Porters Five Force Model

 

through ugh Analysis of Telecom Indus ry thro Porter’’s ive orce Model Porter

 

RODUCTION

 

lecom Mark Market et

 

rowth in Telecom Industr 

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The monthly data usage per smartph in India is expected to increase from GB in 2017 to 18 GB by 2023.

Data usage on Indian telecom operat networks (excluding (excluding Reliance Jio), ou e n s x mont s as ata usa share increased to 34 per cent by the end of June 2017$.

According to a report by leading rese firm Market Research Store, the India telecommunication services market likely grow by 10.3 per cent year-onto reach US$ 103.9 billion by 2020.

 

eless Segment Revenue d minates Market

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In November 2017, India’s India’s telephone subscriber s ubscriber base reached 1,185.88 million. In November 2017, the wireless segment (98.03 per cent of total telephone subscriptions) dominated the market. Urban regions accounted for 57.20 per cent share in the wireless telecom subscriptions in the country, country, while rural areas accounted for the remaining share.

 

y Companies

 

RTER’ TER’SS FFIV IVE E FOR FORCE CE MOD MODEL

 

reat of New Entrants: Lo •

The biggest biggest barrier to entry is access to finance.

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When Wh en fina financ ncin ing g oppo opport rtun unit itie iess a are re less less re read adil ilyy a ava vail ila able, the pace of entry slows.

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Obtain ownership ownership of a telecom license.  

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Low product differentiation. Access to Optical Fiber Fi ber network.

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Unfavorable government policies.

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Presence Pre sence of 6-7 6-7  player playerss in each each regio region n dissuades dissuades ne players from entering the market

 

rgaining Power of Buyers High Buyer power vary between differ d ifferent ent market seg ents. Buyer in Telecom Industry divided into Individual • •

Enterprise customers(IT Companies, Banks etc.)

Buyer’ss Informatio Buyer’ Information n regarding regarding availabili availability ty of othe options has become high. Low cost of switching for retail customers. Service treated by the customer as a commodity. commodity. Competition between Enterprise customers. c ustomers. The bargaining power of buyers is rising.

 

oduct Differentiation

 

rgaining Power of Suppliers : Moderate Suppliers power Suppliers power refers refers to increas increasing ing price, limiti limitin n availability of raw materials, reducing quality. quality. It’s It’s p pow ower er is inv inverse ersely ly pr prop opor orti tion onal al to No: No: o off sup supp pliers & directly proportional to no: of buyers ifferent equipment / supplies needed : Mobile Towers Network Equipment SIM Cards Hand Set •

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ifferent Services needed: Spectrum Bandwidth Information Technology Customer Support •

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rgaining Power of Supplies argaining power classification Entity Name

Power

Mobile Tower

Low

Network Equipment

Medium

SIM Cards

Low

Hand Set

Low

Spectrum Bandwidth

High

Information Technology

Medium

Customer Support

Medium

 

reat of Substitutes : Low  yer Propensity to Substitute. •

tivity,, and affordable affordable services, the number Buoyed by by ch cheaper sm smartphones, fa faster co conne tivity million by June 2018. of mobile internet users in India is estimated to touch 478 million

Products and services service s from non-traditional telecom industries pose . Some Substitutes for voice communication: VOIP (Skype, Messenger etc.) •

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Online Chat (WhatsApp) Email Satellite phones

 

reat of Substitutes tive Prices •

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Previously A Previously Airt irtel el would would lead the telecom telecom industr industr and now as we know that JIO is the th e mai main n su substi bstittut ute e fo for Ai Airtel rtel an and dm mo ost of of th the tte elecom industry. with the advent advent of Jio which combines combines both the ervices and charges the client only or ata an not or voice ca s, w ic is a master stro e y Jio w ic separates Jio and others like Airtel with a complete distinction. This was the m majo ajorr scheme scheme that that Jio Jio implem implement ente e  that compelled the customers from Airtel Airtel or other other telecom telecom industry industry to swit switch ch t a substitute (Jio)

 

dustry Rivalry: High

Industry Indus try riv rivalry alry can be categoris categorised ed into high high intensit intensit and low intensity. •

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Hi High gh in inte tens nsit ityy of of ccom ompe peti tito tors rs are are aggre aggress ssiv iv ly targeting each other’ other ’s markets and aggressively pricing products.   increases profit potential for the existing firms.

The Th e in indus dustr tryy is highl highlyy fr fragm agmen ente ted d with with 15 pla playe yers, such that there are as many as five-six players in one region.

 

dustry Rivalry With low With low produ product ct and service service diff differe erenti ntiati ation, on, low low r prices and innovative services are means of attracting new customers. This tends to drive the margins and a nd profits down. na on e g ex ex arr er ers n orm o regu a ons an spec a ze equ pmen have increased the overall competition. Merger & Acquisitions

 

dustry Rivalry Current  Market Share

Aircel 7% BSNL + MTNL 10%

Jio + Rcom 15%

Ai tel + Telenor + Tata Teleservices 32%

Vodafone  + Idea 36%

 

inal Conclusion Factors of an Attr Attractive active industry: Threat of entrants is low. Threat of substitute products is low. Bargaining power of buyers is low. Bargaining power of suppliers is low. Intensity of rivalry among existing firms is low.

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Telecom Industry in India has limited players a requires huge investment in infrastruct development and its profitability depends number of subscribers and pan India d penetration network. Although Threats subs su bsti titu tuti tion on is lo low w and and bar bargai ain nin ing g pow power of supp supp is moderate, with high Industry Rivalry and h bargaining power of customer make it a moder attractiv attr active e industry industry..