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Cyworld Analysis

Cyworld Analysis

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Published by: Hongdoo Choi on Feb 03, 2012
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Case analysis report: CYWORLD

Class: BIZ2117

Section 6

Group: Consulting Cyworld Members(6): OHM, YEO JIN(2010101000) KIM, YEE JIN(2009101000) YOO, SEUNG YEON(2009101000) CHO, EUN MEE(2009101000) LI, YING HUA(2008122100) CHOI, HONG DOO(2009122198) CONTENTS

3 2-1. Bargaining power of buyers -------------------------4 2-3.8 3-4. value chain ----------------------------------.1. Core competences ------------------------------6 3-3. Weaknesses ----------------------------------1 1 . SWOT analysis ----------------------------------. Environment analysis --------------------------------. Rivalry among competitors --------------------------5 3. Threat of substitutes ----------------------------5 2-5. Present Situation -------------------------------8 4.10 4-1. Threat of new entrants ---------------------------4 2-4. Introduction -----------------------------------. Strengths ------------------------------------1 1 4-2.5 3-1. history of Cyworld ------------------------------5 3-2. Company Analysis --------------------------------. Bargaining power of suppliers ------------------------4 2-2.3 2.

16 1. Recommendations and conclusion --------------------------1 5 7. In the aspect of this term. Michael E. Threats -------------------------------------1 3 5. However. it is necessary to analyze SNS industry broadly before looking into one specific company. Opportunities ----------------------------------1 2 4-4. Bibliography -------------------------------------------------. . most of web-users no longer see the internet as a method just for gaining simple information. Consequently. analyzing SNS(Social Network Service) industry which has been making a significant growth in the world is a good chance to learn how to deal with customer satisfaction(CS). or email. Now consumers want their own specialized room on the web through which they can socialize with others everyday and express themselves. Introduction Nowadays. Environment analysis As mentioned above. Porter formed a framework for industry analysis and business strategy development and we will use this model to systematically understand the context of SNS industry. 2. it is definitely true that deriving consumer s needs into creating and capturing commercial value for a company on the internet is a difficult process. User Segmentation ----------------------------------1 3 6. the concept of communications has been moving to the internet.4-3. In 1979.

Also.Porter's Five Forces model analysis for Social Network Industry 2-1. The only factor which can prevent users to move out is the accumulated user network and data base. The website is made and run by professional programmers who are specially educated. by clicking close the account . Some people who are not satisfied with the network would keep using it to communicate with other friends in that community as far as other people do or/and there are useful sources saved. however. However. Bargaining power of buyers The bargaining power of buyers is relatively strong. woods. Bargaining power of suppliers The bargaining power of suppliers within social network industry is small. the only thing they do is just to sign up. when a group of people start to escape. They provide main structure of the site and software. companies in this industry usually hire their own programmers so the role of suppliers in this industry is not that important. When users firstly get settled down at certain social network. the success of social network is more based on self-production of contents by its users. it s like tidal wave . or oil. Even if they have used one network for quite long time. it s not hard to find other networks and move on. Social network industry is not based on material resources such as steel. 2-2.

people who surf the Internet tend to stick on a page for a very short time and feel bothered when they are forced to sign up. parentsteacher association. bars and parks to future form of networks like virtual reality which is far to come soon. it s not easy to attract certain amount of users at the very first time. a lot of networks need attractive baits which are better than competitors. them. Nowadays. even though it s quite easy to sign up. people use social network websites when they form new groups of all kinds. Moreover. The strength of social network is that it can not only produce new connections among people but also reinforce existing off-line networks with more convenience. speed. Threat of substitutes This could range from traditional networks and their places like soccer clubs. 2-3. Also. and so on. not for living . It s not easy to achieve and maintain users loyalty and that s the reason company updates its service and tries to provide That s the reason why so many websites offer various benefits when a user joins . That s the reason why a lot of network sites keep their fee low as least as possible and are very reluctant to raise it. making this industry more promising. the community loses its utility and power to both current and potential customers. political purpose. 2-4. and easiness. however. friendship.moving out altogether. Starting a social network is very easy as it doesn t require big amount of capital. Threat of new entrants The threat of new entrants into social network industry is low. Without users who use same community. social network is more for entertaining. hobby. As Cyworld distributed free cyber money to new comers. 2-5. or even put additional services with small amount of money. Rivalry among competitors The competition among social network companies is very fierce. So advent of substitutes for social network would have small possibility. resulting in shut down.

music. After that. Cyworld has underwent rapid growth after starting Mini hompy (Mini-hompage) service. firms keep imitating the competitor s strong points and sometimes develop more advanced services. collaborate to complement unfulfilled needs of users. Cyworld. Company analysis 3-1. which functions for the users to express their own life(photos. This gave an outstanding growth of market share to Cyworld. Finally. in 2003. As a result. it became hard for the company to keep its service stable. Some companies.History of Cyworld For about 10 years. One of the biggest competitors.more interesting and useful contents. Cyworld has made a substantial amount of profit. as the number of users significantly increased. for most of Koreans between the ages 10 s to 30 s. Social network service has meant only one thing. Cyworld is web-based social networking company. It was an unprecedented phenomenon that the company powerfully affected consumer trends on the web. Cyworld has evidently achieved quantitative and qualitative growth. like Facebook and Youtube. there was a great fortune for Cyworld in 2004. SK(Sun-Kyung) communications took over that venture with the same brand name Cyworld . . Established by 4 graduates of the Korea Advanced Institute of Science and Technology in 1999 (similar way Google was established by 2 Stanford university students). announced to require a charge for all services. a majority of Freechal users have started to move to Cyworld where all services are free. The word Cyworld is a combination of cyber and world which means a cyber world where people are able to have virtual relationships like a real. Also. However. called Freechal. etc) and connecting others. Also. diary. as we can see at Cyworld s case. driven by the success of unique and core option(mini homepage) that now there are incredibly more than 20 million subscribers out of 38 million internet users in South Korea. 3.

3-2. The users can select specific groups to access specific fold to maintaining their privacy. board. 3) Minihompy Minihompy has many functions such as photo album. Also the users don t have to pay any cost or restricted by the photo size to upload photos. accepting 1chon or cutting off 1chon. So they put the real interpersonal relationship into the network. Through adding the person as 1chon.1chon Cyworld has the special relationship system . users can choose whether to maintain the relationship or not. The users also can purchase items to decorate their mini room and avatar to express themselves. Service: 1) Minihompy Even the users don t have any background knowledge about making webpage can also easily decorate their own minihompy. 4) The blog service Cyworld put the basic functions of mini hompy in blog and make it more simple and clear. 2) Relationship system . banner. core competences Technology Development: 1) Alliance with Nate The wire and wireless linkage between Cyworld and Nate has a great synergy effect. diary. skin to express users own personality. music player. 5) Virtual currency (Dotori) The users use the virtual currency to pay for the skin.1chon. ornament or music in Cyworld. .

Their goal is to create the workplace like a playground.Real-time access to its web and mobile pages Procurement -Active X based ordering systems. banner and Ornament to maintain the customers attention. The users can use Dotori to by items or give Dotori to their friends as the gift.Electronic Scheduling and messaging systems Human Resources . music. Marketing and Sales: 1) Seasonal product According to each season. cartoons as a theme to design the skin. 2) Continuous development of new products They use the latest movies. 3) BGM Cyworld cooperates with Billboard and produces BGM for the users to purchase music as the background melody of their Mini hompy.Internet-based sharing and dissemination of company information Technology . 3-3. Special firm Infrastructure: The company has a special team called Happy Innovation .2) Virtual currency Cyworld use Dotori system to put the realistic currency concept to the cyber world. The team members all from different departments. automated requisitions to pay . They share their information and discuss how to make the company more harmonious. Cyworld design corresponding skin. value chain of Cyworld Administration and Management . ornament and character(Minime) for users to purchase. Not only the employees are happy to work but they can make users also happy.

the Search engine . For this movement. User s satisfaction looks declining. Below is the flow of stock price of SK (SK Communications) [Exhibit 2]. demand management and advanced planning . Present situation As early mentioned above. However.Web disk for uploading user based photos. according to PLC curve [Exhibit 1]. most of internet users in Korea prefer using Google or Naver as their main portal page.Real-time ranking of sold items . there are incredibly more than 21 million subscribers out of 38 million internet users in South Korea. not all of it) It shows that the stock price of the .Club for promoting communication among users -Lost property service -communications with other companies. music.mobile connections to Cyworld -Complaint follow-up . Even though Cyworld are in alliance with a big search engine. Nate.Sharing its main page with Nate. There are three reasons for this current situation. the company seems to be located in the matured face or on the edge of going into declining face. Cyworld was late to prepare smart phone age whereas Facebook and Twitter have their global apps which people love to use every day. recently Cyworld are strongly facing threats from a few foreign competitors such as Facebook and Twitter [exhibit 2].Attract Brands to its Mini hompy 3-4. . Final and the most important reason is that social networking industry is rapidly changing into a wireless environment based on smart phone. So the synergy effect is not enough to crush the rapid chase from Facebook and Twitter. Customers are feeling tired of the decorating their Mini hompy by purchasing items such as skin. Minime and background. videos . First. Second. (Note that Cyworld is only part of SK Communications.Real-time integrated scheduling. mobile pages . songs.Real-time updating its web pages. music Service After-sales Service Cyworld Value Chain .Inbound Logistics Operations Sales and Marketing -Online stores for selling paid items including virtual fonts. such as music manufacturer.

now is a crucial time for Cyworld to establish new market strategies in order to survive and keep their place as the first SNS company in South Korea. In 2008. Therefore. even though the price has been slightly increasing. it seems hard to gain their honor again. [Exhibit 1] [Exhibit 2] 4.700) in late 2007. SWOT framework . however.670).company was highest( 45. After 2008. it s price dramatically decreased to ever lowest( 3.

2) Strong alignment to Korean Cyworld reflect the Korean culture to be accustomed to users. Cyworld has collected mountains of personal information for ten years. This major player can charge customers more and enjoy substantial bargaining power over partners. Hence. Korean people are interested in other s news and tend to show ones daily event. winner could take all and be a natural monopoly. 2010).STRENGTHS First-mover advantage Strong alignment to Korean WEAKNESSES Security Problem Low Flexibility in International Markets OPPORTUNITIES Influential Korean contents THREATS Arch-rival : Facebook 4-1. Also.2% of the web population in South Korea (Radwanick. They know the importance of personal . It is because Cyworld was the first-mover in the social networking industry at that point. Strengths 1) First-mover advantage Cyworld has been ranked top in the national SNS of South Korea for 10 years. boasting a reach of 54.

skin and so on. Cyworld should have invested more in security sector. Weaknesses 1) Security problem In online age. some victims brought a complaint against the corporate about its security policy. However. it is important to build customer loyalty by securing the private information of users. Cyworld does not provide innovate services in distinct after achieving great success unlike Facebook.connection and want to establish a closer relationship. what is called 1 chon. Cyworld succeed to convert from real life to virtual and has been loved by Korean. 2) Low flexibility in international markets Cyworld did concentrate not on flexibility for dealing with International market change but on optimization of Korean users. BGM. That is why the number of users decreases. Therefore. 4-2. as a business model. gift. Facebook presented itself as an attractive site more than the rest of the social networking sites. Cyworld provide minihompy . Also. 1chon services and build virtual paid items. Because of its position. Moreover. In addition. Other users were reluctant to use it and decided to escape. Dotori. . As people want forging global friendship. they should change password at great inconvenience. Cyworld was hacked in recent. it is one step behind in the global world. because Cyword is based on closed relationship. almost all Cyworld users were damaged to be stolen their identity information. Now.

Korean educational animation for children. . In addition. Cyworld is preparing new global strategies to expand their customer. Threats 1) Arch-rival: Facebook Facebook presents itself as an impending threat to Cyworld. the existing Cyworld users have shifted to Facebook. is very popular all over the world. Pororo. As Cyworld was moved too slowly in mobile market. Besides. 4-4.4-3. Several Korean dramas success has surpassed all expectation. It means that Korean contents have competitiveness that match in oversea consumers. Facebook emerged as the new platform and attracted new entry customer. there are several substitutable SNS as well as Facebook in the social network industry. if Korean SNS and worldwide contents combine to form a new business model. as seen by the strong surge of Korean users using Facebook recently. Opportunity 1) Influential Korean contents K-pop is powerful in Europe and Asia. It can be the new opportunity. Influential items are facilitate to attract new global il chon.

It is almost true that this would happen. But one thing is obvious.6% and 34.5. Activity and connections seems to be highly correlated. It means that these two criteria are highly correlated. Therefore. 32. . Users with high connections tend to engage in high activity. Almost the same persantage appears in the purchases criteria. It also shows that the number of purchases and connection is very similar when combined with activity. medium and high number of connections is 33%. User Segmentation (User segmentation below is based on the ABC segmentation from Exhibit 9) The probability of the users to have low. This segment will be the most important if the company wants to engage in peer advertisement in the future. the most valuable segment of users for Cyworld is both connected and active users.4% each. it is difficult to differentiate users based on these 3 criteria.

sharing information and they also want to represent their personalities on the web-site. Cyworld creates new cyber community culture offering simple contents Mini hompy and Dotori . However. contents. Consumers want personal room in the cyber world with the opportunity of communicating. high-technologies reflect consumer s demands. the IT industry is hard to predict. Cyworld should have constant communications with customers and seek to adopt emerging technologies. new competitors such as Facebook and Twitter appear often. Therefore. in other words. A rapid growth of cyworld is not just for one night. Recommendations and conclusion Cyworld is a representative of business to customers(B2C) model providing a relaxed personal space for individuals and cyber community users.6. Its constant developments of new designs.. If cyworld maintains .

First.nate. www. where social events are not only catalogued but created.com/2010/08/10/korean-official-page/ 2010.co.com SK Communications.corp. In other words.co.dt. Cyworld should reassert its concentration on Korean youth.its current strategies. Facebook Introduces Official Korean Language Page. 7.newsis. August 10).fnnews. on . Retrieved from http://www. J. Ltd.insidefacebook. Ltd.com www. the company should overcome their recent security problem. Bibliography www.joins.kr Korea Broadcasting. its business will meet irreparable situation.com Cyworld Homepage.com www. (2010. October 8.kr www. www. Cyworld should recover from weakness and catch their opportunity.cyworld. To overcome this urgent signals which we analyzed above.com Constine.kbs. Finally. gaining back their brand power. www. Second. it is strongly needed to prepare varying IT environment not to recur their mistake for smart phone/wireless internet era. provide enriched media contents relevant to their interests. evolving Cyworld from a social networking service to a social hub.

China Mills Huge Fees for Social Network Games.com/international/china-mills-huge-fees-for-social-networkgames/ on 2010. G. (2010. October 8. June 23).digitaltrends. . Retrieved from http://www.Duncan.

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