Marketing Project: Docomo Case

Assignment Questions: DOCOMO Case
1.How would you assess the profitability and attractiveness of the telecom industry in Japan at the time of the launch of i-mode? What would you conclude from a five force industry analysis?

Ans: The telecom industry in Japan was booming at the time of launch of i-mode. * In a 10 month period during 1998, the market grew by an estimated 8 million users. This brought the total number of subscribers to 39.8 million users in January 1999- fulfilling 87.2% of Japan’s total wireless market. * The competition in telecom sector was fierce as the competitors tried to gain maximum market share. Large foreign investment started taking place as the Government lifted limitations on the same. Competitors were eager to offer new services. * The annual average growth rate of 68% for the wireless market was astounding but was still small compared to that of fixed line market. * Eventhough market was growing but the ARPU was going down. * There was growth in the internet and email usage; hence it was time to move on to a new technology.
The five forces that affected the industry performance were: 1) Intensity of competitive rivalry
With the launch of i-mode, DoCoMo gained first mover advantage. Its competitors were lagging behind in terms of technology. 2) Threat from new entrants
J-phone responded to i-mode’s success by upgrading its J-Sky service so that users could send and receive large email messages. Eventhough new entrants were trying to gain market share, DoCoMo managed to hold on to their customer base. 3) Threat from substitutes
After i-mode’s launch DDI Cellular and IDO, announced their own data communication services, called “EZ Web” and “EZ Access” respectively. 4) Bargaining power of buyers
There was no real substitute to i-mode and hence no direct competition to i-mode. Therefore the bargaining power of buyers was comparatively less. 5) Bargaining power of suppliers
I-mode provided a platform for the content providers as DoCoMo provided pre-selected websites and the phone manufacturers also benefited as they changed the look as well as other features of the phone.
Thus introduction of the i-mode technology was an excellent move taken by DoCoMo. It gave them advantage in terms of increasing the customer base as well as retaining the existing customers.
2. How did DoCoMo create distinctive value at low cost? How did DoCoMo combine the strengths of the mobile phone and the PC-Internet? How did the value curve of DoCoMo’s i-mode differ from those of the mobile phone and the PC-Internet?

Ans:
DoCoMo created distinctive value at low cost by: * Charging Y300 per month, to access the I-mode network, and another Y100 to Y300 to access any of the subscription only sites. This helped DoCoMo to get 9% commission and then pass the rest to the content providers. * Unlike regular mobile services, users were charged by the volume of data transmitted to their mobile phones rather than the length of time on the network. * Adopting new text language c-HTML which was the compact version of HTML. It was low cost, quick and easy.

DoCoMo combined the strengths of the mobile phones and the PC internet. * While analysing how internet works, the company found out that the number of users increased with the increase in the content. Hence they gave content prime importance. * They adopted the concept of Electronic Concierge by allowing users to access pre-selected websites on the screen of the handset. * The size and weight of the handsets was reduced while increasing screen size, data capacity and battery power.

Fig: Value curve of DOCOMO’s I- mode and PC internet and Mobile Phone

3a) Where and how did i-mode create new buyer utilities?

Ans: * I-mode phones have a central feature: i-mode button which provides easy access for users to internet where they could send and receive e-mails, read news, entertainment and download pages from the web * Users were charged with volume of data transmitted rather than the length of time on the network * I-mode pioneered M2M communications that allow i-mode users to purchase soft drinks and others sundries from Japan’s huge network of vending machines * I-mode and Sun microsystems merged to form i-appli, that allowed users to run a wide variety of programs, from video games to online financial services * Strategic partnership with Symbian, a UK-based wireless operating system company, led to the development of a new operating system adaptable to both PCs and mobile phones * I-mode provided the users with the concept of “Electronic Concierge” that allows users to access pre-selected websites on the screen of their handset * I-mode phones has a slightly larger liquid crystal display than the existing latest phones

3b) What is i-modes business model?

Ans:

Takeshi Natsuno devised a business model for i-mode service based on internet world view.
Internet World View- This is a POSITIVE SUM APPROACH. Internet is an open network that can be accessed with various devices, Eg. Computers, PDAs .the specification of this internet service are not determined by either content providers or carriers. These parties are required to accept one another’s technology and services. Consumers choose the infra-structure to use internet services.
Natsuno believed that NTT DoCoMo need to synchronize its content providers wireless technologies and mobile manufacturers to increase number of users. This win-win relationship among players within the network became the foundation of Natsuno‘s business model.
Business Strategy
NTT DoCoMo collaborated with equipment manufacturers, content providers and other key partners to ensure better quality and compatibility.

Key partners include * Sun microsystems - developed i-appli * Symbian – developed new operating system (OS) adaptable to both PCs and mobiles * Japan Net Bank * Play Station * AOL * Walt Disney
This collaboration created win-win situation for partners and stakeholders.

SOURCE: http://www.nttdocomo.com/services/imode/business/index.html
Simple Billing System * Number of official sites are subscription only sites – fees ranging from ¥100 to ¥300 * All fees are collected in consolidated monthly bill * NTT DoCoMo takes 9% commission from subscription fees * Users are charged by the volume of data transmitted and not on the length of the time
This consolidated billing system benefits consumers as they don’t have to pay separate bills for content providers. This also reduces billing cost for content providers.

SOURCE: http://www.nttdocomo.com/services/imode/business/index.html

4) How did NTT DoCoMo make profits out of its i-mode services?

Ans:
I-Mode service was quickly brought to the market by adopting existing widely used technologies like c-HTML. As a result the content providers could quickly modify their PC-Based websites at a low cost to suit the I-Mode service. The service model for I-Mode was such that NTT DoCoMo did not purchase any content from the content providers nor equipment from manufacturers, but accredited official website/mobile phone to be used with the I-Mode service.
In this profit sharing model customers could subscribe to "Official Sites" by paying a monthly fee depending upon subscription. This revenue from the I-Mode was passed on to the content providers by DoCoMo by deducting its profits. This not only attracted more users but also more content providers.

Submitted By: Group B7
Sushant Kirloskar 2012119
Prajakt Kamat 2012096
Manvendra Chougule 2012086
Samir Vaz 2012104
Gaurav Maybhate 2012077
Sohan Phaldesai 2012112