Assignment #8 – Arch Communications &
Arch Communications Group Inc.
Evaluate Arch's industry and its strategic position vis-avis its major competitors. What does your analysis imply for Arch's future investment requirements and the company's ability to earn profits greater than its cost of capital?
Arch Communications became the 3rd largest paging company in the US, with 3 million subscribers in 1996. The core activities included; building networks, distribution through resellers and retailers, sales and marketing through direct channels, backend billing operations and support services.
The rivalry among players within the industry is relatively high. There is limited product differentiation and low switching costs as well as weak barriers to entry. Threat of substitute products was also high, new products that could enter the market included mobile satellite communications, advancements in voice networks and cellular technology improvements. Bargaining power of customers was high, as they were sensitive to prices and the existence of low switching costs within the industry. Manufacturers were supplying the same products to all other competitors, which made the bargaining power of suppliers medium/high.
Nevertheless, Arch Communications gained a competitive edge over its major competitors in the industry due to various factors, such as: * Arch became a low cost provider * Standard, reliable technology- fast delivery of messages * Efficient service delivery * Strategic acquisitions * Large geographical coverage The company’s corporate strategy comprised of a number of goals that contributed to its growth and sustainability. Arch aimed to become a dominant player in the wireless paging industry through implementing a strategy of aggressive growth by acquisitions and internal additions, strong distribution channels and geographic expansion. Arch Communication’s products