The Future Sustainability of The Phone House - Research Paper Example

Industry Analysis As per December 2006, there were over 50 million mobile phone users in France. With the launch of multimedia cell phones in 2002; a sudden hype for mobile phones was noted worldwide. In France too from 2002-2006 the mobile phone users increased by 7.4% every year. Before 2002 mobile phones were only used for communication purpose but after 2002 mobile phones became a fashion statement with digital cameras, music players, internet facility etc. Now mobile phones are a one gadget for all the purposes. Identify key driving forces capable of causing significant change in industry conditions There are three main mobile phone operators operating in France, Orange, SFR and Bouygues. Orange being the largest with 43% market share, second is SFR with 38% market share while Bouygues is third largest mobile operator in France with 19% share in the market. Other than these three, there are a few Mobile Virtual Network Operators as well but since all of them rely on these main three for the backbone support. The power to control the market stays in the hand of these three. Analyses what a firm needs to These three operators were the monopoly holders till 2006 and they some how maintained their position in the market. However in the end of 2005 competition council of France concluded that Orange, SFR and Bouygues have been holding the mobile telecom sector among themselves to maintain their position in the market. Later they all were fined as Orange EUR 256 million, SFR EUR 220 million and Bouygues EUR 58 million. They all were further advised to take their rates down and offer better calling rates to their end customers. Further French government opened doors to Mobile Virtual Network Operators (MVNOs). MVNOs buy minutes in bulk from MNOs and then they provide the connections to customers on better and more competitive rates as they have minutes on cheaper rates so they keep their profits at low rate and give the end customer a better product. This was done to break the monopoly of the three MNOs. Assess the attractiveness of the industry Now in the market today, it’s a customer centric market and customer is the driving force for any company’s success or failure. If customer likes a certain product then that product will be an instant hit but if customer disapproves that then the future of that particular thing isn’t guaranteed. Before 2006, the French market was in the hands of three major MNO’s and they had the power to provide the customers with whatever they wished to however after the doors were opened to MVNOs now there is competition in the industry and for any company be it MNO or MVNO, it is necessary for them to provide the end customer with a value on competitive rates else the result will be of the customer going to some other service provider. Now all the companies are offering the latest and developed services as those are needed to stay in the market. Orange offers 3G, EDGE, combination of mobile phone telephony where at home phone is used as a fixed line phone and connected with a wifi modem to broadband internet; however when the phone is taken out it acts like a normal mobile phone. SFR provides both GSM/GPRS and UMTS / HSDPA networks which enables SFR to provide its customers with complete range of multimedia services. The company was also the first to launch 3G+ services and also the company has 2.3 million customers on fixed line phones which further enable SFR to provide its customers solution to both mobile and fixed line phones under their stores named “ESpaceSFR”. On top of that after acquiring Tele 2 France in 2007, the company is now able to provide its customers with ADSL internet facility as well. Bouygues is focusing on better call rates for its customers who make their target market as students and people with low average revenue per user. Since their main focus is for students thus they are providing value added services which interests students. They are leading mobile multimedia by offering popular Japanese wireless technology called DoCoMo’s i-mode. Bouygues also launched their 3.5G and EDGE services along with HD Video on Demand, high-quality live TV, multi-user mobile gaming & live MP3 streaming. With such services being offered by all of the MNOs; they still cannot relay only on their services. In order for them to stay in the market; they also need to give their customers with packages which are attractive and cost efficient for the end user. After all if in the world today the customer is happy only then a company can get success otherwise the downfall of a company is guaranteed. Competitor / Market Analysis Companies like The Phone House have a lot of potential in the market as they are independent from the networks and they can offer a one stop shop for all the mobile phone needs of a customer. In the market today TPH has an edge of being the largest and oldest independent mobile retail company but this is a high time for competition which means they have to keep working hard and delivering more to their customers if they want to survive and succeed in the industry. Today TPH is buys minutes in bulk quantity from all the MNOs & MVNOs so they get a discounted deal on the minutes and they get even more bonuses if they are able to achieve a certain number of minutes in a month. Along with that they get discounts on sim-free handsets on six major mobile phone brands Nokia, Motorola, Sony Ericsson, Siemens, Samsung and LG. They reason of getting discounts on these is also because they purchase them direct from manufacturer and in bulk quantity. The combination of these two enables TPH to deliver a service on a better rate and more variety to choose from to their end customers. What FUTURE moves are they likely to make? What will be the impact on Phone House’s revenues? In the market of today with hard competition we not only need to retain our existing customers but we also need to get new customers on regular basis. If any of these two is not happening then it won’t be possible for any company to survive in the market and eventually the company will close down. Also the company needs to utilize all the sources available to them. Online marketing and online sales is one of the most effective ways to reach the customer in the world today. Also having shops in every corner of the country so the customer doesn’t need to go anywhere or find an outlet, it should be right there assessable at an arm’s length. It is also very important to understand the value of your customer. In any industry the driving force is always the customer. If your competitor is delivering more value to the customer then no matter what you do, your customer will go to your competitor. You need to make the customer feel special; you need to make the customer feel that they are the most important thing to you. A customer needs 100% attention and he needs solution to his problems or needs. When a customer walks into your shop he expects you to have answers to all his problems, then again, if you’re not able to provide your customer with a solution then someone else will. Other than that variety and customer support are also very important. Variety is needed as when there is a new phone launched, there is a lot of hype created about that model. Now whichever retailer is able to provide that particular model before others gets the edge & will be able to hit maximum number of sales on that phone. So in order to keep your customers glued to the company, it is an absolute must to have the best and latest phones available on a competitive price. Also on top of that when an existing customer has a problem with their phone, the customer services rep should be able to console him & solve his problem to best of the company’s ability. So for example when TPH gave exclusive offers on Motorola MOTOKRZR K1 Gold, or full-length Final Fantasy VII in the memory card of every Sony Ericsson M600i, such moves helped TPH get a lot of attention from the customers resulting in large number of sales. Which company is in the best position to be successful in the future? Now each company wants to make more profits every year but the number of customers is not increasing with the same pace. That results in more competition among the companies to get more share of market. The result is a happier customer because every company trying to grab the attention of the customer gives better and more lucrative offers. The downside to this is that when the fight for customers is so hard, the margin of profit is decreased just to give the customers better offers. In that case a company needs to hit a certain number of sales to manage their profits and to make their survival possible. If a better deal is given but the number of sales is down then the company wont be able to make profits to cut their cost and eventually they will close down. In Oct 2006, Carphone Warehouse faced a serious blow when Vodafone signed an exclusive deal with Phones4U. That made a competitor as the exclusive third party reseller of Vodafone phones for their contract phones. This deal was first offered to Carphone Warehouse which they refused since they want to stay as independent and neutral reseller for the phones and our advices need to be impartial for our customers. Likewise other competitors of TPH in MVNOs came up with different things to hit their target sales; NRJ Mobile introduced Mobile TV Channels, live Messenger services, launched Google Maps and Music Handsets to attract youth. Universal Mobile launched their music Gallery with a wide range of full sound tracks to download from. Debitel France feared a challenge from Virgin Mobile (TPH) in their prepaid range and started with strategies to defend their prepaid plans. On the side of Pay TV in France, the activities are rather closed with the merger of Canal+ and TPS. This merger enabled Canal+ Group to get hold of over 70% of market share and this made them so strong that today that they are capable of competing with any of major telecom operator or foreign media company. Internal Analysis The Phone House became partners with The Carphone Warehouse plc in 1997. TCW is the British leader in the industry and it offered TPH capital to grow into what they are today. Today The Phone House is working in most of the Europe and only in UK the name of The Carphone Warehouse is used, rest everywhere they are known as The Phone House. TPH works as a subsidy of TCW and they are not a new name anywhere in Europe and they have over a million satisfied customers which are further growing every year. Internal Analysis determines if the company has these skills and resources i.e. Strengths and Weaknesses in SWOT TPH is divided into six internal departments, the department dealing with purchasing deals with all the MNO’s and mobile phone manufacturers. Their job is to negotiate best possible deals from both of them so then they can provide their customers with best possible packages which are attractive with both economical call rates and best and latest phones. It is the purchase department that is responsible for setting the prices of their packages as well. The second department at TPH is responsible for insurance related issues. Any losses to the property of TPH or if a customer has their phones insured and they face some loss, it is the insurance department which is then responsible to take care of the loss. Third department at TPH is responsible with franchising and real estate. This department analysis where there is a requirement to open new shop and how to get the property; lease and other related issues. This is a very important department as all the supply from purchase department needs to go to the end user and it is this department which analysis where the customers are. Fourth department is responsible for auditing, it is their responsibility to maintain an internal audit and see how well the company is doing, whether it’s making profits or running in loss. They see if the purchase department is maintaining enough margins and then whether the real estate department is opening shops in areas where customers need TPH. The fifth department is the commercial department. Their job is to make appropriate commercials to attract more and more customers. They analyze what could be an attractive offer to get customers. What should be the offer before some holiday festival etc. The last department is the marketing department. Their job is to decide where they need to put all their billboards to attract maximum number of potential customers, then what kind of flyers need to be placed in the shops & how to place them. TPH has developed an in-house school called “The Phone School” where the employees are taught the art of selling and how to maintain their long term careers in TPH. Most of the promotions at TPH are in-house which means people aren’t brought from outside to be the bosses but they are hired in the company at base level and then as they company grows, they also grow. That is the foundation of a very strong employee-company relationship. Analysis Tools – Value Chain Analysis and Competitive Strength Analysis Now the company has some solid plans for their future growth. Their first target is to grow their market share in all the geographic markets that they are working in, they plan to open more stores at all the locations that they are currently working in and also by using more distribution channels to maximize their sales. Then they further plan to get their customers in a lifetime relationship when customers come to them over and over because they believe they won’t be able to get the value that they will get at TPH. One more thing which will help in this is to give their existing customer some exclusive TPH services which other suppliers cannot offer and that will give TPH an edge over the competitors. By doing all of this TPH believes to become the leading alternative communication services provider. When we look at the history of TPH we understand that it is what they have been doing in the past as well. It can be seen with the following graph: TPH has always opened shops in all the major locations. Another thing that they do is that they open their shops at the same locations as their competitors to have a strong customer competition. These two strategies are the key factors in providing TPH with their retail presence. TPH believes that that the market is under-penetrated in all the locations while the industry gets more and more attractive for the opportunities of selling and secondly they believe that their own share should always continue to increase and they should get in better terms with networks and handsets manufacturers which can further enable them to offer better and more attractive packages to the end user. The end result of this will enable TPH to offer better prices and a wide range of handsets to choose from. 1996 The Carphone Warehouse acquired GEAB Teleshop, one of the major mobile phone retailers in Sweden and Comprotoel Groep, a Dutch name associated with the same business. Followed by these; in 2000 ACJM SL, a leading mobile phone retailer from Spain was also acquired by the group. In the same year another German mobile phone retailer Otto Boenicke was also acquired. Later in Netherlands the group merged 20 Road phone stores making itself one of the largest mobile phone retailers in Europe. By the end of 2001; the company further managed to step in the market of Portugal by acquiring 6 stores of Polirent, in Lisbon area. After Europe; in 2006 this group stepped into the market of USA by two commercial agreements with Best Buy, a leading consumer retailer of USA. The company is growing with a fast pace today, in 2007 alone, they opened 366 new stores in different markets around their operational map which took the total number of stores to 2,144. The company plans on opening 200-250 new stores every year for the next three years. In last three years; the company managed to open around 930 new stores at all their locations TPH understands that their customers are most important factor in the sustainability of their business. From their initial days TPH has been with an attitude of marrying their customers for all of their need related to mobile phones. Today TPH is not only selling their customers with mobile phones and connections but they are also there to offer their customers with any accessory (whether be it hardware or software) for their phone or any other issue related to the phone. In short words; if a phone is purchased from TPH then they are there for anything related to the product throughout the life-cycle of the product. In 2006 TPH came up with their idea of a flagship store which is a new and very innovative idea for a mobile phone store. This store is a combination of lifestyle design and a boutique this kind of a store was a totally new idea in the industry which was never done by any of the competitors before. These flagship stores are designed keeping in mind the psychology of mobile phone customers as what kind of products they like, what are their preferences, what is the requirement of a contract customer and what is the requirement of a pay as you go customer. All these things were given a good thought before coming up with the concept of flagship store. In these stores phones are displayed in the shelves in the centre of the room and not on walls like a normal conventional store. Then they are placed with categories such as fashion phones, high tech phones, prepaid phones etc. There is a quite lounge sitting area furnished with designer couches where a customer is given demonstration of each and every phone that they choose to buy. So they customer can be helped by the TPH consultant and the customer makes their decision with peace of mind. The experience of a flagship store is beyond ordinary. It provides the customer a quiet time and help of sales consultant to make a decision and analyze the advice of consultant. In 2004 TPH launched Breizn Mobile, a regional MVNO in the area of Brittany to give competitive rates on calls made inside the region. This launch was first MVNO to cater the needs of regional calls. Later in 2006 TPH had a joint venture with Virgin Mobile and this was their MVNO called Virgin Mobile in France. Virgin had an experience of running their mobile network in UK and USA and TPH had their chain of stores across France. Together these two became unstoppable. Virgin mobile in France has the back support of the network of Orange. They started using the virgin mega store in France for the publicity of the same. They also offered some very good deals like unlimited SMS 24/7 etc. Such deals were liked a lot by the customers. They also offered digital music services of Virgin Digital music which gave them another edge of the service. TPH entered the landline telephone services in 2004; the first move in this regard was when they acquired a Spanish fixed line company Xtra Telecom after Spain the next big step was made in Switzerland when TPH acquired NTel. The main reason of this was to launch the TalkTalk services in a number of European markets. Later in 2005, The Carphone Warehouse acquired two of their UK based competitors Onetel and Tele2. Further in 2006 when highspeed internet services were in the boom, TPH launched its ADSL services under the name of TalkTalk. At that time they offered their “triple play” packages which were powered by Telecom Italia (the “Alice” Brand), then they offered internet upto 20Mbps along with wifi, cable television service and also unlimited local and long distance calls on any fixed line phone in France. TPH still stresses on being independent from any of the MNO’s and we can further see the financial standing of TPH by following SWOT Analysis What is Phone House’s overall situation? Today The Phone House has strong hold over the market. They are able to provide with solutions for all the telecommunication needs. TPH is offering a wide range of latest model of mobile phone handsets on most competitive rates, and then the phone connections sold by TPH are also given on very economical calling rates. Other than that TPH is also offering a lot of “triple plays” to suit the needs of every household. Over 2000 shops in their markets of operation gives TPH a network where they are easily accessible for their potential customers. TPH is having contracts with all the major networks, handset manufacturers, and other related companies to get better and exclusive deals for their customers to have a better idea and help when making a decision to buy a new phone. Despite of having all these arrangements and concrete infrastructure, TPH is still relying on other sources for supply. TPH doesn’t have its own independent network for anything. Like in the past when Vodafone signed an exclusive agreement with Phones4U, that was a big effect on the business of TPH. Now if all other networks start following the footsteps of Vodafone and start going for exclusive retailers then it will save them a lot in their commissions and would affect the way mobile phones are sold and eventually independent retailers like TPH will start facing a downside in their business and end up loosing big numbers in their sales. What are the implications for strategic action? The market has a lot of room for penetration. Every year when a contract expires then that particular customer looks for a new contract and a new phone as well. That is when the customer should be in such relationship with TPH that they come back to TPH only and don’t go to any other mobile phone retailer. However that is not something on which a company can rely on. There is always room to open more shops at all the places in their different markets. They have their vast infrastructure of shops and they have a lot of skilled sales consultants. They can further offer better bundles and packages on internet, television and fixed line phone services from other networks as well. TPH has a market outside of Europe and USA as well. They can enter Canadian, Middle & Eastern Asian markets as well as they have a lot of potential and TPH has the strength of becoming a worldwide mobile phone independent retailer. Today TPH & TCW both have customers who are faithful to the company and they believe in the company to provide them with best possible product on most attractive rates possible for them. It is those faithful customers that know a name of TPH as their mobile phone service provider. At times customers don’t even know what their MNO or MVNO is. All they know is that TPH is their mobile phone provider. TPH is dependent on other outside sources for them to generate business & revenue. That is a threat always there with TPH and those threats are always stronger than the strength and power that TPH has. So in-order for TPH to get more stable they need to sign long term contracts with all the suppliers. Contracts safeguarding the interests of TPH but at the same time keeping the future secure and the business to keep coming in. Recommendations Clear recommendations For the future sustainability of The Phone House, they need to make the existing customers glued to the company and the company needs to get new customers by offering lacerative offers. For existing customer reward points can be introduced, i.e. for every Euro spent at TPH the customer gets a specific number of reward points, and these reward points can be used to purchase products at TPH. Or there can be different gifts given out to customers on certain number of reward points. Further it can also be done that the cost of certain package changes depending on the number of reward points a customer has in their account. After that or new customers, TPH needs to get more exclusive deals from the handsets manufacturers. Today in the young generation it is seen that they don’t really worry about the price of the phone they are getting, they don’t want cheap tariffs but what they basically want is to offer all flashy phones which are in latest hype. Phones like Apple iphone, Nokia N Series, E Series and C Series, Sony Ericsson Walkman phones and cyber shot phones etc. are some phones which are always of great interest to the youth. So if TPH gets some exclusive deal for these phones then it will be of great help in attracting new customers. If some attractive deals are offered before the holiday season then it would further add to the benefit of the company as more people are inclined towards buying new phones etc. just before the holiday time. Why have you select a particular option(s)? If these two things are done then TPH will be able to give more value to both their existing customers and new customers. Today is a time for value; any customer will go to a place where they are getting maximum value on a product. Someone who is already a customer of TPH will be more likely to come back when he knows that he is getting something extra other than what he is paying for. Those are long term reward points which they will get after spending the money that they have to spend anywhere they go as that is the amount for the service that they want but at TPH they will be getting something extra. Some reward points which they can use for their future shopping at TPH. For new customers; if someone is looking for an iphone then he / she will buy iphone no matter what. The question is who is providing best deal on iphone. So if the answer to his need is with TPH then that particular person will come to TPH else he will go to some other mobile phone retailer. What are the anticipated benefits? Once these two options are applied then the end result will be more new customers and existing customers coming back to TPH for anything that they need. And when there are more customers then the result is obviously in greater number of sales and more profits every year. What timeframe? The effects of these will be long term profits and TPH will be able to get more and better customer database. Once a system is in place where customers are getting reward points for every time they purchase a phone it will be stored in the database and with the help of that database a customer’s history can be maintained as what type of customer he is and what type of phones he likes on what network / tariff so whenever there is an upgrade available then that particular customer can be contacted and informed about the available upgrade and then he can be offered a deal accordingly. What are the risks, limitations associated with the analysis and implementation of option(s) This particular system can also go wrong in terms of what if the other mobile phone retailers start following the footsteps of TPH and are able to offer better deals compared to TPH. Or it is also possible that TPH is not able to get exclusive contracts with mobile phone manufacturers. Even it is also possible that some mobile phone manufacturer gives TPH an exclusive deal on some specific model but in return wants TPH to go exclusive with their complete range like in the case of Phones4U and Vodafone. If TPH is bound to promote phones from only one handset manufacturer then that can result in customers going away from TPH for not being able to provide the customer with what they want. Like for instance a Nokia fan would never want to settle for Sony Ericsson and vice versa. Read More