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Home > Research > An Agent-based Approach for Strategy Analysis of the Emerging Mobile Communications Market (Wang 2012)

An Agent-based Approach for Strategy Analysis of the Emerging Mobile Communications Market (Wang 2012)

As one of the typical emerging market, the 3rd generation (3G) mobile communication service has been launched in China since the year 2009. Recently, the number of subscribers is increasing rapidly. According to the operation data released by the mobile communications operators, the 3G subscribers are currently accounting for more than half of the newly adopted mobile communication subscribers per month. Thus great potentialities are expected in the future 3G service market. However, as for the total number of subscribers, 3G subscribers only account for a small share, which indicates that the 3G service is still in the initial phase. Besides, as the high speed communications service, 3G service has been accelerating the development of various kinds of value-added services, making the communications markets much more complex than before. Therefore, the strategy to improve the market share in the emerging 3G service market becomes a vitally important issue for the three mobile communications operators. To study the issues, the strategies controlling the openness of the platforms in which the value-added services are provided are also analyzed along with several different investment strategies by utilizing the computational simulation and statistical analysis. As the result, the analysis shows that there are statistically significant differences between the platform strategy with the best performance and other strategies in the simulation, thus the best platform strategies for each operator are proposed. Moreover, the analysis also shows that how the efficiency of the strategies varies depending on the different market environments. SOARS is used for constructing this model.

Weiyang Wang, Master of Engineering, 2012

Details

1. INTRODUCTION

The 3rd generation (3G) mobile communications service has started in China since 2009. Recently, the number of subscribers is increasing rapidly. According to the operation data released by the mobile communications operators, the 3G subscribers are currently accounting for more than 50% of the newly adopted mobile communications subscribers per month. Thus great potentialities are expected in the future 3G service market. However, the 3G subscribers only account for about 16% of the overall subscribers, which indicates that the 3G service is still in the initial phase. Therefore, the strategy to improve the share in the emerging 3G market becomes vitally important for the mobile communications operators. To study this issue, we utilize a computational model to analyze several possible market strategies, and try to propose efficient strategies for the operators.

In the previous researches on marketing, various kinds of models are applied. A typical one is the equation-based model which is also usually considered as the macro level model. Specifically, Deguchi applied social learning dynamics to study lock-in and the platform externalities which usually can be found in the telecommunications market, indicated that the lock-in caused by the externalities can possibly result in an unfair market environment. Kim, Lee and Ahn estimated the demand function and examined the competition relationship in the mobile communications market in South Korea with a Lotka-Volterra model. These researches greatly contributed to the understanding of telecommunications markets in macro level. Meanwhile, the market usually consists of many individuals with decision-making processes, e.g. users, operators, handset manufactures. Also, there are complex interactions among these individuals. Therefore, in order to achieve a deeper understanding of the market, it is essential to study the individual level decision-making processes and the interactions. But absolutely, the macro level models can hardly examine the individual level factors. To solve the problem, an appropriate solution is the agent-based approach. In the agent-based approach, a system is captured by simulating the interactions and behaviors of autonomous agents from the bottom up, which provides a rather natural description of complex phenomena. And some researches on marketing have already shown the advantages of using the agent-based approach. A typical one is the Fujikawa's research examining the mobile communications market in Japan with agent-based modeling. However, the model is constructed based upon the developed market, which generally means the factors concerning new adopters are not considered. Thus the model can hardly have a satisfied correspondence to the emerging markets. To overcome the limitations above, we utilize an agent-based approach integrated with the essential features of the emerging market in our research.

2. THE AGENT-BASED MODEL

The model is developed with SOARS (Spot Oriented Agent Role Simulator) and Java. In the model, 1 step stands for 1 month in the real time, and the agents take actions in each step. The simulation is run for 36 steps (3 years). The model includes 4 types of agents, operator agents, user agents, CP agents, and handset manufacturer agents.

In each step, the operator agents invest to value-added platforms, handsets, and network infrastructure according to the investment strategy, and then update some variables representing the state of the operator, In each step, for the user agents which haven't adopted 3G service, they firstly decide if to adopt 3G services, and then select one of the operators. After selecting the operator, they will conduct the platform selection. For those who are already adopting 3G services, they will firstly decide whether to switch to a new operator. The CP agent selects one out of three platforms in every step for each type of platforms, . The handset manufacturer agent selects one out of three operators in each step, if the handset manufacturer provides the handset to several operators simultaneously, it will be considered as several agents in the model.

3. CONCLUSIONS AND DISCUSSIONS

In the research, a new agent-based model of the emerging mobile communications market is developed based on the 3G mobile communications market in China. The main market development factors, such as value-added services, handset terminals, and network quality, are taken into account while developing the model. Especially, the critical characteristics of emerging markets, e.g. the newly adopted users, construction of the network infrastructure, are integrated in the model, while these are usually ignored in the researches of highly developed markets. The model is validated by comparing the simulated data to the historical real data, which proves that the model has a rather good correspondence to the real market, and it is appropriate to apply the computational model to studying the market strategies for the operators.

Based on analyzing the result of the simulation model, the efficient strategies for each operator are proposed, illustrating that the performance of the platform strategies greatly differ in different situations. Therefore, it is essential to evaluate platform strategies along with the concrete situations of the operator. Also, the analysis shows that pure strategies which make all platforms closed or open perform better than hybrid strategies which leaves both open platform and closed platform exist simultaneously. This conclusion suggests that the hybrid strategies are probably not the optimum strategies for the operators.

Furthermore, the critical factor which influences the performance of platform strategies in different situations are also examined, and the result indicates that if a comparatively large number of contents accumulated in the operator's platforms, open strategy is more efficient for the operator. On the other side, closed strategy performs better while relatively fewer contents accumulated in platforms.

Moreover, because the model represents the main characteristics of the emerging market, the conclusions of the research are also applicable in other emerging mobile communications markets. As a model of a typical emerging market, the model provides a general framework of applying the agent-based approach to the studies on mobile communications market. The research also illustrates that the agent-based approach is adequate in marketing research, and it is expected that the work can inspire more applications of agent-based approaches in marketing studies, as well as supporting the enterprises' management decisions.

4. FUTURE WORK

As for the future work, the research studies the efficient strategies for a certain mobile communications operator on condition that other operators only take default strategies (fixed strategies). Therefore, the efficient strategies when other operators apply various kinds of strategies remain to be analyzed. Differing from the 2G era in which voice call is the main service, in the 3G era, the consumers will absolutely pay more attention to the value-added services. Thus the research mainly focuses on analyzing the strategies for managing the value-added services platform. However, some other typical promotion strategies, e.g. handset terminal subsidies, family discount, are not analyzed due to the insufficiency of data, which are expected as possible work in the future.

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