Explaining Apple’s iPhone Success in the Mobile Phone Industry: The Creation of a New Market Space

Abstract

Creating a new market space means redefining market boundaries to make competition irrelevant. Apple with its iPhone was able to redefine market boundaries mainly in two ways. First, it was able to look across substitute industries: the smartphone industry, the portable music industry, and the Internet communication device industry—three product categories that shared similar functionalities. Apple was the first handset vendor to perfectly integrate the core functions of these three product categories into a single device. Second, Apple looked across complementary product and service offerings by relying on a platform mounted on its other devices that brought together a broad ecosystem of app developers for its iPhone. This chapter discusses tools smartphone vendors can use to redefine market boundaries and examines the case of Apple’s iPhone.