Question

With a population of 1.3 billion and GDP growth at or above 10%, China is poised to become the most dominant consumer base in the world. It is no surprise, then, that for several years, a whole host of companies have made attempts to sell their wares in China. Companies that enter China, however, face significant late-mover disadvantages. Consider, for example, mobile phones—any telecommunications firm that wants to enter the Chinese market faces huge hurdles. China Mobile, the largest service provider in the nation, announced that they added 5.26 million new subscribers in the month of August 2009, bringing their total to 502.9 million. These figures dwarf those of the Verizon, the largest service provider in the U.S., which added 1.1 million subscribers in the second quarter of 2009, bringing their total to 87.7 million. China Mobile also has a huge technological advantage, as its network covers all 31 of China’s provinces and reaches 97% of China’s population. Since China Mobile is a state-owned company, it benefits from protectionist policies. Given these advantages, do late entrants to China’s telecommunications market have a chance for success? How can firms utilize late-mover advantages to compete effectively with China Mobile?

Answer 1

Understand the data and stats provided are old; My thesis is strictly based on the shared data.

Most important factor to consider (for new entrants) is Chinese political policies. Since China mobile is considerable dominated by Chinese government, it would be difficult for any new entrants to fit in and increase market share.

It is a 50-50 chance for any new entrants to be successful in China. Below are the late-mover advantages to compete effectively with China Mobile:

1) The new entrants would easily have access to the tried and applied methods by China Mobile and they may directly attempt to implement the most succesful methods/products rather than investing time and money on the failed ones

2) Buyer education is an essential source of lasting competitive advantage/ benefit. Many times, late movers find the cost of educating buyers difficult. Coca-Cola’s competitors have been unable to redefine the market, leaving Coca-Cola on top for over 100 years. In other cases, late entrants can exploit what buyers have learned through their experience with the pioneer.

3) The marketing and sales your competitor did may help on educating customers of the value of telecom services and actually enhance the market. This would be especially beneficial if it’s a market segment where consumers would buy/ pay for more than one services. In a market where customers have a high loyalty to an existing and inferior technology solution, the first mover may do the heavy lifting of getting consumers to start thinking about switching.