Will Nokia win in this war of smartphones?

This article is extracted from The Star E-newspaper which was published on 5th of September 2012. This article is talking about the launching of new smartphone by Nokia which will be effect the economy and the smartphone markets.

We know that Nokia currently are making lose because there are many others strong companies appear to gain the market share. Does the new Nokia’s weapon will get back its market from Apple, Samsung and Google? Now I would like to discuss about the demand of the smartphone in the market and its price elasticity.

 The 21^st century is the new era of high technology; smart phone is one of the most important multipurpose communication tools in the world. Every people need a mobile smartphone to communicate, surfing and roaming every day. Nokia Company is one of the largest company which produce variety kind of mobile phone. In the past 7 years, Nokia’s was known as biggest and strongest mobile phone producer in the world, but its performance was not so well and lack of creative in these few years. In addition, many mobile phone producers had launched its latest powerful and multipurpose smartphones to gain the market demands. Because the strength of the competitors is powerful, finally Nokia Company had been driven out of the market in these few years.

Recently, ‘The Star’ newspaper published a new about Nokia Company had launched 2 latest smartphones (lumia 920 and lumia 820) which partner with Microsoft to compete against other smartphone producers especially Apple and Samsung. In order to get back its customers and make Nokia brand become more well-known, Nokia must set its phone prices become more affordable. When the price of the smartphone is high, the quantity of demand will be decreased. In a same time, when the price of the smartphone becomes higher, the quantity of supplied will be increased. When the supply is higher than demand, surplus will be occurred. This is because when Nokia set its price higher than other companies and many people cannot afford to buy an expensive product.

Nowadays, smartphone can also consider as luxury good. This is because the price range of a smartphone will cost at US$600 to US$800. As we know there are not only the Nokia Company produces the smartphones. There are many other big companies produce smartphone also, such as HTC, Samsung, Apple, Blackberry etc. If Nokia Company sets its phone price higher than other companies, the majority of consumers will switch their option to another. The switching of the product’s brand is called substitution effect. In the market, HTC, Apple and Samsung are the substitute for Nokia’s products. When all the Nokia’s consumers change their brand to these brands, the quantity of demand of the Nokia will be decreasing. There’s another factor might causes the quantity demand of Nokia decreased is income effect. When the Nokia’s prices rises continuously without any improvement of new idea and quality, consumers may not be able to afford to buy the Nokia’s products and causes the quantity of demand decreased. The change in demand of Nokia’s products can be influenced by the preferences of the consumers. This is because the Nokia’s products are lacked of new idea and creative. Today, we can know that the majority of consumers choose Apple and Samsung as their preferences because their smartphones’ design is more beautiful and attractive.

Besides this, the operating system they are using is more comfortable and easy. Operating system plays an important role and can be considered as compliment products of smartphones. This is mean by when the operating system is user friendly, there’ll be a lot of people to buy it. For example, Samsung Company provides more than 1 kind of the smartphones to its consumers such as Windows Phone, Android System and others. So, the Nokia will lose a lot of market to the Apple and Samsung. In contrast, the complementary can be used to increase the demand of Nokia’s products. A smartphone is used in conjunction with operating system, when the operating system of the smartphone is more user friendly, the demand of the smartphone will be higher. For example, the majority of the smartphone users feel iPhone operating system (iOS) is the most users friendly to the consumers, so the demand of the iPhone will be higher. Let say, Lumia 920 (the latest smartphone of Nokia) is using windows operating system which is the latest operating system used on a smartphone and it is developed by Microsoft. Everybody will feel the new operating system is unstable. Besides this, the available of applications for this operating system is not much like Android and iOS system. So the consumers will choose the most stable and user friendly of the operating system. Finally, the consumption on Nokia smartphones will be decreased. In the current view, there is only 1 way to increase Nokia’ sale and meet the market equilibrium, there is Nokia must decrease its price. When the price decreases, it’ sale will be increased.

Next, I would like to discuss about the price elasticity of Nokia smartphone. Elasticity means the responsive of the consumers willing to buy the goods. There will be very elasticity on a smartphones. This is because smartphones can be considered as a luxury goods today. If Nokia phone’s price increases 20%, the quantity of demand will be decreased 30%. Thus, the total profit of Nokia Company will be decreased. The most noticeable reason that we can determine is because there are many phone producer in the market. If the Nokia’s smartphones prices is pricing at above equilibrium price, many consumers will switch it to another brand of smartphones. Thus, it’s quantity of demand will be decreased a lot. The region where Nokia distributes its smartphones will also can cause the elasticity. If the incomes of  the country is much more high, the demand of elasticity of that good is much more higher. Besides, in this smartphone war escalates also forces all the smartphone producers to give a best good and services to the consumers. For instance, Nokia’s warranty policy is not easy to the consumers as they need send their phone to the original manufacture and wait for several weeks. Not like iPhone, all its consumers able to change a new device once they found there is a problem against on it within the warranty period. The competitive of the market make it more elasticity than a normal mobile phone. There’s another benefit of this competitive market, it can create equilibrium efficiency. Thus, the price of the smartphones wouldn’t be too high when it achieves equilibrium efficiency.

In a conclude sentence, I would like to give Nokia Company some suggestion. In order to increase its consumers, Nokia must set its price under the equilibrium price without decrease its quality and service. This can be improved Nokia’sales and gaining more reputation. Besides this, the price range which is under the equilibrium price easy to compete with other company. Although the profit is lesser but it can attract many peoples to own it. When Nokia go back its track and become famous brand again, it can set its selling price much higher to gain more profit.