1) What are the dominant economic characteristics of the VoIP Industry? Public switch telephone networks (PSTN) charge based on minutes whereas Voice-over Internet Protocol (VoIP) charges based on data usage. VoIP services charge a flat fee and Skype actually offers free talk between Skype users. VoIP is likely to grow significantly, taking away from PTSN’s market. VoIP is also cheap to operate as the infrastructure is already there. VoIP is also considered part of the information service industry and not the telecommunication service industry giving it an advantage politically against PTSN.
2) What does the Five Forces Model reveal about the profitability of the VoIP industry? Threat of New Entrants: The threat of new entrants is high in this market. Companies like Google, Microsoft and AOL are planning to compete in the VoIP market. Threat of Substitutes: Substitute for VoIP is low. Bargaining power of Buyers: The bargaining power is moderate because of the simplicity of switching to other companies. Bargaining Power of Suppliers: The bargaining power is weak/limited because VoIP providers are widespread. Rivalry Between Existing Firms: Rivalry between firms is very high because switching costs are low and there is a lack of differentiation.
3) What are the Driving Forces in the industry?
The Driving Forces in the industry are consumers’ eagerness for easy access to communication via the internet as well as the low cost of doing so, powerful substitute for telecommunications, and Skype’s costs are low and the consumer’s cost is low.
4) What are the Key Success Factors in the industry?
The Key Success Factors are the ease of use which is the low cost for the users. Lower costs because both voice and data communications can run on a single network. Lastly, the continued development of PC2PC calls, videos, and file sharing.
5) Which type of strategy is Skype pursuing?
The strategy that Skype is pursuing is differentiation with low-cost. Skype has easy and effective marketing and less expensive retailing and distribution. Skype to Skype calls lets you communicate between anyone at no cost. With “SkypeOut” you can call any landline or mobile phone in the world at comparatively cheap local rates. Also, “SkypeIn” allows users to be reached by a traditional phone through a regular phone number.
6) What are Skype’s short-term and long-term prospects?
Managing their competitors and increasing their revenue. They need to gain larger market share and standout against their competitors. They should also focus sales on a business to business side. They should be making sure that most companies, large and small, are using their application for conference calls.