Awareness of the Five Forces can help a company understand the structure

of its industry and stake out a position that is more profitable and less
vulnerable to attack.

THE FIVE COMPETITIVE FORCES THAT SHAPE

STRATEGY
TELECOMMUNICATION
Second largest Subscriber base in the world(1058.86 million).
Third Largest number of Internet users.

Most of the Internet accessed through mobile phones.

Rising penetration rate.

Affordability and lower rates.
TELECOMMUNICATION

Robust Second largest Subscriber base in the world(1058.86

million).
With 70% of the population staying in rural areas, the
Demand rural market would be a key growth driver in the
coming years.

Policy The country has a strong

telecommunication infrastructure.
Support Unified licensing, MNP, free roaming, etc
 THREAT OF NEW ENTRANTS

New entrants bring in new capacity and a desire to gain market share.
Affects the prices, costs and the investment necessary to compete.
Puts a cap on the profit potential of an industry.
It is the threat of entry, not whether entry actually occurs, that holds down profitability.
Low barriers to entry make it easier for competitors to enter.
 BARRIERS TO ENTRY

Entry barriers are advantages that incumbents have relative to new entrants. The following are 7 major sources:
Supply-side economies of scale
Demand-side benefits of scale
Customer switching costs
Capital requirements
Incumbency advantages independent of size
Unequal access to distribution channels
Restrictive Government Policy
Expected Retaliation
 POWER OF SUPPLIERS
Powerful suppliers capture more of the value by charging higher prices, limiting quality or service.
A supplier groups is powerful if:-
It is more concentrated than the industry it sells to.
Does not depend heavily on the industry for its revenue.
High Switching cost.
Offer differentiated products .
No substitutes .
Can threaten to integrate forward.
Bargaining power of suppliers is greater in films and entertainment industry. Due to the unique
nature of this industry famous actors can be classified as suppliers at the same time as serving
as human resources.
 POWER OF BUYERS

Powerful buyers capture value by forcing down prices, demanding better quality and playing industry participants against
each other
Customer group have negotiating leverage if:
Few buyers
Undifferentiated products
Switching costs
Can threaten to integrate backward
A buyer group is price sensitive if:-
Product represents a significant fraction of its cost
Earns low profits
Quality of buyer product little affects industry product
Industrys product effect on buyers other cost.
THREAT TO SUBSTITUTE

A substitute performs the same or similar function as an industry product

The threat of substitute is high if:-
Offers an attractive price-performance trade-off to the industry product
Low cost of switching

With increasing interest of urban population in outdoor event such as theatres, plays, music
concerts, sporting events like world cup, and 20-20 tournaments, cultural programmes and
penetration of internet and mobile in the Indian population, the threat of substitutes to the
industry is growing at large.
 INTENSITY
Numerous Competitors
Slow growth
Exit barriers
High commitment

1. Price dimension
Identical or few switching cost
Fixed cost are high
Expansion of the capacity
Perishable products

2. Non Price dimensions

Features
Customer service
Brand image
TELECOMMUNICATION (PORTERS ANALYSIS)
Threat of New Entrants: LOW
Strict government regulations ; Extremely high infrastructure setup cost ; Difficulty in achieving economies of
scale.
Substitute Products: LOW
Hardly any threat of substitute products as there is no substitute available in the market.
Bargaining Power of Suppliers : HIGH
High bargaining power of suppliers as there are just a few suppliers in the sector.
Bargaining Power of Customers : HIGH
Low switching cost and mobile number portability give customers high bargaining power; Customers are price
sensitive.
Competitive Rivalry: HIGH
Customers low switching cost and price sensitivity are increasing competition among players ; High exit barriers
are also intensifying competition; There are around 6 to 7 players in each region, leading to intense competition.
FACTORS NOT FORCES

Industry structures determines the industry long run profit potential because it
determines how the economic value created by the industry is divided.
By considering all Five forces, a strategist keeps overall structure in mind instead of
gravitating to any one element. In addition, the strategists attention remains focused on
structural conditions rather than on eeting factors.
Industry growth rate.
Technology and innovation.
Government.
Complementary products and services.
 CHANGES IN INDUSTRY STRUCTURE

Shifting threat of new entry.

Changing supplier or buyer power.
Shifting threat of substitution.
New bases of rivalry.
 IMPLICATIONS FOR STRATEGY

positioning the company

position your company where the forces are the weakest.
exploiting and anticipating industry change
Industry change bring opportunity.
shaping the industry structure
Re-dividing profitability : use tactics that are designed specifically to reduce the share of profits leaking to other
competitors.
Increase the overall pool of economic value generated by the industry.
 DEFINING THE INDUSTRY

where competition actually takes place is important for good industry analysis.
too broadly obscures differences among products, customers, or geographic regions that are
important to competition, strategic positioning, and profitability.
too narrowly overlooks commonalities and linkages across related products or geographic markets
that are crucial to competitive advantage.
The boundaries of an industry consist of two primary dimensions:
First is the scope of products or services.
The second dimension is geographic scope.
 COMPETITION AND VALUE

In a world of more open competition and relentless change, it is more important than ever to think structurally
about competition.

Understanding industry structure is equally important for investors as for managers.

The ve competitive forces reveal whether an industry is truly attractive, and they help investors anticipate
positive or negative shifts and allows to take advantage of undue pessimism or optimism.