Business policy and strategic management


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External Analysis of ISP Industry using Porter's Five Forces Model

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Business policy and strategic management

  1. 1. Business Policy andStrategic ManagementAn analysis of ISP industry usingExternal Analysis tools
  2. 2. 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 …..
  3. 3. 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)
  4. 4. Why ISP’s?
  5. 5. 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
  6. 6. 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
  7. 7. 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.
  8. 8. Consumer Priorities in IndianMarket Price • HIGHQuality of Service • HIGH Access/Speed • LOW-MIDCustomer Service • HIGH Content • LOW Security • HIGH when required
  9. 9. II -Threat of substituteservices/providers- HIGHTelecom CompaniesCable CompaniesPortal Companies
  10. 10. 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.
  11. 11. 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.
  12. 12. 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.
  13. 13. 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.
  14. 14. 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.
  15. 15.  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.
  16. 16. Bargaining Power of Consumers:LOW/HIGH ConsumersLarge Business Internet Cafes/Small Average Consumer Firms Internet based Firms
  17. 17. 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.
  18. 18. Strategic Group Mapping
  19. 19. COMPANY MARKET SHAREBSNLStats 56.76 %MTNL 14.29 %Bharti Airtel 8.07 %Reliance Communications 7.56%Hathway Communications 1.94 Stats as of March 2011
  20. 20. Technology Usage PercentageDSL Stats 48.98%Cable Modem 4.39%Leased Line 0.19%Ethereal LAN 3.74%Fibre 0.22%Radio 6.88%Dial-Up 35.32%Others 0.27% Stats as of March 2011
  21. 21. Strategic Mapping
  22. 22. Strategic Mapping - ISP
  23. 23. Conclusion Mergers and Acquisitions Additional Services Specialization Pricing Models
  24. 24. Conclusion: Bargaining power of Consumers Bargaining Rivalry Threat power of suppliers within from new entrants Industry Threat from substitute products