Purchasing Behavior on Smartphone CHAPTER 1: RESEARCH OVERVIEW 1.0 Introduction The following chapter provides the background of the research, the statement of the problem, research objectives, research questions, and significance of the study. This will provide a better understanding on smartphone in general view, local view and globally. It will also provide how competitive this industry is, and how it influence people‟s daily lives, especially towards undergraduates which is our target for this research. In the research background, we did our research on the invention of smartphone in general and how it has impacted the society at large. We also did research on purchasing behavior in general. Statement of the problem is related to the research objectives and research questions. This study can be used as reference to smartphone developers as we targeting the undergraduates as our respondents and they are the future main users of smartphone. 1.1 Research Background Smartphone started in year 1992, invented by IBM, which was nicknamed as “Simon”. The features it had was calendar, address book, calculator, email service, and a touch screen. It was very expensive at that time, USD$899, not many can manage to afford it. At the year 1996, Nokia launched a series of smartphone that merged between a cell phone and a PDA. The real actual smartphone that first have all-in-one device is Ericsson, R380. As picture show, the phone is able to be flip open and close, inside is a touch screen, using Symbian operating system. Nokia also started with the first camera phone and Wi-Fi phone, which is called the 9500. Page 1 of 89 Purchasing Behavior on Smartphone Only in 2002, is when the revolution on smartphone really started as Blackberry came into the industry, giving its users email services, as well as the Palm Treo and QWERTY keyboard. Other than blackberry, there is also Ericsson‟s P800 model. These phones had new features added to it, such as MP3, camera and wireless technology that leads to popularity of exchange email. More came in the year 2005, Sony Ericsson came out with the N-Series which targeted business people because of their computing capabilities. In 2007, Steve Job, the previous CEO of Apple came out with the iPhone, which change the idea of smartphone in people‟s mind. Android, which is an open-sources operating system started off by Google, Intel, HTC and a group of other developer in 2008. This is one strong force operating system against IOS as it has become one of the biggest percentage users operating in worldwide in 2012. There are many brands in the smartphone industry, such as Nokia, Samsung, Apple, Sony Ericsson (known as Sony currently), HTC and etc. It is supported by different operating systems. Page 2 of 89 Purchasing Behavior on Smartphone Sources: John Koetsier (2013) According to John Koetsier (2013) in the VentureBeat.com (VB), Android has managed to captured estimated 70 percent in the global smartphone market share, whereas Apple only manage to get about 20 percent in it and the remaining is others. In the articles, it mention that the sales of smartphone has grew 38 percent in the last quarter of 2012, reaching 217 million units worldwide, which put over 700 million, based on a new report from Strategy Analytics. Out of this number, 68.3% smartphone uses Android, as the operating system. iOS only owns about 19.4%, as operating system. Neil Mawston, who is Executive Director, Wireless Device Strategies (WDS), is responsible for delivering analysis, insight and recommendations to mobile operators, handset vendors, component makers, investment banks, PC suppliers, software vendors and media firms worldwide. He is a recognized authority on global cell phone trends. (Anon). He made a statement, “Android is clearly the undisputed volume leader of the smartphone industry at the present time.”(Koetsier, 2013). For the other competitors, is a matter of able to grow more and see Android and IOS as competitors as a learning role. Page 3 of 89 Purchasing Behavior on Smartphone Top Smartphone Operating Systems, Forecast Market Share and CAGR, 2012- 2016 Smartphone OS 2012 Market Share 2016 Market Share CAGR2012-2016 (%) Android 68.3% 63.8% 16.3% iOS 18.8% 19.1% 18.8% BlackBerry OS 4.7% 4.1% 14.6% Window Phone 2.6% 11.4% 71.3% Linux 2.0% 1.5% 10.5% Others 3.6% 0.1% -100.0% Total 100.0% 100.0% 18.3% Sources: Dan Grazino (2012) Based on article by Dan Grazino (2012), in 2012, in the top smartphone operating system, forecasting market share and Compound Annual Growth (CAGR), 2012- 2016, Android is predicted to grow in CAGR 2012-2016 by 16.3%, whereas IOS, grow about 18.8%. The one competitor both of these operating systems should not overlook is, Windows Phone which is expected to grow about 71.3%, taking over the smartphone industry as window has make an impression on the smartphone industry. The research manager with International Data Corporation (IDC) says that “Underpinning the worldwide smartphone market is a constantly shifting mobile operating system landscape”. This indicate, although Android is the leader in the smartphone industry, but there is also an expectation that they will be the biggest target in the industry to gain market share. (DanGrazino, 2012) Smart phone has become a very common item in our daily life, the saying of “Anytime, anywhere and almost everything in the palm of the hand” seems to be a very common theme for the current smart phone users of today. According to Aldridge (2004) regarding smart phone, “They are such a big part of our daily lives Page 4 of 89 Purchasing Behavior on Smartphone that it is highly likely you will have a mobile phone in your pocket right now. If you don't, it's probably because you left it somewhere accidentally”. The mobile phone market has become a highly competitive market in spite of the fact that it is relatively new industry (Haverila, 2011). Though this industry is young, it has impact much on our daily lives now as it has been integrated into the work we do and the lifestyle we have. According to the findings by Harris Interactive (2009), undergraduate students spend 12 hours per day with media and gadget. This has provided the industry more opportunities for profit and market share. As for purchasing behavior, it is known as buying behavior is the decision processes and acts of people involved in buying and using products (Brown, 2008). It also is a complex amalgam of needs and desires, and is influenced by factors such as the consumer‟s societal role (parent, spouse, worker, etc.), social and cultural environment and norms, and aspirations and inhibitions (Businessdictionary). Purchase of Smartphone is increasing in the recent year due to the revolution of Smartphone in 2002. The market trend of Smartphone nowadays, has induced the consumer to purchase Smartphone. The manufacturers are slowly reduces the manufacture of mobile phone in the market therefore it has make the increase number of the purchase of Smartphone. When consumer wants to purchase a new phone, the latest phone in the market is Smartphone, mobile phone is considered as an outdated product. Thus, market trend has influence the purchasing behavior on Smartphone. According to Francesco (2012), there are 50 million people own a mobile phone in Italian market, out of this number, 40 percent of them have a Smartphone. Besides, increase visit of website which generated by Smartphone, users spend 79- 80 min per day in using applications. From the research of AdMob Mobile Metrics report 2010 (as cited in Francesco, 2012), there are 22 percent in 2009 compared to 40 percent in May 2010. Marketers have made the Smartphone as laptop which the phone is not only for voice and text messaging but it is more and more as compute devices. Thus, Page 5 of 89 Purchasing Behavior on Smartphone this has make consumer prefer Smartphone more than mobile phone. The added in new and more features of Smartphone are one of the reasons that influence the consumer purchasing behavior. Smartphone provided features and function that could not find in traditional mobile phone. As an example, the wireless technology and touch screen functions. Consumers‟ frequency used Internet, e-mail and GPS function that provided on Smartphone, wireless network which provide everywhere will increase the purchasing behavior toward Smartphone. For the purchasing behavior of Smartphone in Malaysia, the consumer purchasing behavior is determined by the trend in community, consumer‟s needs software of the Smartphone and cost of plan. According to the article, the trend of Smartphone in community is the main factors to influence consumer in their purchasing behavior. Consumers are looking at the trend in community and make the decision to buy a Smartphone. By looking for the trend in community for making the purchasing decision, it has set their purchasing behavior. Other than that, the needs are another important factor to determine the consumer purchasing behavior. Based on their personal needs, consumers make the decision to purchase the Smartphone. This means when consumers purchase a Smartphone, they will look at whether they purchase it as a need or want. For male‟s purchasing behavior towards Smartphone in Malaysia, it has a higher percentage in emphasizing hardware and software of the Smartphone than female. Males are more focus on the hardware and software provided when buying a Smartphone (Mohd Azam Osman, Abdullah Zawawi Talib, Zainal Abidin Sanusi, Tan, S. Y., Abdullah Sani Alwi). 1.2 Problem Statement As mention, there are many brands and operating system out there for smartphone users.