Transcript Wireless Communication

Wireless Communication
Team 5
Sean Caruso
Josh Jones
Tim Marsh
Joseph Roy
Introduction
• Companies
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Alltel
AT&T
Sprint-Nextel
Vodafone
• Wireless communication carriers are
increasingly relying on non-voice services to
sustain growth
• Premium services are of key strategic
concern
External Environment Analysis
• With increased threats posed by new
entrants, comes more intense competition
• New entrants open the potential for firms to
lose market share to the new firm, and have
the potential to drive the prices of products
and services down if they choose to engage
in a price war.
• Losing market share decreases overall
profits, while price wars squeeze profit
margins and force firms to further cut costs.
• In the United States, the threat of new
entrants is always present.
External Environment Analysis
• Barriers to entry of wireless communications
strategic groups are very high.
• A firm must have a massive amount of
capital and infrastructure to be able to have
a wireless network across the country, and
more increasingly, the world.
• Government regulations exist, too, that are
hard to comply with, and a new entrant
would have to have significant resources to
even enter the market.
Competitive Speed
• Fast Cycle
• Constantly releasing new products and
services
• Rapid imitation
• Reverse engineering
• Standard Cycle
• Competitive advantage is less specialized
• Moderately difficult to duplicate technology
• Competitive prices after imitation
Threat of New Entrants
• In the United States, the threat of new
entrants is always present
• Barriers to Entry are very high
• Capital & infrastructure (wireless network
across the country & world)
• Government regulations
• Intensity of rivalry is not increased
Product Substitutes
• Typical substitutes: landlines, satellite
phones, email & internet chat
• Voice-Over-Internet-Protocol (VoIP)
phone service
• Threat of new technologies
• Intensity of rivalry is increased slightly
Bargaining Power of Suppliers
• Phone suppliers have a lot of
bargaining power if their product is
differentiated and unique (iPhone)
• Firms invent and produce their own
technologies (services, network)
• Components are generally commodities
• Intensity of rivalry is not increased
Bargaining Power of Consumers
• Do not have bargaining power to change
the prices of individual carriers’ products
or services, but can switch carriers
• Number portability (2004)
• Other than small contract cancellation
charges, wireless carriers have nothing
else to block customers from leaving
• Intensity of rivalry is increased
Intensity of Rivalry of Competition
• Several large carriers with a large
amount of market share, unwilling to
give up any of it
• There are high fixed costs, high
strategic stakes, and high exit barriers
• Rivalry in the strategic group high
• Intensity of rivalry increased
Opportunities
• Ability to create new
technologies/markets
• Ringtones
• Camera phones
• Wireless internet
• Strategic alliances
• Apple & AT&T
• Roaming
Threats
• Technological advancements lead to
new substitutes
• Relationships with suppliers
Financial Data and Comparisons
• 12 month standard
• AT&T is the clear leader with nearly 55%
gain in stock price
• Vodafone enjoyed 25% growth
• Alltel declined nearly 5%
• Sprint has lost 22.5%.
Financial Data and Comparisons
• 4 ½ month standard
• AT&T has steadily added 12.5% (since the
acquisition of BellSouth, T has enjoyed
market dominance within the strategic
group)
• Sprint gained 6%, but with great
variability.
• Alltel had no change
• Vodafone lost a few points.
Financial Data and Comparisons
• 30 day standard
• S and T have both added just over 6%
• AT again was unchanged
• VOD just under 4%
Debt to Equity Ratio
Debt to Equity (D/E)
2.15
Ratio
1.65
D/E (S)
D/E (T)
1.15
D/E (VOD)
D/E (AT)
0.65
0.15
2003
2004
2005
Year
2006
Interest-Coverage Ratio
Interest Coverage Ratio
10.00
8.00
6.00
Value
Interest Coverage (S)
4.00
Interest Coverage (T)
Interest Coverage (AT)
2.00
0.00
2003
2004
2005
-2.00
Year
2006
Net Income
Net Income
8500.00
Gain/Loss
6500.00
Net Income (S)
4500.00
Net Income (T)
Net Income (VOD)
2500.00
Net Income (AT)
500.00
2003
2004
2005
-1500.00
Year
2006
Strategic Analysis
• Cost Leadership
• AT&T strives to keep costs at a constant,
in order to keep prices competitive and
attract customers
• Vodafone seeks to reduce costs across the
board through outsourcing internal
functions
• Differentiation
• Sprint Nextel and AT&T both pursue a
differentiated service strategy.
• Alltel primarily serves the Midwest and
Southeast segments of the United States.
Strategic Analysis
• First Mover Advantage
• High risk
• Heavy advertising campaign
• Reverse engineering often follows
• Consumers are left with fairly similar
products or services offered by every
company in the industry
• Cycle often repeats
• It could be argued that avoiding the first
move and offering a competing, unique
version holds the real advantage
Strategic Analysis
• Vodafone
• Takes a different approach to the first mover concept
• Establishes itself in countries where the cellular phone
has not yet become commodity.
• They hope that, as the country progresses and
wireless communication market penetration grows
with societal development; an established name will
secure a higher market share
Mergers & Acquisitions
• Utilizing acquired companies to further
expand their range of products and services
available to customers
• Large mergers, like the creation of AT&T Cingular
and Sprint Nextel illustrate this idea
• Vodafone proves to be an exception in some
cases, however, given that they do not own a
controlling stake in Verizon Wireless
• Vodafone has tried to purchase the remaining
shares outright, but also announced to the public
that it would be content with its current stake
since Verizon was making money
Conclusion
• As competition in the wireless
communications industry continues to grow,
the strategies employed by companies within
the industry become crucial factors that
determine their success
• Offering new products and services at
competitive prices remains important, but it
is also vital that the companies remain
aware of the tastes and preferences of
consumers, as well as the products offered
by their competitors
Conclusion
• Through successful differentiation, cost control and
controlled growth, a company within the wireless
communications industry can maintain the strategic
advantage necessary to thrive in this fast paced,
high tech market
• A pattern exists amongst the companies which
revolves around the development of new products
and services, and follows with competitors adopting
a similar offering soon after. This almost generates
a kind of “First, Second and Third Mover
Advantage,” and awareness of the cycle, as well as
the means to efficiently roll out new products and
services are traits needed by these companies to
enjoy continued growth.