Analysis of Sprint PCS - Essay Example

While in services main costs are connected to equipment maintaining those services and have little impact on prices (which are mainly formed by customer's demands), mobile phones have a lot of issues on manufacturing and especially testing product costs. "One hundred percent of mobile phones are tested to ensure regulatory and standard compliance, where many other consumer electronic products are merely sample tested." (Strickler, 2004). Additionally, mobile phones have ultra-short life cycles comparing to other consumer electronics, which is followed with more funds spent on designing new models.

As most of the manufacturing of Sprint is outsourced to China manufacturing labor costs are considered to be low. Still in the context of aggressive competition in the wireless industry they must be taken into account. Recent years have been regarded as productivity increasing due to technological innovations in manufacturing. Raw materials needed for production of cellular phones are the industry without a clear cut leader, which along with decreasing overall waging costs and at the same time slight increase in average wages had a positive influence on productivity and average total costs of cellular phones: as labor productivity growth settles in near its longer-run trend of 2 to 2-1/2 percent, increases in unit labor costs may begin to put some upward pressure on prices, offsetting possible moderation in nonwage costs (Bernanke 2005).

As iMarket StructureAs it was stated earlier cellular phone industry is very dense leaving no free space to possible new contenders. Market structure in mobile services is an oligopoly, when power is concentrated in the hands of several key players, that is: Cingular, Sprint, T-Mobile, Verizon etc. Position of Sprint in mobile phones industry is comparatively weaker, major players are: Nokia, Motorola, Siemens, Alcatel and Sony Ericsson.Such heavy competition along with the wide choice of vendors available to customers creates implications on pricing.

Simply there is very little space for adjusting prices because a company has to stay close to its main pricing curve. Cellular phones have evolved from a hi-tech gadget to an everyday life commodity negatively affecting prices, which continue to decrease. On the other side extremely wide audience of consumers and further shortening life-cycle increases amounts of cell phones sold.Recent performance of Sprint shows that while the customer base of the company continues to increase its revenues are the same as two years ago.

"Sprint's subscriber base grew 110% but its market share has barely changed since June 2002. Price erosion and competition has reduced Services revenue by 19%" (Alexander Resources, 2005) Moreover the company experiences low customer satisfaction recently found by Strategy Analytics: "Sprint PCS posts below average ratings on many measures, though the carrier does redeem itself somewhat with a well-received product and service range" (Wi-fitechnology.com 2004).Therefore Sprint PCS needs changes in its strategy for further development.

First of all, if bigger is not better Sprint needs to reduce the distance between the company and a certain customers group. Secondly it should pay more attention to the quality of its products to increase customer satisfaction with more added value.Economic ForecastBasing on the macroeconomic forecast presented by the learning team (Hahn et al 2005) I have selected the following factors that will affect the demand of