...The Distribution of Value in the Mobile Phone Supply Chain Jason Dedrick, Kenneth L. Kraemer, Greg Linden* Personal Computing Industry Center (PCIC) University of California, Irvine 4100 Calit2 Building 325, Suite 4300 Irvine, California 92697-4650 October 2010 *Authors are listed alphabetically. The Personal Computing Industry Center is supported by grants from the Alfred P. Sloan Foundation, the U.S. National Science Foundation, industry sponsors, and University of California, Irvine (California Institute of Information Technology and Telecommunications, The Paul Merage School of Business, and the Vice Chancellor for Research). Online at http://pcic.merage.uci.edu. The Distribution of Value in the Mobile Phone Supply Chain Jason Dedrick, Kenneth L. Kraemer, Greg Linden* Personal Computing Industry Center, UC Irvine 4100 Calit2 Blgd. 325, Suite 4300 Irvine, CA 92697-4650 October 2010 Abstract The supply chains of the mobile phone industry span national and firm boundaries. To analyze how value is distributed among the participants, we apply a novel framework for analysis based on financial measures of value capture to three phone models introduced from 2004 to 2008. We find that carriers capture the greatest value (in terms of gross profit) from each handset, followed closely by handset makers, with suppliers a distant third. However, the situation is reversed in terms of operating profit. Carriers shoulder the burden of network installation...
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...Smartphones: Building profitability and loyalty in the mass-market Industry Briefing In many mature wireless markets, smartphones already account for one in three handsets sold. By the end of 2011 they will have overtaken featurephones. As the wireless industry’s fastest growing category of device, smartphones are opening up many new and exciting revenue-generating opportunities. However, the migration from the prosumer to wider consumer markets is not without its challenges. This paper identifies five key pressure points that are facing wireless carriers and challenging the profitability and loyalty of their smartphone consumers. WWW.WDSGLOBAL.COM 2. WDSGlobal Industry Briefing Smartphones: Protecting profitability and loyalty in the mass market Contents EXECUTIVE SUMMARY THE RISE OF THE SMARTPHONE Subscriber Break-Even Smartphones and the Technology Adoption Lifecycle - Innovators and Early Adopters - Leaping the Chasm CONSUMER BUYING BEHAVIOR AND MOTIVATIONS IDENTIFYING THE PRESSURE POINTS PRESSURE POINT ONE: USER BEHAVIOR The Golden Hour PRESSURE POINT TWO: DEVICE SUBSIDIES Service Usage PRESSURE POINT THREE: COST TO SUPPORT Increased Average Handle Time - AHT by Operating System - Problem Type by Operating System Brand Escalation and the Threat of No Fault Found Propensity to Call PRESSURE POINT FOUR: SERVICE CONFIGURATION Failures in the Preconfiguration Model PRESSURE POINT FIVE: UNLIMITED DATA PLANS SUMMARY RECOMMENDATIONS APPENDIX ONE p3. p4. p4. p5...
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...is always on the lookout for new opportunities and ideas that will enable him to gain an advantage over his competitors. Dan schulman Dan schulman was appointed CEO in the summer of 2001 Schulman had 18 years of telecommunications experience with AT&T and was the CEO of priceline.com His goal was to achieve a run rate ;1 million subscribers by the end of the first year and 3 million by year four He established his team and Virgin branded service launched in 2002 Virgin Group Limited Virgin Group Limited is a British branded venture capital conglomerate organisation founded by Sir Richard Branson. Branson retains complete ownership and control of the Virgin Brand The core business areas are leisure, travel, tourism, mobile, broadband, TV, radio, music, finance, and health in Asia, Europe, North America, Africa, and Australia. The net worth of Virgin Group Ltd as of September 2008 is £5.01 billion. It consists of more than 400 companies around the world. Virgin...
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...CASE OVERVIEW Omnitel entered the Italian telecommunication market in February 1995. Till then the Italian telecommunication market was dominated by Telecom Italia Mobile which had a monopoly in this market. The rst private company to enter the Italian telecommunication market was Omnitel. This was facilitated by the decision taken by the European Commision (EC) in 1993 that all member states should open their markets and guarantee competition in the telephony market by January 1998. Omnitel had to purchase a license for the GSM network for 760 million dollars. Currently the biggest competition for Omnitel is Telecom Italia Mobile (TIM) which was formed in July 1995 and was listed in the Italian stock exchange after splitting from its parent company Telecom Italia. TIM had a customer base of over four million and held 97% of the market share. STRATEGY TO OBTAIN MARKET SHARE Omnitel is at a critical stage at this point unless penetration in the market is achieved prospects for growth are limited. During the initial six months Omnitel oered plans similar to TIM and focused mainly on high quality customer service. This was the only dierentiating factor between Omnitel and TIM. By means of a market survey conducted it was found that a large share of mobile phone users were reluctant to change brands. Unless new revised plans and schemes by Omnitel were oered the company would not appear attractive to prospective customers. Two high level management...
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...Case Analysis Omnitel Problem Statement In December 1995, we entered the Italian mobile market as the country’s first private cellular service provider (Lal 4). Despite our competitive prices and superior customer service we have only been able to garner a 4% market share (Lal 4). If we do not pick up more market share quickly our company will not be able to survive. Results from our recent market research revealed that Italian cellular customers are not satisfied with the pricing of plans being currently offered (Lal 1). In order to take advantage of that, we must implement a marketing strategy to introduce a new pricing plan that will differentiate us without instigating a price war with our primary competitor Telecom Italia Mobile (TIM). Situation Analysis Market Size and Trends In the late 1980s, the European mobile telephony market was dominated by 12 major state owned behemoths since the governments had not liberalized the mobile space (Lal 2). The market started to become open to private providers when the European commission required its members to open up the mobile telephony space and ensure competition by 1998 (Lal 2). After obtaining our own GSM license, we officially launched our commercial services in December 1995: “[Our] entrance not only increased competition but also enhanced awareness about cellular products among Italians. Cellular penetration in Italy was 7.5% by the end of the...
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... 3 Question 3 (Himi) 4 Conclusion (Eudora) 5 The case study of Nokia Background As a well-known mobile handset maker in the globe, Nokia occupied a 40 percent market share once. However, with mobile industry progressing at an unprecedented rate, the competition was becoming increasingly fierce with encroaching on the market share of Nokia. Due to such situation, the whole mobile handset industry was marked by declining prices and depressed margins making companies look at low-cost production options. Nokia, was also making their efforts to reduce the cost, so they made decision to close the company in Bochum and built a new one in Romania although they were a little worried about the negative effects bought about. As expected, this abrupt announcement caused a wave of resentment on employees, trade unions, politicians and business leaders who condemned Nokia's move. Additionally, Nokia was accused of being insensitive to German culture and greedy for misusing state subsidies. Most importantly, although under great pressure of German government, Nokia refused to alter its decision...
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...options. Which option would you choose and why? In designing your pricing plan, be as specific as possible with respect to the various elements under considerations (e.g., contracts, the size of subsidies, hidden fees, average per-minute charges, etc.). I will recommend third pricing strategy, which is to come up with a completely new plan, since we are trying to target a new market segment. The following will be the structure of the new price plan, which employs a revolutionary and aggressive approach. Subscription Type All of the plans will be prepaid thereby completely eliminating the need for indulging into contracts. The subscription will come into packages that resemble consumer electronic packaging and would be plug_and_play when you buy them. Contracts: Since the plans will be all prepaid, the services will be offered without indulging into a contract. This will allow e.g. the teenagers 14-17 to be able to get the subscription because otherwise they are not eligible to sign the contracts. This is clearly an untouched segment and will bring lot of new customers. However the risk of churn will be increased to 6% per month, but that will be catered into pricing calculations given in the end. Handset Subsidies: All customers will be offered handset subsidies at 50% of the handset costs. This will reduce the subscription price and hence enabling the young customers to afford the plan. Hidden fees and Off-peak hours: All plans will have no hidden fees or charges....
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...strategy for Italy’s second mobile phone service provider. Omnitel conducted some marketing research and find that customers were very happy with Omnitel’s customer service. Italian customers do not wanted to pay fixed monthly usage fee and extra activation fee; instead they only wanted to pay a fee only when they used the phone. TIM (Telecom Italia Mobile) is the state owned company which had a complete monopoly over Italian telecommunications market. Bona was planning to launch his cell phone under the name “LIBERO” which is free from any monthly charges. LIBERO Plan: In Peak hours: Charge- Lit.1595 In Off-Peak hours: Charge- Lit.195 Anticipated average usage: 193 min per month Outgoing calls: 93 min (13 min at peak and 80 min at off-peak) Incoming calls: 100 min (25 min at peak and 75 min at off-peak) Setup Cost = Lit.10000 They are also providing customer a subsidy on handsets in exchange of a contract for a year or two. Bona was planning to convince Caio to sell cell phones at full price but drop the monthly fee. Bona wanted to launch a Advertising Campaign with a budget of Lit. 40 billion, because he wanted to completely blanket Italy with LIBERO posters and billboards so that he can change the customer mind-set regarding cellular phones. Bona do not want to indulge his company in the price war with TIM, since TIM is state owned company and also financially very strong company. Mobile Telephony Market in Italy: ...
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...addresses the following: 1. Identifies and analyzes the industry and competitive environment of the mobile phone industry based on information contained in the case: HTC Corp. in 2009 including key industry and environmental trends, competitive and structural characteristics of the mobile phone industry. 2. Your assessment of the key challenges HTC faces in trying to achieve a sustainable model and long-term success in the industry? 3. Your assessment of the competitive and strategic position of HTC Corp. at the time of the case information. 4. Your assessment/identification of any major changes in the competitive situation for HTC from the perspective of the fall of 2011 that he should bring to the board’s attention based on current information available publicly. Question 1) Identifies and analyzes the industry and competitive environment of the mobile phone industry based on information contained in the case: HTC Corp. in 2009 including key industry and environmental trends, competitive and structural characteristics of the mobile phone industry. Answer 1) HTC is basically a very young high tech company, initially dealt with PDA’s and computers. But in the recent years HTC has emerged as a smartphone firm which has received strong appreciation for the design and high tech products. It has been known for interoperate the Windows OS into the mobile phone devices which sparked the revolution towards the “SMARTPHONE” industry. HTC received strong appreciation...
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...Virgin Mobile USA : Pricing for the Very First Time 1) Virgin Mobile targets the 14 to 24-year olds market. The case lays out three pricing options. Which option woul you choose and why ? All three options are very interesting for Virgin Mobile to introduce the American market. Considering Virgin Mobile’s background, goals and strategy, I would have choose the option 3 « A Whole New Plan » There are few reasons that explain this choice : Firstly, Virgin Mobile’s cultural values are to be innovative, fun. It also wants to make things different from its competitors and continuously improve customers’ experience through innovation. Indeed the options 3 offer something very different than competitors. Secondly, regarding the segment target, 14–24 years old, it is known that those categories can not pass the credit check with the current carriers due to their lack of revenue. The result is that this target market has been forgotten. Moreover, it is an age where teenagers are looking for “independence” and like to do things without parents. It is why the option 3 fit well. Thirdly, I believe that the option 3 is the one that fit the best selling model that has been chose by Virgin. In fact, it does not require any salespersons...
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...1. Trends within the handset industry with companies such as Nokia, produce low-cost cellphones which reduce the average selling price of these handsets. The case states, “ international mobile phone prices fell 35% in recent years. In the price conscious emerging markets, the basic phones were sold below $50 and there was a growing market for $25, and even $10.” Nokia captured this trend of low cost mobile phones that are cheap and disposable for consumers. The demand for low cost manufacturing has become a necessity for Nokia to survey in this thriving market. They had tremendous pressure from costs that lead to weak profitability and other companies consolidating. This introduces the second trend within the mobile handset industry to move production to Central and Eastern Europe because their labor cost were lower. This allows Nokia to sell the mobile handsets for a lower price. Nokia’s strategy is to shift production to low cost locations because their high productivity and simple taxes. They wanted to set new standards for wages, training, workplace safety, and technology transfer that was valued within society. 2. Dependent upon Nokia's image and cultural beliefs, the backlash in Germany was justifiable. Nokia was praised for keeping their company within their own country whereas other companies had offshore production. Bochum was profitable, and it was only beneficial for Nokia to close the plant to reduce the employee expense. They did not go public before their...
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...MOBILE INDUSTRY HISTORY Indian Mobile Industry Stats [Infographic] by ARUN PRABHUDESAI Recently, I have been coming across some interesting infographics and presentations on Indian Mobile Industry. We published one such infographic earlier this week – And here is the second one which the readers will find quite interesting as well. Eyedea Lab, a Web and Graphics Design Studio at Kolkata recently published an informational Infographic which gives you a nice overview of Indian Mobile Industry. Did you know that first mobile phone call in India was made by Late Mr. Jyoti Basu to Mr. Sukh Ramon 30th July 1995. so it can be officially said that Indian Mobile Industry has just finished its 16th year – and is still a teenager so to say! Indian Mobile Industry Infographic [Click on the image to zoom] Yeah, the call rates back then were Rs. 32 per minute and incoming & outgoing both used to be charged ! MARKET TRENDS Five Trends That Will Shape the Mobile Industry in 2011 * Evaluation of Patent Trends, Technology Evolution, and Product Innovation Indicates Potential Winners and Losers in the Technology Battles Facing Mobile Industry UBM TechInsights has made key predictions about the future of the mobile industry based on its in-depth research on patent trends, technology evolution, and product innovation. These five trends will be of strategic importance to most players in the mobile communication industry in 2011, including smartphone and tablet computing OEMs...
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...Virgin Mobile USA: Pricing for the Very First Time Company Background Introduction Case Background Issue of Concern Market Research Analysis All Options Theory Application Calculation Virgin Response Conclusion Recommendations Inviting Questions 2 Introduction Analysis Conclusion Company Background • Virgin, a leading branded venture capital organization, is one of the world's most recognized and respected brands. • Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful business in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. • Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. Case Background Issue of Concern [Source: company website Available from: http://www.virgin.com/AboutVirgin/WhatWeAreAbout/WhatWeAreAbout.aspx] 3 Introduction Analysis Conclusion Company Background Case Background Issue of Concern 4 Introduction Analysis Conclusion Company Background Case Background Issue of Concern Sir Richard Charles Nicholas Branson (born 18 July 1950), is an English entrepreneur, best known for his Virgin brand, a banner that encompasses a variety of business organizations. The name Virgin was chosen because a female friend involved in setting down the initial record shop commented that there...
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...The Indian Mobile Industry May 8, 2007 @ Dallas T V Ramachandran, Director General, COAI CONTENTS I. II. ABOUT INDIA THE INDIAN TELECOM SCENARIO III. KEY PERFORMANCE INDICATORS IV. INDUSTRY INITIATIVES V. TELECOM MANUFACTURING VI. GROWTH POTENTIAL OF THE SECTOR VII. AFFORDABLE ACCESS FOR RURAL AREAS VIII. KEY CHALLENGES IX. LOOKING AHEAD 2 ABOUT INDIA 3 THE WORLD’S SECOND LARGEST MARKET Area – 3,287,263 Square kilometers Population (2006) – 1.11 Billion 22 National Recognized Languages Literacy Rate (2005) – 65% Average Annual Growth Rate – Population – 1.3% (growth is slowing) – GDP- 8.5% Trade (2006) – Total Exports – USD 103 Billion – Total Imports – USD 142 Billion Forex Reserves (including gold) =USD 200 Billion INDIA INDIA Source : FICCI/ Exim bank 4 ….& ONE OF THE FASTEST GROWING ONES One of the fastest growing economies in Asia. Annual GDP growth rate of ~8% over next 5-10 years Set to emerge as 3rd largest economy in the world by 2020 Major global hub for IT & IT enabled services By 2010 – Literacy Rate: 80% Middle Class: 32% (exploding) Poverty: 16% (declining) 5 “I visualize a prosperous India well before the year 2020. We expect the people below the poverty line to come to near zero, our literacy must be nearly 100% and tele-density will reach over 75%.” APJ Abdul Kalam The President of India 6 THE INDIAN TELECOM SCENARIO 7 INDIAN TELECOM GROWTH Even though the world has just discovered it, Indian telecom growth story is >10 years old. 8 ...
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...Virgin Mobile USA PGXPM 10 – ARJUNAS – GROUP VI SERVICE MARKETING Assigned by Prof. D. Sriram MEMBERS: NIRANJAN DAUTKHANI Virgin Group Profile: * Virgin, a leading branded venture capital organization, is one of the world's most recognized and respected brands. * Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful businesses in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. * Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. [ “ We believe in making a difference. In our customers' eyes, Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge. We deliver a quality service by empowering our employees and we facilitate and monitor customer feedback to continually improve the customer's experience through innovation.” ------- Virgin Group Website Virgin Values: * Virgin stands for value for money, quality, innovation, fun, and a sense of competitive challenge. * Successful cellular operations in U.K.- 2.5 million customers in 3 years. * Unsuccessful operations in Singapore (2001) - Virgin hip and trendy positioning failed. Virgin Mobile USA: ...
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