Finance the Market for Wireless

Finance The market for wireless telephone handsets (cellular telephones) is global, with the hands sets used to access a wide range of communication functions, including voice and video calls and mobile access to the internet. While the market is large, there are a surprising limited number of suppliers. In research by Gartner (2013) there are only 10 major manufacturers, these are shown in table 1.

Table 1; Global Sales of Wireless Telephones by Manufacturers for 2012 (Taken from Gartner, 2013) Manufacturer Units sold Market share Samsung Nokia Apple ZTE LG Electronics Huawei Technologies TCL Communication Research in Motion (Blackberry) Motorola 33,916.30 HTC 32,121.80 Others 587399.6 The market structure may be assessed with this information. With 10 manufacturers dominating the market, the market is not a monopoly, as that would require only one form to be present.

The model of the oligopoly is seen when there are only a few suppliers in an industry, or only a few suppliers have a significant level of influence (Nellis and Parker, 2006). This would appear to be the case in the wireless phone market. While there are 10 major suppliers, they are not all equal, the dominant 4 control 52.5% of the market. If the Smartphone market is looked at this has an even higher level of concentration, with two firms; Apple and Samsung having 52% of the global market (Gartner, 2013).

An oligopoly may manifest in different ways; including a high level of competitiveness where both firms compete in an aggressive manner, or tacit collusion where there is a general, if unofficial price fixing. In most markets, collusion that leads to price fixing is illegal. In the wireless telephone market there is a high level of competition, but different firms follow different competitive strategies which are also reflected in their pricing.

Samsung has a multipoint presence, with different models of phone for different segments of the market, with generally mid or upper mid market prices. Samsung seek to compete on differentiation making their phones look and feel stylish, and advertising them as easy to use, leveraging the fact that they operate using Android. Android is the most popular operating system (Gartner, 2013). By comparison Apple has a premium pricing strategy (but not price skimming), the Apple phones are some of the most expensive Smartphones on the market.

Apple competes by differentiating themselves in terms of the style, quality and service, as well as the way that the iPhones are integrated with the other 'i' products. The firm portrays the phones as a lifestyle device and supports sales by leveraging their customers' loyalty (Kotler and Keller, 2011). Other suppliers, such as LG seek to offer a value proposition, where pricing is seen to be lower than brands such as Samsung and the firm is focused on the functionality rather than style.

Therefore, while pricing strategies are different, most firms are seeking to differentiate themselves with features they believe will attract their target market, and the pricing reflecting the target market. Question 2 If a firm such as Samsung wishes to reduce costs there are a number of approaches which may be utilized. Most manufacturers are already using outsourcing for manufacturing either the handsets or some of the components.

Costs are often saved by going to firms in countries where there is the ability to makes gains of comparative advantages, especially in areas where wages and overheads are lower. China is particularly well-known as a manufacturing base, but to save costs it would be possible to move to even lower cost countries, such as the African states where there is a lower level of economic development. However, this may also have costs, as the staff may not be as skills and quality may suffer.

Cost cutting may also be achieved by reducing the cost of the inputs, this could include buying cheaper components for the products, or by leveraging buyer power to try and force down prices from current suppliers. Redesigning units so that there are more universal components across the range may also reduce costs, as fewer parts will need to be held and less capital will be tied up in inventory. Redesigning units so the telephones are easier to assemble; this will reduce the assembly costs.

Reducing the amount of packaging, this will decrease the packaging costs and if the packages are lighter may also reduce transportation costs. While there.