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Skype and the Japanese Market Research Paper

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Introduction

The growth of Skype in the world market has been great. This is especially in Japan that has become vital to Skype’s business. There have been an increase in the rate of calls in the recent past and the growth of the Skype market has been due to the use of disruptive technology to market itself.

The VoIP has been the main disruptive technology in the market as it creates room for reduced cost prices in making calls. This service has hindered the mobile phone business and Skype has been able to take advantage of this technology to market itself. However, the Skype market faces stiff competition from the mobile services in Japan.

According to Abell, the VoIP form of disruptive technology provides more services other than the free calls over the Internet such as the more reliable features that have attracted customers to start using the technology. Most of the Japanese population is composed of business people who spend longer working hours on the Internet and this provides a convenient way to reach their clients.

Skype has become an important communication tool in the present society over the world. The functionality in this application has been vital in bringing in more customers. Skype has been more successful with the use of disruptive technology mainly the voice communication globally but this has not been accredited to financial success (34).

He continues to assert that Skype brings in a technology that is ever changing. This application is more suited for the social interaction. Nevertheless, Skype is the leader in the use of VoIP disruptive technology in the present world economy. This company has enjoyed a competitive advantage in the technology arena and has good marketing strategies.

The rise of Skype has been just through “mass marketing” of its products. Moreover, the success of Skype is because of its customer approach form of business and has a feedback channel where the consumers have to write about their satisfaction of Skype’s high quality products (36).

Skype is aiming towards the developing markets such as the one represented by Japan for its disruptive technology business. There have been varied views from the mobile operators over the Internet communication. VoIP has not been fully legalized in most of the world states while in others it has.

However, few companies have realized the importance of this service with an aim to deal with the revenue losses in their organizations. Few companies have therefore partnered with Skype in an effort to get Internet communications at reduced risk. Some of the companies include KDDI that came into partnership with Skype. This Japanese company has enabled its market to use Internet communications more easily and cost effectively. Partnership solves the issue of different pricing and customer segmentation in an easy way.

Successful partnership with an organization is down to how established the given producing organization is and the “robustness” of its VoIP (Angelov 176). Skype has been the most successful and most companies prefer its partnership because of its popularity. Moreover, regarding revenue generated, Skype’s methods are not that diversified.

They derive revenues from the voice and data communications in the private and business customers. Nevertheless, the Skype-Skype communication has no revenue but more of its revenue coming from the “Skype Out” application and other value added services.

VoIP and Skype

The use of VoIP by Skype has been legalized in several countries including Japan. The use of VoIP has for some time been seen as a threat to the existing mobile phone business and it’s now been seen as an important part of business and Skype has taken advantage of this business.

Many policy makers in Japan have been working on how to implement this disruptive technology. Skype being one of the major implementers of this technology faces several challenges. The success of this technology change has been down to the lower costs as these IP networks offer less costs (Bower 75).

It is also cost effective to Skype as the need to change the traffic onto one network is not a problem. Consequently, the success of this service in the Skype industry has been brought about by the variety of services it brings, and bringing together voice, data and images.

This service has brought into existence other services such as the “push-to-talk” and “integrated cellular” networks. Other changes that can be accredited to this service of wireless technology are the opportunity it can bring to many businesses enabling them to do things in a cost effective manner and in a different way.

VoIP as a Disruptive Technology

Grey Markets as Competitors. For long, the grey markets in the world have given the mobile phone services a great competition. This is mostly not seen by many as a threat to this kind of business and the monopolies have greatly suffered. The grey market in the long run has forced the prices of the call rates to go down to certain levels and the consumers have been able to enjoy the call rates without knowing the reason behind this form of practice (Christensen 80).

The rise of the disruptive technologies has changed the way modern business is being conducted and the form of living of the human beings. Other examples include the GPS tracking systems; handheld devices and wireless form of communication are gaining the market.

The VoIP has had a great consequence in terms of the business deal. This has forced the world companies to take a look at this technology and prepare in the most efficient manner for the future as the traditional form of business and communication are long overdue.

This form of communication is not like the normal phone service that calls for digital communication over a broadband that is network enabled. This form of communication is effective and does not charge for long distances just like the regular phone communication. This form of communication is advanced and the traditional phone services do not have such features in the VoIP (Ellis 56).

Features such as conferencing, calling from PC, have been added to this technology in recent times. However, in making a VoIP call one has to face a challenge of choosing the required network and this is not an easy task to plug into the Internet. This has forced companies to opt for a private network for communication as it connects faster and easily.

Price wars have been the basis of this technology and have been on the rise. The voice market business has found itself in the market today. There are different prices for the wholesale and retail prices of the VoIP in the world and this has brought competition in the globe.

Therefore, the different calling rates in the retail and the wholesale are the basis for the increase of the VoIP international calling. These differences bring into the market unbalanced competition in the VoIP markets (Fowler 35). For example, an individual caller in the retail rate might need between $0. 5 to make a call to the US while in Japan but the same call can be purchased by an operator at a wholesale rate of around $1 and this has made the operator buying the VoIP at a wholesale price enjoy a monopoly because of the varied prices.

However, even though there is a competition between the grey markets and other mobile phone services, it is limited. This is because such business is under control from the authorities unlike in the wholesale and retail call rate prices in the VoIP.

Different countries have different strategies to filter traffic to make calls over the Internet difficult and this is the task given to the grey market operators and this is a blow for the Skype Company. Most jurisdictions have the same “penalties” for the VoIP calling like those of the drug traffickers.

However, even though these limitations exist the level of use of the VoIP is still increasing. Several operators of the VoIP services rebuilding on their tariffs to be the same with the costs incurred in giving of services and to be able to compete with the grey market. The competition in the voice markets has reduced the international rates and the variety of the operators forced by law to that their tariffs are in line within a given period might make this business of VoIP not to be “sustainable” (Gilbert 28).

Reduction in International Call Prices. The level of competition of the VoIP from the grey market is due to the retail price in international calling. A market analysis over a two year period shows the general trend in the international retail calling. However, prices in the international call rates have reduced in several countries globally (Goncalves 142).

International Retail Prices

Percentage Above US$1 per minute US25c-US$1 per minute Below US 25 cents Years from 2004 to 2012
100 ‘04
90 ‘05
80 ‘06
70 ‘07
60 ‘08
50 ‘09
40 ‘10
30 ‘11
20 ‘12
10

The table indicates a drop on the cost of making calls to outside countries in terms of the dollar. This is because of the emergence of Skype’s VoIP communication that affects other international call rates.

Research shows that there are around 20 countries that charge below 25 cents a minute. This seems to be the general price unless there is the introduction of competition. However, in markets that have legalized VoIP communication the mobile phone operators have been forced to compete with the lower prices and have the reduction of their international call rates. For example, the rates in Japan range from 20-25 cents per minute.

Clearly, this shows an increase in traffic regarding the minutes of a call and this might have acted in a way to outweigh the loss of income in the reduction of call rates.

Even with this rate of “collapse” of the international rate is still increasing. The grey market price for an operator may be between 0.04 and 0.05 cents for every minute. This is a clear indication that evened the retail prices falling below $25 will still allow the grey market to operate. However, in countries where the VoIP is legalized the price wars move from the international to the national level (Greene 28).

PC-PC Calling. The grey market competition seems to have been neutralized by the introduction of the PC-to-PC calling. This is due to the partnership of Skype and the Net 2 Phone. The use of this service has tremendously increased. Other “alliances” that have emerged to make the application stronger in the market include Motorola as they aim to gain the market segment (Luxembourg 35). This form of communication is free and critics argue how the companies make money.

This service is possible through Skype out service centers that enable the communication at low rates. Skype manages this communication by having a unified call rate to a few popular destinations. The main purpose of this service is to call the landlines. With this service, the Skype Company takes into account where a client is calling to and not where they are calling from. Skype has managed to be successful with this application and the partnership it has had in the market.

Skype’s Market Segments

There need to be considerations when a given organization chooses to partner with the Internet Communications provider. The robustness of the provider is a key requirement; however customer segmentation is a need. Skype is segmented and needs integration, management capabilities and have a stronger support while the lower segment requires social networking or the video call capabilities.

The partnership of the Skype Company and the KDDI made it to change into Smartphone business to be in the market as the Japanese were fond of this mobile phone. With Smartphone strategic plan, the KDDI managed to introduce the IS-series Android type. However, this type of business had given the mobile operators a hard time in differentiating it (Fowler 56).

Partnering with Skype was as a result of the difficulties its customers had, thus with Skype there was a new idea in the market of “freshness, connectedness, and being free of charge.” However, most mobile phone operators have cited the issue of “free-of-charge” voice calls as a great risk to their businesses. However, the use of Skype brings into it good Internet communications software services and more features and applications.

Greene states that despite the concern over “voice cannibalization” by Skype, the KDDI Company in Japan still had to choose its partnership with Skype because: (1) Skype was more popular among the youths. Since KDDI was moving into the Japanese market for the first time, there was a need for partnership with a company that had been in the market for long, (2) Skype has a greater market share and there are priorities for growth, (3) Skype has a greater revenue turn out and most companies view it as the most preferred partner.

Skype’s partnership with KDDI can be viewed as an opportunity for it to offer new features and services that might not be available to its competitors. The difference with the Skype platform with KDDI’s network was the combination of the two that allowed customers to interconnect through the network and this caused high voice quality and definitely good service delivery.

The integration of the two platforms of Skype and KDDI was termed as “Skype on au” (Goncalves 142). This integration is differentiated with that of other networks through the high quality service offered. Therefore KDDI has a 3M strategy of “multi-network, multi-device, and multi-use” derived from Skype.

Other strategies of branding from Skype have enabled to market KDDI’s Smartphone product. The Skype application installed with the KDDI Smartphone help in marketing as it focuses on the younger generation. Partnering of KDDI with Skype has enabled the company to attract more customers, and the important “trend” they have come up with in the mobile industry (Ellis 56).

Marketing concepts have changed and the market is more concerned about the software rather than the hardware and this gives Skype an opportunity of differentiation of the varied online products and the importance of integration of service delivery.

Opportunities and Threats for Skype

The application software allows its users to make voice calls over the Internet. The calls made within the Skype platform are not charged while those calls made to other traditional landline telephones and other mobile phones are chargeable. This service has become more popular all over the world because of its application features that have been popular among the youth. The features include: Instant messaging, file transfer, and video conferencing.

The high rate of increase of popularity among the world users gives this service provider an opportunity to get more profits from the clients on the use of this service. Clearly, research shows that the “traditional” telecom service providers depend on their fixed line services, but this business has been on the decline due to Skype’s competition (Abell 67).

Moreover, the Skype service providers have managed to be in business through their additional service of offering Internet access service to their clients through the copper line. In addition, the variety of products the company is able to offer has enabled them to have an added advantage over their competitors and this gives them an opportunity to “leverage” and attract more customers thus creating loyalty among the consumers.

Other operators within this service have given the consumers more play packages including the VoIP, HSI8, and IPTV. These services can be important for them to manage the competition from the cable and satellite providers who offer triple play package too.

Moreover, the disruptive technology of offering IP and other products has been an opportunity for Skype to make more profits and advance its market. In addition, the use of VoIP service has been on an alarming rate and this has given Skype an opportunity to have several multiple dedicated networks in a more cost effective way and plan to update to the NGN9 (Bower 75).

Skype has also advanced its technology to coming up with services running over IP through the use of the copper line that seem to be the upcoming innovation. Moreover, the organization can have opportunities in the economies of scale and move ahead of its competitors.

The services that run on the VoIP will also be a benefit to her clients that are after higher quality and more advanced services. Consumers believe that the use of VoIP service is the convenient and easy way to make voice calls while the IPTV will be much better choice for the Skype customers.

The limitations of the bandwidth are a great fear for investors as they feel this might be a risky form of business. This therefore scares away investors that are a blow to the Skype Company. The services offered over the VoIP are calls for high bandwidth. The high requirement of the bandwidth is a problem in the market expansion and brings the issue of traffic when giving services over the VoIP.

Skype also faces stiff competition in its services from Yahoo. Yahoo has the startup Jajah service. Another competitor is Lycos that released a VoIP P2P solution that requires no cost to make voice calls. Yahoo’s Jajah is a great competitor for Skype because it is being sponsored by Silicon Valley venture firm that has more cash and this markets Yahoo’s product.

Moreover, the increase in technology implies that Skype faces the security issue in its service delivery. There is growing concern for Skype to take its security with great care and the hackers might get into their system (Christensen 85).

The external changes such as the government policies, politics and taxes have for long been a threat to the investment of Skype. The government policies for example in Japan affect the profitability of Skype since decisions made by the government tend to favor the mobile operators and this affects the capital availability, cost of production and the demand for its services and products. The low demand in this country has been due to the government policies that bring down the cost of capital thus making the investment more difficult.

Moreover, the government is responsible for the tax rates in a country. This has been a threat for Skype as it influences the economic conditions of a country. If the economy of a country is growing, there is a possibility of increased demand for the Skype products that would not be the case for poor economies. Nevertheless, the opportunity to use a particular strategy in the market may succeed and this will entirely rely on demand that is available in good economies and unavailable in a recession time. Although the recession may provide opportunities for some organizations while making other going out of business it is a great threat to Skype’s market growth.

The economic conditions of a country are affected by the government’s policy and political influences. Moreover, the exchange rates affect Skype’s growth because the number of goods imported or exported may be expensive or cheap depending on the exchange rate currency.

Skype and the Japanese Market

Market Overview

Skype is among the most growing companies at a great rate. In the past 2 years and with its limited “market resources” it has been able to register over 50 million users. To this day Skype has been more successful in its VoIP service (Angelov 175). Before, Skype introduced the voice communication over the Internet Net2Phone was the leading service provider of VoIP. However, at present Net2Phone has lost its market. The decline in Net2Phone is a demonstration of the success of Skype.

Market Strategy

The company plans to introduce corporate subscription packages that shall come with new IT tools for managers, and televisions well suited for teleconferencing. According to a research, 40 percent of Skype’s users are business people and, hence it has come up with a strategy to create quality services to these groups of clients since most of the registered users who are found on Skype are family and friends who communicate for long hours without paying (Abell 66).

This strategy will cause a segmented group and will enable the company to make profit other than being concerned with the family and friends group of customers that spend long hours on the voice call communication for free.

Moreover, it introduced the smart voucher technology in Japan to gain market growth.

Conclusion

The value proposition of Skype is not still performing as compared to the traditional Telco. However, Skype is able to take advantage of its Skype-Skype communication in terms of the price advantage. In terms of customer segmentation, Clearly, Skype’s market entry was based on the traditional adopters and clients from the developing countries. However, Skype can increase her market coverage and take advantage over her competitors by the value proposition that has a fair price than the traditional Telco.

Nevertheless, there are a number of opportunities for Skype to increase her market such as in the distribution channels. The present strategy enables Skype to incur no cost in marketing and it depends on the low cost viral marketing.

However, due to the limited distribution channels Skype is still a mile away from taking over the important market segments in Japan and the world. More expansions are moreover, expected with the channel strategy that the company established. The company still faces challenges in customer relationship management and this can be a hindrance to its expansion.

Social Networking

Overview

The social networking service has transformed the way people communicate with each other. This is especially common to the young ages that are active on the Internet and the use of this technology is on the rise. The rapid growth of this service is due to the introduction of new mobile service with plenty of features.

The young age in this generation makes up a great segment for any kind of business opportunity that is to be introduced and these benefits the new and upcoming services that uses this site for their campaigns and business strategies (Angelov 175).

According to an Ofcom’s recent research there are several adults who use the social networking site in the world. However, this report contradicts other research such as the ComScore that recorded the youth as the most active members of social networking. To be able to secure one’s information, there is the need for privacy and this site comes with features such as permissions to gain access to given pages within its application.

One can control the persons whom, they want to gain access to their profiles, information, and other forms of information. Even though the level of control may differ from service to service in general, but the application allows members to keep their information private and is available only if the user gives permission to gain access to (Ellis 57).

Moreover, this application restricts one from seeing the information on your profile and to be available to the signed members only and those in the user contact list. However, one can be able to make their information public so that all groups of people can see if they prefer the same. These permissions allow users to manage a variety of relationships online and their presence on the Internet and the public.

Some of the social networking sites include Facebook launched in 2004, YouTube in 2005, and Twitter in 2006. However, these sites to present have several users and their valuation of billions of US dollars. This is vital development and cannot be seen in any other line of business.

Twitter

Description. In this model I shall be focusing on the use of social network for marketing. My marketing plan is based on “micro blogging” platform that makes it possible for users to share messages with each other (Bower 77). Twitter has multitude users all over the world; the service is mostly used in North America as research indicates.

However, Twitter is popular in other areas such as Japan where the organization introduced a new version. There is still an increase of Twitter users in the US. Despite the slow growth of Twitter it is less popular as compared to the other social sites such as Facebook and MySpace.

Business Models

Service Design. I will come up with a home page describing my profile. The twitter application allows members to tweet and send messages directly to other users. One can be able to send messages to all the followers. This concept of “followers” is quite different from the one used in Facebook, LinkedIn, or Plaxo (Angelov 175).

These other social sites use friends who can be able to send messages to each other. In this design of “followers” one can be able to follow a user even without the acceptance of them. This implies that it is possible for a user to have more followers that they do not follow themselves.

Even though other social service providers can gain access to the Internet, Twitter service is designed as a mobile service. The homepage for the users is made in such a way that they can be gain access to the mobile phone and the tweets are limited in character form so that they can be sent through messages in an easy way.

In this way, businesses are able to post on their homepage and are followed and the business is able to inform their clients about its progress and new products in the market. Several businesses have been successful through this method of campaigns for their business as they are able to connect to their customers by twitter (Goncalves 142).

Organizational Design. The value chain for advertising shall involve: Twitter, then the application homepage, access providers and then the others. Through this I will be able to create and share ideas with my clients. Several people have moved to twitter as a most effective way to reach to their customers. Twitter does not depend on other companies for other services and this service is an open platform that gives users access to the data and the third parties can be able to develop application on the twitter platform.

The application “add-on” that has been developed include: Browser plug-ins, photo and video sharing applications that make it easy for the use of mobile and computers. Moreover, users can be able to include consumers and other businesses through twitter which is the ideal channel for marketing.

Users can be categorized as: Broadcasters who are the most followed group than they follow themselves. Also there is the “acquaintances” group such as the private users who are the online social network users. Nevertheless, there are users who follow a higher number of people than those following them such as the spammers that want more contacts. Broadcasters include the online radio stations, which are able to advertise businesses and provide news (Gilbert 28).

Financial design. The revenue that twitter generates is quite limited. It comes from the tweet sending and receiving; however, this is a small cost service. Twitter does not charge for the advertisements. The application developers generate revenues, and the tweets twitter shares its revenue with the Twitter Company. Nevertheless, fees imposed on businesses are a possible source of revenue for this company.

Target Market

I wish to target all groups of people but more so focus on the youth. Most of the people who spend long hours on the Internet are the youth and the features of their applications are suited for the youth. The use of Twitter is of great value to the business people as they are able to create homepages about their companies so that they can be followed by the twitter users. Nevertheless, the youth want to keep in touch with their friends in various parts of the world and these acts as the best way to connect with them.

Value Proposition

My strategy of using social networking takes the social interest of customers into great concern. It is possible for one to follow other groups that they do not know on twitter unlike Facebook that is potentially “lucrative” (Abell 60). This implies that unlike Facebook that is based on the ideas of all its members, Twitter’s interest graph varies from the people one knows in real life.

Twitter is hence built on a social graph that is “one way following” rather than a two way. It is possible to follow a person who does not even know you are following them. This will be helpful in my marketing strategy. This social site is moreover organized in the shared interest rather than personal relationships. The site is also inspirational and public by default (Bower 75). Thus twitter has higher chances of capitalizing on the social interest of its members unlike other social sites such as Facebook.

Goal

My goal of this marketing strategy is to be able to involve the youth in my marketing plan. The use of social site such as twitter can help boost my business of the DVD music seller whose customers seem to be the youth. The use of the social networking site for marketing will break the long chains required in marketing and it is cost effective. More so, it is social than other sites and that makes it possible for me to have a lot of followers.

Campaign Structure

I intend to use tweeting to connect with my clients. I will be logged into my account full-time so that I can be able to reply to my clients. The number of people who visit my shop for purchase of the mobile phones will be an indication of my success in this strategy.

Conclusion

The use of social networking in marketing is a good strategy since one is able to communicate with the clients in real time. The advertisements are not charged and the business is able to cover on the advertised cost. The changes in technology enable most businesses to succeed because most people are turning to the Internet for information.

Works Cited

Abell, John. Skype Means Business. Washington DC: Sloan Publishers. 2002. Print.

Angelov, Berlin. “Fusion of Disruptive Technologies: Lessons from the Skype Case”. European Management Journal, 24.23 (2006): 174-188.

Bower, Joan. “Disruptive Technologies Catching the wave”. Harvard Business Review, 22. 23 (2008): 74-88.

Christensen, Cullen. The Great Disruption: Japanese Market. NY: Council on Foreign Relations. 2001. Print.

Ellis, Mullin. “Skype in the Classroom, Think In: A Teaching with Technology Showcase,” Online Journal, 2.5 (2010): 56-9

Fowler, Paddy. “Skype Targets Businesses to Ring up New Revenue”. Wall Street Journal, 8.9 (2008): 34-56

Gilbert, Curl. The Disruption Opportunity: Japan Case Study Review. USA: Sloan. 1998. Print.

Goncalves, Rice. “Skype and the New Regulatory Framework”. Communication Strategies, 59.3 (2009): 141-143.

Greene, Tony. Skype for Business sounds the all-clear on legal pitfalls. USA: Sloan Management. 2000. Print

Luxembourg, Jasner. “Skype tests software for mass-market mobile phones”. Wall Street Journal, 8.9 (2006): 34-56.

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