Presentation on the Product Life Cycle and Product Line Management the Case of Mobile Phones

Presenting...

The Product Life Cycle and Product Line Management: The Case of Mobile

PhonesBy: Jeffrey L. Funk

A Presentation by...

Muhammad Iqrash Awan

Aims

Understand how Product Line Management evolves over the life of an industry.

Compare Klepper's model with the traditional product life cycle.

Explain the evolution of mobile industry in comparison to Klepper's Model.

Generalize the scenario.

The Article Aims to...

Traditional PLC

Technological Discontinuities cause a period of Ferment.

Alternative products are formed and compete for dominance in the market.

New firms sees opportunity and enter the industry.

More Competition = More Innovation

Firms experiment and a De Facto Standard (Dominant Design) is created.

Traditional Product Life Cycle

Traditional PLC

Focus shifts from design improvement to:

1. Marketing2. Distribution3. Process Innovation4. After-Sales Support

Firms that can't compete exit the industry, rest survive till the product survives.

Traditional Product Life Cycle

Criticism on PLC

Dominant Design concept does not apply to all new products.

Firms may go for Process Innovation even before Product Innovation slows down.

Does not explain the reduced entry in later stage of PLC.

Klepper's Criticism (1996) on PLC

Preliminary Concept

Model or Family Variety

Many Emphasis on Common Parts Innovation

One Trivial Emphasis on Innovation

Slow Rapid

Rate of Model or Family Change

Product Variety and Change Model

By: Uzumeri and Sanderson

Preliminary Concept

Breakthrough ProjectInvolves Significant Change in the

product's core concept.

Platform ProjectCreates New Systems Solutions

Derivative ProjectCase Incremental Changes

Classification of Development Projects

By: Wheelwright and Clarks

Mobile Phone Industry

If chronologically summarized, product line management and competition in the mobile phone industry can be divided into:

1. Analog (1981–1995)

2. GSM (1992–1998)

3. Global Digital (1996–1999)

Chronological Summary

Analog (1981 - 1995)

There were two major mobile standards during the 1980:

1. Nordic Mobile Telephone (NMT)

2. Advanced Mobile Phone System (AMPS)

NMT systems were developed by Scandinavian firms.

AMPS was developed by U.S. And Canadian firms

Major Mobile Standards

Analog (1981 - 1995)The Japanese Domination

Analog (1981 - 1995)

AMPS market Growth started in late 1980.

Prices were falling due to technological progress.

Prices fell upto 77% (from $300 to $70).

Lower Prices caused the market to rise from 1.5 million phones to 6.0 million phones between year 1989 and 1994.

Growth in AMPS market

Analog (1981 - 1995)

Motorola was the first one to see the growth in the AMPS market.

Motorola expanded the number of models, creating a product line.

Motorola phones varied according to prices giving it a large target market.

Motorola kept selling low-end phones at loss just to make a strong brand image.

Motorola's good strategy

Analog (1981 - 1995)

Japanese firms did not switch to AMPS technology.

Japanese firms did not focus on phone design.

Japanese firms never created a product line.

Downfall of Japanese Firms

Analog (1981 - 1995)

Nokia and Ericsson both entered the US market around 1987.

Nokia was quick to copy Motorola's strategy

Nokia acquired Mobira and Technophone during 1991 and became a major force in Britain.

Ericsson did well in joint venture with Philips but didn't make any profit.

New Entries Nokia and Ericsson

Analog (1981 - 1995)

Dominant Design did not appear during this era.

Technological improvements were still on going during this time period.

Mobile phones become a dominant force long after the falloff of the Japanese firms.

Notes on Analog Era

GSM (1992 - 1998)

European firms created the digital GSM standard in early 1990.

GSM reduced mobile prices allowing the leaders to give volume discount.

GSM phones hit the 10 million mark in 3 and a half years.

Nokia, Motorola, and Ericsson made heavy investment in GSM technology.

Notes about Analog Era

GSM (1992 - 1998)

Firms that did not seize the GSM opportunity included: Dancall, Hagenuk, Ascom, Bosch, Siemens, Alcatel, and Philips.

Excluding Alcatel and Siemens rest of the above mentioned firms had to quit the market.

Japanese firms had already disappeared during this era.

Firms that went down

GSM (1992 - 1998)

Nokia, Ericsson, and Motorola all had developed their product lines in 1994.

This product line management strategy created an entry barrier due to the economies of scale.

Brand image created by the three giants combined with the low price didn't allow new firms to enter.

Product Line Management and Entry Barriers

GSM (1992 - 1998)

Nokia and Motorola both had a large number of derivative products, Erricson lagged behind at this point.

Nokia emphasized on aesthetic design, user interface, and softwares.

Motorola and Ericsson focused on the weight and working of the internal components.

Difference in the Product Line

VS

VS

GSM (1992 - 1998)

Motorola had low cost AMPS phones but was unable to keep the cost low for GSM phones.

Motorla had to sell the previously profitable high-end phones at a loss in GSM market.

Ericsson suffered because it tried to redefine the market segment, which prevented it from releasing new phones from 1997 to 1999.

Implementation Problem

GSM (1992 - 1998)

Firms went out of business due to economies of scale (contrary to traditional PLC).

There is still no dominant design, even in this era.

Notes on GSM era

Global Digital (1996-1999)

Motorola's bad strategy in GSM market allowed others to compete Motorola on Global Level.

Nokia was the big winner on the Global level as well as in USA because of their well-polished strategy and phones.

Ericsson was slow to react and the no-production gap didn't allow them to take control at global and US level.

Overview of Global Market

Global Digital (1996-1999)

Motorola had only two (GSM and cdmaOne) phone, and never created a TDMA phone.

Motorola chose to rely on Sony (a competitor) for chip manufacturing for cdmaOne phone.

High patent fee and slow growth of cdmaOne phones caused heavy losses to Motorola

Motorola's Mistakes

Global Digital (1996-1999)

Nokia was the big winner due to it's development capabilities creating strong economies of scale.

Nokia had more GSM platforms: TDMA 800MHz, GSM 900MHz, GSM 1800MHz, GSM 1900MHz.

Nokia had wider range of phones and more model than any other company.

Nokia – The Big Winner

Global Digital (1996-1999)

Ericsson was slow to adapt Nokia's strategy.

No Production between 1997 and 1999 kept Ericsson from making a name in the Global market.

Ericsson collaboration with Sony was the only right move.

Ericsson – A Could've been story

Final Words

Klepper's model explained Mobile industry better than the traditional PLC:

1. There was no Dominant design.

2. Economies of scale were the reason for entry barrier.

3. Process innovation was on-going along side product innovation.

Overview

Presenting...

The Product Life Cycle and Product Line Management: The Case of Mobile

PhonesBy: Jeffrey L. Funk

A Presentation by...

Muhammad Iqrash Awan