Analysis of the Cell Phone Industry

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FIVE FORCES ANALYSIS OF THE CELL PHONE INDUSTRY

The cell phone industry is a competitive market and will increase continuously. The profitability of individual companies is driven mainly by their ability to develop new products, providing better service and making their products affordable for consumers. Profitability of companies is achieved also by taking advantage of product marketing, access to capital, and by inquiring the expertise to improve the cell phones.

The profitability of the cell phone industry depends on the number of consumers they can attract. The profitability of the cell phone industry is dependent on the volume of consumers they can attract. The cell phone industry looks strong and competitive between the companies and service they provide.

The microenvironment includes the internal factors of the industry affected by the customers, staff, shareholders and competitors. The best model for evaluating the microenvironment of an industry is Porter’s 5 forces as it takes into consideration the competitors, customers, suppliers and new entrants.

Power of supplier

In this industry we can distinguish between hardware and software suppliers. The first one has a low power, as there are a huge number of large equipment makers, which can be chosen. So that, the cell phone company have the power to bargain for more money with them.

On the other hand the software suppliers has a high power because there are only a few of them, such as Microsoft or Macintosh, so cell phones companies must negotiate a price from a weaker position.

In conclusion, there is moderate threat from the power of suppliers because although the hardware suppliers have a very low power, software suppliers are very high.

Competitive Rivalry

The competition in this market is very high. The outsourcing of the hardware and software tasks has supported the entrance of new companies that come from other sectors such as Apple or Sony that see the potential benefits of the smartphone industry as they have a high market share. In order to enter they need to have a strong investment in R&D (Research and Development) and marketing. The innovation has become an essential part for the differentiation of the company and the main tool in order to gain market share and profits.

Power of buyers

The power of costumers is very high because of the increasing number of choices in the mobile telecommunication industry. The industry is very price sensitive with customers seeking out for the best value for money, due to the high competition and the many available options. The fact that costumers are in many cases tied to long-term contracts with telephone services companies, switching from one handset to another becomes difficult and expensive for them.

Threat of new entrants

The mobile phone industry is already a well-established market and the threat of a new entrant is quite low. The technology needed is quite advanced which makes it hard for competitors to differentiate from the rest. The start-up cost of entering is quite high, and needs a lot of investments in R&D, technology and marketing in order to compete with established companies.

Threats of substitute’s products

Mobile phones have become and everyday need in people’s lives because of the important functions they offer to the consumer, allowing them to be communicated at all times no matter when, or where they are. They offer a wide range of services in just one handset. No other product has the ability to make phone calls, send messages, access the Internet or take pictures among many others. Despite the fact that there are no products that offer all the services explained in one device, other products that focus on each of the functions separately offer these services. A clear example would be the camera on a mobile phone, would not provide the same service of a digital camera that can do a better job in terms of quality and services offered....
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