How telco companies can beat the commoditisation trap
The telecommunications industry is thriving in Southeast Asia, but the commoditisation of technology is something that companies will need to deal with in 2014.
Your company may have pioneered a landmark piece of equipment or innovative service that is unavailable elsewhere, but this will not last forever. Rival firms will eventually come up with similar solutions and this encourages the end user to treat the services offered by businesses as commodities.
While this extra competition is good for the consumer, it can make life much harder for companies. With the telecommunications sector being so fast paced, commoditisation is a particularly big challenge, but there are a number of ways for corporations in Southeast Asia to avoid the trap.
Have you differentiated your brand?
The best way to escape the commoditisation trap is to identify your organisation's most distinguishing features and then create advertising and marketing campaigns around these. Having a strong identity is crucial, as commoditised products tend to be sold based on price, rather than brand value.
Apple - which has a significant presence in Southeast Asia - is a prime example of a company that is constantly threatened by commoditisation. The smartphone and tablet manufacturer has had great success with its iPhone and iPad models, despite facing intense competition from the likes of Samsung.
According to a Gartner report published in November 2013, Apple sold 30.3 million smartphones worldwide in the third quarter of 2013 alone. While it is still trailing Samsung in the overall sales charts, the organisation has maintained a healthy market share, which is thanks mainly to its sophisticated technology offerings, but also its positive global image.
Establish yourself as an industry pioneer
If you build a strong reputation as an early adopter of new technology, customers will usually look upon your business more favourably.
The ongoing rollout of 4G technology is perhaps the best example to use here. Although the fast mobile networks are still relatively new, a greater number of companies are starting to offer 4G services, which again leads to commoditisation.
Consumers will usually opt for the lowest price, but they are also keen to ensure their network provider has a good track record. Firms that were at the forefront of the 3G and 4G rollouts will have a clear edge over rival organisations that have not adopted the technology as quickly.
While many telecommunications firms across Asia are still coming to terms with 4G, China-based Huawei announced in November 2013 that it is already planning major investments into 5G technology. In a statement, the company revealed that it aims to spend $600 million on the research and development of 5G technologies by 2018.
These will be 100 times faster than the 4G networks that are now being installed throughout the continent and they could be deployed as soon as 2020. Eric Xu, Rotating Chief Executive Officer of Huawei, said telecommunications innovation is a "continuous journey" and companies cannot afford to become complacent.
"By 2020, it is estimated that 6.5 billion people worldwide will use mobile networks for data communications and 100 billion of additional 'things', such as vehicles, meters, medical devices and home appliances, will also be connected to the network over 5G," he commented.
"While we continue to evolve our existing 4G network capabilities, we plan to invest a minimum of $600 million over the next five years on research and innovation for 5G mobile network technologies to ensure that we are meeting the consumers' demands for increasingly faster and better connections."
Explore other markets
It is common for telecommunications markets to become extremely congested in certain countries, so it makes sense for companies to explore different regions. Malaysian Prime Minister Seri Najib Razak recently completed a trip to Bangladesh and he believes there are some excellent investments for firms to make in this part of the world.
"We have to explore these opportunities further," he remarked.
"I am satisfied [with the participation of Malaysian companies] but there is room for more."
The Prime Minister used Axiata Group's subsidiary Robi Axiata as a good example of a Malaysian telecommunications business that has expanded into Bangladesh and he is keen for others to follow suit.
The commoditisation of telecommunications technology is something that all businesses - regardless of their size and stature - need to be wary of. Although the demand for smartphones and tablets is strong now, prices have been falling dramatically in recent years, as more manufacturers enter the market.
In order to steer clear of the commoditisation trap, firms must differentiate themselves from their rivals and make it clear to consumers why they should pay more for their services. Image and reputation can be very important, as customers will invariably favour a brand that has a history of technological innovation and good customer service.
Organisations should also ensure their networks and devices are as secure as possible, as it is easy for consumers to lose faith in a company if its products have been successfully targeted by hackers. This kind of reputational damage can be almost impossible to put right.