Industrial Organization
June 15, 2013
Voice Over IP Industry
Top Companies Market Share
Company Name | % Market Share | 8x8 | 15 | ShoreTel | 10 | RingCentral | 8 | Vocalicity | 8 | West IP | 7 | iCore Networks | 7 | Thinking Phones | 4 | Other | 41 |
4- Firm Concentration Ratio( CRm= Σmi=1 si )
.15+.10+.8+.8= .41 or 41%
Using the 4 firm concentration ratio, it is hypothesized that this industry is definitely not perfectly competitive but perhaps approaching oligopoly. The low concentration ratio shows that the companies in this industry compete actively with one another.
Herfindahl Hirschman Index ( )
Lower Bound:
.152 + .102 + .082 +.082 + .072+.072 + .042 = 0.0567
Upper Bound:
.152 + .102 + .082 + .082 + .072 +. 072 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .012 = .0728
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The Lower & Upper Bound of this industry also reaffirms what was analyzed by the 4-firm concentration ratio. With an upper bound of .0728 suggest that the industry of Voice over IP as a unified communication service is lowly concentrated. Firms do not have power to push Price over Marginal Cost.
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Market Definition
Our test market for this analysis is specifically the UCaaS, the unified communication as a service for businesses, through voice over IP. Voice over Internet Protocol is a telecommunication method in which voice packets are sent in a computer-serviced network such as the Internet. There are 3 types of VoIP service that can be used such as analog telephone adaptor which allows you to connect a phone to your internet connection converting traditional phone lines into digital data transmission; IP Phones are specialized phones that gets connected directly in your router through an Ethernet port; or Computer-computer communications which replaces the traditional
References: Market Share: http://www.8x8.com/AboutUs/8x8Blog/tabid/167/PostID/139/Business-VoIP-is-Gaining-Fast-on-Traditional-Providers.aspx Market Definiition: http://www.fiercetelecom.com/press-releases/8x8-and-shoretel-leading-high-growth-cloud-ucaas-market VOIP history: http://blog.tmcnet.com/blog/tom-keating/voip/voip-history.asp Types of VoIP: http://voip.about.com/od/servicesandsolutions/tp/TypesOfVoIPServices.htm