Competitors- This factor has a crucial part in terms of new product area development. It plays a crucial role because of leading companies which have a good reputation compared to Ericsson, can be a strong rival if both companies produce the same product. There are two types of competitors
- Direct Competitors
- Indirect Competitors
Direct Competitors- are similar in form and in satisfying customer’s needs in a similar way
Indirect Competitors- appear in different in form but the product satisfies a similar need. This type of competitors is difficult to identify and understand.
(2)
Evaluation of how factors influenced Ericsson in 18 months and how it can affect the new product area.
Political and legal forces
Legal forces have affected Ericsson in terms of lawsuits. Ericsson has been named as a defendant in six class action lawsuits in the United States, where the plaintiffs alleged that the adverse health effects could be associated with the use of mobile phones. In December 2006, the Stockholm City Court acquitted all current or former employees of the parent company who had all been indicted by the Swedish National Economics crime Bureau for evasion of tax control. The judgment has in part been appealed by the prosecutor.
How this affects new products or services
The lawsuit with regards to the use of mobile phone can affect the company’s desire to move into a new product or service area. This is because technologies such as WIFI and Bluetooth which is rapidly growing can fall into the legal problems due to health concerns.
Environment
- Energy efficient of 3G/WCDMA for 2008 – Improve by 50% from 2005 level.
- Bio fuel – Nigeria, India.
- Ongoing Research Projects (EMF, radio waves & health).
Economical
- Exposure to interest rate risk.
- Exposure to Financial credit risk.
Technology
- Ericsson Mobility World – looking to expand mobile internet application.
Competitors
- Nokia.
- Siemens.
- Apple (Iphones).
Suppliers
- Celestica.
- Elcoteq.
- Flextron.
Inputs
- Steel.
- Aluminium.
- Plastic.
- Fibre Copper.
Outputs
- Cellular telephones (Sony Ericsson Venture).
- Mobile access 2G (GSM/GPRS) and 3G (WCDMA/HSPA) and Mobile platforms.
Customers
- Private.
- Business e.g. customers for 3G (WCDMA/HSPA) include: eMobile and Softbank (Japan), AT&T and T-Mobile (US), Telstra (Australia).
Strategic Analysis
The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.
Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”. For example, in many small businesses there is only one geographical market and a limited number of products (maybe only one product!).
What are the key issues that should be addressed in strategic and marketing planning?
Ericsson’s vision is to be the prime driver in an all-communicating world. This means a world in which all people can use voice, data, images and video to share ideas and information whenever and wherever they want. Ericsson has 130 years of experience and vast experience within the telecommunications industry.
Ericsson wants to improve market share in the future by gaining market share in mobile and fixed networks services and as customers' needs are changing towards all IP networks and high-speed broadband. When Skype introduced this technology back in 2003 this marked a new technology that could potentially change the face of the telecommunications industry and had many operators worried about its potential.
The main potential was being able to make free calls to anyone in world without the need of a network provider subscription.
How do we get there?
Getting access into the VOIP market may require some help from a VOIP provider within this market already examples include Skype and Vonage. The new iSonyEricsson phone we will release will come with all the standard feature of what other Sony Ericsson phones and more features not yet available on the market.
Why is marketing planning essential?
Because businesses operate in hostile and increasingly complex environment, their ability to achieve profitable sales is impacted by dozens of environmental factors. It makes sense to bring some order to this chaos by understanding the commercial environment and bringing some strategic sense to the process of marketing products and services.
A marketing plan is useful to many people in a business. It can help to:
• Identify sources of competitive advantage
• Gain commitment to a strategy
• Set objectives and strategies
"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".
The resources that Ericsson needs in order to compete with their customers are investment in mobile broadband technology along with VOIP technology.
They need to train existing Ericsson support staff to support new complex product.
Strategic Analysis
This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:
Scenario Planning - a technique that builds various plausible views of possible futures for a business
Reaching more people
Ericsson brought telecommunications to more people in more parts of the world than ever before, deploying rural networks and boosting capacity in many high growth markets. The number of global subscriptions grew by a record 500 million, ending the year at 2.7 billion.
Increasing speed and capacity
Their fixed and mobile broadband solutions dramatically improve network speed and capacity. Network evolutions are enhancing quality of service and enabling operators to launch new data services for their subscribers.
Preparing for the future
With the introduction of broadband access, subscribers can enjoy a wide variety of multimedia applications. To accommodate this traffic, however, many operators will have to overhaul their core networks as well.
Expanding their role
By providing operators with innovative offerings and reducing their cost of operations, Ericsson supports their operators in evolving their businesses. They’re taking increased responsibility as a prime integrator and managed services partner for our customers.
Price competition was especially intense this year regarding strategic pricing necessary to win certain new contracts. However, with the merger of several of other competitors, we expect pricing going forward to be more in line with historical trends. The historical price/performance trend in both mobile phones and network infrastructure has significantly expanded the addressable market with resulting unit volume increases more than offsetting lower average selling prices.
Corporate Strategy
Ericsson vision is to be the prime driver in an all-communicating world. This means a world in which all people can use voice, data, images and video to share ideas and information whenever and wherever they want.
Vision
- Ericsson vision is of an all-communicating world.
Mission Statements
- Discovery, innovation, enrich and enable
- Like no other
Business Strategy
Ericsson Business strategy is for a geographic expansion in emerging markets, diversification of features of their mobiles through their joint-venture with Sony and Market penetration with its new models of phones in which they hope gain an advantage with VOIP technology
SWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.
Currents Divisions within Ericsson
- Ericsson Mobile Platforms
- Ericsson Network Technologies (Cables)
- Ericsson Enterprise
- Ericsson Power Modules
- Ericsson Microwave Systems was sold to Saab AB in September 2006
Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry
1) Porter’s Five Forces Model
Considering Ericsson is not really entering a new market, there is no new risks of entering there is no new risks of entering into VOIP mobile phone market.
Although the production costs of this phone will be astronomically high, Ericsson should expect the cost of development and production to decrease as parts become easier to mass produce and manufacturer.
Regulations within this industry are as usual within other Sony Ericsson phones.
There is a substantial loyalty to both Sony and Ericsson products. There I would fully expect sales to be strong of this product. Both companies are well-known for cutting edge technology within their respective fields of specialties that are electronics and telecommunications.
Convincing people to change handsets should not be too much of a problem considering the VOIP feature should encourage existing and new customers. This is because of the lure of free phone calls instead of subscription based network calls.
Ericsson has very good distribution channels. They have many partners within this industry that will help distribute the phone efficiently. At this moment in time Sony Ericsson are unable to undercut other existing business.
2) The threat of substitutes
Ericsson are not really in danger of anything else going onto the market that negates interest of our VOIP mobile phone unless another competitor does something better than Ericsson does. There is no danger to a complete loss in market if Ericsson brings out their phone early within the market and continues to add functionality towards the future iterations of the phones. But future improvement in mobile broadband technologies to improve the quality of services of the VOIP capability within the phone is something that can be a unique selling point.
Profits will therefore be very high initially but will obviously have to drop over time as the market may become saturated.
3) The bargaining power of buyers
We expect many buyers to go out a purchase this phone because it will be one of the best phones on the market, good enough to at least rival the best phones out there. We expect many people to go out and purchase this phone especially new customer without a network provider because this will mean that they will not have to spend as much on a subscribed network provider line.
Many of consumers may search around for the best deals available on the market but will see the combination of VOIP calls and network minutes as an attractive option
4) The bargaining power of suppliers
Suppliers should not be any cause for concern for Ericsson as they have good relations with most of their suppliers.
5) Rivalry among businesses in the industry
Rivalry will be quite fierce within this sector because as mentioned earlier. This is because you would expect competitors to emulate Ericsson’s product This would be by undercutting Ericsson’s prices and possibly thinking of something else, that we’ve have not incorporated into our VOIP phone
Product
It is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It is created by preference and culture.
Here, SonyEricsson partners Skype for Mobile Internet telephony(VoIP), to create the iSonyEricsson.
Product differentiation
Core product: The new iSonyEricsson transcends the problems solved by mobile phones. It is the new wave to connect more people wirelessly using the latest cutting edge Wi-Fi technology which would stimulate a bigger audience due to its main VoIP feature – Unlimited Free communication(phone calls) within wireless connections. It solve the usually problems faced amongst consumers, “I ran out of phone credit”. The western world already boasts of fast internet broadband connection, the iSonyEricsson will be the latest must-have accessory to have in order to fully utilize the internet.
Actual product: This is the new iSonyEricsson which includes the regular features of SonyEricsson phones, and new features to support the VoIP capabilities e.g fast mobile broadband
Augmented product: This consists of extra benefits built around the core and actual products. It includes free warranty for a year and Technical support(Toll-free telephone number).
Consumer product: bought for personal use by final consumers.
The iSonyEricsson is categorised as a Shopping product because before selection and purchase, it will be compared with other similar product. The immediate competitor to the iSonyEricsson is the 3G Skypephone, also launched in the same month.
The key to the iSonyEricsson’s success over its competitor will be SonyEricsson’s strong reputation and brand e.g during the fiscal year ending 2006, the SonyEricsson’s phones outsold Apple’s ipod by almost two-folds. Also, they are the second most profitable handset maker, just behind market leader Nokia.
Place
Is the setting where a product can be bought.
A distributor which is the link between the producer and retailer is very important to marketing. A manufactured product is usually sold to a distributor, which in turn, sells the product to vendors or customers.
The iSonyEricsson phone will be sold through a wholesaler and/or retailer for a number of reasons including:
-
Improving convenience of products by linking “location gap” and “time gap” between manufacturing and utilization.
- Improving competence by decreasing numbers of transactions.
-
Breaking bulk by merging needs of manufacturers and consumers.
- Channel intermediaries act as first line of assistance and can provide more expert customer services.
The distribution chain
Channel Decisions
The proposed channel is based on the following the following: Channel Strategy, Product, price and Consumer site.
Channel members
Using Kotler definition, a “second-level” channel will be used where a wholesaler will distribute to the large dealers.
The iSonyEricsson will be launched on the 1st November,2007 in order to create an awareness of the product before Christmas. Also, the main competitor, 3G Skypephone launches on the 6th November,2007 so our early launch should give the iSonyEricsson an edge.
The iSonyEricsson will target the high income earners at the beginning, therefore we will start in London, then the major cities in England. The next phase would be to make launch in all the big cities in Europe to meet our target. Once our target is met and all our fixed costs are covered the we will start to launch our product in other areas with reduced price in order to target low income earners as well as the students.
The iSonyEricsson will be distributed using Selective Distribution where distributors are carefully selected so sell the product. This avoids reducing consumer’s power to bargain price(Exclusive Distribution) and over-saturation due to excess quantities in the market(Intensive Distribution).
Channel management
The aim is to increase customer satisfaction – Meeting/exceeding expectation in order to be ahead of competition. Key areas are; Supply & Availability, Convenience, Speed of Delivery.
Channel motivation
Motivating entities(owners/employees) of companies within the distribution channel is necessary to achieve maximum efficiency. This will be done by introducing competitors to the distribution phase in order to push sales of the product.
Monitoring and managing channels
This is going to be done by employing auditors to make sure practices leading to good sales of the product are carried out. Also, feedbacks from the consumer could give a good idea about the retailer’s services.
Vertical marketing
Using Contractual VMS, where independent entities within the distribution chain are bound by an agreement. Here, the manufacturer will provide technical and marketing
Price
It is very important because price is the only revenue generating “P” amongst the “4Ps” in the marketing mix i.e, the only element that makes money.
Cost-based pricing
Here, the cost price determines the price per unit. It will involve adding a standard mark-up to the cost of the product.
Variable Cost = £155
Fixed Cost = £10,000,000
Expected Unit sales = 2,000,000
Unit price = £155 + (£10,000,000 / 2,000,000) = £160
iSonyEricsson could by-pass wholesalers by selling directly through websites and stores to customers, Their increased profit margin can be seen below:
At a reduced price of £279,
% Gross Profit = ((Selling price – Cost price) / Cost price) * 100;
= ((£279 - £160) / £160) * 100;
= 74.4%
Compared to:
Selling to wholesalers,
% Gross Profit = ((Selling price – Cost price) / Cost price) * 100;
= ((£177.8 - £160) / £160) * 100;
= 11.1%
Promotion
Activities that communicate the product or service and its merits to target customers and persuade them to buy.
The iSonyEricsson will be promoted by all practical and cost-effective means to achieve maximum coverage.
The Promotion tools
This is only going to be a small part of the whole promotional tool because even though sales people are trained in techniques of personal selling, they are very expensive. it is an effective way to build customer relationships.
The aim is to encourage the sale of the iSonyEricsson by offering temporary incentives e.g free accessories(handsfree, memory cards).
This is a rather long-term approach to establish and maintain a good understanding between SonyEricsson/Skype and the Public to plan for all eventualities.
This will be sent out to out target consumers which includes present consumers of Sony Ericsson and Skype, mobile phone & internet users.
Trade Fairs and Exhibitions
The iSonyEricsson will seek out to gain awareness and exposure by making new contacts and renewing old ones.
The iSonyEricsson will be advertised using the “media” e.g. radio, television, newspapers, outdoor advertisements. A typically set up can be seen below:
SonyEricsson/Skype(Sender) pays for a specific advert which contains a message specific to a target audience(Encoding).
It is transmitted during a set of commercials from a radio station(Message/Media).
The message is decoded by a car radio(Decoding) and the target consumer interprets the message(Receiver).
He/She might visit a dealership or seek further information from a website(Response).
The consumer might buy a car or express an interest or dislike(Feedback).
Sony Ericsson sponsors the Women’s Tennis Association(WTA), and helps promote the Tour in about 80 cities. This will help bring exposure to the iSonyEcrisson phone to people associated with the events.
All these elements will then be integrated to form a distinctive, but logical promotion.
Conclusion
The external analysis carried out above, shows the concerns that Sony Ericsson will face in launching the new product to the public. Sony Ericsson will therefore be able to diversify into a new division quite easily because the company will has an idea on the public’s view and social concerns on the new product. The effect of the external environment on Sony Ericsson in the past 18 months was explained above in order to show how those problems can interfere with the new product. According to the research being carried out on the new product, the external environment will tend not to have a large effect on the new product as explained above.
The strategy is a long term plan of action designed to reach a particular set of goals. The main aim of Sony Ericsson in the creating of the new division is to aim at customer satisfaction and generating profit on goods and services. In order to achieve this aim, the combination of the three main processes in strategic management will be used this includes strategy formulation, implementation and evaluation. This can be explained below-
Strategic Formulation
(1)Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
(2) Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
Strategy implementation
- Allocation of sufficient resources (financial, personnel, time, technology support)
- Establishing a chain of command or some alternative structure (such as cross functional teams)
- Assigning responsibility of specific tasks or processes to specific individuals or groups
References:
http://en.wikipedia.org/wiki/Sony_Ericsson
http://marketingteacher.com/Lessons/lesson_promotion.htm
P. Kotler, 'Marketing Management' (Prentice-Hall, 7th ed., 1991)
Appendix
Questionnaire
- What age group do you belong?
- 16 – 25
- 26 – 50
- 51 and above
- What is your sex?
- Male
- Female
- Do you use a phone?
- Yes
- No
- What is the make of your current phone?
- Have you ever owned a Sony Ericsson?
- Yes
- No
If No
- Out of a 10, how would you rate Sony Ericsson?
If yes
- How did you find the product?
- How much money are you willing to spend on a mobile phone?
- What is your favourite feature on a mobile phone?
- Would you be interested in a new product with these features?
- Yes
- No
