Pakistan Telecom Industry Porter 5 Force Process Model Analysis

1 MOPP

Khalique Zafar (FA14RPM006)

Assignment (1) MGT600 (MOPP)--MSPM Moderator Name: Rumla Tahir Khalique Zafar (FA14RPM006)

1.

What is the main objective/purpose of Michael Porter’s Five Forces Model?

The model identifies and analyzes five competitive forces competition threat of new entrants into industry,  bargaining power of buyers, bargaining power of suppliers and threat of substitute products and competitive rivalry within industry that shape every industry, and helps determine an industry's weaknesses and strengths.

2.

Focusing on the Telecom Industry of Pakistan complete the following worksheet?

WORKSHEET

Bargaining Power of Suppliers Suppliers are POWERFUL if…  There is a credible forward integration thr eat eat by sup plier s.  Suppliers are concentr ated.  There is a significant cost to switch sup plier s. ful.  The customers are  power   power ful.

Suppliers are WEAK if…  The product is standardized. There ar e  The product many competitive sup plier s.  They are supplying commodity  products.  There is a credible backward integration thr eat eat by purchasers. rs.  There are concentrated pur chaser s.  The customers are weak.

What does the bargaining power of suppliers in your industry look

lik e?

Bargaining Power of Supplier—Low Monopolistic conditions always favors suppliers to be able to control and manipulate prices in the market and act powerfully to bargain when key suppliers are less or scarce in numbers and product is monopolized But in Pakistan Telecom industry due to a healthy number of suppliers/telecom operators operating like MOBILINK, WARID, PTML UFONE, CHINA MOBILE (ZONG), TELENOR with almost same type of  products and competition is quite stiff which results in good amount of supply of products ensured by all suppliers at low cost also there is no significant cost involved for customer to switch from one operator to other.

Bargaining Power of Customers/Buyers Customers are POWERFUL if…  Threat of backward integration is high  Customers have lots of competing brands to choose from  Lots of Substitute products are available  Cost to switch sup plier s is significantly low undifferentiated  Rival Products are relatively undifferentiated  Buyers are sensitive to price

Customers are WEAK if…  Product is highly differentiated  Substitutes are unavailable  Switching costs are significant  Customer is unaware regarding the product  Buyers are not sensitive to price  There are concentrated pur chaser s.  The suppliers are strong.

2 MOPP

Khalique Zafar (FA14RPM006) What does the bargaining power of customers your industry look

lik e ?

Bargaining Power of Customers/Buyers—High There are a lot of alternatives available in terms of products and brands for the customer at low price and  product are almost undifferentiated with relatively low cost to switch from one product to another or one supplier to other. Growth rate in the industry is high having cellular industry penetration in the market at 40% with an overwhelming subscriber line touching to 133 million this year and growing at fast pace. Loyal base of customer for any operator and product is hard to come by in the industry. In fact, existence to brand loyalty in telecom industry is close to zero. Only business or corporate class practice to stick to one operator for consistency which are very few in comparison to other customer base. Customers are enjoying power full  bargaining with good quality product at low prices.

Threat of Substitute Products/Services Threat of substitutes will be LOW if…  There is strong brand loyalty.  There are tight or strong customer r elationships.  Switching costs for customers are high.  The relative price compa red to per f or mance of substitutes is high.

Threat of substitutes will be HIGH if…  There is little to no  brand loyalty.  There are loose customer  r elat ionships.  Switching costs for customers are low.  The relative  price com pared to  per f or mance of substitutes is low.

What substitute products/ or services exist for your industry? What does the bargaining threat of substitutes within your industry look lik e ? Threat of Substitute Products/Services—High Five telecom operators with a range of a good number of product in the market along with competitive alternate available in the industry like PTCL and other internet service providers’ alternative. There is little  brand loyalty and performance factor in general did not hurt customers in comparison to price. Switching cost is low as well as no strong customer relationship mechanism in place by any operator in the industry which differentiate one to other. All these factor give liberty to customer for opting substitutes and always pose a high threat to telecom operator. Lower price strategy or high quality service can help in consumer base but not as effective in retaining customers forever.

Threat of New Entrants Threat of new entrants is LOW if…  High Barriers to Entry  Large Initial Capital Requirements  Cost of Doing Business is High  There is patented or  proprietary kn ow-how.  There is difficulty in  brand swit ching.  There are restricted distribution channels.  There is a high scale thresho ld .  Extensive Legal and Regulatory Frameworks exist

Threat of new entrants is HIGH if…   L o w B a r r i e r s t o E n t r y  Legal and Regulatory Frameworks are loose  Initial Capital requirements are small  There is common technology.  There is little brand loyalty  Customer Switching Costs are low  Distribution channels are easily accessible.

3 MOPP

Khalique Zafar (FA14RPM006) What does the threat of new entrants within your industry look

lik e?

Threat of New Entrants—Low  New entrant’s threat is always effected by entry barriers in the economy of the country, capital investment required and economies of scale. Generally entry into business in Pakistan is relatively easy in comparison to other countries in the region due to low capital investment and low level entry barriers in the country. But at  present telecom industry has very high and stiff entry requirement and higher cost and capital investment involved in introducing new products and sustaining cost is also quite high in the industry due to which new entrants are reluctant to enter the market. As Pakistan is among one of the few countries whose economy is  jolted by the row of terrorism and biased behavior of big powers in the region as far as business is concerned. So, the threat of entry of new telecom operator are very low at that point.

Competitive Rivalry Within Industry Competitive rivalry within an industry is LOW if…  There are few  players in the industr y.  Players have different str ategies.  Differentiation between competitors and their products are high.  There is little to no price com petit ion  There are high market growth r ates.  Barriers for exit are low.

Competitive rivalry within an industry is HIGH if…  There are many players of about the same size.  Players have similar str ategies.  There is not much differentiation  between player s and their products.  There is much  price com petit ion  Low market growth rates (growth of a  particular company is  possible only at the expense of a com petit or ).  Barriers for exit are high (e.g. ex pensive and highly specialized equipment).

Comment on the Competitive Rivalry within your Industry using your previous responses above and conditions outlined?

Competitive Rivalry Within Industry--High There are many operator with same product line and almost same strategy of high quality product provision to customer at low rates resulted in only competition on price. Total subscriber line now reached at saturation level of about 133 million which is 40% of the market share. Now growing at steady rate mostly due to huge competitive rivalry based advertising and marketing campaigns. Competitive rivalry is very high quite visible at all levels sometimes seems that rivalry pushing telecom operators in very narrow corners. This competitive rivalry resulted in low prices and good quality of products, giving advantageous benefit to customers.