Convergence is now:Accenture Mobile Handset StudyManagement Summary

It is a huge market—and still growing. By the time you finish reading

this sentence, more than a 100 mobile phones will have been sold

worldwide. At a rate of close to 2 million devices sold per day, 2004

marked another record year for the mobile handset industry. About

650 million devices were shipped to customers globally in a market

worth over US$100 billion—for devices alone.

Convergence is now:Accenture Mobile Handset Study

Innovation has been driving theindustry. Today’s devices are muchmore than simply mobile handsets. Theyoffer a variety of features, ranging fromPDA to gaming functions to digitalphotography—and that is only thebeginning. Wireless is going broadbandand setting the scene for video-tele-phony and more, based on 3G, Wi-Fi,WiMax, and VoIP. Unrelated industrieshave become competitors overnight, ascamera-equipped mobile phones beginto compete with traditional cameras ontheir home turf. Each of these advances—and others like them—is reshaping anindustry that increasingly resembles thegeneral consumer electronics marketmechanism. Competition will intensify;price pressure will increase.

The mobile handset ecosystem

The mobile handset industry is part of acomplex mobile handset ecosystem. The

traditional vendors of mobile devicesare positioned between their suppliersand original developer manufacturers(ODMs) on one side, and mobilenetwork operators (MNOPs) on theother. Within the area of sales anddistribution channels, the mobilehandset vendor behaves more like awholesaler than a retailer, because theconsumer is generally owned by thewireless carrier. Exceptions exist, butprimarily in developing growth marketslike India.

The mobile handset industry has seenenormous growth over the last decadeand has benefited from further robustgrowth in 2003 and 2004. Six bigmanufacturers – Nokia, Motorola,Samsung, Siemens, Sony Ericsson, andLG Electronics—today control aboutthree-quarters of the global mobilehandset market, although market sharedistribution has evolved substantially inthe past decade.

Global vendor market sharedevelopment

The market continues to grow, but it isdoing so with reduced momentum.High growth is now mainly comingfrom developing countries and regionslike China, India, Russia, and LatinAmerica, and will remain primarily inthe mid to low-end market segment inthe shortterm.

Of the several trends that are currentlyinfluencing the mobile handset eco-system, including the mobile handsetindustry, convergence is by far the mostimportant.

• As devices are equipped with moreand more features, industries—onceseparate—find themselves competingagainst each other. For instance, themobile handset is poised to substitutethe entire low to mid-range of digitalcameras.

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With former boundaries to other marketsblurring, the mobile handset industry isbeing reshaped—driven by a broadconvergence trend that is fueled by manyfactors. Once the new industry settles, itwill look very much like the consumerelectronics industry with increasing pricepressure, intense competition, slowergrowth, and significant differences ingrowth rates as well as profit marginsbetween regional and segment markets.

In the most likely global industryscenario for the next two to three years,the combination of growth and conver-gence should result in a rather stablelevel of horizontal industry concentra-tion. As in any other industry, the mobilehandset industry will tend towardconsolidation as it matures over time.While tremendous growth in the lastdecade hampered industry consolidation,convergence is preventing it today.Increased cost pressure, however, willcontinue to favor cooperation below the

Mergers & Acquisition level (e.g., thecooperation for 3G Research & Develop-ment between Sharp and Sony Ericsson).This scenario has several importantstrategic implications for mobile handsetmanufacturers, and three businessmodels are expected to emerge duringthe next couple of years. To competesuccessfully, mobile handset vendors willneed to differentiate themselves clearlyif they want to avoid becoming aprogressively more commoditizedconsumer electronics business.

Global leaderOnly truly global vendors will be able tocompete on both price and differentia-tion, based on their advantages of scaleand scope. Their size will allow them todefend their position against low-costcompetitors; their global reach andbrand awareness will allow them to offerpremium devices. Most of the industry’sResearch & Development effort will becovered by these players.

• The growing worldwide use of the 3Gstandard is a major step towardconverged networks.

• The emergence of wireless local areanetworks (WLAN, including WiFi basedon IEEE 802.11 standards and WiMaxbased on IEEE 802.16 standards)within the unlicensed spectrum andthe development of Voice overInternet Protocol (VoIP) nurture theconvergence of wireless and wireline.Cable companies entering thecommunications market complementthis trend.

• Although no dominant operatingsystem has emerged so far, the fightfor the number one position is wellunder way. A clear mid-term winnerfor the growing smartphone market islikely. One well-known competitor,Microsoft, may be able to transfer itsdominance from the PC sector intothe area of mobile devices.

= Focus of Study

The mobile handset ecosystem

Mobilehandset

manufacturer(e.g. Nokia,Motorola,Samsung,

Siemens, SonyEricsson, LGElectronics)

Customer

Supplier/ODM (e.g. Qualcomm)

New entrants(e.g. Canon,

Nintendo, Apple)

MVNOP*(e.g. Easymobile,Comviq, Debitel)

MNOP**(e.g. Vodafone,

Orange)

Retailer/other (e.g. Tesco, Aldi)

Consumer

Business

Wireline devicemanufacturer

(e.g. Avaya, Cisco)SourceAccenture analysis

* Mobile virtual network operator** Mobile network operator

2

Cost competitorAs mobile handsets increasinglybecome commodities, low-costcompetitors with a me-too strategy areentering the market. Size will be anadvantage for them but not a require-ment. In mature markets, networkoperators will likely provide the neces-sary distribution channels because theyare looking for white label phones. Ingrowth markets, low-cost competitorswill probably compete only locallybecause they will not have the neces-sary market access and global reach.Their success will be threatened, butmostly by new players offering evencheaper devices.

FollowersFrom a global perspective, other playersshould be in a position to pursue a costleadership strategy, to differentiatethemselselves or to address a marketniche. For instance, some players willattempt to circumvent price competi-

tion by offering highly differentiateddevices. Design and brand will be keydifferentiators, while Research & Devel-opment will play a secondary rolebecause of cost. These vendors will belimited in their growth opportunitiesbecause a substantial part of overallgrowth will stem from emerging markets,such as China and India, over the nextcouple of years—the kind of growth thatis very much limited to the low-endsegment. Even in mature markets, themid to high-end segment will notaccount for the largest share of themarket.

These business models should prevail forthe next couple of years.

Regional markets—each with verydifferent stages of development,subscriber penetration, and customerneeds—add new layers of complexity tothe already intricate web of relationshipsamong industry players. Competing

simultaneously in Europe and in China atthe same time, for example, requires verydifferent strategies and mobile handsetportfolios. The major competitors haveresponded to this challenge by posi-tioning themselves differently indifferent markets. One key finding of thecompetitive positioning is thateconomies of scale and scope still givethe big three—Nokia, Motorola, andSamsung—a clear economic advantage.As the three largest players, they controlalmost 60 percent of the global market.Over the past few years, the big threeaccounted for almost all of the industry’sprofits, supported by a statisticallysignificant relationship between absoluteoperating profits, average selling price(ASP), and units sold.

The three leading vendors by volume—Nokia, Motorola, and Samsung—haveachieved strong operating margins in2004. The big three will continue to haveadvantages of scale and scope going

94 95 96 97 98 99 00 01 02 03 Q1 04 Q2 04 Q3 04 Q4 04

40%

35%

30%

25%

20%

15%

10%

5%

0%

SourceFor 94 - Q1 04 data:Gartner Dataquest, Market Share: Mobile Terminals, Histor-ical Figures 1994-2004, by Wood, Ben; January 2005

For Q2 04 data:Gartner Dataquest Alert, Market Share: Mobile Terminals,

Global mobile terminals market share 1994 to 2004

Nokia Motorola Samsung Sony Ericsson (formerly Ericsson) Siemens LG Electronics

Global market share

Worldwide, Q2 04, by Wood, Ben/ Milanesi, Carolina/ Liang,Ann/ De la Vergne, Hugues J./ Mitsuyama, Nahoko/Desai,Kobita/ Nguyen, Tuong Huy/ Song, Sauk-Hun; August 2004

For Q3 04 data:Gartner Dataquest Alert, Market Share: Mobile Terminals,

Worldwide, Q3 04, by Wood, Ben/ Milanesi, Carolina/ Liang,Ann/ De la Vergne, Hugues J./ Mitsuyama, Nahoko/Desai,Kobita/ Nguyen, Tuong Huy/ Song, Sauk-Hun; November 2004

For Q4 04 data:In-Stat Press release February 14, 2005

3

with intermediaries will be key successfactors. The above figure compares thisscenario that we consider to be themost likely one for the next three tofour years with other possible scenarios.

The implications of this short-termscenario for both the mobile handsetmanufacturers and the other partici-pants of the mobile handset ecosystemare extremely challenging. The changingindustry dynamics and competitivemechanisms call for a broad strategicreview of each competitor’s marketapproach. With different businessmodels and success factors, the strategicdirection will need to be realigned withthe emerging scenario. A consumer elec-tronics-like market will for instancerequire particularly astute customerinsight capabilities to ensure adequateunderstanding of market demand. Inmature markets, design and user inter-face will be key buying criteria forconsumers. Internal structures and

forward, but convergence now poses astrategic challenge to vendors of allsizes. Motorola and Samsung are unlikelyto catch up with Nokia. Other playerswill likely need to further differentiatethemselves as Sony Ericsson isattempting to do. LG Electronics seemsto be trying to follow in Samsung’s foot-steps and Siemens is expected toannounce its future positioning soon.

Eventually, the enormous changes in thearea of handset manufacturers will haveimplications for other players within themobile handset ecosystem. For example,as mobile handsets become substitutesfor digital cameras, pure play digitalcamera manufacturers may start to losemarket share.

The emerging market scenario

It is exactly this kind of dynamicconvergence that makes the mobile

handset industry so innovative—and sovolatile. As traditional industry bordersgive way to new, unexpected possibili-ties and combinations, the industrystands to be radically redefined. In theshort-term—i.e., for the next three tofour years—a Paradise Lost scenario islikely to emerge. This scenario will becharacterized by the continued conver-gence of devices and by slower, steadyglobal growth of probably less than 10percent in unit sales and somewhat lessin revenue. In developed markets likeWestern Europe, product design, userinterface, and pricing capabilitiestogether with short time-to-market, astrong brand value, and the ability torespond flexibly to network operators’requirements will be key successfactors. In growth markets like Chinaand India, understanding local demand,the ability to adopt a me-too approachto imitate innovations and to deliverlarge volumes, flexibly combined withstrong market access and cooperation

Scenario model Consolidated market with afew large companies

Slow to stagnantglobal demand

Strong growth ofglobal demand

Fragmented market withmany small companies

Scenario 4:Wars of attrition• Little growth or stagnation of

demand result in concentrationand consolidation

• Success factors are primarilyfinancial strength for M&A deals and size to benefit fromeconomies of scale and scope

Scenario 1:Gilded cage• Strong concentration and

growth in a regulated industryenvironment or during a short-term transition phase

• Success depends on industry regulations or – during a transi-tion phase – on the successfactors of scenario 4

Scenario 3:Paradise lost• Slow growth of demand paired

with convergence• Success factors differ between

mature and growth markets; forthe former, customer insight andbrand value allow for differenti-ation; for the latter, understand-ing of local demand and marketaccess allow for growth

Scenario 2:Gold rush• Hyper-growth and strong decline

of industry concentration• Primary success factors are

market access, flexibility, andspeed to secure market shareearly on in a growth environ-ment

SourceAccenture analysis

4

processes will have to be adjusted toreflect the direction chosen, e.g. tosupport a model based on price competi-tion or a high-end positioning. Forinstance, state-of-the art supply chaincapabilities and production processes—with IT being a key enabler—will berequired to achieve a competitiveadvantage based on costs. Other partici-pants of the mobile handset ecosystemwill need to adjust their positioning, too.For instance, network operators shouldreview their mobile handset portfoliostrategy in the light of the emergingscenario.

By 2008, device shipments are expectedto reach almost 1 billion units world-wide, targeting a global market of morethan 2 billion users. Within this timeframe, the current emerging marketsshould begin to mature, with corre-sponding lower growth rates of handsetshipments and lower net subscriber addi-tions. Although global growth rates are

expected to slow, the overall market willbe enormous and therefore remainattractive, if highly competitive. In thismid-term scenario, a brisk war of attri-tion may be the likely outcome, in whichslow industry growth and consumerdemand lead to concentration and—ulti-mately—consolidation.

At the horizon of 2010, the arrival of 4Gtechnology could be the start signal foryet another realignment of the market asthis new technology may impact marketdynamics. The mobile handset market istoday, and will remain tomorrow, aconstantly changing market.

Details on the idea and theapproach—overview of the fullstudy by chapter

The observation of disruptive changesin the mobile handset industry marksthe outset of the study. The full discus-

sion of the global handset market andits major competitors is grouped intoseven sections:

Disruptive changes in thehandset industry

Powerful forces for change arebuffeting the mobile handset industryfrom all sides. The drivers—innovation,market size, convergence, and industrymechanics—will leave little margin forerror among the industry's currentplayers, and will continue to open thedoors to future entrants in a globalmarket worth more than US$100 billion.

Far from operating in a vacuum, mobilehandset manufacturers are at thecenter of a vast industry ecosystemthat includes suppliers, original devicemanufacturers (ODMs), network opera-tors (MNOPs and MVNOPs), retailers,manufacturers, new entrants,

Shipments (in million)

2003 2004 2005 2006 2007 2008

Annual growth

Number of smartphones shipped inWestern Europe

Smartphones as percentage of totalmobile shipments

Growth (%), Share of totalmobile device shipments (%)

80%

70%

60%

40%

50%

30%

20%

10%

0%

European converged mobile devices shipments development

SourceOvum Connections, July 2004, by Mendez-Villamil, Marta Munoz

40

35

30

25

20

15

10

5

0

45

5

customers (consumer and enterprise)and wireline device manufacturers,each of whom have a direct or indirectimpact on a manufacturer's profits.

The relative importance of ecosystemmembers changes with the vicissitudesof convergence: As new technologiesand related industries emerge, theimportance of various players increasesaccordingly—and with them, thecompetitive mechanisms.

Convergence is now: technological revolution

Convergence is the single most impor-tant trend to reshape the mobilehandset industry. It is technology-driven and is taking place in four mainareas: devices; operating systems;wireless network standards; and wire-less, wireline, Internet, and cablenetworks.

Once separate markets, personaldigital assistants (PDAs) and mobilephones are no longer distinct devices.Both markets have appropriated theother market's functions and featuresto such an extent that the twoindustry segments have blurred. As anincreasing number of handsets incor-porate digital cameras as a standardfeature, for example, such handsetsare increasingly replacing camerasaltogether.

Today's advanced generation ofsmartphones offer more than simplytelephony. Like personal computers,they are equipped with sophisticatedoperating system hardware. Softwaredevelopers are currently in a fight-to-the-finish struggle to become thedominant operating system on thehandsets of the world's 1.4 billionsubscribers. Symbian, the operatingsystem owned by a consortium led byNokia, is pitted against familiar rival

Microsoft, who hopes to extend itsdominance from the PC world.Like software standards, wirelessnetwork standards are alsoconverging. 3G, the broadband airinterface poised to replace 2G and2.5G networks, will harmonizedifferent network standards andincrease overall quality of service. Inspite of early rollout difficulties andslow adoption among 2.5G users, 3Gdevices are expected to achieve ashipment share of around 40 percentby 2008. It will also go far in pavingthe way for 4G, which is likely to bethe first truly converged network.

While network convergence may beproceeding cautiously, wireless, wire-line, Internet, and cable technologiesare coming together at lightningspeed. Particularly WiFi and WiMax,together with Voice over InternetProtocol (VoIP), are driving theconvergence of the fixed line and the

Global mobile users (in million)

1995

2,500

2,000

1,500

1,000

500

0 Average growth in percent

Global mobile users

Year-to-year growth (%)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

70%

60%

50%

40%

30%

20%

10%

0

Global mobile connections

Source1995–2001 data: Telecom Handel 2004: Telecom Handel (http://www.tele-comhandel.de/sixcms/list.php?page=telecomhandel_marktzahlen)

2003 data:Accenture estimate

2003-2008 data:Ovum 2004a: Ovum Connections, July 2004, by Mendez-Villamil, Marta Munoz

6

wireless worlds. Cable operators havealso entered the competition and theyhave started to leverage their net-works to offer broadband fixed linecommunications.

Global mobile handset market:facts and figures

The global market is currently domi-nated by the big six mobile handsetmanufacturers: Nokia, Motorola, andSamsung, who account for roughly 60percent market share, followed bySiemens, Sony Ericsson, and LG Elec-tronics, who account for aboutanother 20 percent market share. Withconvergence reshaping the industryand its competitive mechanisms,however, new players are entering themarket.

The big six have very different back-grounds: Nokia is strongly communi-

cations-focused; Motorola andSiemens have electronics backgrounds;Samsung and LG have emerged from aconsumer electronics history; andSony Ericsson is the result of a jointventure between Sony and Ericsson.The regional strength of the majorplayers differs significantly, both interms of regional market share and interms of regional growth. A multitudeof suppliers surround today’s OEMs,especially because of the disintegra-tion of the mobile handset valuechain.

Worldwide growth of the mobilehandset market has been extraordinaryover the past decade.

But today, growth in more maturemarkets is slowing down and primarilyreplacement-driven, while emergingmarkets show impressive growththrough first-time subscribers, espe-cially in the low-end segment.

In mature markets, sales of new phonesare very much driven by attractivedevice design and user interfaceconfiguration rather than advancedsoftware and operating systems. Anincreasing number of features is nowappearing on even the most standardentry-level phones and mid-rangehandsets.

Despite impressive growth rates ofsmartphones of up to 70 percent in thethird quarter of 2004, the traditionalmobile handset still dominates themarket with about 95 percent of allmobile devices. However, smartphonesare expected to account for around 10percent of global and around 25percent of Western European shipmentsin 2008.

European mobile users (in million)

1995

800

700

600

500

400

300

200

100

0 Average growth in percent

European mobile users

Year-to-year growth (%)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

80%

70%

60%

50%

40%

30%

20%

10%

0

European mobile connections

Source1995–2001 data:Telecom Handel 2004: Telecom Handel (http://www.tele-comhandel.de/sixcms/list.php?page=telecomhandel_marktzahlen)

2003 data:Accenture estimate

2003-2008 data:Ovum 2004a: Ovum Connections, July 2004, by Mendez-Villamil, Marta Munoz

7

Transformation towardconsumer electronics marketmechanisms

The market for mobile handsets willincreasingly resemble the consumerelectronics market. As convergencecontinues to blur traditional industryborders, new competitors will enter themarket, increasing price competitionand price pressure.

Already, the average selling price (ASP)for most mobile handsets has steadilyfallen over the past couple of years.Consistent with the diminishingmarginal utility of innovations, newfeatures like camera phones and colordisplays have not been able to stemthis downward trend, particularlyamong price-sensitive consumers.

Growth will level off and differ sig-nificantly between global regions.Different market segments will also

emerge—with different success factorsfor competition. For the mass marketsegment, brand differentiation will beimportant as handsets becomeincreasingly commoditized. In non-voice segments like mobile gaming,technical integration and partnershipmanagement will be the key tosuccess. And in the high-end segment,both brand and excellent Research &Development skills will be paramount.

To add to the already complex matrix,different strategies will be necessaryto address different market segmentswithin different regions. Given thevast differences between maturemarkets and developing ones, a massmarket strategy for the Germanmarket, for example, will be quitedifferent than one for India.

Software will begin to account for agrowing share of a mobile handset'svalue proposition. Although differen-

tiation was hardware-driven in thepast, it will be more software-drivenin the future, allowing for increaseddevice intelligence and utility.

Paradise lost: The short-termfuture of the mobile handsetindustry

All industries tend toward convergenceand consolidation over time, and themobile handset industry is no excep-tion. It has shown similar trends in thepast, and a slowdown in growth hasgenerally resulted in a higher industryconcentration.

Over the next couple of years, compa-rably limited growth could result in astronger industry concentration, butconvergence will offset this trend or mayeven reverse it. In the short- to mid-term, the industry will most likely followa paradise lost scenario, in which

Electronics andmechanics

Applications

Industrial design

Electronics andmechanics

Applications

Industrial design

Industrial design

Third-partyapplications

Basicapplications*

Electronics andmechanics

1990s 1998-2000 2002-2004

*Note: Operating systems, micro-browsers, firewall, others

Value contribution of different handset components

100%consumer

value

Source Accenture analysis

8

existing players will find their marketshare—and their profits—threatened bynew entrants.

Cooperation among industry players islikely. Indeed, alliances to save costs andto pool parts of the value chain arealready occurring, for example, betweenSharp and Sony Ericsson for 3G Research& Development activities. HeavyMergers & Acquisition activity, however,is unlikely until 2008, when marketgrowth is expected to further slow downand weak demand is to spur concentra-tion and to drive mergers.

The launch of 4G around 2010 leavesthe industry with an open question. Thenext generation of mobile technologymay redefine, yet again, the industry'scompetitive mechanisms.

Competitive positioning:who's winning?

The factors for success in the mobilehandset industry will begin to lookremarkably similar to those for theconsumer electronics business. Theywill fall into two categories: strategicversus economic success factors, withdifferent characteristics for mature andgrowth markets.

In the strategic sphere, understandingdemand and consumer insight will bevery important. Product design, userinterface and pricing will continue tobe the most important purchasingcriteria for consumers.

As more competitors enter the fray andas consumer demand changes rapidly,the time it takes for a handset manu-facturer to bring a new product tomarket will be critical. Productionprocesses will have to be more flexible

than ever before to ensure that theright product gets into consumers'hands at the right time. Customizationrequirements of network operators willalso challenge manufacturers to rapidlyturn around new products.

In mature markets, in particular, brandvalue will play a decisive role in amarket that is increasingly commodi-tized. Existing players will have to rein-force their value proposition toconsumers with strong brands. Ingrowth markets, where the return onResearch & Development investments istoo small, the ability to efficientlyexecute a me-too strategy, to deliverlarge volumes and to cooperate withintermediaries will play a decisive role.

For both developed and emergingmarkets, a strong sales and cost posi-tion is vital. A manufacturer's size willgive it a strong advantage in achievingoptimal supply chain scale, optimal

Overview of most relevant success factors

• Product design, user interface, pricing

• Time-to-market• Flexibility to respond to

Mobile network operatorrequirements

• Brand value

Mature markets

• Product design, user interface, pricing

• Ability to adapt a me-tooapproach/imitate

• Ability to flexibly deliverlarge volumes

• Access and cooperationwith intermediaries

Growth markets

• Size (number of handset shipments globally) to achieve supply chain scale• Average selling price• Production efficiency (Direct costs: total system costs, costs of goods sold)• Overhead (Research & Development and selling, general, and administra-

tive expenses)

StrategicFactors

EconomicFactors

SourceAccenture

9

average selling price, production effi-ciency and overhead, including a reduc-tion in total system costs, cost of goodssold, Research & Development expenses,and selling, general, and administrativeexpenses.

Looking ahead: smart movesto survive

In a paradise lost scenario, threesuccessful business models are likely toemerge: global leaders, cost leaders, andfollowers.

Nokia, Samsung, and Motorola are eachin a position to retain their leadingpositions because they combine aworldwide presence with scaleeconomies and strong brands. They willcompete head-to-head with costleaders—smaller players who competeon an extremely low-profile cost struc-ture. Sony Ericsson may emerge as a

premium vendor—a manufacturer whouses its brand strength and under-standing of demand to carve out a valu-able niche, particularly in maturemarkets. LG's attempt to join the ranksof the global leaders by copyingSamsung’s approach seems rather ambi-tious. Siemens is expected to announceits future positioning soon.

The other players (followers) usuallyeither pursue a cost leadership strategyto achieve a strong economic position,try to differentiate themselves or try toaddress a market niche. An example fordifferentiation in a niche is HTC(Taiwan) and for a cost leadershipstrategy is BPL Telecom (India).

Convergence, and the correspondingchanges for the vendors of mobiledevices, should have the biggest impacton the other participants of the mobilehandset industry. This includes suppliers,network carriers, new entrants and

providers of enterprise communicationsolutions. For instance, mobile networkoperators are likely to revise theirhandset portfolio strategy to the newmarket mechanisms and the positioningof the various handset manufacturers.

Competitor positioning

SourceAccenture

Strategic Position

Economic PositionWeak

Strong

Followers

Global Leaders

Strong

Niche Players

Cost Leaders

10

Methodology

For the purposes of this study, a mobilehandset is defined as any portabledevice that is equipped with a SIMcard. Examples for mobile handsetsfollowing this definition are mobilephones, data cards used for laptops, orSIM-equipped wireless PDAs.

This study is based on extensivesecondary research and input fromleading industry experts on generaltrends and developments. AccentureResearch Team conducted 15 in-depthinterviews with industry experts andrepresentatives from major mobilehandset manufacturers as well asmobile network operators and suppliers.This material was supplemented bydiscussions with 25 Accenture areaexperts with years of industry-specificexperience.

Based on this data, Accenture devel-oped likely scenarios for the nextseveral years, including the furtherdevelopment and analysis of theparadise lost scenario, which wasaugmented by the mature/emergingmarket segmentation and the competi-tive positioning of the big six manufac-turers.

Accenture as a partner for themobile handset ecosystem

Whatever scenario ultimately plays outin the mobile handset industry, it isclear that the participants in thisecosystem are and will continue to beconfronted with the need to continu-ously adapt their business models andmany of their processes to a rapidlychanging competitive and technolog-ical environment. Accenture has deepindustry expertise in Telecommunica-tion, High-Tech, and Media & Enter-

tainment combined with an extensiverange of offerings to help participantsin the ecosystem anticipate and adaptsuccessfully to these challenges tobecome high performance businesses.As shown by the chart, these offeringscan be grouped in six major functionalareas and target all the participants inthe ecosystem, whether suppliers,manufacturers, or network operators.Below we have indicated selectedofferings that are particularly relevant.

Strategy

Accenture’s development tools forcorporate strategy are relevant to allthe participants in the handsetecosystem. The first step is to ensure aclear understanding of what a truestrategy actually involves. It is alreadyapparent, for instance, that VoIP issubstituting with classic telephony.What are the implications of this

Supplier Manufacturer Network-Operator

Customer

Strategy

Customer Relationship Management

Supply Chain Management

Finance & Performance Management

Human Resources

Technology Services

Outsourcing Services

Accenture Communications SolutionsSolutions

Offerings

Mobile handset ecosystem

SourceAccenture

Accenture capabilities for the mobile handset ecosystem

11

process for the mobile handset industryand what strategies can be developedto capitalize on it? Faced with suchissues, Accenture’s approach to Busi-ness Visioning, Growth Strategy, andPortfolio Management provides a pathfor understanding strategy as a processby which one moves from a vision to astrategic plan and its implementation.As another example, the tools availablein the area of SITE—Strategic IT Evalua-tion—are critical for the transformationand optimization of a company’s busi-ness processes through the use of IT.

Customer Relationship Management

Within the context of Customer Rela-tionship Management, Accentureprovides offerings designed to enhanceperformance more specifically in theareas of sales, support, and marketing.Partner Relationship Management is adisciplined approach to improving salesby structuring the relationship with keypartners as effectively as possible—akey consideration for the mobilehandset industry in light of the multiplepartnership relationships characterizingthe ecosystem. In the support area, theUnified Desktop Solution provides aframework for centralizing all availablecustomer contact information. In thearea of marketing, Accenture MarketingSciences is a tool—of particular interestto handset manufacturers—that makesit possible to measure the return oninvestment from a company’smarketing instruments. In a parallelstep, the analysis of a company’s Brandand Marketing Effectiveness helps toidentify the drivers that can enhancethat effectiveness. And CustomerAnalytics provides the detailed under-standing of the customer that makes itpossible to take effective decisions inmany domains of the fast-movingmobile handset business.

Supply Chain Management

Accenture’s offerings in the field ofsupply chain management are exten-sive, covering all aspects of SupplyChain Management from procurementthrough service and warranty manage-ment. Examples that are relevant to themobile handset industry—especially themanufacturers and network operators—include Supply Chain PerformanceAssessment and Supply Chain Planning.As handsets become more complicated,it is increasingly important to supportrepairs and to minimize defects. This inturn requires effective testing proce-dures as part of the supply chain.Accenture’s Supply Chain PerformanceAssessment and Supply Chain Planningare tools to ensure that the supplychain is designed from the outset tominimize subsequent costs, for instanceby incorporating adequate test andquality control procedures.

Finance & PerformanceManagement

A key challenge for financial manage-ment is to develop the control andreporting systems that can enhancefinancial performance while ensuringthe transparency necessary for goodcorporate governance and effectivemanagement control. Accenture offersbest practice tools and support to thisend. Corporate Reporting Excellence,for instance, is an approach to revisit-ing a company’s reporting proceduresand standards to ensure the implemen-tation of best practices. Accenture alsocan provide complete Financial andAccounting Outsourcing solutions incases where the outsourcing of aspecific business process is the bestavenue to cost efficiencies andstrategic advantage.

Human Resources

Releasing the full potential of thehuman resources available to an enter-prise frequently requires a transforma-tion process that focuses both onstructures and mentalities. Sales Trans-formation, as the name implies, focuseson optimizing the performance of theentire sales organization through anintegrated approach designed toleverage the existing resources andculture while incorporating best practicefrom Accenture’s broad experience withstate-of-the-art technology and tools.Another Accenture offering, LearningTransformation, helps clients to effec-tively and efficiently offer learningopportunities to its workforce to keep upwith the dynamics of the fast-movingmobile handset industry. Another impor-tant area is customer education whenintroducing innovations.

Technology

Mobile handsets are technologicalproducts, but the chances of success ofthe participants in the handsetecosystem depend on their own abilityto use technology to achieve their busi-ness goals. With respect to a company’stechnical architecture, Accenture’sapproach to designing the EnterpriseArchitecture makes it possible forparticipants in the handset ecosystemto adapt their IT landscape to supportnecessary changes in key businessprocesses. With respect to the technicalinfrastructure, the Network Assessmentand the Enterprise Network Transfor-mation offerings are further examplesof Accenture’s ability to specificallysupport the network operators in evalu-ating and adapting their critical busi-ness processes to optimize the chancesof success in this dynamic market.

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Contacts:Asia Pacific, Jenny Dong, jenny.dong@accenture.com

Europe, Markus Karras, markus.karras@accenture.com

North America,Melissa Reid, melissa.reid@accenture.com

AuthorsDr. Nikolaus MohrDr. Karsten Kammer

Copyright © 2005 AccentureAll rights reserved.

Accenture, its logo, and High Performance Deliveredare trademarks of Accenture.

About AccentureAccenture is a global management consulting, technology services, and outsourcing company. Committed to deliveringinnovation, Accenture collaborates with its clients to help thembecome high-performance businesses and governments. Withdeep industry and business process expertise, broad globalresources and a proven track record, Accenture can mobilize theright people, skills, and technologies to help clients improve theirperformance. With more than 110,000 people in 48 countries,the company generated net revenues of US$13.67 billion forthe fiscal year ended Aug. 31, 2004. Its home page iswww.accenture.com.