Ruhi, PGP35035, Section – A Assignment – 2

Question. How justified is NTTDOCOMO to diversify to the BFSI segment with their Felicia cards?

Answer.

Advantages of diversifying to BFSI segment with their Felicia cards:

1) First mover advantage: Competitors like KDDI are continuously innovating in the technology. Even
Softbank is going to enter the market. If DoCoMo don’t enter now other market player will offer the
services like of e-wallet first to the customers and DoCoMo won’t be able to gain first mover
advantage or charge premium from application provider or rental fee from its competitor. It won’t be
able to gain market share among the retailers / merchants.
2) Market saturation:
 Japan’s mobile market was already saturating.
 With introduction of new technology 2.5G by KDDI have decreased DoCoMo data service
revenue.
 Major investor like Softbank is also going to enter the market as competitor.
 It was expected that from 2016 New Regulatory measure will allow Japanese mobile phone
subscriber to switch carrier without changing mobile phone.
DoCoMo have to innovate and enter into other sectors and BFSI have no major player in it. So this
provide DoCoMo good opportunity to diversify.
3) Economy of Scope: With Felica card DoCoMo won’t just enter into BFSI but can also diversify easily
into other business segment like Id card. Railways pass etc. with Felica card.
4) Payment through application:
 BFSI application download will generate fee for DoCoMo.
 DoCoMo can come to know about customer buying behaviour and accordingly help
merchants/retailer to send promotional messages, give discounts or give loyalty point scheme
and thus earn fee from merchants/retailer.
 Whenever e-money payment application is used DoCoMo can come to know customer’s
location and can help retailer send marketing message like of empty seats in theatre.
 DoCoMo having share in FeliCa Network will earn transaction fee each time BFSI application
is used for payment.
5) Increased switching cost: With BFSI application having customer debit/credit card data stored in it,
customer may be discouraged to switch to other carrier. Even though customer can use e-wallet
application with other carrier they won’t be able to use DoCoMo / Falica loyalty point program.

Disadvantages of diversifying to BFSI segment with their Felicia cards:

1) Lack of financial knowledge: Credit card functionality often require extensive financial skill to know
whether customer is creditworthy or not as credit card companies profit comes from revolving debt to
cardholder. DoCoMo will suffer losses from bad debt since they lack skill.
2) Possibility of theft, loss or malfunction: There are chances of mobile getting lost with huge amount of
money in e-wallet. DoCoMo reputation will be at stake in case of this financial loss. In this situation
there is confusion of stakeholder to be contacted by the customers. This can be managed by rules and
security features.
3) First mover disadvantage: By entering first into the market in this segment DoCoMo is taking
pioneer’ technical and business risk.
4) Reader/Writer installation cost: Retailer have to install e-Money Reader/Writer which is different for
each e-Money provider. This may discourage retailer from using DoCoMo mobile application for
payment.
DoCoMo will gain a lot by diversifying into BFSI segment as explained in advantages.