The distribution of value in the mobile phone supply chain

Jason Dedrick, Kenneth L. Kraemer, Greg Linden

Research output: Contribution to journalArticle

43 Scopus citations

Abstract

The supply chains of the mobile phone industry span national and firm boundaries. To analyze how value is distributed among the participants, a framework based on theories of firm strategy is applied, and a novel methodology is used to measure value capture in three phone models introduced from 2004 to 2008. The research shows that carriers capture the greatest value (in terms of gross profit) from each handset, followed closely by handset makers, with suppliers a distant third. However, the situation is reversed in terms of operating profit. Carriers shoulder the burden of network installation, maintenance, and upgrading, which absorbs much of the value from their subscription fees. Handset maker nationality, which may also influence supplier choice, is a key determinant of the geographic distribution of value capture. The results are also used to estimate the relationship of handset subsidies to carrier profits, which has been an issue of concern for antitrust authorities in several countries. The analysis shows how the framework can be used to calculate how much service charges might be inflated to cover the subsidies.

Original languageEnglish (US)
Pages (from-to)505-521
Number of pages17
JournalTelecommunications Policy
Volume35
Issue number6
DOIs
StatePublished - Jul 2011

Keywords

  • Balance of power
  • Financial value capture
  • Mobile phone industry
  • Phone subsidies
  • Supply chain
  • Value of innovation

ASJC Scopus subject areas

  • Human Factors and Ergonomics
  • Information Systems
  • Electrical and Electronic Engineering

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