Determinants of the Demand for Mobile Phones in the UK

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Introduction

The Global demand for mobile phones remains strong, no matter what the economic status of a country says. Europe is supposed to me most affected, but despite the economic uncertainty and recession in rich countries and lack of food and resource availability in poor countries, there is no affect in the mobile market.

Consultancy firm Strategy Analytics says 282 million handsets were shipped worldwide in the first three months of 2008, up 14% from a year ago (News, 2008). The demand for the mobile phones was most in developing countries like Asia and Africa. The current statistical data shows that the demand will continue to rise but definitely at a slower rate. With the launch of new fashion phones with attractive features, people are more fascinated and thinking it as a long term investment and trying to overcome the stress level they go for it. Mobile phones are now considered as a status symbol, a fashion statement.

Now the availability of GPRS and internet availability has made the phones more user friendly and people seem to be addicted to them. More than 50% of UK population would feel out of touch with friends and family if they don’t access the internet for a week (survey results published by Critical Path, Inc.).

Partial equilibrium supply and demand analysis discuss what is happening in the market for mobile phones as disposable income is reduced by the current economic crisis

The supply demand analysis shows that the product does not have a single market price, instead it must accommodate two market prices, i.e. one is for the market segment which includes the buyers and one is for the sellers that include the company and wholesalers. The partial equilibrium supply and demand analysis shows that the price of each commodity, here the mobile phones, the quantity sold to the customers and purchased, is determined by the equality of demand and supply. Thus equilibrium in the market is reached when the demand equals supply, i.e. when in a graphical representation they both intersect at one point.

The cost to the consumer is most affected by the demand and supply of the mobile phones and the services the mobile operators provide to benefit them. Due to the current economic crisis the demand is affected and people are more focused to buy cheap mobile phones which are more users friendly and provide best operating services. Due to the fall in economic conditions people cannot afford to buy stylish mobile phones which are less efficient and less reliable during a course of time. The supply is elastic and the drop in price results in small decrease in the quantity to be supplied. The low prices for consumers thus increases the demand thus again maintaing equilibrium.

Partial equilibrium supply and demand analysis: what is happening in the market for add-on software, provided by small firms, as the supply of credit and venture capital funds fall

With relation to partial equilibrium supply and demand analysis where the market price is both affected to the consumers as well as the customers, the operators are providing low-price mobile phones. The cost affects the demand and the network services which operates them, and provides with additional software to provide with the best of services. This is affected as the consumers are now focused on low-price mobile phones. They want phones which operated on digital networks providing clarity in voice and add-on network services. There is a huge competition as customers are switching to less tariff rates with maximum value added services.

The operating networks pay a certain amount as tax and some is invested in the working of the network. This price invested is very low and the profit maximisation is very large. Hence the profit margin is invariably large on line rental. The procedure includes that the operators pays subsidies when one of there tariff plans is sold and the price required for the mobile phones is also effectively low. There is virtually a high profit margin and hence the operators provide mobile phones at reasonable rate thus keeping equilibrium on demand and supply. With the economic crises the supply of credits and venture capital funds has fallen to a specific rate but as the operators are providing mobile phones with reduced rates the demand has thus increased as there will always be a necessity of mobile phones.

What mobile phone producers can do to deal with the negative effects of recession on their business

Mobile phone producers can collaborate with operating firms providing best featured services like GPRS and internet facilities, with additional software packages. The cost required to build in a mobile phone could be proportionately reduced.

A specific line should be drawn and defined focus on market segments and their requirements would benefit the business. They could venture their phones with excessive marketing and providing low cost tariffs for the customers. The producers can be in a joint venture and provide cost affective benefits focussing on long term reliability of the product. With focus on saving money and introducing on low tariff rates can help in profit margin for mobile producers irrespective of recession and economic crisis

References

Baldry, J. C. 1980, General equilibrium analysis: an introduction to the two-sector model. Taylor & Francis.
“Demand for Mobile Phones”. 2009, Coursework Bank. Web.
News. 2008. Strong demand for mobile phones. BBC News.

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Determinants of the Demand for Mobile Phones in the UK

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