The analysis of competition structure in business data service market and suggestion for corporation comtetitive strategy

Abstract

LL (Leased Line) service is a facility-based service as a traditional business data service, but new competition services, such as FR (Frame Relay), VPN (Virtual Private Network), and ATM (Asynchronous Transfer Mode), are value-added services. Because of different service classifications, it is hard for service providers to collect necessary data to plan their market strategies. And regulations and policies are also applied asymmetrically to each service provider. Therefore, above all, a substantial analysis of competitive market structure must be ahead to define business data services market exactly. After the definition, role and various methods of market structure analysis are first reviewed; the Hendry model is selected and modified in this paper to analyze substitution-degree among brands or among services. Since the structure of virtual competitions is required for the Hendry model to be applied to data service market, the market is analyzed first by the well-known Porter``s model. By the analysis of Porter``s model, two virtual competition structures are set up: one is for the competitions among leased line service providers, and the other is for the competitions among business data services such as LL, FR, VPN and ATM. After the modified Hendry model is applied to each competition structure, it is confirmed that 7 LL service providers do not compete directly, but two sub-markets exist for the LL service provisions. However, it is shown that service providers in four types of services compete directly. Using the switching probability matrix driven from the modified Hendry model, future market shares of LL service providers and market shares of business data services are forecasted. The modified Hendry model is faster and easier than the original Hendry model in analyzing substitutability among brands or services because it uses just market share data without panel data. And the empirical results in this paper are helpful for service providers to set comp...