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The mobile phone industry and Porter's five forces analysis

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Introduction

The mobile phone industry and Porter's five forces analysis Competitive strategy depends on a company capabilities, strengths and weaknesses in relation to characteristics and skills of its competitors. Competitive strategy aims to establish profitability and long term stability. The fundamental basis of above average profitability in the long period is the achievement of a competitive advantage. According to Michael Porter, a Harvard Business School professor and the reigning guru of competitive strategy, there are two basic types of competitive advantage: cost leadership and differentiation. So he has developed three generic strategies: - Cost Leadership (a firm sets out to become the low-cost producer in its industry) - Differentiation (a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers) - Focus (after a company has selected a segment or a group of segments it tailors its strategy in order to serving them to the exclusion of the others. In the focus strategy there are two variants: cost focus and differentiation focus). Porter also claims that a competition within an industry is driven by five competitive forces: - Threat of new entrants - Threat of substitute products or services. - Bargaining power of suppliers. - Bargaining power of buyers. - Rivalry among existing firms. Porter defines them as "the elements of return on investment". ...read more.

Middle

The solution is "in competition, not in regulation" a Vodafone's speaker said (ibid.). If the Government remains on its position of cutting down tariffs Vodafone UK would suffer economic losses. Furthermore, Vodafone UK spent billions of pounds for purchasing its 3G licence. The high costs supported by the company for the acquisition of the licence and for improving 3G services could limit the expansion in the 3G mobile phones market and influence their use by customers as well. In this situation there is a double-sided danger. Keeping high the price of licences (in future) could bring high prices for using services and, in the end, could induce people to choose not to use the new technologies. The market is saturated. Customers, thanks to the number portability, have high incentives to switch. The presence of many other competitors makes it available on the market many "packages" for all tastes. Vodafone UK is aware of the importance of developing new technologies and of following trends in society in order to meet the demand. The company constantly invests in R&D and always tries to purchase the latest innovations suitable for mobile phones which are available on the market. Vodafone UK has invested also many billions of pounds in Research & Development and introducing new services (for e.g., TV on mobile, Internet Access, music downloads etc.) ...read more.

Conclusion

The challenge is to rely upon big and important mobile phone, so to develop a strong relationship between the network operator and the manufacturer. Thanks to the five forces analysis it is possible to understand the strengths and the weaknesses of the current competitive position of both our business and our competitors. Thanks to it, it is easier to develop a SWOT analysis. It is a great way to identify whether new products, services or businesses have the potential to be profitable, so it allows us to make a critical analysis of the most important aspects (such as customer analysis, environmental analysis, competitor analysis and so on) for our business. As far as the limitations of the Porter's model is concerned, I agree with D. Recklies that in his critic on the Porter's model argues that "The model is based on the idea of competition. It assumes that companies try to achieve competitive advantages over other players in the markets as well as over suppliers or customers. With this focus, it dos not really take into consideration strategies like strategic alliances, electronic linking of information systems of all companies along a value chain, virtual enterprise-networks or others.". The model was designed to analyse individual business strategies, so it can not evaluate large corporations or synergies between more companies. Another limitation is that the model does not take into account the fact that sometimes it may be possible to create completely new markets instead of selecting from existing one.(http://www.12manage.com/methods_porter_five_forces.html) ...read more.

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