Competitive Advantage The Iridium System example essay topic

Competitive Attribute Program! V Iridium Mobile Satellite System Project The ability to capture values along the Technology Adoption Lifecycle determines not just how successful a firm will be, but whether it will create competitive advantage through technology. Businesses with large fixed costs, capital-intensive business plans, and specialized asset bases will face the challenge to maintain its strategic continuity because it is generally prohibitively expensive to change direction to response to any conceivable structural change. Iridium, a satellite mobile system which cost $5 billion to build, began to provide commercial telephone service on November 1 1998.

This paper aims to use the Iridium Project, which I have participated at Motorola before, to illustrate the incremental benefits and the pitfalls from creating competitive advantage through technology and activity system. Discussion of incremental benefits & industry analysis by using five force model Competitor! V Mobile Satellite System (MSS) companies The largest competitor from MSS companies is Globalstar. Globalstar's communication system is supported by low cost satellites which enhance the possibility for Globalstar to implement a comparatively lower pricing strategy than Iridium.

Although Globalstar has simpler and cheaper satellites than Iridium owns, it requires ground switching systems for effective connections. In return, the coverage of Globalstar system was restricted to land locations. This form of benchmarking activities within Iridium helps to formulate the strategic position and get to know a better reinforcement of strategic fit. Substitutes! V Ground-Based Wireless Services In 1990's, ground-based wireless phone service grew rapidly around the world. A key factor in the growth of wireless phones was the adoption of a single standard, known as GSM, in Europe and parts of Asia.

There were 480 million cellular subscribers worldwide by January 2000 and it reached more than billions before 2005. The economy of scale that introduced will provide the extent of competitive pressure in the business environment. It helps to stimulate Iridium to consider price-performance trade off that offered by the substitutes and the need of product differentiation alternatives in advance. Customers / Buyers! V Global business travelers Major customer consists of the businessman who is willing to travel around the world as well as staying in touch with the office and home.

In account of the industries that operate in remote areas, the competitive positioning option of Iridium tends to be access-based to reach differently accessible customer with the similar need in terms of communication. Iridium designed a set of activities to make trade offs in competing, for instance, reduce marketing campaign in urban areas and brand name development for large corporations. Suppliers! V debtors Iridium did not have suppliers in the traditional meaning because the telecommunication service would not require raw materials. However, one party, the debtors of Iridium, actually acted the role the supplier. Iridium spent $4.8 billion while the expenditure was funded with bank debt, issuance of stock and vendor financing.

The debtor's major concern is the increase of ROI such that the operational effectiveness becomes a key aspect of company performance. Iridium would resemble a utility with high margins, high fixed costs, and steady cash flows once the system is established. Lots of re-engineering effort and change management actions have been done within a short period of time. Finally, the company is even!

SS spin-off!" to other forms of corporation in order to survive and sustain its productivity frontier. Potential New Entrants! V! paceway!" &! SSEllopso!" Several other satellite network systems were proposed but never developed. Hughes Electronics proposed a three satellite project called! paceway!" . Another proposed system project called!

SSEllipso!" involved a $1.5 billion dollar project for telephone service using 17 satellites in elliptical orbits. The major similarity to the potential entrants was the highly initial overhead involved in the projects which introduced a high capital requirement. In concluded, Iridium enjoyed first-mover advantage because of such huge entry barrier. Discussion of Pitfalls base solely on the technology to create competitive advantage The Iridium system is at a first glance is incompatible to the existing telecommunication system. It requires customers to change their current mode of behavior, such as purchasing a new handsets and using such non-replacement portable phone outside a building only. Our attitude towards this type of technology is known as!

SS discontinuous innovations!" . This innovation demand does not only create significant impact to customers but it also represents in the form of changing infrastructure. With such discontinuous innovation, the high-tech industries are necessary to introduce a marketing model which coped effectively and captured the highest revenue in return by understanding the Technology Adoption Life Cycle (TDLC). Iridium has to pay special attention to control the price, information, network externalities, demand and supply in reality. Impact of disruptive technologies In the eleven years that it had taken Iridium to launch its service, the mobile phone market entered the transitional phase and a dominant design begun to emerge. Relatively inexpensive, light-weight phones were available with global roaming capabilities.

Referring to the list of targeted early adopter segments, this transition had eliminated from Iridium's list of potential customers those whose need for satellite phone was driven largely by the need for universal roaming capabilities. Further, this development had caused the public to anticipate the specific phase of mobile telephony. Since customers expected that existing technologies would very soon address more and more of their needs at even lower prices, satellite telephony had come to look like an incrementally better! V and inappropriate expensive! V alternative.

Thus, the absence of a perceived radical innovation had left potential customers largely unwilling to pay Iridium's relatively high prices and to carry around its comparatively heavier and larger phones. Lack of industry evolution Furthermore, in order to access the satellite network, the system still requires line of sight visibility. In essence, Iridium's product lacks improvements over modern terrestrial mobile phones as well as previous generations of satellite phones sufficient to convince customers to pay the entry and other costs associated with becoming an Iridium customer. Generally, in order to charge! SS breakthrough!" -level prices, a new product must provide a breakthrough level or type of functionality that delivers the real value to customers as well as capture the value by the business firm. Without breakthrough innovation, Iridium failed to disrupt the current mobile telephony market sufficiently!

V relegating their product to a whimper, rather than a roar. Conclusion It would be profitable to understand the industry structure and interactions between rivals by the use of five force model. Iridium's strategy basically relied on the formulating the strategic position by benchmarking activities of competitors, plan for product differentiation to counterattack the price-performance trade off of substitutes, making trade off in competing by access-based position option, improve operational effectiveness in response to debtor's pressure and gain fundamental first-mover advantage by highly capital requirement as entry barrier. On the other hand, the failure to handle discontinuous innovation in early adoption phase of TDLC, negative impact by disruptive technologies and lack of industry evolution brings the capital intensive business to lose its competitive advantage. Iridium presents yet another example of blinded strategic commitment that was fated to suffer the consequences of yet another astounding technological capability failing in the marketplace. It is possible that this costly lesson could have been avoided in the first place by creating competitive advantage in terms of capturing value by technology and sustaining strategic position by activity sets..