A Marketing Analysis Of The U.S. And Poland Cell Phone

Industries

By:Christine Gehringer

Andy MohleukMelissa SchlosserMaceij PietrowiczLina Kasyouhanan

Dave Presley

Project Overview

– Better understanding of the overall industry and environment in both the U.S. and Poland

• Market saturation

• Growth trends and opportunities

• Environmental factors

• SWOT analyses

– Be able to identify the major players in both the U.S. and Poland

Project Overview

– Comparative analysis of U.S. marketing strategies and Poland marketing strategies

• Who are the target markets in each country?

• How do the two countries market differently?

– Understanding the 4 P’s in each country• How do product, price, place and promotion differ

between the U.S. and Poland?

U.S. Industry Analysis

How it all started…– 1947 – Researchers investigate the use of small cells

with frequency reuse to increase the traffic capacity of mobile phones

– 1977 – AT&T and Bell Labs constructed a prototype cellular system

– 1981 – Motorola and American Radio started a 2nd U.S. cellular radio-telephone system

– 1982 – FCC authorized commercial cellular service– 1983 – Ameritech made the first American commercial

analog cellular service available

U.S. Industry Analysis

MARKET SATURATION• Four major mobile telephony operators:

– AT&T Wireless– Sprint PCS– Verizon Wireless– Cingular Wireless

In 2001 over $65 billion in revenues was generated with apenetration rate of about 45%

U.S. Market Share Data

AT&T14%

Nextel8%

Sprint12%

VoiceStream 6%

Alltel5%

Verizon22%

Smaller providers

17%

Cingular 16%

U.S. Industry Analysis

GROWTH RATE– 1987 – Cellular telephone subscribers exceed 1 million

– 1999 – Spending on wireless communications services totaled $45.2 billion

– 2002 – 268 million people in the U.S. live in counties with access to 3 or more different operators

– 2003 – Spending projected increase to $75.6 billion

U.S. Cell Phone Penetration2001-2005

66%

64%

61%

53%

45%

0% 10% 20% 30% 40% 50% 60% 70%

2005

2004

2003

2002

2001

U.S. Industry Analysis

INFRASTRUCTURE– 3 major components

• Antennas• Base • Towers

– Semiconductor integrated-circuits & modems also important

– Valued at $100 billion in 2000– Fixed amount of radio frequency or wireless bandwidth– Vendors work to increase capacity, coverage, and call

quality with these set limitations

U.S. Industry Analysis

TECHNOLOGY BARRIERS– Digital replacing analog

• Benefits – Improve service reliability– Expand capacity of voice systems significantly– Lowers maintenance requirements

• Problems – Poor voice quality– Difficult conversion for the cellular operators

U.S. Industry Analysis

-Buyer power low-Favorable

-Threat of new entrants is high-Moderately unfavorable

-Supplier power high-Moderately unfavorable

-Threat of substitutes is high-Moderately unfavorable

-Rivalry is low to moderate-Moderately favorable

Major Players in U.S.

• AT&T

• Verizon Wireless

• Cingular

• Sprint

AT&T

• Competitive monthly fee

• Best home area coverage

• Best national coverage

• Unlimited night and weekend minutes

• Best rates international calling

• Good website – compared to Verizon

Verizon

• Largest wireless provider

• Lowest monthly fee

• Good home area coverage

• Good national coverage

• Second best international calling

• Easy to navigate website/ well organized

Cingular

• Second largest wireless supplier

• Average home area coverage

• No roaming charges from anywhere

• Expensive international calling

• Poor website/not easy to navigate

Sprint

• Smallest of four companies

• Average monthly charges

• Higher priced phones

• Minimal home and national coverage

• Minimal/non-existent international calling

• Poor website – not easy to navigate and technical problems

Major Players in U.S.

• Cellular Service Comparison

Cost Popular

Calling Plan

Number of Anytime Minutes

Number of Night/Wkend Minutes

Additional Minutes Roaming Charges

Home Area

CoverageNationwide Coverage

Phone functions Phone Cost

International Rates Co. Size Website

Verizon $40.00 600 4000 $0.40 - (outside of home area) + + = $29.99 $.65/min + (#1) +Cingular $49.99 500 3500 $0.35 + (None) - - = $19.99 $1.40/min - (#2) -Sprint $49.99 500 4500 $0.40 - (outside of home area) - - = 99.99* N/A -(#4) - -AT&T $49.99 600 Unlimited $0.35 - (outside of home area) ++ ++ = $39.99 $0.35/min -(#3) =

*$50 rebate

Note: since there are different international rates for each country we used Germany for a comparative basis.

Competitive Advantages Summary

• AT&T - Best coverage, unlimited nights and weekends

• Verizon – Best monthly charges, good coverage, largest supplier

• Cingular – No roaming calling from anywhere

• Sprint - No competitive advantage noted in comparison

U.S. Environmental Analysis

• The Demographic Environment– As of December 2001, 128.5 million subscribers

(45% of population)– 268 million people (94% of the total population)

have three different operators offering mobile phone service

– 229 million people (80 % of the population) live in countries with five or more mobile operators

– Nearly 58% of Americans 12 and older own a mobile phone

U.S. Environmental Analysis

• The Demographic Environment (cont.)– Geographic: Rural Vs. Urban

• Virtually no difference in price• Usage is significantly different

U.S. Environmental Analysis

• The Sociocultural Environment– “Cutting the Cord”—growing evidence proves

more people are canceling service from their home telephone provider

– Almost one in five mobile phone users regard their wireless phone as their primary phone

– Even though average pricing has been increasing since 1999, usage has increased to an average of 385 minutes. An increase of 51% from the prior year, during the same month

U.S. Environmental Analysis

• The Economic Environment– The average cost per plan is $36.70– Continued rollout of differentiated plans

– The Americas (including Latin America) is the fastest-growing region with a compound annual growth rate of 73%

U.S. Environmental Analysis

• The Political/Legal Environment– Deregulation of the Telecom industry– Spectrum licenses: Cellular, Broadband PCS,

and SMR

U.S. Environmental Analysis

• The Technical Environment– The four main digital technologies used in the

U.S.: CDMA, GSM, Iden, and TDMA– Third Generation (3G): cdmq2000 1xRTT,

GPRS, and WCDMA– Mobile Satellite Services (MSS) in the U.S.

U.S. Environmental Analysis

• The Physical Environment– 276 million people, (97% of the total U.S.

Population) live in counties where operators offer digital services using CDMA, TDMA/GSM, or IDEN technologies. These counties make up 70% of the total land are of the U.S.

U.S. SWOT Analysis

• Strengths– Lows prices/affordability– Variety of service providers and calling plans– Calling plan benefits

• free long distance

• wireless web

• PDA-like features

– Easy of use

U.S. SWOT Analysis

• Weaknesses– Customer service– Service provider web sites

• not user friendly

– Mass marketing strategy • Need to market to different segments

• Need to differentiate from competitors

– Service contracts

U.S. SWOT Analysis

• Opportunities– Wireless web– Bundling

• Bundle phone with accessories

– Business to Business market– Work on current weaknesses

• improve customer service

• practice differentiated marketing

• improve service provider web sites

U.S. SWOT Analysis

• Threats– Satellite communication

• Current infrastructure would be rendered obsolete

– Two-way radios• Nextel

– Government regulations

U.S. Threat Matrix

Low Probability

-Satellite communicationHigh Probability

Low ImpactHigh Impact

-Two-way radios

-Government regulation

4 P’s in the U.S.

• Product

• Price

• Place

• Promotion

4Ps: Product

• Voice & data products and services

• Text Messaging

• Wireless Internet

• Family/share plans

• Mobile-to-mobile

4Ps: Price

• Competitive pricing– Dependant upon local or national plans &

number of minutes

• “Options” pricing sets companies apart                         

4Ps: Place

• Internet sales & service

• Full service stores for sales & service

• Retail chains for activation

4Ps: Promotion

• TV, Print, Radio, Direct Mailings, and in-store placement

• Sponsorships of Movies, TV, and events• Free services

Poland’s Wireless Communications Industry

Environmental Analysis

• Population 38 million

• Europa’s 7th largest market (by population)

• Geographics

• Economic situation

• Political situation

Industry Analysis

73%67.30%

61.80%

42.20%30.80% 27%

0%

20%

40%

60%

80%

Cell Phone Market Saturation in Selected European Countries

Sweden UK Spain Chech Rep. Hungary Poland

Industry Analysis

• Market potential Poland's population by age groups

in millions

7.15

27.70

4.79

0-1415-64over 65

Industry Analysis

Poland's cell phone market structure

27%

38%

35%Centertel SA

Polska TelefoniaCyfrowa SAPolkomtel SA

Major Players in Poland

• Centertel

• Polska Telefonia Cyfrowa

• Polkomtel

Polska Telefonia Cyfrowa SA

• Financial Structure

• 4.0 million customers

• 98% signal coverage

• Roaming data unavailable

Polska Telefonia Cyfrowa SA

Financial Structure

28%51%

21%

Deutche Telecom

Electrim/Vivendi

Minority owners

Polkomtel SA

• Financial Structure

• 3.6 million customers

• 96% signal coverage

• Roaming with 227 operators in 113 countries

Polkomtel SA Financial Structure

60%20%

20%

Polish Corporations

Vodafone

Tele Denmark

Centertel SA

• Financial Structure

• 2.8 million customers

• 95% signal coverage

• Roaming with 220 operators

Centertel SA Financial Structure

34%

66%

France Telecom

Telekomunikacja Polska SA

Polska Telefonia Cyfrowa SA

• Products

business individual prepaid

Polkomtel SA

• Products

Business

Individualand prepaid

Centertel SA

• Products

business individual prepaid

Poland SWOT Analysis

• Strengths– High barriers of entry– Financial backing of international

companies– Newest technology comparable with biggest

foreign competitors

Poland SWOT Analysis

• Weaknesses– Small market capitalization– Small customer base– Undifferentiated marketing

Poland SWOT Analysis

• Opportunities– Low market saturation– E-banking and other PDA like

applications– Direct marketing via cell phone

Poland SWOT Analysis

• Threats– Opening to the EU competition– Government deregulation– Satellite phone communication– Improvements in stationary phone

services

Poland Threat Matrix

High Impact Low Impact

High Probability

-Market deregulation

-Improvements in stationary phone service

Low Probability- Satellite mobile phone service

4 P’s in Poland

• Product– Voice and data transmission, SMS, MMS, news

and weather messaging, e-banking– Hardware

• Price– careful avoidance of direct price competition– prepaid, business and individual (postpaid)

pricing

4 P’s in Poland

• Place– Three tiered distribution– Internet selling

• Promotion– Three target markets– Print, media, event advertising, direct

marketing

Conclusion

US• Biggest national

market• Analog switching to

digital - 4 technologies• Focus on individual

users• “Cutting the cord”

Poland• Emerging market• Fully digital networks

1 technology• Focus on business and

prepaid users• “getting the phone”

Conclusion

US• Trying to define niche

market• Price competitiveness• Increasing the market

share through price differentiation strategy

Poland• Three target markets• Avoidance of price

comparisons• Service and features

differentiation strategy