Cell Phone - Industry Analysis
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Complete an Industry analysis. Describe and analyze the following:
a. Barriers of Entry
b. Barriers of Exit
c. Customer Buyer Power
d. Supplier Selling Power
e. Product Substitutes
f. Competitive Rivalry
Do not ramble, or re-define the concepts, apply them and be precise. Make your points in approximately 6 paragraphs; each paragraph should have about 3-4 sentences at the most.
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Solution Summary
This is an 847 word solution that outlines an industry analysis from start to finish it is 6 paragraphs in length. There are no references in the solution, because it describes known industry parameters.
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a. Barriers of Entry
In the cell phone industry, the threat of new entrants is low. The startup cost for wireless carriers are extremely high. Economies of scale are hard to achieve in the industry due to the amount of money that would need to be invested. It is difficult to enter the market with existing firms already operating on cost and differentiation strategies. The wireless communication industry is highly concentrated. Almost, 75% of the market is controlled by AT&T, Verizon, and Sprint which makes it difficult for the new entrants to come and compete in the market.
b. Barriers of Exit
The cell phone industry also has many exit barriers. A company would need to invest quite a bit of money in the beginning to increase market share, entice new customers, and have a good product line. Typically it takes a long time to recoup this investment. If a cell phone company were to terminate too soon, they would never reach the break-even point. In addition, it might be very difficult to sell organization depending on how successful the company becomes. Yes, we hear of mergers and acquisitions in the cell phone industry, but not to the extent that it happens in other industries. Since cell phone companies rely on a 40% or higher customer attrition rate (very high compared to most other industries) a company that ...
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