Mobile Application and Their Overall Adoption

Environmental Analysis The overall market for software applications for the mobile phone is fragmented. This is mainly due to ease in which applications can be designed and distributed about customers. Many applications do not require large fixed cost investments. In fact, much of the cost of developing a mobile lies within the intellectual capital needed to create it. Much of this intellectual capital, which consists of labor, compensation, and benefits is variable in nature. This variable cost structure makes entry into the market both seamless and unpredictable.

If, for example, a software application becomes very successful, the company can easily hire more talent on an "as needed" basis. Likewise if an application losses it usefulness, the company can immediately lay off workers to compensate for the lack of revenue. For example, Rovio, the maker of Angry Birds, laid of a third of its workforce this year amid increasing competition from Electronic Arts and Nintendo. The reduction of costs at Rovio would have been much more difficult, if its cost structure was fixed.

However, more consumers are using mobile phones and applications to track others. (Odell, 2005). This technology is only beginning to grow, which presents and interesting business proposition for the Peace of Mind company. The threat of substitutes is very high for Peace of Mind mobile company. Globalization, and in particular the proliferation of the internet around the world, has created an interesting dynamic with the technology sector. An initially great idea can be easily copied by a much more financially sound competitor.

The industry has seen this on numerous occasions with very popular startups. 3D printing, cloud computing, and mobile gaming have all sense competitors come and go. The threat of changing technology makes it much more easier to substitute a product. It also makes it difficult to monetize a product. As competitors realize how successful a particular app is, they rush to make an improved copy of the application, thus making the original obsolete. As a result, the Peace of Mind must constantly innovate to keep competitors away.

However, innovation is both costly and risky. For example, if the innovation isn't well received, a substitute product can then gain in popularity. In order to better compete and insulate itself from substitute products, Peace of Mind must expand using the Network Effect. The network effect is a powerful competitive advantage used by many of the world's top companies. EBay, UPS, Facebook, Google, Visa, MasterCard and IBM all have utilized the network effect.

In essence, the network effect is predicated on getting as many users as possible to use a particular product. In order to get people to use the product, businesses often provide the product for free or provide incentives for use. As a result, a company has very large customer acquisition costs initially to attract and retain customers. However, as more people start adopting the product, they attract other users to adopt it as well. For example, as more individuals get on Facebook, it attracts other users to use the product.

Now, as more users engage with the product, they begin to create a network of users that is very difficult to replicate. For example, with Visa, due to the network effect, merchants must now accept the card, because all of their customers use the card to pay. If they do not accept the card, then they risk losing sales. As a result, the network builds itself, after the initially higher customer acquisition costs. EBay is the best online auction in the world. Why? Because of the network effect.

Sellers want to sell their product where the most buyers are present. Likewise, buyers want to buy where the most products are available. Thus companies such as EBay and Amazon have become very successful using the network effect. The Peace of Mind company must therefore leverage this strategy to gain mass acceptance and thus profit from having a vast and unrivaled network. The value proposition of the Peace of Mind company is very compelling. Parents often worry about their children. They are very concerned about their child's well-being.

They will therefore pay premium prices to ensure that they have access to their children on an "as needed" basis. In this instance, the power of buyers is limited. This is particular true if the company can establish a very strong network of satisfied customers. If the company can leverage the network effect, switching costs will also be lowered. Customers tend to stick with products they are familiar with and have delivered a great experience.

To establish a competitive advantage the Peace of Mind company must first spend heavily to attract customers. Advertising, marketing, and promotion will therefore be used extensively to acquire customers. Once customers are acquired and they have a very compelling experience, they then can recruit other customers. As more customers begin using the application to track their children, the application itself becomes more viable. The company can even increase functionality within the app. For example, the app can allow neighbors within a particular neighborhood communication with each other about their children.

Messages can be sent allowing a trusted individual to pick a child up if they are believe to be in danger. The app could show if a trusted friend is nearby, so they can monitor the child's activities and report back to the parent. These improved functionalities will become more powerful as more people use the app. As result, the five forces that were once a negative within the industry, become positives for the Peace of Mind company.

The barriers to entry are higher as competitors cannot replicate the network that the Peace of Mind company has established. Due in part to the network, the threat of substitutes is much lower. This is because they can't replicate the network. Even if they could, there is no need to have two child monitoring applications. It would simply be redundant. Therefore, the Peace of Mind company benefits from the first mover advantage. Competition and rivalry will still be very dynamic as the mobile application industry is fragmented and ever changing.

Finally, the power of both buyers and suppliers will be reduced. As noted earlier buyers, which will mainly consist of parents, are not price sensitive in regards to the safety of their children. They will therefore pay premium prices for the security of knowing where their child is at all times. Suppliers such as Android, Apple and Microsoft, would welcome this app to their overall product offerings due to its popularity.

In the case of Microsoft, their mobile phones are struggling to compete due to the lack of applications as compared to Android.