1. What position does Apple hold in the smart phone industry? What competitive strategy is Apple using?
2. Why is Apple virtually giving away this platform to third-party applications developers? Wouldn’t it be more profitable for Apple to generate more revenue from its App Store?

Apple is the leader in MP3 players and wants to lead in the mobile smart phone segment, too. In 2008, only one in every 200 mobile phone users in the United States owned an iPhone, but the recent introduction of the iPhone 3G is likely to change that. Unlike other phone applications, Apple opened up its heralded App Store, where iPhone owners can find thousands of applications developed by third parties for their phones—everything from ring tones to games to accounting software and global positioning applications. Many of them are free because they display ads that produce revenues for developers. So far, Apple is not taking a cut of the ad revenues, and developers keep 70 percent of the money that they take in from paid for consumer applications. This is a higher percentage than developers get from other applications markets in the cell phone industry. As a result, iPhone applications can be priced cheaper than similar applications for rivals BlackBerry and Windows Mobile smart phones. And these competitors offer fewer applications on their Web sites than Apple does. Within a month of the iPhone 3G’s release, more than 500 applications were available from Apple’s App Store. An estimated 20 million applications will be downloaded by the end of 2008, followed by 110 million in 2009 and another 210 million in 2010.