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Understanding the nature of each of these forces gives organizations the necessary insights
to enable them to formulate the appropriate strategies to be successful in their market
(Thurlby, 1998). We will examine these concepts as described by Porter’s 5 force model and
as applied to Indian telecom industry simultaneously.
The intensity of rivalry, which is the most obvious of the five forces in an industry, helps
determine the extent to which the value created by an industry will be dissipated through
head-to-head competition. The most valuable contribution of Porter's “five forces”
framework in this issue may be its suggestion that rivalry, while important, is only one of
several forces that determine industry attractiveness.
This force is located at the centre of the diagram
Is most likely to be high in those industries where there is a threat of substitute
products; and existing power of suppliers and buyers in the market
Now let us understand the implication of degree of revelry in HOME APPLIANCES
INDUSTRY. The dimensions of this parameter are determined by:
High Exit Barriers: In any industry, if the exit barrier is high it increases the difficulty of any
organization to leave the industry sector. So it makes any difficult to any willing to leave
company to leave the industry. The in HOME APPLIANCES INDUSTRY suffers from high exit
barriers, mainly due to its specialized equipment. Networks and billing systems cannot
really be used for much else, and their swift obsolescence makes liquidation pretty difficult.
High Fixed Cost: The industry also suffers from high fixed cost which makes the entry
barrier also very high for the industry. It comes as no surprise that in the capital-intensive
telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs,
serious contenders typically require a lot of cash. When capital markets are generous, the
threat of competitive entrants escalates. When financing opportunities are less readily
available, the pace of entry slows. Meanwhile, ownership of a telecom license can
represent a huge barrier to entry.
Very less time to gain advantage by an innovation: Every company in this industrial sector
in investing a huge amount in research and development and marketing strategy. That is
why we see any scheme launched by any company is counter attacked by other companies
very soon. This makes the industry rivalry most prominent.
Price wars: The price war is really very fierce in this industry. Price war in in HOME
APPLIANCES INDUSTRY has commoditized the market that branding has taken a backseat.
Both potential and existing competitors influence average industry profitability. The threat
of new entrants is usually based on the market entry barriers. They can take diverse forms
and are used to prevent an influx of firms into an industry whenever profits, adjusted for
the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or
not economically feasible for an outsider to replicate the incumbents’ position. The most
common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:
Economies of scale: In in HOME APPLIANCES INDUSTRY the economies of scale
exists from the supplier side. That is why companies try to increase their
subscriber base at drastic rate.
The threat that substitute products pose to an industry's profitability depends on the
relative price-to-performance ratios of the different types of products or services to which
customers can turn to satisfy the same basic need. The threat of substitution is also affected
by switching costs – that is, the costs in areas such as retraining, retooling and redesigning
that are incurred when a customer switches to a different type of product or service. It also
involves:
Now let us discuss this concept for in HOME APPLIANCES INDUSTRY . The potential major
substitutes for in HOME APPLIANCES Industry are as follows:
LOCAL BRANDS
Buyer power is one of forces that influence the appropriation of the value created by an
industry. The most important determinants of buyer power are the size and the
concentration of customers. Other factors are the extent to which the buyers are informed
and the concentration or differentiation of the competitors. Kippenberger (1998) states that
it is often useful to distinguish potential buyer power from the buyer's willingness or
incentive to use that power, willingness that derives mainly from the “risk of failure”
associated with a product's use.
This force is relatively high where there a few, large players in the market, as it is the
case with retailers a grocery stores;
Low cost of switching between suppliers, such as from one fleet supplier of trucks to
another.
In the context of in HOME APPLIANCES INDUSTRY we can say that the following points
influence the buyer power:
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier
power typically focuses first on the relative size and concentration of suppliers relative to
industry participants and second on the degree of differentiation in the inputs supplied.
The ability to charge customers different prices in line with differences in the value created
for each of those buyers usually indicates that the market is characterized by high supplier
power and at the same time by low buyer power.
In the drawback of in HOME APPLIANCES INDUSTRY the following should be kept in mind:
Large number of suppliers: The industry basically has a large number of suppliers, which
helps them to choose from a lot of options. So they try to select the best option to
deliver the value to the customers and to have a competitive advantage from their
competitor.
Limited pool of skilled managers and engineers especially those well versed in the
latest.
http://www.indianomics.com/2009/07/15/top-12-wireless-operators-in-india-by-subscribers/
The Wireless Industry crossed 452.91 million-subscribers mark as by end of May 2009.
This total subscribers base of 452.91 million comprise of 298.15 million GSM and
105.51 million CDMA subscribers. During the financial year 2008-09 around
130.67million subscribers were added with a growth rate of 50.00% as compared to
58.12% growth during the year 2007-08.
However the recent regulatory developments have been negative for the telecom
companies as it has increased the number operators per circle which intensified the
competition. The addition of players like Aircel, Loop Telecom (formerly BPL), Tata
Docomo, Virgin Mobile and a few more yet to roll out their services like Swan Telecom,
and Unitech Telecom the pressure on established players is set to increase. So also with
the implementation of MNP and 3G spectrum allocation the Service providers have to be
the best service caterers to hold on to their market shares.
CDMA
26%
GSM
74%
www.reportbuyer.com/.../mobile-services-to-mobilise-the-indian-telecom-sector
The market share of different GSM operators as on May 2009 is displayed below:
BSNL
16%
Vodafone
24%