Qualcom is a company that operates in the technology sector, producing various important gadgets that are embedded in other gadgets such as mobile phones, computers, vehicle systems, and watches. One of the products that the company makes is a Gobi modem. This is a modem that is embedded in various devices enabling them to use wireless internet. Such devices include smartphone, watches, television, laptops, vehicle entertainment and tracking systems and Tablets. There are various other wireless devices that need the Gobi modem. This shows that the products that Qualcom are used for various purposes (Qualcom, n.d).
The market the product is sold can be said to be an oligopolistic market, where there are few producers of the gadget. All over the world, the numbers of companies that make embedded modems like Gobi modems are very few. This means that they have a given level of power to control the prices that are charged. However, a single company cannot control the price to a great extent but can do with appropriate collaboration. The number of buyers are many considering that the mobile phone companies, vehicle manufacturing companies, router making companies and computer making companies all combined make a large pool of customers making many devices every day.
Some of the companies that Qualcom sell products to are also its major competitors. In relation to Gobi modem, the company competes in the segment of wireless service delivery, where the largest companies that it competes with include IBM, Google, HP, Yahoo and Google. The difference between Qualcom products and those of the competitors can be associated with the price and the quality of the products. All these companies are always competing to make their products better so that they are preferred by the customers. Qualcom has a huge challenge of keeping up with the competition from these large multinational companies. Considering the large market of the technological devices, Qualcom has a great room for improving its market share if it takes the necessary steps to ensure that the customers trust and have confidence in their products (Qualcom, n.d).
The customers for the Gobi modems are mainly other companies that make mobile phones, the motor vehicle-making companies and computer making companies. All the devices that use modems can have a Gobi modem, and this means that Qualcom can sell the Gobi modems to such companies. These products then end up to the final consumers hence benefit from the Gobi modems. This means that the major customers for the Gobi modems are companies manufacturing technology devices and the final consumers buy the products when already embedded in other products.
Qualcom has heavily invested in the area of its operation, more than any other company in the world. This is why it has come up with various products and sells its licenses to various companies, such that every product that is sold, such as a smartphone, the company gets a share of the revenue. The company products have also been praised for their quality considering that the company specializes only in making devices that are used by other companies. This enables the company to make products that are sold in various sectors in the industry. The company expects to increase its market share in the future as the demand for various electronics using devices from the company increase.
The other comparative advantage is that the company targets various sectors and the revenues that it generates come from several departments. This gives the company an advantage in that its performance is the company is assured of a constant revenue generation. The projections are that the company performance is expected even to perform better than the other companies in the same industry.
International Trade Opportunities
Qualcom is based in the United States, and makes products that it imports to international companies. Qualcom has various opportunities that it can exploit in the international market. While the company cannot export the products directly to people, it can benefit from the cheap labor and the technology in the international market. there are companies in China that require the technology at Qualcom, and the best option would be Qualcom setting up a factory in China and other countries such as India where the growth in technology is fast and the cost of labor remains low. This can ensure that the company lowers its production costs as well as accesses greater market for its products.
Factors that will affect demand
The demand for Gobi modem depends on various factors. The demand for various technology devices affects the demand for the Gobi modems. This means that the change in the income level of various countries is a major factor that would affect demand as an increase in income would lead to an increase in demand for vehicles and smartphone which would then mean a higher demand for the Gobi modems. Another factor is the invention of other devices that need Gobi modems, which would mean that the demand to meet the needs of the new market would increase.
A reduction in the price of smartphone would change the demand for the Gobi modems. This is because the demand for the smartphone and vehicles, as well as other devices, would increase and this would mean a greater demand for the Gobi modems (Arnold, 2008).
Factors that would affect supply
If new companies entered in the market to make new products without infringing the copyright of Qualcom, then the supply of the Gobi modems and substitutes would increase. another factor is the price of the devices. As the price rises, then Qualcom would invest more in the production of the devices and this would increase the supply (Samuelson, 2010).
A breakthrough in technology would increase the supply of the Gobi modems, if such technology at the company would lower the costs of production as well as make it easier to produce more units on a daily basis than before.
Factors affecting prices
The price of the devices would be affected by technology change. If new technology lowered the production costs significantly, then the producer would lower the price that is charged.
Another factor is the demand in the market since a higher demand would mean that the company would be able to charge a higher price without affecting the profits that it generates.
Factors that affect total revenue
The total revenue for the Gobi modems is affected by its price elasticity of demand. The inelastic demand means that the company can increase the price of the products and increase the total revenue because the demand of the products cannot reduce adversely as the products are highly demanded in the market.
A new technology that lowers the costs of production can improve the total revenue as the products can be sold at a lower price encouraging more companies to buy the gob modems from the company and this would mean an increase in the total revenue (Arnold, 2008).
Factors influencing productivity
Productivity at the company is mainly influenced by the experience of the employees and the technology that is available. As the employees get used to their duties at the company, it comes easy for them to perform their tasks and this improves their productivity. Additionally, technology improvement means that more products can be produced by a single employee, meaning an improvement in the productivity of the employees.
There are various costs that are associated with the production of Gobi modems. There are the direct costs which include the raw materials that are used in the production as well as the labor costs of the employees involved in the production. Other costs include marketing costs of the products (Samuelson, 2010).
The fixed costs of the production include the rent that is paid for the factory premises and the electricity bill that has to be paid when there is production or not. All these costs affect the price of the Gobi modems.
There are also the administrative expenses that are incurred because there are supervisors and managers who make plans and control the other employees. There are also the opportunity costs of producing Gobi modems as the company foregoes the production of other mobile phone gadgets such as an operating system that would also be a source of revenue.
Externality and Government policy
Externalities include the costs that are not reflected in the price of the products. A major externality for the Qualcom is pollution to the environment. The company uses energy and some chemicals that emit dangerous gasses to the environment hence affecting the environment in an adverse way. The government is aware of this, and this is why the company is taxed so that such taxes can be used to provide services to the society such as cleaning the environment (Arnold, 2008). Apart from the company factory, the gadgets in which Gobi modems are embedded pollute the environment such as vehicles and the government policy in such a case is to tax the products. This also depends on the policy of various countries the gadgets are used.
The company can reduce such externality by ensuring that it uses clean sources of energy as well as make efforts to use technology that does not result in environmental pollution.
The tax policy by the government mainly increases the marginal cost of production. The tax increases the production costs, and this means that the marginal cost of production also rises. This discourages the company from producing to its optimum level given the planned production budget remains the same. The marginal revenue, on the other hand, reduces as the increased cost means a higher price for the products and this means less demand for the products.
The company can increase its profits by ensuring that it lowers the costs of production. This is possible if the company opened factories in places like China where the labor costs are low, and the technological development is very fast. Other places include India. With such a strategy, it is possible for the company to partner with various companies that can act as its customers. There is a growing number of companies in such countries that would need the products that Qualcom makes.
Qualcom is doing well as a technology company which has specialized in the production of certain products. The company quality products are a major factor that enhances its competitive advantage. Considering that the company Gobi modems are sold to other companies that make the final products, Qualcom should struggle to make partnerships with such companies so as to ensure that its products are prioritized. Having plants in foreign countries can also better help the company target the international market in a more effective way.
Arnold, R. A. (2008). Microeconomics. Mason, OH: Thomson/South-Western.
Qualcom. (n.d.). Qualcomm Gobi Modems | Qualcomm. Retrieved from https://www.qualcomm.com/products/gobi
Samuelson, P. A., & Nordhaus, W. D. (2010). Economics. New Delhi: Tata McGraw-Hill.
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