Innovation and Change of Mobile Phone Industry - Report Example

Running Head: essay Mobile Phone Industry of the of the of the Political environment analysis of Mobile Phones Political environment surrounds any industry and affects its decisions and growth. It constitutes environmental as well as governmental rules and regulations that could allow or deny some or many of the innovations thought of by the players operating in the industry. Mobile phone industry, being technology driven and investment intensive, has to work by the approval of the legislative and regulatory bodies. Factors coming under political environment that have impacted the change and growth of mobile phones are (Tutor2u n.d): Environmental protection Mobile phones have been associated with radioactive rays emission and unsafe ways of disposal of batteries and mobile parts. Government has always bended its brows on companies that have innovated in their technology and business practices but not provided for safe and eco-friendly disposal of parts and batteries (“Life Cycle Management: A business guide to sustainability”). Being responsible to the environment affects the product offering in the way that consumers make an image of unethical manufacturer in their minds. Nokia has been able to create a good image by providing for eco-friendly disposal of its handset parts across the world. Taxation Taxes are means of revenues for Government. A flourishing industry provides better prospects of high taxes to the government. Mobile phone industry has climbed up the ladder of evolution and growth in a very short span and has also been taxed heavily for latest technological innovations. These innovations sometimes help to curb emerging competition due to its monetary intensity and also help avoid malpractices which might take place under innovation disguise. Consumer protection Consumer protection laws and regulations also have a huge bearing on innovation taking place in mobile industry. Innovations are expensive and if the involved technology does not satisfy customer requirements, it has to be replaced abiding by consumer laws, which could be a means of huge losses for the innovator (Bonthron 2009). International trade Technology reducing international distances every day, mobile manufacturers have to resort to efficiency in operational costs by rationalizing their supply chain through international trading. However, across borders, import and export charges and duties have much affected the growth of mobile phone innovation. There have been many cases where host government has denied entry of foreign players due to the fear of their market being captured by other telephony giant, thereby siphoning a major portion of their GDP. Competition regulation Competition has been very stiff in the mobile phone industry due to it being lucrative and imitability being high. When competition gets higher or the monopolistic manufacturer becomes the price maker, governmental regulations try to break the ice by either restricting some players or allowing greater access and entry. Government attitude Government attitude matters a lot in allowing for change and innovation. Government policies turn liberal if the change is seen as favourable to the economic development of the whole economy. It can make stringent rules or deny the entry of foreign players or does not allow for ventures and alliances between major players, all depending upon how well the change affects the overall economic and regulatory framework. Many countries have restricted many practices in mobile telephony due to increased instances of terrorism, which has direct impact on the growth of mobile phones. Employment laws In mobile phone manufacturing, there are many processes that are considered hazardous or which need skilled workforce. Many manufacturing giants have been condemned of worker exploitation because of which manufacturing operations have been hampered, resulting into delays in change and innovation. The Teece Model Breakthrough innovation has been the cornerstone for success in mobile telephone industry. Mobile phones have changed the way we communicate in the society and have revolutionized the way of living (Fransman n.d). In a way, mobile phones have leapfrogged between development and being developed (Funk 2004). Teece model defined Teece Model was propounded by David Teece when he established a relationship between two variables of imitability and holding of complementary assets and defined the circumstances where a firm can register profits under the forces of these two variables (“University of California”). When any new technology enters the market, a juggernaut comes to replicate the technology to fulfil the huge market demand, however, profits from such innovation can be availed by that firm only which has sufficient complementary assets in the form of distribution channels, marketing function and brand name that supports the spreading and marketing of innovation. A diagrammatic representation of Teece Model is shown as below: Source: www.innovationzen.com Mobile phone industry has evolved from a transmission device to a payment terminal and online system and has seen numerous changes and innovations in its life cycle. However, these innovations have not been the property of a single mobile manufacturer. The entire globe and companies across boundaries have benefitted from innovations taking place in mobile telephony (Insightcentre 2005). Initially when mobile telephony was introduced, people were not aware of such sophisticated technology. The innovator made huge profits through this breakthrough innovation because there was negligible competition and people had demand for a unique device (Anderson & Jonsson 2005). However, it could not enjoy monopoly due to lack of trading and distribution activities and also entry of new players into the market, seeing huge upsurge in demand. Profits achieved from innovation and changes in mobile phone industry have been much affected by paradigm shift in supply chain and operations management. Any innovation is successful when it is communicated to more and more people. Earlier technology did not give rise to this opportunity and the innovators were restricted to local boundaries which ultimately restricted their profits (Pantech Group n.d). However, with increased awareness of developments in buyer supplier relationship and information sharing across the supply chain, mobile manufacturers have been able to secure widespread networks and distribution channels, expanding their reach to far off locations. When innovation was imitated, the complementary assets did not supported as consumer awareness was low, absence of strategic relationship existed and even companies have not registered that much of brand awareness. However, with complementary assets increasing with every player, competition further rose which compelled the need for technical advancement and innovative edge. Now even the innovator had proper complementary assets to support its innovation but now the biggest threat was the imitability of its innovation within matters of time. Nokia has been dominating the mobile industry, because it has held its complementary assets very tightly (Isaacs 2001). Even though imitability is high and as soon as it comes with a novel technology, all the rivals get on their toes to replicate that with even some added features; Nokia has never allowed its market share and profits to slip down because it exercise full control over its supply chain and distribution. It has established collaborative relationships with its suppliers that make innovation available and real in comparatively lesser time period (Kao & Lee 2010). Its marketing function and in-depth knowledge of consumer behaviour (Mooij 2009) and buying pattern judges the apt users of that innovation before the actual sales which helps it avoid the exploitation of its complementary assets by the competitors (Lindholm et al 2003). Although other big mobile manufacturers like Samsung, Motorola, Ericsson and LG have also come up with sleek and trendy designs in mobiles but innovation is counted on technological front, which has been initiated by Nokia always. As opined by David Teece, tacit knowledge also contributes in placing a safeguard against copying of innovations as innovations are direct result of expertise and dedicated hard work with specialized knowledge in the said domain. Nokia is able to introduce innovations and change in mobile telephony, owing to its globalized work force from different nations and employees expert in their domains. This makes task easier for Nokia where other players still wander in search of talented designers and engineers. It not only makes innovation process speedier, but also restricts other to imitate due to lack of professionals and tacit knowledge human asset base. To make its innovations more enforcing, Nokia has established its brand identity (Branding Asia, n.d) by being an eco-friendly and consumer interests favouring organization. It provided for replacements of its defective batteries along with hygienic disposal of mobile parts. All this has anchored its brand name in the minds of consumers, which has not let the rivals eat out the profit of the innovator. Nokia is still enjoying monopoly over the mobile phone market, only because it had realized much before that it cannot do away with imitability aspect but can definitely hold its complementary assets tightly which will provide a cutting edge to it over its stark rivals. It had invested hugely on research, development, outsourcing and safeguarding itself from imitation of its innovations (Grunewalder 2008), but the factor that has worked for it is its reputation in the market of being the innovator and an organization that determines market demand before the actual consumer does. References Anderson, J & Jonsson, M 2005. The Mobile Handset Industry in Transition. Retrieved April 18, 2010 from http://www.jamieandersononline.com/uploads/The_Mobile_Handset_Industry_in_Transition.pdf Bonthron, B 2009. Software and Vector Math: A new approach to innovation in the consumer electronics industry. Retrieved April 18, 2010 from http://www.tcg-advisors.com/resources/documents/InnovationintheConsumerElectronicsIndustry.pdf Branding Asia, n.d. Nokia: Building a powerful technology brand. Retrieved April 18, 2010 from http://www.brandingasia.com/cases/nokia.htm Fransman, M n.d. Evolution of the telecommunications industry into the internet age. Retrieved April 18, 2010 from http://www.telecomvisions.com/articles/pdf/FransmanTelecomsHistory.pdf Funk, J 2004. ‘The Product Life Cycle Theory and Product Line Management: The case of mobile phones’. IEEE Transactions on Engineering and Management, vol.51, no.2. Grunewalder, A (2008). Analysis of Nokia’s Corporate, Business and Market strategies. Germany: Grin Insightcentre 2005. Delivering new growth and new wealth in the mobile phone sector with disruptive breakthrough innovation. Retrieved April 18, 2010 http://www.insightcentre.com/A%20breakthrough%20disruption%20in%20the%20mobile%20phone%20sector.pdf Isaacs, A., 2001. NOKIA- Its tough being # 1. Haas School of Business Kao, H & Lee, J 2010. The Application of Shanzhai Innovation Model in China: The examples of mobile phone, notebook computer and automobile. Retrieved April 18, 2010 from http://www2.druid.dk/conferences/viewpaper.php?id=500846&cf=43 Lindholm, C, Keinonen, T & Kiljander, H 2003. Mobile Usability: how Nokia changed the face of the mobile phone. McGraw Hills Life Cycle Management: A business guide to sustainability. United Nations Environment Programme 2007. Mooij, M (2009). Global Marketing and Advertising: Understanding Cultural Paradoxes. London: Sage Publications Pantech Group n.d. Accelerating Innovation in the Ruthless Mobile Phone Industry. Retrieved April 18, 2010 http://www.caelliott.com/docs/plm_PantechGroup.pdf Tutor2u. Strategy- Introduction to PEST Analysis. Retrieved April 18, 2010 http://tutor2u.net/business/strategy/PEST_analysis.htm University of California. Profiting from Technological innovation. Retrieved April 18, 2010 from http://businessinnovation.berkeley.edu/Teece/research_pfti.html Read More