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  1. 1. QUALCOMM, Inc. 2004 Bill Hartanovich Zoleikha Ozbay Ertan Karakas Trent Williams Ted Pledger
  2. 2. QUALCOMM <ul><li>Designing </li></ul><ul><li>Development </li></ul><ul><li>Manufacturing </li></ul><ul><li>Licensing </li></ul><ul><li>digital wireless telecommunication products and services based on CDMA technology </li></ul>
  3. 3. QUALCOMM <ul><li>Industry: Wireless Communication Technology </li></ul><ul><li>Fortune 500 wireless technology leader </li></ul><ul><li>Code Division Multiple Access (CDMA) </li></ul><ul><ul><li>Fastest-growing wireless communications technology </li></ul></ul><ul><ul><li>One of three major digital wireless formats used in cell phones </li></ul></ul><ul><ul><li>WCDMA </li></ul></ul><ul><ul><li>CDMA2000 </li></ul></ul>
  4. 4. QUALCOMM Business <ul><li>Chip Sets </li></ul><ul><li>Licensing </li></ul><ul><li>BREW </li></ul>
  5. 5. Issues <ul><li>How can QUALCOMM encourage emerging markets to move to CDMA-based 3G systems? </li></ul><ul><li>How should QUALCOMM defend its position against 4G technology? </li></ul>
  6. 6. Prerequisites for Success How does the firm survive competition? What do customers want? Who are our customers? - Samsung, Motorola, Kyocera, LG & licensees (e.g. NEC & TI) What do they want? - IP rights/affordable, quality chipsets What drives competition? - Efficient use of spectrum What are the main dimensions of competition? - R&D, licensing, standards How intense is competition? - Not much How can we obtain a superior competitive position? - Expand licensing agreements, remain innovative into 4G tech. KEY SUCCCESS FACTORS
  7. 7. Key Success Factors <ul><li>Strong licensing agreements </li></ul><ul><li>Technological Innovation </li></ul><ul><li>First Mover Advantage </li></ul><ul><li>Governmental Relations </li></ul>
  8. 8. Five Force Analysis <ul><li>Threat of Substitutes  Low </li></ul><ul><li>-------------------------------- </li></ul><ul><li>Switching costs? Yes  Low </li></ul><ul><li>Prices of substitutes similar? Yes  Low </li></ul><ul><li>Performance substitutes similar? No  Medium </li></ul><ul><li>Supplier Power  High </li></ul><ul><li>-------------------------------- </li></ul><ul><li>Many rivals? No  High </li></ul><ul><li>Many suppliers? No  High </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Important component? Yes  High </li></ul><ul><li>Backward integration possible? Yes  Low </li></ul><ul><li>Forward? Yes  High </li></ul><ul><li>Intensity of Rivalry  Low </li></ul><ul><li>----------------------- </li></ul><ul><li>Industry Growth? Yes  Low </li></ul><ul><li>Differentiation Possible? Yes  Low </li></ul><ul><li>Buyer Switching Costs? Yes  Low </li></ul><ul><li>High Exit Barriers? Yes  High </li></ul><ul><li>Threat of Entry  Low </li></ul><ul><li>----------------------------------- </li></ul><ul><li>Capital requirements? Yes  Low </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Access to distribution </li></ul><ul><li>channels? No  Low </li></ul><ul><li>Government regulation? Yes  Low </li></ul><ul><li>Buyer switching cost? Yes  Low </li></ul><ul><li>Highly profitable? Yes  High </li></ul><ul><li>Buyer Power  Low </li></ul><ul><li>------------------------------------ </li></ul><ul><li>Many buyers? Yes  Low </li></ul><ul><li>Many rivals? No  Low </li></ul><ul><li>Need the Item? Yes  Low </li></ul><ul><li>Have all the Information? Yes  High </li></ul><ul><li>Lots of substitutes? No  Low </li></ul><ul><li>Differentiation possible? Yes  Low </li></ul>
  9. 9. Threat of Substitutes (LOW) <ul><li>Switching costs? Yes  Low </li></ul><ul><li>Prices of substitutes similar? Yes  Low </li></ul><ul><li>Performance substitutes similar? No  Medium </li></ul>
  10. 10. Threat of Entry (LOW) <ul><li>Capital requirements? Yes  Low </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Access to distribution channels? No  Low </li></ul><ul><li>Government regulation? Yes  Low </li></ul><ul><li>Buyer switching costs? Yes  Low </li></ul><ul><li>Highly profitable? Yes  High </li></ul>
  11. 11. Supplier Power (HIGH) <ul><li>Many rivals? No  High </li></ul><ul><li>Many suppliers? No  High </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Important component? Yes  High </li></ul><ul><li>Backward integration possible? Yes  Low </li></ul><ul><li>Forward? Yes  High </li></ul>
  12. 12. Buyer Power (LOW) <ul><li>Many buyers? Yes  Low </li></ul><ul><li>Many rivals? No  Low </li></ul><ul><li>Need the item? Yes  Low </li></ul><ul><li>Have all the information? Yes  High </li></ul><ul><li>Lots of substitutes? No  Low </li></ul><ul><li>Differentiation possible? Yes  Low </li></ul>
  13. 13. Intensity of Rivalry (LOW) <ul><li>Industry growth? Yes  Low </li></ul><ul><li>Differentiation possible? Yes  Low </li></ul><ul><li>Buyer switching costs? Yes  Low </li></ul><ul><li>High exit barriers? Yes  High </li></ul>
  14. 14. Five Force Analysis <ul><li>Threat of Substitutes  Low </li></ul><ul><li>-------------------------------- </li></ul><ul><li>Switching costs? Yes  Low </li></ul><ul><li>Prices of substitutes similar? Yes  Low </li></ul><ul><li>Performance substitutes similar? No  Medium </li></ul><ul><li>Supplier Power  High </li></ul><ul><li>-------------------------------- </li></ul><ul><li>Many rivals? No  High </li></ul><ul><li>Many suppliers? No  High </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Important component? Yes  High </li></ul><ul><li>Backward integration possible? Yes  Low </li></ul><ul><li>Forward? Yes  High </li></ul><ul><li>Intensity of Rivalry  Low </li></ul><ul><li>----------------------- </li></ul><ul><li>Industry Growth? Yes  Low </li></ul><ul><li>Differentiation Possible? Yes  Low </li></ul><ul><li>Buyer Switching Costs? Yes  Low </li></ul><ul><li>High Exit Barriers? Yes  High </li></ul><ul><li>Threat of Entry  Low </li></ul><ul><li>----------------------------------- </li></ul><ul><li>Capital requirements? Yes  Low </li></ul><ul><li>Differentiation possible? Yes  High </li></ul><ul><li>Access to distribution </li></ul><ul><li>channels? No  Low </li></ul><ul><li>Government regulation? Yes  Low </li></ul><ul><li>Buyer switching cost? Yes  Low </li></ul><ul><li>Highly profitable? Yes  High </li></ul><ul><li>Buyer Power  Low </li></ul><ul><li>------------------------------------ </li></ul><ul><li>Many buyers? Yes  Low </li></ul><ul><li>Many rivals? No  Low </li></ul><ul><li>Need the Item? Yes  Low </li></ul><ul><li>Have all the Information? Yes  High </li></ul><ul><li>Lots of substitutes? No  Low </li></ul><ul><li>Differentiation possible? Yes  Low </li></ul>
  15. 15. SWOT Analysis <ul><li>Strengths </li></ul><ul><ul><li>IP rights (CDMA) </li></ul></ul><ul><ul><li>Financial position </li></ul></ul><ul><ul><li>Broad global presence </li></ul></ul><ul><ul><li>R & D </li></ul></ul><ul><ul><li>80% of CDMA2000 patents </li></ul></ul><ul><ul><li>Government relations </li></ul></ul><ul><li>Weaknesses </li></ul><ul><ul><li>Tough licensing agreements </li></ul></ul><ul><ul><li><10% of WCDMA market </li></ul></ul><ul><ul><li>CDMA weak for 4G </li></ul></ul><ul><li>Opportunities </li></ul><ul><ul><li>Emerging markets (3G) </li></ul></ul><ul><ul><li>Development of 4G </li></ul></ul><ul><li>Threats </li></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><ul><li>Chip set makers </li></ul></ul></ul><ul><ul><li>Development of 4G </li></ul></ul>
  16. 16. Competitors <ul><li>Texas Instruments, Inc. </li></ul><ul><li>STMicroelectronics </li></ul><ul><li>VIA Telecom, Inc. </li></ul><ul><li>Motorola </li></ul><ul><li>Nokia </li></ul><ul><li>Ericsson </li></ul><ul><li>Samsung </li></ul>
  17. 17. Future 4G Competitors <ul><li>Intel </li></ul><ul><ul><li>WiMax </li></ul></ul><ul><li>Flarion Technologies </li></ul><ul><ul><li>Flash OFDM </li></ul></ul><ul><li>Clearwire Corporation </li></ul>
  18. 18. Technology Primer <ul><li>FDMA </li></ul><ul><ul><li>1G analog circuit switched </li></ul></ul><ul><ul><li>Approximately 50 chls per cell </li></ul></ul><ul><li>TDMA </li></ul><ul><ul><li>2G/3G digital low/medium speed circuit switched </li></ul></ul><ul><ul><li>a.k.a. GSM, PDC, TD-SCDMA </li></ul></ul><ul><ul><li>Approximately 150 chls per cell </li></ul></ul><ul><li>CDMA </li></ul><ul><ul><li>2G/3G digital low/medium speed circuit switched </li></ul></ul><ul><ul><li>a.k.a. WCDMA, CDMA-2000, CDMA EV-DV, TD-SCDMA </li></ul></ul><ul><ul><li>Approximately 500 chls per cell </li></ul></ul><ul><li>OFDM </li></ul><ul><ul><li>4G digital high-speed IP based packet switching </li></ul></ul><ul><ul><li>a.k.a. WiMax </li></ul></ul>
  19. 19. Functionality - Throughput Interoperability - Open Standards VALUE 1984 1992 2003 2006 1G 3G 2G 4G Past and Present Future 2005 Wireless Communications Life Cycle N O I T A R T E N E P
  20. 20. Group Analysis: Technology and the Market Market Presence 1G Nokia, Samsung, TI FDMA (1G) GSM (2G) CDMA (2G) CDMA2000 (3G) WCDMA (3G) Flarion and ClearWire OFDM (4G) Emerging Nations 2G 3G 4G China TD-SCDMA (3G) QUALCOMM CDMA (2G) CDMA2000 (3G) CDMA EV-DV (3G) 802.16e WiMax Developed Nations Technology Platform An Open Future
  21. 21. Market Acceptance vs. Appropriating Returns QUALCOMM Maximizing Market Acceptance Maximizing Appropriation of Profit
  22. 22. Global Cellular Market 20% 20% $4.9 Billion in revenues $7.4 Billion in revenues 20% 20%
  23. 23. Complementary Resources Service CDMA WCDMA CDMA 2000 Licensing Engineering (R&D) Global Carrier Relations Finance Innovation Manufacturing& Distribution Governmental Relations Service Licensing Engineering (R&D) Global Carrier Relations Finance
  24. 24. Strategies for Exploiting Innovation Risk & Return Resource Requirements <ul><li>Small investment risk </li></ul><ul><li>Starbucks had 3168 licensees operated in 2006 and revenues from these licensees were 15% of total net revenues. </li></ul><ul><li>Starbucks outsourced to Unisys IT infrastructure services of international Starbucks. </li></ul><ul><li>reduces capital investment </li></ul><ul><li>Non-profit organization Conservation International in order to social responsibilities and coffee procurement strategy. </li></ul><ul><li>Pressure from other non-profit organizations </li></ul><ul><li>Pepsi Co. to develop and distribute ready to drink coffee products. </li></ul><ul><li>Dreyer’s Ice Cream to develop and distribute Starbucks ice cream </li></ul><ul><li>Share investment risk. </li></ul><ul><li>Risky as new innovations do not always succeed. </li></ul>- Legal team - Access to resources and capabilities in different locations - Access to resources of other firms - Access to resources of other firms <ul><li>R&D </li></ul><ul><li>Financing </li></ul><ul><li>distribution channels </li></ul>Licensing Outsourcing certain functions Strategic alliance Joint venture Internal Commercialization
  25. 25. Recommendations <ul><li>Push 3G technology with CDMA2000 chip sets in emerging markets </li></ul><ul><ul><li>Negotiate with governments to maintain open standards & enforce licensing agreements </li></ul></ul><ul><ul><li>Leverage strong financial position to continue investment in CDMA2000 architecture and capture market share </li></ul></ul><ul><li>Acquire 4G company </li></ul><ul><ul><li>Strong financial position allows QUALCOMM to acquire 4G innovators </li></ul></ul>

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