Beijing Tianyu Communication Co. Ltd.: Winning in the 3G Era (A)

In 2002, Rong Xiuli established Beijing Tianyu Communication Equipment Co. Ltd. (referred to as “Tianyu” below), entering the handset manufacturing industry after quitting from the largest distributor of Samsung mobile phones in the Chinese market. Despite growing pains in the early days, within six years Tianyu had surpassed rival domestic mobile phone manufacturers. In 2008, Tianyu reached a sales volume of 24 million mobile phones and a market share of more than 6 percent, ranking next only to Nokia, Samsung, and Motorola in the Chinese mobile phone market. At the same time, however, the government initiated the transition of the Chinese telecommunication industry from the second generation (2G) communication technologies to the third generation (3G). In addition to upgraded technology, the 3G market is characterized by the dominant role of telecommunication operators in the industry chain. As a result, Tianyu could not continue counting on its distinct sources of advantage in the 2G mobile phone market when competing in the 3G market. To make matters worse, demand for 2G mobile phones dropped sharply owing to the economic downturn. Rong Xiuli soon launched a campaign for 3G mobile phone market in the company, reconfiguring almost all the resources to the new 3G business. However, the strategic changes encountered tremendous challenges from both inside and outside the company. The complete Tianyu series constitutes three cases. The (A) case examines the Chinese mobile phone manufacturing industry and provides background on the startup and rapid growth of Tianyu. This case also describes Tianyu’s success in the 2G mobile phone market, and presents the difficulties of reconfiguration and transformation Tianyu faced in a changing environment. The (B) case describes how Tianyu solved the problems with its entrance into the new 3G market and how it extended the overseas markets. The (C) case introduces the development and status quo of China’s mobile phone industry. The case series points out the uncertain future of the Chinese 3G market and concludes with possible issues for Tianyu’s positioning when the company competes in multiple markets.