The ultimate power of suppliers

The winding up of Phones 4U demonstrates the importance of market structure and how it affects operations.  We discuss this topic on pages 43-46 of our book.  Market structure is typically part of an economics or business strategy curriculum, but we believe that operations strategy and management can only be understood if the context in which it takes place is understood.

The Phones 4U story illustrates this.  The retail chain began when telecoms company did not have their own retail distribution network – stores or online.  Over time as the market became more competitive, the telecoms giants profits were squeezed and hence they wished to retain more of this by distributing directly to customers (forward integration)  The business model of retail chains like Phones 4U and Carphone Warehouse therefore became increasingly unsustainable.  It neatly illustrates how an oligopoly, in this case the telecoms companies, can exert huge power in the market place.

This entry was posted in Chap 02 Winning Customers, Sector: Retail and tagged , . Bookmark the permalink.

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