The Prepaid Cell Phone Industry Essay

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Introduction

Communication is considered an important element for every individual’s life and different modes of communication are prevalent in society. Cell phones have actually changed the normal facet of communication and modernized approach is followed in the cell phone industry. Prepaid cell phones are slowly and gradually creeping into our society and they are considered an effective communication medium. This paper gives a brief analysis of the prepaid cell phone industry and emphasis is laid on the strategic aspect that is attached with the prepaid cell phones. In a similar manner, analysis is done through porter’s five forces of competition. Finally, the discussion is made on the scenario and analysis is done through that scenario.

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The prepaid phone is usually associated with buying minutes first through online systems or replaceable cards and then consuming it. When an individual is out of minutes then he/she can purchase another card to continue using his/her phone (Johnson, 2009).

As implied by the name the prepaid phone industry deals in prepaid phones and there are several prepaid companies that exist in the market the names the companies are Tracfone, Net10, Callwave, T-mobile, Virgin Mobile, etc. However, there are certain organizations that are prevailing in the market that locks you in a year’s contract and that is the reason why they don’t prefer prepaid contracts. However, the analysis of the industry shows that customer retention and the satisfaction of the customers are minimal in the post-paid or the contract industry and they organizations usually would not care once you have opted for their contract. The propensity of usage in the US industry is relatively high and the related industries that are associated with the mobile market are also attaining benefits from the rise of the prepaid cell phone industry.

Porter’s five forces analysis

There are five forces that are associated with the porter analysis. These five forces are:

  1. The intensity of competitive rivalry
  2. The threat of the new entrants
  3. The threat of substitute products
  4. Bargaining power of customers
  5. Bargaining power of suppliers

The intensity of competitive rivalry: The rivalry actually depicts the competition in the industry. In this aspect firms usually identify their market share and they keep a track of the market share of their competitors. The cell phone industry especially the prepaid market is not considered a disciplined industry because there is fierce competition between the organizations that are operating in this industry.

The threat of the new entrants: The industry of prepaid cell phones can be classified as a capital-intensive industry and that is the reason why the entry of new players is quite difficult in this industry the prevailing players in the industry are considered as the core threat to prepaid phone organizations.

The threat of substitute products: The biggest threat to prepaid phone organizations is post-paid organizations and companies that bound the customers to a certain contract that is linked with usage of services.

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Bargaining power of the customers: In the prepaid cell phone industry the bargaining power of the customer is usually high because of the fact that there are many customers in this industry and the product can be replaced. In a similar manner the customers that are in this industry usually price sensitive and they have relatively low margins (Recklies, 2001).

Bargaining power of the suppliers: In the similar manner it can also be said that the bargaining power of the suppliers is relatively high because there are relatively few suppliers in this industry. The switching cost is high and the organizations that are in this industry are actually experiencing economies of scale.

Scenario

The scenario stresses the point that strategic decision-making is required in order to start a business in the prepaid mobile industry. Max Fischer and his partner should focus on the mass marketing strategy and they should opt for a mainstream market. In a similar manner it can be said that differentiating elements should be added to the product. This differentiating element should give a sustainable competitive advantage that is beneficial in both the short and the long run. There are certain features like loan facility; balance sharing and certain other attractive features that can be added to retain the customers. In a similar manner, emphasis must be laid on the mass market because they can be easily approached and through effective and proactive marketing strategies they can be marketed. Furthermore, the prospective customers can be approached through online marketing, brochures, pamphlets etc. As far as the pricing policy is considered then through analysis it can be said that a penetration policy must be used because through low prices customers can be attracted and the organization penetrates the market and its market share increases. Therefore, it should be kept in mind that marketing and promotional costs can be increased because it’s an industry practice that is the reason why through penetration pricing the economies of scale can be achieved in the long run.

References

Johnson, S. (2009). Prepaid cell phone plans: Great option or Last Resort? Web.

Recklies, D. (2001). Porters 5 Forces . 2009. Web.

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IvyPanda. (2021, November 15). The Prepaid Cell Phone Industry. https://ivypanda.com/essays/the-prepaid-cell-phone-industry/

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"The Prepaid Cell Phone Industry." IvyPanda, 15 Nov. 2021, ivypanda.com/essays/the-prepaid-cell-phone-industry/.

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IvyPanda. (2021) 'The Prepaid Cell Phone Industry'. 15 November.

References

IvyPanda. 2021. "The Prepaid Cell Phone Industry." November 15, 2021. https://ivypanda.com/essays/the-prepaid-cell-phone-industry/.

1. IvyPanda. "The Prepaid Cell Phone Industry." November 15, 2021. https://ivypanda.com/essays/the-prepaid-cell-phone-industry/.


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IvyPanda. "The Prepaid Cell Phone Industry." November 15, 2021. https://ivypanda.com/essays/the-prepaid-cell-phone-industry/.

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