Business Policy andStrategic ManagementAn analysis of ISP industry usingExternal Analysis tools
Discussion Outline An introduction to the ISP industry by ……. An external analysis of the ISP Industry in India using Porter’s 5(6) forces by …… An external analysis of the ISP industry in India using Strategic Group mapping by ….. Conclusions by …..
Introduction to the ISP Industry Services provided by the ISP’s include: Email(including local server based POP clients) The World Wide Web(Internet) Bulletin Boards Voice and Fax services Web Hosting services Web page design and consultancy services Bundled packages/commercial packages(e-commerce)
Porter’s 5 Forces Rivalry within Industry - HIGH Threat of Substitute Products - HIGH Threat of New Entrants – HIGH Bargaining Power of Suppliers - LOW Bargaining Power of Customers - HIGH
I- Rivalry within Industry - HIGH Main Players Areas of Competition Price National Players Quality of Service Access/Speed International Entrants Services Local/Regional Players Customer Service Content OSP Security
Areas of Competition • Heavy competition. Price • A standard pricing is expected by consumers.Quality of Service • Very important • Can the company keep up with speed of Access/Speed change of technology? • A lot of customers require to be online 24x7.Customer Service • Newer customers require online help. • Online subscriptions or discounts at particular Content web-pages affect consumer decisions. Security • For larger businesses, security is a key issue.
Consumer Priorities in IndianMarket Price • HIGHQuality of Service • HIGH Access/Speed • LOW-MIDCustomer Service • HIGH Content • LOW Security • HIGH when required
II -Threat of substituteservices/providers- HIGHTelecom CompaniesCable CompaniesPortal Companies
General Threat Perception Telecom Companies - HIGH • Telecom companies can provide the same services as ISP’s. • They are significantly costlier and have lesser reach. Cable Companies - LOW • They have larger reach, but have greater difficulties upgrading their technology for the same. Portal Companies - LOW • Companies like yahoo in some countries have tied up with local ISP’s.
Threat perception in IndiaTelecom Companies - HIGH• Especially after the advent of 3G services providing decent speed as well as mobile internet services.Cable Companies - LOW• Almost non-existent in India as of now.Portal Companies – LOW• Sify had/has tied up with several local ISP’s to provide internet services. No other notable mentions however.
III- Threat of new entrants: HIGHBarriers to entry - LOW • Very Little technical know-how is actually needed to get into the industryCapital requirement - LOW • Capital requirement is low as a lot of activity can be outsourced.Risk - LOW • Due to frequent mergers and consolidation plans, an easy exit plan is feasible. Therefore, risk of investment is low.Government Regulations – LOW • There is little to no government regulation for setting up an ISP.
III-I - Barriers to entry - LOW Since technology as well as bandwidth can be outsourced from either of telecom or cable companies, the capital investments required to venture into ISP industry are quite low. Lack of severe government regulations further ease an entrants journey into an industry.
IV- Bargaining Power of Suppliers LOWGovernment - HIGH• Government is a major supplier for licenses for setting up an ISP.Telecom companies - LOW• The telecom companies hold little bargaining power simply because of the huge number of firms providing telecom services.Backbone providers - HIGH• Backbone providers are few in number and therefore have high bargaining power.
Why did we put the bargaining power of suppliers low when two important suppliers actually have high bargaining power? The answer is simple: The only sustain-worthy supply needed is local copper connections(wires) which are provided by telecom companies. The Government license is obtained/renewed once in several years. The hardware/backbone is upgraded once in several years.
Bargaining Power of Consumers:LOW/HIGH ConsumersLarge Business Internet Cafes/Small Average Consumer Firms Internet based Firms
Consumer bargaining power Large Business Firms - LOW • Large business firms have little power, once they opt for an ISP. Backward integration of services including local hosts and inter/intra office framework is difficult. Therefore, they tend to stick on to a particular ISP. Internet Cafes/Small Internet Firms - HIGH • They typically have contracts with local ISP’s. This probably makes them most valued consumers since they can afford backward integration of services while also having significantly higher usage. Average Consumer • They have low switching costs and therefore high bargaining power.