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Furthermore. This means iiNet customers do not have to pay phone line rental. Since 1998.0% (Internet Service Providers in Australia 1|Page . This makes iiNet the third largest ISP in Australia.0% of the market share and is considered to be the second biggest single internet service provider (Wired Telecommunications Carriers in Australia Industry Report 2010). Major acquisitions include OzEmail in early 2005. business and personal use. The company is one of a handful of ISPs that have invested in their own digital subscriber line access multiplexers (DSLAMs). the company has acquired in excess of 30 ISPs.iiNet has vision of leading the market with products that harness the potential of the Internet and then differentiate with award-winning customer service. with a current total market share of 4. with about 300 housed in Telstra exchanges. they focus on three groups including. and Westnet in mid-2008.Background The Western Australia-based Internet Service Provider (ISP). As an internet service provider iiNet represents 8. the main product and services that iiNet are focused around the internet and include. iiNet. internet protocol pay television. communication accessories. internet services. iiNet was the first national provider of naked DSL. email and web solutions. was first established in 1993 and listed on the Australian Stock Exchange in 1999. This investment means iiNet customers residing close to an exchange get internet access at speeds of more than 20 megabits per second using ADSL2+ technology. The company has engaged in the wired telecommunications market since the acquisition of AAPT. with ADSL2+ broadband being delivered without the need for a phone service. data storage. Whilst there is a large offering of products. home residential. Whilst as a wired telecommunications provider they are considered to be the third biggest single player. Main Business Activities iiNet has a large offering of products and services for their customers. and subsequently PowerTel.
Netphone 1 & 2 Pay Television Fetch TV 1 & 2 Accessories Hardware. Routers Storage Online Vault Storage. Modem/ VoIP handset.Business Voice Solutions Sip Trunking Email Web Solutions Web Hosting Email Hosting Domain Name Register Website Shopping Carts Virtual Private Servers / Networks Support Computer Software & Hardware Support Accessories Hardware – including: Bob.Residential Internet ADSL Broadband 1&2 Naked DSL Dial Up iiNet Fibre Optic Broadband Mobile Broadband Phone Landline Phone Rental VoIP.Data Business Internet ADSL Broadband 1&2 Naked DSL Mobile Broadband iiNet Fibre Optic Broadband Broadband speed add-ons Phone Landline Phone Rental VoIP Calling. Bob. Modem/Voip Handset Storage Online Vault Storage.Data Personal Internet Mobile Broadband iiNet/TomizoneWifi hotspot Mobile Phone Mobile Phone.including.Sim Only Storage Online Vault StorageData 2|Page .Single & Multiline Business Phone Solutions ISDN.
This means that the market is attractive to new entrants. They use the internet as tools for marketing and are more concerned with the quality of services provided by ISPs. This means that supplier power is high at the moment but may decrease with the introduction of NBN. This weakens buyer power. This situation may not continue to stay this way as customers are demanding faster and increasing bandwidth. which means the customers are willing to pay a premium or a similar product to a competitor at a cost advantage which either means the business makes money on either unit or can offer that unit to customers at a lower price. On the whole. accounting for 84. a business can sustain a competitive advantage by either supplying a different or better product. On the other hand. either a cost leadership or a product differentiation strategy. This service is provided via Telstra and therefore iiNet has to pay a fee to Telstra (iiNet’s main supplier). Telstra has the largest network and infrastructure in the country and can be seen as a monopoly. corporate customers have different concerns other than value for money. Even though prices are regulated by the Australian Competition and Consumer Commission. Also. The introduction of NBN in the future will cause a decrease in the power that Telstra has as a supplier. there is not much required in terms of physical infrastructure as a new entrant can purchase access to already existing infrastructure. When viewed this way. buyer power is moderate to high. This means that technological innovation is desired for the future. Buyer Power The customers of internet service providers are households and businesses. Telstra has the right to propose a price. this makes companies in this industry struggle to achieve economies of scale making the Supplier Power New entrants 3|Page . (Internet Service Providers in Australia 2011) The ISP industry is growing quite rapidly. There is high price competition amongst already existing players.6% and 15.4% respectively (Internet Service Providers in Australia 2009). The industry has high fixed costs and is extremely capital intensive. increasing costs and the requirement for new and developed infrastructure. forcing new entrants to find a way to differentiate them from the rest. There are several ISPs that provide packages and ranges to suit customer needs. This means that customers can easily change ISPs in order to get better value for money. They also do not change their providers due to minor differences in price. iiNet has expanded and upgraded their network so as to allow customers in certain areas to have access to faster internet (ADSL 2+).Porter’s Five Forces of Industry Attractiveness for iiNet The porters five forces generally attempts to identify a business as pursuing either a broad (market wide) or a narrow (niche) scope.
The ISP industry is currently relying on WiMax technology to offer a competitive position against the 4G mobile broadband internet threat. These factors weaken the threat of new entrants. reading. Price in this industry is shaped by two components. It has replaced several traditional methods of research. This means that currently the threat of substitution is low to moderate. ISPs are facing the threat of substitution by mobile telecommunication providers with their 4G technological development which improve data access speeds. Although this threat is not a current one and will take time to materialise. (Internet Service Providers in Australia 2011) Competitive Rivalry 4|Page . Price is a major basis of competition.industry unattractive to new entrants. the market has several other ISPs which mean that competition is high among them. and media. making it moderate. In this highly competitive market it is important for iiNet to keep innovating and developing their services in order to stay in the market. (Internet Service Providers in Australia 2011) The ISP industry is currently dominated by Telstra. This large amount of development leads to high costs and can put a constraint on cash flows. shopping. Besides Telstra. However. (Internet Service Providers in Australia 2011) Substitutes The rapid development of the internet has enabled it to become a necessity in the day to day lives of households and businesses. The main driver for competition amongst high end internet service providers is faster and better service along with value for money. communication. download speeds and the amount of download activity.
iiNet has over 1. Primus. BRAND. Weaknesses Opportunities Brands with outstanding service and products will continue to be rewarded with higher ARPUs (Average revenue per user) in the future. Award winning customer service – iiNet has won several awards over the years. It is a very important tool and is used by businesses before a new venture or project is proposed.3 million customers (iiNet 2010) A publically listed company Ability to leverage off their own infrastructure which is largely a fixed cost network . Other competitors (Telstra.iiNet’s call centres are in Australia and Outsourcing isn’t considered as a beneficial option because customer service is very important. Current customers.The Company is one of a handful of ISPs that have invested in their own DSLAMS. It also identifies areas which iiNet needs to improve upon. Heavy reliance on Telstra's (TLS) last-mile copper network which mean that access costs to third party infrastructure still remain the predominant component of the cost to serve.SWOT Analysis for iiNet A SWOT analysis of iiNet shows its strengths which it can utilize in order to build its strategies. Infrastructure not owned by iiNet. TPG) Low barriers to entry for new entrants after the installation of NBN (National broadband network)Australia wide Threats 5|Page . INNOVATION and SCALE. Strengths Large scale customer base. (mobile voice and broadband products) iiNet’s investment in customer service will capitalise on the opportunities in the switching customer market. Increased scale because of the acquisition of large companies (recently AAPT) with active customer base – iiNet has acquired 30 internet service provides since 1998. with about 300 housed in Telstra exchanges. Optus. Increase in revenue through complementary products. Main focus SERVICE.
as internet access is a commoditised service. the internet is available through mobile phones being one example). particularly for new internet users. iiNet. Product range has become increasingly important. The Australian ISP industry is deemed to have a low level of globalisation. Product innovations are important to winning subscribers in this industry. Given the speed of technological advances occurring within this industry. combined with the trend towards convergence in telecommunication devices (i. as players offer integrated combinations of the latest products and services to encourage customers to become multi-product users. the top four players (Telstra. the ability to offer the latest value added features is of paramount importance in differentiating the various players. More than 90% of Australian ISPs have less than 10.e. Level Concentration in this industry is Medium Basis of Competition Competition in this industry is High and the trend is Increasing Barriers to entry Barriers to Entry in this industry are Medium and Steady Globalisation in this industry is Low and the trend is Steady Industry globalisation 6|Page . Price is the major basis of competition. Innovative packaging and bundling is also becoming significant competitive tool. Branding is now a critical competitive weapon as it serves as means for differentiation. as the price per data byte will continue to deteriorate into the future. The barriers to entry in the ISP industry are the lowest of all telecommunications industries. This is highlighted by the high number of small operation ISPs that exist in Australia.Competitive landscape for iiNet as an Internet Service Provider Factors Market Share Concentration Description The Australian ISP industry is characterised as having a medium level of concentration. Quality of service tends to reflect support and help desk services. Market segmentation can be a basis of competition. which can be a differentiating factor.000 subscribers each. This year. For example. Some players achieve higher margins by focusing on small niche segments or market segments such as business. some ISPs have extended their product suite to include internetbased telephony services (voice over internet protocol or VoIP) as well as national and long distance calling minutes. SingTel Optus Pty Limited and TPG Telecom Limited) in the ISP industry are forecast to account for 63% of total industry revenue. Foreign owned entities are believed to account for less than 15% of industry revenue.
7|Page . In 2008-09.Major competitors There are four major players in ISP market which are identified in graph 2. With advantages in scale and scope. Mergers and acquisitions are a frequent occurrence as emerging ISPs seek enough scale to take on the full service providers: Telstra and Optus. down from the high of 8. The ISP space is hotly contested.1%. the company accounted for about 46% of total telecommunications revenue. This loss of share was despite an increase in its proportion of fixed internet subscribers.2% in 2004-05. In 2010-11.0% of industry revenue. For others. Optus is forecast to account for 8. With iiNet rapidly acquiring new Naked DSL broadband and VoIP subscribers. IBIS World expects the company will reach a market share of 8. Telstra has been able to fend off attacks from a host of competitors.
which would have led to a saving of 2-3%. when a customer transfers from a competitor to iiNet. which allowed them to acquisition over thirty ISP’s (Internet service providers) including two major acquisitions. Of course. This overhead has allowed iiNet to achieve its industry leading NPS and customer retention. NBN is also a new breakthrough in broadband that looks attractive in price for both iiNet and customers. Service The needs of the customers are one major driver of business strategy. poor response times and below average service levels. Over the years. It therefore represents the best attempt that the management can make at defining and securing the future of that business.Strategies of iiNet Business strategy describes how a particular business intends to succeed at its chosen market place against its competitors. 2011). iiNet’s Current Business-Level Strategies Scale iiNet Ltd is the fourth largest internet service provider in Australia. Mobile Voice. the company has followed an expansion strategy. however they didn’t because the saving would have been outweighed by the decrease in service levels. iiNet’s investment in customer service will also capitalize on the opportunity of customers switching within the market. which was gaining market size and market share. iiNet has also been growing in maturity in the broadband market by building scale and diversifying into fresh territory. Although the company still achieved their major objective.000 in 2008 which made iiNet the third largest ISP in terms of the number of subscribers (iiNet. may also be a key differentiator in going forward as iiNet continues to deliver outstanding customer service with call centre costs only being 11% of revenue. and a new suite of innovative consumer products from our iiNet Labs to ensure long term growth. iiNet also decided not to outsource. However iiNet needs to maintain its competitive advantage and the large cost involved with the development as this can put a constraint on cash flows (iiNet. OzEmail for example caused outages. iiNet has reduced the reason for customers to 8|Page . subscribers reached over 480. Quality of service therefore. with a 50% saving on set up costs. NetPhone. OzEmail and Westnet. like Fetch TV. Innovation IiNet’s capital investments in its own DSLAM network manifest its attempt to cope with the risk of rivalry which aims at revolutionizing its product offerings to its customers. with a majority of iiNet’s new customers coming from competitors that has high prices and low service quality. This allows for continued organic growth. After acquiring these two major companies. some acquisitions were not always successful. 2011).
com.Population Clock. 25 July. which tells the consumer that they can buy with confidence. http://www. S. (2010). as being a brand leader. (2011).ITWire. February 22.gov. pp.'Population Clock.' http://www.nsf/94713ad445ff1425ca25682000192af2/1647509ef7e25faac a2568a900154b63?OpenDocument [viewed 27/09/13]. Brand iiNet has a long history of investment in service. 1-12.com/apps/news?pid=newsarchive&sid=aeLOtBUSVHyg [Accessed 9|Page . D. and many others returning to iiNet after having left to try services with iiNet’s competitors.au/australian-it/fighting-fund-pays-off/story-fn7uxxqa-1226005543654 [viewed 27/09/13].au/ausstats/abs%40.theaustralian. Stimpson. Australia/New Zealand Reference Centre. 'iiNet to build up network'.[Online].nsf/94713ad445ff1425ca25682000192af2/1647509ef7e25faac a2568a900154b63?OpenDocument [Accessed 27/09/13]. Bloomberg. EBSCOhost. EBSCOhost.*Online+. The. viewed 27/09/13.’ Swan Says. (2011). Available at: http://www. R.abs. 'Business Strategy for A2'. Age. Colley. brand. By being one of the front running companies in broadband.itwire. Australia/New Zealand Reference Centre. The (Melbourne).com/your-it-news/entertainment/46057-afact-to-go-after-iinet-in-high-court [Accessed 27/09/13]. Available at: http://www. (2010). UK. AFACT to go after iiNet in High Court. (2010). 'Fighting Fund Pays Off'. 2003. 2011. Dyer. Australian. Battersby.leave with 35% of their customers leaving only because they were relocating.abs. Australia’s Ageing Population Presents ‘Challenges. Australian Bureau of Statistics.gov. Fenner. viewed 27/09/13 Beer. iiNet’s brand is being promoted among potential customers. 'Optus spells out its goals'. Bingemann M.au/ausstats/abs%40. P. Bibliography Australian Bureau of Statistics. and innovation and iiNet has the scale and credibility to continue to grow by acquisition and diversification. L 2010.bloomberg. 12 November. Available at: http://www. A 2006. The Australian.
iiNet in strong position for NBN roll-out [online]. Hitt M. EBSCOhost. Strategic Management: Competitiveness and globalisation. The (Sydney). Haynes.au/irm/Company/ShowPage. Australia/New Zealand Reference Centre. Dowling P. viewed 27/09/13. Available from: http://investor. 'IBISWorld Industry Report: Internet Service Providers in Australia. iiNet 2011. R 2008 'Optus lures custom with great deals'. 3rd edn.iinet. Cengage Learning Australia. South Melbourne.aspx?CPID=1415&EID=11894948&PageName=iiNe t%20in%20strong%20position%20for%20NBN%20roll-out [Accessed: 27/09/13] 10 | P a g e .net. 17 July 2008.Hanson D. Hoskisson R 2008. Australia. Internet Service Providers in Australia Industry Report (2009). Ireland R. Daily Telegraph.' IBISWorld Pty Ltd.
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