Who are the key players in the industry?
Out of the five cell phone companies, two of these hold a larger market share. These are Verizon Wireless, with 32%, followed by AT%T at 29%. They account for 61%, which is more than half of the US’s mobile subscribers. From the case study, there is an impression created suggesting that Verizon and AT&T be the drivers of the telecommunication industry in the United States. It is evident especially by the reaction of the other companies once Verizon and AT&T choose to adjust their voice prices, as well as the data packages. Therefore, from the analysis of the case study, it would be correct to conclude that Verizon and AT&T are the key players in the telecommunications industry.
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If a price war will reduce margins, as the case suggests, why would any company embrace this strategy?
One direct reason a company in this competitive industry would embrace a strategy to decrease prices is only to attract customers from rival companies since the customer base has already been exhausted. It would also be more attractive to retain existing customers who would be encouraged to stay put and make use of the new reduced tariffs (Grewal & Levy, 2012). The low price means that customers will be more willing to purchase goods or services. The high price makes the customer reject products and services.
Price is determined by factors such as competitor marketing, the need of consumers, geographic competition, and so on. Given that this market is dominated by few players, it is more than obvious that these players have to watch the price adjustments of the competitors so as to retain their customers and possibly attracting customers even from fellow competitors (Winninger, 1995).
In an oligopoly industry, the competitive environment is usually very dynamic and volatile because the competitors want to maintain their market share. This highly competitive nature of oligopolies is likely to scare off new entrants or even push small competitors out of the market. In the case study given, the smaller companies may be able to survive almost being pushed out of the cell phone market because, as indicated, they have priced their products at a lower rate than the new prices of the larger competitors.
On what other strategy elements could the wireless companies compete?
The companies could take a product differentiation approach (Kerin, Hartley & Rudelius, 2009). For instance, for AT&T, the management could choose to develop the i-phones and the packages that they set for the handsets to target a particular market, i.e., for i-phone lovers. They could even adopt the 4g technology for the i-phones. It will help the company to get itself out of the price war and increase its margins at the same time. The same case could apply to Verizon. They could make use of smartphones which can also bring forth higher margins for the company.
Which wireless provider do you use? Why? Given the benefits of each firm’s wireless program, did you make the best provider choice? Justify your answer
My preferred network is Verizon Wireless because it is reliable, and I am able to use it on my smartphone. It is even better now that it has introduced its unlimited talk and text plans. This is convenient since I make calls frequently while working. The network is also reliable, and it is readily available, which makes it very convenient.
This is the best choice because it is convenient for most of the people I communicate with. Communication is much cheaper since most people share the same network, and communication between the same networks is cheaper. Furthermore, the reliability and availability of the network make it the most appropriate choice.
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Grewal D., & Levy M. (2012). Marketing (3rd ed.). Boston: McGraw-Hill.
Kerin R. A., Hartley S. W. & Rudelius W. (2009). Marketing (9th ed.). Boston: McGraw-Hill/Irwin.
Winninger T. J. (1995). Price wars: a strategy guide to winning the battle for the customer. Rocklin, CA: Prima Pub.