Demand For Wireless Products And Services example essay topic

Over the past decade the wireless telecommunications industry has undergone a multitude of changes and experienced rapid growth. Developments in technology and consumer demand have fueled this growth and research shows that this growth will continue in the years to come. This paper will analyze the basis for these trends in consumption patterns, to include the utility derived from the products, changes in demand, market prices and the elasticity of demand of wireless services. Utility is defined as the "satisfaction one get from consuming a good or service" (Colander, 2004, p. 179).

The utility derived from the use of wireless communications devices includes freedom from being tied to one place, the hope of increased productivity, and cost savings from free long distance. Another aspect of utility is the way wireless devices are used today. In the marketplace "the cell phone is not just a communication device but a device that enables the exchange of ideas and also, increasingly, goods and services" (Key, 2005, p. 52). This tells us that consumers envision cellular phones as not only a means to keep in touch, but as a way to collaborate with others, shop for products, and entertain themselves.

As wireless communication companies recognize the utility derived from their products and services they can develop more services and further increase the demand for their offerings. The demand for wireless communications devices has increased in recent years due in large part to price drops from advances in technology, better and more widespread coverage and new services. One trend that will continue to drive growth in the wireless industry is the cultural change brought on by youth's consumption and use patterns (Key, 2004). This trend almost guarantees that demand for wireless products and services will continue to grow for many years across many sectors. Today, managers and business leaders may be apprehensive to adopt new wireless technologies over their current wire-bound infrastructures because of quality and security concerns. This new generation of workers has already entered the workplace and as they come into positions of more power and influence they are more likely to deploy wireless solutions, which they have already adopted and become comfortable with.

Another growth factor of the wireless industry is the decrease in market prices and the price elasticity of demand for wireless products and services. Advances in technology and increased competition explain the decrease in market prices in the wireless industry over the past few years. Growth projections of the industry have created an incentive for more telecommunications carriers to enter the market, resulting in increased competition. This increased competition has made demand for wireless products and services elastic, meaning that the percentage change in quantity would be greater than any percentage change in price (Colander, 2004). This will cause wireless product and service providers to keep prices low and offer other non-monetary incentives to attract potential customers.

But keeping prices low and incentives may not be enough if states continue to tax wireless services as they have been. There is research that shows some states heavy taxation of wireless services is having a negative affect on the growth of wireless services. In one study conducted by Allan Ingraham and J. Sidak (2004), price elasticity of demand was used to prove that the states disproportionate taxation of wireless services has caused a loss in efficiency. The report uses New York as an example stating, "raising an additional dollar from wireless taxation would result in a welfare loss of between $1.43 and $1.95" (Ingraham & Sidak, 2004, p. 11). This means that the extra revenue that the state receives from the tax pushes consumers out of the wireless market by almost double. Over the years wireless products and services have greatly improved and the current trends indicate that growth will continue in the wireless industry for many more years.

As technology improves quality, security and price more people will opt for wireless solutions to their telecommunications needs. New services and applications will also fuel the growth in this sector. Wireless product and service providers need to prepare for this increase in demand in order to remain competitive.

Bibliography

Colander, D.C. (2004).
Microeconomics (5th ed. ). Burr Ridge, IL: Irwin / McGraw-Hill. Ingraham, A.T. & Sidak, J.G. (2004, August).
Do states tax wireless services inefficiently? Evidence on the price elasticity of demand. Retrieved April 2, 2005 from web G.
2005, February).
Cutting the cord: Investing in wireless. Venture Capital Journal, 45 (2), 52. Retrieved April 2, 2005 from EBSCOhost.