This week again, Professor Akie Iriyama of Waseda University Business School will discuss issues based on management theory. I refer to his book “World Standard Management Theory”. However, this series can be easily read without this book.
Rakuten Mobile has achieved its long-awaited platinum band. The mobile phone industry is an oligopolistic market in which the three major carriers, Docomo, KDDI, and Softbank, boast an overwhelming share. I would like to say that Rakuten Mobile, which acquired the platinum band, is making an impact, but Professor Iriyama points out that there are “three decisive differences” between Softbank and Rakuten Mobile, which also entered the market later. Masu.
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How can mobile carriers differentiate themselves?
Hello, this is Akio Iriyama.
Do you remember in the 157th installment of this series where I criticized Rakuten Mobile’s financial results materials, which were underperforming? The news has come that Rakuten Mobile has been assigned a platinum band by the Ministry of Internal Affairs and Communications.
BIJ Editorial Department Tokiwa
For a long time, mobile carriers were dominated by the three major carriers: Docomo, KDDI, and Softbank. Rakuten Mobile entered this market, but compared to the other three companies, the quality of its services was still inferior.
However, the fact that Rakuten Mobile has achieved platinum band status this time means that Rakuten Mobile has the potential to grow significantly.
Well, to be frank, I don’t think Rakuten Mobile’s situation will change even if it has achieved platinum band status. I think it’s great that Rakuten Mobile has broken into a market dominated by three companies, and I want to support them. However, there is no reason to be optimistic.
BIJ Editorial Department Tokiwa
Why do you think so?
The most important point is the telecommunications industry. First of all, to put it simply,Telecommunications business cannot differentiate itself. That’s all.
This is also the basis of competitive strategy, but there are only two ways for a company like Rakuten Mobile that has entered a new market to win. One is to provide unique products and services that other companies cannot imitate.differentiation strategy”, and the other is something that other companies can also offer, but at a much lower price.cost leadership strategy”.You have no choice but to choose one of these.
And mobile carriers are an industry where differentiation is difficult to begin with. Because,No matter which company you use, the result of “connecting to the line” will be almost the same..
If this were food, preferences would emerge between A and B. McDonald’s and Mos Burger are different, and so are Matsuya and Yoshinoya. Starbucks and Tully’s are also different. The taste, the menu, the atmosphere inside the restaurant, and even the ordering system are all slightly different. This difference leads to different customer preferences. That’s what discrimination is all about.
So, if you ask me if mobile carriers have many differentiating factors like this, they don’t. To put it bluntly, the only difference is whether or not it’s easy to connect. However, all companies are increasing the number of base stations, so there is not much difference in the ease of connection. There is no more comparison element. That’s why I can’t differentiate.
No matter how many platinum bands Rakuten Mobile has, Docomo, Softbank, and KDDI already have platinum bands.Just catching up with the other three companies, not differentiating them. Conversely, just because Rakuten Mobile has achieved platinum band status, I don’t think there are many people who will say, “I did it! I’ll use Rakuten from now on.” What about Tokiwa-san?
BIJ Editorial Department Tokiwa
Sorry, but I won’t be switching.
That’s right. Everyone is already in the platinum band, and switching carriers is a hassle, so switching costs are high. Therefore, a differentiation strategy cannot be adopted.
If a differentiation strategy cannot be used as a competitive strategy, the only option left is a “cost leadership strategy” that competes with low prices. But if you ask me if Rakuten Mobile can do that, it probably can’t.becauseRakuten Mobile will have to spend hundreds of billions of yen every year to build base stations.It’s from.
At such a time, if we were to lower prices any further, the company would go from being in the red to a huge deficit and go bankrupt. Therefore, low prices and differentiation are both close to impossible.
Definitive difference between Softbank and Rakuten Mobile
“But SoftBank entered the mobile market a few years ago and was successful, so shouldn’t Rakuten have potential as well?” Some people may think.
However, there are three crucial differences between Softbank and Rakuten Mobile.
firstSoftbank entered the market at a good time.. SoftBank entered the mobile business at a time when mobile phones were not as popular as they are now, and there were no smartphones.
The second thing isSoftbank’s acquisition of Vodafoneis. Although SoftBank took on an incredible amount of debt through this acquisition, it was able to acquire base stations all at once rather than building them from scratch.
And thirdlySoftBank made Apple’s then-new smartphone, the iPhone, available for the first time in Japan.Yes.
BIJ Editorial Department Tokiwa
Oh yeah, it was.
Docomo and KDDI were delayed in signing contracts for the iPhone. Softbank’s Son didn’t hesitate because he believed that “the iPhone can differentiate itself from others and win.” I realize now that Mr. Son was right.At that time, borrowing trillions of yen to bet on the iPhone was an outrageous gamble.That’s right. But the reason you can bet on that is because Mr. Son is a genius manager.
As a result, SoftBank grew rapidly and became a winner in the completely new market of smartphones. That’s why Japan’s mobile carriers have become a trio of Docomo, KDDI, and Softbank.
However, Rakuten Mobile does not have any differentiating factors like the iPhone.
Therefore, for Rakuten Mobile to win, it is not a smartphone or a smartwatch.Get exclusive contracts for completely new, new generation devices (e.g. glasses, devices implanted in the body, etc.) ahead of other companies., it is necessary to create a situation where “this can only be used with Rakuten Mobile’s Platinum Band!” By doing so, they have no choice but to steal users from Docomo, KDDI, and Softbank. If you can do that, there is a possibility of rapid growth. But if that’s not the case, the situation will continue to be difficult for the time being.
BIJ Editorial Department Tokiwa
I see, that’s why cable TV companies often make tie-in sales saying, “If you sign a contract with us, you can watch XX game.” In other words, since we cannot differentiate ourselves in terms of lines, we are trying to differentiate ourselves even slightly in terms of content. Come to think of it, Rakuten Mobile is also running a campaign where subscribers can watch NBA games.
“band ring”Bundling sounds cool, but as you said, it’s an industry that can’t differentiate itself.They are just trying to make it look like they are differentiated by bundling it with other services.is. But since they are just tied together, rivals can easily imitate them. After all, it’s a comparison of the heights of acorns.
BIJ Editorial Department Tokiwa
I wonder what kind of picture Rakuten Mobile had in mind when starting its business.
I don’t actually know, but I think they probably thought they could win by building base stations at a low price. In addition, the Prime Minister at the time, Yoshihide Suga, was a proponent of regulatory reform and wanted to lower mobile phone charges, which were too high. Mr. Mikitani probably thought that if he entered the industry now, he would be able to get support from the government.
However, when he entered the party, the Suga administration collapsed and his predictions were off. Competitors such as Docomo began offering low-cost plans, and competition between companies became fierce. So, although Mr. Suga’s goal was achieved, Mr. Mikitani probably suffered a loss.
BIJ Editorial Department Tokiwa
Indeed, Mr. Suga mentioned the reduction in mobile phone charges at his first press conference after taking office as prime minister.
Rakuten Mobile has achieved platinum band status this time, but don’t Docomo, KDDI, and Softbank see this as a threat?
You probably don’t think so. As Takafumi Horie said in the video, prices have been increasing recently. That’s because they think they won’t be able to catch up anyway.
In an equipment industry that cannot be differentiated, the first mover advantage is enormous.So, the first one to enter wins. Docomo and KDDI are only winning because they entered regulated industries as early movers, and they have not done much as a company. The only great one is Softbank, which is owned by Mr. Son who made a big gamble.
BIJ Editorial Department Tokiwa
I see. I see. From what you’ve said, it seems like Rakuten Mobile’s struggles will continue.
Of course, I’m sure there are some users who are sensitive about prices, and some who happen to dislike the services of the other three major carriers and switch to Rakuten. However, since the number is small, I think it will be difficult for Rakuten to reach its goal of acquiring millions or tens of millions of users. Personally, I would like to support Rakuten’s challenge, but it is difficult.
BIJ Editorial Department Tokiwa
This time, for the first time in a while, we talked about competitive strategy theory. Let’s pay attention to how Rakuten Mobile will compete in the future.
Akie Iriyama:Professor at Waseda University Graduate School of Business Administration (Business School). He graduated from the Keio University Faculty of Economics and completed the master’s program at the same Graduate School of Economics. After working at Mitsubishi Research Institute, he received a Ph.D. from the University of Pittsburgh Graduate School of Business in 2008. From the same year, he became an assistant professor at the Business School at the State University of New York at Buffalo. Since 2013, he has been an associate professor at Waseda University Graduate School of Business Administration (Business School). He has been in his current position since 2019. His books include “What are management scholars around the world thinking now?” “The world’s most advanced management studies that you can’t learn in business schools” and “World-standard management theory.”
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Source: BusinessInsider
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