IT assignment on: Mobile phones

IT assignment on: Mobile phones

ABSTRACT

Mobiles have become a major part of the lives of the people. With the upcoming latest technology it has become easy for every individual to do their daily transactions by just clicking a few buttons. This can be doing any banking transactions or booking their tickets online, payment of bills etc. It is very important thus for the banks to ensure the safety when their customers transact from their mobile using their respective application. A UK Banking firm needs to introduce a new product “Key card’ that will ensure safe transactions for its customers while transacting from their mobiles. This key card is a just like a calculator that will flash a peculiar pin that the customers can use whenever they are transacting from their mobile. The UK banking firm has given this opportunity to Hewlett Packard which is an American multinational company that specializes into information technology. The report discusses the potential market for the new product by studying the perspective of the customers and by preparing a market forecast report. This will be done by doing a thorough market research by determining the market size and by understanding the needs of the customers.PART 1: INNOVATION REVIEW

The UK banking firm has been working on introducing a new product into the market for their customers that can ensure safety while they complete their transactions through their mobile phones. They have chosen Hewlett Packard for this and have given them a cost of four million pounds to make the new product. This product is a key card which is just like a calculator. This product will display a peculiar code that will be used by the customer to do any mobile transaction. It is very important to know whether the customers will accept the product or not.

Stakeholder Analysis

In order to study this it is important to know the viewpoints of the stakeholders. Stakeholders are those people who have the interest in the working of the organization or who will be affected directly or indirectly by the actions that an organization takes. The stakeholders of this product are:

Customers: the customers are the most important stakeholders for every organization. The bank is introducing this new product for their customers in order to ensure their safe transactions and thus it is for the benefit of the customers. The customers will be excited and will welcome this product. Thus they are the ones who will be benefiting the most from the introduction of this product. The customers will be very happy if they are communicated that their bank will be providing a new service that will make mobile banking a new experience altogether. This is also a service that enables the customer not to leave their homes and carry out their transaction from anywhere.Employees: the employees are also the stakeholders of this product as the making of this product will definitely attract the customers and thus it is expected that the company might earn profits. (Chron 2012) The employees of the company will be waiting for the introduction of this product as they are affected by the success of the economy as it helps in improving their well being. The employees will therefore be motivated and they will work hard on the product.

Government: the government is involved in making rules and regulations as to the operations of the bank and thus it is also one of the main stakeholders of the firm. The government always encourages any technology that is introduced in order to ensure the safety of the citizens of the country and Key card is a product that is introduced so that people can make transactions safely from their mobile phones.

Creditors: the creditors of the bank will also be the stakeholders because they have given their money to the bank. If the product for which the money has been invested does not succeed in the market, then it will directly affect the creditors.

Suppliers: Suppliers are the ones who provide the product or raw material that helps in making the end product. They also have an interest in the success of the product for which they have provided raw material or products. If the end product is successful in the market then there are chances that they might get another order and if the product is not successful then that will affect their earnings. Thus they will be interested if the product is successful in the market.

Consumer Acceptance

It is very important before introducing a product to ensure that the product will be acceptable by the end customers. In order to analyze whether the new product Key Card will be acceptable by the customers or not the Technology acceptance Model will be used. This model was contributed by Davis in the year 1986 which predicts whether a product which involves information technology will be acceptable or not. This model also helps to identify any modifications that should be made to the information system so that it becomes acceptable by the customers. As per the model the factors which determine the acceptability of a product are

Perceived Usefulness: refers to the extent to which an individual thinks or perceives that the use of the product will help in improving his performance.

Perceived Ease of Use: refers to the extent to which an individual thinks or perceives that the use of the product will be effortless.

The TAM has been adapted from the theory of reasoned action. The use of a particular product like a key card is determined by the behavioral intention of an individual. The behavioral intention of an individual is said to be determined by the ease of use of the product and also by the perception he has about the product, i.e. whether the product is easy to use or not. An individual may also accept a product if it will help him in improving his performance even if he is not convinced with the product. Thus the chances of the key card to get accepted are more as it will safeguard his bank details. (JCMC 2007)

Source: (JCMC 2007)

The model also throws light upon the direct link that exists between the perceived usefulness and the perceived ease of use. This means that if an individual is under the perception that using an information system is easy then he will be sure that it will help in improving his performance. The key card will be readily accepted by the customers who use their mobile phones for different tasks and thus they will be sure that the key card will be easy to use and this will definitely help them in safeguarding their transactions.

Perceived ease of use also influences the attitude of an individual with the help of two factors which are Self Efficacy and Instrumentality. The concept of self efficacy states that if a product is easy to use then the sense of efficacy of an individual is more. Thus if key card is concerned then the people will think that it is easy to use and thus they will be under the influence that the safety of their transactions is under their control. However, it should not be ignored that there are people who are frequent users and they find it difficult to trust new technologies. Such users might perceive the key card a difficult to use information system and they might stick to their old ways of doing their transactions. Perceived ease of use is also very helpful in improving the performance of the individual. If an individual is sure that using the key card will be easy then he will employ less efforts and thus he will be able to save his time and energy and he will be able to use that time and energy in completing other tasks. (JCMC 2007)

While doing market research the first thing to explore is the target customers. It is very important to decide who are target customers are. This will make it clear how acceptable will the product be to the end customers. The age group plays an important role while determining whether the product will be acceptable or not. The research should also check how frequently the customers use their mobile phones for doing their bank transactions. This will categorize the customers and thus their behavioral intention will be clear. Also the research should definitely include whether actually the people will accept the Key card, only, if they think that it is easy to use and will ignore its advantages. It is important to get a feedback whether the ease of use is more important or safety of their details. All the answers to these questions can be obtained by getting a questionnaire answered by a sample of people that contain people from different walks of life and different age group.

UNDERSTANDING CUSTOMERS

Analytical Hierarchy Protocol

Analytical Hierarchy Protocol is a mathematical and psychological tool which was developed by Thomas l. Satty in the 1970s and since then being used extensively in the decision making process where a decision is made in the field of making a choice, resource allocation, benchmarking, quality management and conflict resolution. This method of analysis is further used by many famous corporate and educational institutions like Microsoft Corporation in the area of quantifying  the overall presentation and quality of software systems, Bloomsburg university of Pennsylvania in selecting the university faculty , university of Cambridge in the field of deciding where to outsource the offshore manufacturing work, American Society of Civil Engineers in assessment of the risk in operating cross-country petroleum pipelines and the U.S. Department of Agriculture in employing the best way to manage U.S. watersheds.

In Analytical Hierarchy Protocol technique, we represent a problem in hand as a hierarchy and then solve it step by step. An illustration has been given here to clarify its usage:  Matrices for Each Respondent

The four important factors which have been assessed here are as follows:

Cost – cost of accessing my bank account via my mobile phone handset

Any place – no need to leave home or the office to perform the service

Control – mobile banking increases my ability to control my account

Time saving – it’s faster to use my mobile phone handset to control my account

Cost has been noted down as the factor A, Any Place accessibility as the Factor B, Control as the factor C and Time Saving as factor D.

Factor D0.3383Rank #1highestFactor B0.3342Rank #2 Factor A0.2913Rank #3 Factor C0.0362Rank #4Lowest

According to the attributes matrices, factor D holds the maximum importance for a customer which is marked by time savings. In today’s world, time saved is money saved as time is perceived as money. The lowest ranking is attributed to factor C which is control as consumers find it hard to use their mobile phones to control their account activity. In countries of Asia and Africa, where people are less educated are finding it very hard to operate a business phone that can be used in several ways. In addition to this, these people being relatively less rich than the citizens of Europe and America don’t even possess a smart-phone leave alone its usage. In such a scenario, we can assess easily that if a company is going to launch a product like ‘key card’, it should concentrate more fiercely on developed markets like Europe and America.

PART 3: INNOVATION PLANNING

A. MARKET FORECAST

A market forecast for Key Cards is provided below using the consumer adoption model. Consumer adoption model is generally used to forecast the demand of a new innovative product just like Key Cards. Consumer adoption curve contains five factors based on which we can decide the adoption of Key Cards by its target audience. A brief description of the curve and its factors are provided below:

(Source: SMART 2012)

Innovators: Innovators are those consumers who are ready to take some risk and try new ideas and products. The consumers who are ready to accept the Key Cards assuming a little risk will come under this category.

Early Adopters: Early adopters are those consumers who are opinion leaders and adopt the new products earlier than others but carefully. Consumers who will investigate a little before adopting the Key Cards will come under the category of early adopters.

Early Majority: Early majority is the group of those consumers who adopt the new product before the average person. The consumers who will accept the key cards before a majority of consumers will come under this category. These consumers are deliberate in adopting the new products.

Late Majority: Consumers of Key cards who are skeptical and will accept the Key Cards after a majority of people have tried it will come under the category of Late Majority.

Laggards: Laggards are the traditional consumers. They adopt the new products only when it becomes a tradition itself (SMART 2012).

We would be using all the above classes of consumers to forecast the market for Key Cards. Consumer adoption model is based on the purchase intention and actual adoption of the new products by the consumers. To develop the model a large database on purchase intention and actual purchase behavior of new products has been used. Therefore, to predict the future market of Key Cards we can definitely use the above model.We are required to assume some facts to forecast the market for Key Cards. For example market share that the bank will be able to achieve with its new products. Some of the assumptions are clearly stated below:

• Let us assume that the Banking firm will be able to capture 15 % market share of the Key card market in mobile banking.
• Also it is assumed that the assumptions used to develop the consumer adoption curve are true for the Key Card market as well.
• Market size of the Key cards in UK is assumed to be £ 190 million (Data Monitor 2012).

Total number of mobile banking consumers in UK is 10 million. As we have already assumed that the market share of the bank will be 15 % therefore, the market size which bank will be able to achieve is £ 28.5 million and number of consumers 1.5 million. These 1.5 million consumers will be divided into five different classifications. Statistics of the market classifications is given below:

Total market size         =          £ 190 million

Total number of consumers     =          10 million

Market share of Bank             =          £ 28.5 million and 1.5 million consumers

Innovators                   =          0.0375 million =          37500

Early Adopters                        =          0.2025 million =          202500

Early Majority             =          0.51 million     =          510000

Late Majority              =          0.51 million     =          510000

Laggards                     =          0.24 million     =          240000

Sales revenue of the banking firm based on the likely market share is £ 28.5 million. Sales revenue from the different classes of the consumers is provided below in the table:

Cost of production of Key cards is £ 4 million (Given). Marketing cost will be around £ 5 million, distribution cost will be £ 2 million and other miscellaneous expenses will be 3.5 million.

All the above figures are assumed. Therefore,

Total cost                    =          £ 14.5 million

Total fixed cost                       =          £ 6.5 million (Assumed)

Profit               =          Revenue – Cost

Profit               =          Revenue – (Total fixed cost + Total variable cost)

Profit               =          £ 28.5 million – (£ 6.5 million + £ 14.5 million)

Profit               =          £ 7.5 million

Therefore, Profit margin         = 26.31 %

RATIONAL BEHIND THE FORECAST

The reasons behind the forecast provided above are given below:

• There are pattern available for the adaptation of new technology by the consumers such as volitional non- organizational orientation, many available alternative technologies etc. Based on these patterns above classifications have been done.
• Above forecast is also based on the increasing popularity of the mobile banking in UK. 25 % of the UK mobile internet user use mobile banking.
• A survey done in UK states that, only 4 banks out 14 high street banks surveyed offer a dedicated mobile banking app.
• Survey also clears that mobile banking is more popular among youth and youth easily accepts the new technology (Murphy 2011).

B. REVISED FORECAST

The two less favorable scenarios for the mobile banking are stated below:

1. Security reasons can become a less favorable scenario for not adopting the mobile banking. 68 % of the total consumers give security a reason for not using mobile banking.

2. Inconvenience in downloading and running these mobile banking apps are another less favorable reason for not using the mobile banking apps (Metaforic Ltd. 2012). Market forecast for these two less favorable scenarios are given below:

SCENARIO 1: SECURITY REASONS 

People who are scared of security reasons will be those people who will come under Laggards and Late Majority as we have already explained that consumers in these categories are those people who accept a new technology after it becomes a tradition or when a majority of people have already adopted it. This scenario will exclude the 50 % of the consumers of the mobile banking firm. And hence forecast for this scenario is given below:

Total number of consumers     =          5 million

Total market Size                    =          £ 190 million

Market share of the firm         =          8 % (assumed)

Sales revenue                          =          £ 15.2 million

Cost                                         =          £ 8.5 million (variable) & £ 3 million (fixed)

Profit               =          Revenue – Cost

Profit               =          Revenue – (Total fixed cost + Total variable cost)

Profit               =          £ 15.2 million – (£ 3 million + £ 8.5 million)

Profit               =          £ 3.7 million

Therefore, Profit margin         = 24.34 %

NOTE: All the variable cost such as marketing, distribution as well as fixed cost will get reduced as the number of consumers has got reduced now.

SCEANRIO 2: INCONVENIENCE

Second scenario says that consumers are feeling inconvenience in downloading mobile banking app and running them. These consumers are those who are less familiar with smart phones and internet technology. Generally these kinds of consumers are above 55 years and youth are very comfortable with new technology. Let us assume that 12 % of the consumers will reject the Key Cards due to this reason. Hence the market forecast is given below:

Total number of consumers     =          8.8 million

Total market Size                    =          £ 190 million

Market share of the firm         =          13 % (assumed)

Sales revenue                          =          £ 24.7 million

Cost                                         =          £ 12 million (variable) & £ 5 million (fixed) (Assumed)

Profit               =          Revenue – Cost

Profit               =          Revenue – (Total fixed cost + Total variable cost)

Profit               =          £ 24.7 million – (£ 17 million)

Profit               =          £ 7.7 million

Therefore, Profit margin         = 31.17 %

RETURN ON INVESTMENT

Return on investment is calculated as follows

ROI     =          (Gain from investment – cost of investment)/ Cost of investment

ROI in first case 35.71 %, in the first less favorable scenario ROI becomes 32.17 % and in second less favorable scenario ROI becomes 45.29 %.

Impact of these changes on the firm is that the market share of the firm is getting reduced due to less favorable scenarios. Although in terms of percentage there are little changes we can see in ROI but the sales revenue of the company gets reduced highly. Sales Revenue in normal scenario was £ 28.5 million and in first less favorable scenario it reduced up to 15.2 million. Also the market share of the firm gets reduced due to less favorable scenarios.PART 4: INNOVATION IN PRACTICE

The product chosen for discussion is Sony mobile. Its product development process has been discussed in brief. On the basis of analysis, it was found that company reduced hardware and software platforms in their overall mobile group. They also focused on picture and touch screen quality, as customer considers it most while using a hand set. Moreover, company decided to go with Android rather than any other options because it is already popular among the customers and would be much faster. They followed their technical excellence and a rich tradition or traditional expertise. In this context, there are a few competency areas where it needed to develop. Therefore, to make its handset innovative, company should have focus on customer value, competitor differentiation and extendibility. As Sony included android in its system, it could go for a new product line market to gain competitive advantage. It should have focused on its precision of engineering, making perfect and new designs. Every company wants to be a pioneer and swim upstream. In this core concept, a realistic strategic framework should be designed in order to reinforce the entire product development system not to change that. Thus, there are some realistic approached that could have been used by Sony to make its product effective and innovative (Fatakia, 2012).

Furthermore, core competencies are termed with something unique and different an organization has unlike others. Therefore, Sony should have used a strategic framework for customer benefit and an interface that is easily handled by every user easily. It should not have focused only on its designing and android functioning but also considered marketing and sales part. It should have align its corporate strategies with logistics management so that good coordination can be made. Company should consider three main competencies while producing a new handset in the market.

• It should contribute both to the perceived value of the customer and company’s financial health.
• The competency should have been unique and innovative that it would be substantially superior to company’s peers and competitors.
• Moreover, competency should be capable of being pertained to a variety of its new products and solutions.

In this regard, main point of concentration of Sony should be on technology innovation, production & operations and marketing & availability of the product. Discussin about the core competencies of a phone, following are the main areas considered highly:

Cellular wireless technology: However, there are subsequent improvements and developments in semiconductor technologies, but new, innovative and competent attributes and capabilities are provided at the same cost. Therefore, Sony should have taken commodity chips in to account that are used in cell phones and are easily available in order to enable exciting hardware systems.

Cellular manufacturing: As company already enrolls miniature system in its manufactured handsets, it should also go for assemblies of digital, plastic parts that are precise interlocked, analog, etc. In order to gain competitive, cost and technology advantages, Sony should use ODMs so that it could make the operations effective (Expert program management, 2011).

Software/User interface: Most of the cell phones companies are hardware centric and focus on hardware system and its quality and seeks software as an essential cost to sell their products. But, the use of software system has been changed and demand is increasing. Thus, Sony should have used software as one of its core competency as Apple iPhone is providing specialized media applications with a complete ecosystem for customers to buy media and other applications. As a result, the market share of Sony could have increased like Apple and Samsung. It should use interface as its core competency by providing innovative and different customer benefits. Moreover, it should be complex to imitate by its competitors and it should be used in its every new line of mobile products.

Semiconductor design: Additionally, as semiconductor industry is growing better, every mobile is applying new designs of semiconductor. Likewise, it should have taken this into consideration in order to provide longer battery life and develop phone’s functionality at a lower cost (Innovation in project, 2012).

Inter-project learning:  It refers to the capturing of new knowledge or competency that is created and built up throughout the formulation of a project. Apart from this, that knowledge is also transferred in order to improve other current and prospect future project’s execution (Newell & Edelman, 2008). Successful and effective delivery of a range of projects is also making certain through inter project learning. It may occur in global electronic firms with the use of its key mechanisms including the production, compilation, storage, right of entry, distribution and finally reuse of new project knowledge.

However, knowledge is more than information and date in electronic firms. Therefore companies may undertake the knowledge of design, their implementation and production of a new range of well-build electronic and communications technologies. For example, mobile companies through inter-project learning may learn and undertake innovative and technological ideas. Moreover, technological expertise obtained can be used for their prospect new product line. At a global level, there are so many electronic firms that are implementing and developing core competencies and serving better to their consumers by applying knowledge through inter-project learning.

Additionally, as an innovation manager, inter-project learning can be aided and used as one of the best alternatives for product development and innovation.Following diagram can be taken into consideration for best use of inter-project learning. It would be made capable of application across various different projects and innovations by the management of organization. Holistic approaches would be used to generate new ideas of knowledge generation and execution of projects in a subsequent order. Building blocks and activities related to the project would be used for future prospect and new ideas would be added to the project so that competitiveness could be obtained. To aid it in an effective way, first it is required to accumulate knowledge experience, articulate that knowledge, codification of knowledge and then re-use of knowledge (Mainga et al, n.d).