Resources for Sustainable Competitive Advantages in the Mobile Service Market

Convergence effects between telecommunication, information technology, media and entertainment (TIME) markets lead to additional value-added opportunities within these markets, allowing new intermediaries to enter the market [1, 2]. On the other hand, due to these effects traditional entry barriers of these markets disappear and new forms of competition and substitution for existing suppliers and products emerge [3, 4]. The strategic reaction of the incumbents of the TIME industries towards these developments is mostly to pursue cautious competition prevention strategies within these new fields of value creation according to the principle of “cannibalize yourself before someone else does”. Examples for the result of these strategies are free online offers of newspaper publishers or wireless hotspots for internet access from telecommunication providers. Competition prevention strategies are characterized by a high risk of investment. This is the case because high initial investments are necessary to open up these innovative markets. Furthermore hardly any sustainable sources of corresponding revenues exist for the time being. It is difficult to create direct revenues due to the widespread “free lunch” mentality within the internet [5]. Indirect revenues typically generated within volatile promotion markets have proven to be insufficient to amortize initial investments. Consequently, competition prevention strategies seem to be unsuitable. Instead, new fields of added value creation should be occupied only if sustainable advantages – e.g. additional revenues, additional customer share, or lower initial investments – can be derived from a player's existing resources within this field [6, 7]. Thus within converging markets of the digital economy two tasks for incumbents in TIME industries arise: Firstly, sustainable resources typically developed within the traditional markets of TIME industries need to be identified. Secondly, the complementary resources required to create innovative service offerings need to be identified based on theoretical scenarios of the technological evolution. In the following we will focus on the market for mobile services, as an example for a promising innovative field of added value creation in the converging markets of the TIME industries. In the context of the incumbents' twofold task we will analyze their actual and potential resource configuration from a resource-based view. Contrary to the traditional focus of resource-based theory we will not focus on an individual firm but on the typical resource configurations of companies within the markets of the TIME industries. Thereby two utilization scenarios within the mobile service market are emphasized: Portable internet access via mobile terminals and mobile services developed to satisfy the particular needs of mobile customers. In the scenario of portable internet access our findings are that network providers and access service providers are facing an imminent threat to their traditional markets by inexpensive close-range radio technologies such as the various 802.11x, 802.16x and 802.20x standards [8, 9, and 10]. A resource-based analysis leads to the conclusion that the core resources in the market for portable internet access are not only the possession of physical network access points but a trustful and carefully managed relationship with customers. As the incumbents of the telecommunication markets have already developed resources in these fields, their obvious strategic choice is to use them as a basis for the development of the service market for mobile internet access. Services specially developed for mobile users need to generate an added value compared to conventional internet services to reach a significant market share. The key for success in this field is a provider's ability to adapt and bundle services and contents either according to individual user demands or according to local contexts of individual service requests. It is widely acknowledged that the user information necessary to satisfy individual demands will lose its current characteristic as a freely available commodity [11, 12, and 13]. Although the initial market for mobile services is presently dominated by network access providers that originate from the telecommunications industry, our findings are that this domination will be challenged by new intermediaries and players from the traditional media market that mange to create value from customer information from various sources. References: [1] Thielmann, B., Strategisches Innovationsmanagement in konvergierenden Märkten. Medien und Telekommunikationsunternehmen in Online-Diensten und im digitalen Fernsehen, Gabler, 2000. [2] Zerdick, A. (Ed.), E-conomics: Strategies for the Digital Marketplace, Springer Verlag, 2000. [3] Heitmann M., Müller C., Methoden der Strategiefindung unter der Bedingung der Konvergenz von Branchen am Beispiel Mobile, 02.2002, URL: http://www.informationobjects.ch/NetAcademy/naservice/publications.nsf/all_pk/2016 [15.04.2004]. [4] Greenstein, S., Khanna, T., What does industry convergence mean?, In: Yoffie, D. (Ed.), Competing in the age of digital convergence, Boston, Mass. 1997, p. 201-226. [5] Mings, S., White, P., Profiting from Online News: The Search for Viable Business Models, In: Kahin, B., Varian, H. (Eds.), Internet Publishing and Beyond – The Economics of Digital Information and Intellectual Property, The MIT Press, Cambridge 2000, p. 62-96. [6] Barney, J. B., Gaining and sustaining competitive advantage, Upper Saddle River, NJ 2002. [7] Grant, R. M., Contemporary strategy analysis: concepts, techniques, applications, Cambridge, Mass. [u.a.] 1995. [8] Sikora, A., 802.11. Standard für drahtlose Netze, tecCHANNEL 2001, URL: http://www.tecchannel.de/hardware/680/index.html [2004-04-15]. [9] WiMAX Forum, IEEE 802.16a Standard and WiMAX. Igniting Broadband Wireless Access, URL: http://www.wimaxforum.org/news/downloads/WiMAXWhitepaper.pdf [2004-04-15]. [10] Klerer, M., Introduction to IEEE 802.20. Technical and Procedural Orientation, 802.20 Working Group Permanent Documents 04, URL: http://grouper.ieee.org/groups/802/20/P_Docs/IEEE%20802.20%20PD-03.pdf [2004-0415]. [11] Hagel, J., Rayport, J., The new Infomediaries, The McKinsey Quaterly 1997, No. 4. [12] Richie, S., Brebner, G., Gittler, M., Client-Side Profile Storage: A means to put the user in control, HP Laboratories Grenoble, 09.11.2001. [13] Wörndl, W., Privatheit bei dezentraler Profilverwaltung, Dissertation, Fakultaet fuer Informatik, Technische Universitaet Muenchen, Aug. 2003, URL: http://tumb1.biblio.tumuenchen.de/publ/diss/in/2003/woerndl.pdf [2004-04-15].