The impact of standards competition on the survival of telecommunication companies

Abstract

 Over the past two decades, the communications industry has seen significant changes Some well-known communications equipment manufacturers that were once leading were either acquired or forced to exit the market, particularly those major North American players such as Motorola, Lucent, and Nortel disappeared. However, some European communications companies (such as Ericsson) not only maintained business leadership, but also led industry advancement.At the same time, some Chinese companies transitioned from later starters to market leaders. What are the reasons behind the successful manufacturers and those that were acquired? Can we identify patterns of corporate strategies as guidance for enterprise development? There are few corporate management theories and cases regarding the influence of technology standards on enterprise development. Existing research on technological innovation and standards doesn’t necessarily guide individual corporate development. The originality of this paper lies in the discovery of the relationship among a company's technology direction, its choice of standards organizations, and its competitiveness. The author analyzes wireless communications standards camps and their competition through in-depth research on the communications industry, including the research on technology evolution, business model changes, and major regional dynamics, as well as the investment focuses, market changes, and the patent shares in standards of major communications equipment manufacturers. The main conclusions are as follows: The competitiveness of a standard organization is correlated with the number of its core members. An open standards organization without exclusive monopoly is more competitive. The choice of technologies and standards organizations determines the survival of the company. (The success of open GSM and the 3GPP standards organization represented by Ericsson was key to the success of the equipment manufacturers that adopted 3GPP standards.) The market position of a tech company is closely related to its innovation capability (patent) and positively correlates to its revenue growth. Only by insisting on establishing systemic strengths rather than blindly following the trend of business models can a company ensure its continuous competitiveness. The conclusions of this paper serve as reference for similar industries as well, namely business to business markets involving advanced technology, high barriers of entry, high capital investment requirements, and customer loyalty.