organization. These risks are manageable and prone to elimination. Such risks originate from executives and employees’ unethical, illegal, or inappropriate actions. A company should have a zero-tolerance policy for such risk factors to protect its operational processes

(Kaplan & Mikes 2012). In essence, perils are unacceptable to any establishment in any industry. However, there are risks that a company willingly accepts for producing superior returns on investment. Strategy risks are different from internal risks because a company takes several risks in the pursuit of revenue and profit margins. For instance, BP accepts the risk of drilling numerous miles into the Gulf of Mexico due to the high value of oil and natural gas. Therefore, risks remain accounted for and propel the company to high-reward ventures (Kaplan & Mikes 2012). Concerning a smartphone company venturing into the Mexican market, it will need to absorb amplified costs of security measures. The plan would help the company mitigate existing political environment issues. The Mexican social and monetary landscapes expose an extensive, hardworking, and low-cost labor market. Hence, a smartphone business will have a priceless access to productive workers. Workers will need training. The backdrop of an underperforming education system may impede the training process. However, the Mexican workforce has a robust score on the productivity scale. Furthermore, elevated urbanization and unemployment escalate the accessibility of employers to an ample and cheap labor pool (PWC 2015). Therefore, the training risk is a risk worth taking.

Conclusion

The essay has highlighted the potential of a smartphone company doing business in Mexico. While some risks are apparent, Mexico has shown a resilient infrastructural development and an evolving telecommunication industry. Furthermore, there has been a fecund investment in the industry. In 2012, it amounted to $6.8 million. The cumulative Foreign Direct Investment for the sector from 1999 to 2014 amounted to $131.8 million (PWC 2015). These figures complemented by fiscal projections and proliferation of ubiquitous brands display a thriving market. The smartphone venture will have to acclimatize and adjust to political, social, and economic environments. It will also contend with the presence of competitors in an increasingly lucrative landscape. It will need to carve out its niche while considering cultural influences, social preferences, and consumer norms (PWC 2015). Most of all, however, a smartphone corporation will have to embrace the high risk that is a product of emerging markets. Therefore, its business operations will relate to risk mitigation, marketing, and operational strategy in the pursuit of excellence. Ultimately, the smartphone business in Mexico is too good an opportunity to miss, which is why the company should enter the market of Mexico.

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