Automation and standardization make for an inexpensive and commoditized product, which is emphasized by a vision of the founder M. Dell to have a “low-cost leadership” and to keep every cost, not only R&D but overhead, too, down. Finally, within the organization, a “single point of accountability” makes quality control easier and provides customers with a sense of reliability.
Example of low cost handsets by reliance and zte of releaince
To focus on markets and not technology has a very important strategic consequence regarding the entry market strategy. Some companies will try to push radical technology to reap the profit of innovation and market leadership. For instance, Nokia’s strategic intent was to “take a leading, brand-recognized role in creating the Mobile Information Society by combining Mobility and the Internet while stimulating the creation of new services.”
Furthermore, because of the quick evolution of technology and the environment in the high-tech sector, the time frame for the definition of a strategic intent, and sometimes for staying at the top of a firm, is always much shorter than in more traditional businesses. This point is confirmed by S. Tchuruk, CEO of Alcatel, the giant European telecom equipment maker, who joined Alcatel in 1995, after more than 30 years in the oil and chemical industry: “When I was in the oil industry, it was much easier. You knew what demand was and could easily predict your output.” Still S. Tchuruk is one of the great survivors of the telecom equipment industry. From 1995 to 2004, there have been six chief executives at Ericsson, four at Nortel, and three at Lucent.
The value to a customer of many high-tech solutions is a function of the availability of complementary solutions, like the coverage of the telephone network for a cellular handset. In order for all those complementary solutions to work well together, compatibility is essential. In the cellular telecommunication market, compatibility demands a common set of technological standards for the design of cellular base stations, digital switches, and handsets, to ensure maximum geographical coverage for users. The larger the coverage, the greater the value for customers and the bigger the future demand, leading more customers to invest in the expansion of the network.
Increasing returns explain why the cellular phone caught on more quickly in Europe than in the United States in the 1990s. In Europe, more than 900 telecom vendors and operators backed only one technology, the Global System for Mobile Communications (GSM), while there were four different and noncompatible technologies in the United States. The value for the cellular phone users clearly was much bigger in Europe than in the United States. The value of increasing returns varies according to the different categories of networks.
The simplest communication networks are the “one-to-many” broadcast networks like television. Their value is proportional to N, the size of the audience: the more the audience, the greater the value of the network (and the more you can charge advertisers). This is sometimes known as Sarnoff’s law, named after one pioneer of the broadcast industry. A second type of network is the “many-to-many” telephone network, where everyone can communicate with everyone else. AT&T’s long distance network, Yahoo or AOL provide good examples of this second category. In this case, the total value of a communications network grows with the square of the number of devices or people it connects (N2), as pointed out by Bob Metcalfe, inventor of the Ethernet.
A third category of networks provides the ability to interconnect independent networks, such as Group Forming Networks (GFNs) on the Internet, whose conferencing capabilities allow more than just two-way conversations. Chat rooms, discussion groups, auction hosts such as eBay, user groups buddy lists, trading rooms, and marketplaces allow groups of network users to combine and communicate around a common interest, topic, or purpose. In that case, David Reed, a former research scientist at Lotus, proved that the value of the network scales exponentially with N. On the Internet, standards have emerged around basic foundation technologies (but not yet for sound, graphic, video, and animation software) as connectivity protocols like TCP/IP offer more flexibility at far lower cost than equivalent nonstandard technologies. Soon TCP/IP won over Open System Integration (OSI), which likewise is a technical standard but too costly to introduce widely.
Requirement of Base Technology
From the above article it can be seen that to have a good IPTV service you require to have a very good broadband connection. i.e. one technology is useless without the other. Hence if we want to market IPTV as a service you need to have a very good backbone of broadband services. For instance IOL Broadband is the first company to introduce IPTV services(content provider) in Mumbai using the MTNL backbone. But the problem that the cmpnay is facing is that it cannot market its services in full throttle because MTNL backbone of broadband is not very reliable and the customers don’t have faith in the service provider. No doubt IOL may be providing excellent content, but whats the use if the backbone itself malfunctions.Also if IPTV markets itself very well, then the broadband penetration will also increase in the various parts of the city.
Go global
In our global economy, increasing returns on investment follow the firms that penetrate one large geographical market after another. In telecommunication, Nokia was a Finnish company in the 1980s; it was a European company in the early 1990s and by the late 1990s it was truly global. In 1997, Nokia shipped just over 20 million units; in 2001 Nokia shipped 140 million units, about one out of every three cell phones in the world and less than 3% of Nokia’s revenues come from Finland.
Companies like Ericsson, IBM, Motorola, Nokia, Philips, 3Com, Toshiba and hundreds of smaller companies have agreed to back and promote a new communication standard, Bluetooth. This is an evolving short-range networking protocol for connecting different types of digital devices by wireless signals within a 35-foot range. The goal of the standard is to overcome the difficulty of getting different devices “to talk to each other.” With Bluetooth as a common standard, users will be able to connect a mobile phone with a computer, or access the Internet via their mobile phone.
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