Apple and Android in the tablet market: An empirical research

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1. Introduction 
Although tablet computers had already been envisioned by the end of the 
Sixties, as witnessed by Alan Kay’s 1972 research paper, it is not until 
January 2010, when Steve Jobs unveiled the iPad, that they achieved 
mass market commercial feasibility. Since 2010 numerous other players 
have entered the market and tried to challenge Apple’s dominance. As of 
winter 2011 only Android, the operating system created by Google and 
licensed to a multitude of original equipment manufacturers (OEMs), was 
the only real alternative to Apple in this iPad-dominated market. 
As of November 2011 the publicly available research on this market 
mostly considers this market as composed by a single segment with 
homogeneous needs and preferences. The lack of a segmentation study is 
the compelling reason for this project, whose main research questions 
have been defined as:  
1 – What are the characteristics of tablet consumers? 
2 – How are Android and Apple positioned in the market?  
3 – What are the main segments in the tablet market? 
4 – How are Android and Apple perceived by the different segments? 
This work focuses on Apple and Android tablets not as stand-alone 
products but as high-tech platforms, which have been defined by Gawer & 
Cusumano as “evolving systems made of interdependent pieces that can 
each be innovated upon” (2002). In this paper a platform means the 
ecosystem characterized by the use of a specific operating system and 
composed by physical devices, applications, accessories and services 
provided either by a manufacturer itself or by third parties.  
It is important to consider Apple and Android tablets as platforms because 
of the nature of the industry itself, indeed, customers tend to first choose 
one of the ecosystems and then select a specific product within the chosen
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ecosystem. This is especially true in the case of the Android ecosystem, 
where there are multiple OEMs of devices sharing the same operating 
systems and applications. Apple on the other hand has a more closed 
platform where it is the only producer of devices, but it still relies on third 
parties to develop applications and accessories that make its products 
more valuable.  
This paper is structured in five parts; the first chapter contains a review of 
the relevant literature and an industry analysis of the tablet market based 
on current researches and news articles. The second chapter explains the 
methodology used in the research and the main insights gained from the 
preliminary in-depth interviews. The third part focuses on the analysis of 
the data collected through the survey and will answer the research 
questions. The fourth part contains the managerial implications of this 
research and recommendations for companies wanting to enter in or 
already operating in this market. The fifth and last part proposes the 
limitations of the research, the conclusions and the recommendations for 
further research.
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2. Industry analysis 
As mentioned before, the tablet market came into existence in January 
2010 with the launch of the Apple iPad. Since then this sector has been 
growing dramatically fast, as a matter of fact, Gartner estimated that 63.6 
million devices would be sold in 2011, which means an increase of 
261.4% when compared with the 17.6 million sold in 2010 (Ybañez, 
2011). Other estimates point out how more tablets have been sold in the 
fourth quarter of 2011 alone (more than 23.6 million devices) than in the 
whole 2010 (Rusconi, 2012). If we integrate these figures with Gartner’s 
forecasts of 326 million tablets sold in 2015 (Ybañez, 2011) and we relate 
them to the New Product Adoption Model, we can infer the current 
position of the tablet market on the adoption curve. The New Product 
Adoption Model was first introduced by Rogers in 1962 and later modified 
by Mahajan, Muller and Srivastava, on the basis of the Bass diffusion 
model (1969), in their 1990 research paper to account for non-normal 
distribution curves. Chart 1 shows a representation of the model by 
Mahajan et al., while the red lines and writings are the estimated 
representation of the tablet market development from 2010 onwards. 
 
 
    2010       2011         2012         Future... 
Chart 1 - Adopter Categories and the Tablet Market Development
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In the chart above it is possible to visualize the evolution of the tablet 
market based on this theory and on the sales data and forecasts. We can 
assume that 2010 has been the year of the Innovators, that in 2011 the 
Early Adopters entered the market and that in 2012 the Early Majority will 
start entering the market. This hypothesized evolution is also confirmed 
by industry trends as the arrival of Windows 8 tablets on the market in 
2012 and the launch of many low-cost tablets (Mello, 2012) that will 
attract many new customers to the market. However, the rapidity of this 
tremendous growth has been sort of unexpected, even for Apple, the 
market leader. In fact, in the spring of 2011 Apple itself was finding it 
difficult to scale up its manufacturing operations fast enough to satisfy 
customer demand (Daily Mail Reporter, 2011).  
In 2010 Deloitte was forecasting the size of the tablet market to reach 2 
billion dollars in 2012 (Beaumont, 2010). This estimates have long 
become obsolete, the most recent researches point to a market value for 
2012 ranging from the $31.86 billion estimated by Visiongain (2012) to 
the $35 billion proposed by JP Morgan (Sutherland, 2011). Longer term 
forecasts oscillate even more widely, from an estimate of a value of 49 
billion in 2015 (Kucera, 2011) to the over $120 billion forecasts for 2016 
conjectured by Informa Telecoms & Media (Terrelonge, 2012). Although 
estimates and forecasts regarding the tablet market have proven to be 
quite unreliable in the past two years they still indicate the presence of a 
huge opportunity to be seized by technology companies. Also, the value of 
the tablet market does not reside only in the hardware side; 
complementary markets are becoming significantly important as well. For 
example, the applications market has quickly reached the size of several 
billion dollars. The download of applications, for both tablets and 
smartphones, from Apple’s App Store grossed about $4.9 billion as of 
January 2012, while in the same period the Android Marketplace earned 
about $330 million. However, from a volume perspective the two stores 
have more similar performances, with Apple at 18 billion downloads and
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Android still at only 10 billion, but quickly catching up with an extra billion 
downloads per month (Sahajwani, 2012). The difference in gross revenues 
is mainly due to the tendency of high quality developers to launch their 
apps on Apple first, because of its higher profitability, and only if the apps 
become successful roll them onto other platforms. This is caused by the 
higher presence of free apps on the Android store that reduce the interest 
that can be generated by paid ones (Sahajwani, 2012). Users are less 
likely to pay a fee for an application when they can try many free ones 
first, thus one of the main advantages of Android from the customers’ 
perspective turns into a great disadvantage for developers. Developers 
will then cancel or delay the release of their apps on this system and this 
will affect the quantity and quality of the applications available on the 
platform. 
2.1. Porter’s Five Forces 
The following paragraphs will present an analysis of the tablet industry 
based on the Five Forces framework proposed by Michael Porter in 1979. 
This framework has been chosen because of its comprehensive approach 
to the analysis of the several forces shaping the nature of an industry. It 
also allows the scholar to broaden his perspective and to focus on the 
underlying structure of an industry more than on the visible attributes and 
trends (Porter, 1996). 
Another important aspect is that this framework is very flexible and allows 
for multilevel analysis, in fact in some cases the same force has been 
studied at both the platform level and the product level. In other 
instances, different considerations have been made based on the time 
horizon considered, whether short or long term. 
2.1.1. Buyer Power: Low 
The tablet market started out as a consumer market and individual 
consumers still represent the lion share of sales, moreover, the different
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platforms are strongly differentiated through several complementors 
available in each one (mostly accessories, applications and services) and 
the branding of the different producers. Within the single platform the 
complementors tend to overlap and consumers mostly make decisions 
based on the balance of specific product features and price.  
Moreover, tablets tend to be purchased not because they are needed on a 
utilitarian basis, but to satisfy higher level needs, such as status seeking 
and entertainment. They are considered as more luxurious and exclusive 
than other consumer electronics (Massoud, 2011), thus consumers tend to 
be less price-sensitive when purchasing them.  
However, even though the bulk of tablet sales is in the consumer market, 
more and more businesses are joining in and buying tablets for their 
employees. A survey conducted by ChangeWave on 1641 corporate IT 
buyers in November 2010 was showing how 7% of the respondents was 
already providing tablets to their employees and another 14% was 
planning to purchase them during the first Quarter 2011 (Carton, 2010).. 
Even stronger the data published by Morgan Stanley in February 2011 on 
Fortune 100 companies (Huberty et al., 2011), showing 80% of these 
firms already using or piloting the use of the devices. Also, corporate 
buyers are showing little loyalty to their usual IT suppliers and have clear 
in mind which devices they want to buy, as identified in the ChangeWave 
survey, where 78% of the buyers were planning to buy from Apple, which 
usually is not the most common supplier for corporate clients (Carton, 
2010). 
Therefore this industry presents all the characteristics of a typical 
consumer market, with a fragmented majority of small buyers and fewer 
bigger ones. As it is typical for this kind of markets, the bargaining power 
of buyers tends to be relatively low.
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2.1.2. Supplier Power: Medium-High 
Tablet manufacturers rely on several suppliers to source all the different 
components they need, such as: screens, CPUs, batteries, memories and 
so on. Each of these sectors would need an ad-hoc analysis, but it is 
possible to identify some common patterns. Because of the recent 
development of the tablet market there are few suppliers that have been 
able to develop the necessary know-how and are equipped with the 
production capacity to supply the main players. Therefore, the industries 
in which the suppliers are competing tend to be quite concentrated. 
Evidence of this concentration can be found in the numerous supply chain 
disruptions happened in 2011 due to an earthquake in Japan and to floods 
in Thailand that incapacitated some leading suppliers of components 
(Yang, 2011). Another factor adding pressure from the suppliers is the 
presence of some supply constraints on some components that are shared 
with smartphones. This is due to the rapid growth of both industries and 
the impossibility for the suppliers to scale up rapidly enough to smoothly 
support both industries (Huberty et al., 2011). This aspect is partially 
balanced by the fact that, when designing new products, manufacturers 
can opt for different designs or technologies, thus, at least in theory, 
increasing their switching capabilities among suppliers. However, 
economic and technological constraints often impose severe limitations on 
the designs available to manufacturers, thus limiting their switching 
capabilities. 
Because of the above-mentioned reasons, it is possible to say that the 
supplier power is quite high. 
2.1.3. Threat of Substitutes: Medium-Low 
Tablets can be substituted by both smartphones and computers, especially 
laptops and netbooks. However, since these two product categories were 
already present in the market when tablets were launched, they are more 
in the situation of being substituted then of substituting. In fact, tablets