Value Chain & Competitive Analysis
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The term "value chain" is widely used (and
misused) in the technology industry, usually by companies asserting that
they are "moving up the chain" to escape commoditisation of their core
product or service. Others refer to a set of distribution channels or routes
to market as a value chain. We perceive it differently. Increasingly,
companies are using their position in a wider value chain (or sometime value
web) to leverage strength to induce competition elsewhere, thus increasing
available profits for themselves. |
In certain instances, disruption to an existing value chain can occur when a
technology substitution brings an existing industry structure face-to-face
with another, in which business models vary widely. The Internet's highly complex
value chain, facilitating new types of intermediaries, has had this impact on a
number of conventional industries. There is a possibility that mobile operators
face value chain substitution from wireless LANs in the future.
To understand these effects requires understanding of complete technology
product/service stacks - sometimes from semiconductors right up to services,
taking in hardware, software, infrastructure and integration. Disruptive
Analysis has substantial experience in exactly this type of visionary analysis.
Sample considerations
Case Study: Mobile Handsets
As an example, our research into the evolution of the mobile handset value chain has thrown up an array of
observations and implications for both vendors and investors attempting to
anticipate market direction.
- The value chain splintering into multiple permutations
- There are now too many layers for optimal industry profitability: exits
are likely
- It is likely to take at least 2-3 years for the industry structure to
recrystallise
- The handset industry will reshape around new product segments
- Low-end handset value chain driven by BOM (bill of materials),
time-to-market & ODM/OEM manufacturing. Potential evolution of low-cost
"Swatch" equivalents.
- Mid-range / feature handset fragmented & dominated by “egos” of existing
brands. Lengthening upgrade cycles despite 2.5/3G, owing to operators lack of
willingness to subsidise upgrades.
- High-end will be increasingly driven by Symbian & Microsoft handset
reference designs, as software development issues drive hardware homogeneity
- PDAs will use ODM/EMS model predominantly, reflecting lower volumes and lack
of RF expertise among computing-centric vendors
- Important drivers / issues
- Evolution of chipset vendors & platform designer tiers
- Rise of ODMs & Taiwanese manufacturing
- Japan, China & Korea follow different paths to rest of world
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