Competition in the Real World
When shopping for netbooks or laptops, consumers test out their options from familiar companies such as Dell, HP, Apple, Microsoft, and Compaq etc. But soon new options will become available to the buyers. As they hunt for the perfect PC for them, they will now see familiar names but from another market. Wireless Carriers, like AT&T, Verizon, and T-Mobile, are joining the PC market. One of the first examples of their brainstorming idea became apparent on April 1st, when AT&T started selling laptop computers for a small amount of 50 dollars, to people who signed up for a 2-year agreement to get at-home and mobile broadband services.
Although they only made this deal available to consumers in Philadelphia and Atlanta, they were very satisfied with the results and plan to make this available nationwide. In addition to AT&T, T-mobile has already merged into the PC market in Western Europe. Since last fall they have began selling netbooks; and wireless companies there already account for 25% of all small laptops sold there. AT&T was not the first to join the monopolistic PC market in the U. S; T-mobile made netbooks available this past September in the U. S and Verizon plans to provide small, economically priced laptops later this quarter.
As wireless companies enter the market, it benefits both the companies and the consumers. It benefits the wireless market because they can persuade consumers to buy monthly wireless Internet access service plans. In turn, the consumers save money on upfront costs for the computer and monthly charges may be less expensive compared to the existing Internet providers. The demand for smartphones and the high costs of Internet sparked the idea. Although they are paying 200 dollars or more of the netbook’s price tag, they are gaining the economic profit that comes with the new contracts and members that sign up for wireless data service plans.
The public may perceive that the existing PC makers have no chance and their profits will only get worst. However, the choice of the wireless companies to enter their market introduces the idea of them working together. For example, it now becomes easier for them to create and produce other electronics, such as smartphones and MIDS, and sell them through the wireless carriers. In a way, PC makers will then enter the wireless market as well. Due to the quicker and increase of netbook sales, the “PC industry overall gets pulled into this downward spiral of lower average selling prices and margins” according to Roger Kay.
In addition to a decrease in demand for more expensive computers, the demand for smartphones’ demand will also decrease. Consumers will have more options such as the netbooks or the MIDs that were previously mentioned. MIDs may be used as a superior substitute over a smartphone, because of its higher battery life, larger screens, all for about the same price as a smartphone. In the future, this could mean diminishing marginal profits for many industries and companies. Furthermore, electronic retailers, like Best Buy for example, will soon realize they have competition.
The competition arises from wireless carriers dropping upfront costs by several hundreds of dollars, in exchange for an economic profit. This may cause Best Buy or other retailers to drop their prices until they reach the bottom line price. Even then wireless carriers will still have the upper hand because of the services they can provide and the network they have already gained. Because of that outcome, it may push retailers in the direction of decreasing their inventory of PCs and increasing other inventories that will make them gain more economic profit.
Electronic retailers should not be the only pessimistic about the wireless carriers’ merge onto the PC market. Cable providers will also face even more damage to their profits. They have already lost consumers to websites such as Hulu. com, Google videos, and youtube. com. Wireless carriers will provide connection from a telecom provider instead. The consequence of their actions will force cable providers to accept the inevitable and cancel cable subscriptions over time. Even though Wireless carriers are entering the PC market right now, they will eventually take over the media and video industry.
Over the past few years the demand for technology has increased dramatically. Society always wants what is new, and different. Because of such a high demand, and oligopolistic competition between companies, it forces them to use product differentiation to push them ahead of their rivals. For example, the creators of iPhone are already creating MID-like device with video capabilities, to provide a better alternative to the smartphone. Not only do firms have to produce the next superior product, they also have to come up with the next best economical deal for the bargain hungry consumers.
Especially during a recession, consumers are less willing to spend their hard earned money on luxuries. Therefore it is important for companies to come up with the perfect cost to attract consumers, without procuring an economic loss. To do so, many firms are going to provide bundle packages. For example, AT;T has already offered discounted netbooks for consumers who sign up for the sixty-dollar a month bundle, including at-home Internet access and on-the-go broadband service. They also provide another deal in which they sell an Acer netbook for only a hundred dollars, when its usual asking price from retailers is 300 dollars.
Understanding this story is important for consumers because they should not have to give up luxuries completely during these less thriving economical years. Consumers should still be able to indulge on products they crave, without having to sacrifice too much of an opportunity cost. Previously, consumers may have felt guilty for spending such large amounts of their disposable income on luxuries. However, they should finish reading this article optimistic towards investing in a netbook, especially through a wireless carrier.