Monday, July 13, 2015

Cell Phone Industry

After reading the article, The Five Competitive Forces that Shape Strategy, I thought about the cell phone industry and the competition and strategies that exist.  When I think of the cell phone industry, my mind immediately goes to AT&T, Verizon, and sometimes Sprint and T-Mobile.  In the past AT&T and Verizon have dominated the industry and have been the leading competitors with their prices and strong signals.  In the article, “No time like the present to switch cell phones or plans” it states by the end of 2013 Verizon controlled 36.5%, AT&T had 32.5%, Sprint 15.5%, and T-Mobile with 10.9% of the US wireless market.  Over the past few years the smaller carries like Spring and T-Mobile have invested in their infrastructure to improve their networks in hopes of getting customer to leave the bigger ones and come to their companies.  Sprint claims people can save up to 50% on their bills by switching from AT&T or Verizon, and in response to this Verizon and AT&T have had to come up with their own strategies in order to stay relevant.  Either increasing data plans for customer or subsidizing part of the bills, the bigger companies have had to respond by trying to lure customers back using substitutions to entice them. 

Something that T-Mobile does that sets them apart is allowing customers to use a free cell phone for seven days to test out the coverage and the service provided to see if they like the company.  In regards to the buyer’s power in these circumstances, the products are similar enough that the buyers are able to play the big cell phone companies against one another.  Additionally, there aren’t switching charges, and if there are, I believe the other company will be the buyer out of their contract so they don’t have to face fees for leaving.  On the other hand, an example of the buyer being price sensitive was the example: “…buyer tend not to be price sensitive in services such as investment banking where poor performance can be costly and embarrassing.”  The interesting thing about this to me was the cell phone article stated a quote from a buyer saying that he would gladly deal with poorer performance from T-Mobile or Sprint to have $75.00 on his cell phone bill.  I think more and more people are gathering this mindset—they can live with a dropped call or poorer performance to deal with lesser prices. 

One aspect I would look into for further analysis and understanding is the scope of these products—how individuals vs companies vs different countries use these cell phone companies and what effect that has on the strategies that the companies engage in.  In these cases price competition is high and will most likely continue to be for some time as the companies decrease prices and come up with new ideas.  It will be interesting to see what else AT&T & Verizon have in store and will do in response to Sprint and T-Mobile.   

Moylan, Martin. "No Time like the Present to Switch Cell Phones or Plans. "Minnesota Public Radio. Minnesota, 24 Dec. 2014. No Time like the Present to Switch Cell Phones or Plans. Web. 12 July 2015.

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