Mobile Applications Industry - COnnecting REpositories · PDF file Spring term of 2013 Mobile...

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Transcript of Mobile Applications Industry - COnnecting REpositories · PDF file Spring term of 2013 Mobile...

  • School of Economics and Management

    Department of Business Administration

    FEKN90

    Business Administration-

    Degree Project Master of Science in Business and Economics

    Spring term of 2013

    Mobile Applications Industry

    - Industry Dynamics and Business Models

    Authors:

    Martina Fredholm

    Martin Gunnarsson

    Mentors:

    Fredrik Häglund

    Magnus Johansson

  • 1

    Foreword

    For 20 weeks we have been working on this Master Thesis in Business Strategy at Lund

    University, School of Economics and Management.

    This master thesis is part of a project initiated by Vision Mobile, through CEO Andreas

    Constantinou, in cooperation with Lund University School of Economics and Management.

    Five groups have been studying the area of “profit migration in telecom.” The intention is to

    generate five separate master theses that together cover the whole value chain of the telecom

    industry. These findings will eventually be published as a book where each thesis covers one

    part of the value chain. The value chain is divided into five different parts; Network operators,

    Infrastructure providers, Handset OEMs, Applications, Developer Business to Business

    Ecosystem. Our thesis is devoted to the Applications Industry.

    We are grateful for the valuable guidance and support from many people around us. Andreas

    Constantinou has been very helpful in contributing with in-depth industry expertise. Our

    mentors Fredrik Häglund and Magnus Johansson have been of great support during this time,

    providing valuable insights and guidance in the writing process.

    Lund, May 2013

    Martina Fredholm Martin Gunnarsson

  • 2

    Abstract

    Title: Mobile Applications Industry – Industry Dynamics and Business Models

    Submitting date: 15/07/2013

    Course: Master Thesis in Business Administration, MSc in Business Strategy

    Authors: Martina Fredholm and Martin Gunnarsson

    Advisor: Fredrik Häglund and Magnus Johansson

    Key words: mobile application, business models, platforms, ecosystem, network effects

    Purpose: The purpose of this thesis is two-folded:

     To break down and explain the growth and development of the mobile applications

    industry.

     To find out if the success of an application can be explained by a connection between:

    1. Business model and application sector affiliation and; 2. Business model and

    geographic market targeted

    Methodology: We have performed an exploratory case study covering different application

    business models depicting the relationship between the highest grossing applications. To

    understand the dynamics and development of the industry we have used different theories

    which we also have based our framework on. In order to conduct a well reinforced analysis

    we have collected empirical material and secondary data.

    Theoretical perspectives: Business models, Disruptive innovation, Network effects,

    Ecosystems, Platforms

  • 3

    Conclusion We have found that there are a connection between high grossing applications and

    business models. The “Free in-app” business model is the most common business model over

    all sectors and geographic markets. However, business models associated with high grossing

    applications do differ depending on application sector affiliation. We also found that,

    although to a lesser extent, that business models for high grossing applications differ

    depending on geographic market targeted. Nevertheless, why certain business models are

    more successful for certain geographic markets needs to be studied further.

  • 4

    Table of Contents

    1.0 Introduction ....................................................................................................................................... 6

    1.1 Background ................................................................................................................................... 6

    1.2 Problem Discussion ....................................................................................................................... 9

    1.3 Problem Definition ...................................................................................................................... 10

    1.4 Purpose ........................................................................................................................................ 10

    1.5 Research Question ....................................................................................................................... 10

    1.6 Delimitations ............................................................................................................................... 10

    2.0 Method ............................................................................................................................................ 12

    2.1 Starting Point ............................................................................................................................... 12

    2.2 Overall Approach ........................................................................................................................ 12

    2.3 Research Method ......................................................................................................................... 12

    2.3.1 Case Study ............................................................................................................................ 14

    2.3.2 Semi-Structured Interviews .................................................................................................. 15

    2.4 Data Collection ............................................................................................................................ 15

    2.4.1 Primary Data ......................................................................................................................... 15

    2.4.2 Secondary Data ..................................................................................................................... 15

    2.5 Validity and Reliability ............................................................................................................... 16

    2.6 Critique ........................................................................................................................................ 17

    3.0 Theory ............................................................................................................................................. 19

    3.1 Business Models .......................................................................................................................... 19

    3.1.1 Value Creation .......................................................................................................................... 19

    3.1.1.1 Exposure to Advertisements .............................................................................................. 21

    3.1.1.2 Multi-Price Strategy .......................................................................................................... 22

    3.1.1.3 Product Life Cycle Theory ................................................................................................ 22

    3.1.2 Value Capture ........................................................................................................................... 23

    3.1.2.1 Pricing ............................................................................................................................... 23

    3.1.2.2 Monetization ...................................................................................................................... 24

    3.2 Disruptive Innovation .................................................................................................................. 25

    3.3 Value Migration .......................................................................................................................... 25

    3.4 Business Ecosystems ................................................................................................................... 27

    3.5 Platforms ..................................................................................................................................... 28

    3.6 Network Effects ........................................................................................................................... 30

    3.7 Two-Sided Networks ................................................................................................................... 30

  • 5

    3.8 Theoretical Framework ............................................................................................................... 31

    4.0 Empirics........................................................................................................................................... 34

    4.1 Introduction Applications Industry.............................................................................................. 34

    4.2 Smart Devices.............................................................................................................................. 34