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Synopsis
Virgin Mobile USA, as a new entrant into the US radio receiver returns market, aimed to acquire one million subscribers in a year. The fraternity chose to focus on a niche market: consumers in their teens and twenties. The company also was wondering about its pricing scheme: -- Fol downcasting the typical pricing structure in the industry, -- Or adopting a new pricing structure which gets rid of contracts, unknown fees, and bucket plans, and implys pre-paid plans?
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What are the threats to industry profitability?
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Industry Analysis
Competitors: displace markets with six national service providers (AT&T, Cingular, Verizon, etc) -- no single provider can control more than 25% of the market (Exhibit 1). Buyers: -- The main(prenominal) ingredient with consumers above 30 has reached maturity with a perceptivity rate of about 50%. -- Penetration into the niche segment with consumers aged 15-29 was much lower. However, it did not attract many providers wedded that such consumers typically do not have commendation history. -- Buyers do not have much bargaining force but their satisfaction is low.
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Industry Analysis (Contd)
Suppliers: Cell reverberate manufactures collaborate with service providers to bundle phones and service plans.
Distribution channel (outlets, electronic stores, etc) have large bargaining power and typically require for $100 commission per phone. Entrants: Threats from new entrants are low given that the market is very crowded and network personal effects are significant. Substitutes: There are no good substitutes to wireless phone services. Conclusion: the key threats to industry profitability include fierce competition, consumers dissatisfaction on pricing structure, and high customer accomplishment costs (roughly $370 including distribution commission, handset subsidy, and advertising). Therefore, the key task for Virgin Mobile is to deal with these three problems.
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