Analyze the Cellular
Service Provider Industry
The cellular service industry has
grown significantly over the last couple of years. The stiff competition
encourages firms to adopt innovative technologies. The high supply of mobile
services makes it easy for customers to switch carriers to get better services
at lower rates. This shows that companies must employ various strategies to
maintain a competitive edge in the market. The oligopolistic structure of the
market causes a few organizations to control the price. The large companies use
aggressive strategies such as mergers and acquisitions to force small firms out
of the industry. The paper will analyze the cellular service provider in the
United States.
Structure of the Cellular Service Industry
The
cellular service industry follows an oligopolistic market structure where there
are many customers and a few sellers. The major companies in the market
regulate and control the prices. The rising annual growth rates are causing the
demand for cellular phone services to increase. The firms adopt competitive and
innovative technologies to acquire a larger market share. The organizations
provide similar products and services. However, they compete by providing
products and services with unique features. The top companies in the industry
include Verizon Wireless, AT&T Wireless, T-Mobile Wireless, and Sprint
Wireless (Besen, Kletter, Moresi, Salop, & Woodbury, 2013). The firms can
merge with each to improve their competitive power and become more profitable.
The mergers and acquisition ensure that only a small percentage of the
organizations control the market. The oligopoly market structure promotes price
rigidity (Kumar, n.d.). A move by one firm to lower prices causes the
competitors to reduce more, which affects their profitability.
Impact of the Market Structure on the Customers
Oligopolistic market structure
causes customers to suffer due to the non-price competition. A small portion of
the firms in the industry determines the price of the services. The smaller
firms cannot influence the price. The customers also have few options. The
merging and acquisitions of large companies force various small firms to exit
the industry. The small organizations lack the capital to cover advertisement
costs in order to become more competitive. As a result, the consumers will have
to accept the services provided by the large businesses due to restricted
alternatives. However, oligopolistic market encourages competition among the
players. The firms must be innovative and adopted advanced technologies in
order to maintain competitiveness. Cellular providers have acquired the
wireless technology that gives customers a better experience. Moreover, the
kinked demand curve and rigid prices are beneficial to consumers. When one
company lowers its rates, the other players must follow suit to avoid losing
customers. Thus, customers might obtain high-quality services at reduced
prices.
Analysis of Verizon Wireless
Verizon
Wireless offers technological solutions, devices, and services. The company
operates about 1,700 retail locations in America (Crunchbase, n.d.). The firm
has successfully incorporated wireless technology in its services. Wireless
services enable customers to connect internet on their tablets and computers
easily. The organization also provides 3G and 4G network technologies. The
products and services with superior features allow the business to maintain a
competitive edge in the industry. During the fourth quarter of 2016, Verizon
had around 145.74 million customers (Statistica, n.d.).
The
positive factors that Verizon Wireless faces in the current economic
environment include high economies of scale, strong brand image, and
high-quality services. The company has a strong brand that enables sit to
compete in the market. The intensive and generic strategies give it the strength
to differentiate itself from the competitors by emphasizing quality. For
instance, it has an extensive telecommunications infrastructure that assists in
optimizing efficiency and profits (Smithson, 2017). The organization also
enjoys high economies of scale. The large size of the firm enables it to
maximize its services in order to target consumers.
The
negative factors that affect Verizon Wireless include the high cost of
infrastructure, security threats through information technologies, and stiff competition.
The company incurs huge expenses to develop and maintain infrastructure. The
high cost of infrastructure makes it hard for the business to compete based on
price. Continuous technological improvements among the competitors threaten the
success of the organization (Smithson, 2017). Verizon Wireless must adopt
modern technologies and engage in aggressive marketing strategies to survive.
Finally, the information technologies are vulnerable to cyber-attacks. The security
concerns will cause the firm to lose subscribers since customers want the
protection and safety of their personal information.
Conclusion
The
cellular service industry follows an oligopolistic market structure where only
a few companies determine the price. Organizations must be innovative and adopt
new technologies for them to compete. Thus, customers are likely to enjoy
high-quality services. However, consumers have few alternatives. The
aggressiveness and high competition force small firms to exit the industry.
Only big players are left in the market. The large firms can exploit the
consumers by raising the prices since it is difficult to switch carriers.
Verizon Wireless enjoys a relatively high market share due to high economies of
scale, strong brand, and high quality of its services. The negative factors
that threaten the success of the business entail stiff competition, the high
cost of infrastructure, and security threats.
References
Besen, S.,
Kletter, S., Moresi, S., Salop, S., & Woodbury, J. (2013). An economic
analysis of the AT&T-T-Mobile USA wireless merger. Journal of Competition Law and Economics.
Crunchbase.
(n.d.). Verizon Wireless. Retrieved from https://www.crunchbase.com/organization/verizon-wireless#section-overview
Kumar, M. (n.d.).
Top 9 characteristics of oligopoly market. Retrieved from
http://www.economicsdiscussion.net/oligopoly/top-9-characteristics-of-oligopoly-market/7342
Smithson, N.
(2017). Verizon SWOT analysis & recommendations. Retrieved from
http://panmore.com/verizon-swot-analysis-recommendations
Statistica.
(n.d.). Wireless subscriptions market share by carrier in the U.S. from 1st
quarter 2011 to 2nd quarter 2018. Retrieved from https://www.statista.com/statistics/199359/market-share-of-wireless-carriers-in-the-us-by-subscriptions/
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