Corpus Electronics: Decision to Segment the Market for Convergence Products
The communications marketplace is becoming increasingly competitive. Consumers’ expectations are growing and the range of products and services they demand is increasing in complexity. Monolithic systems, arrogant suppliers, and traditional delivery approaches seem to be outdated in today’s fast-paced world. The product in this environment has ceased to be a discrete domain and the responsibility for it has become fragmented. As such, the boundaries between computers, communications, and entertainment products are blurring. Wireless products, particularly WiFi and Bluetooth, are now being widely used and digital cameras are standard in cell phones. With the move to all-digital communications and storage, a number of markets are converging: medical- consumer, automotive entertainment, communication-entertainment, and computing entertainment.
Convergence within consumer products has seen digital cameras becoming integrated with cell phones and PDA devices being combined with digital media players. Manufacturers have come under pressure to accommodate the requirements of multiple data formats and communication standards within a single product, as well as to anticipate the needs of future standards in the design platform. The ubiquitous spread of wireless connectivity is adding to the convergence trend.
One aspect of globalization is the convergence of income, media, and technology. Many expect this convergence to lead to homogeneous consumer needs, tastes, and lifestyles. For example, cross-border music channels such as MTV, increased travel, and global communications have encouraged the notion of a ‘global teenager’ – that is, the notion that teenagers possess similar values, regardless of their country of origin.
John Costa (Costa), MD of Corpus Electronics (Corpus), has been pondering for a long time about marketing convergence products. Given the market situation, most of Corpus’s competitors have shifted to product convergence and are marketing products such as camera phones, televisions with in-built video players or televisions etc.. Though a leader in innovation, Corpus is still sticking to the old single function product model where one product performs only one function. Costa, one of the founders of the company which came into being in 1982, has seen Corpus grow to become one of the biggest in Europe. He thinks that product convergence is a fad and will pass with time. However, the new marketing manager Ajmal Ramirez (Ramirez) has a different viewpoint. Ramirez thinks that product convergence is here to stay. He also wants the company to go into convergence products so that it does not lose market share in the long run.
DEFINITION OF CONVERGENCE
The dictionary meaning of the word “convergence” varies from “the act of synergistically coming together” to “contraction” to “similarity of form and structure.” In an era where media fragmentation, brand proliferation, and new consumer niches are being discussed, there’s a
This case study was written by Subodhip Roy, IBS Hyderabad. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.
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completely contrary phenomenon of convergence that is simultaneously taking place. This phenomenon of convergence takes place at three levels – technology, product categories, and brands. However, the levels are heavily intermixed and interdependent.
A lot has been written about how technology convergence is redefining and even making certain categories obsolete. Email, PDA, and mobile music, which earlier used to be three non-related product categories, are today available in a single device. The Sony’s PlayStation 2 is not only a games console, but also a CD player, DVD player, and Internet connector. Hybrid cars, which till some years ago, were only at the concept stage, are today available to the customer and there is no end to what microchips have made possible.
It is not new for products by the same company to be ‘bundled’ together. The evolution, however, starts when products from different companies converge in a sense. Take the example of Reuters or CNN being content providers for general portals like Yahoo! Similarly, a new cell phone that incorporates iTunes music is an example of media convergence in consumer electronics. For the consumer, it means more features in less space, while for the media conglomerates, it means remaining competitive in the struggle for market dominance. The potential risk with this pace of convergence is that the lines between products and categories will become blurred.
THE MARKET RESEARCH
In such a scenario, Corpus was in a dilemma on whether to go in for convergence products or not. Just to prove his point, Ramirez conducted a small market survey to find out the dimensions of product convergence in electronics and whether the consumers could be segmented. The first objective of the study was to explore the common/existing themes (if any) of product convergence in the market. The other objective was to explore the presence of consumer segments based on their perceptions of perfect convergence.
DATA COLLECTION AND METHODOLOGY
Data was collected using a structured questionnaire where responses from the consumers were elicited based on the products (Exhibit I). The items used in the questionnaire were selected based on a thorough research of the market and the convergent products mentioned in the exhibit.
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