Porter's 5 Forces on the Communication Industry

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Date Submitted: 03/12/2011 09:08 PM

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Porters 5 Forces analysis

The wireless communications industry is one of the world’s sectors of the economy that is experiencing high competition due to challenges of globalization, advance in technology and diversity of customer needs. The main services that are offered in this business are; internet access, cell phone service or mobile communication, messaging, music, ring tone and video distribution among others. There are about 600 companies that are actively involved in this industry and they constitute combined annual revenue of over 110 billion US dollars. However, there are four major companies that have dominated this concentrated market fro some time and they include; Verizon, Sprint Nextel, T-mobile and AT&T. Wireless communication services owe its demand to an increase in consumer income and only those with good income can actually utilize or receive such services. Most businesses also utilize the technology and therefore the profitability of the wireless companies depends on how best they can attract these businesses, their marketing skills and their ability to come up with new innovative technologies.

Porters five forces analysis has been used by many companies to analyze their position in the industry and therefore strategically position itself to handle the issue of competition. Since the issue has been identified as a major threat to the existence of the companies industry, this kind of analysis is thus suitable for companies which would like to understand their competitors, their customers, buyers, sellers, suppliers, and other stakeholders in the business. (Porter, 1985)

Threat of New Entrants

Previously established wireless communication firms pose a big challenge to new companies in the market which try to exploit the new markets. Although substitute services are being offered in smaller companies, they still have to ‘beat’ one another in either way in order to create a better market share. With known brand names and...