DoCoMo - The Japanese Wireless Telecom Leader



Themes: Differentiation
Period : 1992 - 2003
Organization : NTT DoCoMo (DoCoMo) Inc
Pub Date : 2003
Countries : Japan
Industry : Telecommunication

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Case Code : BSTR049
Case Length : 17 Pages
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DoCoMo - The Japanese Wireless Telecom Leader | Case Study

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Background Note Contd...

With the entry of foreign players like Motorola into the Japanese cellular phone market, the number of subscribers increased from 2.13 million in 1993 to 31.4 million in 1997. However, as the competition intensified, DoCoMo registered a drastic decline in sales during 1992-94. To sustain its position in the market, the company in October 1993, decided to stop taking rental security deposits on handsets. Following this, in April 1994, DoCoMo launched its own handsets, and encouraged its customers to purchase these handsets rather than renting them, and reduced the initial subscription fees.

This strategy resulted in a substantial increase in its subscriber base. In December 1996, the company eliminated the initial subscription fees for its service altogether, which further triggered the subscriber base growth. On account of its focused initiatives and the growing demand for mobile telecom services in Japan during the mid 1990s, DoCoMo emerged as the market leader by 1997.

However, during the same period, the company sensed that there was little differentiation between the products offered by various mobile players in Japan. Apart from this, feedback from its customers showed that the growth rate of voice services (1G - first generation technology) was gradually declining.

DoCoMo thus realized the need to shift to a higher-level technology, to differentiate its services from those of its competitors KDDI2 and J-phone3 to sustain its growth in the market. Following this, the company began focusing heavily on Research and Development (R&D) to develop advanced second generation (2G) wireless products.

These initiatives gave rise to the development of 'DoPa' - DoCoMo Packet transmission service, i.e., communication of data through mobile phones. Launched in March 1997, 'DoPa' enabled customers to receive or transmit data in packets. The service was charged on the basis of the volume of the packet. The launch was followed by yet another initiative of the company, the '10 Yen Mail Service', which allowed customers to send an email of upto 1000 words, through their mobile phone, for just 10.

Though the 'DoPa' initiative met with reasonable success, DoCoMo found itself still under threat from its competitors KDDI and J-Phone. To further derive competitive advantages, the company gave free reign to Keiji Enoki (electrical engineer in NTT) to develop a unique, value-adding wireless product. The company also brought in outside talent like Matsunage Mari (a former editor for a classified ad magazine) and Natsuno Takeshi (an Internet expert) to create a new wireless product. In February 1999, on account of the rigorous R&D efforts, DoCoMo launched I-mode, a revolutionary product, which changed the market dynamics overnight.

I-mode was the first instantly accessible mobile Internet service in the world, which made the Internet available on the phone without the need to dial-up (Refer Table II for details regarding the functioning of I-Mode). I-Mode was offered as an optional service to DoCoMo's customers and provided access to over 15,000 websites, which were specially adapted to be viewed on their handset screens.

This enabled subscribers to perform many Internet functions such as exchanging e-mails, checking stock quotes, getting maps, viewing train schedules, buying movie tickets, making online purchases, downloading new ring tones or playing games.

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2] KDDI Teleserve Inc., a division of KDDI Corporation (Japan) was established in 1987. It offered wireless mobile phones and mobile phone services in Japan. KDDI evolved as the second largest wireless telecom carrier in Japan next to DoCoMo.
3] J-Phone is the wireless telecom subsidiary of Japan Telecom. J-Phone division included Japan Telecom’s mobile communications and nine companies of J-Telecom’s affiliates, Digital Phone and Digital Tu-Ka. Japan Telecom had a capital alliance with British Telecom and AT&T, the leading telecom companies in the UK and the US respectively. In 2000, the J-Phone division also entered into a joint-venture agreement with UK-based Vodafone Group, the largest wireless carrier in the world.