Digital Convergence and Home Network Services in Korea: Part 2 – Business Models and Strategic Alliances

Digital Convergence and Home Network Services in Korea: Part 2 – Business Models and Strategic Alliances

Hyun-Soo Han (Hanyang University, South Korea), Heesang Lee (Sungkyunkwan University, South Korea) and Yeong -Wha Sawng (Electronic and Telecommunications Research Institute, South Korea)
DOI: 10.4018/978-1-60566-194-0.ch015
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Abstract

In this chapter, we proposed managerial implications and strategic alliance opportunities of the home network service providers in Korea. Based on in-depth analysis of recent industrial status of home network services in Korea, we first analyzed business models of each interested parties participating converging services of home network industry. Next, in order to complement the weakness of participant’s business models, strategic business alliance opportunities and managerial implications were drawn upon resource-based view (RBV) theories. Subsequently, strategic propositions for the success of the home network are suggested at the firm level, with respect to three main converging home network services. Finally, we offer future directions and considerations to expedite home network service evolution. The findings and propositions suggested in this study could be exploited for further research on other digital convergence services.
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Business Model Analysis Of Home Network

This section provides comparative analysis of the business models of the various participants in the home network industry with reference to press release data and interviews conducted with industrial participants. In addition, literatures reporting the past experience of the Korean home network (Byeon, 2006; Kim, 2005; Korea Home Network Industries Association, 2005; Ministry of Construction & Transportation, 2006; Ministry of Information and Communication, 2005; Ministry of Information and Communication, 2006) were also referenced for our analysis.

Business model means a concept and implementation system that secures and uses an enterprise’s resources to provide better customer value than that of the competitors. The theory of business model draws more attention as the proliferation of Internet based companies and verification necessity of the technological and commercial feasibility. Industrial participants of home network services were diverse due to inherent nature of convergence from many industrial sectors. In our study, the home network services were classified into three types; home control & automation service, home broadcasting & entertainment service, and home communication & information service. The companies participate in home network services were from various industrial sectors such as telecom, broadcasting, home appliances, construction, and contents and solution providers. The details for service classification and participant analysis were presented in Part 1 of this study. For the purpose of analyzing business models of home network services, we summarize the components of the business model as in Table 1 by referring to the study of Afuah and Tucci (2006).

Table 1.
Business model components
ComponentDescription
Customer value  A value provided to the customer
Customer segment  Target customer of the service, to whom the value is provided
Scope of services and products  Scope of the products and services provided to the market
Price  Pricing method and strategy
Source of revenue  Pattern of the profit that is achieved while providing the product
Business activities  Activities that should be carried out to achieve the value
Implementation  Organizational structure, human resources, and system needed to carry out business activities
Capability  Capability of providing the value in a better way
Sustainability and growth opportunity  Degree to which a competitive advantage over other companies can be maintained

Key Terms in this Chapter

Complementarity: Material or good whose use is interrelated with the use of an associated or paired good such that a demand for one generates demand for the other.

MSO (Multi System Operator): A cable company that serves multiple cable television systems or community.

u-City (Ubiquitous City): High-tech future city built on ubiquitous infrastructures, technologies and services to improve life quality and raise city value by systemizing administrative functions and processes of the city.

FTTH (Fiber to the Home): The installation of optical fiber from a telephone switch directly into the subscriber’s home.

CATV SO (CATV System Operator): A cable company that serves only one system or community.

MoD (Mobile service on Demand): An umbrella term for a wide set of technologies and companies whose common goal is to enable individuals to select multimedia contents from a central server for viewing on a television or computer screen.

Business model: Description of means and methods a firm employs to earn the revenue projected in its plans.

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