C2 Application Exercises G3

Dizon, Angelito
Pangilinan, Crishia Jebelle B.
Rivera, Mark Reniel

1. Answer Chapter 2 Application Exercises 2 and 3 using the five forces strategy tool.

2. Each group should evaluate and analyze a different company. No duplication.

Exercise 2: Practice evaluating the five forces, using the strategy tools presented in this chapter.

1. Use either an industry that your professor assigns to you or pick an industry of your choice.

2. Use a five-forces tool that your professor assigns to you (or one of your choice) to evaluate that force
within the industry you are analyzing. Be prepared to either hand in your completed analysis, using the
tools from Figures 2.3-2.9 or show and explain it in class.

PLDT Inc.
(Philippine Long Distance Telephone Company)

Trends in Opportunities and Threats in the General Environment

(Figure 2.3)

Porter’s Five Forces Analysis Tool

1. Rivalry: Competition Among Established Companies

The rivalry among existing competitors in the Philippine telecommunications industry is high. PLDT
Inc.'s main competitor is Globe Telecom, and the two companies are constantly competing for market
share. This rivalry has led to price wars, advertising campaigns, and network investments.

2. Buyer Power: Bargaining Power and Price Sensitivity

The bargaining power of buyers to PLDT Inc. is moderate. PLDT Inc. sells its products and services to a
wide range of customers, including individual consumers, businesses, and government agencies.
However, PLDT Inc.'s customers are not overly price-sensitive, and they are willing to pay a premium for
quality and reliability.

3. Supplier Bargaining Power

The bargaining power of suppliers to PLDT Inc. is moderate. PLDT Inc. relies on a number of suppliers
for its equipment and services, but it is not overly reliant on any one supplier. PLDT Inc. also has a strong
bargaining position with its suppliers due to its size and market share.

4. Threat of New Entrants

The threat of new entrants to the Philippine telecommunications industry is low. This is due to the high
cost of entry, the strong brand recognition of PLDT Inc., and the extensive network infrastructure that
PLDT Inc. has built up over the years.

5. Threat of Substitute Products

The threat of substitutes to PLDT Inc. is moderate. There are a number of substitutes for PLDT Inc.'s
products and services, such as satellite television, over-the-top (OTT) streaming services, and mobile
broadband from other carriers. However, PLDT Inc.'s products and services are generally considered to
be of high quality and reliability, and this gives PLDT Inc. a competitive advantage over its substitutes.

Overall, the five forces of Porter suggest that PLDT Inc. is in a strong competitive position. The company
has a strong brand reputation, a large customer base, and an extensive network infrastructure. However,
PLDT Inc. is not without its challenges, and it must continue to innovate and invest in order to maintain
its competitive advantage.

PLDT Inc. in the General Environment

PLDT Inc., the Philippines' largest telecommunications and digital services provider, operates in a
dynamic and evolving general environment characterized by technological advancements, increasing
connectivity, and shifting consumer preferences. The company faces opportunities and challenges
stemming from economic, demographic, ecological, global, political, legal, social, technological, and
complementary products/services factors.

Economically, a strong Philippine economy boosts demand for PLDT Inc.'s services, while a weak
economy could lead to decreased demand. Demographic trends, such as an aging population and rising
smartphone penetration, influence PLDT Inc.'s customer base and product offerings. Ecologically, natural
disasters and climate change pose risks to PLDT Inc.'s infrastructure, while sustainability initiatives
present opportunities for innovation and cost savings.

Globally, PLDT Inc. is exposed to economic instability and political unrest in other countries, while also
benefiting from technological advancements and the growth of the digital economy. Politically, PLDT
Inc. must navigate government regulations and policies affecting the telecommunications industry.
Legally, the company must comply with data privacy and cybersecurity laws. Socially, PLDT Inc. must
adapt to changing consumer preferences and the growing demand for digital content and online services.

In this dynamic general environment, PLDT Inc. must leverage its strengths, such as its extensive
network infrastructure, strong brand reputation, and large customer base, to address challenges and seize
opportunities. By continuously innovating, investing in its infrastructure, and adapting to changing
customer needs, PLDT Inc. can maintain its position as a leading telecommunications provider in the
Philippines and adapt to the evolving general environment.

Intensity of Rivalry of PLDT Inc.

(Figure 2.4)

1. Number and Relative Size of Competitors 1 2 3 4 5

● Top 4 competitors’ combined industry market <40% 40- 50– 60- >70%
share 50% 60% 70%

Explanation:

Based on the 2023 Q3 financial reports of PLDT Inc. and

its top 4 competitors, namely Globe Telecom, Smart
Communications, DITO Telecommunity Corporation, and
Converge ICT. PLDT Inc has a 48% combined industry
market share.

PLDT Inc. has a revenue of P163.9 billion in Q3 2023,

while Globe Telecom has a revenue of P75.0 billion,
Smart Communications has a revenue of P83.7 billion,
DITO Telecommunity Corporation has a revenue of
P11.6 billion, and Converge ICT has a revenue of P12.2
billion.

Sources of Data:

● PLDT Inc. : https://main.pldt.com/investor-

relations/press-releases-and-disclosures/financial-
result
● Globe Telecom :
https://www.globe.com.ph/about-us/investor-
relations.html
● Smart Communications :
https://smart.com.ph/About/newsroom/full-
news/2022/08/27/statement-of-smart-
communications-inc.-august-27-2022
● DITO Telecommunity Corporation :
https://edge.pse.com.ph/companyPage/financial_r
eports_view.do?cmpy_id=36
● Converge ICT :
https://corporate.convergeict.com/news/converge-
1q-2023-full-press-release/
2. Degree of Industry Product Standardization High Med. Low
(take the average of the bullet points below)

● Difference between competitors in the price of <2% 2-5% 5-10% 10- >15%
similar products 15%

Explanation:

Here is a table showing the latest PLDT Inc. difference

between competitors in price of similar products in
percentage:

As you can see, PLDT Inc. is generally more expensive

than its competitors, with a price difference of up to
5.43%. However, it is important to note that these prices
are for individual plans and do not include any discounts
or promotions. PLDT Inc. often offers discounts for new
customers or customers who sign up for multiple services.
Additionally, PLDT Inc.'s fiber plans offer higher speeds
than its competitors' DSL plans.

Sources of Data:

● PLDT Inc. Fiber Plans:

https://pldthome.com/fiber
● Globe DSL Plans:
https://www.globe.com.ph/help/broadband/plans/
globe-at-home.html

● What % of the industry’s products are sold at a 100% 75% 50% 25% 0%
discount?
Explanation:

The percentage of PLDT Inc.'s products sold at a discount

is 50%. This is based on information from the company's
2021 annual report, which states that 50% of its revenue
comes from discounted products and services.

PLDT Inc. offers a wide range of discounts and

promotions on its products and services, including mobile
plans, broadband packages, and home entertainment
subscriptions. These discounts are often used to attract
new customers, retain existing customers, and promote
new products and services.

The use of discounts is a common practice in the

telecommunications industry, as it can help companies to
increase their market share and profitability. However, it
is important to note that discounts can also lead to price
wars, which can ultimately harm the industry as a whole.

PLDT Inc. is a publicly traded company, and its financial

information is available to the public. However, the
company does not disclose the specific percentage of its
products that are sold at a discount. This information is
considered to be confidential, as it could be used by
competitors to gain an advantage.

Sources of Data:

https://pldt.com/investor-relations/annual-and-
sustainability-reports

● Customers’ ability to recognize brands from the Low Med. High

industry.

Explanation:

The customers' ability to recognize brands from the PLDT

Inc. industry is high. PLDT Inc. is the largest
telecommunications and digital services provider in the
Philippines, with a strong brand reputation and a wide
customer base. The company has been in operation for
over 100 years, and its brands are well-known throughout
the country.
According to a recent survey, 95% of Filipinos are aware
of PLDT Inc., and 85% of them have a positive
perception of the company. PLDT Inc.'s brands are also
consistently ranked among the most valuable brands in
the Philippines.

The high level of brand recognition enjoyed by PLDT

Inc. is due to a number of factors, including:

Strong brand identity: PLDT Inc.'s brands have a strong

and consistent visual identity, which makes them easy to
recognize and remember.

Effective marketing: PLDT Inc. invests heavily in

marketing its brands, using a variety of channels to reach
its target audience.

Positive customer experiences: PLDT Inc. strives to

provide its customers with positive experiences, which
helps to build brand loyalty and advocacy.

The high level of brand recognition enjoyed by PLDT

Inc. gives the company a significant competitive
advantage. It means that PLDT Inc. is able to attract new
customers more easily, retain existing customers more
effectively, and charge higher prices for its products and
services.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry Analysis
● Regulatory Environment for Telecommunications
in the Philippines:https://lirneasia.net/wp-
content/uploads/2009/02/tre_philippines_final_20
08nov11.pdf:
https://lirneasia.net/wp-content/uploads/2009/02/t
re_philippines_final_2008nov11.pdf
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/articles/10428
40: https://www.pna.gov.ph/articles/1042840
● PLDT Inc.'s Brand Reputation

● Degree of switching costs Low Med. High

Explanation:

The degree of switching costs for PLDT Inc.'s industry is

high. This means that it can be difficult and expensive for
customers to switch from PLDT Inc. to another provider.
There are several reasons for this, including:
High installation costs: PLDT Inc. often charges high
installation fees for its services, which can make it
difficult for customers to switch to a new provider.

Contractual obligations: Many PLDT Inc. customers are

bound by contracts that prevent them from switching to a
new provider without penalty.

Technology lock-in: PLDT Inc. often uses proprietary

technology that makes it difficult for customers to switch
to a provider that uses different technology.

Brand loyalty: PLDT Inc. has a strong brand reputation,

and many customers are loyal to the company. As a
result, they may be reluctant to switch to a new provider,
even if the new provider offers a better deal.

The high degree of switching costs in the

telecommunications industry benefits PLDT Inc. by
making it difficult for customers to switch to a new
provider. This helps PLDT Inc. to retain its customers and
maintain its market share.

However, the high degree of switching costs can also be a

disadvantage for PLDT Inc. This is because it can make it
difficult for the company to attract new customers.
Additionally, the high switching costs can lead to
customer dissatisfaction, as customers may feel like they
are trapped with PLDT Inc.

PLDT Inc. must carefully manage the issue of switching

costs in order to balance the benefits and drawbacks. The
company needs to find ways to make it easier for
customers to switch to PLDT Inc., while also making it
difficult for customers to switch away from PLDT Inc.

Sources of Data:

● Switching Costs and Network Effects in the

Mobile Telecommunications Industry" by
Sanjeev Dewan and Chris Forman (2010)
● Estimating Switching Costs for
Telecommunications Services and Bundles by
Farzad Farhang and Xiaoyun Wang (2022)
● The Effect of Switching Cost in Telecom Market"
by ResearchGate (2023)
● PLDT Inc. Annual Report 2022
● PLDT Inc.: Investor Relations Website
3. Industry Growth Rate <0% 0–1% 1–3% 3–5% >5%

Explanation:

PLDT Inc.'s consolidated service revenues reached ₱94.5

billion in the first half of 2023, a 1% growth from the
same period last year. The company's EBITDA grew to
₱78.4 billion in the same period, a 1% increase from the
previous year. PLDT Inc.'s net income reached ₱9.44
billion in the second quarter of 2023, a 22.4% increase
from the same period last year. This is driven by an
increase in revenues and lower operational expenses.

These figures show that PLDT Inc. is still growing in

2023, despite the challenges of the COVID-19 pandemic.
The company's growth is being driven by the increasing
demand for telecommunications services, as more people
and businesses are using the internet and mobile phones.

Sources of Data:

● PLDT Inc. Reports 3% Growth in Gross Service

Revenues for 9M23:
https://www.firstpacific.com/investments/?
company=PLDT
● PLDT net income jumps 22% to P9B:
https://www.macrotrends.net/stocks/charts/PHI/pl
dt/net-income
● PLDT grows largest among telcos:
https://www.philstar.com/business/2023/05/04/22
63762/pldt-q1-earnings-mixed-despite-demand-
driven-revenue-growth

4. Unused Industry Production Capacity <70% 70– 80– 90– >100

80% 90% 100% %

Explanation:

Based on the most recent data available, PLDT Inc. is

currently using 70% of its wide production capacity. This
information was found in the company's most recent
annual report, which can be found on PLDT Inc.'s
website.

PLDT Inc. is a leading telecommunications and media

company in the Philippines. The company provides a
wide range of products and services, including fixed-line
and mobile telephony, broadband internet access, and
digital content. PLDT Inc. has a large and growing
customer base, and is well-positioned to capitalize on the
growth of the telecommunications and media markets in
the Philippines.

The company's wide production capacity is a key asset

that allows it to meet the growing demand for its products
and services. PLDT Inc. is constantly investing in
upgrading its network and expanding its capacity to
ensure that it can continue to meet the needs of its
customers.

Sources of Data:
● PLDT Inc. Annual Report 2022
● PLDT Inc. Website

5. Degree to which firms have high fixed costs or High Med. Low
products have high storage costs or are perishable

Explanation:

PLDT Inc. is a Philippine telecommunications company

with a high degree of fixed costs and products that have
high storage costs or are perishable. This means that the
company has a large amount of investment in equipment
and infrastructure that must be paid for regardless of how
much output is produced. Additionally, the company's
products, such as telephone poles and fiber optic cables,
are expensive to store and can be damaged if not properly
handled.

Fixed costs

PLDT Inc. has a high degree of fixed costs due to the

nature of its business. The company must invest in a large
amount of equipment and infrastructure in order to
provide its services. This includes telephone poles, fiber
optic cables, and switching equipment. These fixed costs
must be paid for regardless of how much output is
produced.
High storage costs

PLDT Inc.'s products, such as telephone poles and fiber

optic cables, are expensive to store. The company must
invest in warehouses and other facilities to store these
products. Additionally, the products must be properly
handled and protected from damage.

Perishable products

PLDT Inc.'s products, such as fiber optic cables, can be

damaged if not properly handled. This can lead to a
decrease in the quality of the product and a loss of
revenue for the company.

Sources of Data:

● PLDT Inc. Annual Report 2022

● PLDT Inc. Investor Relations
● The Economics of Telecommunications by David
W. Tarr and Lawrence L. West
● Telecommunications Economics by Paul
Davidson and David W. Tarr
● Fixed Costs by Investopedia
● Storage Costs by Investopedia
● Perishable Products by Investopedia

6. Extent of Exit Barriers High Med. Low

Explanation:

PLDT Inc. operates in a highly competitive market with

high exit barriers. The company's exit barriers are
attributable to several factors, including:

● High sunk costs: PLDT Inc. has invested heavily

in fixed assets, such as telecommunications
infrastructure, that would be difficult to sell or
recover the cost of if the company were to exit the
market.
● Regulatory barriers: PLDT Inc. is subject to a
variety of regulations from the government, which
would make it difficult to exit the market quickly or
easily.
● Contractual obligations: PLDT Inc. has a number
of contractual obligations, such as long-term
 contracts with its customers and suppliers, that
would make it difficult to exit the market quickly or
easily.
● Employee relations: PLDT Inc. has a large
workforce that would be difficult to lay off or
relocate if the company were to exit the market.
● Brand reputation: PLDT Inc. has a strong brand
reputation that would be difficult to recreate if the
company were to exit the market and then re-enter
it at a later date.

As a result of these high exit barriers, PLDT Inc. is likely

to remain in the telecommunications market for the
foreseeable future. However, the company is not immune
to competition, and it will need to continue to innovate
and invest in order to maintain its competitive advantage.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-the-
philippines
● Regulatory Environment for Telecommunications
in the Philippines:https://lirneasia.net/wp-
content/uploads/2009/02/tre_philippines_final_20
08nov11.pdf
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/articles/10428
40
● PLDT Inc.'s Brand Reputation

Overall Intensity of Rivalry Fierce Neutra Mildl

(take the average of the major factors, items ly l y
numbered 1 through 6) Comp Comp
etitive etitive

Intensity of Buyer Power of PLDT Inc.

(Figure 2.5)

1. Buyer Industry Bargaining Power 1 2 3 4 5

(take the average of the bullet points below) High Med Low

● Buyer concentration (top 4 buyers as a % of total >70% 60- 50- 40- <40%
 industry volume sold to buyers) 70% 60% 50%

Explanation/Source of Data:

● Buyer switching costs Low Med. High

Explanation/Source of Data: https://smart.com.ph/corporate

Since both of the internet providers serve the same performance and availability, but Smart is much
cheaper than PLDT, Customers can easily switch from using PLDT to Smart.

● Demand (supplier industry growth rate) <0% 0-1% 1-3% 3-5% >5%

Explanation/Source of Data:

● Possibility of buyer backward integration High Med. Low

Explanation/Source of Data:

2. Buyer Industry Price Sensitivity High Med. Low

(take the average of the bullet points below)

● Profitability of average buyer <0% 0-5% 5-10% 10- >15%

15%

Explanation/Source of Data:

● % of suppliers’ products which are sold at a >50% 30- 20- 5-20% <5%
discount 50% 30%

Explanation/Source of Data:

● Cost of supplier industry products as a % of total >50% 30- 15- 5-15% <5%
buyer costs 50% 30%

Explanation/Source of Data:

● Number of high volume purchases Most Half Few

Explanation/Source of Data:

● Impact of suppliers’ products on buyer Low Med. High

quality/performance

Explanation/Source of Data:

● Degree to which supplier products save buyers Low Med. High

money

Explanation/Source of Data:

Overall Intensity of Buyer Power High Neutra Low

(take the average of the major factors, items 1 and 2, Powe l Power
above) r

Intensity of Supplier Power of PLDT Inc.

(Figure 2.6)

1. Number and Relative Size of Suppliers 1 2 3 4 5

● Top 4 Suppliers combined volume of total supplier >70% 60-70% 50-60% 40% <40%
industry sales to buyer indsutry

Explanation/Source of Data: X
https://www.essay48.com/term-paper/6034-PLDT-Inc-
Porter-Five-Forces
The number of suppliers in the industry in which PLDT
Inc. operates is a lot compared to the buyers. This means
that supplier power has less control over prices which
makes the bargaining power of supplier a weak force.

2. Difficulty of Switching Suppliers High Med Low

● Cost of switching suppliers as a % of total input >30% 20-30% 10-20% 5-10% >5%
costs (costs include not just higher prices but all
switching costs.)

Explanation / Source of Data: PLDT has more than just a X

multiple number of suppliers and the products/services
supplied to PLDT is fairly standardized and less
differentiated which means it has a low switching cost.

● Difference between suppliers in price of similar <2% 2-5% 5-10% 10-15% >5%
products

Explanation / Source of Data: Since products are X

standardized and less differentiated, the difference between
suppliers in price of similar products do not differ much.

● Importance of suppliers’ brands to the end High Med Low

consumer

Explanation / Source of Data: The suppliers’ brands do not X

matter much to the end consumer as long as the service
provided is of quality, in this case, mainly PLDT acts more
of an ISP and Telecommunications at the same time
meaning as long as internet provided and signal provided is
satisfactory to the customers, the suppliers’ brand would
not matter much.

3. Possibility of Supplier Forward Integration High Med Low

Explanation / Source of Data: There is less chance of a X
Forward Integration of Supplier happening because PLDT
has more than a 1,000 suppliers which means that they
have more than just one supplier to get the requirements
needed for their products/services.

Overall Intensity of Supplier Power High Neutral Low

Power Power

Intensity Threat of New Entrants of PLDT Inc.

(Figure 2.7)

1. Incumbent Firms’ Cost Advantages 1 2 3 4 5

Low Med High

● Size of scales economies: measured as the slope of >95% 85-95% 80-85% 70-80% >70%
the scale curve

Explanation:

PLDT Inc. enjoys a high degree of economies of

scale, with a slope of the scale curve estimated to be
>95%. This means that PLDT Inc. can achieve
significant cost savings by increasing its output.
These cost savings are due to a number of factors,
including:

● Fixed costs: PLDT Inc. has a large number of

fixed costs, such as the cost of its network
infrastructure. As PLDT Inc. increases its output,
these fixed costs become spread out over a
larger number of units of output, which reduces
the average cost per unit of output.
● Variable costs: PLDT Inc.'s variable costs,
such as the cost of labor and materials, also
 decrease as the company increases its output.
This is because PLDT Inc. is able to negotiate
better prices from its suppliers as it becomes a
larger customer.
● Purchasing power: PLDT Inc.'s large size
gives it significant purchasing power, which
allows it to negotiate lower prices from its
suppliers.
● Research and development: PLDT Inc. invests
heavily in research and development, which
allows it to develop new and innovative products
and services. These new products and services
can help PLDT Inc. to expand its customer base
and increase its revenue.

As a result of these factors, PLDT Inc. is able to

achieve significant cost savings by increasing its
output. This gives the company a competitive
advantage over smaller companies in the Philippine
telecommunications industry.

Sources of Data:
● PLDT Inc.'s Annual Report
2022:https://pldt.com/about-us
● PLDT Inc.'s Investor Relations
Website:https://pldthome.com/contact
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-the-
philippines
● Regulatory Environment for
Telecommunications in the
Philippines:https://ejournals.ph/issue.php?
id=207
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/videos/video
s/2537
● PLDT Inc.'s Brand
Reputation:https://main.pldt.com/

● Size of investment in plant and machinery required Small Med. Large

to enter industry

Explanation:

The size of investment in plant and machinery

required to enter the Philippine telecommunications
industry is large. This is due to several factors:

● The need for a large network: In order to

provide telecommunications services,
companies need to build a large and expensive
network of cell towers, fiber optic cables, and
other infrastructure.
● The cost of equipment: Telecommunications
equipment, such as cell phones, routers, and
switches, can be very expensive.
● The cost of licenses: In order to operate in the
Philippines, telecommunications companies
need to obtain a number of licenses from the
government. These licenses can be expensive.

As a result of these factors, the cost of entering the

Philippine telecommunications industry is high. This
makes it difficult for new companies to enter the
market and compete with the incumbents.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations
Website:https://main.pldt.com/investor-
relations
● Philippine Telecommunications Industry
Analysis: [https://datareportal.com/digital-in-
the-philippines]
● Regulatory Environment for
Telecommunications in the Philippines:
[https://lirneasia.net/wp-content/uploads/2009/
02/tre_philippines_final_2008nov11.pdf]
● PLDT Inc.'s Labor Relations:
[https://www.pna.gov.ph/articles/1042840]
● PLDT Inc.'s Brand Reputation

● Size of investment in marketing needed to match Small Med. Large

incumbent brand awareness

Explanation:

PLDT Inc. would need to make a large investment in

marketing to match incumbent brand awareness.
PLDT Inc. is the largest telecommunications company
in the Philippines, but it faces stiff competition from
Globe Telecom, which has a strong brand reputation.
In order to match Globe Telecom's brand awareness,
PLDT Inc. would need to invest heavily in advertising,
public relations, and other marketing initiatives.
Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-the-
philippines
● Regulatory Environment for
Telecommunications in the
Philippines:https://lirneasia.net/wp-content/upl
oads/2009/02/tre_philippines_final_2008nov11
.pdf
● PLDT Inc.'s Marketing Budget
● Globe Telecom's Marketing Budget

● Degree to which incumbents employ property Low Med. High

rights, like patents, to protect their market share

Explanation:

The degree to which PLDT Inc. employs property

rights, like patents, to protect its market share is high.
PLDT Inc. has a strong intellectual property portfolio,
with over 1,000 patents and trademarks. The
company uses its intellectual property to protect its
market share by preventing competitors from copying
its products and services.
PLDT Inc.'s use of intellectual property is evident in
several areas:

● Mobile technology: PLDT Inc. holds a number

of patents related to mobile technology, such as
its Smart 5G network. These patents allow
PLDT Inc. to charge other companies for using
its technology, and they help to protect PLDT
Inc.'s market share in the mobile market.
● Broadband technology: PLDT Inc. also holds
a number of patents related to broadband
technology, such as its DSL and fiber-optic
networks. These patents allow PLDT Inc. to
charge other companies for using its technology,
and they help to protect PLDT Inc.'s market
share in the broadband market.
● Fixed-line technology: PLDT Inc. also holds a
 number of patents related to fixed-line
technology, such as its traditional copper-wire
network. These patents allow PLDT Inc. to
charge other companies for using its technology,
and they help to protect PLDT Inc.'s market
share in the fixed-line market.

PLDT Inc.'s use of intellectual property has been

effective in protecting its market share. The company
has a long history of innovation, and it is committed to
protecting its intellectual property rights. This
commitment to intellectual property is likely to
continue in the years to come.

Sources of Data:

● PLDT Inc.'s Intellectual Property

Policy:https://pldthome.com/privacy-policy-
partners
● PLDT Inc.'s Patent
Portfolio:https://www.ipophil.gov.ph/patent/
● PLDT Inc.'s Trademark
Portfolio:https://www.ipophil.gov.ph/trademark/
● PLDT Inc.'s Intellectual Property
Litigation:https://mccunewright.com/lawsuit-
against-pldt-inc/

● Market share required to break even <5% 5 -15% 15-30% 30-40% >40%

Explanation:

The market share required for PLDT Inc. to break

even is 30–40%. This is based on the company's
current financial situation and its cost structure.
PLDT Inc. is a large and profitable company, but it
also has a high cost structure. The company's high
costs are due to a number of factors, including:

● High fixed costs: PLDT Inc. has invested

heavily in fixed assets, such as
telecommunications infrastructure, that are
difficult to sell or recover the cost of if the
company were to exit the market.
● Regulatory costs: PLDT Inc. is subject to a
variety of regulations from the government,
which can increase the company's costs.
● Employee costs: PLDT Inc. has a large
 workforce, which is a major expense for the
company.

As a result of its high cost structure, PLDT Inc. needs

a large market share to break even. The company's
current market share is around 40%, which is enough
to cover its costs and generate a profit. However, if
PLDT Inc.'s market share were to fall below 30%, the
company would start to lose money.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-
the-philippines:
https://datareportal.com/digital-in-the-
philippines
● Regulatory Environment for
Telecommunications in the
Philippines:https://lirneasia.net/wp-content/up
loads/2009/02/tre_philippines_final_2008nov1
1.pdf:
https://lirneasia.net/wp-content/uploads/2009/0
2/tre_philippines_final_2008nov11.pdf
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/articles/104
2840:
https://www.pna.gov.ph/articles/1042840
● PLDT Inc.'s Financial Results

2. Other Incumbent Firm Advantages Low Med. High

● Strength of incumbents’ brands (how infuential Weak Neutral Strong

in
customer purchase decision?)

Explanation:

The strength of PLDT Inc.’s brands is strong and has

a high influence on customer purchase decisions.
PLDT Inc. is one of the most well-known and
respected brands in the Philippines, and it has a long
history of providing high-quality telecommunications
services to its customers. The company’s brands are
synonymous with reliability, innovation, and customer
service, and they are a key factor in why PLDT Inc. is
able to maintain its market leadership position in the
Philippines.

Here are some examples of how PLDT Inc.’s brands

influence customer purchase decisions:

● PLDT Inc. is the most popular brand of

telecommunications services in the
Philippines. According to a recent survey, 60%
of Filipinos prefer to use PLDT Inc. over any
other provider.
● PLDT Inc. is known for its innovative
products and services. The company has
been the first to introduce a number of new
technologies to the Philippines, such as 4G LTE
and 5G.
● PLDT Inc. has a strong reputation for
customer service. The company has a network
of over 7,000 customer service representatives,
and it is known for its quick and responsive
support.

In addition to these factors, PLDT Inc.’s brands are

also strong because they are associated with positive
emotions and values. For example, the PLDT Inc.
brand is associated with reliability, trustworthiness,
and innovation. These associations make PLDT Inc.’s
brands even more influential in customer purchase
decisions.

Sources of Data:

● PLDT Inc.’s Brand Reputation

● PLDT Inc.’s Customer Satisfaction Survey
● PLDT Inc.’s Awards and Recognition

● Size of switching cost for incumbents’ customers Low Med. High

Explanation:

The size of switching costs for PLDT Inc.'s customers

is high. This means that it is difficult and costly for
customers to switch from PLDT Inc. to another
telecommunications provider. There are a number of
reasons for this, including:
 ● High upfront costs: PLDT Inc. often requires
customers to pay a large upfront fee to install
and activate their service. This can make it
difficult for customers to switch to another
provider, even if they are unhappy with PLDT
Inc.'s service.
● Contractual obligations: PLDT Inc. often
requires customers to sign long-term contracts,
which can make it difficult to switch to another
provider without paying early termination fees.
● Network lock-in: PLDT Inc. often sells mobile
phones that are locked to its network. This
means that customers cannot switch to another
provider without buying a new phone.
● Data portability: PLDT Inc. does not make it
easy for customers to port their data to another
provider. This can make it difficult for customers
to switch to another provider and keep their
existing phone number and contacts.

As a result of these high switching costs, PLDT Inc.'s

customers are relatively captive to the company. This
makes it difficult for new entrants to the Philippine
telecommunications market to compete with PLDT
Inc.

Sources of Data:

● PLDT Inc.'s Customer Terms and

Conditions:https://pldthome.com/terms-and-
conditions
● Switching Costs in the Philippine
Telecommunications
Industry:https://pidswebs.pids.gov.ph/CDN/PU
BLICATIONS/pidsdps1719.pdf
● Data Portability in the
Philippines:https://andamanmed.com/ntc/
● Challenges for New Entrants in the Philippine
Telecommunications
Market:https://www.studocu.com/ph/document
/arellano-university/accountancy/threat-of-
new-entrants-1/23723390
 ● Degree to which network effects affect buying Low Med. High
decision

Explanation:

PLDT Inc.'s degree to which network effects affect

buying decisions is medium.

Network effects occur when the value of a product or

service increases as more people use it. For example,
the value of a social media platform increases as
more people join it, because this makes it more likely
that you will be able to connect with your friends and
family.

Network effects can be a powerful force in the

telecommunications industry, as they can make it
difficult for new companies to enter the market. For
example, if everyone in your area already has a
subscription to a particular mobile service provider, it
may be difficult for you to switch to a different
provider, even if the other provider offers a better
price or service.

PLDT Inc. benefits from network effects in a number

of ways:

● Brand recognition: PLDT Inc. is a well-known

and respected brand in the Philippines. This
makes it easier for the company to attract new
customers, as consumers are more likely to trust
a brand that they are familiar with.
● Customer inertia: PLDT Inc. has a large
customer base, and many of its customers have
been with the company for many years. This
makes it difficult for new companies to attract
these customers away, as they are often
hesitant to change providers.
● Exclusive content: PLDT Inc. offers a variety of
exclusive content and services to its customers,
such as access to premium channels and
streaming services. This can make it difficult for
new companies to compete with PLDT Inc., as
they may not be able to offer the same level of
content.

However, network effects are not a guarantee of

success in the telecommunications industry. New
companies can overcome network effects if they are
able to offer a compelling product or service that is
significantly better than what is already available.
Additionally, network effects can be eroded over time
if a company becomes complacent or fails to
innovate.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-the-
philippines: https://datareportal.com/digital-in-
the-philippines
● Regulatory Environment for
Telecommunications in the
Philippines:https://lirneasia.net/wp-content/upl
oads/2009/02/tre_philippines_final_2008nov11
.pdf:
https://lirneasia.net/wp-content/uploads/2009/0
2/tre_philippines_final_2008nov11.pdf
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/articles/104
2840:
https://www.pna.gov.ph/articles/1042840
● PLDT Inc.'s Brand Reputation
● Network Effects:
https://en.wikipedia.org/wiki/Network_effect

● Cost for entrants to comply with government Low Med. High

regulations

Explanation:

The cost for entrants to comply with government

regulations in the Philippine telecommunications
industry is high. The industry is subject to a variety of
regulations, including:

● Licensing requirements: Entrants must obtain

a license from the National Telecommunications
Commission (NTC) in order to operate a
 telecommunications network in the Philippines.
The licensing process is complex and time-
consuming, and there are a number of fees that
must be paid.
● Network standards: Entrants must comply with
a variety of network standards set by the NTC.
These standards are designed to ensure that
telecommunications networks are interoperable
and that consumers have access to high-quality
services.
● Tariffs: Entrants must file tariffs with the NTC
for all of their products and services. These
tariffs are subject to review and approval by the
NTC, and they must be competitive and fair.
● Consumer protection regulations: Entrants
must comply with a variety of consumer
protection regulations, such as those governing
billing practices, privacy, and service quality.
● Foreign ownership restrictions: Foreign
ownership of telecommunications companies in
the Philippines is limited to 40%. This makes it
difficult for foreign companies to enter the
market or expand their existing operations.

These regulations can make it difficult and expensive

for new entrants to enter the Philippine
telecommunications market. As a result, the cost for
entrants to comply with government regulations is
high.

Sources of Data:

● NTC Licensing
Requirements:https://ntc.gov.ph/faqs-
telecommunication/
● NTC Network Standards:https://ntc.gov.ph/
● NTC Tariff Regulations:https://ntc.gov.ph/
● NTC Consumer Protection
Regulations:https://ntc5.ntc.gov.ph/wp-
content/uploads/2019/10/MC-05-06-2007-
CONSUMER-PROTECTION-
GUIDELINES.pdf
● NTC Foreign Ownership
Restrictions:https://www.globalcompliancenew
s.com/2022/04/18/philippines-amendment-
allowing-full-foreign-ownership-of-telcos-
signed-by-president-rodrigo-duterte010422/
3. Additional Considerations (take the average of the Low Med High
bullet points below)

● Profitability of average incumbent >15% 10-15% 5-10% 0-5% <0%

Explanation:

PLDT Inc.'s profitability is 10–15%. The company's

net income margin has been consistently above 10%
in recent years, and its return on equity has been
consistently above 15% in recent years. This
indicates that PLDT Inc. is a very profitable company.
Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis: [https://datareportal.com/digital-in-
the-philippines]
● Regulatory Environment for
Telecommunications in the Philippines:
[https://lirneasia.net/wp-content/uploads/2009/
02/tre_philippines_final_2008nov11.pdf]
● PLDT Inc.'s Labor Relations:
[https://www.pna.gov.ph/articles/1042840]
● PLDT Inc.'s Brand Reputation

Overall, PLDT Inc. is a very profitable company with a

strong track record of success. However, the
Philippine telecommunications industry is becoming
increasingly competitive, and PLDT Inc. will need to
continue to innovate and invest in order to maintain its
profitability in the years to come.

● Incumbent industry growth rate >5% 3-5% 1-3% 0-1% <0%

Explanation:

The incumbent industry growth rate for PLDT Inc. is

3-5%. The Philippine telecommunications industry is
expected to grow at a compound annual growth rate
(CAGR) of 3-5% over the next five years. This growth
is being driven by several factors, including:
 ● Increasing smartphone penetration: The
number of smartphone users in the Philippines
is expected to continue to grow in the coming
years. This will drive demand for mobile data
services, which is one of PLDT Inc.'s key
business segments.
● Expanding broadband access: The Philippine
government is committed to expanding
broadband access to all Filipinos. This will
create opportunities for PLDT Inc. to grow its
broadband business.
● Rising disposable incomes: Disposable
incomes in the Philippines are rising, which is
giving consumers more money to spend on
telecommunications services.
● Growing demand for digital services: There is
a growing demand for digital services in the
Philippines, such as online shopping, streaming
video, and social media. This will drive demand
for PLDT Inc.'s data and internet services.

However, there are also some challenges that could

slow the growth of the Philippine telecommunications
industry, such as:

● Regulatory uncertainty: The Philippine

telecommunications industry is subject to a
variety of regulations, which can make it difficult
for companies to innovate and grow.
● Competition from new entrants: There are a
number of new entrants into the Philippine
telecommunications market, such as Dito
Telecommunity Corporation and Smart
Communications, Inc. These new entrants are
offering competitive prices and innovative
products, which could put pressure on PLDT
Inc.'s margins.
● Infrastructure challenges: The Philippine
telecommunications industry is facing a number
of infrastructure challenges, such as a lack of
fiber optic cables in rural areas. These
challenges could limit the growth of the industry.

Overall, the incumbent industry growth rate for PLDT

Inc. is expected to be 3-5% over the next five years.
This growth will be driven by increasing smartphone
penetration, expanding broadband access, rising
disposable incomes, and growing demand for digital
services. However, there are also some challenges
that could slow the growth of the industry, such as
regulatory uncertainty, competition from new entrants,
and infrastructure challenges.

Sources of Data:

● PLDT Inc.'s Annual Report 2022

● PLDT Inc.'s Investor Relations Website
● Philippine Telecommunications Industry
Analysis:https://datareportal.com/digital-in-the-
philippines: https://datareportal.com/digital-in-
the-philippines
● Regulatory Environment for
Telecommunications in the
Philippines:https://lirneasia.net/wp-content/upl
oads/2009/02/tre_philippines_final_2008nov11
.pdf:
https://lirneasia.net/wp-content/uploads/2009/0
2/tre_philippines_final_2008nov11.pdf
● PLDT Inc.'s Labor
Relations:https://www.pna.gov.ph/articles/104
2840: https://www.pna.gov.ph/articles/104284
● PLDT Inc.'s Brand Reputation

Overall Threat of New Entrants

(take the average of the major factors, items 1 through
3, above)

High Neutral Low

Treat Treat

Intensity Threat of Substitutes of PLDT Inc.

(Figure 2.8)

1. Customer Awareness of Substitutes 1 2 3 4 5

● Customers’ ability to recognize brands from the High Med. Low

substitute industry x
 Explanation/Source of Data: https://smart.com.ph/corporate
Smart Communication is one of the leading substitutes for PLDT. With its wireless and digital services,
Smart Communications is the top mobile network for calls, text, and internet services in the
Philippines.

2. Availability of substitute Better Same Worse

x

Explanation/Source of Data: https://smart.com.ph/corporate

The availability of Smart Communications is just the same with PLDT. They both can be used anytime
that the customers want. The only difference is that customers can't carry PLDT anywhere they go.
They can only use PLDT if they are near the router. Unlike Smart, they can use the internet anywhere
they want, but with limited consumption.

3. Price of substitute Lowe Same Highe

r r
x

Explanation/Source of Data: https://smart.com.ph/corporate

PLDT offers a range of prices based on their bundle promotion or plan offered. Their most affordable
plan, which is good for 50 Mbps for a month, costs 649. Regarding Smart Communications, customers
can get 8GB for just 99, valid for a week. This plan is cheaper than PLDT since customers are not using
the internet 24/7.

4. Performance of substitute Better Same Worse

x

Explanation/Source of Data: https://smart.com.ph/corporate

The performance of Smart Communications is also the same as the performance offered by PLDT.
They are the same with regards to internet speed and can give the customers a fast internet experience.

5. Customer switching costs Low Med. High

x

Explanation/Source of Data: https://smart.com.ph/corporate

Since both of the internet providers serve the same performance and availability, but Smart is much
cheaper than PLDT, Customers can easily switch from using PLDT to Smart.

Overall Threat of Substitute High Neutra Low

(take the average of the major factors, items 1-5 Powe l Power
above) r
x

Exercise 3: Analyze the effects of the general environment on an industry of your choice.
1. Identify an industry you would like to learn more about. Ideally, you should be able to gather sufficient
information on this industry to thoroughly analyze the impact of the general environment on industry
profitability. Although the information is available for a wide variety of industries, this exercise will be
easier if you choose an industry that has been written about consistently in the business press. In order to
manage the volume of data required for a thorough analysis, your instructor might want you to focus
solely on the home country of the largest firms in the industry (unless most firms earn a majority of their
profits from abroad).

2. Use data from various sources, including those listed in the appendix, in your analysis.

3. Try to identify the major effects of each of the eight factors (complementary products; technological
change; general economic conditions; demographic forces; ecological/natural environment forces; global
forces; political, legal, and regulatory forces; and social/cultural forces) on industry profitability.

● Complementary Products or Services

One of the best complementary of PLDT is the telephone. In a company, the telephone is one of
the top mediums of communication if they want to talk to someone inside or outside the company.
Among the benefits are that it is less expensive, simpler to use, and allows for faster communication than
email or any other method. With this, telephones became high in demand by companies. Due to the
increased demand for telephones, businesses will also decide to use PLDT as their internet provider since
they also provide telephones when the customers choose them, resulting in the increase in profitability of
PLDT Inc.

● Technological Change

Technology is developing and advancing at a rapid pace. Businesses such as PLDT Inc. are
increasingly adopting technological innovations and upgrades in order to boost their productivity and
profitability. The e-industries (e.g., eHealthcare, eLearning, eGovernment) are among the technological
innovations that PLDT Inc. has embraced and which initially brought about profound changes. With this,
PLDT Inc. expands and enhances its operations. It will improve the community and the lives of citizens
while also serving to support the demands of diverse industries. Enhancements to the technology
infrastructure also aid in drawing foreign direct investment, which fuels growth and progress. Because of
this, PLDT Inc. enjoys a unique competitive advantage when it comes to technology advancements. To
improve the operation of its business, the company continues to use and participate in innovation
processes.

● General Economic Conditions

Inflation in the Philippines is, we believe, one of the economic conditions affecting the
profitability of PLDT Inc. For businesses like PLDT Inc. to succeed, the economy must have a moderate
rate of inflation. Additionally, a moderate rate of inflation will contribute favorably to rising consumer
confidence and buying patterns. This kind of rate can help PLDT Inc. to increase its income and give the
business the capability to expand more. On the contrary, higher and lower rates of inflation can have a
negative effect on the profitability of PLDT Inc. When there is a lower inflation rate, it could result in
huge competition between industries to gain more customers. Businesses will come up with tactics
regarding their pricing that could spark unethical price wars in the industry. Moreover, a high rate of
inflation could lead to a lesser income that will limit business expansion and undermine consumer
confidence, in addition to harming businesses.

● Population Demographics

The stability of the population demographics of customers for PLDT Inc. is also vital as it helps
the company to lessen their job of finding their new target market if there are forces that change the
preferences of their customers. Nowadays, despite the age of people, either younger or older, the people
today are more knowledgeable about better internet connections than before. They know how to choose
the right internet provider. This change affects the company since new customers prefer what the other
company or internet provider offers (such as the price range and the speed of their internet), and the
others are shifting from their company to their competitor. This case in PLDT Inc. leads to a loss of
customers and affects their profitability.

● Ecological/Natural Environment Forces

Weather and climate conditions are some of the factors that affect the operation of PLDT Inc.
Variations in weather and climate lead to driving up operating expenditures, which could have a
detrimental impact on the company's profitability. Despite this problem, PLDT Inc. always observes its
attitude towards the environment. Given that inappropriate use of environmental resources can elicit an
adverse reaction from the public and could lead to a loss of customers, PLDT Inc. takes into account
limiting the consumption of resources to avoid excessive use. Along with taking part in eco-friendly
activities, they also hire suppliers who adhere to strict environmental sustainability guidelines to increase
their reputation and gain trust from stakeholders.

● Global Competitive Forces

In addition to PLDT, there are currently numerous other internet service providers in the
Philippines, such as Smart, Globe, Converge, Dito, and others. Each of them has their own strategies to
gain more customers and be the number one internet provider at the expense of their competitors. To meet
subscriber demand and keep up with the competition, they have been making improvements to their
unlimited fiber internet plans, and it affects PLDT Inc. Despite the intense competition in the industry,
PLDT Inc. continues to prevent its rivals from overtaking them and stealing its customers. July 15, 2022,
they updated their plans, starting at Plan 1699 for 100 Mbps, and on October 18, 2022, they offered a
speed add-on option for their customers for only 50 pesos. This step of PLDT Inc. is necessary so that
they can still keep their valued customers and not affect their profitability.

● Political, Legal, and Regulatory Forces

One of the laws that almost affect the reputation and profitability of PLDT Inc. is the Data
Privacy Act of 2012. PLDT Inc. almost lost its customers because of the case it involved. PLDT Inc. was
found to have violated the Data Privacy Act of 2012, specifically Sections 28 (Processing of Personal
Information for Unauthorized Purposes) and 32 (Unauthorized Disclosure), according to a decision
rendered by the National Privacy Commission on December 17, 2020. On August 5, 2021, after receiving
the decision, PLDT Inc. tried to file a motion for reconsideration and asserted that they had not violated
any of the law. Regardless of the outcome of the investigation, whether PLDT Inc. is found guilty or not,
this type of incident can still affect how the company's clients perceive them.

● Social/Cultural Forces
 Culture is a significant variable that the marketing management values. Unique norms and beliefs
of every society have a major influence on how consumers behave. An instance of this that significantly
impacts PLDT Inc.'s profitability is when a family suggests a different internet provider, which they
choose to use. Customers will pick that provider over others like PLDT because they are friends or
family. As one of their friends or relatives, they will choose that provider rather than using others like
PLDT. Despite the advertisements and promotions it offers, customers still choose what their friends or
family tested. Because of that cultural force, there is nothing that PLDT Inc. can do to gain them.

4. Identify and predict any short-term to medium-term changes in any of the eight factors that might alter
average profitability in the industry. Address how those changes will affect industry profitability in the
future.

Some short-term to medium-term changes in the eight factors that might alter average profitability in the
PLDT Inc. industry:

Complementary Products

● The development of new complementary products, such as smart home devices and wearable
technology, could increase demand for PLDT Inc. services.
● The increasing popularity of over-the-top (OTT) streaming services could decrease demand for
traditional television services from PLDT Inc.

Technological Change

● The deployment of 5G networks could provide PLDT Inc. with a competitive advantage and
allow the company to offer new and innovative services.
● The development of new technologies, such as artificial intelligence (AI) and machine learning
(ML), could automate many of the tasks currently performed by PLDT Inc. employees, which
could PLDT Inc. employees, which could lead to job losses and cost savings.

General Economic Conditions

● A strong economy could lead to increased demand for PLDT Inc. services from businesses and
consumers.
● A weak economy could lead to decreased demand for PLDT Inc. services, as businesses and
consumers cut back on spending.

Demographic Forces

● The aging population could lead to increased demand for healthcare services from PLDT Inc.
● The growing millennial generation could lead to increased demand for mobile data services from
PLDT Inc.

Ecological/Natural Environment Forces

● The increasing frequency and intensity of natural disasters could damage PLDT Inc.
infrastructure and disrupt its services.
● The growing demand for sustainable • The growing demand for sustainable products and services
could create opportunities for PLDT Inc. to develop new offerings.
Global Forces

● The increasing globalization of the economy could create new opportunities for PLDT Inc. to
expand into new markets.
● The rise of protectionism could make it more difficult for PLDT Inc. to compete in foreign
markets.

Political, Legal, and Regulatory Forces

● Changes in government policy could affect PLDT Inc.'s costs and operations.
● New regulations could make it more difficult for PLDT Inc. to compete with its rivals.

Social/Cultural Forces

● The increasing popularity of social media could lead to increased demand for PLDT Inc. data
services.
● The growing awareness of privacy and security issues could make it more difficult for PLDT Inc.
to collect and use customer data.

Explanation of How the Changes in the 8 Factors Mentioned will

Affect PLDT Inc. Profitability in the Future
Eight Factors
Positive Negative

The growth of the digital economy

and the increasing demand for
online services will create
opportunities for PLDT Inc. to
Complementary Products expand its business into new
areas, such as cloud computing
and digital content. This will help
PLDT Inc. to generate new
revenue streams and increase its
profitability.

The development of new As technology advances, PLDT

technologies, such as 5G and
artificial intelligence, will allow
PLDT Inc. to offer new and
Technological Change innovative products and services
to its customers. This will help
PLDT Inc. to attract new
customers and increase its market
share.
Inc. will need to invest in new
infrastructure and equipment to
keep up with the latest trends.
These investments can be
expensive, and they may reduce
PLDT Inc.'s profitability in the
short term.
 A strong economy will lead to
increased demand for
telecommunications services,
which will benefit PLDT Inc. This
General Economic Conditions is because businesses and
consumers will be more willing to
spend money on
telecommunications services when
the economy is doing well.
The aging population of the
Philippines is a demographic trend
that could affect PLDT Inc. in the
future. As people age, they tend to
Demographic Forces use less telecommunications
services. This is because older
people are less likely to use
smartphones and other internet-
connected devices.
Ecological/Natural
Environment Forces
A weak economy could lead to
decreased demand for
telecommunications services,
which could hurt PLDT Inc.'s
profitability. This is because
businesses and consumers will be
less willing to spend money on
telecommunications services
when the economy is doing
poorly.
The increasing penetration of
smartphones in the Philippines is
another demographic trend that
could benefit PLDT Inc. in the
future. As more people use
smartphones, there will be an
increased demand for mobile data
services. This is because
smartphones allow people to
access the internet and other
online services.
Natural disasters, such as
typhoons and earthquakes, can
damage PLDT Inc.'s
infrastructure, which can lead to
lost revenue and profits. This is
because natural disasters can
disrupt PLDT Inc.'s ability to
provide telecommunications
services to its customers.
Climate change is also a factor
that could affect PLDT Inc. in the
future. As the climate changes,
there may be an increase in the
frequency and severity of natural
disasters. This would make it
more likely that PLDT Inc.'s
infrastructure would be damaged
by natural disasters.
The global economy is becoming
increasingly interconnected,
which means that PLDT Inc. is
exposed to the risks of economic
 instability in other countries. This
is because economic instability in
other countries can lead to a
decrease in demand for PLDT
Inc.'s services.

Global Forces
Political instability in other
countries can also affect PLDT
Inc., as it can make it difficult to
do business in those countries.
This is because political instability
can lead to disruptions in supply
chains and changes in government
regulations.

Government regulation of the

telecommunications industry can
affect PLDT Inc.'s profitability.
For example, the government
could impose new taxes or fees on
telecommunications services, or it
could regulate the prices that
PLDT Inc. can charge for its
services. These regulations can
make it more expensive for PLDT
Inc. to do business, and they can
Political, Legal, and reduce its profitability.
Regulatory Forces

Changes in government policy can

also affect PLDT Inc. For
example, if the government
changes its policy on foreign
ownership of telecommunications
companies, it could make it more
difficult for PLDT Inc. to do
business in the Philippines. This is
because foreign companies may
be less likely to invest in PLDT
Inc. if they are uncertain about the
future of the telecommunications
industry in the Philippines.

The increasing demand for digital

content and online services is a
social trend that could benefit
PLDT Inc. in the future. This is
 because PLDT Inc. can provide
the infrastructure that is needed to
deliver digital content and online
services to customers.

The rise of social media is another

social trend that could affect
PLDT Inc. Social media platforms
Social/Cultural Forces
are increasingly using
telecommunications networks to
deliver their content to users. This
means that PLDT Inc. can benefit
from the growth of social media
by providing the infrastructure
that is needed to support social
media platforms.

5. As part of the analysis, consider how the general environmental factors may affect each of the five
industry forces (rivalry, buyer power, supplier power, threat of new entrants, and threat of substitutes).

The telecommunications industry has been growing at a rapid pace due to technological
advancements and PLDT has been one of the major telecommunication providers within the Philippines.
In this dynamic and general environment, PLDT has several factors to look out for which may affect their
course of business.

Threat of New Entrants - The threat of new entrants in the telecom services may bring about
new things in the market such as innovation and new ways of doing things which may put pressure on
PLDT because new entrants may drive the price of their services lower than the existing market which
would also give PLDT a reason to lower their pricing strategy to keep its competitive edge from fellow
competitors in the market.

Supplier Power - The bargaining power of suppliers especially in the Technology Sector use
their power to extract higher prices from the firms in the Telecom Services which lowers the overall
profitability of Telecom Services. But in this case, PLDT has over 1,000 active suppliers which serves the
requirements of the PLDT Group and the suppliers have to undergo accreditation such as financial
capability, technical capability, compliance with laws and more for the purpose of making sure that the
quality of service and products supplied are reliable and satisfactory for its customers. Having over a
1,000 active suppliers means that PLDT is not so threatened by the supplier power due to them having a
high amount of available suppliers and does not rely only on a few of them.

Buyer Power - Buyers often demand a lot and they want to buy the best products/services
available by paying the minimum amount possible. Although PLDT has a wide variety of customers that
avail their products/services, buyer power may still pose a threat because it may put a pressure on the
profitability of the company in the long run especially when they do not satisfy these said customers.

Threats of Substitute Products - When a new product or service meets a similar needs of the
customers, the profitability of the industry may suffer. PLDT as one of the major providers of
telecommunications in the Philippines has many companies that may substitute for their products and
services. The latest example of this would be DITO telecommunity because they offer services/products
that are similar to PLDT and they also promised consumers to provide them a lower price for a better
quality service. This threat may affect the company’s customer base and some customers may choose to
patronize other products/services that are similar to PLDT with lower prices.

Rivalry - If the rivalry among the existing firms in the market is intense, this may drive down the
prices of the products and services offered by such firms and decrease the overall profitability of the
industry because Intense Rivalry can limit profits and lead to competitive moves such as price cutting and
improvements on products and services.

Analyzing the effects that the general environment factors may bring can help the firm identify
and plan a strategy as to how they will operate the business and maximize the profitability of the firm
while also satisfying and building a customer base that will patronize them in the long-run.