Antecedent Factors in the Mobile Phone Industry - Research Proposal Example

Antecedents of Global New Product Launch Performance： An examination of Antecedent factors in the mobile phone industry Research Proposal Table of Contents 1. Introduction 2. Literature Review 3. Statement of Objectives a. Sub-objectives 4. Research Design a. Research Paradigm b. Exploratory Study c. Data collection d. Sampling e. Data Analysis and interpretation f. Verification, validation and limitation of research 5. Timetable of Research 6. References 1. Introduction The mobile phone market has become increasingly competitive over the 25 years of its existence with about 1 billion units being sold a year (Woyke, 2008). The demand for mobile phones is not simply as a communication device but more as an entertainment and fashion product, having encompassed features like camera, multimedia messaging, internet access color screens and so on. Till the end of 2007, worldwide sale of mobile phones was 289 units, 15 percent higher than the previous year. Although Samsung from Korea had taken over the American company Motorola, becoming number 2 in the global market, Nokia, the Finnish company, continues to be the leader. Nokia has not only introduced new mobile models, it has also engaged in aggressive price cuts, with the average price of its handsets reduced to Euro 82 from Euro 90. In the first quarter of 2007, Nokia’s shipment of mobile handsets was 252, only 12 percent higher than the shipment in the same quarter the previous year, according to Strategy Analytics. Till then, the quarter to quarter growth rates had been over 20 percent. Although by 2007, Nokia’s market share was 36 percent, compared to 33 percent the previous year (Ecommerce Times). Source: Guardian, 2007 Nokia has targeted the low-income customers to increase its market share by reducing the average price and increasing the number of low-priced products so that 40 percent of its revenues are derived from these products in low-income markets like Asia and Latin America (Ewing, 2008). Hence, Nokia has a 46 percent market share in Asia and 66 percent in Africa. Competitors have observed the rise in replacement demand in mobile phones with new features in these markets. Sony Ericcson of Japan has already introduced two new models, including AM/FM radio with speakers. The mobile phone market is a global one, with companies from various countries competing in all markets. Although Nokia, is the global market leader, it faces stiff competition from companies from other countries. The new entrants from Asia – Samsung and Sony Ericcson – have been providing stiff competition to Nokia since 2004, particularly in Asian markets. The fiercest threat that Nokia now faces is from a new company, Canada’s Research in Motion, which introduced the Blackberry as well as from Apple, which has graduated from a computer company to a communication one with its iPhone that has very attractive design elements (Woyke, 2008). The main driver of mobile phone demand of late has been the markets in India, China, Africa and Latin America (PMN, 2007). These markets contribute to a large proportion of new subscribers globally as well as the replacement demand from new customers who bought their first mobile 18 to 24 months ago. Nokia has been able to capture both these segments in these emerging markets. Particularly as Motorola has been focusing on the mid and top-tier markets, Nokia has quickly captured the vacuum left. Nokia also has taken a significant share of the US CDMA market, which has been the main market for Motorola although it does not have a major market share in America. Source: PMN, 2007 Being a Finnish company, Nokia’s main market is in Europe and it has limited product research facilities in Asia. Hence, some of the smaller competitors have an advantage over western manufacturers like Nokia and Motorola in understanding demand trends in Asia. In the western markets, particularly in the US and Western Europe, consumer demand is stagnant as a result of the global economic recession. Lower consumer spending is likely to lead to postponement of replacement demand for mobile phones, particularly for the high-end products. This is why companies like Nokia are concentrating on diversifying into other markets where demand from first-time buyers has not yet been saturated and it has been focusing on low-end products. Besides, companies are also incorporated new add-ons, like open operating systems like Windows Mobile, Symbian and Google’s Android (Woyke, 2008). 2. Literature Review The mobile handset industry is a new one and a producer’s success depends largely on the acceptance of the new technology by customers. According to the diffusion of innovation theory by Rogers (1962), innovation of a product, service or idea is adopted on the basis of relative advantage, compatibility, observability, trialability and complexity. While adoption is positively relative to the first four factors, the last factor has a negative impact. Customers adopt innovation in five specific phases – by the early innovators who are a small group of people who initiate the innovation, the early adoptors, who are the initial purchasers, early majority and late majority when more customers take to the innovation and laggards who enter into the market at a late stage. Rogers (1995) found that customer behaviour in general formed a bell-shaped curve in adoption and diffusion of innovation. To enter a new market, innovation of the product is essential. According to Porter’s (1980) Five-Forces theory, the level of competition in an industry is defined by the 1) the threat of entry of new competitors (new entrants), 2) the threat of substitutes, 3) the bargaining power of buyers, 4) the bargaining power of suppliers and 5) the degree of rivalry between existing competitors. Analysing the business environment of global mobile phone companies, it may be said that the company faces stiff competition. The new entrants, Samsung and Sony Ericcson, are giving the older companies stiff competition. Although there is no substitute for mobile phones, as it has become almost a consumer necessity globally, individual models of mobile phones are highly substitutable. The buyers of mobile phones have high bargaining power, which is evident from the high degree of price cutting strategies by companies. Suppliers, too, have high bargaining power since almost all mobile phone manufacturers outsource production of components to Asia and capabilities of Asian suppliers have grown. There is cut-throat rivalry among the existing competitors. Fern (2004, cited in Archibald, 2006) has used the Boston Consulting Group (BCG) Matrix developed in the 1960s and Hammel and Prahlad’s (1989) theories to categorize product launches in terms of market share and strategic intent of the player. The BCG Matrix correlates market share with market growth and categorizes the product as successively the Problem Child, Star, Cash Cow and Dog. Hammel and Prahlad (1989) categorizes the strategic intent as technological excellence (TE), operational excellence (OE) and customer intimacy (CI). Products are launched with high technological costs when it is done with TE. The margin requirements at this stage are extremely high to cover development costs. At the OE stage, reverse engineering is often taken resort to. Additional features may be provided at much lower costs. At the CI stage, customer requirements are incorporated into the technology. For global product launches, it is essential to study the various markets that the product is being targeted. When marketers first began to tread across geographical barriers in the 1960s and 1970s, the concern was essentially to expand into new markets, to position products in these markets correctly and to adapt the marketing mix to local conditions. Countries were then considered as independent units and differences were categorized as linguistic, economic, political and cultural entities. As products began to be integrated across countries in the 1980s and 1990s, the concern shifted to marketing integration and removal of regional barriers. The main debate among international marketers, then was whether to “standardize” or to adapt to local market conditions (Levitt, 1983). In international marketing now, a major concern in the present times is whether to design advertising campaigns for product launches by keeping in mind a homogenous set of customers across cultures or to incorporate the cultural elements of the society that the product is marketing in. Woods et al (2005, cited in Dahl, 2000) found that there are significant differences in the purchasing decisions for the same product in markets in the U.S., Quebec and Korea. Hence, the standardized marketing and advertising strategy bears the risk of not being comprehensible to some customers, to which the message may not have any “psychological triggers”. Marketers are increasingly recognizing differences in cultures while developing their business strategies. Hence, Caillat and Mueller (1996, cited in Dahl, 2000) found that "differences between British and American advertising were significant, indicating that consumers of the two countries are currently exposed to distinct styles of commercial messages based on different cultural values". Similarly, Cheng & Schweitzer (1996, cited in Dahl, 2000) found from studying Chinese and US television commercials that "cultural values depicted in Chinese television commercials have much to do with product categories”. Dahl (2000) studied beer advertising in the UK, Netherlands and Germany and finds that cultural differences among the countries affect the advertising content as well as message considerably. While humor (which has been a dominant approach in the UK) and the everyday-usage message dominate British commercials, themes also differ across culture. Association of beer with friendship and sports is higher in the UK than in Netherlands and Germany, where beer is seen more as everyday product. 3. Statement of Objective The objective of the research is to find the antecedent factors in global new product launches in the mobile phone industry. For the purpose of the study, new product launches of the major global mobile phone manufacturers – Nokia, Motorola, Samsung, Sony Erricson, LG, Apple – over the period 2007-08 will be analyzed in order to find the critical antecedent factors that result in success and failures. 3.1. Sub-objectives To identify the external competitive factors in which the product launches are made To analyze the regional market characteristics in which products are launched To analyze whether new product launches involve high degree of product innovation, price competitiveness or design changes To identify the cultural parameters that manufacturers take into account while undertaking international marketing of global products 4. Research Design The nature of the research problem determines the choice of a research methodology, whether qualitative or quantitative. Since the research problem for this study entails intangible elements like cultural differences across countries, a qualitative study is more suitable. 4.1. Research paradigm In this study, the marketing events under study are the antecedent factors for the success of global product launches in the mobile phone industry. The nature of different markets has intangible characteristics like culture, competitive scenario and so on. For qualitative research, it is essential to be elaborate in the preliminaries, which includes the background of the study. This suggests that a qualitative methodology is the most appropriate for data collection since it will allow individual characteristics and experiences of consumers to emerge. 4.2. Exploratory study The exploratory study will be based on case studies of global product launches in the mobile phone industry. This will follow Novak and Gowin’s (1984) Vee Heuristic that combines the various elements of qualitative research. The main elements of the Vee heuristic or Vee Diagram developed by these authors are 1) focus question, 2) world view, 3) philosophy/ epistemology, 4) theory, 5) principles, 6) constructs, 7) concepts, 8) events and/or objects, 9) records, 10) transformation, 11) knowledge claims and 12) value claims. Accepting the improved elements of Vee Heuristic by Ahlberg and Ahoranta (2002), we can state the process for our research methodology as 1) focus question: what are the antecedent factors of global new product launches, 2) value basis: is it important to study the impact of cultural differences in new product launches 3) theoretical basis: new product launches are determined by a variety of factors including innovation, competition, marketing techniques, etc., 4) conceptual basis: cultural differences have an impact on the new product launches in various markets, 5) methodological basis: focus group discussions and questionnaire survey to study the impact of cultural differences on new product launches, 6) description of existing literature, 7) records, 8) transformation, 9) knowledge claims and 10) value claims. 4.3. Research methodology The research will be undertaken on the basis of the Grounded theory, in which a series of interviews are conducted so that ideas of a group of informants come out. Open questions based upon ‘what’, or ‘how’ will be posed to allow international managers of mobile phone manufacturers to provide their own accounts of their experiences. The insight into the culture of the focus group is then inductively drawn from the data, and the result is said to be ‘grounded’ in the data (Glaser& Strauss, 1967). 4.4. Data collection In this study, I will collect information from various sources, including company documents, media reports and published research. However, the main study will be based on the primary data collected through the interviews of international managers. Using the Grounded Theory, each informant’s perspectives on the focus questions will be garnered. As a result, we will be able to collect the common themes and general perspectives on the process of new product launches. It must be remembered, though, that specific answers to questions will not be available. Instead, there will be broad range of views that will have to be supplemented with alternative data and information. The following questions will be designed to assist in developing a systematic approach to the interviews: 1) What are each managers’ experiences in product launches? 2) How competitive are the managers’ markets? 3) What are the strengths and weaknesses of each of the markets and can these be converted into opportunities and threats for the markets that the managers work in? 4) Do managers take into account the socio-economic attributes of the markets while deciding on new product launches? 5) Do managers take into account the cultural attributes of different markets while promoting new products and deciding on advertising campaigns? The interviewees will be contacted before the interview and briefed on the nature of the questions so that they will be able to give a focus to the issues raised and also to be mentally prepared for the questions. 4.5. Sampling For the purpose of the study, 10 managers from 5 companies will be selected, one each from the headquarters of the company and one from a regional market. Since probability sampling is not feasible, given the time and resource constraint, interviewees will be chosen at random. 4.6. Data analysis and interpretation Following the general process of qualitative research, initial data analysis will be made immediately after each interview. In this manner, I will be able to refine the focus questions in the subsequent interviews with newly gained knowledge and insight. Since I will have a large volume of information, the data collected from the interviews will be arranged in a matrix for the purpose of analysis and general ideas. Analysis and interpretation of data will require a careful attention to the issues raised by the interviewees even when these were not raised in the specific questions. Analysis and interpretation are conceptually separate processes; analysis being the process of organizing data into patterns and categories and interpretation provides meaning and significance to the emerging patterns and looking for cause and effect relationships among qualitative parameters. 4.7. Validity, Verification and Limitation of Study Grounded theory is chosen as the methodology for this study because the procedure will provide a systematic picture of the experiences of international managers of mobile phone manufacturers. The results of the study, which are ‘grounded’ in the data, are reliable and valid within the limitations of the methodology. It may be the case that the interviewees did not report their actual views. Hence, the success of getting sufficient and valid results will depend on the skill with which the interview is conducted. To supplement the results, observations by other researchers in the same area will be compared. Care will be taken to minimize any distorting effects arising from the position of the interviewer. 5. Timetable of research Theoretical literature review of product launch strategies: 15 days Exploratory study on the mobile phone global product launches: 15 days Data collection: 15 days Data Analysis and Interpretation: 7 days Report writing: 7 days Editing and proofreading: 2 days Total: 2 months 2 days References Bartlett, David, Nokia’s Battle to Stay world’s number one, BBC News, February 22, 2005, http://news.bbc.co.uk/1/hi/business/4257999.stm Regan, Keith, Nokia Market Share Drops as Market Adjusts, Ecommerce Times, 2004, http://www.ecommercetimes.com/story/34343.html Guardian, Nokia increases market share in mobile phone business, Guardian, November 27, 2007, http://blogs.guardian.co.uk/technology/2007/11/27/nokia_increases_market_share_in_mobile_phone_business.html Cellular Co, Worldwide Cellular Phone Increase 21% in 2003, http://www.cellular.co.za/news_2004/june/062404-gartner_sees_nokia.htm Mobile Monday, Nokia market share breaks 40 per cent threshold, 24 Jan, 2008, http://www.mobilemonday.net/news/nokia-market-share-breaks-40-per-cent-threshold New York Times, Nokia Forecast Adds to Industry's Gloom, April 19, 2002, http://query.nytimes.com/gst/fullpage.html?res=9A06E0DA143FF93AA25757C0A9649C8B63 PMN, Sample extract: Q2 2007 market share and unit shipments, http://www.pmn.co.uk/insight.shtml Woyke, Elizabeth, Mobile Firms Fight For Third, Forbes, March 24, 2008, http://www.forbes.com/technology/2008/03/24/mobile-motorola-nokia-tech-wire-cx_ew_0324mobile.html Fern, Edward, “Strategic Categorization of Projects,” http://www.time-to-profit.com/TTPcategories.asp Hamel, Gary & C. K. Prahalad, Strategic Intent, Harvard Business Review, May-June, 1983 Dahl, Stephan, Cultural Values in Beer Advertising: A look at beer commercials from the UK, the Netherlands and Germany, Presented at the Research Day, July 2000, Intercultural Research Group - University of Luton http://www.stephweb.com/capstone/beer.shtml Levitt, Theodore, Globalization of Markets, Harvard Business Review, May-June, 1983 NOVAK, J.D. and Gowin, D.B. Learning How to Learn, Cambridge University, London, 1984 Ѕtrauѕѕ, A., & Corbin, J. Baѕicѕ of qualitative reѕearch. Newbury Park, CA:Ѕage, 2000. Åhlberg, M. & Ahoranta, V. Two improved educational theory based tools to monitor and promote quality of geographical education and learning. International Research in Geographical and Environmental Education 11(2), 2002 Read More