Cas hong-kong mobile telecom industry

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Case: The Hong Kong mobile telecom industry
Charlotte Baettig, Karin Bonvin, Marc Burkhalter, Margarita Esguerra, Adrian Sauter, Du Xiao Xiao

Table of contents
1. Summary of the case 2. The industry

2.3 General alternatives for competitors 3. New World (NW) 3.1 SWOT-Analyse 3.2 Strategy
3.2.1 Option n°1 3.2.2 Option n°2 3.2.3 Option n°3

2.1 Porter‘s five forces 2.2 Industryattractiveness

4. Recommendation to the CEO

1. Summary of the case
Situation (mid-2000s):

• Entry of new firms in the market and development of new segments due to:
 Deregulation of the market  New technologies: 3G

• Digital system: higher capacity, email delivery and text messaging • 6 2G operators:

• Industry regulated by the OFTA (Office of Telecommunication Authority)
 Grantslicenses  Allows resellers to participate  Promotes mobile number portability

2. The industry
2.1 Porter‘s five forces*

Possible future entrants: PCCW (an operator for fixed lines), China Mobile, and China Unicom




OFTA: regulation power; Large number of equipment suppliers like Nokia, Motorola, and SamsungKeen competition emerges from a high number of competitors: SUNDAY, People, Smartphone, CSL, New World, Hutchison


The bigger the pool of mobile operators, the higher the bargaining power of buyers. Buyers have very low switching costs.


The only possible substitutes are: fixed phones and Internet (e.g. Skype)
* Porter, M., “How competitiveforces shape strategy“, Harvard Business Review, 1997

2. The industry
2.2 Industry attractiveness
Conclusion drawn from Porter’s five forces: • The market is fragmented with severe cut-throat competition • Possible entrants like China Mobile and China Unicom increase competition awareness and uncertainty for future incidents • Even though OFTA regulates the market, the large number ofsuppliers lowers their supplier’s bargaining power • There are no real substitutes. However, the importance of technical advances might have future implications • Customers are looking for the cheapest provider. The regulation by the OFTA says, customers can keep their mobile phone number if they change the operator, then it lowers the switching costs even further  The telecom industry is ratherunattractive, but in motion

2. The industry
2.3 General alternatives for competitors
What operators can do to improve their competitive position in this market: • Invest on 3G technology  obtain the license from the OFTA (already done for CSL, Hutchison, SUNDAY and SmarTone) • Increase the customer’s loyalty
 Invest on advertising  Subsidies on handsets  Distinguish the firm (extend the offerof data downloads, offer customization options)  Move from the CDMA to CDMAY (faster technology)

• Mergers and acquisitions
 Increase the market shares  Eventually enter the Chinese market

3. New World
3.1 SWOT-Analyse
By targeting young customers New world’s mobility must recognize the strategic need for technological developments
STRENGTHS: -Clear market segmentation (teenager,student, elderly) -High market share (25%) -Free numbers calling family members free of charge WEAKNESSES: -Lack of R & D investments -No 3G licenses -Less profitable in relation with market share vs. Competitors

New World
OPPORTUNITIES: -Hong Kong mobile sector free from any government ownership -Product development  young target -China is a good base for low cost -Partnerships / Allianceswith equipment manufacturers like Huawei THREATS: -CSL attracting younger people -China mobile & China Unicom / PCCW -Resellers (MVNOs) -Mobile number portability  easier to change operator

3. New World
3.2.1 Strategy 1: Moving to 3G
Vision: •Be up to date with technology •Increase market share •Stay attractive for young people Advantages: •Teenagers and students always want the best and...
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