1. Introduction
1.1 The measurement of demand
The measurement of demand within the mobile market can be determined by four action parameters, which operators can use:
• price
• quality
• service
• advertising
The implementation for those action parameters depends on the product itself, the phase of the market, the type of company and the market form, including barriers the market offers.
In my homework I will focus on the criteria price and service to give a short explanation of the so called overall concept “Harvard School”. Discussing this concept, the state does not interrupt any action of the market. It includes the assumption that the market will find its equilibrium itself and does not need any interferences.
After giving some general information about the German mobile market, I want to present my results about the development of prices for mobile services. Furthermore, another focus should be the service that operators provide. Therefore especially the innovation of new tariffs and reaction time of the operators will be analysed. Afterwards the German mobile market will be evaluated by an international comparison.
Altogether each topic that is worked out should be finally interpreted towards the measurement of competition within the market for mobile services.
1.2 Price-competition as an indicator to determine the intensity of competition
As aforementioned the action parameters are divided into four main categories. This is done to isolate the effect of each action parameter concerning towards the process of competition.
However, for each single company and the competition on the mobile market it is important to know about the success of the combination of all action parameters, concerning the payoff of the company, as the case may be the result on competition.
Here I want to focus on the price-competition to determine the intensity of competition. Price-competition mainly guarantees the orientation of business operations, all based on the economic principal. A market with functioning price-competition can be seen as a necessary precondition to achieve all goals of competition.
In reality price-competition does not contain as much relevancy as in theory, which can be explained by the analysis of different market forms (e.g. homogen polypol, heterogen polypol…). Different market forms cause particular situations, where the prices for mobile services are determined. For instance, if there is a high degree of possible cost reduction, the price is influenced by that. Within other market forms the latitude of possible prices, which are generated by the operators, determine the prices of mobile services. Whereas in some cases prices can be found as a result of solidary behaviour of the operators.
Furthermore, the action parameter price is not only influenced by the product itself, the phase of the market, the type of company and the market form, including barriers the market offers. It is further influenced by the amount of using this action parameter, which depends on the objectives and the behaviour of the company.
Concerning the current situation of the mobile market there are only four main operators, which provide mobile services to the consumer. Because of that it seems to be logical, that the price-competition is not a sufficient precondition to measure the total degree of competition. The amplitude of possible prices for several mobile services is very low as we will see in the following analysis. Thus, an operator with very expensive services would be less competitive and loose business. Nevertheless, prices for mobile services can differ between the four operators because it is no perfect market and very difficult for the consumer to find the cheapest contract for themselves.
Table of Contents
0. Thesis
1. Introduction
1.1 The measurement of demand
1.2 Price competition as an indicator to determine the intensity of competition
2. User and provider of the mobile market
2.1 Market share
2.2 Number of users and penetration rate
2.3 Churn rates
3. Price competition within the German mobile market
3.1 Price index for the service of telecommunication in Germany
3.2 Development of prices for special services
3.3 ARPU rates
4. Tariff innovation and reaction time
5. International comparison of postpaid services
5.1 The development of subscribers and penetration rates
5.2 Comparison of prices of postpaid services
6. Degree of competition at the German mobile market
Research Objectives and Topics
This paper examines the intensity of competition within the German mobile telecommunications market by analyzing price developments, tariff innovations, and subscriber metrics, while contextualizing the German market through an international comparative perspective.
- Analysis of market concentration and shifting market shares among the four major operators.
- Evaluation of pricing strategies, including service-specific price indices and ARPU (Average Revenue Per Unit) trends.
- Assessment of industry reaction times regarding tariff innovations such as flat rates and new subscriber bundles.
- Benchmarking the German market performance against other European nations using international subscriber and pricing data.
Excerpt from the Book
1.2 Price-competition as an indicator to determine the intensity of competition
As aforementioned the action parameters are divided into four main categories. This is done to isolate the effect of each action parameter concerning towards the process of competition.
However, for each single company and the competition on the mobile market it is important to know about the success of the combination of all action parameters, concerning the payoff of the company, as the case may be the result on competition.
Here I want to focus on the price-competition to determine the intensity of competition. Price-competition mainly guarantees the orientation of business operations, all based on the economic principal. A market with functioning price-competition can be seen as a necessary precondition to achieve all goals of competition.
In reality price-competition does not contain as much relevancy as in theory, which can be explained by the analysis of different market forms (e.g. homogen polypol, heterogen polypol…). Different market forms cause particular situations, where the prices for mobile services are determined. For instance, if there is a high degree of possible cost reduction, the price is influenced by that. Within other market forms the latitude of possible prices, which are generated by the operators, determine the prices of mobile services. Whereas in some cases prices can be found as a result of solidary behaviour of the operators.
Summary of Chapters
1. Introduction: Defines the core parameters of market demand and introduces the concept of using price competition as a primary indicator for market intensity.
2. User and provider of the mobile market: Analyzes the structural composition of the German market, focusing on operator market shares, penetration rates, and churn statistics as indicators of competition.
3. Price competition within the German mobile market: Investigates historical price trends, special service pricing (like SMS/MMS), and ARPU developments to measure competitive pressure.
4. Tariff innovation and reaction time: Explores how quickly operators adopt innovations like flat rates and minute packages to remain competitive.
5. International comparison of postpaid services: Benchmarks the German market against ten other European countries regarding penetration rates and pricing.
6. Degree of competition at the German mobile market: Synthesizes the findings to conclude that the market remains highly competitive with continued growth potential.
Keywords
Mobile Market, Price Competition, ARPU, Churn Rate, Market Share, Telecommunication, Tariff Innovation, Flatrate, Penetration Rate, UMTS, SMS, HSDPA, Germany, Competitive Intensity, Subscriber Growth
Frequently Asked Questions
What is the fundamental focus of this thesis?
The work focuses on analyzing the intensity of competition in the German mobile telecommunications market through the lens of price dynamics and operator behavior.
Which key areas are analyzed to measure market competition?
The study evaluates market shares, subscriber growth, churn rates, pricing models, and the speed at which operators react to new tariff innovations.
What is the primary objective of the research?
The objective is to determine if the German mobile market is sufficiently competitive by analyzing service pricing and the introduction of new tariff structures.
Which scientific methodology is applied?
The paper utilizes market data analysis, historical price trend evaluations, and international benchmarking against European peer nations.
What does the main body of the work cover?
It covers the structure of the German mobile market, the evolution of pricing from 1999 to 2006, the analysis of innovative tariff schemes, and international comparisons.
Which keywords best characterize this work?
Key terms include Mobile Market, Price Competition, ARPU, Churn Rate, Tariff Innovation, and Penetration Rate.
How has the role of smaller market participants changed recently?
Smaller participants have gained significant relevance over the last five years, contributing to increased competitive pressure on the established major operators.
Why are churn rates considered a significant indicator in this analysis?
High churn rates indicate that consumers frequently switch operators in search of better individual solutions or cheaper contracts, reflecting a high degree of competitive market activity.
What conclusion does the author reach regarding the future of the German mobile market?
The author concludes that the high degree of competition is likely to persist, as operators continue to innovate and compete on price to maintain their subscriber bases.
- Quote paper
- Volker Küpper (Author), 2007, Price-competition at the German mobile market, Munich, GRIN Verlag, https://www.grin.com/document/77306
