Case Analysis First Direct : Branchless Banking

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Creating a new communications culture
Dr. Keiji Tachikawa President and CEO
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(No Transcript)
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• Group 2B FT 2005
• Simone Huijs / Suraj Basnet / Ken Kodaka
• / Eugene Kolesnikov / Joan Moreau / Piercarlo
  Oddone
  
• Rotterdam School of Management
• Erasmus Graduate School of Business

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Intro
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Agenda

• Case summary
• Business model
• Competitive advantages
• Current Challenge (1996)
• Strategic Recommendations
• Case update

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About DOCOMO
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• History

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About DOCOMO
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• Market Conditions
• Low PC penetration
• High mobile penetration
• Expensive use of Internet/phone
• WAP
• Competitors EZ-Web J-Sky

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Distinctive Value of i-mode
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• Packet data service
• Closed portal
• i-Menu/Bookmark List
• Always-on Internet
• E-mail
• M-commerce
• c-HTML

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What is i-mode?
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• 1. EntertainmentCharacter Download / Horoscope
• / Fortune Telling etc.
• 2. InformationNews Updates / Weather Forecasts
• / Sports News, etc.
• 3. DatabaseTelephone Directory / Search
• / Restaurant Guide, etc.
• 4. TransactionMoney Transfer / Balance Check
• / Security Trading, etc.

A 3D baseball game
Pokemon Hiroba
CNNUp-to-the-minute news
Weathernews
Northwest AirlinesFlight schedule, prices,
Amazon.co.jpThe online store allowing
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About i-modeTechnology
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• WML and c-HTML technology
• Easy for contents provider to offer sites to
  i-mode
  
• Creating win-win situation between DoCoMo
  and official and unofficial site
  providers
  

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About i-modeTechnology positioning
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Value creationValue network
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• Firm infrastructure

HR management
Technology development
Procurement
Network promotion contract management

• Advertising and promotion to mobile phone users
• Selection of Content Service Providers (CSPs)
• Maintaining subscription contracts
• Maintaining contracts with CSPs
• Lobbying with regulators
• Service branding
• Revenue sharing?

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Value creationValue network
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• Firm infrastructure

HR management
Technology development
Procurement
Network promotion contract management

• Advertising and promotion to mobile phone users
• Selection of CSPs
• Maintaining subscription contracts
• Maintaining contracts with CSPs
• Lobbying with regulators
• Service branding

• Service provisioning
• Mobile phone provisioning
• Phone usage options
• Integrated billing system

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Value creationValue network
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• Firm infrastructure

HR management
Technology development
Procurement
Network promotion contract management

• Advertising and promotion to mobile phone users
• Selection of CSPs
• Maintaining subscription contracts
• Maintaining contracts with CSPs
• Lobbying with regulators
• Service branding

• Service provisioning
• Mobile phone provisioning
• Phone usage options
• Integrated billing system

• Infrastructure operation
• Network maintenanceand expansion
• Front office operations
• Back office operations

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Value creation at low costBusiness model
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Network externalities / Increasing value of netw
ork

Attracting new customers
High Customer retention
High switching costs
Economies of scale
Lower costs of supporting new customers
Clear/strict rules for CSPs
Clear/simple environment for customers
Use of content aggregators
Efficient delegation of administrative work
Efficient billing system
Portion of CSP subscription fee to
- DoCoMo (9) - content aggregators (70) - in
dividual CSPs (21(
i-mode subscription packet volume based paymen
t

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Innovation
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• 1997 - Launched packet data communication
  service
  
• 2000 - Launched phones with cameras
• Beginning of 2001 launches i-Appli, a service
  based on Java
  
• October 1, 2001 - Launched 3G (FOMA) service in
  Japan (currently 3m users)
  
• October 2003 - Introduced in 2Mpix devices that
  can record video and use i-Appli DX
  
• In the works - Phinger Phone using bone
  conduction technology

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SWOT today
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• Strengths
• First mover advantage, experience, image
• Resource leverage
• Bold and innovative company culture
• Synergies with NTT including handset production
• Broadband capability via 3G

• Opportunities
• Low penetration rate European/US market
• Transition to 3G/4G new multimedia services
• M-Commerce
• New technologies in the RD pipeline

• Weaknesses
• Lack of own network in other countries
• Late globalization effort
• Narrowing technology gap with other companies

• Threats
• Other mobile networks encouraged by i-mode
  success
  
• New technologies providing network connection
  (e.g. WiFi transformation into WAN, satellite
  broadband)
  
• Traditional ISPs using 3G/4G capability
• Culture differences in Europe and USA

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Porters analysis
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New entrants ISP / Data providers Barriers Sw
itching cost

Buyers Short term Competitors in Japan Not i
n Europe High switching cost Long term Conver
gence lower switching cost Standardization increa
se bargaining power
Suppliers CSP Non-partners will increase the
ir independency Value of partnership reduced Bil
ling system is a barrier to bargaining
Manufacturers May increase the costof handsets
due to specialization Infrastructure In Europ
e, TelCOs are partners and may go to the standard
networks (cost increases) In Japan, no impact
Industry rivalry DoCoMos main competitors in E
urope are ISPs and cartels of CSPs
Substitutes Handsets PDAs (based on WindowsCE
, PalmOS, etc..) Network Standardized networks
(GPRS/UMTS)
Content Open standards (WAP2)
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Key issues
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• Strong position size, first mover, experience,
  image
  
• Industry leader in hardware and middle-ware
• Leading position in Japan
• Lack of own networks, competition in Europe and
  USA difficult
  
• Narrowing technology gap with other companies
• New technologies competing for network services
  (e.g. wireless WAN, satellite)
  
• Business model success encourages competitors
• Traditional ISPs coming into play in 3G
  networks?
  

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Partnership -Overview-
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• Type of partnership for DoCoMo
• Application of partnerships e.g. Sony
• Content partnerships e.g. AOL
• Technical partnerships e.g. Smart
• Operating partnerships e.g. ATT

High quality Content
Loyal customer base
Proliferation of the i-mode size
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Partnership -objective-
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Reasons for partnership with DoCoMo

• Attractiveness of the i-mode standard
• Comprehensive content
• Attractive design
• Highly readable content

Quality standards of DoCoMo

• Exclusive choice of ATT not best choice

• Technological compatibility (DoCoMo W-CDMA
  i-mode)
  
• Agree future growth strategy (ATT not market
  i-mode)
  

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Transformation to 4G
1980 1G
1990 2G
2010 4G
2000 3G
Voice Service
Voice Low Speed Data Transfer 64kbps
Voice High Speed Data Transfer 384k- 2Mbps
Voice Super High Speed Data Transfer 50M- 10
0Mbps
From Analogue To Digital
Improve efficiency in frequency utilization
Providing Seamless service

• Beginning of data transfer service

• Solution to multimedia communication needing huge
  data transfer

• Solution to lack of frequency
• Alignment to global standard
• Proposition of affluent contents

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Probable feature of 4G
4G Seamless, Anywhere and Super high speed connec
tion

• Business use
• Everywhere super high speed internet connection
• Business trip with super high speed connection
  anywhere with PC
  
• TV conference from high speed train
• On time supply chain management, reporting system
  by video
  
• Home use
• Solution to avoid redundant between mobile phone
  and current internet connection
  
• More fluent and fast connection for video
  download or TV telephone than 3G

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4G Strategy against Wireless
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4G Strategy against Wireless-Market overview-
Mobility
Wide Area
4G
Urban Area
2G,3G
Wireless LAN, ISP
Limited Spot
Competition from seamless service providing
No mobility
0.1
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10
100
Speed of communication (Mbps)
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4G Strategy against Wireless
Hegemony in internet connection

• Maintain current customer base
• Prevent ISP providers from entering into mobile
  4G market
  
• Penetration into ISP or WiFi service market
• Cost reduction for connection
• Campaign for creating consumer awareness to
  enclosure current ISP user
  
• Partnership with ISP

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4G Strategy against Wireless
Proposition of wide range of i-mode contents

• Provide TV program, movies by partnership with
  media companies
  
• Collaborate with CRM system
• Provide higher quality pictures or videos message
  than 3G
  
• Introduce interactive mobile games

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Other future strategies?
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Questions ?
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• 1959
• NTT Formed