A Study on Improving Competitive Advantage for Cellular Phone

A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 1 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 行動電話系統服務商競爭優勢之研究 謝文雀 Wen-Chueh Hsieh 東吳大學國際貿易系 游蓓怡 Pei-I Yu 國立高雄第一科技大學行銷與流通管理系 胡同來 Tung-Lai Hu 國立台北科技大學工業工程與管理系 ABSTRACT With the liberalization of GSM telecommunication, cellular operators are facing more and more challenge. Because of similar mobile voice and data services, it‟s important to be differentiated by the competitive advantages resulted from marketing strategies. The purpose of this study is to analyze the competitive advantage of Taiwanese GSM operators at current stages and their survival in the future competition. In addition to reviewing secondary data, five licensed cellular operators are interviewed and ten propositions are constructed for further empirical study. The conclusions are: Firstly, the key factors to success for Taiwan Mobile communication industry are brand image, call quality, innovated services, price and sales channel. Secondly, the nature of the telecommunication service is the continuous upgrade of technology. Finally, convergence of the technology such as fixed line communication, multimedia access, satellite, cable TV and so on also plays an important role in operators‟ decision. However, 3G (Third Generation) mobile licenses award is the immediate battle for GSM operators. Keywords: marketing strategy, cellular phone operator, competitive advantage 投稿受理時間: 92 年 10 月 15 日 365 審查通過時間: 93 年 1 月 8 日 2 臺北科技大學學報第三十七之一期 摘要 本研究探討當前台灣 GSM 行動電話系統服務商創造競爭優勢之行銷策略 對於行動電話系 。 統服務商而言，由於各系統商所提供的服務同質性高，因此藉由行銷策略提供差異化服務，以 提升競爭優勢是很重要的。本研究為一探索性研究，針對研究問題，除廣泛收集次級資進行分 析之外，並實際與台灣地區系統服務商進行深度訪談，綜合文獻回顧及訪談結論，主要研究發 現如下：(1)台灣行動電話系統服務商主要成功因素包括品牌形象、通訊品質、創新服務、價格 及銷售通路。(2)電訊服務的本質是科技持續不斷的精進，科技將帶動此一產業發展。(3)科技的 集中化如固網、多媒體、衛星及有線電視對於系統商的決策亦扮演十分重要的角色，3G(第三代 行動電話)執照的開放對於現有的 GSM 行動電話服務商亦帶來立即的競爭與挑戰。本研究經由 分析研討後歸納六項命題，供後續實證研究深入探討。 關鍵詞：行銷策略；行動電話系統服務商；競爭優勢 I. INTRODUCTION In early 1980, there was a telecommunication liberalization trend all over the world and the telecommunication service market gradually transformed from traditional monopoly to open competition. Due to natural monopoly and the public utilities characteristics of telecommunications services, it was operated either by the government or by private sector under monopoly as control industry. After the 80s, with the fast development in communication and electronic technologies, the production structure and demand pattern of telecommunication services were changed and led the industry into a liberalizing process. In Taiwan, the government released the 366 new regulation on Telecommunication service. This new regulation not only boosts the types and quality of telecommunication service but also stimulated the modernization of telecommunication network and accelerated the arrival of digitized information era. In 1996, the Ministry of Transports and Communication (MOTC) opened up the cellular service by awarding eight licenses to private companies. In 1997, two of the licenses are for operation throughout all of Taiwan, while the remaining six are restricted to certain region. Far EasTon Telecom and Taiwan Cellular Corp were awarded with the GSM 1800 national licenses. K Telecom, Tuntex Telecom, MoBiTai Telecom, TransAsia Telecom and Far EasTone Telecom are awarded with GSM 1800 northern regional A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 3 license, GSM 1800 southern regional license, GSM 900 central regional license, GSM 900 southern regional license and GSM 900 northern regional license accordingly. Tuntex Telecom was merged with K Telecom in 1998. Far EasTone acquired 5% of MoBiTai on mid-2000. Japanese NTT DoCoMo acquired 20% of K Telecom in November 2000. Taiwan Cellular Corp acquired TransAsia Telecom on May 2001. A series of local and global consolidations are now taking place in Taiwan‟s mobile industry. Compared with United States, England, Japan and Hong Kong, the liberalization was relatively slow in the Taiwan. Afterwards, Taiwanese government realized the global liberalization trend in the telecommunication fields. In 1987, the government announced the phone users could have their own phone terminals. Before that, all the phone users leased the terminal from the government. Taiwanese government opens Value Added Network Service (VANS) market in 1989. Until 1996, the government determines to speed up the privatization in the telecom market. There are four kinds of licenses release: paging, trunking radio, cellular phone and mobile data transmission. This is not the end of the government‟s privatization schedule. Taiwanese government will privatize the fixed line service, satellite communication service and third generation mobile license (3G). their The mobile licenses are believed as a “cash cow” for the business. The relationship among the operators is not only competitive but also complimentary. Because of the nature complimentary relationship in the mobile communication area, the operators need to ally with each other in order to provide the “one number anywhere‟s” service to the subscribers. Moreover, the liberalization of mobile telecommunication services speed up the revolution of the information age and social behavior changes. This is a brand new business. Every operator devotes all their efforts in strategic alliance and marketing strategies in order to obtain the competitive advantage for the success business. After the mobile license released in 1997, the mobile market in Taiwan is quiet interesting and unique. This is the motive for us to dig deeper into this vivid mobile market in Taiwan. The primary objective of this research is to explore how the operators in Taiwan build up own competitive advantage through strategic alliance and marketing strategies in order to survive in the competitive market. More specifically, the following items will be addressed: (1)To analyze the industrial factor trend and impact.(2)To analyze the influence of macro environment factors (political / legal factors, technological factors, economic factors, social and cultural factors) on the operators' marketing strategy and strategic alliance.(3) To 367 4 臺北科技大學學報第三十七之一期 analyze the influence of micro environment factors (suppliers, competitors, subscribers, substitute and threat) on the operators‟ marketing strategy and strategic alliance.(4)To explore how the operators apply their marketing strategy and strategic alliance to strengthen their competitive advantage. develop the value chain into value constellation (Normann and Ramirez 1993). What is strategic alliance? Presently, no final definition of strategic alliance is among different authors. Porter and Fuller (1986) suggested that strategic alliance is a formal, long-term alliance associating the business activities among companies, but not a form of merge. Devlin and Bleackley (1988) argue that II. LITERATURE REVIEW 2.1 Strategic Alliance In order to enter specific market, product, and technical domain or to compensate their own shortcomings in the value chain, strategic appliance is a fast and effective way. Traditionally enterprises can secure an appropriate niche for survival through the adjustment of own business scope or in the core resources; however, after the 80„s, strategic alliance became prevailingly among enterprises. Business entities with natural separation in own specialties form a business commonwealth with mutual benefits, such as joint research and development, technical cooperation and the cooperation in products, services, promotions and logistics (Kotler 2002). Strategic alliance allows the business entities with different resources to build their own edge, also serves to reduce the competition and to share the risks (Lewis 1990), it even is an important way of creating competitive advantages (Porter 1998). It can strategic alliance is a strategic option existed in the long term strategic planning of company aiming at strategic consideration, ensure and maintain or promote the competitive edges of the company and to change competition positions. Magsaysay(1989) suggested that strategic alliance is Part of overall strategy of a company which is inspired from the basic mission and direction of the company, aiming at reaching the long term target of a business entity and for establishing future competitive advantages. Aaker (2001) suggested that strategic alliance is a kind of cooperation which is for promoting the advantages of two or more companies to reach strategic target. 2.2 Marketing Strategy Accompanying the changes in time, the marketing management concept evolves as well. Kotler (2002) divided the progress of marketing management into five stages: production, product, sales, marketing and social marketing. 368 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 5 Most of the scholars based their marketing strategies on the marketing combination strategy of McCarthy (1981). McCarthy„s Marketing Combination Strategies includes four parts, product strategy, price strategy, sales channel strategy and promotion strategy, which are also called 4Ps. The marketing strategy of McDaniel and Kolari (1987) is divided into product, price, place, promotion, marketing research, new business and others. Dickson and Ginter (1987) divided marketing strategy into market segregation strategy and product differentiation strategy. Waterschoot and Bulte (1992) separated it into basic combination and promotion combination. Cellular Phone Communication Industry is a kind of service industry with different features from manufacturing which lead to different topics in dealing with service marketing. The traditional 4Ps marketing mix is not appropriate in the marketing activities in service industry and the unique features of service industryintangibilities, inseparability, variability and perishability should be taken into account. Hence, Magrath (1986) indicated that the marketing strategy of service industry, in addition to traditional 4Ps, product, price, place and communication, 3Ps, participant, equipment and customer service management should be considered. Product is the combination of finished product and services that a company provided to a target market. Price means the cost to consumers who desire to obtain the product. Distribution is the activities allowing the products of a company to reach the target market. Communication means the activities involved with the communication with consumers and convincing them to buy. Participants are the keys in transmitting service to subscribers. Equipment can improve the service ability and maintain stable quality. Customer service management is the planning and control over the products, from pre-sale to after-sale. 2.3 Competitive Advantage Day and Wensly (1988) suggested that competitive advantage comes from through sources: one is technical and resources advantage, the others are geographical advantage and advantage in performance. All these advantages are normally indicated by market share or interest rate. However, customer‟s satisfaction and the added value of the distributors are advantages not supposed to be neglected. Bakos and Treacy (1986) took the intraorganization efficiency and effectiveness as relative competitive advantage in beating competitors in same industry and in intruding new industry. Analyzing competitive advantage can help management to assess the competition position 369 6 臺北科技大學學報第三十七之一期 of their company and to adopt specific actions to improve. Therefore, how to create and maintain competitive advantage is of strategic purposes. Porter (1998) raised a concept of value chain which is based on various value activities to explore how an enterprise builds its competitive advantage through all kinds of value creation. Though the value chain could build competitive advantage, the value chain of a business is only a part of value system. The total value systems also include four value chains of suppliers, enterprise, sales channel, and customer. Therefore, if individual enterprise wishes to promote the value it provides, then alliance is a means to create multi-win situation. Hill and Jones (1998) said that an organization could create better efficiency, quality, innovation and flexibility to build up competitive advantage through increasing competitive capacity, resources and the potential in applying resources. It means that competitive advantage is the result of an organization applying the possessed resources and capability. Efficiency, quality, innovation and flexibility may be regarded as the four building blocks or structures of competitive advantage. III. RESEARCH METHOD 3.1 Research Framework This research starts from the overall macro and micro environment analysis of mobile telecommunication to understand the characteristics of mobile phone industry. Next, the survey is conducted to understand how the upper and down stream interact within whole mobile communication industry from the situation of strategic alliance, how the mobile communication industry obtain resources through strategic alliance, how the resources secured from strategic alliance are used to build up competitive advantage on one hand, and transform to be the power of applying marketing strategy on the other hand, to enhance and to boost the competitive advantage. Figure 1 shows the framework of the research. Macro Environment Factors Micro Environment Factors Strategic Alliance Marketing Strategic Competitive Advantage Figure 1 Framework of Research 370 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 7 3.2 Research Design This research intends to analyze the process of mobile phone operators gaining competitive advantages through strategic alliance and application of marketing strategy. The research interviewed, marketing strategy and situation of strategic alliance. The marketing strategy includes the competition capacity of the company, market positioning, products, prices, distribution, communication, participant, equipment and customer service management. In strategic alliance, it is divided in accordance with value system into system operators, channel operators and the trades, plus the cooperation with foreign firms, so to find out the points considered in selecting partners and the benefits received from the cooperation relationship. In the meantime the primary data are combined with secondary data. The results of interview are applied with inductive analysis. The case analysis was adopted to make comparative analysis of the difference in strategic alliance and marketing strategies among the operators. The analysis of various operators was categorized to explore how the operators build up their competitive advantage. The inductive analysis means emphasizing the details and features of data to discover the important domains, orientation and inter-relations. is conducted from two aspects: professional interview and secondary data analysis. The interview made for this research is in the form of in-depth and open-ended interview. The interviewees are the persons from three private telecommunication companies who now are managers with ample experience in the management of mobile phone communication industry. In addition to in-depth interview of senior professional, the research is complemented with thoroughly sorted secondary data to link and to interpret the opinions of experts. In the secondary data collection, the papers, periodicals, special reports, newspaper and magazine or research report related to mobile communication industry are most concerning. Besides, the documentary data of the operator and network information are also collected in the hope to perfect the research with the most sufficient data. IV. Case Study 4.1 Case 1: C Telecom The C Telecom has introduced mobile phone system since 1989 when it was still in the age of Telecommunication Bureau, in which it adopted 371 3.3 Data Collection and Analysis Questionnaire is used in interview. outline of interview questionnaire is divided into three parts: the basis position of the company 8 臺北科技大學學報第三十七之一期 the North American Cellular AMPS Mobile Phone System. At the initial stage of release, the areas serviced are limited to 3 metropolitans, Taipei, Taichung and Kaohsiung. With keen demand, Telecommunication Bureau installed digital GSM900 system in 1995 and complete island-wide coverage in 1996. The building of GSM 1800 Network System started in 1997, but due to the delay in purchasing procedures, the GSM subscription was released in October 1998 when the private operator commenced their operations. Presently C Telecom is operating 3 different mobile phone system, AMPS, GSM 900 and GSM 1800. supplier will be awarded per the result of open tender. The GSM 900 and GSM 1800 are both supplied by Nortel of Canada. Nortel is one of the largest digital exchange network and digital network solutions suppliers, who design solutions for customer and for upgrading the competitive advantage. (3) Sales Channel: In the past, C Telecom did not have Sales Channel. Subscribers must apply for subscription at the windows of Telecommunication Bureau at various locations in person. Communication firms provided only communication products. After opening for private participation, for providing total services of one-stop shopping for handsets and subscription 4.1.1 C Status of Strategic Alliance Telecom was independent from (1) Foreign Joint Venture: Telecommunication Bureau on July 1, 1996 and under it there are 7 branches and 2 research units, Telecommunication Laboratory and Telecommunication Training Institute. The Mobile Phone Services are provided by Long Distance and Mobile Telecom Branch. Since C Telecom is still state-run company, there is no foreign partner exist. (2) System Equipment Supplier: All purchases of C Telecom must be made through open tender. All equipment purchases shall be going through collection of market information, specifying equipment specifications in details for suppliers to bid and the system for subscribers of mobile phone and radio addressing, C Telecom selected Senao Computer International as Category 1 marketing agent and Auroa and Chuan Hong as Category 2 agent to the sales of mobile phone and radio addressing subscription and handsets, and the Category 1 agent Senao Computer provided the operation window for sales of handsets and after services. (4) Relationship with the trades: Since C Telecom has Island-Wide operating license of AMPS, GSM900 and GSM1800, it has no need in mobile phone network roaming, and in addition to providing line leasing for private operators, the cooperation with the trades are in prevention of pilferage and the account 372 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 9 split. Due to the overseas business trips and traveling prevailing among the nationals, C Telecom has cooperated with overseas telecommunication operators to provide international roaming services. In the overseas, C Telecom is one of the two companies offering the most roaming services, total 52 areas. (2) Price Strategy: Prior to the opening for private operation of mobile phone market and the restructuring of Telecommunication Bureau, C Telecom enjoyed monopoly status. In the absence of competition pressure, they did not bother with creative rate structure, not did they offer new rate packages to attract consumers. After the opening, in order to rationalize the rate structures, C Telecom introduced a few major downward adjustment of rates, and had designed for different subscribers with different rates combinations. The NT$200 monthly lease introduced in early 1999 had brought substantial impact and had brought C Telecom large number of subscribers to their long stagnated operations. Since the private operators inaugurate their services only for less than 2 years, the profit is not high enough that C Telecom was seen as price leader in mobile phone industry, as far as price strategy is concern. And, since C Telecom believed that their own rate structure was fairly complete that the prepaid card price would not be attractive, that they do not have the intention to introduce such kind of product. (3) Distribution Strategy: In the sales Channel strategy, C Telecom owns 49 sales offices, 251 stations all over the island, that they have established excellent connection and interaction with various locals. Senao International provides C Telecom windows 4.1.2 Marketing Strategies (1) Product Strategy: Prior to the opening for private operation, there was only C Telecom who is providing mobile phone services, offered only basic and certain added services, such as insertion, voice mail and designated transfer, without much innovation. After opening, in order to meet the impact of market opening, in addition to ordinary value added services, there are new information products provided gradually. In order to offer more tenderly services and to boost the short message function of digital mobile phone, C Telecom has developed by their own a service to check the stock market via short message. Presently with such a service, subscribers can transmit stock codes and receive the stock market information, that they can monitor the stock market information any time and any place. With the strong and enormous support of their own Telecommunication Laboratory, it is easier for C Telecom to solve problem in technical level when presenting new product / service. 373 10 臺北科技大學學報第三十七之一期 for various well-known brands of handsets as well as after services, making a mono-line service in sales window. The terminal equipment sales are made available also in 3 marketing agents. The long time experience and complete marketing channel allows subscribers to receive single window services from handset to on-line till the after services of Chuang Hwa Telecom. (4) Branding Strategy: In the field of communication and promotion strategies, due the budget control and the radio addressing, long distance service included in the overall advertisement budget of Long Distance and Mobile Branch of A Company, they have not been able to spend a lot on the TV and media advertisement. However, under the forceful and incessant campaign of private operators, C Telecom have started fighting back, with their “unique low price and full area dual band advantages” on TV and Newspaper media. (5) Recruitment Strategy: In qualified Recruitment with public strategy, servants, prior but to after re-structuring C Telecom staff with people re-structuring, they are able to recruit staff by interviewing without having passed national examination. The education and training, with the assistance of Telecommunication Training Institute, each Recruitment, whether of marketing, customer services or technical engineering, are receiving professional and complete training courses on periodical basis. But due to the previous monopoly position, C Telecom have less than sufficient in marketing and sales manpower which need be supplemented and enforced. (6) Equipment Procurement Strategy: In equipment, due to the budget and contracting, the speed of installation of mobile phone system of C Telecom sometime falls behind the speed of market demand. But they still accelerate the speed of purchasing to expand equipment like base stations to meet the market. AMPS system of C Telecom has originally 497 base stations, which was expanded to 570 at end of 1998. GSM 900 system increased 570 to the original 886 base stations. The GSM1800 which opened on Oct. 14, 1998 will complete 1300 stations gradually. In addition, for upgrading communication quality, both GSM 900 and GSM 1800 have Enhance Full Rate , (EFR) function, allowing consumers to enjoy high quality communication effects. (7) Customer Service Management Strategy: Since the high quality service is the guarantee to the marketing and sales, C Telecom has been trying to boost their services and network quality, to serve subscribers overall. In Customer Service Management, they adopted the following measures of one-counter, counter on air, network counter and off-hour service 374 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 11 counter to provide secured, convenient and diversified services to assure their commitment to subscribers. Continuous and efficient implementation of quality policy of “ Whole staff action, Customers satisfaction, Intelligent integration, Innovative service, Inter-knitted networks and Quality first”. Because C Telecom must following the procedure announced to proceed their purchase, the installation is always delayed and there are cases that the subscribers‟ needs were not satisfied. This is why there were always imbalance between demand and supply before t he mobile phone market was opened for private operators. Hence, in the very beginning of opening for private operators, many consumers switched to the private ones and caused substantial loss of subscribers to C Telecom. Although CTelecom had begun a series of system fine tuning and increase many base stations, expand the system capacity, providing additional subscriptions, but it still failed to compete with the speed of private operators. Additionally, the prices, both the rates and the structure were rigid at the beginning of opening for private operation, which kept the growth of subscribers to stay. Facing the flexible marketing of the private operators, in addition to maintain the trustworthy image of C Telecom with more than 100 years history, C Telecom has endeavor to boost competition capacity. 4.2 Case 2: T Corp T Corp cooperates with Motorola Corp. in developing Iridium Project for global satellite communication system. It is a multinational telecommunication organization formed with large telecommunication operators of more than 10 countries. They secure the concession of operating GSM1800 in Hongkong in 1995 and operate digital lower power radiotelephone (CT2). In 1997 they shifted the market emphasis to the mobile telephone market and won the GSM 1800 Island-Wide mobile phone license with the highest score, and inaugurate trial- run on December 16 the same year. On January 1, 1998, the operation is official commenced. 4.2.1 Status of Strategic Alliance (1) Foreign Joint Venture: The joint venture foreign firm of T Corp is GTE of USA. GTE is one of the 4 largest public listed companies in the world. GTE is not only the top one in the US City Phone Network System in market share, but also one of the largest mobile communication operators of USA. It has 3.8 millions subscribers and 250 sales points in the world with 24 million fixed network subscriptions. It is also the planner and major supplier of the US Government communication system and military satellite and radio sub-systems. GTE announced in August 1998 375 12 臺北科技大學學報第三十七之一期 that it will merge with Bell Atlantic to further expand the operation scale and competition power of GTE USA. (2) System Equipment Supplier: T Corp selected Siemens of Germany among many of the system equipment suppliers to cooperate, based on the excellent techniques in mobile communication. In addition, Siemens has their branch in Taiwan allowing in-time support and assistance and is believed to have guarantee in the control and maintenance of systems. Siemens Telecommunication is the largest affiliate of Siemens in Taiwan with 25 years history and 700 high quality employees. The other thing that worth to mention is that, T Corp affiliate in Hongkong, Ba-Fong Telecommunication is also in GSM 1800 system, so, prior to the announcement of winner of the mobile phone operating licenses, the system equipment has been purchased, and the equipment was used in priority after securing the operating license in Taiwan. (3) Sales Channel In order to provide consumers with sufficient wide contact, T Corp adopted extensive channel alliance. In the communication distributors, there are Aurora, Hsiang Hong, Janchi, Fongsheng, Chuan Hong, Taiwan Telecom, Taikee, Tienditong, Daily communication, total contracted distributor alliances. They also formed cooperation with information firms like Acer Tech, Janchi, and even EVA Air. All these cooperation aimed at provide fast and convenient service to consumers through the wide spread service network. (4) Relationship with the trades: With the Island-Wide GSM 1800 operation license, T Corp does not need to link roaming with other operators in network linking, so the cooperation with the trades in domestic market is limited to the general accounting and in pilferage prevention. In international roaming, it covered America, Europe, Oceanic, Asia, Africa and Middle East, making the area of roaming as many as 52 areas. It is one of the 2 with the most roaming countries. This makes its subscribers enjoying the mobile communication service outside the domestic mobile telephone network. 4.2.2 Marketing Strategy (1) Product Strategy In addition to ordinary basic service and value added services, T Corp provides also information services, such as 850 News Station, 860 Leisure Entertainment station, 880 Financial Information station, 887 Financial Voice Information, 167 Weather Information station, 168 Traffic Information Station special value added information service to offer convenience in daily life. In t he hope that the mobile phone not just for talking, but a bridge of living information transmission. The other feature of attraction is that T Corp participated in the 376 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 13 Iridium Plan Global Satellite communication System. Together with the GSM 1800 operation license secured lately, they made the only private telecommunication operator providing satellite and GSM Dual Frequency communication services. After the reserved card services provided by the competitors, T Corp also presented with OK Card-a reserved card products to invade the youth market. (2) Price Strategy In pricing, T Corp insists on a set of simple and easy to understand rate program, enable the customer to understand straightforward, saving the time in calculation. In the rate structure, they offer multiple discount programs for high volume subscribers and for low volume subscribers, they provided reserved card system, allowing the consumers of different natures have respective applicable standard. T Corp does not stress on price competition. Their basic principle is not aggressive but not falling behind. So, when the connecting fee of mobile phone reduced from NT$1.70 to 1.15 in Sept. 1998, T Corp make earliest announcement to reflect the NT$0.55 difference totally to the communication fee and became the first one to reduce the rate due to the saving in connection fee for protecting the interest of the subscribers. The Telecommunication Bureau maintains the prices of reserved card at the ratio of twice of the monthly lease as set. (3) Distribution Strategy T Corp adopted intensive strategy in sales Channel. They build sales points, either direct managed stores or distributors are more than the competitors. The experience in the operation of CT2 makes T Corp understand exactly “ What is the most effective sales channel”. They believe that consumers tends to visit the traditional telecommunication stores and special stores, and the sales channel of information and home appliance channels will not be effective in short period of time. Therefore, in addition to direct managed stores, there are specialized communication stores with points all over the island, like Aurora Communication, and ordinary traditional communication stores. They have set up contracted service centers to have wider contact with consumers to provide fast and convenient services. They claimed that they provide preferential programs in commission for distributors and the price difference in handset, and they are flexible in the adjustment. As to OK Card, they provide services at channel of different line with long business hours to meet the consumer‟s group features. (4) Branding Strategy In communication, T Corp believes that in the very beginning of opening, there should have intensive advertisement, making the consumers hearing and seeing 0935 when they switch on TV and read the newspaper, to build up the 377 14 臺北科技大學學報第三十七之一期 brand awareness and take advance in the market. In the early stage, they targeted at the office worker, with the Chairman of the Board select the leading actor of the advertisement, appealing to technology and boasting that they are member of iridium plan, stressing the number of base station. They pointed out the product service characteristics with simple, clear and direct advertisement. It has built up the quality and professional brand position. In the reserved card, since they pointed at the youngsters, they chose young, model idol singer as the speaker for their reserve card, bombarded heavily at the media. (5) Recruitment Strategy In this party, T Corp believed that they are more advantageous than other private operators are. Since they have been operating CT2, the have trained a team of local telecommunication marketing men. They are different from the others without actual battling experience. Having participated in Iridium plan with first class telecommunication companies of 17 countries, they are equipped with a team of professional managers who have practical domestic telecommunication experience, inter national visions. In additional to the existed, they stressed heavily on the training of professional to create local elite in telecom munication. (6) Equipment Procurement Strategy In hardware, T Corp has always been emphasizing the number of base stations, which were placed in intelligent, multi-level manners, giving the system the flexibility to switch among the levels automatically, as per the needs of subscribers. Because T Corp anticipates the number of subscribers will grow very fast and considering the future costs in building base station, they invested NT$14.9 billion in the building of base stations and the exchange equipment. They started with low-height base station to ensure the service quality of communication. T Corp claimed strongly that the placing and installation of base stations has been through planned professionally and perfectly, that not only with wide signal coverage, but also will have 2496 base stations in total. (7) Customer Service Management Strategy In Customer Service Management, in order to ensure the communication during moving would not be interrupted; they select the best system equipment, and even have continuous coverage design in traffic trunk lines. They invested 3% of the revenue in R&D to develop new products / services jointly with the industry, the government and academic units. All these were intended to create a customer services oriented enterprise cultural. Customer first is the starting point of all the operation. They provide professional yet humane customer services, with respects toward the subscribers‟ interest. 378 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 15 With the smooth cooperation with the system equipment supplier, Siemens, plus the technical experience in the management of CT2, T Corp has been very swift in the planning and installation of base stations. They are the fastest and most one in base stations among the private operators. With the number of base stations and the rate of coverage, the advertisement directed to the communication quality that have no room for doubt. T Corp participated in the operations of Iridium Plan, CT2; Bafang Communication GSM 1800 system of Hongkong made them the one with substantial telecommunication operation and technical experience among the private operators. Due to the less involvement of the Foreign Partner, GTE, T Corp can really understand the needs of the consumers in both decision making and in product services and meeting the changes in the Taiwan market, which resulted to the product and price combination that meet the taste of Taiwan consumers. In order to strengthen the price structure, T Corp used the CT2 numbers to present NT$99 “Free Net”. Free Net allows subscribers of CT2 to use 096 in dual handsets, providing CT2 and GSM double network services. Subscribers may roam the island-wide network of T Corp with GSM1800 handsets, or with CT2 handset to communicate with ultra low prices and reduce the charges to the minimum, but still enjoy high communication quality and variety in services. It is not only attract subscribers of different groups with lower rates, but also make best use of the network resources and promote the rate of utilization. The advertisement and price strategies of T Corp are in simple and clear approach. They appeal directly and clearly, eliminate the needs of consumers to guess the true content. The advertisement stressed the number of base stations, the coverage of communication network, indicating the out –of- question nature of communication quality. The intensive TV advertisement in the early stage clearly passed the features of no interception, immediate services, tried to build up the strong brand image. They even change the company name to the widely accepted slogan. It has successfully implanted the brand into the minds of consumers. T Corp believes that after the rate competition, the brand would be the weapon for competition. The products, services and communication quality will finally come to similar levels among the operators, there will then Brand Image left to be distinctive and to be the major factor for winning. The existing equipment supplier of T‟s GSM system Siemens is not strong at the 3G mobile communication equipment. Therefore, T Corp has requested other international equipment 379 16 臺北科技大學學報第三十七之一期 suppliers to support his 3G equipment. one of biggest privately owned enterprises in Canada, earning a big fame in operational management and professional skill. (2) System Equipment Suppliers K Telecom has highly regard for Lucent Technology Corporation because of the ability of bringing forth new idea in technical provided by Bell laboratory so that it can maintain the total telecom quality. Moreover, to bring the consumers of Taiwan into the field of broadband mobile telecom of 21 century, K Telecom imports the first set of GPRS (general packet radio service) advanced network system in Asia. The system is first built up by Nokia who is responsible for southern part of island. Lucent, with 120,000 people and offices in the world, separated from AT&T in the first of October, 1996. Nokia obtains the first place in the market possessed rate of GSM1800 system of the world combined with the two other system facility suppliers of GSM900 ranked in the front of the third place in the market. Under the principle of one company one system the rest of company insist, K Telecom simultaneously corporate with this two suppliers and receive the overall back up from them. It is the first ever in Taiwan. Therefore, K Telecom believes that they can get more advantages than any other companies in maintaining the internet infrastructure and communication quality. 4.3 Case 3: K Telecom K Telecom, dominated in person by Ku Cheng Yun who is the second generation of Ku‟s family, gain the telecommunication business license of GSM1800 in northern area of Taiwan. In addition to the Ku Group, the most prestigious investors in domestic corporation include Microelectronics Technology Inc., Shin-Kong Life Insurance Co., Cathay Life Insurance Co., Tecoelectronic & Machinery Co. As for the foreign investors, the original telecom company of Sprint is changed to Bell Canada International (BCI). In January, 1999, K Telecom purchased the 82% of shares of Tuntex Telecom dominated by Tuntex Incorporation, formally become the third telecom company of privately run in Taiwan. 4.3.1 Status of Strategic Alliance (1) Foreign Joint Venture: BCI, one of K Telecom‟s partners, starts its career as one of the top ten in the field of telecom industry of the world. It takes charge of the Bell Canada Telephone Company, Bell Mobil Telecom, Northern Telecom, Bell Telecom International, TMT Satellite Communication. Its business contains the communication service and equipment produce of wired, wireless and satellite network, with 120,000 people, total assets of 41 billions. Bell is also 380 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 17 (3) Sales Channel K Telecom has now quite few direct sales stores in Taiwan, including the flagship store near the Taipei Railway Station and the other major counties and cities around Taiwan. As for the dealers, K Telecom corporates with ARCOA Telecom, COSMOS Telecom, TECOM, Easycall Telecom, Globe Telecom, Digital Communication, Chunghwa Telecom Co., Aurora Corporation. In addition to the coverage of total five continents and all the big countries like Japan, USA, Canada , China and so on. K Telecom still develop the potential subscribers to get more market share. 4.3.2 Marketing Strategy (1) Product Strategy K Telecom continuously produce a new product or service in a rapid due to the highly contest of mobile market. To attract the subscribers, K Telecom create a financial channel 288 which subscribers can grasp the real-time financial information and life channel 388 which consumers can order pizza, KTV boxes, taxi call. Furthermore, K telecom cooperates with the Pop starts to provide the value added voice service. For example, the voice of alarm is using the voice of the Pop starts. After the clearly investigations subscribers. (2) Price Strategy K Telecom is aware of the strong competition on the price. But the construction of fare is widely involved the different levels thinking of the costs of business, traders shouldn‟t neglect the major factor of the external contest and the industrial structure. K Telecom also has to pay a huge connection fee to the Chun Hwa Telecom. In the long run, the lowering price will influence the quality of service unless the connection fare may be cut and valuations, K Telecom introduces the prepaid service for low usage traditional communication marketing, K Telecom also collaborates with the electrical house appliance industry: Sony, U-Lite Electronic Co., Onking Chain-Store Co. In pre-billing system, K Telecom has partner relationship with the Welcome Supermarket, Watsons, Sunsun Department Store, 7-11, OK Convenience Store for consumer‟s conveniences. record store for the young groups. (4) Relationship With The Trades K Telecom original has contract with Tuntex Telecom who runs the license of GSM1800 in middle and southern part of island, ongoing the activity of communication wandering. After acquisition the half of shares of Tuntex Telecom, K Telecom become the third private operator of GSM1800 in Taiwan. Due to the global village effect, K Telecom sign up the contract of globe roaming with foreign companies and now has a perfect geographic Moreover, K Telecom also develop the new marketing of 381 18 臺北科技大學學報第三十七之一期 down. Therefore, K Telecom emphasis the From the K service, attempting to make the image of professional service. In the early 1998, K Telecom used the ON LINE as WANG LAI( means “pineapple in Taiwanese) for harmonic sound to restore the refreshment and built up the kindly image for businessmen who have the needs of mobile phone. After bringing about the prepaid service, K Telecom access to the more subscribers. In order to coordinate the location of product-directed and combine the brand and image of product, K Telecom also exhibit the differences of style and flavor with ON LINE and gain extensive responses and discussions. Aside from the advertisement of different products with different styles, K Telecom emphasizes that they are the first to adopt the cell-based system and seek to build up the technology image for quality success. (5) Recruitment Strategy K Telecom grants the customer service personnel should receive sturdy training; therefore, company is proud of the quality of their personnel. With college degree above, customer service personnel take pre-work and audit on line training at least one month. Thus, they not only can understand the telecommuni- quality on the price plan but not become the leader of lowering price plan. Telecom price plan, finding that there are different portfolios of price plan for the variety of subscribers. Then, they may choose one of the cheapest plans according to their own needs. As to the prepaid card, the idea of free monthly fee, free deposit is to extend the segment of low usage subscribers. (3) Distribution Strategy With the direct sales store and agent under special contract, K Telecom can provide the kindly professional service for subscribers. K Telecom uses computer link up and call center to keep and manage the relationship between marketing dealers and herself. Also, on the combinations of sell promotion, K Telecom corporated with the cellular retailed company by using their own resources to providing more favorable promotion for channel distributors. Besides, K Telecom holds on to the idea of which mobile phone is the necessity of the people‟s livelihood. K Telecom not only signs contract with 7-11 but also cooperate with the record stores to attract the young generation. (4) Branding Strategy Through different media, like TV, In the newspaper, magazine, and internet, K Telecom works really hard to acquire subscribers. beginning, K Telecom takes the quality of cation know-how but also have a good etiquette to deal with so that can settle down all of the problems from subscribers. Moreover, K Telecom also conducts the complete training and 382 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 19 expects their personnel can give the support to the most for the upper level and below level personnel. K Telecom pushes the idea of inside service to maintain the service standard. (6) Equipment Procurement Strategy To make subscribers enjoy the most advanced integrated telecom service, K Telecom invest huge amount of money in advanced technology and import the know-how and equipment which are suitable for the future development. Under the condition of which domestic dealers generally maintain standing system facility supplier, K Telecom, break the record, sign contract with Nokia who is the second system facility supplier. service ) They import the first set of GPRS (general packet radio in Asia. GPRS is the technology It will largely help the network and the which allows the GSM technology to transfer voice as well as data. quality of the entire payment convenient are the key factors of influencing the user satisfactory (Dept of Transportation, 1997). K Telecom introduced the advanced billing system for upgrading the quality of service and also put a lot of efforts on the process of management in order to issue the first payment successfully. With the cooperation of Lucent Technology, K Telecom becomes the first telecom company adopting the micro-cell based station in Taiwan. As the users continuously increase, the establishment of micro-cell based station and large-scale based station don‟t interference the message-transmitted communication dead angle, disturbing and jamming. battery life. Telecom Meanwhile, it lowers the efficient of cell-phone and increases the By using the way of strongly educates the advantage of advertising the micro-cell based station, K communication quality. Asides, K Telecom development of the future product. (7) Customer Service Management Strategy K Telecom set up a KPI (keep performance indicator) in every departments and aim to keep the competition in the market for the best satisfactory. In marketing aspect, K Telecom cautiously select the distributing and marketing dealers with good reputation in the market and hold a large scale educational training, conducting the idea of operational and service. As to the consumers, billing accuracy and match the micro-cell technology into their marketing strategy to satisfy the needs of subscribers. In 1998, K Telecom merged Tuntex Telecom and then became the third privately owned in Taiwan. Therefore, we corporate with Nokia and expect to establish the first set of GPRS in Asia which can provide both voice calls and data calls. K Telecom also have the variety of wireless communication application service for subscribers, for example: 24 hours on 383 20 臺北科技大學學報第三十七之一期 line e-mail. In order to satisfy the subscribers from different level, and after well market investigation, K Telecom first introduced the prepaid card service and make a huge shock on the market. It makes a lot pressures on other competitors who latter on become followers by the product. For the convenience, K Telecom signs up the contract with 7-11 to sell the prepaid cards. In this way, it can promote users to choose these convenient products and match up the idea of company. In the meantime, K Telecom used the interactive advertisement from TV, by choosing the subscribers to be the actor of advertisement story for K Telecom, increasing the feel of identification that draw a lot of response. After getting rid of the obstacles of operation in single area, K Telecom believed it will gain more power in the competition. Especially, facing the strongly competition in Taiwan telecom market, K Telecom has to react rapidly in order to respond the strategies from the others. In 2000, K has singed up a partnership with Japanese operator NTT Do Co Mo whom is well known for its I-Mode services. I-mode is also a role model for the third generation mobile services. Nokia has signed an This shows K agreement to Telecom‟s ambition on the telecom territory. cooperate on the development of 3G mobile networks and applications. The will also work together on network technology development to prepare for the early introduction of standardscompliant 3G services in K Telecom‟s network. Nokia will supply a fully functional 3G experimental system which will be used by K Telecom to evaluate, test and demonstrate end-to-end mobile multimedia applications in totally live working environment. 4.4 Proposition Development From the case study and data analysis, ten propositions could be drawn to link the theory and practice for the reference of mobile operators in Taiwan and the base of further studies to be explored and empirically tested. Proposition 1: “Sales Channel” is the most important factor of strategic alliance factors; which are, foreign joint venture, system equipment supplier, sales Channel and relationship with the trades. There was a lag in Taiwan‟s mobile service market. important It‟s not possible for Taiwan‟s to gain the mobile operation operators to do everything by themselves. It‟s management experience from the foreign joint venture, build up the network with system equipment supplier, establish a sales Channel and cooperate with the trades. Proposition 2: Price is the first criteria for subscribers to choose which mobile operators to use because the quality of the networks of any operators is relatively stable nowadays. 384 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 21 In the beginning of the privatization mobile services, price was the key concerns for most of the subscribers. The mobile network is all build up by the global equipment suppliers and managed by the foreign join venture and local operators. Neither to say, the network quality is relatively stable. The mobile usage price has dropped significantly due to the privatization. But, comparing with the fixed line price, it‟s still expensive. concern. Proposition 3: In Taiwan mobile market, quality, innovated services and branding strategies are the key components of the marketing strategy. After analyzing marketing strategies, it is identified that the key to success for Taiwan Mobile communication industry is call quality, innovated services and brand image. Besides the concern of price, subscribers are focus on phone call quality, innovated services and brand image. Ring tone download, short message, mobile coupon, stock quotes, weather report and taxi plate recording are the examples of the innovated services. Brand image differentiates the mobile operators‟ services. position to attract their subscribers. Proposition 4: Mobile operators are not only All the operators positioned themselves in certain For certain subscribers, price is the GSM operators. To be able to survive in future, mobile operators extend their operation to fixed lines, cable TV and mobile. Taiwan is unusual in having licensed fixed line competition at a very late stage relative to mobile development. Among the leading operators, TCC and FET have strong affiliations to a fixed line entrant. Media groups transform into global multi access players. The Media groups do this via joint ventures or mergers and acquisitions or other partnerships with access providers. Taiwan‟s mobile satellite market is deregulated in 1999, which paved the way for the introduction of Global Mobile Personal Communications Satellite System (GMPCS). Proposition 5: A series of local and global consolidations are now taking place in Taiwan’s mobile industry. Operators increase ownership stakes in or partner with other operators in order to increase the national and global reach for their service providers. Operators do this in order to focus on low cost operations and take advantage of economies of scale in network building and to take leadership in service provider role before new players do this. services. New industry structure is consisting of a few network providers and many Stronger price pressure is towards 385 22 臺北科技大學學報第三十七之一期 telecom suppliers. New service providers rise quickly and they have completely different customer needs. Proposition 6: In Taiwan, 3G licenses to utilize their services to the end subscribers. In the very beginning of the operation, the operators have to cooperate with other who has wide radio coverage. With the unique features of Taiwan mobile phone industry, the strategic alliance is for securing market resources and technical resources. Since the mobile communication operators are the leading business groups in Taiwan, they are not short of funds. It‟s more important for them to keep the market share and up-to-dated technology. The mobile communication industry is a technology-driven industry. In marketing strategy, the operators obtained resources and channels through alliance and emerged with various market strategies combination. In product strategy, the services provided by the operators are similar, with emphasis in the convenience to daily life of subscribers. In price strategy, immediately from the opening for private mobile operation, the subscription fee has been downward adjusted continuously and accompanied the improvement in price structure. In distribution strategy, every operator has directly managed stores, sales department and distributors. The operators with prepaid card services make cross trade alliance with convenience stores to offer convenient subscription services to the subscribers. In the communication and promotion strategy, the media advertisement is the major announced in 2001. as well as new entrants All the incumbent operators are fighting hardly with each other 3G is a generic term rather than a specific technology. While the move to 2G (GSM) signifies the transition from an analogue-based network to a digital one, the move to 3G refers to the evolution of networks to include data as well as voice services. The profitable 2G businesses attract the new entrants. V. CONCLUSIONS 5.1 Conclusion Mobile communication industry is intensive in technique, capital and human resources. The result of the government control on the GSM licenses has caused the lagging behind of Taiwan communication industry development. It forced the operators to cooperate with foreign firms, in equipment of operation as well as management skills after the opening of licensing. The obligation of the roaming agreement among island-wide and regional operators enables the regional operators 386 A Study on Competitive Advantage for Mobile Phone Operators in Taiwan 23 approach of market campaign and following by the different product promotion combination. The regional operators elected to strengthen the interaction with local market and to transform disadvantages into advantages. In recruitment strategy, all the operators invested heavily in the training of customer service personnel, which demonstrates the importance of service quality. In equipment procurement Strategy, the building of base stations is closely related to the quality of communication, so all the operators injected huge amount of techniques and manpower in planning and maintaining their networks. After analyzing and deducing the strategic alliance and marketing strategies we can find that through the application of resources and capacity, it is created competitive advantages in communication quality, service quality, coverage, innovated services, convenience, price strategy and the brand awareness. From this research, it is identified that the key to success for Taiwan mobile communication industry is in quality, sales Channels, innovated services and brand image. Therefore, it is believed, with the open and well-intended competition, the subscribers are able to enjoy cheaper rate, wider, multi-dimensional service and better service quality. However, The potential of 3G market cannot be ignored. 3G systems provide faster net access and voice and data transmissions than existing second-generation GSM system whose ransmission speeds can reach to 2Mbs per second, several hundred times faster than GSM. Also, the huge investment is expected to lure international vendors to Taiwan. Hence, it is very important for existed cellular phone operators to proposed effective strategies to overcome the challenge. 5.2 Marketing Implications We would like to provide certain suggestions to the operators: (1) Building technical base through strategic alliance: The past strict control of the government over radio communication knowledge caused the private operators to rely on the foreign firms, in experience and techniques for their operation. Among various kinds of alliance activities, the important one is to master the technical sources, securing the management skill and then create new products and services that meet the local market demand. We hope the industry will some day upgrade technical level of Taiwan communication industry, strengthen the competition strength, and playing the roles as their foreign partners are playing in Taiwan Market. (2) Participate in public welfare to feedback to the public: Mobile phone industry has wide business opportunities, hefty profit. It is suggested that 387 24 臺北科技大學學報第三十七之一期 the industry shall appropriate funds to establish foundation to contribute to the public. In the meantime, participate and sponsor the public interests. Through participation in such activities, they will receive the public identification and build up good enterprise image. (3) Merging to Fix-Network, building market scale: With the prevalence of domestic city phone, and the hot market of radio communication market, the operators, after the opening of fixed-network market, can secure the international telephone services, which is charged higher than the other country, and the wide band information integration (internet) services. It is estimated the fixed-network market will worth more than NT$100 billion. The mobile phone operators may secure the opportunity and build the market scale through strategic alliance. (4) 3G Development in Taiwan Taiwan‟s Directorate (DGT) (3G) General established mobile of an Telecommunications of third-generation transmissions than existing second-generation GSM system. Transmission speeds can reach to 2Mbs per second, several hundred times faster than GSM. The 3G license competition is expected to attract bidders from among the island‟s leading companies, especially those that do not currently have a mobile phone business. Also, the huge investment is expected to lure international vendors to Taiwan. 5.3 Future Research Direction This study formulates the following two suggestions: The concept of telecommunication services keeps on updating. Voice is not only service anymore. Internet portals (such as Yahoo), multimedia player (such as AOL Time Warner) are all coming to the battle. Future researchers could study on the operator trend: Auction of the 3G licenses is a very good way for government to cover the deficit. 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