A report on the firm analysis of detemobil and manesman (Research Paper Sample)

A REPORT ON THE FIRM ANALYSIS OF DETEMOBIL AND MANESMAN
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Executive Summary
This report gives an analysis of two giant cellular service providers domiciled in the German telecommunications industry, DeTemobil and Mannesmann and saliently depicts why DeTemobil has been more successful than Mannesmann albeit they operate in the same industry. To vividly bring out the inherent differences, Porter’s five analyses have been used to show the competitive advantage DeTemobil has had over Mannesmann. The report delves further to depicting the core competencies DeTemobil has had that have strategically positioned it above other telecommunication firms with Mannesmann included. How the firm has maneuvered to being the industry leader through strategic audits is also vividly brought in to the lime light in this report. Towards, the end, a conclusion is drawn in a nut shell on the findings of the report.
Introduction
Germany has placed herself in the globe as one of the countries with the most advanced telecommunications systems. The German telecommunication network is highly digitalized and has experienced rapid infrastructural changes in the recent past making it a highly developed nation it terms of telecommunications. In the past few years, the telecommunications industry in Germany has become a high-tech industry in which technology and related resources determine a firm’s success. (Shi, 2007) DeTemobil and Mannesmann are among the giant telecommunications industries operating in Germany. DeTemobil has stood out as a profitable firm compared to Mannesmann due to the strategy it has employed in its business model hence out competing Mannesmann one of its competitor.
DeTemobil, marked T-mobile, is a subsidiary to the German Deutsche Telecom AG and provides mobile phone wireless services to over 150 million subscribers. T-mobile was the sole mobile service provider to Germany in the 20th Century. It enjoyed monopoly such that by the Mannesmann was licensed to join the industry, T-mobile has had a large market share hence it enjoyed economies of scale. The advantage of having a larger market share enabled T-mobile to have invest in more superior infrastructure since it had large reserves of capital from accumulated profits.
On the other hand, Mannesmann which had been operational in the coal and steel industry, diversified into the telecommunications industry. It found a readily established firm in the market and as such had a daunting task of sustaining and stabilizing its operation s in the market. To maintain sustainability and profitability, it used mergers and formed strategic alliances. This however did not position it in the lead as the T-mobile had a comparative advantage to which at the moment, Mannesmann cannot successfully outcompete with the current strategies in place.
The Germany Telecommunications Industry
The telecommunication industry is currently the largest provider of employment opportunities around the globe. The advent of the telecommunication technology is one of man’s greatest inventions which have had major impacts to individuals, firms and governments. As can be noted, mergers and consolidation have changed the landscape of the telecommunication industry and competition has globalised the telecommunication industry. Deregulation and privatization will have a continual effect on the telecommunication sector. Consumer preferences and tastes will lead to a greater use of the internet as wireless technologies continue to grow unabated.
In Germany, the communications industry touches most of technology related businesses (Plunkett, 2008). These include but are not limited to wireless communications, internet, fiber-optics and satellites. It is also involved in entertainment such as cable TV systems. Competencies for technology delivery due to technology standardization processes also lead to high profitability in the sector. This is because they meet consumer requirements. The sector continues to have an increased number of consumers because of the introduction of wireless methods of communication.
This increases the profitability of the telecommunications industry compared to other industries whose scope of consumers is limited. Most firms and people from all the other sectors depend on the telecommunication industry due to its high profitability. This is because the number of consumers goes up leading to high volume sales. This raises profitability of firms in the German telecommunication industry.
T-Mobile and Mannesmann Porter’s five forces analyses
The Porter’s Five Forces analysis will disclose the companies’ areas of strengths and weaknesses. The tool is used for the assessment and evaluation of the companies’ competitive strength and position.
Bargaining power of suppliers
The pressure exerted by suppliers to T-mobile is relatively low. As can be noted, T-mobile has no one large or monopolist suppliers who will exert pressure on their prices. The electronic devices outsourced by T-mobile can be sourced from different suppliers hence limiting their bargaining power. This hence places the firm at a higher comparative advantage and increases the chances for its profitability.
Similarly, Mannesmann has little pressure exerted from its suppliers. The reasons being they do not also have a single supplier who can exercise monopoly power on them.
Bargaining power of Consumers
T-mobile has wide market coverage. The consumers however have a wider market choice and as such, the consumers bargaining power is relatively high. The customers demand a large network quality they can use cheaply. It should however be noted that the buyers require special customization which calls for observation of sensitivity towards the consumers preferences.
The consumers bargaining power for Mannesmann is relatively higher compared to that of T-mobile. This is because it has a lower command of the market and hence a lower customer base. The demand elasticity is thus highly elastic and responsive to changes in prices.
Threats from substitutes
Albeit the telecommunications industry is highly volatile in terms of competition, the threat from substitutes to T-mobile is relatively low. This has been made possible by the strategic position in which the firm had undertaken. T-mobile has had successful product differentiation and the limited number of substitutes places it at a higher comparative edge. T-Mobile took 25% shares and leadership of 3-city Chinese mobile group in the year 1996. It also has subscribers in its two networks in Germany, Austria, the Czech Republic, Indonesia, Netherlands, Malaysia, Poland, Switzerland and Ukraine. T-Mobile fostered and nurtured a considerable asset stock to cope with technology regulation. It made further acquisitions in Europe and an extremely large acquisition with Voice streams in the United States of America (From & Eliassen, 2007)
Mannesmann, has a relatively higher threat from substitues compared to T-mobile with the major threat being T-mobile. T-mobile’s products pose the major threat to Mannesmann since they are more superior.
Threat from new Entrants
T-mobile’s brand name is one of its major assets. It had over time build its reputation strongly in the market. High capital requirements to join the market act as a major barrier to entry of new firms. Organization for Economic Co-operation Development reported that DeTemobil was the largest mobile operator company in German with a 41% of the market share in 2003.
As for Mannesmann, the threat from new entrants remains relatively similar to T-mobiles’. High cost of capital, brand names and high technological requirements impose major difficulties for new entrants.
Competitive Rivalry
The intensity of rivalry to the T-mobile is relatively low. This is due to the presence of government regulation through licensing and the large size of the industry. Mannesmann faces a major difficulty in terms of competition. T-mobile is its largest competitor in the market. As such, the intensity of rivalry to Mannesmann is relatively high.
Other factors contributing to the success of T-Mobile over Mannesmann
T-Mobile took 25% shares and leadership of 3-city Chinese mobile group in the year 1996. To widen its market, it announced an intention to offer a new service called Pegasos QEDesign in 1998. (Polishuk,1998) It has been striving for total ownership of business units operating in different countries through advocating for a unified brand name in all relevant markets. T-Mobile fostered and nurtured a considerable asset stock to cope with technology regulation. It made further acquisitions in Europe and an extremely large acquisition with Voice streams in the United States of America (From & Eliassen, 2007)
Danger Inc., a mobile internet software and company, announced a content partnership with a vast sports news station in Europe. This leveraged Danger’s internet platform and Kicker Online was to supply a broad range of premium sport content principally for T-mobile (Polishuk, Mobile Internet, 2006)
T-Mobile invested in research and development by outsourcing to external universities and streamlined its internal knowledge transfer among the research and development units. This has led to sharing of knowledge and technology that result into innovation and success in the market. It also expanded its GSM infrastructure continuously so as maximize geographical and population coverage (Jepson, Dumbill, & Weeks, 2004). This is shown by the graph below that compare the market share of cellular service firms in Germany.


From the graph, it can be noted that DeTeMobil has the largest market share followed by Mannesmann. DeTeMobil has a competitive advantage than the rest of the firms because it has differen...