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Introduction DOCOMO was spun off from the Japanese

fixed line monopoly, Nippon Telegraph and Telephone (NTT) in August 1991 to take over the mobile cellular operations. DOCOMO provides 2G (mova) PDC cellular services, 3G FOMA W-CDMA services, and 4G LTE services. Its businesses also included PHS (Paldio), paging, and satellite. DOCOMO ceased offering a PHS service on January 7, 2008.i In Japan, it is the market leader in cellular and internet services with 60 Million subscribers.ii Additionally, it has access to another several million customers through partnerships and investments in mobile services operators abroad.

DOCOMO is very strong financially with revenues of $53 Billion in 2012iii. The Net Income was healthy at $5.6 Billion and a reasonable profitability of 10.6% in a highly competitive industry. The company has a market cap of $70,000 Billion and EPS of $140.iv

Fig.1 – Profitability, Revenue & Net Income of DOCOMO

DOCOMO operates in a highly competitive environment where competitors like DOCOMO and KDDI are always on the heels of the NTT, which is the market leader. DOCOMO has always been at the leading edge of technology innovation and adoption in the field of mobile communications and devices. It was the first company in the world to provide 3G services commercially over its WCDMA network. The closest competitor, DOCOMO, is only half the size of DOCOMO and the revenues are much lesser than that of DOCOMO’s. In the last 20+ years of its operation, DOCOMO has been able to maintain the market leadership in a highly advanced consumer nation like Japan through its constant research and innovation. DOCOMO has reached a saturation level in the domestic markets and since last 5 years it has explored newer markets outside Japan.

Fig.2 – Japanese Telecommunications Market Share

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Industry analysis DOCOMO has been performing well

historically in terms of financial and operating cash flows. However, the recent trend has been towards a slight decrease in the operating cash flows as the Japanese mobile consumer market has become saturated. Further, the competition is trying to eat into the revenue pie of DOCOMO.

Fig.3 – Cash Flow Analysis of DOCOMO

The recent trend in the Japanese mobile telephony and internet market is also southwards due to the stagnation of the market. So, the industry is looking towards a challenging decade ahead.

In light of the market situation, the most important question for DOCOMO in coming decade is – Can DOCOMO maintain its market leadership in an increasingly competitive mobile services market?

5-Forces of Japanese Telecommunications

Consumers in the Japanese telecom market are fairly advanced and the entire market as such is fairly saturated currently. The bargaining power of the consumers is fairly high as they have multiple options to choose from in terms of service providers.

Suppliers of equipment and content for the telecom players are mainly based out of Japan, USA or Europe. Most of the suppliers are focused on providing the cutting edge technology to the end consumers and the implementation of large scale network upgrades put the telecom service providers at the mercy of suppliers who can drive a hard bargain. However, the suppliers do not drive a hard bargain as Japan is an advanced market which also serves as a test market for the implementation of advanced services elsewhere in the world. This makes the supplier bargaining power medium in Japan.

Threat of new entrants is practically nil in Japan as domestic companies do not enter the highly competitive market and foreign companies cannot enter the market independently.

Rivalry among the top companies in the market is quite high as each of them tries to outdo the other in innovation and consumer experience.

Internet impact is quite high on this industry. Alliances and partnerships is the name of the game. The service providers have to be internet enabled and

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since most of the consumers are focused on the online environment and social media, the internet adoption and enabling are critical success factors.

Overall, the telecom industry is not appealing for new entrants, but the existing market players have a high possibility of retaining the market share.

DOCOMO Strategy Analysis & Options

The DOCOMO strategy has been to provide a wide range of related services to its consumers. This enables the company to lock-in the consumers within the DOCOMO eco-system. A simple example of such lock-in can be providing a mobile phone buyer the handset packaged with internet data pack. The user can also be provided the online payment option for paying the mobile bills regularly. The mobile phone can be preloaded with custom apps for accessing social media and common internet services..

Fig.4 – DOCOMO Strategy Segment

The strategic options available for a company like DOCOMO in the Japanese market are –

- Alliances and Partnerships - Eco-system - Innovation excellence - Technology excellence

1. Innovation Excellence DOCOMO’s vision is shaping a smart life.

DOCOMO aims to bring smart life into reality by propelling the evolution of mobile services and new value creation through convergence of industries/services leveraging clouds. This goal has been expressed in its vision documentv.

The Japanese consumers have a higher propensity to consume data intensive internet services like anime, music, movies, shopping, etc. These can be leveraged to increase the Average Revenue Per User (ARPU) over the next decade.

2. Technology Excellence

NTT DoCoMo has the upper hand here. It is this unique factor which probably has helped it retain the market leadership. The increasing use of internet to make phone and video calls from laptops and mobile devices has reduced the per capita voice call consumption in Japan and advanced markets across the world.

Naturally, new technology is the only reason any consumer will be willing to pay a premium for the services provided by a telecom provider. Technology excellence in the form of new device

Overall Low Cost Provider

Broad Differentiation

Focused Low Cost Provider

Focused Differentiation

Best Cost

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launches, new lifestyle enhancing applications, improved connectivity, etc. can provide DOCOMO the requisite edge to remain relevant in a razor-thin margin industry.

3. Alliances and Partnership

DOCOMO has been actively forming new alliances and partnerships. Most of the alliances and partnerships are primarily aimed at providing allied services to the consumers of mobile and internet services. Through partnership it has the option of increasing market reach as well as ARPU for existing consumers in Japanese market.

Tie-ups with partners like Tata Teleservices in the fastest growing telecom markets like India will provide opportunity for DOCOMO to grow its markets which are outside the reach of the current Japanese telecommunications providers.

Japan has an increasing number of senior

citizens who are from a different generation. That generation is not used to the use of mobile services. However, with the latest developments in technology like touch based devices and an increasing number of applications and services available on the various platforms of mobile, there is a huge untapped market for DOCOMO.

4. Eco-system The market of DOCOMO is not limited to mobile

phone calls, texts and internet. It also operates a wholesome ecosystem which keeps the consumer engaged in its own revenue generating businesses.

This ecosystem can be further enhanced by providing value added services, lifestyle services and next generation custom services which will entice the user to remain in the same provider space. The alliances and partnerships will further contribute to this kind of an ecosystem enhancement.

It can partner with existing government agencies, banks, insurance providers and utility providers to help attract the senior citizen segment which will create a new eco-system. This kind of an eco-system will help keep the new age customers within the reach of various DOCOMO touch-points and thus increases the potential of upselling and cross-selling. Thus, the ARPU as well as the market share can be increased.

Blue Ocean Strategy for DOCOMO

Fig.5 – DOCOMO PMS Portfolio Mapvi

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DOCOMO currently has a portfolio of products and services which are currently in the settler and migrator segments. This provides an opportunity for the company to change its portfolio mix by adding new products or services to move into the pioneer segment of the PMS map. This is possible by doing strategic value innovation to achieve a blue ocean market space. There are various critical success factors in the Japanese telecom industry. When we map the value curve of the various KSFs on a strategy canvas we can see a graph as below.

The advancements in technology have provided touch-enabled devices which increase the ease of use. Additionally, the latest technologies are light and efficient in accessing internet based services.

Fig.6 – Value Curve for Telecom Industry

The new market segment that can be targeted by DOCOMO is the senior citizen segment. The customers in this segment are different from the young and existing customers of DOCOMO. The needs and wants of services are totally different from that of the younger tech-savvy generations. The launch of 3G and LTE services enables DOCOMO to provide innovative services like banking, insurance, utility bill payment, face-to-face conversations, etc. to the new markets. These services can help DOCOMO to immediately appeal to the senior citizens in Japan as it increases their convenience. It is aligned with their vision of shaping a smart life for customers.

But certain criteria need to be handled well to ensure the successful adoption of these services. Since the aged persons are usually settled in the remote areas of Japan where the network quality may not be as good as urban areasvii, increasing network quality and network coverage become important.

Fig.7 –Importance-Performance Analysis for DOCOMOviii

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By studying the Value Curve on the strategy canvas as well as the Importance-Performance map, we can see that the Blue Ocean Strategy for DOCOMO is to enter the senior citizens market. The strategic critical success factors that DOCOMO will have to leverage to make the competition irrelevant are –

- Creating an inclusive eco-system - Simplifying technology through innovation

Simplifying technology through innovation

enables the senior customers to access the technology and the services provided by DOCOMO with little resistance. Reducing this resistance is the elimination of the first barrier to the entry of this market segment. Since DOCOMO has always been at the leading edge of innovation curve, this should not be difficult to achieve.

Creating an inclusive eco-system allows DOCOMO to tap unexplored market spaces outside Japan and at the same time create new market spaces within Japan. Outside Japan, the financial services industry is evolving strongly in countries like India, Japan, Brazil, etc. which makes it a lucrative market for DOCOMO to enter with its new packaged offerings that offer a functional eco-system that eases the lifestyle of the consumers. The convenience factor will help DOCOMO grow faster than its competition who will be more focused on offering technologies and services which are still in the red ocean market space; like entertainment, gaming, movies, music, etc. These kind of services are attractive but not totally essential to the markets that DOCOMO needs to tap in Japan.

Thus, we can see that alliances play a major role in not only achieving technology excellence and innovation excellence, but also for creating new market spaces via creation of functional eco-systems. Thus, the final recommendation for DOCOMO is – building a compelling & inclusive eco-system.

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REFERENCES

i http://en.wikipedia.org/wiki/NTT_DoCoMo

ii http://www.nttdocomo.com/binary/about/facts_factbook.pdf

iii http://www.nttdocomo.com/binary/about/facts_factbook.pdf

iv http://www.bloomberg.com/quote/9437:JP

v http://www.nttdocomo.com/binary/about/facts_factbook.pdf

vi http://designforit.blogspot.com/2009/11/about-blue-ocean-

strategy.html

viihttp://www.nttdocomo.com/about/facts/index.html

viii

http://www.bth.se/fou/cuppsats.nsf/all/b378ba60a5008ec5c12578

3b00499608/$file/thesis2010-0610%20wang%20och%20yang.pdf