Discussion on Iridium
Essay Preview: Discussion on Iridium
Report this essay
Competitive Attribute Program ÐŽV 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 ÐŽV Mobile Satellite System (MSS) companies
The largest competitor from MSS companies is Globalstar. GlobalstarÐŽ¦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 ÐŽV Ground-Based Wireless Services
In 1990s, 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 tradeoff that offered by the substitutes and the need of product differentiation alternatives in advance.
Customers/Buyers ÐŽV 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 tradeoffs in competing, for instance, reduce marketing campaign in urban areas and brand name development for large corporations.
Suppliers ÐŽV 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 debtorÐŽ¦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 ÐŽ§spin-offÐŽÐ to other forms of corporation in order to survive and sustain its productivity frontier.
Potential New Entrants ÐŽV ÐŽ§SpacewayÐŽÐ & ÐŽ§EllopsoÐŽÐ
Several other satellite network systems were proposed but never developed. Hghes Electronics proposed a three satellite project called ÐŽ§SpacewayÐŽÐ. Another proposed system project called ÐŽ§EllipsoÐŽÐ 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 ÐŽ§discontinuous innovationsÐŽÐ. 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