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Convergence in LBS-related Areas and Intensifying Competition

Horizontal competition among devices is growing due to convergence and GPS phones

MP3 player and PMP makers are entering the car navigation market, and car navigation makers are adding multimedia functions to their devices. As a result, competition between previously disparate devices is growing.
Declining GPS chip prices and growing demand for location-based information has led cell phone makers to incorporate GPS chips and map software into their handsets, making them another competitor in LBS (location based services) devices.
Vertical competition is increasing as device makers are now providing LBS directly and telecom firms lack market power
Navigation devices that include telecom functions are now available, and as a result, an alternative to telecom networks is becoming available for delivering LBS.
This trend, companied with the introduction of cell phones equipped with maps and GPS chips, is leading to greater vertical competition with device makers, and telecom firms are being reduced to mere bit pipes.

The competitive landscape is becoming more complex as portal firms enter the market

The search paradigm is shifting from the internet to mobile devices, and portal companies are competing to provide maps, which are a basic function of LBS.
Internet companies that offer blogs, cafes, and SNS (social network services), can easily expand into the area of LBS and have a large user base. As a result, they are well positioned to gain subscribers and shift to mobile services.


Outlook for the Changing Competitive Landscape

The industry will be increasingly dominated by large companies

The overall market is expected to grow. but small companies will see their share of the market contract since scale and marketing power are key requirements for success.
As large firms enter the market, small-to-mid size LBS companies that lack competitiveness will need to either develop new business models, expand overseas, or exit the market.

The LBS industry in each region will differ depending on the operating environment

Cell phone makers and internet firms (content providers) will drive growth while carriers will be in the Korean LBS market while carriers will see relatively slow growth.
In China, rising car ownership, business travelers, and tourists will boost demand for LBS.
The U.S. market has a strong network infrastructure and widespread use of GPS-equipped phones. Internet firms offering a wide variety of applications and services will drive growth.
GPS-enabled smartphones and PNDs (personal navigation devices) will stimulate latent demand in Europe.

The distribution of market power among players is shifting

Although local operating environments differ, the weakening of carriers’ market power
is a global trend for the LBS industry.
This is because the business model for carriers (bit pipe) offers limited opportunities to generate additional revenues in the LBS industry.
In contrast, internet firms that can employ a variety of business models and tap into the base of existing wired internet users will play an increasingly important role in LBS.

Handset makers will expand into a wide variety of related areas, and content, applications and UI will be competitive factors

Although handset makers will each have their own strategy, they will generally gain in
overall competitiveness compared to other LBS device makers.
In addition, design and UI (user interface) will be the focus of competition in addition
to functional innovations.


Implications

The LBS market is entering a new growth phase

The LBS market has suffered from sluggish growth that was short of expectations, but
is now entering a new growth phase as the operating environment changes.

Internet companies and handset makers, rather than traditionally carriers, are most likely to capture the new growth opportunities.