KCCMS THE BUSINESS SCHOOL

K.C. College of Management Studies

PGCHM

Semester I

2009 – 2010

STRATEGIC MANAGEMENT
TOPIC: PORTER’S 5 FORCES MODEL OF BHARTI AIRTEL

BY- GROUP 2

NAME ROLL NO

MINAL AGARWAL 2

HARDIK CHOWDHARY 11

URVI MADHWANI 31

KAUSHIK SHAH 45

VAISHALI B. SUPEKAR 50
 PORTER’S 5 FORCE MODEL OF BHARTI AIRTEL

INTRODUCTION OF BHARTI AIRTEL:

Bharti Airtel is one of India's leading private sector providers of telecommunications services
based on an aggregate of 66,689,943 customers as on April 30, 2008, consisting of 64,370,434
GSM mobile and 2,319,509 Bharti Telemedia subscribers.

The businesses at Bharti Airtel have been structured into three individual strategic business units
(SBU’s) - mobile services, telemedia services (ATS) & enterprise services. The mobile services
group provides GSM mobile services across India in 23 telecom circles, while the ATS business
group provides broadband & telephone services in 94 cities. The enterprise services group has
two sub-units - carriers (long distance services) and services to corporates. All these services are
provided under the Airtel brand.

Company shares are listed on The Stock Exchange, Mumbai (BSE) and The National Stock
Exchange of India Limited (NSE).

Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields
of business. Bharti Tele-Ventures is today acknowledged as one of India's finest companies, and
its flagship brand 'Airtel', has over 12 million customers across the length and breadth of India.
With approximately seven million subscribers, Airtel commands nearly 20% share of the market
- making it the number one brand in the country.

Airtel has been positioned as the market leader in mobile services. Airtel not only created the
image of Airtel being a market leader, but also showcased the brand as an innovator. It was a
badge people were proud to wear - and flaunt. They have tried to convey the message to the
people that Airtel is the mean using which you can express yourself to the world.

TELECOMMUNICATION / MOBILE SERVICES:

Airtel’s mobile footprint extends across the country in 23 telecom circles. It’s service standards
compare with the very best in the world. In fact, that’s how Bharti has managed to win the trust
of millions of customers and makes it one of the top 5 operators in the world, in terms of service
and subscriber base.
The company has several Firsts to its credit:

• The First to launch full roaming service on pre-paid in the country.

• The First to launch 32K SIM cards.
• The First in Asia to deploy the multi band feature in a wireless network for
efficient usage of spectrum.
• The First to deploy Voice Quality Enhancers to improve voice quality and
Acoustics.
• The First telecom company in the world to receive the ISO 9001:2000
• Certification from British Standards Institute.

PORTER’S 5 FORCE MODEL:

A business has to understand the dynamics of its industries and markets in order to compete
effectively in the marketplace. Porter defined the forces which drive competition, contending
that the competitive environment is created by the interaction of five different forces acting
on a business. In addition to rivalry among existing firms and the threat of new entrants into
the market, there are also the forces of supplier power, the power of the buyers, and the threat
of substitute products or services.
 Main aspects of the porter model are as follows:

1) Threat from competiton - The rivalry between existing sellers in the market.
2) Bargaining power - The power exerted by the customers in the market.
3) Supplier bargaining power - The impact of the suppliers on the sellers.
4) Threat of new entrants - The potential threat of new sellers entering the market.
5) Threat of substitutes - The threat of substitute products becoming available in the market.

These five forces, taken together, give us insight into a company's competitive position, and
its profitability. Understanding the nature of each of these forces gives organizations the
necessary insights to enable them to formulate the appropriate strategies to be successful in
their market

1) Threat for competition:

The major players in the telecommunication are Vodafone, BSNL, Idea, Aircel, Reliance
GSM and others. As per 16th April, 2008 GSM mobile operations constitute ~67% of
India’s wireless market. Bharti Airtel continued to rock in the GSM space at the cost of
BSNL increasing its market share to 32% [30.63% in 2007] at the end of March
2008.GSM subscriber base for JUNE 2009 has been updated for the complete list with
the additions done and dealt lets have a look at the market shares and user base of GSM
operators. Bharti Airtel reached the 100 MILLION CUSTOMERS mark the first to do so
in India, with a total base of 102,367,881 customers. This was made possible with the
gain of 28.18 customers during the month.

2) Bargaining power of the consumer/buyer:

The most important determinants of buyer power are the size and the concentration of
customers. Other factors are the extent to which the buyers are informed and the
concentration or differentiation of the competitors. Consumer bargaining power is high.
Due to intense competiton consumers have a lot of options open for them. Each and every
company comes up with different plans and value-added services to attract and retain
their customers.

3) Suppliers bargaining power:

• Bargaining power is the ability to influence the setting of prices.
• The more concentrated and controlled the supply, the more power it wields against the
market. Here the supplier bargaining power is low because AIRTEL having a strong
brand image many corporation would like to be associated with them. This would in turn
increase their brand image and help them in expansion. Outsourcing deals of Airtel are
 with Ericsson for managing, providing and maintaining the equipment. Another deal is
with IBM for networking.

Threat of new entrants:

The threat of new entries will depend on the extent to which there are barriers to entry.
These are typically-

Economies of scale (minimum size requirements for profitable operations),

 High initial investments and fixed cost
 Cost advantages of existing players due to experience
 Brand loyalty of customers
 License fees
 Infrastructure set-up cost is high.
 Distribution channels are controlled by existing players,
 High switching costs for customers
 Rapidly changing technology

The threat of new entrants for Airtel is therefore low.

4) Threat of substitutes:

A threat from substitutes exists if there are alternative products with lower prices of better
performance parameters for the same purpose. They could potentially attract a significant
proportion of market volume and hence reduce the potential sales volume for existing
players. For Airtel the threat from substitutes is high as video conferencing, online chats,
social networking sites are some of the ways to communicate n doesn’t have too much of
cost involved in it.