How Google Plans to Win the Tablet Market With the Nexus 7

Google's (NASDAQ: GOOGL  ) latest attempt to win the tablet market is called Nexus 7, an Android device that is now less than half the price of Apple's (NASDAQ: AAPL  ) iPad Mini Retina. The light device features the world's sharpest 7-inch tablet screen and has amazing technical specifications, which include a quad-score Qualcomm Snapdragon processor.

Because the fast-growing tablet market is expected to make up to 50% of the PC market next year, Google's attempts to capture market share could help to improve its top line significantly. However, market competition is quite fierce, with Apple focusing on the high-end segment, and players such as Lenovo (NASDAQOTH: LNVGY  ) and Samsung fighting for the low-end segment. In this competitive context, will the Nexus 7 allow Google to capture market share?


Source: Google

The Google strategy
Google has developed a high-end device in terms of tech specs that it is selling for low-end prices. For example, the Nexus 7 has higher resolution and brightness than the iPad Mini Retina. And although the iPad mini Retina's A7 dual-core processor is superior to Google's Nexus 7 Snapdragon processor, both tablets are snappy and quick in their own ways.

By not only closing the tech gap, but also charging less than half the price of Apple's star tablet, Google could eventually position itself as a best-selling tablet manufacturer. 

What this means for Apple
As Quartz contributor Christopher Mims notes, after the Nexus 7 release, it became more evident that Apple is basically asking consumers to pay 100% markup for a device that isn't all that different from the competition.

The reality is that the tablet space has reached a point where the differences between devices don't matter that much. In this commodified space, Apple may need to adopt a more aggressive pricing strategy to protect market share.

As a luxury brand, Apple can only sell its products to the high-end segment. This strategy may pay off in the smartphone space, where the size of the high end segment is still large. As a result, Apple enjoys high margins in the smartphone world, despite controlling only 40.6% of the U.S. smartphone market, and 14% of the global smartphone market.

However, because the tablet space is far more commodified -- Mims calls tablets 'the televisions of the mobile world' -- charging a premium for its iPads may not be a good idea.

Lenovo is a hard-to-beat competitor
The world's biggest PC vendor, Lenovo, is also interested in becoming the world's biggest tablets vendor. This year, the company's combined sales of smartphones and tablets surpassed PCs for the first time ever. Its tablet unit shipments are growing more than three times year over year.

Lenovo is using the know-how and cash accumulated from selling PCs to build top-quality tablets, which it sells at very low price points. Notice that, unlike Google, Lenovo offers not only Android tablets, but also Windows tablets. The company's Windows-based ThinkPad tablets are business-centric devices, offering an all-day PC experience. These devices specifically target customers who are already accustomed to a Windows experience.

Final Foolish takeaway
With 323 pixels packed into every inch, Google's Nexus 7 is a great device in terms of tech specs. Considering the Nexus 7 is now less than half the price of Apple's iPad Mini Retina, and that the tablet world is highly commodified, Google could capture significant market share with this device. 

This device also shows investors that nowadays the tech gap between Apple's tablets and competitors is minimal. Apple has become a luxury brand, which is fine in the smartphone world, but could become an issue in the tablets market. In this context, Lenovo's aggressive pricing strategy, and the company's separate approach to business customers, could pay off.

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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 24, 2013, at 2:21 AM, Hefslaugh wrote:

    The Apple ecosystem of apps and products that just plain work is so far superior to what google has to offer that it renders this article a joke. Those that appreciate this, buy it; those that don't, (or can't afford the quality) buy whatever is cheapest. Those that buy mainly on price are not the customer a quality driven company wants to pursue. Apple will continue to bring in the lion's share of PROFITS in smartphones and tablets.

  • Report this Comment On December 26, 2013, at 1:18 PM, symbolset wrote:

    The Nexus 7 is exceptional value for money and a darned nice 7" tablet. The pure Android experience is awesome. I can't wait to see what they come up with this year.

  • Report this Comment On December 28, 2013, at 4:02 AM, emilykulish wrote:

    Google's Nexus 7 and Nexus 10 are not cheap at all. Now 8" Windows 8 tablets are available. Dell's Venue Pro 8" is selling for only $249. It has a lot of advantages over Android tablets.

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