Development of technology is a well-cited demand of consumers of mobile phone sets and innovation in the field becomes the single indicator of success. In such a competitive environment inception of a new manufacturer of mobile phone handsets suffers various disfavors. The macro-environmental forces add more insult to the injury. From the analysis of the same the report dictates that the firm has to be responsive to the trends namely the technology and services innovation, the increase in the disposable income of the target market, environment friendly business operation for becoming “green activists”, and the increase of information society roles. There are strongly supported and suggested notions by the study that the compliance with these trends would make the firm more well of and it would result competitive advantage over competitors for an extended period.
Ashman, A., et al. (2006) mentioned that the world’s one of the most competitive industries is the cell phone handset industry. The environment of the industry is rapidly changing worldwide. In such an industry, the inception of new companies is highly threatened of being the looser because of present rulers of the industry such as Nokia, Motorola, and Sony-Ericsson etc. However, there are active threats but due to the rapid growth of such products, the cell phones with very new technologies have brighter future as there is only one competitive difference in the industry and that can only be brought through rapid technological advancement as well as research and development (R&D)1.
The ‘Spider’, a trademarked mobile handset manufacturer, is a new entrant in the highly competitive industry of United Kingdom (UK). The company is to provide high-tech cell phones to its consumers. The company initially offers ‘ProjectorCellPhone’ to the businessperson who is required to project their data and facts to make visualize their ideas and claims. The cell phone has compatibility with 2G and 3G GSM network system, and is equipped with Windows Operating System, WLAN, Wi-Fi, Bluetooth, HSCSD, Printing technologies along with office applications, LCD display panel, PDA functionality and others usual cell phone services such as SMS, MMS, Camera (both static and video), music and video player applications etc. The most prominent benefit is that one could use the phone with any kind of projector through the means of a cable that has several output ends to be plugged with different kinds of projectors such as Cannon, HP etc. The handset could gain at least 100,000 customers in the very first year as the new technology is provided with relatively low cost in the premium price category. The phone has to compete with several low cost Chinese products such as LANYEN70 GSM mobile phone, Vision etc. and so with some high-end brand such as HTC Dream, Samsung etc. To overcome such phenomenon the company occupies a rapid technological advancement to emerge in nanotechnology category. At this aspect, the organisation adopted the following pyramid of competition:
Johansen, B. (2008) has stated prediction of innovation the company would also predict the possible technological advancement beforehand as of 2-5 years by adopting the notion. Then it would collaborate with R&D to gain competitive strength in ideas generation and to select and support standards. The product would go to the market and it has to fight for market share that has already been captured by the present giants. The key competitors in the market are Nokia, Sony-Ericsson, Samsung, I-Phone and Smart phone. The product family competitors are HTC Dream and Samsung Projector Phone etc. are the category competitors. Table-1 has shown the market share of global mobile market where Spider hold minimal shares among others 17.70%.
Ashman, A., et al., (2006) added that in the future the technology will also be in the leading position as same as now and the high-tech fashion phones will also be threatened by the much high-tech phones as same as now. They also argued that if any technology becomes standard for the product the sellers needed to change to that standard. That is why Spider adopts the above stated competitive idea.
External Business Environment of Spider
Robbins, S. & Coulter, M., (2003) defined ‘External business environment’ means outsiders such as different kind of forces and institutions who have ability(s) to influence and affect the organisation’s performance.
And the PESTEL analysis, which is termed as a tool to look at outsiders of any organisation those, has profound impacts on its performances. According to The Environment Scan- Environmental Organizational Scanning (Anon., 2009), PESTEL is an analysis of forces those belong to the macro-environment and are outside the organisations’ control and have impacts on the business’s strategic planning and product development. The PESTEL incorporates social forces named Political (P), Economical (E), Social (S), Technological (T), Environmental (E), and Legal (L) forces. The PESTEL analysis of Spider is as following:
The Spider has to run its operation in UK under some industry definite laws and regulations those govern telecommunications services and its competitions. Saplitsa, I., (2008) added that in 2000, EU Regulatory Framework for the Communications Sectors has been adopted by UK in regard to the users’ interest and it has phenomenal effects on Spider’s business. The different kind of pressure groups such as consumer associations and quality associations both from national and international levels enact pressures to it. The political stability both in national and international sides pave the way to do business in the country and as having no due pressures from terrorism, wars, and conflicts also signals green to better business operations. Ashman, A et al., (2006) mentioned that the government policies of deregulating the market make the manufacturers and operators of cell phone to do business without government intervention.
According to NSO (2009) the consumer price index in January 2009 in the Telephone and Telefax services was 92.4 taking 2005 as 100 in UK. And the consumers trend (ADGX) in 2008 is 4418 in UK. However, in the present time, there is a downturn in the world economy but the rising income of the country’s people generates more of disposable income. Thus, such an increase in income makes the people choosier to purchase cell phones and therefore they are more elasticized to choose mobile phones having more than just a mobile phone features, having capability of more than just making call and messaging texts, and the price is very critical in the same extent. However, inflation rate also cuts the buying powers of the consumers but the growth of 3G mobile technology and nanotechnology is on the trumpet march.
From the table it can be said that it is a high competitive market, as a result Spiders should concentrate on market strategy.
NSO (2009) also added though the tax, VAT and tariffs increase the price of the same product but import and export of the same are growing phenomenally and manufacturers also in rapid technological advancement. The exchange rates of EURO also make doing business more lucratively in the country. One of the more concerning fact is that the low-cost Chinese manufacturers who produce high-tech cell phones are emerging in UK. The UK products more backed in competition due to the less import barriers, the EU countries such as Finland also get many benefits due to the tariff free trade, and hence the manufacturers who only serve in UK are backed again. Inequality in income distribution between top tier and lower tiers is increasing day by day and the disposable income increase for top fifth is increased from 36 to 40 percent whereas that of other three quintile’s is decreased and from 10 to 7 percent decrease is faced by the bottom quintile group.
Saplitsa, I (2008) expressed that the social values and attitudes towards the use of cell phone contribute a due response. Moreover, referent and ethnic groups are playing more of roles in the extent. The group influence is the most important for the Spider’s ‘ProjectorCellPhone’ because the target group of the product is more influenced by the social class, social status and the group belonging. The unprecedented demographic changes in UK trigger changes of social systems, consumption patterns, education and job markets. For sustainable growth, the firm has to make proper knowledge about the societal changes and to adapt to the changes. The very selection of the target customer also demands choosy media uses and thus the organisation may have to incur more costs.2
Ashman, A. et al., (2006) mentioned that particularly the rise of information society triggers importance of telecommunications to the consumers and so do of the advancement of mobile set technology to consumers as more and more related information is available everywhere. Leisure activities also increase the importance of cell phone and its value added services and functionality; and the same are also happened in works. The trends of nanotechnology cell phones is on trumpet march and more of service engagement is enacted such as having Windows operating system, office applications, WLAN, Wi-Fi etc. The firm has also led by the trends and hence has to incorporate these facilities and to add favor the product has projector compatibility.
There is much technological advancement in the cell phone manufacturing field. Johansen, B. (2008) pointed out that the increase of amenities makes the consumers more in need of further improved technology. Now the 3G mobile technology is in the biggest engulfment because more and more mobile connection providers and manufacturer turned to incorporate it. Moreover investment in technology improvement i.e., R&D has increased dramatically. Mobile giants such as Nokia, Samsung, and Sony-Ericsson etc. are investing huge money in their R&D. For example, Nokia has been projected the market demands of advancement 8-10 years prior and generates ideas and then forms collaboration and alliances with universities to shape the changes and definitely, such a movement requires a big investment. Saplitsa, I. (2008) argued that an amount of.74% as percentage of GDP of the EU Governments are usually employed in the R&D activities in their budget for the betterment of products, its quality and thus quality of life of consumers. Change in software is also happened and make the manufacturers relentlessly improve their products. Globotrends (2008) has demonstrated how technological advancement triggers market share as of mobile phone operating systems as following:
For maintaining legislation, organisations have to incorporate in some corporate social responsibilities. There are some believes that the use of mobile phones and radiation from the same may result cancer, bodily injury, ear damage, brain damage etc. those make such a business more vague in terms of environment friendliness. Non-biodegradable feature of mobile phone and parts of the same also gained attention as threats to the environment and thrown away parts of the same become one of the major concern. According to Guardian (February 19, 2009) the GSM Association has made the mobile companies to produce universal charger, the LG and Samsung unveiled built-in solar panels in their mobile phones, Nokia’s Remade of 2008 unveiled the environmental friendliness activity of the company etc. poster the trends how the present giants are responding to the environmental causes. Ashman, A. et al., (2006) added that throughout the world the idea of recycling of the thrown mobile phones and their parts is also getting more awareness. In addition, for the very reason many of the giants such as Nokia are conscious about the fact and the Nokia has incepted three steps of recycling process of cell phones. Moreover, many companies are accepting the following measures, as does the Nokia to be environmentally responsive:
Through the system stated above Nokia performs three tasks namely- substance management, energy efficiency, and take back and recycling (Nokia, 2009). In UK regulations, regarding the environment makes the mobile phone manufacturer to be more responsive to environment and there international regulations increase.
Legal forces of any country lead, protect, and stop organisation to do certain things. Regulatory measures tune fine shape of the organisation according to country legislation. Current legislation in the home market regulates how to and what to exchange and the future legislation may further restraints or frees up. Regulatory bodies and procedures help to building firm legislative base. Employment law of UK also dictates how to the firm should operate and employ man power thus may avail restraint on it. Competitive regulations of UK give emphasize more on end users not on the competitors as they signed EU Regulatory Framework for the Communications Sectors as the report has stated earlier. Ashman, A. et al., (2006) argued that due to the less strong legal framework patenting a mobile design is almost impossible in UK. Consumer protection legislation also has direct impact on the firm’s operation. The various consumer protection legislations of UK have imposed to the mobile phone service providers and manufacturers. The health related legislation in work place makes the firms more vulnerable to any kind of uncertainty and made to follow certain standards in the workplace that ensures workers’ safety and thus somehow increases legal bindings and made the firms more liable. Moreover having some legislative actions such as signing tariff free entrance to the domestic market of the outsiders makes the domestic firms more vulnerable in the competitive power, the same is true for UK.
Four Key Trends the Firm Should Consider in the Next Three Years
The four key trends i.e., the directions having momentum and durability that the firm should consider in the next three years include the following:
Rise in Income and hence Disposable Income
The world will recover its economy downturn very soon and thus increase of income and amount of disposable income would get upturn. Moreover, to recover the economic downturn there would be more investment and thus more employment opportunities and thence will create more disposable income and thus will create more opportunities to gain more profit. As it is known that because of more disposable income, consumers are, looking for more sophisticated mobile sets and thus there is an increase in opportunities of high-tech mobile companies. Moreover, the disposable income of top quintile people is increasing throughout several decades as the report stated earlier so the firm would be in good position in the product as it is aiming the top tier, businesspersons, as its target consumers.
Rapid Technological Development
The only competitive advantage that can be formed in the mobile phone handsets sector is only to be made through rapid technological advancement. This trend will remain rising in the coming three years. This trend would cost the firms more as the investment in R&D is enormous and because of such instances, some companies would have to leave the market results from loosing market share rapidly. The projector mobile phones of same category such as HTC Dream and others would make the market more competitive for the Spider’s ‘ProjectorCellPhone’. Engagement in innovation through analyzing competition, new standards, and product improvement potentialities of the firm would require plenty of association and collaboration with different research firms, universities and independent bodies for the job.
Awareness of Environment Friendliness
Legislation and rapid formation of environment campaigners make the firm to be prone to respond to the action in favor of environment and thus to its stakeholders. UK is a member state of EU and an integral participant of EU legislation. This report stated earlier in PESTEL analysis part so the firms in the same country would make the firms more cost consuming because further R&D will be needed to seek the way to save the environment and has to incorporate many corporate social responsibility programs to be under ethical but profitable business. Moreover, information dissemination of such activities would make the market more prone to certain companies who do well in this regard. On the other hand, being environmentally responsive would lessen the harms of using mobile phone if any; the consumers would be choosier throughout.
More and more information are accessible by the consumers at present. Tailoring group based informational message and promotional activities is also become more complex because exposure to various rapid information makes perceptual dilemma and thus makes decision making a more complex process and such a phenomenon would continue in the next three years. On the other hand, such a society becomes a major source of mouth communication. In the same way becomes threats to the mobile handset companies because negative word of mouth would costs the firm and its brand image and for the very reason compiling these parties demands into the firm’s values and culture results complexity in firm’s sustainable development and competitive advantages.
Strengths and Weaknesses of Spider
The strengths those are carried by the ProjectorCellPhone constitute having latest technology in built along with usual services of a mobile phone, targeting the top tier consumers. The businessmen, who are experiencing increase in their disposable income and thus makes them more prone to the latest technology, being a bearer of a much lower costs in the premium category product, investment in innovation and technological advancement and the product’s capability to be used in any kind of digital projectors. On the other hand the weaknesses belong to the firm include being a very new player of the highly competitive industry, having several industry threats such as low cost Chinese cell phone sets and other projector cell phones, being less familiar to the target consumer and resulting low customer base brand equity.
Opportunities and Threats analysis of Spider
- Increase customers interest on the new design cell phones,
- The employees working in team spirit at Spider are dedicated to construct the impossible into possible and to rotate the calamity into opportunity.
- The creative ideas of management Spider and innovations would open new dimension for further opportunities for the company,
- It has the wider opportunity to drive more seriously in South Asian population density market like Bangladesh India and Pakistan than the other competitors,
- It emphasizes to train the top management of supplier companies.
- Recent global economic recession is a burning threat for the company,
- If the recession long lasts then it will carry more market risk for Spider,
- Spider has to face extreme competition in the global mobile phone market.
- The higher valued product possibly will not sold large volumes, thus pricing would also be a problem.
- Spider has lacking with its traditional marketing strategy,
- Declaim in profitability since related to over-employment among the majority services,
- The increasing non-brand mobile phones are winning market share in less developed countries is also threats for the company.
Limitations of the Report
The report was intuitive in finding the influence of the macro-environment influences on the Spider’s and its ProjectorCellPhone according to the present condition of the market and related industry. The reliance completely on secondary data made the report flaw entrenched and not a close sighted one. If primary research in the related market and industry were conducted, then the results could have more relevance and decision favoring dataset. Moreover conducting some studies on the target consumer group would result the demands of the market and thus would help in tailoring customized product, further technological advancement and customized communication so that the firm could have competitive advantage earlier and to have familiarity to different kind of information society. However, the report results some flaws but it is well build enough to dictate the firm how to approach its out of control forces.
- The analysis suggests that the firm should incorporate some programs such as commencing investment for collaboration with universities and research firms for further technological advancement,
- Acquisition and commercialization of critical technologies,
- Spider should concentrate on formation of products, services and solutions portfolio based on competitive operations appearing as balanced offerings of design, aesthetic image and value- recognition.
- It should provide more attention on its promotional activities customized to specific consumer group and invest in order have word of mouth communication in favor.
- Spider’s cost management is mostly imperative to look after price erosion by analyzing the next generation pricing of the company through the introduction of cost saving devices.
- Diversification and inauguration of other product lines are also to be made by the firm.
- Proper implementation of the recent organizational structure,
- It should focus on mass customization, functions and co- branding with other companies.
Growth of Spider’s ProjectorCellPhone is highly relying on the innovation that the firm could make as per the notion made by the report. The PESTEL analysis reveals that the macro-environment forces outside the firm highly requires strategic moves in order to be competitive in the market. As the disposable income of the product’s target customer is usually increasing, hence, there is a good sign for the products success though there is an economic downturn but no harm is made to the product. On the other hand, investment in rapid technological innovation is highly encouraged to conquer competitive advantage and higher market share. Environment responsiveness through the means of “green production”, recycling, using biodegradable parts etc. is also required by the macro-environment. The stability of political condition both inland and with other countries makes the market more predictable and thus a place of profit making through meeting of consumer demands.
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- Ashman, A., et al. (2006)
- Saplitsa, I (2008)