NTT Docomo, Inc. is the predominant
mobile phone operator in Japan. The name is officially an abbreviation of the
phrase, “do communications over the mobile network”, and is also from a
compound word dokomo, meaning
“everywhere” in Japanese. The company is headquartered in Tokyo, Japan.
The organizational structure is
divided both functionally and regionally.
Within Japan there are 8 regional subsidiaries responsible for service
provision in their territories.
Additional subsidiaries are located outside of Japan in other potential
high growth markets. These other
subsidiaries are focused on building partnerships with foreign communications
companies and conducting research and development. The functional groups, such as
marketing, research and development, and mobile multimedia, are headquartered
in the NTT Docomo headquarters building in Tokyo.
Industry Analysis Based on Porter’s Five Forces
1. Competitive Rivalry
Currently,
the mobile telephone industry in Japan is high as wireless communications has
almost become a necessity. Plenty of real life examples could be given about
telecommunication companies ending up making losses trying to cut prices lower
than their competitors. International competitors like Vodafone AirTouch,
British Telecom and AT&T is putting pressure on domestic companies to be
competitively efficient. The capital
intensity required in the business has resulted in these companies owning large
specific assets. As a result, they are
willing to fight fiercely to defend their investments from competitors.
2. Threat of Substitutes
Within
the wireless industry, there are two competing technologies and standards
(W-CDMA and CDMA-2000) leading to a huge debate between the Americans and
Europeans. Docomo was the first in the
world to introduce the first ever 3G network. Docomo also provides 4G LTE.
Docomo’s first mover advantage as well as 3G and 4G LTE currently being the
most popular technology in the mobile communication industry worldwide
significantly eases the threat of substitutes on Docomo both domestically and
internationally.
3. Bargaining Power of Buyers
The
consumers do have a lot of alternatives to switch to if they are not satisfied
with the services they are getting.
Although companies are trying to lock-in customers with different
strategies, small differences in price and services could cause customers to
change providers. Hence, we can say that the bargaining power of buyers is
high.
4. Bargaining Power of Suppliers
Suppliers
in this industry are handset manufacturers, infrastructure providers, and technology
developers. Recent international
agreements between major cellular phone manufacturers and mobile service
providers have also resulted in most handsets being compatible with different
wireless services provided. There are
several competing wireless standards such as CDMA and GSM, which undermine the
bargaining power of technology developers.
It is also noteworthy that wireless service providers cannot switch from
one technology provider to another without incurring high costs in rebuilding
infrastructure. Docomo backward integrated by investing heavily in R&D and
developed its proprietary standard 2G (2nd Generation) PDC and 3G
W-CDMA to reduce reliance on technology providers.
5. Threat of New Entrants
The
threat of new entrants in this industry is moderate. Currently, there are just a few important
players. New entrants are usually
discouraged through ownership of patents and licenses, network externalities,
excess capacity, specificity of assets and high exit costs. The main players in
this industry own licenses to use the technologies for their networks. Even with all the barriers mentioned, payoffs
are high enough to attract new entrants. Based on our industry analysis, the
wireless industry in Japan appears very profitable but increasing competition
could erode profit margins in the near future.
References:
web.mit.edu/course/15/15.249c/Docomo.doc
