Swot Analysis Chapter Six.docx

SWOT ANALYSIS Reliance Jio Strength Low tariff: - Company has launched its 4G service with highly competitive or rather very low tariff. Company has strong financial capacity to withstand initial losses. Very Wide network:-Company has created wide national network with a huge investment of around $20 billon. The company has used latest technology and hence capable to give quality service. Brand Name: - Brand Value of company is very high.

Weakness Late entry into telecommunication sector: - The telecom sector had grown exponentially in its initial phases which started around two decades earlier. Presently market has seen only modest growth and it has become highly competitive due to entry big players such as Vodafone, Idea etc. Operation of Mobile Number Portability Still not smooth: - Nowadays mobile number has become identity of a person and hence it is difficult for anyone to change his mobile number. MNP takes many days for its implementation and it is hard to manage this transition period. MNP is crucial for Jio as a large number of customer is expected through migration from existing service providers. Highly dependent upon data consumption: - As per the current trend around 60 to 70 percent of revenue comes from voice calling and hence there is a huge potential loss for making voice calling free. This loss can be offset only when consumption of data increases manifold.

Opportunity Large scale availability of smart phones: In last 2 decades the number of people using Smartphone has increased manifolds. If company is able to provide quality service at competitive rate it can quickly grab large number of customers. Increasing rate of data consumption: In its earlier phase almost entire revenue of the mobile service provider was from voice calling. However since last two years the proportion of revenue from data users is increasing exponentially which has resulted in almost 30-40% of the total revenue. Lower data tariff may further increase data consumption and thus contribute more to the revenue of company.

International market:-There is huge opportunity in many developing countries.

Threats Saturated market: - The initial phase of rapid increase in subscriber is now over. A new entrant like Jio needs a large customer base to cross breakeven point. Highly competitive market: - After the entry of big players like Vodafone, Idea etc. the market has become highly competitive. Changing Government Policy: The changing government policy like cancelling of 2G licences ,imposition of tax with retrospective effect(on Vodafone), refund for call drop etc., has created uncertainty in the market causing adverse impact on the investment sentiment. Rapid up gradation in Technology: - From 2G to 3G and 3G to 4G changes have occurred in very short span of time. Even next generation 5G is approaching shortly. Each up gradation requires huge investment and it is not possible to remain in market without it.

Vodafone Strength Massive market coverage: Vodafone is ranked top 2000 brands by Forbes. It is known for its wide distribution and network coverage. It has the second largest subscriber in India. Vodafone operates in more than 25 countries across the globe. Revenues generated: Vodafone generates billions of dollars of revenue every year. It is ranked 104 in its sales figure across the global 2000 list and number 84 in market value. Marketing: The marketing by Vodafone is legendary. The Vodafone zoo zoo’s was a brilliant and endearing campaign which converted many user to diehard fans of Vodafone. Premium cost: While other telecom operators are penetrating the market, Vodafone is differentiating its services regularly. Due to its marketing and communication, user already think that Vodafone is a notch above the rest and they are proud to be a user of Vodafone.

Weakness Dropping brand valuation – One of the possible reasons for the drop in subscriber base of Vodafone can be the dropping brand valuation of the company. Both –

subscriber base and brand valuation of the company was very strong to begin with. But both have them have suffered in the last 3-4 years. Losing market share in USA – USA is a country where Vodafone could have demanded the premium it needs to keep itself afloat. However, it is fast losing market share in the USA to Verizon wireless and AT&T, both of whom are performing far above Vodafone if we consider the US market only. Poor performance in Europe – Due to brexit and other economic conditions in Europe, Vodafone’s performance in its home market has been poor and it has not generated much revenue from its home market. In fact, if we look at revenues, 40% of the revenue is coming from India and not from US or UK.

Opportunities Rural markets – If a high percentage of subscriber base of Vodafone is in India, then rural market penetration becomes a priority for the telecom operator. However, Vodafone seems to be operating more only in urban markets whereas its top competitor such as Airtel and Reliance communications have penetrated rural markets successfully. Emerging markets – Not only rural markets in developing countries, other emerging markets such as those in Africa are also a great potential place for Vodafone. These new and emerging markets have increasing disposable income and communication becomes important once a network is growing. Thus, there are many roles a telecom company can play in an emerging market. 4G – The 4G spectrum has created disruption but at the same time has made people look at the telecom operators once again to see which one they will side with. In india for example, the free plans of Reliance jio have resulted in many people leaving Vodafone and joining Jio.

Threats Competition – A major threat for Vodafone is the competition it faces everywhere it goes. India has Airtel and Reliance Jio. There is cut throat competition in the telecom sector and this is strongly affecting the brand Vodafone, which was trying to offer differentiated services by keeping a bit of premium pricing. Low margins – Vodafone’s differentiation initially worked, but in the last 3-4 years, the competition has been so fierce, that the whole telecom market is operating in a

penetrative pricing mechanism. Competition is always good for consumers but too much competition is bad for companies.

Airtel Strength Good returns on capital expenditure - Airtel is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams. Strong distribution network – Over the years Airtel has built a reliable distribution network that can reach majority of its potential market. Strong Free Cash Flow – Airtel has strong free cash flows that provide resources in the hand of the company to expand into new projects. Strategic Alliances: The Company has top notch stakeholders, namely Sony Ericsson, Nokia and SingTel, and the recent one being Apple. Such strategic alliances boost the brand equity and the bottom line of the company.

Weakness High attrition rate in work force – compare to other organizations in the industry Airtel has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees. Limited success outside core business – Even though Airtel is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.

Outsourced Operations: Outsourcing operations helped Airtel in lowering its cost. But on the other hand, they are running the risk of being dependent on some other companies which may affect its operations.

Opportunities

New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Airtel. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics. New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Airtel to drive home its advantage in new technology and gain market share in the new product category.

Strategic Partnership: Partnering with smart phone companies is going to be a smart strategy as far as MNP (mobile number portability in India) is concerned. This will ensure fixed cash flows in the future and a higher customer base.

Threats Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales. No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.

Idea cellular Strength Robust Services: Idea Cellular offers a wide variety of services over and above just telecom such as digital communication, online entertainment, digital payments, Games, Movies, music, and cloud-based services.

Wide network: Idea has a network that spans across India and is there in 40,000 towns across the country. The idea is also credited with the fastest 4 G network in India close to 230,000 sites and a fibre optic cable covering close to 1.28 lakh kms. It is proposed to expand the Idea 4G services to 20 circles which will cover more than 94 % of the total market. Various domains of service: The Company is also a registered presence in other technology areas such as Enterprise Services, Customer Service, Marketing, Internet & Broadband, Infrastructure Innovation, and VAS.

Weakness Weaker 4 G: In comparison to the market leader Airtel, Idea Cellular indicates slower 4 G speeds and more customer complaints about internet speeds. With increased usage of smartphones, this can turn out to be a critical weakness. Poor rural access: Idea Cellular is more focused on urban marketsand cities and customer complain that the speed is painfully slow in rural regions. This gives many competitors an upper hand in rural areas. Pricing: The competition in the telecom service market is on a steep incline and the only way to penetrate the market through the lowest pricing. However, the company is finding it extremely challenging to undercut the prices of its competitors. Promotional Schemes: Mobile service providers are offering numerous promotional schemes and offers not just on calls but also on data and apps. These promotional schemes are eating into the financial models of the business.

Opportunities

Growth in technology: The technology changes are creating new opportunities in domains like VoIP and cloud-based communication services. These may be used as value added services for telecom service providers for which they can charge a premium. Connected devices: The possibility of cities migrating to smart cities and the emergence of connected devices will present a new segment that technology companies can target. Emerging technologies like artificial intelligence presents a whole new gamut of services.

Threats Competition: There is neck to neck competition in the telecom sector from players like Airtel, Jio, and Vodafone. Lobbying and mafia: There are a lot of unethical practices and malpractices including lobbying and corruption in the telecom sector and this is creating a pricing struggle in the telecom sector in India.