This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
Telecommunication industry is one of the booming industries and it has the high business potential. It is a vast industry with high investment. It is the major cause for the increase in the employment rate in most of the developed and developing countries. It provides employment for one million people in U.S. and stands first in employment provider in the world. Phoneix centre research stated that the business competition will be healthy and advantage to the consumers as the prices are lower and the quality is higher. It is a dynamic industry with many networks of services including mobile phone, internet services and telephones. Majority of the telecom industries are controlled by private organisations rather than a government monopoly controlling it. A large number of traditional telecom services are replaced by new technologies such as mobile services and other wireless technologies. The modern telecom industry increased the quality and speed of the internet.
Texts and images are the big concern for the telecom industry rather than the voice services. Developments are made in the internet technologies such as broadband and data applications than the telephone service. More research and development works are going in the mobile sector as it earns the maximum revenues than the traditional phone service. Telecom industry is linked directly to the economy of a country. In the recent years countries in the Asia pacific and Latin America took over the manufacturing of telecommunication equipments from North America and Europe. This trend is due to the cheap labour and steady economy. Further the growth of India and China made many manufacturers to establish their business in these countries. Many telecommunication multinationals favoured Australia for its business due to its resilient economy and political stability. This is the reason for Australia to stand one among the dynamic telecom markets in the world.
As of 2009 Telecommunication industry has revenue of $1.2 trillion in U.S. and $3.7 trillion globally. At the end of 2008, 59.3% of world population subscribed to mobile. International telecommunication Union (ITU) estimates that there was an annual growth rate of 23.2% which made to increase from 1.41 billion in 2003 to 4.01 billion users at the end of 2008. Many industries provide low cost wireless network to the people in developing countries including third world countries. This will make an increase of 5.5 billion wireless subscribers by 2011 to 2012. There was an annual growth rate of 2.4% in global landline users. There was an average of 18.95 landlines per 100 populations. But for U.S. there was a decrease 3.5% annual growth rate which made to 182.9 million people using landline to 158.4 million.
The major factors which affect the telecommunication industries are
- Competition between wired and wireless providers.
- Advancement in internet and wireless networks.
- Availability of mobile phones with 3G services.
- Low cost providers.
Telecommunication industry is the only industry which has many advanced technologies such as Internet, Fibre-optics, Wireless communication and Satellites. Cable TV systems play an important role in entertainment sectors as they offer high speed internet access and many operators sell TV via Internet protocol services. Innovation and cost control will make telecom industry to grow. Cell phone call cost became very low nowadays and it is big threat to the landlines.
The top four telecom industries are China Mobile (China), Vodafone (Britain), Verizon communications (U.S) and AT&T (U.S), which play a major role in connecting people around the world. These four industries play a major role in the world's telecommunication.
China Mobile is a state owned enterprise and ranks first in global telecommunication industries. It reached five hundred billion customers on 31st of august 2009 with 45 million people subscribed from the start of 2009. It has an annual growth rate of 23.8% which resulted in the yearly turnover reached more than 65 billion U.S dollars. It contributes to 74.25 percent on the market share in Mainland China.
Vodafone is the largest mobile network in Britain and second largest in the world. It was established in the year 1984, Newbury, London. Acquisitions and collaborations made Vodafone to become the largest telecommunication industry in the year 2000. Vodafone group has 260 million customers and more than 553 million venture customers. It has a yearly turnover of $64,470 million. It has partner network in 33 countries and ownership interest in 27 countries. Nick Read is the current CEO of Vodafone group with head office located at Newbury, London. The mission statement of Vodafone group is
‘To be the communications leader in an increasingly connected world.'
Apart from telecommunication services,
Vodafone also provides many advanced features to its customers which are listed below
- Vodafone Live
- Vodafone 3G
- Vodafone Passport
- Vodafone at home
- Vodafone at office
Verizon Communications is the leading industry in United States with revenue more than 43 billion U.S. dollars. It provides many advanced features such as wired and wireless communications and broadband services to different sectors. Its wireless network is the most reliable network in United States serving more than 70 million people nationwide. Verizon Business provides business solutions and Verizon Telecom Provides entertainment and information. Ivan Seidanberg is the present CEO and operating its head quarters at NewYork. The mission statement of Verizon Communication is
‘As a leader in communications, Verizon's mission is to enable people and businesses to communicate with each other. We are also committed to providing full and open communication with our customers, employees and investors.'
It is the most profitable telecommunication industry in U.S. The main focus of the company is to provide excellent service which meets the needs of their customers.
AT&T is one of the largest providers of IP oriented communication services with fastest 3G network. It is the largest Wi-Fi network and largest number of high speed internet access subscribers in United States. AT&T represents the most market share in long-distance telecommunications industries. Randall Stephenson is the present CEO for AT&T industries and the head office is located in New York. AT&T mission tells about its business strategy which reads as follows:
‘We aspire to be the most admired and valuable company in the world. Our goal is to enrich our customer's personal lives and to make their business more successful by bringing to market exciting and useful communications services, building shareholder value in the process.'
AT&T followed many innovative ideas in order to compete globally. They attracted more consumers by serving bundled packages which include High speed internet access, TV via Internet Protocol in combination with VOIP, Wireless accounts. Its services include internet, video telecommunications, voice data and mobile phones.
AT&T's acquisition of MediaOne which is the 4th largest cable television operator will expand its business and can give local and long distance phone service through cable systems. It also provides entertainment to millions of US home including many additional services such as AT&T solutions, Wireless services, Labs, and Customer markets.
Other industries like T-Mobile and Orange also made millions of consumers switch from landlines to mobiles. WiMAX a leading wireless technology with a range of 30 miles has the potential to rupture landlines and broad bands. Comcast one of the leading industries switched to VOIP bandwagon along with Vonage and Skype. Voip was less expensive and it made a good alternative to landlines.
Most of the cellular companies in U.S. have upgraded their network to 3G. They handle traffic volume more efficiently by adding large number of new towers. Mergers and acquisitions is also a cause for the growth in telecommunication industry. The competitive world is shifting dramatically due to mergers like Sprint and Nextel to Sprint Nextel. In recent years government regulations on these industries are evolving rapidly which is an added advantage to these business strategies.
Main Aspects of Porter's Five Forces Analysis:
Porter's five forces analysis is a model which should be represented for an industry or for a business to frame the strategy effectively. The five forces predict the competitiveness among the rivalries and also the attractiveness that the present market has. Attractiveness refers to the profitability that may be gained by the corresponding product or business. These five forces are considered as micro-environment by Porter. Identifying and working towards these forces will affect the ability to serve the customers and make profit. A change when identified in any of the forces requires to re-asses the marketplace for the business.
Competitors Rivalry between Existing Industries:
The competition in the present telecommunication industry is very vast such that the saying “Survival of the fittest” comes. Already established companies compete within themselves to come into power and also restricting the new comers entering the field. European market which is one of the largest market in the world have got a very tight and tough competition in which the major competitors in telecommunication for Vodafone being O2, Orange, T-Mobile and 3. Vodafone keeps its voice on the top when comparing in these companies. Their focussed strategy makes them to stay in the position where they are now.
Vodafone's strategy of providing services has been maintained and keeps them updated with the emerging technology as well. One of the fastest growing technologies is the wireless technology where 2.5G has been replaced by 3G technology and the 4G is on the way. Therefore Vodafone has to keep itself up to date with the emerging technologies to advance their position in the market and the services in the present technology. Each competitor in this field has their own competitive advantages and specialised in their own way. In order to expand their market, they have to follow the strategy which suits the new market or it may even depend on the place where it is being established and should give constant growth and services. The smaller companies will find tough to replicate the service provided by Vodafone. The high quality of service will make them embossed on the telecommunication market which is expected by all the customers. Everyone expects “value for money” service. In this field, “value” is a relative term. They compare cost of value within the rivalries and will come out with the best out of them. Vodafone competitive strategy works well in this competitive structure when they update themselves with all the technologies which should never go down with their competitors who will also try to keep them updated with everything. Their main resources are to bring the innovation and knowledge which are important to stay ahead. These resources are harder to copy and establish which are carved in the company's history by staying focused on what they do.
There is a rival competition between AT&T and Verizon. AT&T has been in the market for a longer period than the Verizon Communications. One of the best feature for AT&T is the roll-over minutes feature in which the subscribers can carry their calling minutes to the next month if they did not use it in the current month. This made AT&T to stand first in U.S. until 2008. But the trend soon changed when Verizon bought Alltel which made AT&T to lose its number one position to Verizon.
Other Industries like T-Mobile and Sprint face a tough competition with AT&T and Verizon. Even though these companies provide low cost services, they could not attract other customers. Boost, an additional feature is the only option for Sprint to retain its subscribers. Thus none of the industries in U.S. could compete with AT&T and Verizon because of its huge availability of capital and large number of subscriber.
China Mobile Ltd., reported a slowdown in its profit due to its tough competition with China Unicom and China Telecom Corp. But the launch of third-generation mobile service will enhance its growth by providing quality handset and network coverage to the new subscribers. CEO Wang Jianzhou said the company will grow by the new value added services and providing more services to the urban cities where the mobile penetration is high in the recent years.
Barriers to Entry:
Cost and Legal requirements are the two types of barriers. Installation cost for satellite and towers are too high for a new entrant to face. High initial expense is the main barrier for a new entrant in telecommunication industry. Federal communications require some conditions and a Spectrum license from the company. These legal requirements are the barriers for the new entrants. Threat of new entrants and barriers are inversely related. High barriers to the new entrants results in low threats to the existing industries.
Substitutes and Complements:
There is huge number of substitutes for the long distance calls. Some are e-mail, phone cards, postal service and internet based services such as Skype and Voip. Subscribers feel easy to use the alternative provider as the cost is low and the time consumed is relatively low. But there is little impact on the profit for the existing industries as they too provide these substitutes to their customers.
Verizon's threat is the Nextel's walkie-talkie instruments. These devices become popular among the workers in the industries such as construction, roadways and some manufacturing industries. Also the internet products had some impacts on Verizon. But Verizon provided low cost wireless services to its customers in order to retain its existing customers and to lower the impacts of the substitutes.
Employees, fibre optics and hardware providers are the main suppliers for the telecommunication industry. Acquisition is the main reason for these suppliers to grow. Labours are easily hired or replaced because of the jobs which available in the telecommunication industry need not require extraordinary skills. Other suppliers are those who provide software facilities and network infrastructure.
Industries like Nokia, Motorola, LG, Samsung and Motorola are the major suppliers for the Verizon communications. It does not depend on any single supplier and customers have different choices. So the power of supplier is very low. Similarly the purchasing power of Vodafone is very high which made them to demand their phone manufacturers for exclusive deals. In the recent years, due to its emerging power, Vodafone decided to manufacture its own brand mobiles in order to break the power of Nokia.
Buyer power has a significant effect in the telecommunication industry. As the customer can easily switch to alternative provider at no cost if they are not satisfied with rates or any other features with their current service provider. So the industries must provide cheap long distance calls in order to retain their share and revenue. Consumers are well informed about the cost of long distance calls from the alternative providers. So the existing providers should do frequent marketing to inform the customers about the services and long distance call rates.
Buyer power of Verizon is very high due to its rival competition. Verizon created a competitive advantage by offering GPS in mobile phones and excellent customer service which reduced the buyer power.
As said earlier telecommunication is one of the most important industries responsible for the developing world. The world is nothing without communication. Each industry is dominant in its own markets.