The major forces shaping the business environment of the fixedline telecom indus

Question

The major forces shaping the business environment of the fixedline telecom industry are technology and government policy. The industry has been influenced by fiber optics (greatly increasing transmission capacity), new modes of telecommunication (wireless and internet telephony), the convergence of telecom and cable TV, and regulatory change (including the opening of fixedline infrastructures to “virtual operators”). Using the five forces of competition framework, show how each of these developments has influenced competition and profitability in the fixedline telecom industry.

Explanation / Answer

Ans-

Following are the five forces of competition which influences on Fixed line telecom industry are –

Answer –

The Porter’s five force analysis is basically to understand the competition in the market. These five forces help to understand the competition drivers in the market. In a market, the competition can be assessed by five different directions. These five directions are important enough and had significant impact on the competition. The five forces are as below

Force 1 : The Threat of New Entrant – A business is always can have a threat from a new entry for the competitor in the market. The new entrant can have big impact on the organization. Impact on Fixed line telecom Industry : Fiber optics technology is a new entrant in the industry market. This creates the competitive force on fixed line telecom industry as this is a new technology in the market and being appreciated by consumers. It will provide competition to fixed line telecom industry and its profitability can be lowered.

Force 2 : The Threat of Substitutes – The threat of substitutes is a big force which can have adverse effect on the organization’s survival. It is so quick that the organization will not have sufficient time to manage the entry of substitute.

Example – The new technology of fiber optics may be a substitute technology in near future can create a big threat for the current telecom technology. Thus this provides the threat of substitute to current telecom industry and its profitability will be lowered in near future.

Force 3 : Bargaining power of Customers- This is another force of competition. This force will develop the pressure on the organization. If the customer has multiple options for our product, then the scenario will be further tough. The competitors will try to explore this chance.

Example – The customer will prefer new technology and may ask the current telecom industry to lower their prices for the current services. Hence it will affect the profitability and increase competition for the industry.

Force 4 : Bargaining power of Suppliers – This is another force of competition develops from supplier. If the supplier knows that he is single source to the organization, he will try to explore this situation and can increase the cost of raw material. This can lead to have the different pressure on the organization from supplier side.

Example – It will be difficult for the supplier to maintain the supply as the volume of current technology is lowered. Thus the suppliers will try to increase the price for the raw materials. Thus it will impact the industry profitability.

Force 5 :Industry Rivalry – Competitive industry rivalry is different force which has a big impact of the organization. We need to understand the industry rivalry force and take appropriate action to manage the impact.

Example – Higher rivalry issues will be seen due to low volumes among old technology industries and it will further lower the profitability and increase competition among old technology industries due to arrival of new technology of fiber optics.

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