Understanding Emergent M-Commerce Services by Using Business Network Analysis: The Case of Finland

Successful m-commerce business models depend on complex networks of business relationships; comprising telecommunications service providers, mobile device makers, financial linkage providers, and various third-party value-adding companies. This chapter discusses such business relationship networks in the context of Finland, and offers general guidance for the formation and sustenance of effective business networks for mcommerce players worldwide. Understanding Emergent M-Commerce Services By Using Business Network Analysis: The Case of Finland M-Commerce and Business Networks Across the globe, mobile commerce service providers are testing or planning to test a wide variety of business models. One of the striking features of m-commerce business models is the complex network of business relationships needed to create, launch and sustain such services. Such business networks comprise of telecommunications service providers, various types of device makers, payment systems and financial linkage providers, and various third-party value-adding companies. A key question for m-commerce strategists and their financial supporters is this: What types of business network arrangements work towards promoting early success and long-term sustainability of m-commerce ventures? To seek an answer to this question, it is helpful to: • Focus on a lead country where mobile telecommunications and m-commerce have developed further than most other places • Draw from theoretical schemas that help us to understand complex global networks, especially networks that cross the boundaries of many nations. From the mid-1980s, Finland has been one the leading countries in developing and deploying mobile services, in terms of per capita availability of mobile handset terminals and mobile service accounts. With its flagship company Nokia, Finland is a global technological leader in the development of mobile communication networks and terminals. By the start of the new millennium, a large numbers of new start-up companies emerged in Finland to serve both Nokia’s and other companies’ needs for mobile applications and service development. Regions such as the Helsinki suburb of Espoo and the remote Arctic Circle city of Oulu have developed as mini-Silicon Valleys with many startup firms focused strongly on mobile communications and m-commerce. The number and diversity of agreements, strategic alliances, and mergers featuring firms from Finland and crisscrossing geographical barriers has been staggering. The merger of Sweden’s Telia and Finland’s Sonera adds to this growing list. This merger represents a step towards the emergence of a pan-Nordic/Baltic telecommunications operator, with the requisite critical mass needed to thrive in that region as well as to make some global impact. Just as SAS – based on the combined strengths of Sweden, Denmark, and Norway – succeeded in the global airline market, the newly merged Scandinavian operator will have a global footprint. Business network theories have enjoyed decades of popularity in Scandinavia and have been employed to study the internationalization and global linkages of Scandinavian firms. This chapter presents an approach to understanding the mobile telecommunications industry, and especially the emergent m-commerce space in Finland, using the Scandinavian-inspired business network analysis methods. The chapter aims to illustrate the dynamics of the industry by presenting a market model based on business network theories. The chapter draws from studies conducted at the Helsinki School of Economics as well as the experience of the authors. While the chapter draws mainly from the Finnish experience, the overall objective is to create a generic analysis tool for m-commerce market actors to assess their strategic positions. The key questions addressed are the following: 1) What kinds of actors are there in the mobile telecommunication business, and especially in value-added m-commerce services? 2) What kinds of resources do these actors rely on? 3) How are the various actors related to each other? 4) How do these relationships help or hinder the strategy of each actor? 5) What general lessons can be drawn about the potential success and failure of m-commerce actors and strategies? This chapter develops the framework first from illustrative analyses of the Finnish situation. Next, the model is outlined in a generic form. Suggestions are then provided for customization of the model for various countries and different market needs. Conclusions and future research directions round out the chapter. Finland as Mobile Business Pioneer The Finnish telecom industry dates back to 19th century when the first telecom networks were built into the country, initiated by the Russian Czar and the Finnish autonomous government. Until the 1980s, because of very limited capital resources available in the country, local telecom companies and cooperatives dominated the Finnish telecommunications markets. Yet, the nearly 300 local telephone companies had very talented personnel and Finland’s telecom industry, led by the national monopoly company Telecom Finland, gradually developed one of the most sophisticated networks in Western Europe. Liberalization and digitization of the telecom network, strongly initiated and steered by the Finnish government, boosted the sophistication of the networks. Telecommunications rose in importance for the Finnish economy throughout the 1990s. Table 1 shows the rapid growth in the importance of telecommunications for the economy. Telecommunications represented only two percent of total Finnish GDP in 1990 but by 2000 this had doubled to about four percent of the economy. During the 1 In its early years, like most other telecom firms worldwide, Telecom Finland (TF) operated as a division of the Finnish national post office. TF changed its name Sonera in 1997. Now Sonera and Sweden’s Telia have merged. same period mobile phone penetration rose from a mere five percent to over 70 percent of the Finnish population. By the end of the twentieth century Finland became one of the leading countries in mobile communications. Nearly 78 % percent of Finns had a mobile phone in 2001 and the market neared the point of saturation (Leppavuori, 2002). Among certain segments, e.g. teenagers and business community, the penetration was nearly 100 %. Public telephones have become obsolete as nearly everyone has a personal portable phone. People moving into an apartment or a house very often forego a fixed connection Table 1: Rapid Growth of Finnish Telecommunications Industry Telecommunications Industry in Finland 199