It ensures product quality, planning and capacity control. There are a number of advantages to this strategy. In fact, OV source every one of their mobile phones from their own factories. Unlike Xiaomi or Apple, OV built up their manufacturing capability from the outset. Then let’s move on to their manufacturing. This helps OV overcome their smaller supplier penetration compared with the global volumes of the competition. The support from high quality global suppliers not only helps OV to implement their product strategy but also secures delivery support for OV during the peak season, when component shortages are common with competitors. It’s well known in supplier circles, for example, that OV will pay for suppliers’ dinner and offer free accommodation to technical staff sent from suppliers.

OV have worked hard on cultivating fruitful and respectful relationships with suppliers including Sony for cameras, Samsung for displays and Qualcomm for processors. In this market, it would seem, the business model really matters. Because of a shortage of processors and DRAM, Xiaomi suffered a shipment shortage of 8 million units and its market share plunged. The fully outsourced model meant Xiaomi had less bargaining power than its competitors. This resulted in a shortage of key components and fierce competition among brands to obtain them. In 2016, the Chinese mobile market was booming, and every player was seeking to expand production to meet growing demand. However, the strategy later proved to be a huge drawback. It sold its products exclusively online and offered extremely competitive prices. Samsung’s market share shrank to just one third of that of the new market leader OPPO.Īnd what happened to Xiaomi, briefly the market leader? Well, its business model was built around outsourcing most of its value chain and managing only retail, customer experience and brand image.

OV took first and third positions in 2016, pushing Apple to fourth place. Just one year later, OPPO and VIVO (together known as OV), two unfamiliar Chinese brands that had nevertheless been cultivating the market for years, overturned the ranking again. By the end of that year, they had pushed Apple into third position and squeezed Samsung out of the top five. Then in 2015, two Chinese brands, Xiaomi and Huawei, crashed on to the scene and changed the story. In the early stages of this market’s development, after the launch of the iPhone in 2007, Apple and Samsung dominated. As recently as last year, newcomers were still muscling in and snatching market share from under the noses of more well known, established brands. However, the size of this market didn't offer much protection to market leaders. The Chinese market accounted for a third of worldwide smartphone sales in 2016, with about half a billion units sold.

One mobile market