The Situation: Patrick Zuliani is the founder and CEO of Zuliani Telecom, a publicly traded cell phone service provider that is about to start offering service in remote areas across Canada (see grey area in figure 1) following the approval of www their application to the Canadian Radio-television and Telecommunications Commission (CRTC). The CRTC was willing to fast-track the approval for Zuliani Telecom to enter these markets as there is often only one provider of wireless mobile in these areas and rural Candians have been complaining about high prices and poor customer service. The CRTC has not yet granted them access to any of the densely populated urban areas of Canada (see yellow area figure 1). Canada's current mobile wireless industry can best be described as an oligopoly where Rogers, Telus, and Bell have over a 90% market share. This means that the market can be potentially very lucrative if Zuliani telecom can strategically secure a foothold in the rural market and create a strong business case to present to the CRTC so that they gain access to the urban market. The shareholders and the board of directors for Zuliani Telecom are getting very impatient with the current share price of the company and the large capital investments that have been made to enter the Canadian wireless mobile market. The pressure is on Mr. Zuliani to present a strategic plan that will impress the board and show the company's long-term profit outlook justifies the recent investments. Mr. Zuliani's friend, Nathan Price, has recommended you based on your outstanding work helping Northern Cottage Living. Therefore, Zuliani Telecom has made you a lucrative offer to consult them during this important time. Pricing Strategy and Profit Prediction: Zuliani Telecom will only be offering a single monthly plan (unlimited talk, text, and data) and is still unsure of what price they will end up offering for this wireless mobile service. Since Zuliani will essentially only be competing with one existing company in most rural markets there will be an expected transition from the existing monopolies to Cournot duopolies since:
The Situation: Patrick Zuliani is the founder and CEO of Zuliani Telecom, a publicly traded cell phone service provider that is about to start offering service in remote areas across Canada (see grey area in figure 1) following the approval of www their application to the Canadian Radio-television and Telecommunications Commission (CRTC). The CRTC was willing to fast-track the approval for Zuliani Telecom to enter these markets as there is often only one provider of wireless mobile in these areas and rural Candians have been complaining about high prices and poor customer service. The CRTC has not yet granted them access to any of the densely populated urban areas of Canada (see yellow area figure 1). Canada's current mobile wireless industry can best be described as an oligopoly where Rogers, Telus, and Bell have over a 90% market share. This means that the market can be potentially very lucrative if Zuliani telecom can strategically secure a foothold in the rural market and create a strong business case to present to the CRTC so that they gain access to the urban market. The shareholders and the board of directors for Zuliani Telecom are getting very impatient with the current share price of the company and the large capital investments that have been made to enter the Canadian wireless mobile market. The pressure is on Mr. Zuliani to present a strategic plan that will impress the board and show the company's long-term profit outlook justifies the recent investments. Mr. Zuliani's friend, Nathan Price, has recommended you based on your outstanding work helping Northern Cottage Living. Therefore, Zuliani Telecom has made you a lucrative offer to consult them during this important time. Pricing Strategy and Profit Prediction: Zuliani Telecom will only be offering a single monthly plan (unlimited talk, text, and data) and is still unsure of what price they will end up offering for this wireless mobile service. Since Zuliani will essentially only be competing with one existing company in most rural markets there will be an expected transition from the existing monopolies to Cournot duopolies since:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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