Strategic Analysis of Airtel Limited in Indian Telecom Sector

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The whole presentation depicts the Strategic Analysis of Airtel Limited in Indian Telecom sector. Here we talk about gradual evolution of Indian Telecom sector and growth of Airtel against its competitor. It also covers the internal value analysis of Airtel - Resource Based View.
It is really informative for anyone interested to know about Airtel and Indian Telecom sector.
Thanks
Rajinder

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Strategic Analysis of Airtel Limited in Indian Telecom Sector

  1. 1. PRESENTATION BY Group 5: Kinny Jain Nikhil Saraf DionysiaMichalopoulou Rajinder Pal Singh
  2. 2. HIGHLIGHTS OF THIS PRESENTATION: Airtel Background External Analysis Macro-Environmental Analysis: PEST ANALYSIS Micro-Environmental Analysis: PORTERS 5 FORCES [ ILC, SGA] Opportunities and Threats Internal Analysis Resource Audit UNIQUE RESOURCES Core Competencies: PORTERS VALUE CHAIN FRAMEWORK Strengths and Weaknesses Organisational Purpose: AIRTEL MISSION STATEMENT EVALUATION Competitive Strategy Analysis: PORTERS GENERIC FRAMEWORK Development Strategy Analysis: ANSOFF’S PRODUCT/ MARKET FRAMEWORK Conclusions and Recommendations PART A PART B PART C
  3. 3. Go-ahead to the CDMA technology INDIA Private players were allowed in Value Added Services National Telecom Policy (NTP) was formulated 1992 1994 1997 Independent regulator, TRAI, was established NTP-99 led to migration from high- cost fixed license fee to low-cost revenue sharing regime 1999 2000 2002 BSNL was established by DoT ILD services was opened to competition Internet telephony initiated Reduction of licence fees 2003 Calling Party Pays (CPP) was implemented Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued 2004 Intra-circle merger guidelines were established Broadband policy 2004 was formulated— targeting 20 million subscribers by 2010 2005 FDI limit was increased from 49 to 74 percent Attempted to boost Rural telephony 2006 Number portability was proposed (pending) Decision on 3G services (awaited) 2007 Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. Evolution of Telecom In India
  4. 4. INTRODUCTION Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. It is one of India’s leading private sector providers of telecommunications services with more than 110 million customers. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. Core values  Empowering People - to do their best  Being Flexible - to adapt to the changing environment and evolving customer needs  Making it Happen - by striving to change the status quo, innovate & energize new ideas with a strong passion & entrepreneurial spirit,  Openness and transparency - with an innate desire to do good  Creating Positive Impact – with a desire to create a meaningful difference in society.
  5. 5. National Coverage Investor Relations :- http://www.bhartiairtel.in
  6. 6. Integrated Telecom Company  Mobile / Wireless Services – 2G / 3G – Rural Market  Telemedia Services – Fixed Line – Broadband – DTH  Enterprise Services – Carrier – Corporate  Passive Infrastructure – Bharti Infratel – Indus Tower 6
  7. 7. PEST
  8. 8. PEST ANALYSIS- EXTERNAL ANALYSIS Political Regulations Political Opposition to participation by the private players Govt support to promote FDI in Telecom sector Banning of Phone Use in Certain Circumstances Technology  Equipped with New Technology  Rapid Industrial growth rate induced by emerging technologies.  Strong Fibre Optic Network  Utiilization of E- Commerce facilities  Efficient Customer Care Services Socio-Cultural  High End Phones becoming status symbol  Due to Intimate family bonding in Indian Culture, there is need to remain connected Tech Savvy Generation Economic Cost of calls Being Driven Down Worldwide Recession- Both Boon & Bane Middle class consumer base growing due to accelerated economic growth Untapped markets in emerging Economies - New Opportunity
  9. 9. PORTER 5 FORCES INDUSTRY LIFE CYSLCE STRATEGIC GROUP ANALYSIS
  10. 10. Porter’s 5 Forces Threat from Competition Customer Bargaining Power Threat of Substitutes Supplier Bargaining Power Threat of New Entrants
  11. 11. 1. Threat from Competition Wireless Market – Top 4 garnering 75% market share HIGH
  12. 12. Competitor Market Share – Threat HIGH
  13. 13. 2. Customer Bargaining Power  Lack of differentiation among Service Providers  Cut throat Competition  Low Switching Costs  Number Portability will have –Ve Impact  Businesses & Consumers HIGH Customers & Market Share
  14. 14. 3. Suppliers Bargaining Power LOW
  15. 15. 4. Threat of Substitutes  Landline  CDMA  Video Conferencing  VOIP - Skype, Gtalk, Yahoo Messenger  e-Mail & Social Networking Websites BROADBAND SERVICES DIMINISHING MARKET HIGH
  16. 16. 5. Threat of New Entrants  Huge License Fees to be paid upfront & High gestation period  Entry of MVNOs & WiMAX operators  Spectrum Availability & Regulatory Issues  Infrastructure Setup Cost - High  Rapidly changing technology LOW
  17. 17. AIRTEL TELECOMMUNICATION INDUSTRY LIFE CYCLE Johnson , Scholes & Whittington : Pg. 68, 2008
  18. 18. TELECOMMUNICATION INDUSTRY LIFE CYCLE Telecom Industry is in its mature growth stage. Significant achievements have happened in this sector. In 2009 February, there was a rise in subscriber base by 13.25 million. Total subscriber base was 375 million in 2009. A hike by 50%. This shows the changes in the consumption pattern among the middle class. AIRTEL
  19. 19. STRATEGIC GROUP ANALYSIS
  20. 20. Competitor Analysis 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% Bharti Rcom IDEA MTNL Competitor Analysis OP Margin Net Margin Company Sep-07 Sep-08 Sep-072 Sep-083 Bharti 43.00% 38.00% 26.40% 19.30% Rcom 37.90% 31.60% 23.90% 13.20% IDEA 32.80% 26.60% 14.10% 6.50% MTNL 23.70% 22.90% 7.00% 6.80% Best OP Margins & Net Profit Margins among Peers Source: CMIE November 2008
  21. 21. AMOU & ARPU Stats 838 461 303 88Russia China India USA 0 2 4 6 8 10 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 ARPU(USDpermonth) GSM CDMA Minutes of Usage per Month – Mobile Services ARPU* in India – Mobile Services Despite a low tele-density of approximately 30.5% India has the second highest minutes of usage per month. This offers huge growth opportunity to telecom companies. The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs; thereby, enhancing affordability.
  22. 22. Strategic Group Analysis PRODUCTRANGE NarrowBroad NATIONAL GLOBAL GEOGRAPHICAL SCOPE BSNL, MTNL 15.00 % Other – 5% Airtel 25% 10 % Reliance 18% Vodafone 17% TATA 9.3%IDEA 9.6% VIRGIN -0.5%
  23. 23. INTERAL ANALYSIS RESOURCE AUDIT AND PROCESS VALUE CHAIN
  24. 24. Human resources  well defined rewards and recognition system  Young team - Average age is 26years  Employees decide their training needs.  A state-of-the-art learning centre and training practices adopted from British Telecom  PACE (Progressive Assessment of Culture and Environment) feedback taken from employees used for company’s strategy Physical  Over 110 million customers  Received license to provide 2G ad 3G in Sri Lanka  First Telecom operator in India to offer MS Windows Mobile 5.0  Strong Distribution channel. Financial  Profit crosses US$1 bn  Fixed asset (09) $ 7,986,254,556  Dividend offered for 2008-09 is 20% of the face value of each share  Received US$1.275 bn investment from international investors in Bharti Infratel.  Ability to raise funds Intangible  Strategic partnership with Google.  Goodwill & Reputation  Facility based Operator license in Singapore. AIRTEL Resource audit (unique resources) – Internal Analysis
  25. 25. SupportingActivities Primary Activities Firm infrastructure - CRM tools, MIS, ERP, Networking Equipment, Telecom equipment for coverage and signal strength, IT Infrastructure HR management - IT skilled work force, Telecom engineers, SCM specialists Customer service & Telesales training, Franchisee management, 7,646 out of 23,789 employees in Mobile services, Owned retail staffing and training. Technology development - Creating a 3G enabled network, mChek - Launching M commerce by tie ups with banks and credit cards. Procurement - Established a SCM network to acquire networking & Telecom tools, Maintain long term relation with suppliers to provide handsets & services M A R G I N M A R G I N
  26. 26. Primary Activities - Analysis Input Marketin g & Sales Process Output Post Sale •Network Infrastructure Nokia-Siemens, CISCO , INTEL •Software and content provider IBM, INFY TCS, AFFLE, On Mobile, India Times, Hungama Mobile, Mauj , One 97 IMI MOBILE. •Finance •Licenses • Strong Channel Distribution •Market Innovators •Trend Setters •Unique advertising strategy – Emotional values & Humor •GSM Services •VAS •Fixed Lines •Broadband Public Corporate Businesses SME’s Institutes Infrastructure Development Network Integration Competitive Position Capable Supplier Start
  27. 27. Value Chain Analysis – Conclusions & Recommendations Inbound Logistics Operations Output Marketing & Planning Post Sale Value Chain Outcome - 37% PM • Aero mobile, MATE, GPS tracking device for B2B • M-commerce •wide network coverage as they own their network infrastructure Android platform based HTC mobile unique marketing strategy, low STD rates – Trend setters Bill payments and Indian rail tickets using m commerce
  28. 28. SWOT SUMMATION OF EXTERNAL & INTERNAL ENVIRONMENT ANALYSIS
  29. 29. AIRTEL Strength & Weakness STRENGTHS WEAKNESSES OPPORTUNITIES THREATS INTERNALEXTERNAL  Tele-Density – 30.6% Low among Developing Countries  Low Broadband Penetration  Untapped Rural Market  Bharti Infratel – Cutting Down cost in Rural area  Growing Globally First Indian Sponsor to signed Manchester United • Falling ARPU • Intense Competition From Nearest Competitor • Shortage of Bandwidth • New Players Entering Indian telecom sector • Uncertain Economic Condition • Valuable Business Partners – Techno & Financial •Strong Brand Image • First Mover Advantage • Single Private Leading Indian Telecom Company • Enthusiastic & Innovative Business Development team •Marketing Driven Low Cost Model • Blessed with Directional Visionary - S.N. Mittal • Massive Economies of scale from large subscriber base • Outsourcing of Core Systems • Lagging behind in Exploring market Investment opportunity
  30. 30. NoNoYesYesNoYesNoYesYes An evaluation matrix of the mission statement Customer Product/ Services Markets Technology Concernforsurvival, GrowthProfitability Philosophy Self-Concept Concernfor PublicImage Concernfor Employees AIRTEL ORGANISATIONAL PURPOSE Vision By 2010 Airtel will be the most admired brand in India: Loved by more customers Targeted by top talent Benchmarked by more businesses Mission Statement “We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more”
  31. 31. AnsOff Directional Matrix
  32. 32. PRODUCT M A R K E T E X I S T I N G EXISTING NEW N E W AIRTEL ANSOFF DIRECTIONAL MATRIX PRODUCT DEVELOPMENT MATE – Mobile Application Tool for Enterprise M commerce – mChek (Recharge Anywhere, Anytime) Airtel Way Finder - GPS Service Blackberry New Tech-Savvy Handset Options in Prepaid & Post Paid Schemes: HTC, BlackBerry, Apple iPhone Lowered Overseas Call Rates – Bahrain @ Rs 5.00/- 3G Network – Awaiting for GOI Approval AeroMobile – Airtel in-flight connectivity on Emirates and Malaysian Airlines Bridge Alliance – Roaming in Asia Pacific Region MARKET PENETRATION “The Airtel Advantage” : 50 paisa / min Call on both National Long Distance Calls & Local calls Value Added Services: Airtel Live, Hello Tunes, Astrology Lowered National & International Roaming Tariff Extensive & Increasing Sales & Distribution channel covering 1.27 million Delhi Half Marathon – 2nd Edition – 28000 participants Celebratory Endorsement - Top BollyWood & International Personality Tie with major TV events – KBC, India Got its Talent MARKET DEVELOPMENT 3G Network Implementation in Sri Lanka Airtel –Vodafone Alliance: Debut in Europe through Channel Islands (Jersey & Guernsey) Low cost Calling Cards to India - UK, USA, Singapore etc. MTN – Airtel Alliance - South-South Cooperation ** DIVERSIFICATION Bharti InfraTel & Indus Towers - Passive Infrastructure Provider Bharti Teletech – Landline & Telephone Equipment Bharti Telemedia Services – Broadband & Internet, DTH, IPTV Airtel Tracking Services – GPS Bharti Walmart – Sipermarket
  33. 33. Ansoff Product / Market Framework 110 million Mobile Customer Base 24% of wireless market 3rd largest single country mobile services operator Sixth largest in-country integrated telecom operator in the world
  34. 34. Poter’s Generic Matrix
  35. 35. Porters Generic Strategy Differential Strategy Cost Leadership Narrow Market Scope Broad Market Scope Uniqueness Competency Low Cost Competency
  36. 36. Porters Generic Strategy (Cont….) Own Tower Infrastructure Operator in 23 circles in india Huge Distribution Network High Customer Base Huge Economy of scale Low cost Mobiles on Postpaid & prepaid Lowest fare International Calling cards First in class Value added services, Mobile web- internet on mobile, Hello Tunes, MATE - mobile application tool for enterprise. Aero mobile- the In-flight connectivity iphone and Blackberry Phones. L O W C O S T U N I Q U E N E S S BROAD MARKET NARROW MARKET
  37. 37. CONCLUSION AND RECOMMENDATIONS “Refine your processes, strive for dominance and build a brand” MR. Sunil Bharti Mittal Airtel have done a good job by Improving their core competencies. Being the market leader & Especially in building a brand We would recommend Bharti Airtel to continue with their good work and concentrate more on mobile services which is Bharti’s cash cow, in its process of huge diversification.
  38. 38. Thank You

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