Competitive Forces (5 Forces)
Barriers to Entry:
The telecommunication industry is dominated by only a few fully integrated companies like Motorola and Nortel. Because of this, companies like Alcatel are involved in smaller scale acquisitions that are filling in product assortments. One issue with this is that smaller players are being squeezed by severe price competition. The telecommunications industry does have high entry costs given that the industry requires a high level of integration, a large amount of capital, and an established communication network. If new competition can get over these barriers, finding a way to compete on price will become a major source of competition for all players in the industry. Power of Suppliers:
Switching costs associated with suppliers are not a key factor in this industry. Before a company can even begin competing in the telecom industry a decision must be made regarding in which segment of the industry the company will choose to compete. The first segment is wireless handsets, which is essentially cell phones. The second segment is the part that is really exempt from switching costs. The wireless infrastructure refers to the type of network on which a wireless handset operates. Examples of the different platforms are Time Division Multiple Access (TDMA, used by Ericsson, Lucent, and Nortel), Code Division Multiple Access (CDMA, used by Lucent, Nortel, and Motorola), and Global System for Mobile Communication (GSM, used by Ericsson, Lucent, Alcatel, Nokia-Siemens, and Motorola). Because these different infrastructures have competing standards, they are often incompatible. Because Alcatel Lucent are involved in all three of those platforms, the new company will faced some issues with unifying their platform offerings, which will mean changes for the companies supplying some of the products used to establish these networks. Industry trends point towards a drop-off in the use of TDMA, as the technology is older and...
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