DoCoMo: The Japanese Wireless Telecom Leader
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Case Code: BSTR049 Case Length: 17 Pages Period: 1992 - 2003 Pub Date: 2003 Teaching Note: Available |
Price: Rs.500 Organization: NTT DoCoMo (DoCoMo) Inc Industry: Telecommunication Countries: Japan Themes: Differentiation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
I-Mode: DoCoMo's Success Story
I-Mode became an instant success, resulting in a phenomenal growth in DoCoMo's subscriber base. The fact that the usage of the Internet was still in its infancy in Japan till then worked to the company's advantage.
I-Mode resulted in a huge surge in DoCoMo's profits in the very first year of its launch. According to reports, on an average, I-Mode generated 30% higher revenues per subscriber as compared to DoCoMo's phones that provided only voice services. In 2000, the company reported a net income of $ 2.4 billion, a 39% increase from the previous year. To leverage the success of I-Mode, DoCoMo announced its plans to develop third generation (3G) services in late 1999. The company also announced its global strategy to establish itself as a global player expanding its operations outside Japan. Under this strategy, DoCoMo planned to take up minority stakes in less evolved cellular companies worldwide to establish itself as the first global cellular telecommunication giant...
DoCoMo - Beyond I-Mode
In early 2001, DoCoMo announced the development of Freedom of Mobile Multimedia Access (FOMA), a 3Gservice that was to be launched in May 2001. As a part of this, through the early half of 2001, the company used I-Mode's success to acquire minority stakes in various cellular companies around the world.
Commenting on this, Natsuno Takeshi, Executive Director, DoCoMo said, "No one ever expected this to happen a year and a half ago. Only those who witnessed the shift [i.e. DoCoMo] can imagine what to expect with 3G. DoCoMo alone is very sure of the potential of 3G, because we have already experienced the explosive success of the data business. Our overseas business is to offer our know-how. We cannot give it away free, but we can make a minority investment in interested partners. I think it is a perfect strategy." Analysts pointed out that though DoCoMo had tried earlier to enter the global arena with I-Mode through its deals with few cellular companies, it could not succeed due to I-Mode's incompatibility with the digital transmission standard used worldwide...
DoCoMo - Problems Aplenty
In early 2001, though DoCoMo still remained the largest company in Japan by its market capitalization and the second largest mobile phone company in the world (after Vodafone), it was facing problems on account of its aggressive overseas investment drive. With wireless stocks plummeting across the world during early 2001, DoCoMo was forced to write off $7.7 billion, due to the decline in the value of its investments in various foreign wireless companies. Meanwhile, DoCoMo was facing problems in launching FOMA. The launch, originally scheduled in May 2001 had to be postponed by 5 months. The company also announced that it would launch a 'mini trial' service of FOMA in the introductory phase, by providing it to about 4,000 customers in Tokyo.....
Life After the Loss
DoCoMo's decision to continue with its global strategy met with apprehension in the markets, though the Government of Japan gave it support stating that DoCoMo was Japan's "flag bearer" in the global arena.
In the words of Hiroyuki Arai, Director, Parliament Telecom Policymaking Committee, "DoCoMo is our flag bearer. If the company takes its time getting into the global arena, we will lose our lead to American or other foreign companies. Without that kind of commitment from Japanese companies, our economy will never recover." However, the company's management had to face the wrath of its shareholders in July 2002.....
Business as Usual?
In January 2003, DoCoMo decided to reduce its promotional expenditure on 3G services and focus on increasing profits. Commenting on this, CEO Keiji Tachikawa said, "Reckless spending on network expansion will not help promote (3G services); we'd better focus more on returns on investment." The company thus decided to focus on offering better phones with good battery life and to enhance the quality of its content through better content partnerships........
Exhibits
Exhibit I: DoCoMo - Financial Statements (2000-2002)
Exhibit II: About Wireless Telephony 'Generations'
Exhibit III: DoCoMo - Partner Network
Exhibit IV: Strengths of DoCoMo's Business Model
Exhibit V: DoCoMo - Stock Price Movements (2000-2003)
Exhibit VI: DoCoMo Subscriber Growth
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