Business Strategy

Porter's Five Forces Model

Bargaining Power of Consumers - Medium

There are a wide array of competitors in this industry for consumers to choose from.  The four major carriers are AT&T, Verizon, T-Mobile, and Sprint.  Several of the major carriers also have subsidiaries who compete in the market, such as MetroPCS (T-Mobile) and Boost Mobile (Sprint).  There are also regional carriers and Mobile Virtual Network Operators (MVNO).  The large number of industry participants and the intensity of the rivalry between them greatly strengthens the bargaining power of consumers.  Switching costs, in the form of service contracts, have been used in this industry to attenuate the power of consumers.

Bargaining Power of Suppliers - Low

The primary suppliers for this industry are the manufacturers of mobile devices and the manufacturers of wireless infrastructure hardware.  There has been a great proliferation of smartphones, in recent years, and competition in the mobile device industry is intense.  This industry rivalry, along with the fact that service providers like AT&T have created switching costs which prevent customers from switching carriers, has minimized the bargaining power of these device manufacturers.  The manufacturers of wireless infrastructure hardware, such as Cisco and Alcatel-Lucent also have their bargaining power diminished by the number and strength of their competitors.

Threat of New Entrants - Low

The wireless service provider industry has significant barriers to entry.  This industry requires an extremely high capital investment in order to establish wireless infrastructure.  Alternatively, a company can enter as an MVNO.  By entering into a business agreement with an established carrier, an MVNO can gain access to existing infrastructure and operate without the need for large capital investment.  This, however, makes MVNO completely reliant upon the larger wireless service provider with whom they are engaged.  There are also regulatory barriers, since the radio spectrum is managed by the Federal Communications Commission.

Threat of Substitutions - Low

There doesn't exist yet any credible threat of a substitute for wireless service, in the near future.  One possible, long-term substitute could be Municipal Wi-Fi.  Several cities around the world are experimenting with blanketing their localities with Wi-Fi access.  If Wi-Fi network access were to become sufficiently widespread, it might become feasible for consumers to forgo their mobile carrier and rely upon the Municipal Wi-Fi network for their connectivity.  The primary caveat for the substitution of Municipal Wi-Fi would be its availability outside of major urban areas.

Industry Rivalry - High

The four primary competitors in this industry are extremely large and powerful companies, with the resources for fierce competition, none of whom control a majority market share.  There are also several smaller competitors with space in the marketplace.  Since the mobile coverage areas of the carriers largely overlap, they must all compete directly with one another.

 Competitive Strategy

AT&T follows an Industry-Wide Differentiation competitive strategy.  The target market for AT&T is all wireless service users in the United States.  AT&T mainly competes with its rivals through differentiation.  Their marketing efforts highlight the reliability of their service, the nationwide extent of their network, and the quality of their customer service.