Mobile Phone Market

1
Mobile Phone Market
Josh Sephton Jon Ellson Phil Close
Tongtong Qian Will York
2
A Brief Introduction

• Our branch of WYEC (the Warwick Young Economic
  Consultants) has been chosen to research and
  analyse the communications market, focusing
  especially on the mobile phone sector.
• To conduct this analytical research, we have
  studied the available phone networks and
  competition between different service providers
  as well as actual products.
• We will go on to summarise our findings and
  present them in a brief and clear way. We will
  then conclude with our recommendation to the
  Government with regard to policy intervention.

3
The Companies

• The main competitors in this market are
• Virgin Mobile
• Vodafone
• Orange
• T- mobile
• O²
• 3G

4
The Market

• With only a small number of companies, the market
  is very competitive, with no clear market leader,
  except in video phone technology, where 3G has a
  clear monopoly with no other viable competitors.
• This level of competition has forced the
  companies into spending lots of money on research
  and development in order to stay afloat in the
  market. An example of this can be seen in Virgin
  Mobile, who have recently slashed share prices
  due to a low company value, and a general fall in
  the mobile phone market.
• The market can be considered an oligopoly due to
  the strong competition between a small number of
  companies.

5
Competition and Market Structure

• In this fast growing and technologically advanced
  industry there is a lot of by-products developed.
  Some of the said products complement the main
  phone industry, some rival the industry.
• Some of the complements of the industry, things
  that help and encourage the growth of the market,
  include, but are not limited to
• handsfree headsets
• network deals
• upgrades
• PDAs
• Data transfer - WiFi, Bluetooth, WAP

6
Competition and Market Structure - Contd

• The main rivals externally of the market as a
  whole are (including the main reason why the
  option is not viable)
• pagers (died out)
• Landline (confined to a building)
• PDAs (good but not a replacement)
• Payphone box (not practical for a busy person)

7
Innovation

• The strong competition has resulted in an
  increase in innovation with regard to integrating
  phones with PDAs (Personal Digital Assistants)
  and so a new generation of Smartphone has
  appeared in the market.
• This means that all types of competition in the
  market are predominant
• Price
• Quality
• Quantity
• These types of competition rely on each other to
  maintain balance throughout the market.
• For example, if the price and quality are pitched
  at the right level, quantity will follow.

8
Production

• Structure
• Research -- Design -- Research --
  Manufacture
• The mobile phone industry is a capital intensive
  industry, with millions of pounds being ploughed
  into research and innovation. As well as this,
  the actual production process of the making of
  the mobile phones is very costly.
• As a result, as mentioned previously this is one
  of the fastest growing industries in the world,
  the some of the highest levels of competition.

9
Costs
Like we heard in the last slide, the industry is
very expensive. There are two types of costs
though, variable and fixed. Below are listed the
main costs involved in the whole process.
10
Ownership - Profits and Revenue

• The mobile phone industry is owned mostly by
  shareholders. This makes the industry a private
  industry with little or no intervention from the
  government.
• The owners of the companies, who hold the
  majority of the shares, always work to achieve
  high dividends and maximise profits. The managers
  on the other hand, who often hold little or no
  shares in the company are more interested in
  revenue maximisation, leading to good reports.
  This is because it reflects well on them.

11
Our Recommendation

• Our conclusion is that the government should not
  intervene in this market.
• Because of the healthy competition, prices are
  kept to a low, reasonable level.
• However at the same time the technological
  advances are kept to a maximum, also thanks to
  the strong competition.