Summary: Virgin Mobile USA

Virgin Mobile USA is a part of a large conglomeration that prides itself on its ability to enter markets and devastate the incumbent companies by offering customers a unique and improved value proposition. They have, however, taken on a large challenge as a new company in the United States that is trying to enter into a competitive industry. This analysis will attempt to dissect the forces acting upon the cellular-service industry using Porter’s 5-Forces Model. It will also provide a SWOT analysis with the goal of providing a comprehensive pricing strategy for Virgin Mobile.

The cellular-service industry in the United States has reached maturity with AT&T, Verizon, Sprint, and T-Mobile taking the largest share of the market. Each company has

The aforementioned high barriers to entry challenge the top four cellular-service providers. The high fixed costs cause companies to want to acquire as many customers as possible to spread the fixed costs, and thus reduce overall costs. High competition means that customers can take advantage of competitive pricing. Additionally, customers have the advantage of almost non-existent switching costs once their contracts expire. However, customers realistically only have four cellular-service providers to choose from, so customers only have moderate buying power. The aspect that makes the cellular industry an attractive target for Virgin is that there are virtually no threats of substitute products. Once a company establishes itself, the potential for profits is high, but gaining a foothold is difficult. Virgin Mobile proposes that entering into an untapped youth market will help establish brand. Subsequently, it is vital that Virgin formulates their pricing strategy in such a way that will attract and retain a young demographic.

It is important to note that Virgin has already successfully entered the mobile phone market in the U.K., and that experience represents a significant strength for Virgin Mobile. They also possess great strategic flexibility that comes with renting network space from Sprint on an as-needed basis. They do not face the significant fixed costs of the other carriers, which provides them the capability of targeting smaller markets. Additionally, Virgin’s partnership with MTV represents a small strength that should help them appeal to a youth