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The distribution of value in the mobile phone supply chain

Author

Listed:
  • Dedrick, Jason
  • Kraemer, Kenneth L.
  • Linden, Greg

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.

Suggested Citation

  • Dedrick, Jason & Kraemer, Kenneth L. & Linden, Greg, 2011. "The distribution of value in the mobile phone supply chain," Telecommunications Policy, Elsevier, vol. 35(6), pages 505-521, July.
  • Handle: RePEc:eee:telpol:v:35:y:2011:i:6:p:505-521
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    Cited by:

    1. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2016. "Channel coordination through subsidy contract design in the mobile phone industry," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 97-104.
    2. repec:eee:respol:v:47:y:2018:i:8:p:1367-1387 is not listed on IDEAS
    3. Flores-Roux, Ernesto M., 2013. "Mobile broadband: the urgent need for speedier roll-out," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37063.
    4. Barrantes, Roxana & Jordán, Valeria & Rojas, Fernando, 2013. "The shifting digital paradigm in Latin America," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37059.
    5. Covadonga Gijón Tascón & Teresa Garín-Muñoz, & Teodosio Pérez-Amaral, 2012. "Satisfaction and protection of individual mobile telecommunications consumers," Documentos de Trabajo del ICAE 2012-21, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    6. Petr Pavlínek & Jan Ženka, 2016. "Value creation and value capture in the automotive industry: Empirical evidence from Czechia," Environment and Planning A, , vol. 48(5), pages 937-959, May.
    7. Katz, Raúl L., 2013. "Broadband, digitization and development," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37062.
    8. Colciago, Andrea & Etro, Federico, 2013. "Cloud computing, structural change and job creation in SMEs," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37064.
    9. León, Omar de, 2013. "Regional and international connectivity," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37061.
    10. repec:wip:report:2017:944 is not listed on IDEAS
    11. Bustillo, René, 2013. "The advance of cloud computing," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37068.
    12. -, 2013. "Broadband in Latin America: Beyond Connectivity," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 120 edited by Eclac.
    13. Katz, Raúl L. & Galperin, Hernán, 2013. "The demand gap: drivers and public policies," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37060.
    14. Galperin, Hernán & Mariscal Avilés, Judith & Viecens, María Fernanda, 2013. "National broadband plans," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37065.
    15. Ganuza, Juan José & Viecens, María Fernanda, 2013. "The challenge of over-the-top content and services," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37069.
    16. Joonkoo Lee & Gary Gereffi, 2013. "The co-evolution of concentration in mobile phone global value chains and its impact on social upgrading in developing countries," Global Development Institute Working Paper Series ctg-2013-25, GDI, The University of Manchester.
    17. Bustillo, René, 2013. "Net neutrality: debate and policies," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37067.
    18. Choi, Daewon, 2013. "Broadband and industrial policy: the Korean experience..," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37066.
    19. Chen, Xu & Wang, Xiaojun, 2015. "Free or bundled: Channel selection decisions under different power structures," Omega, Elsevier, vol. 53(C), pages 11-20.

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