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How the Smartphone has Impacted Economic Development

5 Min Read

The evolution of the smartphone saw communication equipment that was designed for business use quickly transform into smaller and smaller consumer devices. The BlackBerry was the desired phone for busy executives, and then in 2007 Apple introduced the first iPhone. These phones, and the many apps that soon followed, changed the way we communicate, do business, entertain ourselves, socially interact with others, and learn.

Technology has long been a driver of economic development throughout the world, but it is only recently that mobile technology – and smartphones in particular – have been significant economic factors. One reason is that much of the manufacturing of the phones themselves is performed overseas.

According to a major report conducted by GSMA, the mobile economy contributed an estimated $2.4 trillion to the international economy in 2013, representing about 3.6% of global gross domestic product. This number includes more than 10 million jobs created, and contributed at least $336 billion to public funding in the United States alone. Not only that, but the size of the mobile economy is growing at an aggressive pace, with estimates that it could contribute as much as 5.1% to global GDP by 2020.

How Smartphones Relate to the Mobile Economy

One of the clearest indications that smartphones are an integral part of the mobile economy, and the economy at large, is the fact that so many people now have them. According to the Pew Research Center, an estimated 64% of adults in the United States own a smartphone, while 90% of American adults own a cell phone of some kind. As smartphones continue to drop in price and increase in functionality, that 64% will inevitably increase.

Globally, smartphone penetration has almost doubled in the past five years. In 2010, it was estimated that about 20% of the global population used smartphones, while by 2014 that number was estimated at 37%. If we look as far back as 2008 – which is the first full year that Apple’s iPhone was available (and is widely regarded to herald the start of the modern smartphone era) – that number has more than tripled, from about 12% in 2008 to the 37% we see in 2014.

Economic Impact of Smartphones and Apps

There are numerous business articles that conclude smartphones have contributed to economic globalization and growth as they’ve been adopted at arguably unprecedented rates. The following are a few ways in which smartphones have contributed to economic development around the world.

  • Dramatically Increase in the Ability to Communicate and Collaborate

There is no question that the ability to communicate with others from anywhere in the world has contributed significantly to economic growth. However, it has also helped companies save money on expenses that are simply no longer necessary. For example, mobile-compatible conferencing software, such as Citrix’s GoToMeeting, allows smartphone users to share both voice and data from worksites or any other mobile location. This reduces delays and substantially decreases the need for executives to physically travel to locations around the world.

  • Creation of a Brand-New “App Economy”

The creation of the “app economy” has also been a major boom for the economy at large. In fact, even as early as 2012, it was estimated that there were around 500,000 jobs created as a result of the app economy. It is worth noting that the estimate does not include the design, manufacture, or marketing of smartphones and other mobile devices.

  • Lower Barriers to Entry

One of the other benefits of the so-called app economy is the dramatically lower barrier to entry that this new sector offers. Instead of requiring a massive manufacturing capacity or labor pool, entrepreneurial individuals can take a great idea, learn how or hire someone to code, and utilize the platforms built by Apple, Google, or Microsoft to distribute their software solution to a truly global market.

  • Ability to Better Utilize Excess Capacity

One of the other major advances that smartphones have facilitated via the app economy is the growth of apps that utilize “excess capacity.” Excess capacity is an economic term that refers to capital or other assets that are being underutilized.

Perhaps the best example of this is Uber, the ridesharing app that is taking the world by storm and severely disrupting the taxi industry. Uber allows anyone with a car, presuming the car is new enough and well maintained, to use it to get paid for giving other people rides. Uber, through the use of their smartphone app, is able to manage drivers with riders very effectively, reducing costs associated with getting a ride. Car owners are able to utilize their vehicles that would otherwise just sit idle.

Economic Impact on the Developing World

Another incredible impact of the smartphone is its ability to bridge the technology and infrastructure gap that exists in the developing world. Cellular signal is far more practical than hardwiring telephone and data lines in many parts of the developing world. Access to mobile technology, and increasingly affordable smartphones, offers incredible promise and economic opportunities for companies across the globe.

While moonshot projects like Google’s Project Loon are somewhat far-fetched, at the very least they offer a glimpse at a long-term trend in the developing world, including greater access around the world to the global economy, facilitated by the increasingly ubiquitous smartphone. As we continue to improve their functionality and ease of use, smartphones will remain an essential part of the economy. For those with a keen interest in working in the international business arena, the online MBA program provides the technical, financial, cultural, and political knowledge to be able to secure a successful career.

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