- UK news broadcaster ITN is providing an election news service to “Vodafone Live!” subscribers, headed up by their political team, including Nick Robinson and Alastair Stewart. The 3G service will include daily text updates and a picture message sent at 8pm every evening, consisting of a video and text summary of the key political events of the day, plus an opinion polls round-up.
- In 1984, the UK government privatised the telecommunications industry, and established Oftel (now OFCOM), the UK telecommunications regulator. The regulator ensures the market remains competitive, and recently put pressure on the market to reduce prices for calls between networks. (BT’s history, btplc.com)
Economic
- Mobile phone radiation is a serious issue. In 2003, UK Government spent 1.4 million to research the radiation of mobile phone.
- Convenience and cost are the main reasons consumers are choosing to send texts instead of making voice calls, be it fixed or mobile calls. Half claimed to send text messages when their home fixed line was tied up or connected to the Internet.
- "The forecast for 2003 for `pure-play' digital cameras is about 32 million or 35 million units sold worldwide," (160characters.org) It can be seen that mobile phone industry is one of the big industry all over the world.
- The mobile phone sector is a major employer, “employing nearly 200,000 people” (O2 CSR, 2004), and the UK’s economic upturn through the 1990’s boosted consumer confidence, helping the industry grow.
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At the end of 2000, Nokia Ventures, Vodafone, Apax Partners and Argo Global changed its model from consumer auctioning by mobile to "mobile marketing". Above compiles interactive consumer marketing using the mobile channel and mobile phone technology Sales of cell phones with cameras embedded could reach 50 million units and phones that have cameras as a separate attachment could see another 40 million units.
- Mobile telephony accounts for 2.3% of the UK’s GDP, and for £15 billion per annum in tax. (O2, Media Centre, 2004)
Social
- There are now more GSM mobile handsets in daily use than the total number of personal computers and televisions combined.
- Usage of mobile telephones and penetration into the market has increased most notable amongst the 55+, C2DE social grades and middle income groups since 2000. (Oftel, 2003) Equally, there has been a considerable increase in the use of mobile phones by the young.
- "As we rapidly evolve towards a mobile wireless information society that will bring about convergence of mobility and the internet, GSM is continuing to play a crucial role in facilitating the smooth transition to the next generation of mobile telecommunications services," concludes Jenkins.
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As mobile handsets become more advanced, networks are being forced to address the concern that children will be exposed to inappropriate material such as pornography and gambling via their telephone. The network providers are committed to the use of age verification software to try and prevent under-age users accessing this material. (BBC News 2nd July 2004)
- Teenagers have transformed their daily communication structure by text messaging.
Technological
- The mobile industry is fuelled by technological change, and which played an enormous part in its growth since 1985.
- Now is possible to use mobile phone watching television.” There's live Sky News and CNN to keep you up-to-speed with the latest news from home and around the world.”(Vodafone.com)
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O2 has launched a 'super fast' 3G service in the Isle of Man through its subsidiary Manx Telecom. O2 CTO Dave Williams said that "HSDPA delivers the kind of 3G we were all promised in the first place." By Q3 2006, O2 said it will roll out HSDPA across its UK, Germany although Ireland may launch a little earlier. HSDPA upgrades 3G to improve the network's data performance, taking downloads speeds up to 1.4Mbps in its current form, though O2 is looking to improved data rates that should push 3.6Mbps by the time the technology goes live outside the Isle of Man.
- Downloadable ring tones and logos are increasingly popular among teenagers markets.
- The technology present in mobile handsets is constantly being upgraded, and consequently the products have short product life cycles, leading to rapid obsolescence.
3G phones
Legal
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Planning law has also been a key issue for network providers when locating base station transmitters. The most ideal locations are usually in highly populated areas, and have been denied planning permission on the basis they are unattractive.(BBC News 14th January 2005)
- There are a number of legal considerations surrounding the mobile phone industry, one of which is the current health concern linked to the use of handsets, and proximity to transmitter base stations. The 2000 Stewart Report, set up by Department of Health, found that exposure to radio frequency radiation at levels below existing guidelines, did not cause adverse health effects. (Jon Agar, 2003)
- Another health and safety law was implemented in 2004, preventing the use of mobiles whilst driving, increasing sales of hands free kits.
Environmental
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Lancet medical journal (1988) reported that affecting human’s health. causes blood vessels to constrict and increases blood pressure.
- Over 20,000 mobile phone masts are active in the U.K. this means that almost everyone is being constantly exposed to low level radiation.
-
According to the BBC News 27th July 2005, it shows that one of the key environmental considerations facing the mobile phone industry is the positioning of their transmitter base stations. These have not only been questioned for their safety in populated areas, but are also unsightly.
- Environmental consideration needs to be given when dealing with waste resulting from disused handsets. Many network providers now have recycling bins in their retail outlets, where handsets can be disposed off in an environmentally friendly fashion. The sustainability of resources used in manufacturing is also an issue. “The growing production and use of mobile phones, has resulted in an overall increase of resource consumption.” (Vodafone.com)
- Mobile phones are becoming an increasingly popular way to listen to music.
1.52 Porter’s Five Forces Analysis
Figure 1
Figure 1 show the five forces framework decides by Porter (1985).Porter suggests that firms need to analyse five factors within an industry in order to understand its nature.
Rivalry between established competitors in the industry
- There is an abundance of mobile phone suppliers and a high level of competitive rivalry in the mobile industry.
- Another source of industry competition is the increasing emphasis being placed on extra services, such as downloadable games and ring tones. These areas of rivalry are likely to increase in importance as the network operators implement 3G conversions and encourage existing and new customers to upgrade to compliant handsets.
- On the other hand, this strategy is also subject to the legal requirements of the b1973 Fair Trading Act. Any takeover giving a business in excess of a 25% market share maybe subject to investigation by the Competition Commission.
- The number of network providers is limited to five, dictated by the number of airwave frequency licenses granted by the government. Despite this low concentration, the industry remains highly competitive, partly due to its maturity, prompting the need for providers to maintain existing customers. Customer retention rates are secured through upgrade options and new phone offers at the end of the contract period.
- Develop a differentiated product such as .The market offers a large variety of tariffs and phone packages giving the customers a high degree of choice. ‘Stop the clock’ is one of the popular pay as you talk plan produce from Vodafone recently.
‘Stop the clock’ advertisement
Threat of new entrants
- The large advertising and marketing budgets used by incumbent firms act as a barrier to new entrants, who would need to match this spending in order to compete effectively.
- There are high barriers to entry in the mobile phone industry. This is mostly due to government restrictions on the number of airwave frequency licenses available, meaning only a limited number of network providers may exist. These licenses are expensive, during licence bidding for 3G in 2000, the total bids for 5 licences amounted to £22 billion. This acts as an extremely high barrier to entry. (The ESRC Centre for Economic Learning and Social Evolution)
- There are also long- term relationships between suppliers and networks which would be difficult to replicate.
- In addition, high costs of the infrastructure required to run a network such as base stations and transmitters.
Bargaining power of suppliers
- Supplier will charge as much as they can for the resources they offer to the industry. Manufacturers are competing on handset price and features, with an ever increasing demand for feature based product differentiation. This gives the supplier slightly more influence over a network provider attempting to attract customers with the latest phones.
- The bargaining power of suppliers is moderate to low.
- There are many suppliers competing for market share, and market saturation has led to phones being given away for free on selective contracts, undermining manufacturers pricing strategies.
- Acquire a supplying firm in order to control the availability of raw materials to the business.
- Mobile handsets suppliers are also in some cases the suppliers of the base station infrastructure, including Ericsson, Motorola and Nokia, giving them a greater power over the networks. (Johnson & Scholes, 2002)
- In mature mobile phone market, conditions has led to a situation whereby upgrading is more important by networks than increasing the existing customer base. To retain existing customers and entice new ones, handsets are supplied which are network specific. For example, the pink color Motorola V3 only available at ’The Carphone Warehouse’. Therefore, making the supplier more dependent on the network provider.
Limited Edition of Motorola V3
Bargaining power of buyers
- The bargaining power of buyers is very high in the mobile phones market. The market is more and more mature with a high degree of penetration, putting suppliers in a relatively weak position.
- On the other hand, high buyer bargaining power is the competition between independent retailers and the network provider’s own retail outlets. Buyers are looking for the best deals, and negotiate favourable terms in the market.
.
- Customers are always changing their mind on networks and port their existing telephone number to the new provider. There are many choices of network and tariff options which meet different customer needs. However this choice brings with it a danger of over complexity. The movement from one network to another is defined as the ‘customer churn rate’. In 2003, 27% of both prepaid and contract customers moved networks. (Oftel, 2003) Incentives to remain with existing networks are offered through free handset upgrades, however handsets are also offered by alternative networks as a joining incentive. This means buyers can negotiate both the terms of contract and the preferred handsets, signifying a high degree of buyer power.
- Also, there is an abundance of mobile phone suppliers, Vodafone Orange, O2 and T-mobile, with most major electronics manufacturers offering a product and again providing excess choice to the buyer.
- Low prices, unique trading system, excellent customer service and convenience due to good location are the main issue to attract new customer
Threat of substitute products
- Consumers have many option of buying an alternative good because direct substitutes exist for the output of mobile phone industry.
- There is low level of treat of substitute products in the industry and no direct substitute exists for making a telephone call whilst on the move. Fixed line telephones are the clearest substitutes, and the call costs are generally lower.
- There has been some technological development relating to satellite mobile telephones, operating on a different system to the base station networks, although this technology remains in its infancy and offers no credible threat.
- However, substitutes do exist for many extra features on the latest handsets. Many of the new devices have incorporated portable music and video players, which may be substituted with other stand alone devices. The quality of cameras on phones is beginning to catch substitute standard digital cameras.
- A substitute product is made available for sale, use spoiling tactics. Firms may cut their price or run huge promotions to try to prevent the competitor becoming established.
1.53 SWOT analysis
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT includes an internal and external element. It can be used in every different organisations. Also, it helps managers to set up business strategy, make marketing decisions and help organisation reacting the change of the market in time. Nokia is one of the most famous mobile phone suppliers. SWOT analysis of Nokia mobile phone shown below in figure1.54.
Figure1.54 SWOT analysis of Nokia mobile phone
1.6 Conclusion
In summary, technological advances have helped to turn the mobile phone into an entertainment console. 3G mobiles provide a faster phone service to conventional handsets as well as offering additional products to the user such as internet access.
PESTLE has provided an analysis of the key influences present in the UK mobile phone industry. Mobile phone radiation is a serious issue which public are concerned about. Also, Porter’s five forces had displayed that consumer behaviors, reasonable price and quality of service is the key elements to achieve success in mature mobile phone market.
This report has attempted to demonstrate how mobile phone market has evolved. It can be seen that buyer power is shown to be high and supplier moderate to low, with a low threat of new entrants into the market. Hence, marketers need to stay abreast not only of technological developments, but also of the way people respond to them.
“Mobile device industry volumes in 2006 to grow more than 10% from the 780 million units we estimate for 2005, and the mobile device market to also grow in value in 2006.”(nokia.com)It has a rapid grow in mobile industry in the future. Mobile Operators and Mobile Phone Suppliers have invested big-time in 3G. On the other hand, mobile television will be a logical extension to the 3G phone’s capabilities and instant messenger applications may be fully integrated with mobile technology.
1.7 Critical Success Factors
It had a rapid growth in the past few years in mobile phone industry. Technology innovations not only help mobile supplier produce different kind of high-tech phone, but also advance the market growth. In order to expand the market size and increase competitiveness, providing good services to consumer, invest in technology and marketing research is necessary. 1.8 References / Bibliography
1.81 RESEARCH PORTFOLIO
Web Sites
This is the website of the BBC newspaper. This website provided a huge number of most updated news in UK. I had used following article as my PESTLE analysis.
BBC News 27th, July 2005 Row over hospital roof phone mast
[Accessed 27th, July 2005]
BBC News 22nd, November 2005 Big growth in mobile phone sales
http://news.bbc.co.uk/1/hi/business/4459278.stm
[Accesses 22nd, November 2005]
BBC News 3rd, November 2005 Mobile music 'gaining popularity'
[Accesses 3rd, November 2005]
This website provided a lot pf research on mobile and fixed line phone information in UK.Ofcom is an independent authority for the UK communications industries which responsibilities across television, radio, telecommunications and wireless communications services.This provided information of consumer behavior and new techniques.
Oftel Residential Survey (02/2003), Consumers’ Use of Mobile Telephony,
[Accessed 14 January 2005]
It provided news and events happened in mobile phone industry.
(2003)
http://www.160characters.org/news.php?action=view&nid=72
[Accessed 12th, August 2003]
3G is one of the mobile suppliers in UK mobile phone industry. This website is introduced new phones and all history about this company in detail. It also provided all the news relates to mobile phone industry.
Socio-Economic Impact of GSM Wireless
[Accessed 8th March, 2004]
This website provided a study of human behavior base on Economics, Psychology and anthropology. There are many date and graph shows in this website. It is helpful to analysis UK mobile phone industry environment.
The ESRC Centre for Economic Learning and Social Evolution (ELSE)
[Accessed 14 January 2005]
This website show different products and services such as o2 future plan, financial report, new products and brief history of the company.
This website report the most update news happen in this company. Also it has divided into two parts, personal and business.
This website provided lots of information and forecasts about the UK mobile phone Industry and services produce by orange.
This website provides a diversification of services.
Textbooks
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Jean-Pierre, Jeannet and H.David Hennessey (2001) Cases in Global Marketing Strategies. 5th Edition , Houghton Mifflin Company
This book provided me with an overview on different industry such as drug and car industry. It was clearly laid out, and had good use of example to aid your understanding of the concepts.
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Brassington, F. and Pettitt, S. (2000). Principles of Marketing. 2nd Edition, Prentice Hall.
This book was a good reference in giving basic analysis of marketing tools and principles.
- Joyce, P. and Woods, A. (2001), Strategic Management – A Fresh Approach to Developing Skills, Knowledge and Creativity, Kogan Page Limited
This textbook contains analysis of strategies management. It use to analysis PESTLE analysis.
- Agar, J. (2003), Constant Touch – A Global History of the Mobile Phone, Icon Books UK
This was useful in giving information on mobile phone industry. It shows the history and evolution process in mobile phone.
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E Johnson, G. and Scholes, K. (2002), Exploring Corporate Strategy – Text and Cases, 6th Edition, Prentice Hall
This book indicates the marketing strategy in different mobile company.
E - Journal
It is an e-journal which provides a clear explanation of traditional political structures.
The mobilization of democracy
[Accessed October 2005]
It is an e-journal which included a health report in 1988.On the other hand, it gave an illustration of how does it cause radiation in different environment. Also, how to prevent this problem is UK government mainly concerned.
The
[Accessed 2003]
