Innovation in Mobile Communication Industry - Case Study Example

? Innovation in Mobile Communication Industry (Case study: Iphone Introduction In this growing age of technology, the demand of innovative solutions is equally important for the business industry, researchers and also for consumers. From the literature, five dimensions of innovation are identified, and they are as, something new is innovation; stream of change is innovation, innovation as a process, innovation as worth driver, and innovation as invention (Ram, Chu, and Wu 2010). The innovative standards of telecommunication industry are: GSM, GPRS, CDMA, 3G, LITE, etc. In a technological world change is vital to run the industry (Malerba 2004). The innovations in mobile communication industry have great impacts on it, in terms of increase of mobile users. The development in mobile industry directly impact on the mobile service provider companies. Cellular phones are used not only for making calls but also for internet usage, messaging, gamming, and for many other applications (Krantz and Smith 2011). The growth drivers of telecommunication industry are based upon two factors: technology and regulation. The innovations in mobile communication industry have increased the economy and changed the social life of consumers as well. The relationship among communication industry and the economy is focused (Mosco 2009). This paper is aimed to see the sights of innovation in mobile communications industry. According to the Wireless Association’s statistics, the use of mobile phones has peaked up the population of America by 3.9% (Kang, 2011). The prediction by Perez about mobile usage will exceed with world population, and this rate will continue to reach 1.4 mobile phones per capita by 2016. The mobile phones operating systems are of different kinds: Android, Apple, Windows, BlackBerry, and Symbian (Perez 2012). The estimated value of mobile users is almost 5.6 billion which is approximately equal to 80% of the world. This paper is structured as follows: a brief description of related concepts to innovation and mobile communication industry are presented in section 1. Section 2 presents innovation in mobile telecommunications industry and innovative topologies through presenting the different generations of mobile phones. Section 3 researches by focusing on Iphone as an example of innovation in mobile communications industry and analyses its market using PEST and Porter’s 5 forces models. Section 4 briefly portrays mobile communication innovation drivers. In section 5 the work is summarized and the conclusion is given. 2- Innovation: Background 2.1. Definitions The mixture of new things results as innovation. The introduction of new methods of production, techniques, and products define the innovation process. The new ways towards development become possible due to the innovative solutions. In some cases, the investment in the innovation is risky, but the novel product becomes successful and profitable in many cases (Cooper 2011). The change and innovation is not a new concept, it is as old as mankind itself. Everything in this world needs improvement; this need has become the core reason for change and innovation. Human nature also demands change in things and technologies. Addition of new values to almost every field of life makes the innovation as an important factor. Due to this urge, researchers have focused on the innovation concepts, theories, demand, benefits, and risk. The social and economic effect of innovation makes it more considerable. The difference between invention and innovation is defined as: invention is the creation of something totally new and innovation is some advancement in previously invented thing or technology. These two concepts are related and closely linked with each other (Fagerberg 2004). The concept of innovation is defined by various authors in different ways according to their area of interest and personal understanding of the phenomena. The innovation is defined by Barnet (1953) as”any thought, behaviour or thing that is new because it is qualitatively different from existing forms”; therefore, innovative product is anything with improved features. A few authors do not agree with the above theory of innovation, according to them innovation is something changed for market demand (Wilson 2010). The description about history, element of diffusion, necessities of change, and consequences of innovation are the focused areas of Rogers’s research. According to him change management and innovation have a strong relationship. A process of change is occurred with the innovation in the existing product. This change needs a system to manage the change, which is commonly known as change management system. The knowledge and information along with the product invention and modification as innovation all are maintained properly in change management. Another thought about innovation is imitation, which is related to the concept of understanding the product in a new context. According to this definition there is a novelty in context with respect to the environment where it is situated (Anderson 2012). Some studies about innovation present it as a new thing, but many other theories consider it only changes in previous things. The invention and innovation phenomena are closely related at some points, which create this ambiguity. As the concept of Fagerberg (2004) for innovation is newness in old invention and take imitation differently. The dimensions and dynamic of innovation are taken differently as the definition is taken. There are 12 dimension of innovation. These are shown in the following figure. Along with the dimensions four dynamics of innovation are considered. These are WHAT, WHO, HOW, and WHERE. WHAT consists on product innovation phase, HOW it is consisting on process innovation phase, WHERE it consists on expansion phase, and WHO consists of segmentation phase? Figure: Dimensions of Innovation (Source: Chase 2012) The dissimilarities between theorists in understanding the innovation concept were also reflected in the way they classified innovations. Several typologies were presented to classify innovations and all were based on different factors. These typologies are presented in the next section. 2.2. Innovation typologies The literature has exposed the four well known typologies of innovation. These topologies are considered as the base for different factors like the type of novelty, degree of radicalism, degree of openness and innovation field. According to the first topology of innovation, it is classified into a new product; new process, new market and business plan (Cooper 2011). The understanding of new products and innovations is highly important. These inventions and innovations need to be explored and discussed in the literature. The workings of these four topologies are according to the names, new product concerns with providing the novel products in the market. The second topology named as process and it is working as the innovation of new process for finding the new ways for production of previously invented products. The process innovation was subdivided into two categories, technological innovation and organizational innovation. In the technological innovation, new technologies are introduced for the improvement of existing process. The closely related concept on invention and innovations is applied here in technological innovation of the process. The novel technology is invented for making the process improved, where the process is taken as innovative, and the technique is taken as invention. Both concepts are linked and related with each other. The other aspect of process innovation is about the organizational innovation, in which the new procedures of management and techniques are introduced for the enhancement of process (Villeval, 2009). The degree of innovation is based on the changes made. Some innovative products are changed, and the impacts are low, some are usual, and few of them must be very high and long lasting. The technological revolution could be expected in the industry as the consequences of innovation. Such impacts that can change the results for any single industry; it might make a positive effect on other similar industries. Sometimes it happens that small innovation can result into the great impact for industry and becomes popular for product. Chesbrough (2003) has believed that two concepts of innovation. One is open innovation and second is close innovation. In close innovation, internally the organization is responsible for the creation of idea, concepts and theories for any enhancement in the existing product, process, and technology. The idea is generated internally in the organization and translated into innovation; the innovation is commercialized in the next step. This innovation involves internal idea and concept of the people worked for the organization, in many cases it results good, but there are chances that this innovation may be less useful for the organization. Another concept about innovation is open innovation, which generates the ideas from different sources, and several organizations are involved and working for same phenomena. The result from such innovation is better as compared to close innovation. The open innovation product contains different kinds of theories in it. The fields of innovation are also the considered seriously. According to Clegg, Kornberger and Pitsis (2008) there are mainly two fields of innovation at present. One is social field, which is regarding the art, psychology and organizational science. The other field of innovation is regarding the technical field such as machineries and high Technology. Based on some major factors, economical side of social innovation is discussed. These are subdivided into four parts: 1. New market and new market strategies are created. 2. Management that refers the new managerial policies is defined for the creation of increase in productivity. 3. Political and new government policies are referred for the creation of innovations. 4. Institutions that refer the emergence of new institutions in the industry. The above discussion about innovation typologies reflects the diverse concepts and theories available in the literature. There is an overlapping connecting on the different typologies. The organizational innovations are superfluous in more than typology. The economic point of view is more focused in the literature. The organizational innovation has a great impact on the production of new products in this growing age of technology. The innovation in mobile communication industry is discussed in the paper. The Iphone is taken as a topic of study the understanding is made about the innovation through the mobile phone example. 3- Innovation Mobile Communication Industry Mobile communication industry is fast growing and innovations are in high demand. In mobiles product based and technology based innovations are required. The novelty in mobile communication industry improves the sale and profitability. There are different types of innovations, which are made for mobile. The topologies discussed previously about innovation are applied in mobile communication industry. Mainly the technological innovation topology is used for mobile innovation. The features of mobiles are improved day by day according to market demand and customers requirement. The handsets are improved with respect to hardware and software as well. The description about the generations of mobile phone is presented below. The case study of Iphone is taken as an example for getting better understanding of the innovations held in mobile communication industry. 3.1. Mobile Phone Generations In early 1980s, the first mobile phone was introduced by TNN in Japan. Another European version is known as Nordic Mobile Telephone (NMT). Initially phone services were limited to voice calls only. The roaming facility was first provided by NMT and Japanese did not provide this feature. According to Mosco (2009), in the first generation of mobiles seven different national standards are present. The second generation of mobile phones (2G), was introduced in 1990s, this generation of mobiles are tried to overcome the missing features of first generation computers. The unified standards system was adopted by first generation innovations as called the Group Special Mobile (GSM), in later stages this concept was changed and known as Global System for Mobile communications (GSM). The first generation mobiles used the analogue network technology for communication. In the second generation, the mobile communication technology instead of analogue network there is use of digital network. The data transfer in digital network system is more reliable, better transmission of voice calls, power consumption gets low as compared with analogue network. The addition of more standard in the second generation networks, the General Packet Radio Service (GPRS), this standard allows the faster communication of data. The enhancement in GPRS standard, the improved and innovated technology is provided for mobile communication industry. Another innovation in mobile standard is the Enhanced Data GSM, Evolution (EDGE) standard and this allows the faster data transmission rate as compared to previous standards. The production of small batteries, introduction of Short Text Messages (SMS), and feature of downloading the mobile ring tones are some famous features offered in first and second generation of mobile communication industry. All these come under the definition of innovation. The technological innovation is taking place in different generations of the mobiles (Chen 2007). Furthermore, advance level innovation in mobile communication industry is regarding the introduction of third generation mobile phones. The third generation mobile (3G) was developed by Japan in 2002. The data transmission services are enhanced in all generations of the mobile market. The fast data transmission is an important feature of third generation mobile phones. The use of cellular phones for the internet is valued than the original working of phones. The phones calls and text messaging are common features of mobile phones, but this is also possible with internet feature available on recent mobile phone technology (Wallis 2013). The internet usage is working on its peak and used by many customers on mobile phones. Along with the innovations held in mobile communication industry, there are innovation appears for the internet technologies as well. The software’s worked in mobile are innovated increasingly to fulfil the demands of the market. The invention and innovation both work similarly in mobile industry and mobile software’s area. The high technological use is possible with EDGE and GPRS. Examples of these applications include multimedia, online TV stations especially designed for mobile users. The technological innovations have fully taken the lifetime on mobile communication industry. In the next section, the case study of Iphone is explored, which gives the best description about the mobile innovations with respect to technological innovations. Iphone is the Smartphone and it is made by Apple Inc. 3.2. Case Study ( Iphone) 3.2.1. Overview The Iphone is a Smartphone and it was formed by Apple Inc. in 2007. Iphone 3G, Iphone 3GS, Iphone 4, and Iphone 4S are major types. The technical features of these models present the design of the latest 3 models. The first two models (Iphone and Iphone 3G) look identical to Iphone 3GS. The introduction of Iphone was a revolution in mobile phone communications industry. It has the standard features: like voice calls and transmission of data as well and it also contains many other innovative features that make the phone unique from other existing phones in the market. All latest models of Iphone are thin, fastest in service, and light weight. The ultra fast wireless technology is built in the Iphone. The innovated connector is thin and smarter it replaced the 30-pin adapter. The market analysis of Iphone is presented below from two different perspectives, using PEST analysis and Porters Five Forces Models (Apple Inc. 2013). 3.2.2. PESTEL Analysis To analyze the external environment of any organization a technique named PESTEL analysis is used. PESTEL stands for Political, Economical, Soci-cultural, Technological, Legal and Environmental. There is a short version of PESTLE analysis known as PEST analysis, which does not include the legal and environmental factors as focused area. The following sections will elaborate the PESTEL analysis for Iphone external environment. a) Political Factors The political environment from North America and United states has helped a lot in the growth of Smartphone technology. The practical survey was conducted for Smartphone and feature phones users. By the end of 2011 the survey was conducted and found that Smartphone had more users in United States (Entner, 2010). Besides, the deployment of Iphone in Europe, world faced some political challenges. The European policies regarding the promotion of mobile communication industry increased the market competition. This competition reduced the profitability of mobile manufacturers. Political factors always affect the Apple to continue the way of success to Iphone. The market of Apple Inc. always considers the political conditions and regulations in the country where approach to operate. Another political challenge of Iphone is the lack of support with UMTS standards. These standards are a requirement from the official European mobile communication authorities. This issues airside after the introduction of the first generation of Iphone. To compete with European market apple fights against them through technology. After the development of first model of Iphone in 2007, Apple is forced to introduce Iphone 3G to meet the demands and solve the issues. b) Economical Factors The global economy has been suffering from recession (Wessel, 2008). The growth of Smartphone sales is growing bit steady. Customers’ demand getting higher and price expectation remains low. To meet the customers’ demands and improving the technology is a difficult task. The financial conditions of mobile phones and features are growing at same manners. In this battle of improve in features and technology and the prices of mobiles, and in a few case price is compromised for getting better technology, so in some cases price is considered by neglecting the technology. There are companies, which have tried to overcome this issue, and provide the economical mobiles in the mobile communication industry that is the target of such organizations. The examining of sales and economic position of Iphone in particular has witnessed an immense increase as the release of the first model. As an example, table (2) compares Apple’s Iphone sales with those of its major competitor like Nokia, Samsung etc. Table 2: Iphone sales and market share in 2010 and 2011 (Source: Framingham, 2013) The table depicts the sales of Iphone and market shares of 2012. A massive growth is observed in the Table above. This also gives positive indication for future enhancements. However, global economic future is unclear and non-predicted correctly; the same risk is applied for mobile communication industry. If economic condition is bad in all over the world, people surly want to purchase cheap mobiles instead of Iphone and other technological mobiles. If economic conditions are natural, and then mobile customers will focus on the required product, few will be interested in the technological mobiles and other will consider only price (Framingham 2013). c) Soci-cultural Factors The social and cultural values of different countries are directly captured and result into changes in the demands of mobile communication industry. The influence of culture must have some requisites for production market. These requisites must achieve the capturing of the local market, which can help to get the better demands in the international market. These social and cultural values include the lifestyle, age and education of customers. The Apple’s product did creative marketing previously, like the iPod has successful media player that was famous in youngsters. The Iphone brand is established in the customer’s mind, and this is done only through knowledge of cultural values of the society. d) Technological Factors The technological factors are major factors of mobile communication industry, because mobile is a combination of many features, voice calls, short messages, wireless internet, online gaming, music, pictures and many more. So, it has the biggest impact on mobile industry. The technology is innovated in mobiles according to need of customers, market demand. The Apple’s Iphone have different versions, and each new version is technologically enhanced from previous version (Kenny and Pon, 2011). The technological innovative features include as the traditional keypad is replaced by touch screens, and fully functional inter browsers (McCray, Gonzalez and Darling, 2011). e) Legal Factors The legal factors have a great effect of the performance f the company. Recently the Apple legally wins over Samsung. In court Apple wins over its competitor company Samsung. Apple win means the new buyers have to pay some additional tax on Apples products and this law affects the customer market of apple. f) Environmental Factors The environmental factors are affecting the product prices of Apple. The loyalty of customers towards Apple products reduces the effects of environmental factors. The new products are made under the latest environmental legislation but consumers are not reduced due to the price issue (Bernan 2007). 3.2.3. Five Forces Analysis The porter’s five forces analysis is a tool used to analyse the internal environment of the organization or certain industry. This analysis model was proposed by Michael E. Porter in 1979. In his study, he focuses buyers and suppliers bargaining powers, the threat of substitutes for the products, the threat of new entrants, and the competitive rivalry (Thompson and Martin 2010). a. The bargaining power of buyers In certain situations, the bargaining power of buyers could be determined as significant. In the Iphone case, buyers are mostly individual consumers as businesses tend to adopt other Smartphone like blackberry for their convenience for businesses purposes (West and Mace, 2010). b. The bargaining power of suppliers In mobile communications industry, companies can outsource some of the mobile phones hardware and software components from external suppliers. The Iphone is an open innovation. For the development of first Iphone model, Apple has used 30 different external companies to supply some hardware components (Muller, Hutchins, and Pinto, 2012). c. Threat of substitutes The threat of substitutes gets high if the product with low price and high performance are available in the market (Thompson and Martin 2010). In the previous discussion the Smartphone like Iphone by rivals was discussed. These phones are similar but not identical in technology with Iphone, but the threat of substitutes is argued. As result apple’s increased the Iphone prices. d. Threat of new entrants The threat regarding new entrants always exists in almost all industries. That is why industries tried to innovate, alter and invent products to meet this threat. Even new entrant also has to face some major concerns like economic of scale, product differentiations, capital requirements, and customer switching costs, access to suppliers, government regulations, and rivals retaliation (Thompson and Martin 2010). e. Competitive rivalry Rivals in a convinced industry use special techniques to enhance the competition. The special techniques are related with the price, increase in advertising the product, increase in warranties; the after-sales services could improve (Thompson and Martin 2010). A severe competition is going on among many companies of mobile communication industry. A good example of Apple’s Iphone will explain the competitive rivalry. After the introduction of first Iphone, many competitive companies tried to make the Smartphone like Iphone. Many features are imitated as Iphone contains (West and Mace, 2010). Nokia, the major player in the Smartphone market has launched several ad attacks against Iphone calling it a “beta Smartphone” (Ingram, 2012). 4- Mobile Communication industry Innovation Drivers. The literature available about innovation drivers of mobile communication industry, there are three main types of drivers. The detail about them is provided below. a. Technological provisions The gap among hardware and software is present in the industry from the binging of industry. If we consider the 1G and 2G mobile phones, there is hardware level innovation. The necessity of hardware innovation is observed for users. Later on in 3G the demand is increased about software and technological innovation. This technological level innovation is made to compete with the market demand. The best innovation in smart phones is observed as Iphone. This revolutionary development of Iphone is also called the mobile application development. It opens the new ways of innovation in mobile communication industry. The technological necessities are considered as first innovation driver of mobile communication industry. b. Market competition The market competition is regarded as second innovation driver of mobile communication industry. The product should be unique featured for competing in the mobile market. The innovations made in mobiles must fill the upcoming requirements of consumer and make good position in the market. Few of the innovation are made only to capture the market place of organization. If mobile company not making any innovation for a long time, it must suffer the position in the mobile market. The market competition always motivates the organizations for innovations (Ridely 2008). c. Fixed networks competition The rivalry among mobile communication industry and fixed networks is considered as the third innovation driver. The services provided by fixed networks are more reliable and faster than the internet working for mobile networks. There is a strong need to improve the wireless network for mobiles to compete with fixed networks. The up-coming challenge of mobile communication industry is to meet the wireless network performance as good that will be able to capture the market in this area (Doole and Lowe 2008). 5- Summery and Conclusion The paper has focused on the concept of innovation definitions, innovation technologies and innovative elements of mobile communication industry. From the last three decades a technological revolution has emerged in the mobile communication industry. The mobile phone industry is highly motivated and grows from simple calls making devices to sophisticated machines for smooth use of internet and playing high quality games in it. In this research work, the case study is presented to analyze the Apples Iphone taken as an example. The analysis of internal and external environment of the Apple’s origination is made through PESTEL and Porter’s analysis. The core findings of the analysis are: The Apple had faced numerous political obstacles when Iphone was deployed. The political matters are considered before the production of any new products. The pricing strategy of Iphone is good enough to meet the customers’ demands and approach, as any technological mobile must have. Social and cultural values of consumers are in favour of Apple. Rivals are trying hard to surpass iPhone’s capabilities. Apple should keep on innovating new technologies. 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