Price_Barriers_to_Entry

Price Barriers to Entry Introduction In today’s business, economic influences play a vital part in the success of an organization, especially when customers are cautious about spending their money on goods and services. In order for Sprint Nextel Corporation to be successful, they must carefully analyze the industry they are in by understanding how economic influences can affect the role and infrastructure of their organization. When it comes to completing with competitors like Verizon Wireless, AT&T Mobility, and T-Mobile, executive leaders must act intelligently to strengthen their foothold in the market, while finding creative ways of promoting their products globally. These major telephone service providers also want to maintain a market structure that makes it difficult for new competitors to enter the market, creating an oligopoly market. By creating an oligopoly market these companies are creating and maintaining high standards for barriers to entry that create obstacles for potential competitors trying to enter the market. It also gives Sprint an advantage because of the limited number of competitors makes it easier for them to monitor and track changes. The goal for Sprint is to become a global leader in the telecommunication industry. In order to do this the organization must revolutionize the telecommunication industry by limiting the access of potential competitors while increasing its current customer base. The primary objective is to establish target goals through aggressive advertising by offering exclusive services packages that will give the organization a competitive edge over competitors. The use of non price barriers will give Sprint and its current competitors a unique market strategy that will discourage future competitors from entering the telecommunication industry. Barriers for Entry Advertising Trademark infringement / Customer Loyalty Advertising is at the beginning of the maturing stage. The organization must continue to stay competitive by offering exclusive features at a value-added price. The primary goal of Sprint is to continue looking forward into the future by staying innovative, driven, and competitive. It is essential to differentiate brand identity and image between completing competitors. Brand can take on many forms, such as a company name, symbol, sign, slogan or color. In order for Sprint Nextel Corporation to legally protect their products from completing competitors, the organization first must establish a trademark. Trademark is a unique design attach to a product by a company or merchant to identify that the product is made or sold by a particular firm or person. Trademarks signify that the creator or merchant trust that the quality of their products will increase his or her standing or goodwill. A recognized trademark signifies to customers the name that is staked on the products. Trademark Laws are put in place to prohibit completing company for passing their products as of someone else. By Sprint registering their products with the United States Patent and Trademark Office, this will prohibit completing competitors from committing trademark infringements. Executive leaders must recognize that the organization success relies on creating superior value for the customers. Value is a way to generate new business for the organization. The bottom line is that loyal customers add value to organization by: Giving the organization a consistent cash flow over a period of time Creating new sales by referring other customers Buying a large quantity of goods and services Reducing the organization servicing and selling costs Enhancing customer loyalty can lead to sustainable and profitable sales growth for the organization. Customer loyalty is based on customer buying behavior. The ability to expand into foreign markets and building partnership will increase the number of loyal or new customers. It comes as no surprise that Sprint Corporation is developing marketing strategies to engage their customers. The goal is simple, present value to a customer or potential customer to induce the purchase of a good or service. Government Regulation Supplier Agreement Distributor Agreement The distributor agreement is a contract that balances the responsibilities and expectations between the supplier and the distributor. The distributor is given the right to sell, promote, and provide customer support for Sprint products in an effort to expand its customer base. Distributors can be a formally based company, housed inside a store, or a free agent, branched out in various locations such as a street vendor. Distributors have invested time and resources in advertisement, equipment, and training of Sprint services and products to ensure their success as a part of the company. With new companies trying to come into a network area where Sprint has already been established as a dominate service provider it would be difficult to create these types of agreements. Very few distributors would be willing to terminate their agreement in hopes for success with a new unknown company. Because Sprint is one of the leading companies in the telecommunications industry distributors can be confident that they will reach a certain level of success; whereas a new company leaves uncertainty of any form of success. Control of Resources Intellectual Property As new companies seek to enter the telecommunications industry they need to have access to resources for the production of technology. They also need to be aware of intellectual property laws protecting Sprint products and materials. Intellectual property laws protect patents, trade secrets, copyrights, and trademarks. Potential companies must not infringe on these rights in the design of their own products and materials. These laws are intended to stop potential competitors from producing the same product for a specific period of time and can restrict new entry into the market. Capital When starting up a new business companies need capital. Capital is a form of financial resources needed to implement and carry out the company business plan. Before any product or service is provided new companies will need resources for development, marketing, sales, and other components needed for the formation of the company. It is difficult to for unknown companies to get the support needed to enter into a market as aggressive as the telecommunications industry. Those investors that do offer support generally require a high demand on return in order to limit any loss they may incur. For many companies trying to enter the market this can be a hindrance. Network Base The Sprint offers a nation wide coverage area, and with its recent merger with Nextel the coverage area will expand even more. Sprint is able to provide a service that customers can rely on and are loyal to the company. With this type of network base it will be difficult for new competitors entering the market because Sprint has already established itself and captured a significant portion of users. New entrants would have to go to great lengths in order compete with the level of service and products Sprint already provides. Research and Development The technology required to enter the telecommunications industry requires a significant amount of investment which can deter potential entrants from the market. This is an important aspect in business because of the level of competition. New businesses must understand the process and methods to be able to compete on a level playing field with its competitors. They must have the resources available to monitor and track its competitors and customers to ensure they stay abreast with new trends, demands, and needs of customers. New companies generally lack the resources needed in this area, whereas a company such as Sprint that has been around for years has learned where and when it needs to focus on certain areas of its business.