Suleman rasheed

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PTCL five forces analysis

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Suleman rasheed

  1. 1. PTCL Project of strategic business management Student name: Suleman Rasheed Teacher name: Sir, Ahmad Shehzad Registration no: MCM05121029 Class: M.com 4th semester porter five forces, SOWT analysis, TOWS matrix analysis Topics: Date: 26th Dec, 2013 University of Lahore PTCL
  2. 2. I verify that I personally conducted the research reported herein, and that this paper is an accurate reflection of my financings. I understand that falsifying or fabricating information is fraud. I understand that misrepresenting another person’s material as my own is plagiarism. I further realize that either fraud or plagiarism will result in failing this class, and subsequently can lead to formal charges. Moreover, I verify that this paper was solely researched, prepared and written exclusively for this class by: (Student signature) Page 2
  3. 3. Table of Contents 1. Porter five forces analysis of PTCL Company ....................................................................................... 4 1.1. Threat of new entrants .................................................................................................................... 6 1.1.1. Scale of economics: ................................................................................................................ 6 1.1.2. Product differentiation: ........................................................................................................... 6 1.1.3. Capital requirement: ............................................................................................................... 7 1.1.4. Knowledge requirements: ....................................................................................................... 7 1.1.5. Switching costs: ...................................................................................................................... 7 1.1.6. Access of distribution channels: ............................................................................................. 7 1.2. Threat from substitute products: ................................................................................................... 10 1.3. Bargaining power of customer ..................................................................................................... 12 1.4. Bargaining power of suppliers:..................................................................................................... 14 1.5. Competitive rivalry ....................................................................................................................... 16 2. SWOT Analysis of PTCL..................................................................................................................... 18 2.1. Strengths ....................................................................................................................................... 19 2.2. Weakness ...................................................................................................................................... 20 2.3. Opportunities ................................................................................................................................ 21 2.4. Threats .......................................................................................................................................... 22 3. TOWS MATRIX Analysis of PTCL .................................................................................................... 23 3.1. SO (strength and opportunities) .................................................................................................... 24 3.2. SI (strength and threats) ................................................................................................................ 25 3.3. WO (weakness and opportunities) ................................................................................................ 26 3.4. WT (weakness and threat) ............................................................................................................ 27 4. conclusion............................................................................................................................................. 28 5. Recommendation ……………………………………………………………………………………..26 6. References ……………………………………………………………………………………………27 Page 3
  4. 4. Abstract After gathering and collecting the data from secondary source of information and making technical analysis on them it conclude that porter five forces model is not completing implemented on PTCL. PTCL is facing the problem of threat of new entrants, thereat of substitutes, and threat of rivalry, but PTCL have good bargaining power of customer and supplier. Except all of these PTCL have little high switching cost of customers which is the main resistant of PTCL in increasing its sales. The growth rate of PTCL has been decreased in 2012 by 3% approximately. And the growth rate of Ufone has increased by 46% which is not a good signed for PTCL future. If we talk about the SWOT analysis of PTCL we can conclude that PTCL have many strength and opportunities to increase its business in market. And also have some threats and weakness which is badly facing by PTCL. If we talk about the TOWS matrix analysis of PTCL we can conclude that PTCL can increase its strength by using it opportunities and minimize it threats by using its strengths and also minimize the weakness by using the opportunities. Page 4
  5. 5. Porter five forces analysis of PTCL Company The competitive environment is prepared by five forces: Threat of new entrants Substitute products The bargaining power of suppliers The bargaining power of customer Competitive rivalry Page 5
  6. 6. In discussing competition porter competitive strategy distinguishes between factors that characterize the nature of competition. The competitive forces influence the state of competition and also influences the collectively determine the profit potential of the industry as whole. Threat of new entrants (and barriers to entry to keep them out) Barriers to entry: Scale of economics: High fixed costs often imply a high breakeven point. And a high breakeven pint depends on a large volume of sales. PTCL has achieved this target in Pakistan so it is very difficult to beat PTCL due this barrier because PTCL has a large volume of sales in telecommunication department in Pakistan. Product differentiation: Existing firms in industry can built up a good brand image and strong customer relationship over a long period of time. In Pakistan PTCL is providing number of different products such as Wire line products: Land line/ fixed phone Broadband Smart TV Wireless products: Page 6
  7. 7. Vfone EVO 3G 3.1 EVO 3G nitro 9.3 3G EVO Tab In telecom industry there is not an other industry which have these types of products so PTCL is completely enjoying its product differentiation. Capital requirement: When capital requirement is high the barrier against new entrant will be strong, so in the case of new entrants of any firms in the telecommunication industry PTCL should have large amount of capital to overcome to its competitors. Knowledge requirements: As well as high capital requirements knowledge and know how are also necessary to make a barriers for competitors. PTCL is working in Pakistan since 1947. And it has a complete knowledge staff of telecom sector. So it is also a barrier against its competitors. Switching costs: Switching cost refer to the costs of time, money, and convenience that a customer would have to incur by switching from one supplier products to another supplier. There are some competitors of PTCL in providing the services of internet facility. Qubee,Wateen, Witribe and Private net cable providers. PTCL have a high cost of installation which is not a good sign as barriers to entry. Access of distribution channels: PTCL have a number of exchanges in all over the Pakistan. So it is another barrier for new entry. Page 7
  8. 8. Advantages on existing producers: Patents rights Experience and know how Goodwill Established network Yes No (+) (-) Is PTCL has established any brand identities in telecom industry?  Does PTCL will incur any high costs in switching suppliers?  Is a high amount of capital needed to enter a new company in industry?  Do the new companies will face difficulty in accessing distribution channels?  Do the new companies face the problems in obtaining the necessary materials, skilled people or supplies?  Does PTCL product or service have any basic features that give PTCL lower costs?  Can the new coming companies expect strong retaliation on entering the market?  7 1 Page 8
  9. 9. Results: The above facts and figures shows that PTCL have not huge threat from new entrance because the new entrance will face difficulty in accessing distribution channels, new entrance need huge amount of capital, new entrance will face difficulty obtaining the necessary materials, skilled people or supplies, new entrance will take a lot of time to grab the market. Page 9
  10. 10. Threat from substitute products: PTCL have many competitors like (warid, mobilink, wateen, witribe, qubee and etc) which are providing the substitute products in the telecom market. The threat can be determined on the basis of annual profit of competitors. Annual profits Threat from Substitutes (Companies) (Growth rate) 2011 2012 Warid 26805 29233 9.1% Mobilink 73936 83271 12.6% Ufone 27455 40060 46% Telenor group 45081 51561 14.4% Wateen (30.05) (10.5) (34.4%) 7,458,760 7,244,466 (2.9%) PTCL Source: Pakistan telecommunication authority 20011-12 Page 10
  11. 11. Results: According to the facts and figures we can say that the growth rate of PTCL is decreased by 2.9%. This is not good sign for PTCL. In other hand all companies are going in profit and also increasing its growth rate gradually except wateen. So there is a need to overcome on its competitors for PTCL. WT (weakness and threat) PTCL can expand network coverage with the help of improved firm infrastructure and PTCL can also reduce the percentage of customers which are switching to other networks. By using the advantage of profit taking growth of subsidiaries PTCL can minimize its flat organizational structure and PTCL can also reduce the price wars among competitors By taking the advantage of scope for cost efficient operations PTCL can minimize the extra employee overhead cost to extra hiring’s and PTCL can also make barriers against new entrance. By using the advantage of joint venture with other telecom companies for introducing new technology PTCL poor coverage of wireless and line services and PTCL can also easily beat to its competitors. By using the advantage of adopt lasted technology PTCL can reduce the poor customer services especially in call centre PTCL can also decrease its energy crises. All the telecommunication companies operating All the telecommunication companies operating Page 11
  12. 12. Bargaining power of customer There is high bargaining power of customer in telecommunication sector. There are many competitors in market and they are offering the different packages at different prices to customers and situation of price war is running very hardly. Customer has a power of buying any package which is suited to them. Charge of switching from one company package to other company package is low. Hence power of customer is high. Bargaining power can be represented through this table. Questions Yes (+) No (-) Are there a huge number of buyers related to the number of firms in the business?  Is PTCL not charging very high switching cost from  customers? Is number of buyers are greater than number of suppliers in market?  Is PTCL having a large number of customers each with comparatively small purchases?  Is the customer has complete awareness about different market prices?  Is the customer is required a lot of important information Page 12
  13. 13.  about PTCL? Is there anything that prevents PTCL customer from switching to another company?  Is PTCL customers are highly sensitive to price?  Is PTCL product is unique to some degree or has accepted branding?  Is PTCL customers are satisfied from suppliers?  8 2 Results The above facts and figures shows that the bargaining power of the customer is high because if PTCL will not provide products and services at the economic rate to customers. They will be move to other networks which results a decrease in the sales of PTCL. The switching cost which is charged by PTCL from its customers is so high this is not a good sign for PTCL. Page 13
  14. 14. Bargaining power of suppliers: The power of supplier is high in case of telecommunication sector. But the reality is that numbers of suppliers are few in the markets but they are competing in the market to make agreement with mobile service providers. The overall aim of the suppliers is that to get the higher prices from customers. Yes (+) No (-) The numbers of suppliers of PTCL are high in the market there for bargaining power will be high of suppliers.  PTCL suppliers would find it hard and difficult to enter my  business PTCL have a variety of potential suppliers.  PTCL business is significant to its suppliers.  PTCL cost of purchases has not major influence on PTCL overall costs.  Is PTCL have products which is differentiated from competitors products?  5 1 Page 14
  15. 15. Results According to the facts and figure PTCL have strong bargaining power of suppliers because the huge numbers of suppliers of PTCL are working in the market, PTCL suppliers would not find it hard and difficult to enter my business, PTCL have a variety of potential suppliers, PTCL have products which is differentiated from competitors products. Page 15
  16. 16. Competitive rivalry Currently there are many market competitors but in future they might be increased. The intensity of competitive rivalry within an industry will affect the profitability of the industry. The completive actions might be taken from the price competitions, advertisement, and sale promotion campaigns, introducing new products for the market, providing guarantees or warranties and improving after sales services. Competition can decrease the demand of PTCL, expand the market or it can leave demand unchanged. There are different factors to determine the intensity of competition in the market. Yes (+) No (-) PTCL is growing rapidly?  In cost structure the fixed costs of the PTCL are a relatively low  portion of total costs. Is PTCL can switch customers through suppliers easily?  There are significant product and brand difference between PTCL and its competitors.  It would not be hard to get out of this business because there are no specialized skills and facilities or long-term contract  commitments etc. PTCL customers would incur significant costs in switching to a Page 16
  17. 17.  competitor. Is PTCL having the capacity to achieve a substantial increase in output capacity?  If success is a prime strategic objective, then PTCL will be likely to act very competitively to meet their targets?  This is difficult for PTCL to exit from the market?  5 4 Results The above facts and figures shows that PTCL have strong threat of rivalry companies, because PTCL is not growing rapidly, PTCL has decreased it profit in previous year which is the major threat for PTCL and this is only due to PTCL competitors which decrease the PTCL profit like (Wateen, Warid, Ufone, Mobilink, WiTribe, and Qubee). Page 17
  18. 18. SWOT Analysis of PTCL Strength Opportunities Profit taking growth of Largest operational network subsidiaries Monopoly Scope for cost efficient Oldest and experienced operations Market leader Adopt lasted technology High speed of internet Weakness Threats Flat organizational structure New entrants in market Bureaucratic environment Political instability Political intervention Rapid increase in the govt. tax Extra employee overhead due to rate extra hiring Energy crises Switching cost is too high Page 18
  19. 19. Strengths Biggest operational network and infrastructure in telecommunication sector. Enjoying an integrated monopoly. PTCL is the oldest and experienced telecommunication company of Pakistan. All the telecom companies operating in the directly or indirectly depending on PTCL. Market leader in local loop and wireless local loop. PTCL maintain the record of customer in an organized way while other private companies have not such type of facility. Telecommunication companies in which numbers are assigned with proper area codes. Pakistan telecommunication can be used as back network if mobile networks are shutdown due to any reason. PTCL is offering a high speed of internet to its customers naming as DSL. And also providing concession to students. PTCL is offering low call rate rates in all over the world. It is also offering the wireless USB’s for high speed internet. Strength Largest operational network Monopoly Oldest and experienced Market leader High speed of internet Page 19
  20. 20. Weakness Flat organizational structure. Complicated environment. Political interference in decision making. Extra employee overhead dues to extra hiring. Customer services are very poor specially in providing internet services. Wireless coverage and services is also poor. Functional units are not well organized. To high bad debts due to non payments of billing. Switching cost is too high. Lack of technical staff in the department of DSL internet providing servers. Not quick response. Weakness Flat organizational structure Bureaucratic environment Political intervention Extra employee overhead due to extra hiring Switching cost is too high Page 20
  21. 21. Opportunities Profit taking growth of subsidiaries. Scope for cost efficient operations. Joint venture with other telecom companies for introducing new technology. Improvement in customer services through hiring educated staff. Adopt latest technology. Opportunities Profit taking growth of subsidiaries Scope for cost efficient operations Adopt lasted technology Page 21
  22. 22. Threats Inflation in country may increase the cost of services which will finally transferred to customers. Energy crises can decrease the efficiency of company. Rapid increase in the govt. tax rate might reduce company profits. New entrants in market. Political instability. Increasing number of competitors like (Mobilink, Warid, Telenor, Zong and etc.) WT (weakness and threat) PTCL can expand network coverage with the help of improved firm infrastructure and PTCL can also reduce the percentage of customers which are switching to other networks. By using the advantage of profit taking growth of subsidiaries PTCL can minimize its flat organizational structure and PTCL can also reduce the price wars among competitors By taking the advantage of scope for cost efficient operations PTCL can minimize the extra employee overhead cost to extra hiring’s and PTCL can also make barriers against new entrance. By using the advantage of joint venture with other telecom companies for introducing new technology PTCL poor coverage of wireless and line services and PTCL can also easily beat to its competitors. By using the advantage of adopt lasted technology PTCL can reduce the poor customer services especially in call centre PTCL can also decrease its energy crises. Threats New entrants in market Political instability Rapid increase in the govt. tax rate Energy crises Page 22
  23. 23. TOWS MATRIX Analysis of PTCL EXTERNAL FACTORS (opportunities and threats) SO SI Use strength to maximize opportunities (maxi – maxi strategy) Use strength to minimize threat (maxi – mini strategy) WO WT Minimize weakness by taking advantage of opportunities (mini – maxi strategy) Minimize weakness and avoid threat (mini – mini strategy) INTERNAL FACTORS (Strength and weakness) Page 23
  24. 24. SO (strength and opportunities) By using the largest operational network and infrastructure in telecommunication sector. PTCL have an opportunity of earning maximum profit. Enjoying an integrated monopoly PTCL have the opportunity of expand customers. PTCL is the oldest and experienced telecommunication company of Pakistan has opportunity to redesign its policies and structure. All the telecommunication companies operating in Pakistan are directly or indirectly depending on PTCL in this situation PTCL have this opportunity to expand network coverage. Market leader in local loop and wireless local loop PTCL have the opportunity to provide more value added services and products. PTCL maintain the record of customer in an organized way while other private companies have not such type of facility. Pakistan telecommunication can be used as back network if mobile networks are shutdown due to any reason. PTCL is offering a high speed of internet to its customers naming as DSL in this situation PTCL have the opportunity to provide different type of packages to family, friend, and students. PTCL is offering low call rate rates in all over the world by using this strength PTCL have the opportunity to lead in the market. SO Use strength to maximize opportunities (maxi – maxi strategy) Page 24
  25. 25. SI (strength and threats) PTCL is the largest operational network and infrastructure in telecommunication sector and by using this strength PTCL can reduce the percentage of customers which are switching to other networks. PTCL is the oldest and experienced telecommunication company of Pakistan by using this strength PTCL can reduce the price wars among competitors. All the telecommunication companies operating in the directly or indirectly depending on PTCL by using this strength PTCL can reduce the threat of other depending companies. Market leader in local loop and wireless local loop. By using this strength PTCL can make barriers against new entrance. PTCL is offering low call rate rates in all over the world by using this strength PTCL can easily beat to its competitors. PTCL is earning high profit in every year. By using this strength PTCL can decrease its energy crises. SI Use strength to minimize threat (maxi – mini strategy) Page 25
  26. 26. WO (weakness and opportunities) PTCL can expand network coverage with the help of improved firm infrastructure. By using the advantage of profit taking growth of subsidiaries PTCL can minimize its flat organizational structure. By taking the advantage of scope for cost efficient operations PTCL can minimize the extra employee overhead cost to extra hiring’s. By using the advantage of joint venture with other telecom companies for introducing new technology PTCL poor coverage of wireless and line services. By using the advantage of improvement in customer services through hiring educated staff PTCL can minimize the bad debt costs. By using the advantage of adopt lasted technology PTCL can reduce the poor customer services especially in call centre. WO Minimize weakness by taking advantage of opportunities (mini – maxi strategy) Page 26
  27. 27. WT (weakness and threat) PTCL can expand network coverage with the help of improved firm infrastructure and PTCL can also reduce the percentage of customers which are switching to other networks. By using the advantage of profit taking growth of subsidiaries PTCL can minimize its flat organizational structure and PTCL can also reduce the price wars among competitors. By taking the advantage of scope for cost efficient operations PTCL can minimize the extra employee overhead cost to extra hiring’s and PTCL can also make barriers against new entrance. By using the advantage of joint venture with other telecom companies for introducing new technology PTCL poor coverage of wireless and line services and PTCL can also easily beat to its competitors. By using the advantage of adopt lasted technology PTCL can reduce the poor customer services especially in call centre PTCL can also decrease its energy crises. WO Minimize weakness by taking advantage of opportunities (mini – maxi strategy) Page 27
  28. 28. Conclusion After gathering and collecting the data from secondary source of information and making technical analysis on them it conclude that porter five forces model is not completing implemented on PTCL. PTCL is facing the problem of threat of new entrants, thereat of substitutes, and threat of rivalry, but PTCL have good bargaining power of customer and supplier. Except all of these PTCL have little high switching cost of customers which is the main resistant of PTCL in increasing its sales. The growth rate of PTCL has been decreased in 2012 by 3% approximately. And the growth rate of Ufone has increased by 46% which is not a good signed for PTCL future. If we talk about the SWOT analysis of PTCL we can conclude that PTCL have many strength and opportunities to increase its business in market. And also have some threats and weakness which is badly facing by PTCL. If we talk about the TOWS matrix analysis of PTCL we can conclude that PTCL can increase its strength by using it opportunities and minimize it threats by using its strengths and also minimize the weakness by using the opportunities. Page 28
  29. 29. Recommendation It is recommended that to PTCL that it should apply porter five forces model properly in its business. Minimize the switching cost of customer; reduce the threat of substitutes, new entrants, and threat of rivalry. Increase it sales by providing valuable quality both in land line products and wireless products. And should also be focused on its internal and external environment for making quick and efficient response to its customers. PTCL should also focus on its strength, weakness, opportunities, and threat while making the significant policies. Page 29
  30. 30. Reference www.slideshare.com www.ptcl.com www.wekipedia.com www.pta.com www.scribed.com Page 30

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