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Strategic Management Airtel and Idea



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  • 1. Telecommunication Industry The era of telecommunication in India started from the year of 1851 with the initiativefrom Government of India near the city of Calcutta now known as Kolkata. However the rapidgrowth in telecom industry came into picture after the year of 2002-03 onwards as the morenumber of service providers came into existence. Since 2002-03 there is rapid change in thetechnology and increase in numbers of subscribers in the Indian telecom industry till now. Thefollowing are the milestones in the Indian telecom industry.  1851 First operational land lines were laid by the government near Calcutta.  1881 Telephone services introduced in India.  1883 Merger with postal system.  1923 Formation of Indian radio Telegraph Company.  1932 Merger of ETC and IRT into Indian Radio and Cable Communication Company.  1947 Nationalization of all foreign telecommunication companies to form the posts, telephone and telegraph, a monopoly run by the Governments ministry of communications.  1985 Department of telecommunication established an exclusive provider of domestic  Long-distance services that would be its own regulator.  1986 Conversion of dot into two wholly government – owned companies the VSNL for International telecommunication and MTNL for services in metropolitan areas.  1997 Telecom regulatory authority created.Indian Telecom Industry Features  Building a modern and efficient infrastructure ensuring greater competitive environment  Strengthening research and development for manufacturing, value added services.  Efficient and transparent spectrum management  To accelerate broadband penetration  Universal service to all uncovered areas including rural areas.  Enabling Indian telecom companies to become global players.Global Business School | Strategic Management | 1
  • 2. Major Players in Telecom Industry Rank Operator Market Share % 1 Bharti Airtel 24.5% 2 Vodafone 19.8% 3 Idea Cellular 15.6% 4 Reliance Communications 14.6% 5 BSNL + MTNL 7.9% 6 TATA 6.9% 7 Aircel 5.5% 8 Uninor 3.6% 9 Others 1.6% Total 100%Global Business School | Strategic Management | 2
  • 3. Market Growth Indian telecom industry is characterized by a large subscriber base, substantialTeledensity but low revenues per user (ARPU) Wireless Subscribers (Million) CAGR +34.5% 1000 900 800 700 600 500 934 400 852 300 636 200 427 287 100 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Wireline Subscribers (Millions) CAGR -4% 45 40 35 30 25 20 39 38 36 34 15 31 10 5 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 3
  • 4. Revenue of Telecom Industry (USD Billion) CAGR +4.88 % 45 40 35 30 25 20 37.4 38.4 32 31.7 33.8 15 10 5 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Teledensity in India CAGR +12.8 % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 79.60% 73.90% 30.00% 56.60% 20.00% 39.90% 28.30% 10.00% 0.00% 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 4
  • 5. Average Revenue Per User (USD) CAGR -23.5 % 7 6 5 4 3 5.9 2 3.8 2.6 1 2.1 1.9 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Global Comparison of ARPU (USD) 50 45 40 35 30 25 46.5 20 15 32 10 5 8.3 1.9 0 US UK China India (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)  More than 3-fold increase in subscribers since 2008  High Tele-density of 79.6% in 2012  64.4% of the current subscribers are urban  Indian Telecom ARPU is the lowest amongst the lowest in the world.Global Business School | Strategic Management | 5
  • 6. ARPU Spending on Voice (USD Bn) 2.5 2 1.5 1 2.04 1.5 1.44 1.27 0.5 0 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Average Spending on MVAS (Mobile Value Added Service) in USD Bn 0.6 0.5 0.4 0.3 0.48 0.2 0.39 0.31 0.34 0.1 0 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Declining voice Carriers increasingly Growing smartphone revenue straining focusing on adding adaption & increasing ARPU, However per value added services mobile penetration user spending on to thier portfolio to further pushing MVAS MVAS increasing supplement revenuesGlobal Business School | Strategic Management | 6
  • 7. Indian MVAS (Mobile Value Added Service) Market Size (USD Bn) 8 7 6 5 4 6.8 3 5.1 2 4.3 3.1 1 1.9 0 2009 2010 2011 2012 2013 (E) (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Revenue Share of MVAS Categories Mobile App 10% Education 7% CRBT 32% Games 8% Health 7% News SMS Based 14% 17% Governance 5% (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 7
  • 8. Telecom companies are also aggressively focusing on the fast growing data center marketin India Data Center Market (USD bn) 7 6 5 4 3 5.8 2 4 1 2.6 1.7 0 2010 2011 2012 2013 (E) (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Competitors Cost Components Cost Share Tata Communications Power 38% Ctrls Maintenance 21% NetMagic Bandwidth 12% Reliance IDC Equipment 12% Airtel Facility 10% Wipro Manpower 7% Sify TOTAL 100 Cost Components Manpower 7% Facility 10% Power Equipment 38% 12% Bandwidth 12% Maintaince 21%Global Business School | Strategic Management | 8
  • 9. Telecom Value Chain Subscription Telecom Network Network Content & Devices Subscribers Infrastructure Equipment Operator Portals Resellers GTL - Nokia- Bharti Airtel Company Facebook Infrastructure Siemens Vodafone Outlet Rediff Indus Towers Huawei Reliance Dealers Tata Quippo Ericsson Idea Blackberry App storesCore IT Requirements of Telecom Industry Network Enterprise Partner Customer Management Management Management Management •Fault Management • Finance & •Partner Network •Service Activation •Config. Accounting Management •Revenue and Management •HR Billing •Account •Sales & Operation •Supply Chain Management Management Planning Management •Customer Analytics •Performance •Facility •Contacts Management Management •Revenue Fraud Centers/Call •Security •DBMS3 Management CentersGlobal Business School | Strategic Management | 9
  • 10. PEST Analysis Political Factors Economical Factors Socio – Cultural Technological Factors Factors Consumer Money Supply Lifestyle Changes Total Government Protection Law GDP Trends Career Spending For Research Government Interest Rates Expectation & Development Policy Inflation Rates Consumer Focus of Technological Antitrust Imports Activism Efforts Regulations Price Control Growth Rate Of New Products Protection Laws Population Internet Availability Special Incentives Stability Of GovernmentGlobal Business School | Strategic Management | 10
  • 11. Economical Trends Following are the Economical trends have huge impact on telecommunication Industry  Money Supply  GDP trends  Interest Rates  Inflation Rates  Imports  Price controlMoney Supply (Investment from MNC’s to Indian Telecommunication Industry) The Russian government has picked up equity amounting to US$ 670 million-US$ 700million in Sistema Shyam TeleServices Ltd (SSTL), a joint venture between Russia-basedtelecom Sistema and Shyam Group in India. Sistema holds 56.68 percent stake in Sistema ShyamTeleservice Ltd. Russian Government holds 17.14 percent stake in SSTL. Norway-based telecom operator Telenor has bought a 60 per cent stake in UnitechWireless for US$ 1.23 billion. Japanese telecom major NTT DoCoMo acquired a 27.31 per cent equity capital of TataTeleservices for about US$ 2.6 billion in November 2008. Bahrains Batelco has signed a deal to buy 49 per cent in Chennai-based S-Tel, a GSMservice provider, for US$ 225 million. BSNL, Indias leading telecom company in revenue terms, will put in about US$ 1.16billion in its WiMax project. After the cancellation of license of Uninor, It‘s partner Telenor has signed a partnershipagreement with an Lakshdeep Investment & Finance which will contribute 26% in the entity andwill allow Telenor to participate in the forth coming mobile license auction.Global Business School | Strategic Management | 11
  • 12. India’s GDP Telecommunication is an enabler of business, an increase in the number of people usingphones results in an increase in GDP. The Gross Domestic Product (GDP) in India expanded to5.5 percent in the second quarter of 2012 and Telecommunication industry has contributed 13.6% to the total GDP.India’s Interest Rate Rising interest rates have had an adverse effect on telecommunication industry stockprices. Interest rates rise, the cost of borrowing money rises affecting the telecommunicationIndustries profit after tax (PAT). The Interest rate for the year 2012 has remained at 8%.Global Business School | Strategic Management | 12
  • 13. Imports Mobile phones shipment to India during the first half of 2012 crossed 10 crore units,registering a growth of 16.6% over the same period over the previous years, according to CyberMedia Research (CMR). High number of mobile phones will result in high number ofconsumption of mobile simcards which will again result in increase revenue and growth for theIndustry.India Stock Market (Sensex) Stocks in India had a positive performance during the last year. India Stock Market(Sensex) rallied 900 points or 4.61 percent during the last one year.Global Business School | Strategic Management | 13
  • 14. Price war in Telecommunication Industry As competition has mounted, the companies share prices have taken a hit, with marketleaders Bharti Airtel sliding -31.91 percent, Idea Cellular falling -11.57 percent and RelianceCommunications tumbling -28.86 percent in the past one year.Bharti AirtelGlobal Business School | Strategic Management | 14
  • 15. Idea CellularReliance CommunicationGlobal Business School | Strategic Management | 15
  • 16. Technological Factors Following are the Technological factor trends that have huge impact ontelecommunication Industry  Total Government spending for Research & Development  Focus of Technological efforts  New Products  Internet availabilityTotal Government spending for Research & Development Clearing the differences in sec 10AA of the SEZ Act and the union minister‘s reiterationon the significance of SEZs will help the Indian telecommunications industry to take forward itsSEZ plans throughout the country.The enhanced deduction from 150-200% is also a positive stepon R&D investment to boost the R&D segment in the country. The estimated budget for telecomfor the year 2009-10 was Rs 16,731 crore, and the revised one was Rs 16,099 crore, for the year2010.Focus of Technological efforts Most Indian service Providers are focusing on 4G technologies to enhance data Rate as100 Mbs for single users which eventually helping TRAI to generate more revenue .New Products Smart Phones (Android OS 4.0, iPhone, Windows) Galaxy Tabs , HSDPA Modem, Blackberry Application are helping service providers to attract more subscribers eventually increase inmarket share.Internet Availability BSNL, RCOM, Airtel are providing DSL services to rural and urban areas in India. Theseservices include IPTV, high-definition TV, 3-D TV, video-on-demand, bandwidth-on-demandand videoconferencing. The service was built on Gigabit passive optical network (GPON)technology by using Optical N/W.Global Business School | Strategic Management | 16
  • 17. Political Factors Following Political Factors have huge impact on telecommunication Industry  Consumer Protection Law  Government Policy  Antitrust Regulations  Protection Laws  Special Incentives  Stability of governmentConsumer Protection Law On September 2009, The Supreme Court stated that Telecommunication complaint‘scannot be filed in Consumer Courts, as there is a special provision in Indian Telegraph Act,Clause 7B. Hence all the Telephone complaints are considered into arbitration rather thanConsumer Courts with the help of Consumer Protection Act. The customer faced many difficulties by this law as the arbitration was handled by theDepartment of Telecom, which was difficult to approach and follow the rules by the customers.According to the Department of Telecommunication for the past one year there were nocomplaints by the customers. On February 2012, The Supreme Court re-established the Consumer Protection Courtwhere in The Consumer Protection Act was an additional facility not an alternative one, whereinthe consumer can approach the Consumer Court. All the Telecom players are licenses not the Telecom Authorities, Hence the Arbitrationis optional for the consumers.Global Business School | Strategic Management | 17
  • 18. Antitrust Regulations Is an attempt to shift focus from curbing monopolies to promoting competition. Antitrustlaws are helping in Strategic policing on anti-competition market practices and trends in Indiantelecommunication industry.2G spectrum scam by Telecommunication ministry 2G licenses issued to private telecom players at throwaway prices in 2008. Spectrumscam has cost the government Rs. 1.76 lakh crore.Government Stability and Incentives Indian Governments stability from last 10 yrs has really helped telecommunicationindustry to grow with rapid pace . TRAI had asked the stakeholders to give inputs on variousaspects including barriers in the growth of telecom equipment manufacturing in India; incentiveschemes which can enhance design and development of telecom products; factors affecting thecompetitiveness of Indian manufacturers; and methods to boost research and development toincrease telecom related intellectual property from India.Global Business School | Strategic Management | 18
  • 19. Socio - Cultural Trends:  Lifestyle Changes  Career expectation  Consumer activism  Growth rate of population  Lifestyle ChangesLifestyle Changes Fast-changing lifestyles are forcing telecom companies to enlarge the breadth and depthof their services. Value-added services, such as music downloads, video-on-demand and onlinegames are gaining currently in India.Career Expectation It is predicted that Employment growth in the various occupations in thetelecommunications industry is expected to increase by 7% every year. Indian engineers witnessa huge demand in the International Telecommunication Industry, as they are considered to beicons of high-tech executives, telecomm technicians, installers, mechanical engineers, telecommmarketers and desktop support people in Telecomm companies all around the world.Consumer activism According to telecom consultant and consumer activist S N Aggarwal, in June, callsrelated to telecom hassles touched a high of 39%. The National Consumer Helpline received1,136 calls with telecom woes, out of a total of 2,914 in June.Growth rate of population Indian business model of being profitable despite having the lowest tariff in the worlddue to large Telecom density. The big driving factor for the confidence in the growth in telecomsector is the youth population in India. With around 40% youth population for whomcommunication needs are as essential as food and water, this is a huge potential market.Global Business School | Strategic Management | 19
  • 20. Porter’s Five Force Analysis Threat to New Entrants Declining ARPU Access to Optical Fiber Network Regulatory Charges Threat of New Entrants FDI Spectrum Cost Investment Cost Restriction of operators in a regionBargaining power of Rivalry among Existing PlayersSuppliers Excessive Competition Threat from Substitutes FDI Price War Gmail/yahoo mail Mobile handset Market Share of Competitors Skype Suppliers MNP Facebook Different types of Exit Barriers Crowd Call products Presence of Competitors Way2sms Spectrum Cost Bargaining power of Buyers Customer‘s switching costs Buyer‘s ability to backward intergradations Buyer‘s Information Product differention Competition between Buyers Threat of New Entrants Global Business School | Strategic Management | 20
  • 21. FDI At present 74% to 100% FDI is permitted for various telecom services. 100% FDI ispermitted in the area of telecom equipments manufacturing and provision of IT enabled services.This has made telecom one of the major sectors attracting FDI in flows in India. The mainObjective of the TRAI to have so much FDI is to encourage competition in the telecom sectortogether with better quality and affordable prices in order to meet the objectives of New TelecomPolicy, 1999.Investment Cost The cost of active equipment is estimated to be 40 percent of the telecom operators totalcapex, while the balance is accounted for by passive infrastructure. (For example, Bharti hasinvested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers acrossthe country). Typically, a ground based tower costs Rs. 25-30 lakh. A roof-based tower can bebuilt for Rs.13-14 lakh. Additionally, cost of maintaining one tower is estimated at Rs. 60,000-65,000 per month. However, if a telecom service provider decides to rent the passive networkfrom a tower company than the telecom service provider in that case would need to pay monthlyrent of Rs. 40,000 per tower for passive network and operating expenses close to Rs. 40,000-45,000 for active network. Furthermore, tower sharing among telecom service providers is just25% as compared to 90% in the west and some operators are not even willing to share towers.However, with the recent announcement made by BSNL about leasing its towers which will helpboth the older and newer players to penetrate into new markets. Tower sharing makes thetelecom industry moderately attractive for the new players and investors. Threat to New EntrantsGlobal Business School | Strategic Management | 21
  • 22. Declining ARPU (Average Revenue per User) The market is attracting new class of consumers which are mostly rural and their ARPUis well below Rs 250/- (probably Rs 150 – 175/-). So, managing bottom-lines at such low levelsof revenue per user will prove to be a challenge for new entrantsAccess to Optical Fiber Network The largest optical fiber has been built by the incumbent operator BSNL who is also thelong distance operator. The private sector players such as Bharti and Reliance have alsoconstructed optical fiber cable network connecting mainly cities and towns but their presence isvery limited in the rural areas and difficult terrains. Hence it is fairly difficult for new entrants tolay down optical fiber connecting remote places as well.Regulatory Charges The regulatory charges in the telecom sector have a complicated structure becausemultiple levies impede the smooth implementation of telecom projects in India. Given thecontinuously-declining ARPUs, and the extremely-low tariffs, sustaining the current growth ratesof the industry requires urgent attention towards rationalizing the convoluted tax structure in thesector. TRAI has recommended to the DoT committee to phase out the multiple levies in thissector with a single levy in a phased manner. Further with regard to license fees, which currentlystand at 6%-10% of total revenue, TRAI has suggested that it be reduced at a uniform rate of 6%across all licenses.Spectrum CostGlobal Business School | Strategic Management | 22
  • 23. Indias highest decision-making body (The Cabinet) fixed the base price for a 5megahertz (MHz) chunk of radio waves in the 1,800 MHz frequency band at a staggering Rs14,000 crore. The 1,800 MHz frequency is used by operators who use GSM technology, whichincludes most incumbents and a few new players. Players like Sistema, who operate on thecompeting CDMA platform, will have to pay even higher to get in: Rs 18,200 crore for 5 MHz inthe 800 MHz band. There is absolutely no rationale to fix the base prices of the auction at suchastronomical levels even if the payout is staggered over 12 years. Federation of Indian Chambersof Commerce and Industry (FICCI) has criticized the reserve price set by the cabinet for 2Gauction saying it will result in high tariff. The industry body called it anti-consumer.Restriction of operators in a particular region The Government has a policy of awarding licenses to only 3-4 operators to carry outbusiness in a particular circle or region which also acts as a deterrent for a new company whichis trying to enter the industry. Threat of New EntrantsGlobal Business School | Strategic Management | 23
  • 24. Threat of New Entrants is low in the Telecom Industry, If any company wants to enterthe Telecom Industry they need to have high amount of capital, and then the companies have topay the Spectrum cost in order to carry out their operations. Later only 3-4 operators are allowedto operate in a circle. With Declining ARPU and Regulatory charges adding more worries to thenew entrants to enter the industry, Threat of New Entrant in Telecommunication sectorremains low. High LowGlobal Business School | Strategic Management | 24
  • 25. Rivalry among Existing PlayersExcessive Competition Another major concern that has come to the forefront in the recent past has beenheightened competitive intensity in the industry that has correspondingly fuelled the price warbetween industry players. The Indian wireless market is one of the world‘s most competitivemarkets, with 12 operators across 23 wireless ‗circles‘ and 6 to 8 competing operators in eachcircle Eventually, the competition in the industry is expected to intensify further with the entry ofnew players, both domestic as well as foreign players. With the competitive intensity of theindustry already at such high levels new operators might find it difficult to gather significantshare in Indian telecom market. While the new players may benefit from a faster network rolloutthrough tower sharing, they will face challenges in terms of high subscriber acquisition costs andlower ARPU customers. List of Players in the Industry Rank Operator Market Share % 1 Bharti Airtel 24.5% 2 Vodafone 19.8% 3 Idea Cellular 15.6% 4 Reliance Communications 14.6% 5 BSNL + MTNL 7.9% 6 TATA 6.9% 7 Aircel 5.5% 8 Uninor 3.6% 9 Others 1.6% Total 100%Global Business School | Strategic Management 25
  • 26. (source: bric-spotlight-report-india-telecom-november- 2011) The high growth rates encouraged the government to allow even more service providersto enter the industry. In 2008, the Indian government awarded licenses to several newcompanies, opening up an opportunity for global companies to gain a foothold in the market.Telenor of Norway, Sistema of Russia, and Etisalat of the UAE quickly acquired majoritycontrol of new license holders and launched services. To grab market share, the new entrantslaunched their services at attractive price points. When the more established players respondedwith price cuts of their own, it blew up into a full-fledged price war. The growth in subscriberadditions slowed, the profit margins of even the most established companies in the industrydeclined and losses piled up for the new companies. Stock prices of telecom companies, whichwere investor favorites for several years, started to underperform. In 2010, the government invited applications from existing service providers for licensingadditional telecom spectrum for providing high-end 3G services. In a deviation from its earlierpractice of fixed pricing for airwave spectrum, the government decided to give out the newlicenses on the basis of a competitive auction. The prices quoted by the bidders were severaltimes higher than the fixed price granted previously by the government for older licenses,including just a year before in 2009.Global Business School | Strategic Management 26
  • 27. Price War The ever-increasing competitive intensity in the sector, with licenses and spectrum inseveral circles allotted to newer operators, is also a concern and could lead to unrealistic pricinglevels to grab subscribers. The pricing strategy of per second billing already has taken the pricewar between telecom operators to the next level. The intensifying price war could put significantdownward pressure on the industry revenue growth. Further, the ongoing price war and theconcomitant decline in telecom traffic could raise the entry barrier for new companies. Minimum Full Talktime offered by the Companies Tariffs (Minimum Full Talktime) Aircel 200 Vodafone 250 Relaince 150 Tata Docomo 200 Airtel 250 IDEA 200 BSNL 220 (source: Business School | Strategic Management 27
  • 28. Market Share of Competitors The Indian telecom Market for the month of July 2012 ended with a subscriber base of913.49 million. The overall mobile telecom density stood at 75.21% (Urban – 157.11%, Rural –39.54%). The Urban to Rural Ratio was 63.37% to 36.63%. Active mobile subscriber base inJune 2012 was 695.82 million which increased to over 698.08 million active subscribers in July2012. Hence, India‘s wireless telecom market has shown a positive growth. In July 2012, about 4.98 million subscribers submitted Mobile Number Portability(MNP) requests which are about 0.55% of the total mobile subscriber base in India. (source –  Bharti Airtel has strengthened its leadership position with 24.5% market share in India.  Idea has largest proportion of active mobile users at 92.80% followed by Bharti Airtel (90.46%) and Vodafone (89.16%)  Top 5 players in Indian wireless telecom industry accounts for 82.3% market share in terms of active subscriber base.  Reliance subscriber base experienced 13.25% decline as the company disconnects 20.48 million inactive customers from its network.Global Business School | Strategic Management 28
  • 29. MNP (Mobile Number Portability) From the above chart its clear that Idea is the leader in terms of MNP with 36,01,099,closely followed by Airtel with 34,56,655 with third place going to Vodafone with 26,80,438.Global Business School | Strategic Management 29
  • 30. According to TRAI; Uninor, Airtel, Idea and Vodafone were the biggest subscriber loser forthe month of August 2012. Uninor lost 23,83,031 Airtel 19,02,683 Idea 16,46,783 Vodafone 15,59,538 The decline in the user base of the country is due to large scaledisconnections of non active subscribers by many operators.(Source - Business School | Strategic Management 30
  • 31. Exit Barriers Telecom is a capital intensive sector with sunk costs. The production of an additionalminute of wireless call costs virtually nothing, most of the cost being upfront investment inexpensive equipment deployment. But in India exiting the Telecom industry is quite easy there are no restrictions in India asper the Indian Telecom regulator (TRAI) but the entry fees paid by them will not be refundable.Operators intending to exit the business can surrender their license giving at least 60 days notice.TRAI directs licenses to maintain the Quality of Service (QOS) even during the period whennotice for surrender of license is pending.  Spectrum/Infrastructure can be traded/sold to other players in the industry.  Compensation is also paid, if the Regulator or the Government is responsible for the failure.  Improved labor and Forex laws help the companies to release the employees easilyGlobal Business School | Strategic Management 31
  • 32. Presence of Competitors in each Region With 3-4 players operating in same region, cut throat competition can be seen seenamong the competitors. 3G Network Map of India (Source: Business School | Strategic Management 32
  • 33. Rivalry among existing players In the traditional economic model, Competition drives profit to zero, but players in thetelecom industry strive for competitive advantage. The number of business units operating withina particular industry indicates the rivalry among them. If the number of business operatingcompanies in a particular industry is small it means that the rivalry among them will also be low.But in case of Telecom industry with 10-12 players operating in the industry the rivalry is veryhigh. Each operator is trying to grab the maximum market share with unrealistic pricing to grabthe customers and they even try to woo the customers of other operators into their network withMobile Number Portability. Hence Rivalry among Existing players is very high intelecommunication industry. High LowGlobal Business School | Strategic Management 33
  • 34. Bargaining power of BuyersCustomer Switching Costs The cost of new connection is very low, or one can say new connections are available forfree. Moreover, with the introduction of mobile number portability switching has become all themore easier. Some operators have estimated the charges can be as low as Rs. 20. The TRAIstatistics for May 2010 shows subscriber switching capacity of 20% with a yearly growth rate of12.75%. This factor gives new entrant and investors a reason to entry this industry.Buyers ability to backward intergradations Not much intermediaries between the producer and the consumers. High Investmentrequired for backward integration which is less likely to occur. Hence no backwardintegration in this case.Global Business School | Strategic Management 34
  • 35. Information to Buyers’ With large scale print and video advertising, and Big celebrities like Anushka Sharma(Reliance), Abhishek Bachan (IDEA), Ranbir Kapoor (Tata Docomo), A.R Rahman (Airtel)buyers are well informed about the latest updates of the products with better offerings inUrban as well as in Rural areas. The official websites of the players in the industry also play amajor role in keeping the buyers informed.Global Business School | Strategic Management 35
  • 36. Product differentiation Airtel, Reliance, Idea and all other companies have similar prices for similarproducts and less likely for anyone to maintain product differentiation and hence buyershave the option to switch over. 1GB Data Packs of various Companies TATA Docomo BSNL Aircel IDEA Vodafone Relaince Airtel 0 50 100 150 200 250 300 TATA Airtel Relaince Vodafone IDEA Aircel BSNL Docomo 1GB Data MRP 250 255 241 250 198 250 255 (source: Competition between buyers The individual buyers dont have any competition among themselves but BigOrganizations like IT or banks do have. Enterprise customers generate major part of therevenues for any telecom companies like Reliance, Airtel or Idea which means higher buyerpower. But this is not significant for those who deal with individual customersGlobal Business School | Strategic Management 36
  • 37. Bargaining Power of Buyers The power of buyers is the impact which customers have on any industry. In case ofTelecom industry Bargaining Power of Customers is high with low switching cost customers canswitch from one operator to another. Also there is a little product differentiation betweenoperators, If one operator introduces a new scheme then within few days the same kind ofscheme is offered by rival operator. With companies providing information to buyer throughadvertising and keeping them up to date. Bargaining Power of Buyers is high inTelecommunication Industry. High LowGlobal Business School | Strategic Management 37
  • 38. Bargaining Power of SuppliersFDI For manufacture of Telecom Equipments - FDI up to 100% is allowed through automaticentry route. Attracting more foreign investments and providing excellent opportunities fordomestic as well as foreigners in manufacturing sector. No industrial license is required for setting up manufacturing units for telecom equipments.The last few years saw many renowned telecom companies setting up their manufacturing basein India.  Nokia and Nokia Siemens Networks have set up their manufacturing plant in Chennai.  Ericsson has set up GSM radio Base Station Manufacturing facility in Jaipur.  Motorola, Foxconn has set up large manufacturing plants in Chennai. Elcoteq has set up handset manufacturing facilities in Bangalore.  LG Electronics has set up plant of manufacturing GSM mobile phones near Pune.  Ericsson has launched their R&D Centre in Chennai. Flextronics has set up an SEZ in Chennai.  A large number of companies like Alcatel, Cisco have shown interest in setting up their R&D centers in India.Global Business School | Strategic Management 38
  • 39. As far as telecom industry is concerned, its‘ a service based industry which is intangible,Therefore the role of suppliers will be very minimum. Some of the suppliers are  Mobile Handset Suppliers: There are many handset suppliers in the market, some of them are Nokia, Samsung, Sony, Spice, Micromax, Karbonn etc. Company Market Share Nokia 38.2% Samsung 25.3% Micromax 6.3% Blackberry 4.7% Karbonn 4.3% HTC 3.0% Spice 2.5% LG 2.5% Hwawei 2.4% G‘Five 2.1% Others 8.7% Market Share of Mobile handset Companies in India 45 38.2 40 35 30 25.3 25 20 15 8.7 10 6.3 4.7 4.3 3 2.5 2.5 2.4 2.1 5 0 Market Share of Mobile Handset Companies in IndiaGlobal Business School | Strategic Management 39
  • 40. Revenue generated by various Companies through operations in India Company Revenue in Revenue in Change in % Change in 2010-11 2011-12 Revenue Revenue Nokia 12929 11925 -1004 -8.41% Samsung 5720 7891 2171 27.5% Micrmax 2289 1978 -311 -15.72% Blackberry 1950 1460 -490 -33.56% Karbonn 1004 1327 323 24.34% HTC 450 923 473 51.24% Spice 920 790 -130 -16.45% LG 1834 780 -1054 -135.12% Hwawei 626 750 124 16.53% G’Five 1326 670 -656 -97.91% Graphical Representation of the above data 2500 2000 1500 1000 Axis Title 500 0 -500 -1000 -1500 Samsun Microm Blackber Nokia Karbonn HTC Spice LG Hwawei G Five g ax ry -1004 2171 -311 -490 323 473 -130 -1054 124 -656( (source - Business School | Strategic Management 40
  • 41.  Optic fiber and Aluminum - other Suppliers in the industry are Optic fiber and Aluminum. Companies producing different types of Telecom products (source:  Software Companies - Software assistance, where players can have edge over others. The major software providers are TCS, Infosys, Wipro and Satyam. Big players like Reliance and Tata have their own software solution department.Global Business School | Strategic Management 41
  • 42. Spectrum Cost In order to opearate or provide services in any of the circles in the country, a serviceprovider has to have a licence which is provided by the Department of Telecommunication(DoT) at the time of auction. Although the reserve price for auction is already has been set by the Cabinet before theauction takes place. The DoT(Licence Provider) or the Supplier in our case has ―No or littlepower‖. Reasons being:  Players in the market won‘t bid if the reserve price set is too high. In case of 2012 2G auction the reserve price which was set by the Cabinet was at staggering 14000Cr, which was too high according to the experts in the market. The reserve price of 2G was 4 times higher than the 2010 3G reserve price.  High Spectrum cost will attract less numbers of bidders. No of Companies participated in 2G auction 2012 were:- 1. Airtel 2. Idea 3. Vodafone 4. Videocon 5. Telewings Communication2008 (2G Spectrum Auction) If the Telecom Minister is corrupt like A. Raja who dished out specctrum in 2008auction, when he provided the licenses for a mere 1,659 crore when the price proposed to thetelecom companies was a minimum of Rs 3,622.2 crore for every unit of 2G Spectrum. This willweaken the supplier power because of the corrupt officals.Global Business School | Strategic Management 42
  • 43. 2010 (3G Specturm Auction) In 2010, 3G auction Government kept a reserve price of 3500 for four 3G licenses andexpected to generate 25000 crore from the auction. The 3G licence‘s were auctioned in a highly competitative bidding. The Governmentearned a revenue of whooping Rs 67,719 crore from the auction.Reasons for such unexpected revenue?  Low reserve price.  More number of players participated in the auction 1. Airtel 2. Aircel 3. Idea 4. Reliance 5. S Tel 6. Tata 7. Vodafone Apart from the above state owned BSNL and MTNL were also awarded licence, althoughthey did not participated in the auction. Both these state-owned operators were given a head startby the government in the 3G space by allotting the required 3G spectrum, on the condition thateach would pay an amount which would be equivalent to the highest bid in the respective serviceareas as and when the 3G auctions took place. BSNL paid the Indian government Rs10,187crores for spectrum in all 20 circles it operates in. State-owned MTNL provides 3G services inthe other 2 circles - Delhi and Mumbai. The auction took place over 34 days and consisted of 183 rounds of bidding. The mostexpensive telecom circle was Delhi at a price of Rs3316.94 crore per operator. The five mostexpensive circles were Delhi, Mumbai, Karnataka, Tamil Nadu and Andhra Pradesh. Theyaccounted for 65.56% of the total bids.Global Business School | Strategic Management 43
  • 44. Table Showing Circles’ won by various companies during 2010 3G Spectrum (source - Business School | Strategic Management 44
  • 45. 2012 (2G Specturm Auction) The auction took place for just 2 days and consisted 14 rounds. The bids received wereworth Rs 9,407 crore far lower than the target of 28,000 crore. Out of 144 circles of spectrum onoffer, 101 got bids. Delhi, Mumbai, Karnataka and Rajasthan circles did not receive any bids.Players which participated in the auction were Airtel,Idea,Vodafone,Videocon and TeleswingsCommunication Table Showing Circles’ won by various companies during 2012 2G Spectrum (source - Business School | Strategic Management 45
  • 46. Overall, from the above we can conclude that Although spectrum cost is decided by theCabinet/TRAI the bidding which takes place at the time of auction lies in the interest of themarket players. If there, are more number of competitiors and the bidding is likely to becompetitive. The exixting market players are more likely to be aggressive and more focusedabout their bids. Therefore, Spectrum cost will provide a little or No Bargaining to suppliers as its fullydriven by the bidders in the auction.Global Business School | Strategic Management 46
  • 47. Model showing how Low Cost Spectrum can provide High Bargaining power to Suppliers Low Spectrum Cost Attracts more number of Players Aggresive bidding by Fight for circles Players Between Players High Revenue Higher Bargaining through Spectrum power of SuppliersGlobal Business School | Strategic Management 47
  • 48. Bargaining Power of Suppliers Similar to buyer power, Suppliers also exert pressure on companies. The main rawmaterials for the telecom industry are the telecom equipments, telecom tools, telecommunicationproducts, circuit breaker, electric cables etc. With thousands of companies producing these kindsof products within India and Mobile Handsets companies having No or little impact on Telecomplayers. Spectrum Cost is the only thing that the companies need to worry about, keepingBargaining Power of Suppliers at low. High LowGlobal Business School | Strategic Management 48
  • 49. Threat of SubsitutesGlobal Business School | Strategic Management 49
  • 50. Threat from subsitutes is relatively very low as they don‘t provide the mobility as the cellphones or telecom providers do. Above are the few examples.Yahoomail: Yahoo mail offers free email with unlimited mail & photo storage, includes spam &virus protection, chat & free text sms from your inboxGmail: 10+ GB of storage, less spam, and mobile access. Gmail is email thats intuitive,efficient, and useful. And maybe even fun.Facebook: Facebook is a social utility that connects people with friends and others who work,study and live around them. People use Facebook to keep up with friends and relatives.Way2sms: Indias First web to mobile Free SMS site, wherein messages can be send to anynetwork free of cost.Crowd Call: Crowd Call is basically a new and secured concept for conferencing yourfriends or business clients right from your smart phone. With Crowd Call you get 10free calls/day to call over 40 countries worldwide. There is no time limit for any call 1call can be as long as you want and the person you are going to call does not need tohave any app installed in his phone, he just needs to have a valid phone number andhe can be invited into conference. The only thing you need is an iPhone or Androiddevice installed with the Crowd Call app and rest part is covered by crowd call itself,the other party do not need to have any app installed but just a regular number andthey receive your call right by your own number. You get 10 free calls per day whichyou can use to call over 40 countries, on iPhone at a time you can select 2 person tocall together and after the call is connected you can again minimize the call and callanother two persons and merge call together for free 5person conference call .Global Business School | Strategic Management 50
  • 51. Threat of Subsitutes Threat from subsitutes is relatively very low as they don‘t provide the mobility as the cellphones or telecom providers do. For instance if a person who wants to speak to any person wouldmake use of cell phone rather than logging into his skype account and making call from there.Therefore Threat of Subsitutes in telecom industry is very low. High LowGlobal Business School | Strategic Management 51
  • 52. Bharti Airtel Bharti Airtel Limited, commonly known as Airtel, is an Indian telecommunicationsServices Company headquartered at New Delhi, India. It operates in 20 countries across SouthAsia, Africa and the Channel Islands. Airtel has GSM network in all countries in which itoperates, providing 2G, 3G and 4G services depending upon the country of operation. Airtel isthe worlds fourth largest mobile telecommunications company with over 261 million subscribersacross 20 countries as of August 2012. It is the largest cellular service provider in India, with183.61 million subscribers as of November 2012. Airtel is the third largest in-country mobileoperator by subscriber base, behind China Mobile and China Unicom. Airtel is the largest provider of mobile telephony and second largest provider of fixedtelephony in India, and is also a provider of broadband and subscription television services. Itoffers its telecom services under the Airtel brand, and is headed by Sunil Bharti Mittal. BhartiAirtel is the first Indian telecom service provider to achieve Cisco Gold Certification. It also actsas a carrier for national and international long distance communication services. The companyhas a submarine cable landing station at Chennai, which connects the submarine cableconnecting Chennai and Singapore. Airtel is credited with pioneering the business strategy of outsourcing all of its businessoperations except marketing, sales and finance and building the minutes factory model of lowcost and high volumes. The strategy has since been copied by several operators. Its network—base stations, microwave links, etc.—is maintained by Ericsson, Nokia SiemensNetwork and Huawei, and business support is provided by IBM, and transmission towers aremaintained by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first timeGlobal Business School | Strategic Management 52
  • 53. to be paid by the minute for installation and maintenance of their equipment rather than beingpaid up front, which allowed Airtel to provide low call rates of 1/minute (US$0.02/minute). During the last financial year (2009–10), Bharti negotiated for its strategicpartner Alcatel-Lucent to manage the network infrastructure for the tele-media business. On 31May 2012, Bharti Airtel awarded the three-year contract to Alcatel-Lucent for setting upan Internet Protocol access network (mobile backhaul) across the country. This would helpconsumers‘ access internet at faster speed and high quality internet browsing on mobile handsets.HISTORY Sunil Mittal founded the Bharti Group. In 1983, Mittal was in an agreement withGermanys Siemens to manufacture push-button telephone models for the Indian market. In1986, Mittal incorporated Bharti Telecom Limited (BTL), and his company became the first inIndia to offer push-button telephones, establishing the basis of Bharti Enterprises. By the early1990s, Sunil Mittal had also launched the countrys first fax machines and its first cordlesstelephones. In 1992, Mittal won a bid to build a cellular phone network in Delhi. In 1995, Mittalincorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquiredcontrol of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In2000, Bharti acquired control of Skycell Communications, in Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti Enterprises wentpublic in 2002, and the company was listed on Bombay Stock Exchange and National StockExchange of India. In 2003, the cellular phone operations were rebranded under the single Airtelbrand. In 2004, Bharti acquired control of Hexacom and entered Rajasthan. In 2005, Bhartiextended its network to Andaman and Nicobar. This expansion allowed it to offer voice servicesall across India. In 2009, Airtel launched its first international mobile network in Sri Lanka. In2010, Airtel acquired the African operations of the Kuwait based Zain Telecom.In March 2012,Airtel launched a mobile operation in Rwanda. Today, Airtel is the largest cellular serviceprovider in India and the third largest in the world.Global Business School | Strategic Management 53
  • 54. Corporate structure Airtels initial corporate structure concentrated on the hierarchy of the operations insidethe company as a whole. The structure depicted the corresponding operation/region of differentin-charges and it didnt hold anyone responsible for each of its services. So, the company found itbetter to restructure its corporate hierarchy. The transformed organizational structure has twodistinct Customer Business Units (CBU) with clear focus on B2C (Business to Customer)and B2B (Business to Business) segments. Bharti Airtels B2C business unit willcomprehensively service the retail consumers, homes and small offices, by combining theerstwhile business units - Mobile, Telemedia, Digital TV, and other emerging businesses (likeM-commerce, M-health, M-advertising etc.). The B2C organization will consist of ConsumerBusiness and Market Operations. The organization has changed the style of the company as thecompany do not have any brand logo till the time.Mobile Services Airtel operates in all telecom circles of India. Its network is present in 5,121 censustowns and 457,053 non-census towns and villages, covering approximately 86.6% of thecountry‘s population as of September 2012.Airtel is the 6th most valued brand according to an annual survey conducted by BrandFinance and The Economic Times in 2010.3G On 18 May 2010, the 3G spectrum auction was completed and Airtel paid the Indiangovernment 122.95 billion (US$2.24 billion) for spectrum in 13 circles, the most amountspent by an operator in that auction. Airtel won 3G licences in 13 telecom circles of India:Delhi, Mumbai, Andhra Pradesh, Karnataka, Tamil Nadu, Uttar Pradesh (East), Rajasthan, WestBengal, Himachal Pradesh, Bihar, Assam, North East, and Jammu & Kashmir.Airtel alsooperates 3G services in Maharashtra & Goa and Kolkata circles through an agreementwith Vodafone and in Gujarat through an agreement with Idea. This gives Airtel a 3G presencein 15 out of 22 circles in India.Global Business School | Strategic Management 54
  • 55. On 20 September 2010, Bharti Airtel said that it had given contracts to EricssonIndia, Nokia Siemens Networks (NSN) and Huawei Technologies to set up infrastructure forproviding 3G services in the country. These vendors would plan, design, deploy and maintain3G–HSPA (third generation, high speed packet access) networks in 13 telecom circles where thecompany had won 3G licences. While Airtel awarded network contracts for seven 3G circles toEricsson India, NSN would manage networks in three circles. Chinese telecom equipmentvendor Huawei Technologies was introduced as the third partner for three circles. Airtel 3G services are available in 200 cities through its network and in 500 citiesthrough intra-circle roaming arrangements with other operators. Airtel had about 5.4 million 3Gcustomers of which 4 million are 3G data customers as of September 2012.4G On 19 May 2010, the broadband wireless access (BWA) or 4G spectrum auction in Indiaended. Airtel paid 33.1436 billion for spectrum in 4circles: Maharashtra, Karnataka, Punjab and Kolkata. The company was allocated 20 MHz ofBWA spectrum in 2.3 GHz frequency band. Airtels TD-LTE network is built and operatedby ZTE in Kolkata, Huawei in Karnataka, Ericsson in Punjab and Nokia SiemensNetworks in Maharashtra. On 10 April 2012, Airtel launched 4G services using TD-LTE technology in Kolkata, becoming the first company in India to offer 4G services. On 24May 2012, Airtel announced an agreement to acquire a 49% stake in Qualcomm Asia Pacific(India). Qualcomm holds 4G spectrum and licenses in Delhi, Haryana, Kerala and Mumbai. Asper the agreement, by the end of 2014, Airtel will assume full ownership and financialresponsibility for 4G operations in these 4 circles.Airtel had 3180 4G subscribers as of May 2012Global Business School | Strategic Management 55
  • 56. WiFi Airtel has plans to launch WiFi services in India. It intends to start offering WiFi servicesin Delhi NCR, Mumbai and Bangalore in initial phase. All plans will be on secure wirelessbroadband internet with unlimited usage and will be session or time based. Users can use theservice by finding a hotspot, selecting airtel WiFi Zone, activating the voucher and then login tostart browsing. Airtel intends to partner with establishments to setup hotspots which will betermed WiFi Hangout for an establishment owner and WiFi Partner for the cafe and restaurantowners. Airtel WiFi Partners can offer services at zero investments and can earn commission onevery WiFi session sold.Network Experience Centre Airtel has a Network Experience Centre (NEC) which observes end to end customerexperience, in near real time, along with the standard network elements on Airtels operations.The NEC is located in in Manesar, Haryana and went live on 31 October 2012. It is the first suchfacility in India and will be able to monitor Airtels network performance across mobile, fixedline, broadband, DTH, M-Commerce, enterprise services, International Cable Systems andinternet peering points from a single location. It will monitor all Airtel and partner NOCs. In caseof an emergency, the NEC will enable the operator to prioritize actions to restore normalcy andreduce resolution time. The NEC houses a video wall with 3600 square feet of solid state LEDscreen to monitor Airtels telecom network. The clear span of the roof is 49 m x 18 m and thebeams, which are fireproof and about 8 feet deep, have been specially designed to hold thestructure without columns. The NEC was designed specifically to be used as a command centerin case of national emergencies and natural catastrophes. The facility is earthquake proof andalso provides for a single control of command and a fully redundant technology layout.iPhone The iPhone 3G was rolled out in India in 2008 by Airtel. However, high prices andcontract bonds discouraged consumers and it was not as successful as the iPhone is in othermarkets of the world. Airtel introduced the iPhone 4 on 27 May 2011 and the iPhone 5 on 2November 2012.Global Business School | Strategic Management 56
  • 57. Telemedia Under the Telemedia segment, Airtel provides broadband internet access through DSL,internet leased lines as well as MPLS (multiprotocol label switching) solutions, as wellas IPTV and fixed line telephone services. Until 18 September 2004, Bharti provided fixed linetelephony and broadband services under the Touchtel brand. Bharti now provides all telecomservices including fixed line services under a common brand airtel. As of September 2012, Airtelprovides Telemedia services to 3.3 million customers in 87 cities, of which 1.4 million havesubscribed to broadband/internet services. Airtel Broadband provides broadband and IPTV services. Airtel provides both capped aswell as unlimited download plans. However, Airtels unlimited plans are subject to free usagepolicy (FUP), which reduces speed after the customer crosses a certain data usage limit. In someplans, Airtel provides only 256kbit/s beyond FUP, which is lower than the TRAI specified limitof half the subscribers original speed. The maximum speed available for home users is 16Mbit/s. In May 2012, Airtel Broadband and some other Indian ISPs temporarily blocked filesharing websites such as, etc. with out giving anylegal information to the customers. The block was due to a Madras High Court issued ‗John Doe‘order taken by Chennai-based Copyright Lab. In response to a petition filed by Vinay B, aresident of Shimoga, Karnataka, the District Consumer Disputes Redressal Forum ordered Airtelto pay 20,000 to the petitioner for "deficiency in internet service" thereby causing mental agonyto the complainant. ―By misinterpreting the Madras High Court order, Airtel blocked entirewebsites. It is needless to say that the company‘s actions amount to deficiency in service as wellas unfair trade practice,‖ said the forumGlobal Business School | Strategic Management 57
  • 58. Chairman’s speech of Bharti Airtel At the industry level, telecom is in the midst of a tectonic shift. Data is clearly the futureof mobile telecom and Airtel is gearing itself up for this. New generation mobile technologieswith much faster data capabilities are steadily taking root, opening up mind-bogglingpossibilities in new service areas like healthcare, banking, commerce and education. During the year, Bharti Airtel led from the front as it systematically rolled out 3Gnetwork, across India, making Airtel the most robust network in the country. Airtel also launched 3G networks in seven African markets. Airtel Launch of 4G servicesin April 2012 marked another watershed for the Indian telecom industry. This is the firsttechnology platform that India has launched simultaneously with its global release, helping movethe Indian telecom industry to a global standard. “Airtel Money” was a distinctive service Launch for them during the year in India andeight other African markets. Besides being the first of its kind, M-commerce service offered by an operator in India, itis also India‘s first mobile- based service to offer instant money transfer. Cancellation of several 2G licenses allotted to other telecom operators by the HonbleSupreme Court was one such significant event. The issue of pricing of 2G spectrum in India ishowever still hanging fire. Airtel reconnecting with its prime target audience - the youth - with a path breakingbrand campaign in India – ―Har Friend Zaroori Hai‖. The campaign had a universal appeal andresonated deeply among the target segment. The other major youth related theme that Airtel developed across all our operations wasthat of sports. While it introduced ―Formula One‖ in the Indian sub-continent, in Africa, Airtelconnected with youth through Airtels Rising Stars program for football enthusiasts.Global Business School | Strategic Management 58
  • 59. VISION By 2015 Airtel will be the most loved brand, enriching the lives of millions. Enriching lives means putting the customer at the heart of everything we do. We willmeet their needs based on our deep understanding of their ambitions, wherever they are. Byhaving this focus we will enrich our own lives and those of our other key stakeholders. Only thenwill we be thought of as exciting, innovation, on their side and a truly world class company.MISSION Recruit & Maintain Caliber Working Staff Provides Customer Specific Software Solution Continues Improvement in Software Quality Not remain as Only Software Solution Provider, but be as Continues Service Provider To empower stakeholders in services and inventories to deal with associatedQUALITY POLICY We will deliver error free service to our customer by doing our jobs right and first timeevery time.Global Business School | Strategic Management 59
  • 60. PORTER 5 Forces Model Analysis Porter 5 Forces Model Bargaining Power of Buyers (High) • Low switching costs for buyers • Huge competition between the existing players in the market. Bargaining Power of Suppliers (Low) • Large pool of suppliers in the market • Have access to other countries supply Industry Rivalry (High) • Players like Vodafone are big competitor • Existing Players are also eating up the market share Threats of new Entrants (Low) • Not easy to match Airtel‘s distribution network and marketing know how Threat of Substitutes (Low) • Threat is less as substitutes have less mobility High LowGlobal Business School | Strategic Management 60
  • 61. ISSUE PRIORITY MATRIX BHARTI AIRTEL Probable Impact on Corporation HIGH MEDIUM LOW Antitrust New Products Price control HIGH Regulations Focus of Government Special Incentives MEDIUM Technological Policy (b) efforts Government Protection Laws Protection Laws LOW Policy (a) (a) (b)Global Business School | Strategic Management 61
  • 62. Antitrust Regulations (High High) Bharti Airtel are in trouble ahead with Telecom Commission recommending that theywould have to give up the entire 900Mhz band of Spectrum(being used for 2G services, whichgives wider coverage) they hold when their licenses come up for renewal in 2014. In order tocontinue operations, Bharti would have to compete with other players in fresh auction for thisband of spectrum. Bharti Airtel & Vodafone hold over ¾ of the superior 900 Mhz spectrum.New Products (High Medium) Airtel began taking preorders for Apple‘s much awaited iPhone 5S ahead of its retaildebut on November 2nd 2012. iPhone supports Nano Simcard which will be available in all AirtelStores with effect from 2nd November 2012. Bharti will provide attractive tariff schemes and freeminutes for the iPhone. It will be a unique advantage to customer who opt to buy the gadget fromthem, as Ebay & are selling the iPhone in black market for 58000/- for 16GB and1,06,000/- for 64GB where as Airtel will be providing the same Phone for 45000/- 16GB and59,500/- for 64GB. Airtel has also come out with five monthly plans at discounted rates for itspost-paid customers buying iPhone 5.Price control (High low) Bharti Airtel will bid for 5 Circles, Bharti will not bid for circles where they are alreadyin comfortable position and will be instead planning to fill in gaps in their coverage. Airteldeposited 102.75 crore in advance for the 2G auction indicating to bid in a maximum of 5circles.Focus of Technological Efforts (Medium High) Airtel which had bagged the 4G spectrum in four telecom circles in Kolkata,Maharashtra, Punjab and Karnataka has launched its 4G services in Kolkata and Bangalore andenjoys the monopoly in this market. Other players are yet to launch 4G services in the market.4G has 4 times more speed than 3G.Global Business School | Strategic Management 62
  • 63. Government Policy (b) (Medium Medium) Government has constituted a six member group to consider various issues arising out ofban on bulk Short Messages Service (SMS) and Multimedia Message Service (MMS) becausethe Government has received representation from association of the deaf and others opposing theciting difficulties faced by them while communicating. If the TRAI lifts the ban on 100 SMS perday then there will reduction in the revenue of the Airtel, as earlier Bharti used to charge0.50ps/per SMS after 100 SMS/per day.Special Incentives (Medium Low) Telecom regulator TRAI approved a hike in processing fee for all mobile rechargecoupons priced above Rs 20/- but has left it unchanged for the vouchers below that. TheAuthority has decided to increase the ceiling on Processing Fee on Top up vouchers to Rs 3/-from Rs 2/- in respect of Top-up vouchers having maximum retail price of Rs 20/- and above.The order will affect 90% of the prepaid users. Bharti telecom with its 20.67% market share willgenerate more revenue from this decision.Government Policy (a) (Low High) As a result of the high base price of spectrum for the upcoming auctions, call rates willrise by 30-40 percent. Base price of Rs 14,000 crore for 1800Mhz band and Rs 18,200 for 800Mhz based on the recommendations made by sectoral regular TRAI. This will affect the marketshare of Airtel as their tariffs are already priced high compare to its competitors and they facehuge competition in the 2G segment.Global Business School | Strategic Management 63
  • 64. Protection Laws (a) (Low Medium) Notices are to be issued to telecom firms asking them to stop 3G roaming service outsidetheir licensed area with immediate effect as the government was losing revenue because of theiragreements. Airtel who paid 12,295 crores for spectrum in 13 circles, the largest spender in 3Gauction in 2010 is likely to be impacted more than its competitors.Protection Laws (Low Low) Airtel faces the largest number of complaints among all the operators for rejecting MNPrequests by its subscribers. It has been accused of violating and deviating from compiling withMNP regulations (denying the ID proof such as Aadhar Card and Voter ID)Global Business School | Strategic Management 64
  • 65. EFAS of Airtel (Opportunity)Opportunity Weights Rating Weighted Score CommentsIndia’s GDP 0.02 2 0.04 More number of people will opt for mobile services if income increases.Imports 0.06 2 0.12 Increase in number of Mobile phones will lead to increase in subscribers.Technological 0.16 3 0.48 Airtel operates in eleven 3GEffort circles, with four 4G circles but still huge market to cover.New Products 0.09 3 0.27 Airtel has come up with iPhone 5S, 3G & 4G data card.Internet 0.06 3 0.18 Airtel is present in Data card asAvailability well as broadband.Lifestyle 0.10 2 0.20 Airtel keeps on coming with newChanges campaign depending on the changing lifestyle of the people. The latest campaign ―Jo Tera Ha voh Mera Hai‖Growth Rate 0.04 3 0.12 Airtel‘s market leadership willof Population provide the benchmark to capture new market.Global Business School | Strategic Management 65
  • 66. EFAS of Airtel (Threats)Threats Weights Rating Weighted Score CommentsFDI 0.06 3 0.18 Airtel can compete with the foreign players on pricing and service basis.Price War 0.16 4 0.64 More number of players will lead to high bargaining power of the buyers.Interest Rates 0.09 4 0.36 Airtel‘s expansion/acquisition in other countries will come at a cost. If the cost of borrowing is high. This will result in reduce PAT.Consumer 0.07 1 0.7 As Airtel has the highest numberProtection of consumer complaints, Consumer Protection law may beLaw a concerned.2G Scam 0.09 2 0.18 Company name may come under scam.Total 1 3.41 Airtels EFAS GDP Imports Consumer 2% 6% Protection Law 7% 2G Scam 9% Technological Effort 16% Interest Rate 9% New Products 9% Price War 16% FDI Internet Avalability 6% 6% Growth Rate of population Lifestyle Changes 4% 10%Global Business School | Strategic Management 66
  • 67. IFAS of Airtel (Strengths)Strengths’ Weights Rating Weighted Score CommentsMarket 0.12 4 0.48 With a market share of 24%,Leader Market leadership is Airtel‘s major strength.Strategic 0.1 3 0.30 Strategic shareholders provideStakeholders the much needed innovations and ideas to survive in the(Sony, Nokia, market.Erikson)Brand Name 0.09 3 0.27 Being the oldest player in the market for more than 15 years. Airtel is duly recognized by its Brand name.Strong 0.1 3 0.30 Changing Advertising campaignAdvertising & according to market trends and targeting the youths is the newCelebrity way Airtel has managed to holdBrand the top position in telecomAmbassador market.Wide 0.1 3 0.30 Wide customer base brings inCustomer high revenue.BaseMonopoly in 0.11 4 0.44 Presence of 4G in 2 out of 44G circles, while the other players are yet planning to enter.Presence in 0.07 3 0.21 Global business as Airtel ismore than 20 present in developing economies of the world.countriesOther Brands 0.05 2 0.10 It‘s a conglomerate withlikes Airtel TV presence in telephone devices and the has market share of 14%& Beetel in the emerging DTH industry.High ARPU 0.06 3 0.18 Airtel has a high ARPU compared to its competitors in the market.Global Business School | Strategic Management 67
  • 68. IFAS of Airtel (Weakness)Weakness Weights Rating Weighted Score CommentsUntapped 0.15 4 0.60 Mobile penetration is only halfRural Market in India. Signaling possible opportunity for Airtel.Customer 0.05 3 0.15 Airtel has most number ofComplaints customer complaints, signaling weak customer service providedare higher by the market leader.according toTRAITotal 1 3.33 IFAS of Airtel Customer Complaints 5% Market Leader 12% Untapped Rural Market Strategic 15% Stakeholders 10% High ARPU 6% Brand Name 9% Other Brands 5% Strong Advertising Presence in more Wide 10% Monoploy than 20 Countries Customer in 4G 7% Base 11% 10%Global Business School | Strategic Management 68
  • 69. SFAS OF AIRTEL Strategic Weights Rating Weig Duration Comments Factor hted Score S M LMarket 3 0.21  More number of people will optLeader 0.07 for mobile services if income increases.Strategic 0.09 3 0.27 Strategic shareholders provide theStakeholde much needed innovations and ideas to survive in the (Sony,Nokia,Erikson)Monopoly 0.11 3 0.33 Presence of 4G in 2 out of 4in 4G circles, while the other players are yet planning to enter.Untapped 0.15 4 0.60 Mobile penetration is only half inRural India. Signaling possible opportunity for Airtel.MarketTechnologi 0.16 3 0.48 Airtel operates in eleven 3Gcal Effort circles, with four 4G circles but still huge market to cover.New 0.09 3 0.27 Airtel has come up with iPhoneProducts 5S, 3G & 4G data card.Lifestyle 0.08 2 0.16 Airtel keeps on coming with newChanges campaign depending on the changing lifestyle of the people. The latest campaign ―Jo Tera Ha voh Mera Hai‖Price War 0.16 4 0.64 More number of players will lead to high bargaining power of the buyers.Interest 0.09 4 0.36 Airtel‘s expansion/acquisition inRates other countries will come at a cost. If the cost of borrowing is high. This will result in reduce PAT.TOTAL 1.00 3.32Global Business School | Strategic Management 69
  • 70. SFAS of Airtel Interest Rates Market Leader 9% 7% Strategic Shareholders 9% Price War 16% Monopoly in 4G 11% LifeStyle Changes 8% Untapped Rural Market 15% New Products 9% Technological efforts 16%Global Business School | Strategic Management 70
  • 71. TWOS of STRENGTHS WEAKNESS AIRTELGlobal Business School | Strategic Management 71
  • 72. Internal Factor Analysis IFAS Untapped Rural Market Share Brand Name Market Strategic Stakeholders Customer Monopoly in 4G Complaints are External Factor Analysis higher according to EFAS TRAI Opportunities Strength/Opportunities Weakness/Opportunities Untapped Rural New Products / Brand Market / Technological Effort Name Technological New Products New Products / 4G Efforts Lifestyle Changes Lifestyle Changes / Customer Strategic Shareholders Complaints / New Products Threats Strength/Threats Weakness/Threats Price War Market Share / Price War Interest Rates Brand Name / FDI Untapped Rural FDI Strategic Shareholders / Market / Price War Interest Rates STRENGTHS / OPPORTUNITIESNew Products / Brand Name Bharti Airtel coming up with new products with the Brand Name would help theirproducts to move in the market very easily.Global Business School | Strategic Management 72
  • 73. New Products / Monopoly in 4G Airtel‘s monopoly in 4G will help its 4G products to grab new market share.Lifestyle Changes / Strategic Shareholders Bharti‘s Strategic Shareholders (Nokia, Erikson) will provide the benchmark for Airtel inorder to adapt new strategies and to bring about changes according to the Lifestyle of the people. STRENGTHS / THREATSMarket Share / Price War Airtel‘s huge market share will provide the base as it goes into Price War against itscounterparts. With high market share Airtel can generate economies of scale and thus cansurvive in the market.Brand Name / FDI Bharti‘s Brand Image will help it to overcome the competition from Foreign players.With Bharti understanding the behavior of the people in domestic market, it will certainlyprovide an edge over the foreign companies entering the domestic market.Strategic Shareholders / Interest Rates Every company wants to expand or grow in one or the other way. Hence in order toexpand into different geographical locations companies will need capital. The same is withAirtel, It will need capital or Debt in order to funds its growth strategies. Here the StrategicGlobal Business School | Strategic Management 73
  • 74. Shareholders will help in getting the debt easily or at lower rates making expansion less cheaperand fruitful.(Note: In case of already listed Companies like Airtel, these Companies will go for Debtfinancing rather than equity. As equity financing will be costly and will again generate morenumber of shares, sending a negative signal among the shareholders and will also have aeffect on the share price of the company) WEAKNESS / OPPORTUNITIESUntapped Rural Market / Technological Effort Airtel‘s vast growth in technology with the introduction of 4G recently and strong footingin 2G and 3G. Bharti will certainly look upon its Technology in order to grab rural market share.Customer Complaints / New ProductsReduce Customer Complaints by readdressing them so that they will readily accept Newproducts. WEAKNESS / THREATSUntapped Rural Market / Price War Bharti has to overcome its major weakness of ―Untapped Rural Market‖ if they don‘tother competitors will build on this weakness and will compete with Bharti on pricing.Global Business School | Strategic Management 74
  • 75. BCG Matrix Of AIRTEL Companies Market Share Industry Growth Quadrant Bharti Airtel 20% 12% - 15% STARS Bharti Infratel 40% 20% STARSBharti Reality Ltd - 30% QUESTION MARKS Field Fresh Food 10% (UK) 30 % - 40% QUESTION MARKSBeetel Teletech Ltd 30% 20% STARS Bharti Walmart - 15 % – 20 % QUESTION MARKS Bharti Retail - 15 % – 20 % QUESTION MARKS Bharti AXA Life 1.3% 13% - 14% QUESTION MARKS InsuranceGlobal Business School | Strategic Management 75
  • 76. BCG Matrix of AIRTEL • STARS • QUESTION MARKS Bharti Reality Ltd Bharti Airtel Field Fresh Food Bharti Infratel Bharti Walmart Beetel Teletech Bharti Retail Ltd Bharti AXA Insurance - - • CASH • DOGS COWSGlobal Business School | Strategic Management 76
  • 77. Airtel’s Basic Growth Strategies Horizontal CONCENTRATION Growth DIVERSIFICATION Concentric Concentration Horizonth GrowthGlobal Business School | Strategic Management 77
  • 78. Outsourcing operations Direct to Home Horizontal Deals with Satellite Growth Google Service African AdventureBharti Airtel’s outsourcing deal with Avaya & IBM.Global Business School | Strategic Management 78
  • 79. The world‘s 4th largest Telecom company by customers. Bharti Airtel has its IToutsourcing deal with Avaya that covers all 20 countries where it offers mobile phones facilities.Avaya will become Bharti‘s second partner after IBM (Airtel awarded a 10 year contractestimated to be worth over $1.5 billion for managing its IT requirements in Africa to IBM. TheUS firm also handles Bharti‘s IT requirements in India, Sri Lanka & Bangladesh under a 2004deal which is estimated to be worth at least $4 billion) Under the 5 year deal Avaya will operateand manage the IT requirements of all Bharti‘s Business Processing Solutions (BPO) partnersacross to 80 locations.Bharti’s customer care operations in India are handled by:  Essar Group owned Aegis  Magas Dialog  Hinduja TMT  Kochar  Infotech  IBM Daksh  Mphasis  Teleperformance  First Source  WiproBharti’s African operations are handled by:  IBM  Tech Mahindra  SpancoBharti’s deal with GoogleGlobal Business School | Strategic Management 79
  • 80. Bharti‘s Airtel Broadband & Telephone Service, India‘s largest private broadband andtelephone service provider & Google Inc, the world‘s most popular search engine announcedplans to work together in bringing information web based services to Airtel‘s community ofbroadband internet customers. As part of the agreement, Airtel will offer its broadband customers a world class portalwhich will include  Google Search for web based queries.  Google Gmail will provide 2GB storage, spam filter & options of web access.  Google Talk instant messaging service for sending instant messages to friends & family anytime, anywhere in world.  Google Docs & Spreadsheets so users can share and collaborate in real time  On Demand games, service and music download service.Bharti Airtel and Google Inc’s join hands to work on Google Phone (Gphone) GPhone is an operating system for mobile phones and not a mobile phone. Mobilecompanies like Samsung and Motorola are likely to give orders for handsets specially pre-loadedwith the Gphone OS. Google said that Finnish giant Nokia is not their partner in this. TheGphone that will power Google‘s mobile operating system has been is built on open sourceLinux technology. With the introduction of GPhone, it is expected that the users may start using cheaperalternatives with ease that will be able to operate various other applications for connectivity andcontent.Bharti’s African questGlobal Business School | Strategic Management 80
  • 81. On March 30, 2010, Mr. Sunil Bharti Mittal, Chairman and Managing Director of BhartiAirtel and Mr. Asaad Al, Banwan, Chairman, Zain Group executed the definitive agreements atNetherlands marking the transformation of Bharti Airtel into an emerging-market multinational.The acquisition is the largest by an Indian company, second only to the USD 12 billion takeoverof Corus by Tata Steel in 2007.1 In the Indian telecom space, the deal is the second largest afterthe USD 11.2 billion (approximately) Vodafone Hutchison transaction in 2007. Airtel will beoperating in 16 African countries. (Source: )Direct to Home Satellite ServiceGlobal Business School | Strategic Management 81
  • 82. Airtel digital TV is an Indian direct broadcast satellite service provider owned andoperated by Bharti Airtel. Its satellite service, launched on 2008, transmits digital satellitetelevision and audio to households in India. It uses MPEG-4 digital compression with DVB-S2 technology, transmitting using the satellites INSAT-4CR 74°E and SES-7 108.2°E. Airtel DigitalTV service was launched on 8 October 2008. As of 13 December 2012, Airtel has total 304Channels and Services including 17 HD channels. Its primary competitors are cable television and other DTH service providers—RelianceBig TV, DD Direct+, Dish TV, Tata Sky, Sun Direct, and Videocon D2H. It has a total subscriber base of7.1 million as of 31 December 2011. (Source: ) Diversification ConcentricGlobal Business School | Strategic Management 82
  • 83. Beetel Teletech Limited Bharti Infratel Limited Bharti Realty Limited Mobile Services FieldFresh Foods Pvt. Ltd Telemedia Services Bharti Airtel Airtel Business Comviva BHARTI Digital TV Service ENTERPRISES Jersey and Guernsey Centum Learning Limited Bharti Walmart Bharti Retail Bharti AXA Life Insurance Bharti AXA General InsuranceGlobal Business School | Strategic Management 83
  • 84. (source: )Global Business School | Strategic Management 84
  • 85. Porter’s Generic Competitative Strategies of AIRTEL Lower Cost Differentiation Cost Leadership Differentiation Bharti Airtel Beetel Teletech Ltd Broad Target Comviva Bharti Walmart Bharti Retail Bharti AXA General Insurance Cost Focus Focused Differentiation Narrow Target Bharti Infratel Limited Field Fresh Foods Pvt Ltd Jersey and Guernsey Centum Learning Limited Indus Towers Bharti Softbank Holdings Bharti Realty LimitedBharti Airtel (Cost Leadership / Broad Target) Bharti Airtel Limited is a leading integrated telecommunications company withoperations in 20 countries across Asia and Africa. Headquartered in New Delhi, India, thecompany ranks amongst the top 4 mobile service providers globally in terms of subscribers. InIndia, the companys product offerings include 2G, 3G and 4G services, fixed line, high speedbroadband through DSL, IPTV, DTH, enterprise services including national & international longdistance services to carriers. In the rest of the geographies, it offers 2G, 3G mobile services.Bharti Airtel had over 253 million customers across its operations at the end of April 2012Bharti Infratel Limited (Cost Focus / Narrow Target) Bharti Infratel Limited is amongst India‘s leading telecom tower infrastructure serviceproviders. The company deploys, owns and manages telecom towers infrastructure, for variousmobile operators across 18 states of India. It has a vast footprint of over 34,000+ towers andholds a 42% stake in Indus Towers Ltd - a Joint Venture between Bharti Infratel, Vodafone India& Aditya Birla Telecom – that has the distinction of being the world‘s largest tower company.Global Business School | Strategic Management 85
  • 86. Bharti Realty Limited (Cost Focus / Narrow Target) Bharti Realty Limited is a young, vibrant and dynamic realty company with expandinginterests in commercial, retail and residential real estate. It has grown from strength to strength,constructing and managing over ten top of the line facilities for Bharti group companies and thirdparty clients. Spurred by its accomplished success and acquired expertise, Bharti Realty Limitedhas now forayed into developing quality commercial real estate in the central business district(CBD) areas of metropolitan cities, retail real estate in the up-market localities of metropolitancities and in a few prominent cities of Punjab, and high end residential real estate in the DelhiNCR region, Mumbai and Bangalore.FieldFresh Foods Pvt. Ltd (Focused Differentiation / Narrow Target) FieldFresh Foods Pvt. Ltd, a joint venture company between Bharti Enterprises and DelMonte Pacific Ltd. The company offers branded FieldFresh fruits & vegetables across India andinternational markets, including Europe and the Middle East. The company produces marketsand distributes farm fresh products. FieldFresh Foods Pvt. Ltd, aims to become one of the mosttrusted provider of premium quality fresh farm products, processed foods and beverages.Beetel Teletech Limited (Differentiation / Broad Market) Beetel is a leading global technology brand which offers a wide range of innovativeproducts in the mobile phones, IT peripherals and fixed line telephone segments. Leveraging itsconsistent performance, distribution and marketing capabilities Beetel as a brand has achieved aleading market share in the telecom and allied product segments.With powerful distribution and marketing capabilities, Beetel distributes a host of iconic brandslike Blackberry, Apple, Avaya, Polycom, Samsung, Sanyo, Panasonic, Transcend, Iomega,Aastra Telecom, RAD Data Comm, Actelis and Strontium. Its products and solutions are presentworldwide, spanning 35 countries in 5 continents.Global Business School | Strategic Management 86
  • 87. Comviva (Cost Leadership / Broad Target) Comviva is the global leader in providing mobile solutions beyond VAS. With anextensive portfolio of solutions spanning VAS infrastructure, application delivery platforms andcustomer-facing applications, Comviva enables mobile service providers to enrich mobile users‘lives, whilst rationalizing costs, accelerating revenue growth and enhancing customer lifetimevalue. Comviva‘s solutions are deployed by service providers in over 85 countries and powerservices to more than 650 million mobile subscribers globally.Jersey and Guernsey (Cost Focus / Narrow Target) Jersey Airtel and Guernsey Airtel are subsidiaries of Bharti group and offer mobileservices on the islands of Jersey and Guernsey respectively in the Channel Islands (Europe). Allservices are offered under the Airtel-Vodafone brand under a partnership to bring a range ofVodafone global products together with other exciting services from Bharti to customers inJersey and Guernsey.Centum Learning Limited (Focused Differentiation / Narrow Target) Centum Learning Limited provides end-to-end learning and skill-building solutions thatenhance business performance to Bharti Group and several large corporate. Centum Learning hasreceived the Gold Award for "Excellence in Training" at the World HRD Congress, 2010 andhas been adjudged as one of the Top 15 Emerging Leaders in Training Outsourcing 2009Worldwide. Centum Learning provides industry oriented employability programmes through anetwork of 130 Centum Learning Centers spread across 90 cities. It has also launched a neweducation initiative, Centum U – Institute of Management & Creative Studies which offers UGand PG programmes in association with world renowned institutions.Indus Towers (Cost Focus / Narrow Target) Indus Towers, a JV between Vodafone India (42%), Bharti Group (42%) and AdityaBirla Telecom Limited (16%) is India‘s leading mobile towers company. The company, whichoperates in 15 telecom circles across India, provides services to all telecom operators and otherwireless service providers such as broadcasters and broadband service providers on non-discriminatory basis.Global Business School | Strategic Management 87
  • 88. Bharti Retail (Cost Leadership / Broad Target) Bharti Retail is a wholly owned subsidiary of Bharti Enterprises. The Company operatesEasyday neighborhood stores and compact hypermarket stores called Easyday Market. BhartiRetail provides consumers a wide range of good quality products at affordable prices. Easydaystores are a one stop shop that cater to every familys day-to-day needs. Merchandise at EasydayMarket stores include apparels, home furnishings, appliances, mobile phones, meat shop, generalmerchandise, fruits and vegetables among others.Bharti AXA General Insurance (Cost Leadership / Broad Target) Bharti AXA General Insurance is a joint venture between Bharti Group and AXA Group.The company is one of the fastest growing in the general insurance segment and is the first in theindustry to receive dual certifications of ISO 9001:2008 & 27001:2005 within the a year oflaunching operations. The company offers an extensive product range for retail, rural andcommercial clients with cashless facilities in over 4000 hospitals and 1600 garages as well as24/7 multi-modal claims registration.Bharti Softbank Holdings (Focused Differentiation / Narrow Target) Bharti Softbank Holdings Pvt. Ltd. ("BSB"), is a 50:50 joint venture between BhartiEnterprises, one of India‘s leading business groups and SOFTBANK CORP, parent corporationfor one of Japan‘s leading internet company groups ("SoftBank"). The company BSB activelyfocuses and participates in the growth of the mobile internet ecosystem in India with an emphasison three key areas: Social Media, Gaming and e-Commerce.Bharti Wal-Mart (Cost Leadership / Broad Target) Bharti Wal-Mart is a B2B joint venture between Bharti Enterprises and Walmart forwholesale cash & carry and back-end supply chain management operations in India to servesmall retailers, manufacturers, institutions and farmers. The Company operates Cash & Carrystores under the Best Price Modern Wholesale brand. A typical cash-and-carry store standsbetween 50,000 and 100,000 square feet and sells a wide range of fresh, frozen and chilled foods,fruits and vegetables, dry groceries, personal and home care, hotel and restaurant supplies,clothing, office supplies and other general merchandise items.Global Business School | Strategic Management 88
  • 89. Functional StrategiesMarketing  Special data plans for iPhone 5S.  Airtel customers in Africa to get free incoming calls while international roaming in India, Sri Lanka and Bangladesh.  Airtel Intros Data Share Plan – Share Your Airtel 3G Data to Two Friends or Three Devices.  Airtel 4G LTE Services Launched in Pune.  India‘s first 4G LTE Smartphone Huawei Ascend P1 LTE Launched with Bharti Airtel.MARKETING MIXProducts  Airtel Connections Prepaid  Airtel Connections Postpaid  Airtel Data Cards  Airtel Blackberry phones  Airtel I phones  Airtel Digital TVPrice  Customer based pricing strategies.  Flexible pricing mechanism  Controlled by TRAIPlace  It was wide and extensive presence even in the remotest areas.  Airtel customer care touch points  Distributions like paan shops, grocery stores, chemists, outlet etcGlobal Business School | Strategic Management 89
  • 90. Promotions  Large scale print video ad  Big celebrities like SRK and SACHIN are roped in to endorse the product because it.  In 2002 Airtel got it s signature tune from A.R.Rehman , this signature tune is the most downloaded in India  Provides innovations such as bollywood movie premiers, music series such as ring back tone and many morePhysical EvidencePeople  Total employees 25616 as per Q3 2012  Dedicate and passionate workforce  One of the best customer support.  Have won 2nd best employer award in 2004.Process  Process for services is very easy and customer can avail it very easily.  121 is the customer support number which can be dialed from anywhere in India.Global Business School | Strategic Management 90
  • 91. Key Technology Partners of AirtelTechnology Partners (Software)  Savis  Ramco  VeriSign  Microsoft  Tally  VMware  SymantecCustomer Support Partnerships with Business Process Outsourcing (BPO) companies to run their customercare operations  Aegis  Mphasis  IBMIT requirements Partnerships with IT and software companies for technology infrastructure, and solutions,such as billing, business intelligence, cloud services, and others  Infosys  HP  WiproValue Added Services Partnerships with content generators, aggregators, and portals, for delivery of value addedservices  Yahoo  Comviva  GoogleGlobal Business School | Strategic Management 91
  • 92. OSS Solution CompanyPrepaid Charging TelesoftCRM ORACLEFraud Management SubeMediation ComptelOrder Provisioning ComverseInter Connect Billing Elite CoreAirtels HR StrategiesYoung Turks Average age of Airtel employee is just 206 years. This has helped the HR department tomould the young entrants according to the company preference.Strong Training Program Unlike other companies Airtel allows its employee to decide their training needs and ifthe employee does not know what his training needs are then there is no place for him in theorganizationTeam Building Efforts The younger professionals are circumspect to air their views, with better interaction withthe senior managers they play to begin a more pro active role in team building effortsHR Committee The HR steering committee (HRSC) of the company that has acted as the fulcrum of theHRD efforts in the organization. HRS Consists of the CEO, the COO and all other functionalheads. The committee meets once a week to discuss various initiatives and the plan of action onthe same.Learning To encourage learning within the organization, the company has set up astute-of-the-artlearning centre. Here, employees can get logged on to customized training programmesdeveloped by British Telecom (BT).Global Business School | Strategic Management 92
  • 93. Performance Measures To measure the performance, the entire organization is measured on five performanceparameters: profitability, market share, brand saliency, customer satisfaction, and employeesatisfaction. Further, each employee is given individual targets that are linked to these fiveparametersPerformance Bonus Eventually, there are the performance-related bonuses that set the tone for these activities.The company has 60 per cent of the employees are on variable pay structure, and that explainsthe success Airtel has had in business and HRD.Employee Satisfaction Survey The HR Department also conducts an internal employee satisfaction survey called PACE(Progressive Assessment of Culture and Environment), the inputs of which go into thecompanys annual strategy.Open House Session The `open house conducted between the departments and HR takes up individualgrievances. In the case of family group meetings, each HOD conducts meetings with his directreporters once a month, wherein issues other than those related to work are discussed.Measurement Boards ``Measurement is indeed a key driver of business within Airtel. A philosophy of constantmonitoring has been established. `Measurement Boards for every department are prominentlydisplayed where the performance indicators of the same are displayed graphically,Cross Functional Teams The HR department also sets up cross-functional teams in times of product or servicelaunches. Such teams typically constitute high performers from each department, whocollectively make it happenGlobal Business School | Strategic Management 93
  • 94. KRA According to Airtel a employee can be effective if he knows what is expected of him.Formal job description documents have been issued to all our employees that clearly mention the`key result areas. This goal setting has helped in communicating to each of our employees aboutour experiences from them, and established role clarity.Communication Forum Some of the other key HR initiatives include the managers communication forum, openhouse, family group meetings, HR interface and HR intranet. To explain them, the managerscommunication forum, undertaken once a quarter, facilitates direct interaction of the employeeswith the top management. ‗They get to discuss issues relating to the performance of the previousquarter, directions for the next quarter, an update on the regulatory environment and the keyinitiatives for the period,Global Business School | Strategic Management 94
  • 95. Present Business Strategy of Bharti Airtel  Segment Telecom market on several parameters – Region Wise, Density of Area and Income.  Strong focus on Urban & Rural Markets.  Use of Emotional-Moral appeal like ―Har Ek Friend Zaroori Hota Ha‖ campaign as part of promotion strategy to target youth  Network Coverage is the key factor for the company‘s success.  In case of existing Telecom market, Airtel is positioned as one of the premium brand  Moving from domestic Indian Telecom business to global business. Entering into Africa and other developing economies.  Leveraging the brand value and creating innovation and being the initiator for the 3G and 4G segment in Indian telecom market.Global Business School | Strategic Management 95
  • 96. Financial Analysis of AirtelProfitabilityratios 2008 2009 2010 2011 2012Operating ProfitMargin (%) 32.98 35.25 39.08 38.74 41.4Net Profit 24.23 22.74 26.47 20.29 13.77Margin (%)ROA (%) 106 145 96 115 130EPS (Rs) 32.9 40.79 24.82 20.32 15.09Asset Turnover 96.08 96.35 85.23 67.83 65.43(%) (Source: Operating Margin % 45 40 35 30 Axis Title 25 20 15 10 5 0 2008 2009 2010 2011 2012 Operating Margin % 32.98 35.25 39.08 38.74 41.34Global Business School | Strategic Management 96
  • 97. Net Profit Margin % 30 25 20 Axis Title 15 10 5 0 2008 2009 2010 2011 2012 Net Profit Margin % 24.23818951 22.74142387 26.47083602 20.29671717 13.77304521 ROA 160 140 120 100 Axis Title 80 60 40 20 0 2008 2009 2010 2011 2012 ROA 106 145 96 115 130Global Business School | Strategic Management 97
  • 98. EPS 45 40 35 30 Axis Title 25 20 15 10 5 0 2008 2009 2010 2011 2012 EPS 32.9 40.79 24.82 20.32 15.09 Assest Turnover % 120 100 80 Axis Title 60 40 20 0 2008 2009 2010 2011 2012 Assest Turnover % 96.08011338 96.35226533 85.23793566 67.87480583 65.45571831Global Business School | Strategic Management 98
  • 99. Idea Cellular Idea Cellular Limited was incorporated in 1995, and now ranks third in terms of all-Indiawireless revenue market share at 13.6 per cent. Idea ranks second with 23.6 per cent revenuemarket share in nine service areas where it holds 900 MHz spectrum and which derive about 41per cent of the industry‘s all-India revenues (based on gross revenues for UAS and Mobilelicenses only, for March 2011 quarter, as released by TRAI). The market positioning of Idea reflects the strength of its brand considering the fact thatIdea added 11 out of its total 22 service areas in the past four years. Today, it is a pan-Indiaplayer with commercial 2G operations in 22 service areas, and 3G in nine of these circles. Itssubscriber base has grown multifold, from 7.37 million in March 2006 to 89.5 million in March2011.Global Business School | Strategic Management 99
  • 100. Idea holds 16 per cent stake in Indus Towers, a joint venture with other telecom majorsBharti Airtel and Vodafone. Indus Towers is the worlds largest tower company with over onelakh towers. In 2007, Idea was listed on the National Stock Exchange (NSE) and the BombayStock Exchange (BSE). The company now has its own NLD and ILD operations, and ISP license. Idea has anetwork of over 70,000 cell sites covering the entire length and breadth of the country. Thecompany has over 3,000 service centers servicing Idea subscribers across the country. Idea‘sservice delivery platform is ISO 9001:2008 certified, making it the only operator in the countryto have this standard certification for all 22 service areas and the corporate office.Idea has won numerous awards and is the only Indian GSM operator to win the prestigious GSMAssociation Award consecutively in the best mobile technology category for the Best Billing andCustomer Care Solution both in 2006 and in 2007, even in the face of international competition. Idea enjoys a market leadership position in many of its operational areas. It offers GPRSon all its operating networks for all categories of subscribers, and was the first company in Indiato commercially launch the next generation EDGE technology in Delhi in 2003. As a pioneer intechnology deployment, it has been at the forefront through the adoption of bio fuels to power itsbase stations, and by employing satellite connectivity to reach inaccessible rural areas in MadhyaPradesh. Idea has been a leader in the introduction of value-added services, and there are manyfirsts to its credit, including a voice portal Say Idea, Idea TV, voice chat and instant messenger.Tariff plans have been customer-friendly, catering to the unique needs of different customersegments, for instance the Womens Card caters to the special needs of women on the move, andYouth Card covers the emerging youth segment. Idea was adjudged the ‗Emerging Company of the Year‘ by The Economic Timesand the‗Most Customer Responsive Company‘ in the Telecom sector, in the year 2010. Brand Idea haswon many accolades for its innovative communication. The ‗What an Idea, Sirji‘ ads have wonfour Effies from 2008-2010, making it one of the ‗Buzziest‘ brands in the country.Global Business School | Strategic Management 100
  • 101. In 2011 Brand Idea moved to the No. 4 position amongst all service brands in the MostTrusted Brands Survey conducted by Brand Equity, an Economic Timespublication.Ideas biggest campaigns – "Break the Language Barrier" and "No idea – Get Idea" were rankedglobally as the best brand campaigns 2011 at MMA Global Awards and World CommunicationAwards, London. Idea won the advertising effectiveness awards with a Gold EFFIE for the "No idea – GetIdea" campaign and a Silver for the" Language Barrier" campaign. In radio, Idea won six awards at the Golden Mikes Awards 2011 and was adjudged theAdvertiser of the Year. Besides, Idea has also won a series of Digital Awards, the biggest beingthe Yahoo Big Chair where it won Gold.Global Business School | Strategic Management 101
  • 102. Chairman’s speech of Idea Cellular The Idea Cellular Company, undeniably plays a critical role in the economic growth ofthe country and in its journey towards inclusive growth. For the year 2011-12, Idea has posted an impressive performance. It continues to grow itsrevenues at almost twice the industry growth rate. During FY12 your Companys annual revenuegrowth stood at 26%. Idea is the third largest wireless operator in India, with a revenue marketshare of 14.4% - up by 1.1% during the calendar year 2011. Idea enjoys the pole position in terms of quality of subscribers in this industry.Idea enjoys the pole position in terms of quality of subscribers in this industry. The ratio of VLR(active) subscribers to reported subscribers is over 93%, the highest in the sector andsignificantly higher compared to the industry average of 74%. Idea today the third largest Indianwireless operator, in terms of total VLR subscribers. Idea has maintained its leadership position in terms of net subscriber additions underMNP facility. A net gain of around 2.9 million subscribers with a lowest port out ratio of 0.62subscribers reflects the strong faith of over 113 million customers in Idea Company‘s quality ofnetwork, better customer services, customer centric product offerings and superior brandstrength. Idea won 3G Spectrum in 11 service areas and has entered into roaming arrangementswith other operators to offer 3G services in the remaining service areas. In 3G reach of Idea hasbeen extended to more than 3,000 towns and 10,000 villages in 20 service areas. This allows its113 million subscribers to experience the world of faster internet with the speed of up to 21Mbps, video calling, Mobile TV, Idea Mall applications store and many other futuristic services. The service areas specific strategy has enabled Idea to focus and consolidate its positionin established service areas while following a calibrated approach in the new service areas. Ideahas improved its competitive standing in the Indian wireless market, acrossall parameters.Global Business School | Strategic Management 102
  • 103. VISION Is to be the fortune 200 by 2015, with revenues of 65 billion dollar and EBITDA target of10 billion dollar.MISSION To deliver superior value to our customers, shareholders, employees and society.VALUES  Integrity  Commitment  Passion  Speed  Seamlessness- boundryless in letter and spiritGlobal Business School | Strategic Management 103
  • 104. PORTER 5 Forces Model Analysis Porter 5 Forces Model Bargaining Power of Buyers (High) • Low switching costs for buyers • Huge competition between the existing players in the market. Bargaining Power of Suppliers (Low) • Large pool of suppliers in the market • Have access to other countries supply Industry Rivalry (High) • Players like Airtel and Vodafone are big competitor • Existing Players are also eating up the market share Threats of new Entrants (High) • Not present in broadband, operating style of New Entrant will be the same as Idea‘s as they have less number of towers. Threat of Substitutes (Low) • Threat is less as substitutes have less mobility High LowGlobal Business School | Strategic Management 104
  • 105. ISSUE PRIORITY MATRIX IDEA CELLULAR Probable Impact on Corporation HIGH MEDIUM LOW Antitrust Government GDP HIGH Regulations Policy (c) Government Government Imports MEDIUM Policy (a) Policy (d) Government New Products Government LOW Policy (b) Policy (b)Global Business School | Strategic Management 105
  • 106. Antitrust Regulations (High High) The Supreme Court‘s verdict on the 2G Scam to cancel all the 122 licenses issued in2008 will affect more than just the companies whose licenses were cancelled. 9 licenses of Ideawere cancelled in the Supreme Court verdict. Idea will lose its service are in Punjab, Assam,Jammu & Kashmir, Kolkata, North East, Orissa, West Bengal, Tamil Nadu(includingChennai)which will adversely affect the growth of the company.Government Policy (c) (High Medium) Telecom Minister Kapil Sibal said mobile subscribers will not have to pay roamingcharges from next year, National Telecom policy 2012, approved in May aims to abolishroaming charges and allow mobile phone subscribers to use same number across country withouthaving to pay extra charges on services once they are outside their telecom circle. The impact isexpected to be medium on Idea as its yet to enjoy the maximum market share in the industry.Government Policy (a) (Medium High) Idea Cellular has emerged as the most aggressive bidder for the upcoming 2G spectrumauctions by depositing Rs 1,306.75 crores, the highest earnest money among all the potentialbidders. Idea will be bidding for the circles where its licenses were quashed by the Apex courtearlier this year. According to the sources Idea is likely to bid for 7 Circles.Government Policy (b) (Low High) Idea Cellular has been the biggest gainer of Mobile Number Portability service with aaddition of 3.22 million customers as on March 31st 2012 compared to Bharti‘s 1.2 Million.Government Policy (d) (Medium Medium) Government notices are likely to be issued to Telecom firms, asking them to stop 3Groaming service outside their licensed area with immediate effect as the Government was losingrevenue because of their agreements. Idea being the 2nd largest player in 3G market will tend toGlobal Business School | Strategic Management 106
  • 107. have a medium affect as it covers 11 circles which are relatively low population compared to themarket leader Bharti Airtel.Imports (Medium Low) Mobile phone shipment to India during the first half of 2012 crossed 10 crore units,registering a growth of 16.6 percent over the same period last year, according to Cyber MediaResearch (CMR). The total shipment was recorded at 10.24 crores. Increase number of phoneswill lead to increase number of subscribers and in this fast growing market companies like IdeaCellular are bound to be benefited.Government Policy (e) (Low Low)As a result of the high base price of spectrum for the upcoming auctions, call rates will rise by30-40 percent. Base price of Rs 14,000 crore for 1800Mhz band and Rs 18,200 for 800 Mhzbased on the recommendations made by sectoral regular TRAI. Idea cellular will be leastaffected by this as it will look upon its competitors to make the move, as Idea is the onlyTelecom company which has reported quarterly profits continuously and it keeps revising itstariff plans circle to circle frequentlyNew Products (Low Medium) Competition in the budget smart phones segment continues to heat up, as Idea Cellularlaunches its Android Touch Phones, The device is already available at online retailers such asFlipkart with a price of just above 5,000/-. The Idea Android Smart phones have been affordablypriced to ensure rapid uptake by both – 2G users wishing to upgrade to 3G and existing 3G users.Idea is also offering special introductory offer with these phones.GDP (High Low) Telecom market is expected to grow by 30-35 percent by 2016. Signaling an increase inthe GDP of the country. According to the reports, Idea Cellular is expected to make the most ofthis opportunity as it tends to take the market share from Bharti Airtel by its aggressive 2Gbidding, Brand Image and Advertising efficiency.Global Business School | Strategic Management 107
  • 108. EFAS of IDEA (Opportunity)Opportunity Weights Rating Weighted Score CommentsIndia’s GDP 0.02 3 0.06 More number of people will opt for mobile services if income increases.Imports 0.1 2 0.2 Increase in number of Mobile phones will lead to increase in subscribers.Technologic 0.17 4 0.68 Idea has nine 3G circles and still has to enter the 4G EffortNew 0.08 3 0.24 Idea fairly relies on 3G data card and their mobile handsets.ProductsInternet 0.07 4 0.32 Idea is only present in Data cards but not in broadband.AvailabilityLifestyle 0.08 3 0.24 Idea follows the same concept of campaign ―What an Idea Sirji‖ChangesGrowth 0.08 3 0.24 Idea has grown in the recent years, expanding its marketRate of share to 14%.PopulationGlobal Business School | Strategic Management 108
  • 109. EFAS of idea (threats)Threats Weights Rating Weighted Score CommentsFDI 0.05 2 0.10 Idea will have to compete with foreign companies on pricing point of view.Price War 0.1 4 0.4 Market players would determine the price.Interest Rates 0.06 2 0.12 Idea will have least effect with less aggressive expansion plans.Consumer 0.02 1 0.02 Not so important as companyProtection practices fair trade practices.Law2G Scam 0.17 4 0.68 Idea‘s license were recently cancelled by the Supreme Court in 2G scam of 2008Total 1 3.30Global Business School | Strategic Management 109
  • 110. Ideas EFAS GDP 2% Imports 2G Scam Consumer 10% 17% Protection Law 2% Technological Effort Interest Rate 17% 6% Price War 10% New Products 8% FDI Growth 5% Internet Avalability Rate of 7% population Lifestyle Changes 8% 8% IFAS of IDEA (Strengths)Strengths’ Weights Rating Weighted Score CommentsFlexible 0.1 3 0.30 Attractive 2G & 3G plans in accordance with the customers.PlansGood 0.1 2 0.20 Strong advertising campaign in 2G & 3G.AdvertisingHigh Brand 0.12 4 0.48 Idea won back to back ―Best Brand Campaign‖ held inVisibility London recently for its ―3G Population Campaign‖Celebrity 0.08 3 0.24 Abhishek Bachan is the ambassador of Idea for a quite aBrand while now and has even won theGlobal Business School | Strategic Management 110
  • 111. Ambassador ―Best Brand Ambassador of the Year‖ award.Increase in 0.7 3 0.21 Idea continuous to grow its revenue and its market share,profits even in stiff competition.Innovative 0.14 4 0.56 Idea has delivered many ground breaking ideas/service in theServices’ telecom service. The latest one being ―Emergency Internet Usage Service‖ where a person can enjoy uninterrupted internet service with zero balance. IFAS of idea (Weakness)Weakness Weights Rating Weighted Score CommentsUntapped 0.17 4 0.68 Idea just like Airtel have hugeRural Market market to cover.Not present in 0.12 3 0.36 Idea‘s absence in broadband,Broadband affects its revenue and the market share.Absence in 4G 0.1 2 0.20 Idea is again not present in 4GCircles market as the future market opportunities remains untapped.Total 1 3.23Global Business School | Strategic Management 111
  • 112. IFAS of Idea Absence in Flexible Plans 4G Circles 10% 10% Good Not Present Advertising in Broadband 10% 12% High Brand Visibilty 12% Untapped Rural Market 17% Innovative Celebrity Brand Services Ambassador 14% 8% Increase in Profits 7% SFAS OF IDEA Strategic Weights Rating Weig Duration Comments Factor hted Score S M LCelebrity 0.08 3 0.24  Abhishek Bachan is the Brand Ambassador of IdeaBrand for a quite a while now andAmbassador has even won the ―Best Brand Ambassador of the Year‖ award.Flexible 0.10 3 0.30 Attractive 2G & 3G plans in accordance with thePlans customers.High Brand 0.08 4 0.32 Idea won back to backGlobal Business School | Strategic Management 112
  • 113. Visibility ―Best Brand Campaign‖ held in London recently for its ―3G Population Campaign‖Absence in 4G 0.12 2 0.24 Idea is again not present inCircles 4G market as the future market opportunities remains untapped.Untapped 0.13 4 0.52 Idea just like Airtel haveRural Market huge market to cover.Technologic 0.12 3 0.36 Idea has nine 3G circles and still has to enter the 4Gal Effort market.Lifestyle 0.08 2 0.16 Idea follows the same concept of campaignChanges ―What an Idea Sirji‖2G Scam 0.13 4 0.52 Idea‘s license were recently cancelled by the Supreme Court in 2G scam of 2008Interest Rates 0.06 2 0.12 Idea will have least effect with less aggressive expansion plans.Price War 0.10 4 0.4 Market players would determine the price.TOTAL 1 3.18Global Business School | Strategic Management 113
  • 114. SFAS of IDEA Price War Celebrity Brand 10% Ambassodar 8% Interest Rates Flexible Plans 6% 10% 2G Scam High Brand Visibilty 13% 8% Absence in 4G Lifestyle Changes 12% 8% Technological Efforts Untapped Rural 12% Market 13%Global Business School | Strategic Management 114
  • 115. TWOS of IDEA STRENGTHS WEAKNESSInternal Factor Analysis IFAS High Brand Untapped Rural Visibility Market Innovative Services’ Not present in Broadband Flexible Plans Absence in 4G External Factor Analysis Circles EFAS Opportunities Strength/Opportunities Weakness/Opportunities Innovative Services / Not present in Growth Rate of Lifestyle Changes Broadband / Growth Population High Brand Visibility / Rate of Population Lifestyle Changes Growth Rate of Absence in 4G / Population Lifestyle Changes Threats Strength/Threats Weakness/Threats Innovative Services / Price War Price War Untapped Rural 2G Scam Flexible Plans / FDI Market / Price War FDI High Brand Visibility / 2G Scam STRENGTH / OPPORTUNITIESGlobal Business School | Strategic Management 115
  • 116. Innovative Services / Lifestyle Changes Idea‘s Innovative Services will help it to adjust according to the lifestyle changes of thepeople, gaining more market share as they are used to do.High Brand Visibility / Growth Rate of Population Subsidiary of Aditya Birla Group ―Idea Cellular‖ is well recognized due to its parentcompany, Growing Rate of Population will lead to more number of subscribers were Idea willlook to tap this opportunity through its Brand Visibility. STRENGTHS / THREATSInnovative Services / Price War Idea‘s Innovative Services‘ will provide an edge over its competitors. Innovation is whatdrives a company‘s growth in the market. This will also help it to fight with other players onpricing basis.Flexible Plans / FDI 74% FDI in Telecom Industry will allow foreign players to enter the market. Idea‘sFlexible Plans will provide the base as it compete with foreign and domestic alliances.High Brand Visibility / 2G Scam Although Idea was under the 2G Scam of 2008, this would hardly affect the company asAditya Birla Group of Companies are known for their ethical and CSR activities for the society,people will have utmost trust in brand like ―IDEA‖. WEAKNESS / OPPORTUNITYGlobal Business School | Strategic Management 116
  • 117. Not present in Broadband / Growth Rate of Population Growing Rate of Population will provide the much needed opportunity to Idea forgrowth, If Idea can come up with broadband service this will greatly impact its market share.Absence in 4G / Lifestyle Changes Lifestyle of Urban people keeps on changing frequently (example from 2G to 3G to 4G).Absence of Idea in 4G circle will only hinder its growth as Bharti is the only player in 4G, whowill look to skim the market. Weakness / ThreatsUntapped Rural Market / Price War Tapping Rural Market will provide Idea to compete on pricing basis. As this willgenerate more number of subscribers which will in turn generate Economies of Scale.Global Business School | Strategic Management 117
  • 118. BCG Matrix Of IDEA Companies Market Share Industry Growth Quadrant Grasim Industries 21% 3% - 4% CASH COWS LtdUltra Tech Cement 20% 12% STARS Aditya Birla - 3% CASH COWS Chemicals LtdAditya Birla Minacs - 14% QUESTION MARKS Essel Mining & - 4% DOGS Industries Ltd Idea Cellular 14% 12% - 15% QUESTION MARKSGlobal Business School | Strategic Management 118
  • 119. Aditya Birla Retail - 15 % – 20 % QUESTION MARKS Ltd BCG Matrix of IDEAGlobal Business School | Strategic Management 119
  • 120. • STARS • QUESTION MARKS Idea Cellular Aditya Birla Ultra Tech Retail Ltd Cement Aditya Birla Minacs Grasim Industries Ltd Essel Mining and Aditya Birla Industries Ltd Chemicals Ltd • CASH • DOGS COWSGlobal Business School | Strategic Management 120
  • 121. IDEA’s Basic Growth Strategies Horizontal CONCENTRATION Growth DIVERSIFICATION Concentration Concentration Horizontal GrowthGlobal Business School | Strategic Management 121
  • 122. Acquisation of Spice Outsourcing of IT Horizontal Deals with business to Growth Nokia IBM Tie Up with Real NetworkIdea-Spice deal 4th largest M&A in IndiaGlobal Business School | Strategic Management 122
  • 123. The buyout of Spice Telecom by Idea Cellular is the fourth largest merger and acquisitiondeal involving an Indian entity and may be a pre-cursor to more such transactions in the telecomspace. The country‘s 3rd largest mobile operator in terms of subscribers, Idea Cellular acquiredB K Modi-owned Spice groups 40.8 per cent stake in Spice Communications.Idea, IBM in Business Partnership IBM and Idea Cellular Limited (Idea) have a 10-year business transformation partnership,wherein IBM would integrate, innovate, and transform Ideas business processes and ITinfrastructure. The deal, which has been designed on an innovative risk-reward revenue sharing model,covers all of Ideas existing operations and potential new additions. It is learnt the 10-yearpartnership size will be around $600 million to $800 million, depending upon Ideas businessrevenues and circle expansion.Nokia India announces carrier billing tie-ups with IdeaGlobal Business School | Strategic Management 123
  • 124. Nokia also announced a billing tie-up with Idea Cellular for Nokia Music as well asNokia Store. The tie-up will enable Idea customers to pay for apps bought via the Nokia storeand/ or renew their Nokia Music subscriptions using their prepaid or postpaid accounts. NokiaMusic subscriptions rate for Idea customers are the same as their Vodafone counterparts.Real Networks and Idea Cellular Partner for Ringback Tone (RBT) Service in India RealNetworks India Pvt. Limited, a wholly owned indirect subsidiary of RealNetworks,Inc. (NASDAQ: RNWK), the US-based digital entertainment services company, is in a long-term Ringback Tone (RBT) partnership with Idea Cellular. Idea Cellular is Indias 3rd largestmobile services operator with over 100 million subscribers.Global Business School | Strategic Management 124
  • 125. Concentration Idea Cellular Aditya Birla Nuvo Aditya Birla Group Power Projects Aditya Birla Retail Limited Essel Mining and Industries Madura Fashion and Lifestyle Aditya Birla Capital Advisors Private Limited Aditya Birla Insurance Brokers Aditya Birla Money ADITYA BIRLA Aditya Birla GROUP Finance Limited Aditya Birla Science and Technology Company Limited Dahej Harbour & Infrastructure Limited Utkal Alumina International Limited Aditya Birla Chemicals (India) Limited Aditya Birla Minacs Worldwide Limited UltraTech Cement Limited Hindalco Industries Limited Grasim Bhiwani Textiles Limited Grasim Industries LimitedGlobal Business School | Strategic Management 125
  • 126. Porter’s Generic Competitative Strategies of IDEA Lower Cost Differentiation Cost Leadership Differentiation Aditya Birla Nuvo Grasim Industries Limited Broad Target Hindalco Industries Limited UltraTech Cement Limited Idea Cellular Limited Aditya Birla Retail Limited Cost Focus Focused Differentiation Narrow Target Aditya Birla Chemicals Grasim Bhiwani Textiles (India) Limited Limited Aditya Birla Finance Aditya Birla Science and Limited Technology Company Aditya Birla Money Limited Aditya Birla Insurance BrokersAditya Birla Nuvo (Cost Leadership / Broad Market) Aditya Birla Nuvo Limited (ABNL), a US$4.5 billion conglomerate by revenue size, ispart of Aditya Birla Group, a US$40 billion Indian multinational company. Having a market capof about US$2.5 billion as on 30th November 2012, ABNL is present across financial services,telecom, fashion and lifestyle, IT-ITeS and manufacturing businesses. Powered by an intellectualcapital of over 65,000 employees, ABNL touches the lives of more than 120 million Indians.Grasim Industries Limited (Differentiation / Broad Market) Grasim Industries Limited is a global leader in viscose staple fibre and ranks amongIndias largest private sector companies with a consolidated net revenue of Rs.216 billion andconsolidated net profit of Rs.22.8 billion (FY 2011).Global Business School | Strategic Management 126
  • 127. Grasim Bhiwani Textiles Limited (Focused Differentiation / Narrow Market) Grasim has a presence in fabrics and synthetic yarns through its subsidiary GrasimBhiwani Textiles Limited, which is well known for its branded suitings, Grasim and Graviera,mainly in the polyestercellulosic branded menswear.HINDALCO INDUSTRIES LIMITED (Cost Leadership / Broad Market) Hindalco Industries Limited is a global leader in aluminium and copper. It is the worldslargest aluminium rolling company and one of the biggest producers of primary aluminium inAsia. Its copper smelter is the worlds largest custom smelter at a single location. Its consolidatedturnover of US$15.85 billion (Rs. 72,078 crore) places it in the Fortune 500 league.ULTRATECH CEMENT LIMITED (Cost Leadership / Broad Market) UltraTech Cement Limited and its subsidiaries have an annual capacity of 52 milliontonnes, making it among the top 10 producers of cement globally. UltraTech is also the largestmanufacturer of White Cement in India. The company manufactures and markets ordinaryportland cement, portland blast furnace slag cement, portland pozzalana cement, ready mixconcrete and building products and building solutions.Aditya Birla Chemicals Ltd (Cost Focus / Narrow Market) Aditya Birla Chemicals (India) Limited (formerly Bihar Caustic and Chemicals Limited)was incorporated as a joint venture of the Aditya Birla Group and the Bihar State IndustrialDevelopment Corporation. The unit was set up with the objective of catering to the caustic sodarequirements of Hindalco Industries Limited, and to contribute towards the economicdevelopment of the backward region of Palamu district in Jharkhand.Aditya Birla Finance Ltd (Cost Focus / Narrow Market) Aditya Birla Finance (ABF) is one of Indias leading non-banking financial companies(NBFC). Incorporated in 1991, the company is one of the largest players in security basedlending and the pioneer of IPO Financing in India. ABF offers specialised solutions in areas ofcapital market and corporate finance.Global Business School | Strategic Management 127
  • 128. The Aditya Birla Science and Technology Company (Focused Differentiation / NarrowMarket) The Aditya Birla Science and Technology Company (ABSTC) is the corporate researchand development centre for the Aditya Birla Group. Located in Taloja, just outside of Mumbai inIndia, ABSTC supports the broad diversity of the Groups businesses through multi-disciplinaryteams of expert scientists and engineers who lead fundamental and applied research projects. Thecompany aims to be a world-class organisation that delivers innovative solutions, continuouslyimproves core competencies and executes effectively. The centre is supported by state-of-the-artequipment set in a one-of-a-kind brand new technology-led environment.Aditya Birla Money Ltd (Cost Focus / Narrow Market) Aditya Birla Money is a single brand offering the combined products and services ofAditya Birla Money Limited and Aditya Birla Money Mart Limited.Aditya Birla Insurance Brokers (Cost Focus / Narrow Market) Aditya Birla Insurance Brokers Limited (ABIB) is a leading composite general insuranceintermediary, licensed by the Insurance Regulatory and Development Authority of India (IRDA).The company specialises in providing general insurance broking and risk management solutionsfor corporates and individuals alike.Idea Cellular Limited (Cost Leadership / Broad Market) Idea Cellular Limited was incorporated in 1995, and now ranks third in terms of all-Indiawireless revenue market share at 13.6 per centAditya Birla Retail Limited (Cost Leadership / Broad Market) The Groups foray into the retail sector began in December 2006 when it acquiredTrinethra, the chain of stores based in south India. May 2007 saw Aditya Birla Retail Limited(ABRL) launch their own brand of stores called More. ABRLs vision is "to consistentlyprovide the Indian consumer complete and differentiated shopping experiences and be amongstIndias top retailers while delivering superior returns to all stakeholders".Global Business School | Strategic Management 128
  • 129. Functional StrategiesMarketing Strategies  Zero Balance, No Tension: Use Uninterrupted Mobile Internet, Courtesy Idea Cellular  IDEA‘s Special International Roaming Packs – ‗iRoam‘  Idea Cellular Introduces New 3G Android Smartphone Aurus for Rs.7190MARKETING MIXProduct  Prepaid  Postpaid  VAS  Roaming  Business OfferingPlace  Delhi  Andhra Pradesh  Gujarat  Maharashtra  Haryana  Kerala  Madhya Pradesh  Karnataka  Uttar PradeshPrice  Differs for different service plansGlobal Business School | Strategic Management 129
  • 130. Promotions  ATL :- TV commercials (Brand Ambassador : Abhishek Bacchan), title sponsors of reality shows, partners of IPL  BTL :- Recently tied up with Yahoo for Mobile advertising, hoarding, bus banners, events, bill boardsPhysical EvidencePEOPLE  Employees 6,481 (2010)  The Group has been adjudged The Best Employer in India and among the Top 20 in Asia by the Hewitt-Economic Times and Wall Street Journal Study 2007.Process  Providing the easy accessibility for the end consumer to communicate to one another via telephonic media.  They also provide the service of data browsing with help of 2G and 3G networks.  They also have the process of customer care service, where the end consumers call directly talk to the CRM- Customer Relation Manager and get their problem solved.Global Business School | Strategic Management 130
  • 131. Key Technology Partners of IdeaCustomer Support Partnerships with Business Process Outsourcing (BPO) companies to run their customer careoperations  SpancoIT and Software Requirements Partnerships with IT and software companies for technology infrastructure, and solutions,such as billing, business intelligence, cloud services, and others  Atos  SubeValue Added Services Partnerships with content generators, aggregators, and portals, for delivery of value addedservices  Axis bank  Mauj  Online MobileOSS Solution CompanyPrepaid Charging EricssonCRM ORACLEFraud Management SubeMediation ComptelOrder Provisoning ComptelInter Connect Billing Elite CoreBusiness Intelligence CognosGlobal Business School | Strategic Management 131
  • 132. Hr Policy  Health check-up policy  Buy your car scheme  Credit card scheme  Corporate Club Membership  Company Car Policy  Company Leased Accommodation Policy  Employee Referral Policy  Employee Spouse Cellular Phone Policy  Employee Cellular Phone Connection Policy  Group Personal Accident Insurance  House Deposit Loan  House Rent Allowance PolicyGlobal Business School | Strategic Management 132
  • 133. Present Business Strategy of Idea Cellular  MNP: As TRAI has passed the regulations of Mobile Number portability, the followers in the industry were likely to make the best utilization of it hence IDEA developed the strategy of providing better tariff plans compared to other telecom players which resulted in maximum number of subscribers opting for Idea Cellular.  Diverse Tariff Plans: A Product line with Vertical as well as Horizontal Spread in tariff plans catering to the needs of every consumer.  Experiential Marketing: Reaching consumers through shops, college event campaigns and influencing customers to adapt its services indirectly.  With helding the position in present circles: Development in their established market, They have up with strategy of over investing in existing circles for the development of better network coverage and tapping better rural market. 67% of net subscribers are addition for Idea which comes from rural market.  Population Advantage: India with a population of 1.2 billion is an opportunity for Idea to have much the market share. Hence they have come up with rampant advertisement for whole population.  Outsourcing: Outsourcing its key IT requirements to companies like IBM.  Segment Indian Tea market on several parameters – Region wise, demographic and lifestyle.  Strong focus on Urban & Rural MarketsGlobal Business School | Strategic Management 133
  • 134. Profitability Analysis of IdeaProfitabilityratios 2008 2009 2010 2011 2012Operating ProfitMargin (%) 37.07 31.63 27.37 23.59 25.2Net Profit 15.53 10.15 8.88 5.5 2.98Margin (%)ROA (%) 13.44 36.37 34.59 37.18 38.99EPS (Rs) 3.96 3.23 3.19 2.56 1.74Asset Turnover 66.78 52.22 65.89 66.98 83.52(%) (Source: Operating Margin % 40 35 30 25 Axis Title 20 15 10 5 0 2008 2009 2010 2011 2012 Operating Margin % 37.07 31.63 27.37 23.59 25.2Global Business School | Strategic Management 134
  • 135. Net Profit Margin % 18 16 14 12 Axis Title 10 8 6 4 2 0 2008 2009 2010 2011 2012 Net Profit Margin % 15.53802649 10.15521964 8.886075949 5.504826507 2.988326848 Return on Assets 45 40 35 30 Axis Title 25 20 15 10 5 0 2008 2009 2010 2011 2012 Return on Assets 13.44 36.37 34.59 37.18 38.99Global Business School | Strategic Management 135
  • 136. EPS 4.5 4 3.5 3 Axis Title 2.5 2 1.5 1 0.5 0 2008 2009 2010 2011 2012 EPS 3.96 3.23 3.19 2.56 1.74 Assest Turnover % 90 80 70 60 Axis Title 50 40 30 20 10 0 2008 2009 2010 2011 2012 Assest Turnover % 66.78262598 52.22528346 65.89556804 66.98706746 83.53920166Global Business School | Strategic Management 136
  • 137. Comparing the Current Market Position of Airtel and Idea PARAMETERS Bharti Airtel Idea Cellular Profitability Positive but declining Declining Porter Analysis Profitable Less Profitable Acquisitions Global Context Domestic Context Core Competency Innovative and Public Integrity, Commitment, Passion Relationship and Speed Selling USP Airtel Tune Promotional Campaigns BCG Matrix Analysis Stars Question Marks Porters Generic Strategy Cost Leadership Cost Leadership EFAS 3.41 3.30 IFAS 3.33 3.23 SFAS 3.32 3.18 EPS 15.09 1.74Global Business School | Strategic Management 137
  • 138. References:       www.telecomtalk.comGlobal Business School | Strategic Management 138