Does platform diversification directly influence on performance?

Abstract

Facing a new convergence environment, telecommunications service industry is in the middle of overheated competition. Telecom companies are implementing various strategic options to attract more customers, increase per-user revenue and maintain current subscriber base. One of common and key strategy is platform diversification. However current research on platform is conceptual level only. This research attempts to define platform in telecommunication service industry and to show the relationship between the platform diversification and firm performance. We develop and vindicate a model of platform diversification, using data from South Korea's telecommunications service industry and empirically test its impact on performance. The results show that the more platform business has, the more it can be benefited in terms of total sales and total assets. In addition, it shows that the result is germane to ROI and ROA on which revenues were generally affected. This research addressed some key implications for both practitioners and academics. Under the condition of sutured market where securing a new subscriber-base is getting difficult, how to lock-in current subscribers is important. Platform diversification is a useful strategy for this. Also for academics, we identified the concept of platform and empirically measure it. This can give future research implication in the topic of network theory also.