Assignment : Say "Charge It" with Your Cell Phone

Assalamualaikum,

Questions : 

1. Do you view this technology as a potential threat to traditional telephone
    companies? If so, what counter strategies could traditional telephone companies
    adopt to prepare for this technology?

2. Using Porter's Five Forces describe the barriers to entry for this new technology?

3. Which of Porter's three generic strategies is the new technology following?

4. Describe the value chain of the business of using cell phones as a payment
    method.

5. What types of regulatory issues might occur due to this type of technology?

Answer : 

1. Absolutely yes. This modern technology is big threat towards the traditional
    telephone companies. Since ages, our community had been using these
    traditional telephones such as public phone or mobile home. Nevertheless,
    people has shifted to the use of these modern telephones due to its technology
    advances. Thus, it is a must for the traditional telephone companies to apply
    counter strategies to prepare for this new technology such as :

    a) make traditional telephone more appealing to people and possibly 
        cheaper packages then what they already have
        For example : Telekom Malaysia always make an attractive packages
        offer to its customers such as Streamyx+Netbook packages as low as
        RM38, SME Fax Plan 78, BizApp Store, TM Office In A Box 365,
        TM SME Relocation Services and more.

    

    b) if possible, somehow tried to affiliated with these cell phone companies
        to make out profits

        For example : Telekom Malaysia merge with Celcom in year of 2003. Since
        then, they have produced many products.

2. Barrier to Entry :
 
    This new technology indeed do not have any problem to enter the market because
    of its physical characteristic that are portable, light and user friendly. Thus, these
    cell phone companies must offer customers an array of services that this new
    technology will provide.
    For example : a customer prefer to use prepaid card instead of telephone bills.

   Threat of Substitutes : 

   In switching cost, cell phones companies can monitor what customers buy. After
   many times of visiting sites they can tailor products to what the customer likes. If
   they shop else where, there will be a switching cost since the new shopping site
   does not have a profile of the past's purchases the customers made.

3. The new technology is is following focused strategy-target a niche market
    and targeting the growing market of cell phone users and purchasing 
    products and services from the cell phones out from Porter's three generic
    strategies. Target a niche market here means the subset of the market on which
    a specific product is focusing. So the market niche defines the cell phones
    features aimed at satisfying market needs, as well as the price range, production
    quality and the demographics that is intended to impact.
    For example : Nokia, Motorola, Samsung etc are a few market leaders who
    make mobile phones ranging from basic handsets to fully featured camera, mp3,
    internet and 3G enabled phones. But despite this there exists an extremely
    premium market for mobile phones and this is where Vertu luxury mobile phones
    are exclusive niche products due to their expensive finishing and latest features.
    Vertu mobile phones are high end phones which have a gold and diamond
    finishing which makes them expensive collector's items, and thus there is only a
    niche market with premium customers.

4. Not so long ago, a mobile phone was for making calls, sending text and not much
    more. However, the rise of the smartphone has changed all that, opening up many
    new ways to make payments.
    For example : Internet banking on your smartphone. Some banks have develop
    'apps' for smartphones (like the iPhone, Android or Blackberry), while others have
    created specially adapted versions of their websites that make them easier and
    quicker to view on the small screen of a phone and makes payment efficiently. By
    this way, more people will engage in this type of payment method.

5. Regulatory issues might occur due to this type of technology are :

    a) people will be skeptical with putting personal information out there not knowing
        what kind of security protection the company has.
        For example : customers who want to buy electrical goods through online are
        required to give in advance their bank account number information. Here lies the
        problem where they would feel hesitate on what kind of security protection the
        company has.

    b) people/anonymous will find a way to hack into cell phones.
        For example : some cell phone companies did not have a strong immune
        system from being hacked. Opposed to iPhone because they have their own
        defense system that will prevent them from being hacked.

Chapter 2 : Identifying Competitive Advantage (Porters 5 Forces Model)

Assalamualaikum,

Porter's Five Forces Framework 

An business organization has to fully understand  the dynamics of its industries and markets in order to compete effectively and intensively in the marketplace. The forces which derive competition and attractiveness of a market, contending that the competitive environment is created by the interaction of these five different forces acting on a business. In addition to rivalry among existing firms and the threat of new entrants into the market, there are also the forces of supplier power, the power of buyers, and the threat of substitute products or services ( The Figure shown Porter's Five Forces Framework ). Michael E. Porter suggested that the intensity of competition is determined by the relative strengths of these forces. The Five Forces directly are interconnected with the effect on the company's ability.

Michael E. Porter

According to Porter’s Five Forces Model, if entry into a market is easy then rivalry is likely to be high. Considering McDonald’s competitive rivalry, there is intense competition in fast food industry that many small fast food businesses fight with each other to improve their customer base. This makes a competition the major focus between businesses. Although, McDonald’s, with more than 32,000 local restaurants serving more than 60 million people in 117 countries each day, has a number of fast food outlet competitors across the countries such as Burger King, Taco Bell, KFC, Wendy’s, it is currently the leader of the industry in market capitalization with a cap of $39.31 billion. Here are few additional details about Porter's model : 

1. Barriers to Entry

Economics of scale mean larger firms can produce at lower cost per unit. This tends to lower the number of firms in the industry and reduce competition.
For example : The telecommunication industry where to service a single phone in a town costs a huge amount of money. Lines must be laid,towers constructed and other infrastructure purchased to hook the phone up to local and long-distance lines. When the company is servicing a thousand  phones in the town, however the cost per phone of all the infrastructure is significantly lowered as the lines are already laid and the infrastructure is set, so it makes sense for the telecoms company to have all of its line/infrastructure to be used fully, rather than lay there redundant. 

Proprietary product differences are the characteristics that make a product appeal to a large market segment. But only those characteristics that cannot be copied at low cost by competitors will be a barrier to entry.
For example : Coca Cola have a secret formula for their cola soft drink that acts as a high barrier to entry. Very few firms try and compete head-to-head with Coke in the cola segment of the industry.

Brand identity is the extent to which buyers take the brand name into account when making purchase decisions.
For example : Customers are more interested in KFC than any other fast food because of its easily remembered tagline "So Good" which its previous tagline "Finger Lickin' Good" had been ditched in an attempt to improve its image.

Capital requirements are the total cost of acquiring the plant and equipment necessary to begin operating in the industry. 

2. Bargaining Power of Suppliers

Differentiation of inputs means that different suppliers provide different input characteristics for inputs that basically do the same job. The greater the degrees of differentiation among the suppliers the more bargaining power suppliers have.
For example : Drug industry relationship to the hospitals. Basically they have same goal which is to rehabilitate disease suffered by patients.
Presence of substitute inputs means the extent to which it is possible to switch to another supplier for an input (or a close substitute). The greater the number and closeness of substitute inputs the lower the bargaining power of suppliers.
For example : If the price of coffee rises substantially, a coffee drinker is likely to switch over to a beverage like nescafe because the products are so similar.
Supplier concentration is the degree of competition among suppliers. Usually the more concentrated the industry, the fewer suppliers and the more control suppliers have over the prices they charge. Greater power concentration often means greater supplier bargaining power.
For example : Intel is one of only a few providers of CPUs for the PC industry. This give them power over the PC industry.
Cost relative to total purchases in the industry refers to the amount your firms spends on input from a particular supplier compared to the total revenue of all firms in the supplier's industry. Lower expenditure usually implies more bargaining power for the supplier. The buyer's bargaining power falls as spending with a particular firm falls simply because the buyer's business is not as important to the supplier.

3. Threat of Substitute

Relative price performance of substitutes is the price of substitutes for your output compared to the price you are charging. If the prices of substitutes is lower, the competitive threat increases as the price differential increases.
For example : Few business people put cheap pens in their shirt pockets. They prefer a very expensive pen. The prestige factor is much higher for the higher-priced pen. The need being satisfied is not the ability to write, but the image being portrayed.
Switching costs refers to the cost to the buyer of switching from one seller to another. The greater the switching cost the lower the threat of substitutes because buyers have a stronger incentive to stick with a single supplier.
For example : In software industry, the switching costs are the time required to learn a new program. This make it less likely that a buyer would switch readily from Excel to Lotus. This buyer switching costs gives power to the software company.
Buyer propensity to substitute is the extent to which buyers are willing to consider other suppliers.
For example : Special interest groups forced McDonald's to switch from styrofoam containers to paper containers for carry out food.

4. Bargaining Power of Buyers

Buyer concentration versus firm concentration refers to the extent of  concentration in your industry. The more concentrated the buyer's industry relative to your industry the greater bargaining power of buyers.
For example : When DVD's were first released you could only get them in a few specialty shops who could  set DVD prices. Now DVD's are stocked in supermarkets, record shops, service stations. This has significantly reduced the ability of any one stockist to set price.
Buyer volume is the number of units of your product the buyer purchases from all sources. The greater buyer volume compared to the quantity purchased from you, the greater the bargaining power of buyers.
For example : A small doctor's surgery that uses only one ream of paper each quarter, they may just pop over to the local news agent to buy that ream of paper and not worry to much about how much it costs. Whereas a finance company who uses 50 reams of paper each week is more likely to want to get a good deal on their paper.
Buyer information is the state of information buyers have about your industry. The more information buyers have about industry the more bargaining power buyers have.
For example : The auto tire industry. Buyers (auto manufacturers) know what it takes to make a tire. Therefore, they have power over the tire industry. This is demonstrated by the relatively low margins in the tire industry.
Substitute products means the number and closeness of substitute available for your product. The greater the number of available substitute the more bargaining power buyers have.
Price of your product relative to total expenditures on all products. This is the fraction of total expenditure buyers spend on your products. The greater the fraction of total expenditure the greater the price  elasticity of demand and the more bargaining power buyers have.
Product references refers to the degree of differentiation between your product and other products in the market. The greater the differentiation of your product, the lower its price elasticity of demand and the less bargaining power buyers have.
Brand identity is the extent to which your brand name is recognized and sought out by buyers. The stronger your brand identity the less bargaining power buyers have.
For example : While high performance tire with a brand name seen on racing cars would favorably impact the brand identity of a very expensive sports car, a brand of tire that automobile assembly plants put on compact cars would negatively impact the brand identity of this car.

5. Rivalry Determinants

Industry growth is the speed at which the market is growing. Rapidly growing markets provide less incentive for firms to aggressively compete with each other.
Intermittent overcapacity is the amount demand fluctuates during a year (or over a business cycle) and the impact lower demand has on how efficiently the firm is able to use its plant and equipment. In some industries a decrease in demand leads to significant idle productive capacity, while other industries are not as susceptible to this factor. More intense rivalry is likely to be fostered in an industry in which firms face either large amounts of unused plant capacity or face frequent idle capacity.
For example : Sale of farm produce during harvest of a bumper crop
Concentration and balance is the number of firms in the industry and their relative size. An industry in which a few firms supply most of the output is likely to not be very competitive because the large firms will control the market.
For example : High-end jewelry stores reluctant to carry its watches, Timex moved into drugstores and other non-traditional outlets and cornered the low to mid-price watch market.

Chapter 1 : Business Driven Technology

Assalamualaikum,

The technology which is in line with the rapidly growing development indirectly also help entrepreneurs in double the value business return run by them. In the past businessman used to make a business through a dove, make a campfire or using a large ships to sell merchandise back then. They have to bear time,money and energy losses. Fortunately Tim Berners Lee,the internet founder had succeeded in created World Wide Web in 1989. This has opened up vast opportunities especially to these entrepreneurs to expand their businesses. Then, all kind of electronic devices emerged in order to make life easier such as telephone, computer, fax machine and others. Nevertheless, there are two main terms used in this scope of area, specifically Information Technology (IT) and Management Information Systems (MIS). Normally people do know the meaning of Information Technology (IT) itself but not for the Management Information Systems (MIS).

Information of Technology

Information Technology (IT) is a field concerned with the use of technology in managing and processing information. It's covering many field that deal with the use of electronic computers and computer software to convert, store, protect, process, transmit and retrieve information securely. Hence, it can be an important enabler of business success and and innovation. It is not useful unless the right people know how to use and manage it effectively. It either can be harmful or vice verse.

Management Information Systems (MIS) is a business function just as marketing, finance, operations and human resources. It is a general name for the business function and academic discipline covering the application of people, technologies and procedures-collectively called information systems to solve business problems. Organizations must manage information properly. Therefore, an organization must determine what information it requires, acquire that information, organize the information in a meaningful style, assure the information's quality, provide software tools so that employees throughout the organization can access the information they require. There are three important element of Management Information System (MIS) which is data,information and business intelligence, IT resources, and IT cultures. Data is a raw facts that describe the characteristics of an event. Information is a data converted into a meaningful and useful context. Information from sales events could include best-selling item, worst-selling item, best customer and worst customer. Business intelligence is a applications and technologies that are used to gather, provide access to, and analyze data and information to support decision-making efforts. People, information, and information technology are the three key of IT resources.

In my own opinion, i strongly agree with the use of these electronic devices in business. It's help in reducing costs of money, time and energy. It's also help in improving productivity and generating economic growth. I do like with the idea adopting the use of Information Technology (IT) in business organizations in helping achieve their goals. The higher level of adopting the IT, the more advanced and high competitiveness the organizations are.