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MOPP Khalique Zafar (FA14RPM006)

Assignment (1)
MGT600 (MOPP)--MSPM
Moderator Name: Rumla Tahir
Khalique Zafar (FA14RPM006)



1. What is the main objective/purpose of Michael Porters Five Forces Model?

The model identifies and analyzes five competitive forces competition threat of new entrants into industry,
bargaining power of buyers, bargaining power of suppliers and threat of substitute products and competitive rivalry
within industry that shape every industry, and helps determine an industry's weaknesses and strengths.

2. Focusing on the Telecom Industry of Pakistan complete the following worksheet?
WORKSHEET
Bargaining Power of Suppliers
Suppliers are POWERFUL if
There is a credible forward integration
threat by suppliers.
Suppliers are concentrated.
There is a significant cost to switch
suppliers.
The customers are powerful.
Suppliers are WEAK if
The product is standardized. There are
many competitive suppliers.
They are supplying commodity products.
There is a credible backward integration
threat by purchasers.
There are concentrated purchasers.
The customers are weak.

What does the bargaining power of suppliers in your industry look like?

Bargaining Power of SupplierLow
Monopolistic conditions always favors suppliers to be able to control and manipulate prices in the market and
act powerfully to bargain when key suppliers are less or scarce in numbers and product is monopolized
But in Pakistan Telecom industry due to a healthy number of suppliers/telecom operators operating like
MOBILINK, WARID, PTML UFONE, CHINA MOBILE (ZONG), TELENOR with almost same type of
products and competition is quite stiff which results in good amount of supply of products ensured by all
suppliers at low cost also there is no significant cost involved for customer to switch from one operator to other.

Bargaining Power of Customers/Buyers
Customers are POWERFUL if
Threat of backward integration is high
Customers have lots of competing brands to
choose from
Lots of Substitute products are available
Cost to switch suppliers is significantly low
Rival Products are relatively undifferentiated
Buyers are sensitive to price
Customers are WEAK if
Product is highly differentiated
Substitutes are unavailable
Switching costs are significant
Customer is unaware regarding the product
Buyers are not sensitive to price
There are concentrated purchasers.
The suppliers are strong.
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MOPP Khalique Zafar (FA14RPM006)

What does the bargaining power of customers your industry look like?

Bargaining Power of Customers/BuyersHigh
There are a lot of alternatives available in terms of products and brands for the customer at low price and
product are almost undifferentiated with relatively low cost to switch from one product to another or one
supplier to other. Growth rate in the industry is high having cellular industry penetration in the market at 40%
with an overwhelming subscriber line touching to 133 million this year and growing at fast pace. Loyal base
of customer for any operator and product is hard to come by in the industry. In fact, existence to brand loyalty
in telecom industry is close to zero. Only business or corporate class practice to stick to one operator for
consistency which are very few in comparison to other customer base. Customers are enjoying power full
bargaining with good quality product at low prices.
Threat of Substitute Products/Services
Threat of substitutes will be LOW if
There is strong brand loyalty.
There are tight or strong customer
relationships.
Switching costs for customers are high.
The relative price compared to performance
of substitutes is high.
Threat of substitutes will be
HIGH if
There is little to no brand loyalty.
There are loose customer relationships.
Switching costs for customers are low.
The relative price compared to
performance of substitutes is low.

What substitute products/ or services exist for your industry? What does the bargaining threat of
substitutes within your industry look like?

Threat of Substitute Products/ServicesHigh
Five telecom operators with a range of a good number of product in the market along with competitive
alternate available in the industry like PTCL and other internet service providers alternative. There is little
brand loyalty and performance factor in general did not hurt customers in comparison to price. Switching cost
is low as well as no strong customer relationship mechanism in place by any operator in the industry which
differentiate one to other. All these factor give liberty to customer for opting substitutes and always pose a
high threat to telecom operator. Lower price strategy or high quality service can help in consumer base but
not as effective in retaining customers forever.
Threat of New Entrants
Threat of new entrants is LOW
if
High Barriers to Entry
Large Initial Capital Requirements
Cost of Doing Business is High
There is patented or proprietary know-how.
There is difficulty in brand switching.
There are restricted distribution channels.
There is a high scale threshold.
Extensive Legal and Regulatory Frameworks exist

Threat of new entrants is
HIGH if
Low Bar r i er s t o Ent r y
Legal and Regulatory Frameworks are loose
Initial Capital requirements are small
There is common technology.
There is little brand loyalty
Customer Switching Costs are low
Distribution channels are easily
accessible.
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MOPP Khalique Zafar (FA14RPM006)

What does the threat of new entrants within your industry look like?

Threat of New EntrantsLow
New entrants threat is always effected by entry barriers in the economy of the country, capital investment
required and economies of scale. Generally entry into business in Pakistan is relatively easy in comparison to
other countries in the region due to low capital investment and low level entry barriers in the country. But at
present telecom industry has very high and stiff entry requirement and higher cost and capital investment
involved in introducing new products and sustaining cost is also quite high in the industry due to which new
entrants are reluctant to enter the market. As Pakistan is among one of the few countries whose economy is
jolted by the row of terrorism and biased behavior of big powers in the region as far as business is concerned.
So, the threat of entry of new telecom operator are very low at that point.
Competitive Rivalry Within Industry
Competitive rivalry within an industry is LOW
if
There are few players in the industry.
Players have different strategies.
Differentiation between competitors and
their products are high.
There is little to no price competition
There are high market growth rates.
Barriers for exit are low.
Competitive rivalry within an industry is
HIGH if
There are many players of about the
same size.
Players have similar strategies.
There is not much differentiation
between players and their products.
There is much price competition
Low market growth rates (growth of a
particular company is possible only at
the expense of a competitor).
Barriers for exit are high (e.g.
expensive and highly specialized
equipment).

Comment on the Competitive Rivalry within your Industry using your previous responses above and
conditions outlined?

Competitive Rivalry Within Industry--High
There are many operator with same product line and almost same strategy of high quality product provision to
customer at low rates resulted in only competition on price. Total subscriber line now reached at saturation
level of about 133 million which is 40% of the market share. Now growing at steady rate mostly due to huge
competitive rivalry based advertising and marketing campaigns. Competitive rivalry is very high quite visible
at all levels sometimes seems that rivalry pushing telecom operators in very narrow corners. This competitive
rivalry resulted in low prices and good quality of products, giving advantageous benefit to customers.