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Introduction         DOCOMO was spun off from the Japanese                      DOCOMO operates in a highly competitivefix...
Industry analysis                                       5-Forces of Japanese Telecommunications        DOCOMO has been per...
since most of the consumers are focused on the                  The strategic options available for a companyonline enviro...
launches, new lifestyle enhancing applications,       This ecosystem can be further enhanced by providing   improved conne...
DOCOMO currently has a portfolio of products                The new market segment that can beand services which are curre...
By studying the Value Curve on the strategy                Thus, we can see that alliances play a majorcanvas as well as t...
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NTT DOCOMO - Technology Strategy Analysis


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Technology Strategy for the next decade for NTT DOCOMO. This paper is intended as an academic work only and any discrepancies or incorrect hypotheses may not be held against the author.

Published in: Business

NTT DOCOMO - Technology Strategy Analysis

  1. 1. Introduction DOCOMO was spun off from the Japanese DOCOMO operates in a highly competitivefixed line monopoly, Nippon Telegraph and Telephone environment where competitors like DOCOMO and(NTT) in August 1991 to take over the mobile cellular KDDI are always on the heels of the NTT, which is theoperations. DOCOMO provides 2G (mova) PDC cellular market leader. DOCOMO has always been at theservices, 3G FOMA W-CDMA services, and 4G LTE leading edge of technology innovation and adoptionservices. Its businesses also included PHS (Paldio), in the field of mobile communications and devices. Itpaging, and satellite. DOCOMO ceased offering a PHS was the first company in the world to provide 3Gservice on January 7, 2008. i In Japan, it is the market services commercially over its WCDMA network. Theleader in cellular and internet services with 60 Million closest competitor, DOCOMO, is only half the size ofsubscribers.ii Additionally, it has access to another DOCOMO and the revenues are much lesser than thatseveral million customers through partnerships and of DOCOMO’s. In the last 20+ years of its operation,investments in mobile services operators abroad. DOCOMO has been able to maintain the market leadership in a highly advanced consumer nation like DOCOMO is very strong financially with Japan through its constant research and innovation.revenues of $53 Billion in 2012iii. The Net Income was DOCOMO has reached a saturation level in thehealthy at $5.6 Billion and a reasonable profitability of domestic markets and since last 5 years it has10.6% in a highly competitive industry. The company explored newer markets outside Japan.has a market cap of $70,000 Billion and EPS of $140.iv Fig.1 – Profitability, Revenue & Net Income of DOCOMO Fig.2 – Japanese Telecommunications Market Share Madhuranath R
  2. 2. Industry analysis 5-Forces of Japanese Telecommunications DOCOMO has been performing well Consumers in the Japanese telecom markethistorically in terms of financial and operating cash are fairly advanced and the entire market as such isflows. However, the recent trend has been towards a fairly saturated currently. The bargaining power of theslight decrease in the operating cash flows as the consumers is fairly high as they have multiple optionsJapanese mobile consumer market has become to choose from in terms of service providers.saturated. Further, the competition is trying to eatinto the revenue pie of DOCOMO. Suppliers of equipment and content for the telecom players are mainly based out of Japan, USA or Europe. Most of the suppliers are focused on providing the cutting edge technology to the end consumers and the implementation of large scale network upgrades put the telecom service providers at the mercy of suppliers who can drive a hard bargain. However, the suppliers do not drive a hard bargain as Japan is an advanced market which also serves as a test market for the implementation of advanced services elsewhere in the world. This makes the supplier bargaining power medium in Japan. Fig.3 – Cash Flow Analysis of DOCOMO Threat of new entrants is practically nil in Japan as domestic companies do not enter the highly The recent trend in the Japanese mobile competitive market and foreign companies cannottelephony and internet market is also southwards due enter the market the stagnation of the market. So, the industry islooking towards a challenging decade ahead. Rivalry among the top companies in the market is quite high as each of them tries to outdo In light of the market situation, the most the other in innovation and consumer experience.important question for DOCOMO in coming decade is Internet impact is quite high on this industry.– Can DOCOMO maintain its market leadership in an Alliances and partnerships is the name of the game.increasingly competitive mobile services market? The service providers have to be internet enabled and Madhuranath R
  3. 3. since most of the consumers are focused on the The strategic options available for a companyonline environment and social media, the internet like DOCOMO in the Japanese market are –adoption and enabling are critical success factors. - Alliances and Partnerships - Eco-system Overall, the telecom industry is not appealing - Innovation excellencefor new entrants, but the existing market players - Technology excellencehave a high possibility of retaining the market share. 1. Innovation Excellence DOCOMO’s vision is shaping a smart life.DOCOMO Strategy Analysis & Options DOCOMO aims to bring smart life into reality by propelling the evolution of mobile services and The DOCOMO strategy has been to provide a new value creation through convergence ofwide range of related services to its consumers. This industries/services leveraging clouds. This goal hasenables the company to lock-in the consumers within been expressed in its vision document v.the DOCOMO eco-system. A simple example of such The Japanese consumers have a higherlock-in can be providing a mobile phone buyer the propensity to consume data intensive internethandset packaged with internet data pack. The user services like anime, music, movies, shopping, etc.can also be provided the online payment option for These can be leveraged to increase the Averagepaying the mobile bills regularly. The mobile phone Revenue Per User (ARPU) over the next decade.can be preloaded with custom apps for accessingsocial media and common internet services.. 2. Technology Excellence Overall Low Cost Broad NTT DoCoMo has the upper hand here. It is this unique factor which probably has helped it Provider Differentiation retain the market leadership. The increasing use of internet to make phone and video calls from Best Cost laptops and mobile devices has reduced the per capita voice call consumption in Japan and advanced markets across the world. Focused Low Focused Naturally, new technology is the only reason Cost Provider Differentiation any consumer will be willing to pay a premium for the services provided by a telecom provider. Fig.4 – DOCOMO Strategy Segment Technology excellence in the form of new device Madhuranath R
  4. 4. launches, new lifestyle enhancing applications, This ecosystem can be further enhanced by providing improved connectivity, etc. can provide DOCOMO value added services, lifestyle services and next the requisite edge to remain relevant in a razor- generation custom services which will entice the user thin margin industry. to remain in the same provider space. The alliances and partnerships will further contribute to this kind of 3. Alliances and Partnership an ecosystem enhancement. DOCOMO has been actively forming new It can partner with existing government agencies, alliances and partnerships. Most of the alliances banks, insurance providers and utility providers to and partnerships are primarily aimed at providing help attract the senior citizen segment which will allied services to the consumers of mobile and create a new eco-system. This kind of an eco-system internet services. Through partnership it has the will help keep the new age customers within the option of increasing market reach as well as ARPU reach of various DOCOMO touch-points and thus for existing consumers in Japanese market. increases the potential of upselling and cross-selling. Thus, the ARPU as well as the market share can be Tie-ups with partners like Tata Teleservices in increased. the fastest growing telecom markets like India will provide opportunity for DOCOMO to grow its markets which are outside the reach of the Blue Ocean Strategy for DOCOMO current Japanese telecommunications providers. Japan has an increasing number of senior citizens who are from a different generation. That generation is not used to the use of mobile services. However, with the latest developments in technology like touch based devices and an increasing number of applications and services available on the various platforms of mobile, there is a huge untapped market for DOCOMO. 4. Eco-system The market of DOCOMO is not limited to mobilephone calls, texts and internet. It also operates awholesome ecosystem which keeps the consumer Fig.5 – DOCOMO PMS Portfolio Mapviengaged in its own revenue generating businesses. Madhuranath R
  5. 5. DOCOMO currently has a portfolio of products The new market segment that can beand services which are currently in the settler and targeted by DOCOMO is the senior citizen segment.migrator segments. This provides an opportunity for The customers in this segment are different from thethe company to change its portfolio mix by adding young and existing customers of DOCOMO. The needsnew products or services to move into the pioneer and wants of services are totally different from that ofsegment of the PMS map. This is possible by doing the younger tech-savvy generations. The launch of 3Gstrategic value innovation to achieve a blue ocean and LTE services enables DOCOMO to providemarket space. There are various critical success innovative services like banking, insurance, utility billfactors in the Japanese telecom industry. When we payment, face-to-face conversations, etc. to the newmap the value curve of the various KSFs on a strategy markets. These services can help DOCOMO tocanvas we can see a graph as below. immediately appeal to the senior citizens in Japan as it increases their convenience. It is aligned with their The advancements in technology have vision of shaping a smart life for customers.provided touch-enabled devices which increase theease of use. Additionally, the latest technologies are But certain criteria need to be handled well tolight and efficient in accessing internet based services. ensure the successful adoption of these services. Since the aged persons are usually settled in the remote areas of Japan where the network quality may not be as good as urban areasvii, increasing network quality and network coverage become important. Fig.6 – Value Curve for Telecom Industry Fig.7 –Importance-Performance Analysis for DOCOMOviii Madhuranath R
  6. 6. By studying the Value Curve on the strategy Thus, we can see that alliances play a majorcanvas as well as the Importance-Performance map, role in not only achieving technology excellence andwe can see that the Blue Ocean Strategy for DOCOMO innovation excellence, but also for creating newis to enter the senior citizens market. The strategic market spaces via creation of functional eco-systems.critical success factors that DOCOMO will have to Thus, the final recommendation for DOCOMO is –leverage to make the competition irrelevant are – building a compelling & inclusive eco-system. - Creating an inclusive eco-system - Simplifying technology through innovation Simplifying technology through innovationenables the senior customers to access thetechnology and the services provided by DOCOMOwith little resistance. Reducing this resistance is theelimination of the first barrier to the entry of thismarket segment. Since DOCOMO has always been atthe leading edge of innovation curve, this should notbe difficult to achieve. Creating an inclusive eco-system allows DOCOMOto tap unexplored market spaces outside Japan and atthe same time create new market spaces withinJapan. Outside Japan, the financial services industry isevolving strongly in countries like India, Japan, Brazil,etc. which makes it a lucrative market for DOCOMO toenter with its new packaged offerings that offer afunctional eco-system that eases the lifestyle of theconsumers. The convenience factor will helpDOCOMO grow faster than its competition who willbe more focused on offering technologies andservices which are still in the red ocean market space;like entertainment, gaming, movies, music, etc. Thesekind of services are attractive but not totally essentialto the markets that DOCOMO needs to tap in Japan. Madhuranath R
  7. 7. REFERENCESi$file/thesis2010-0610%20wang%20och%20yang.pdf Madhuranath R