The social network aspect of business competition

How friendship connection can be used for business growth

Typical school age kids would rather busy themselves with Facebook or Friendster than deal with more serious stuff like business. Interestingly, even more "mature" and "serious" people who deal with business should do too, according to a recent independent research by Erika Fille Legara, Anthony Longjas and Rene Batac, a team of PhD Physics students from the University of the Philippines.

In a paper titled "Competition in a Social Structure" to appear in the International Journal of Modern Physics C, the group quantified the extent at which social relationships affect economic choices, particularly in the use of mobile phones [1]. The research applies very aptly so in the Philippines, where SMS is most voluminous in the world, and where competition is practically between the two largest companies, Globe Telecommunications and Smart Communications.

Friendship connections

Mobile phone subscription is primarily dictated by the need to communicate and stay connected with family and friends. This, in itself, makes clear the notion that there really is a social relationship aspect to cellular phone use.

From this cue, the authors investigated the effect of friends and family relations to the growth of mobile phone companies in the Philippines. With a complex systems background, the team is familiar with the notion of the "degree distribution" within a real-world network: degree is the number of friends, and by the obvious fact that not all people have the same number of friends, the resulting histogram of the number of firends will follow a Brody distribution [2].

Each individual, therefore, is affected by the majority of his/her own little neighborhood, not by the global dynamics. It is possible to have an individual using a "less popular" mobile subscription because majority of his/her friends subscribe to that service.

Company growth

With data of mobile phone users for the last few years, the group is now ready to test their predictions.

They plotted the solution to a coupled differential equation describing the rate of company growth for both Globe and Smart and superimposed it with data provided by the National Telecommunications Commission (NTC) of the Philippines. The results - a perfect fit.

The differential equation model is based on continuum and mean-field approximations and with the assumption of a constant population with static friendships. The good correspondence of model results with data for the years 2001-2007 show that the assumptions used are valid. With this, the trend of increase in population of users for both networks are predicted for the coming years, with Smart leading and Globe following closely behind. Both are shown to have increasing trends for the next few years, albeit at slower rates.

As a conclusion, the authors suggested that strategies that target GROUPS of individuals instead of random individuals better in attracting more subscribers and, ultimately, winning in the competition.

In general the competition model proposed was shown to be general enough and can be applied to a wide range of other systems that are competing for resources that are spatially arranged in a network structure. Language death dynamics, for example, is included as an exmple in the paper.

Friends themselves

The authors are friends themselves, driven by a common interest in complex systems research.

What started out as a class project ended up as an independent publication by the group, who belong to different subgroups of complex systems research in the National Institute of Physics, UP. Erika studies network dynamics, while Anthony and Rene do granular materials experiment and modeling, respectively.

1. Legara, E.F.T., Longjas, A., and Batac, R. (2008). Competition in a Social Structure. To appear in International Journal of Modern Physics C. [pdf]
2. Lind, P.J. and Herrmann, H.J. (2007). New approaches to model and study social networks. New Journal of Physics 9, 228.