Strategy in the cordless phone market

Francesco PRONO - Mod eMBA 2013
Date: 29th February 2012

Introduction
In this article, I will analyse the competitiveness of companies in the industry of Cordless Voice Terminals, also known as Cordless Phones.
This industry is more and more challenged by the mobile phones industry, but still shows important numbers and facts, as more than 100 million terminals are sold each year, in a quite stable worldwide market.

Nowadays, roughly 80% of the cordless phones sold around the world are based on a digital technology called DECT(an acronym for “Digital Enhanced Cordless Telecommunication”), which uses specially allocated radio frequencies, from 1880 MHz to 1920 MHz. DECT is the leading technology in voice quality at home. DECT represents around 90% of the total revenues of the cordless telephony.

Picture 2 – Source: MZA Ltd
The Five Forces

First of all, let’s have a look at the Five Forces Model of Porter.
According to Porter, the intensity of competition in a given industry is influenced by five main forces: * Competitive rivalry within the industry * Threat of new market entrants * Threat of substitutes * Bargaining power of suppliers * Bargaining power of buyers

Competitive rivalry within the industry - high
The industry of Cordless Voice Terminals is quite fragmented. Close to big actors such as Panasonic, Gigaset , Philips and Samsung, there are many other smaller manufacturers, especially from Asia, but also some European ones, such as Sagemcom, Technicolor, Binatone, Ascom. The Asian companies are especially focused on low-end products, exhibiting prices difficult to rival. Rivalry is quite intense, and the margins are increasingly low, except for high-end products. Moreover, the growth of the whole market is slower and slower, which means that a company can increase its sales