The bargaining power of customer is high because they can cheaply and easily change. The demand is very elastic and the information is not asymmetric. First because the market is price in-elastic.
The change in the price of the product does not cause a significant change in the demand of the product. And also because most of the products are standardized, it is difficult to respond to consumers requirements in constantly innovating and creating additional value. Consumers have more choices but less differentiated products. Products of substitute is low.
Except fixed line phone there is limited number of substitutes.The substitutions is created through additional functions and features. The most recent substitutes are the notebooks but even these products do not have the same finality than phones. New entrants have low influence.
It is difficult to enter this market because competitors must constantly innovate, launch new products, develop additional features at the best quality possible, increase production capacity, levels of services and at low prices in order to survive. Thus this market requires huge capital investment in R&D and manufacturing costs for instance.Moreover, distribution network is important in this market, it is very hard but strategic to create alliance with mobile operators. Economies of scale are crucial in order to face high fixed costs.
Differentiation but also brand recognition is required to sell on this market because buyers have high power. Supplier power of bargaining is moderate. There is limited number of supplier because most of the companies like Research in Motion are designing, manufacturing and programming all the devices themselves. However there are numerous hardware and software suppliers.
Competitors have a high power.There are many equally balanced competitors. Moreover, there is a limited differentiation between the products offered but competitors differentiate themselves through applications and services deliver. Further, fixed costs (manufacturing, R&D, network access, etc) are very high thus companies have to maximize their productive capacity leading to surplus capacity and intense rivalry.
Furthermore, barriers of exist and switching costs for buyers are low, so competitors can easily attract consumers with price and service strategy. In conclusion, the wireless phone industry has low threat of substitutes and high entry barriers.However it is crucial to underline the threats posed by the high bargaining power of buyers and the strong competition. In the wireless industry, competition has increase.
Iphone launch and other smartphones saturation are good illustrations of this intensification. The strongest competitive forces is the competition and the weakest is the substitutes. The high competition beating in this industry represent a competitive force that is having the greatest effect on industry attractiveness with various companies fighting to produce the competitive edge.
