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The bargaining power of suppliers in the Pakistan telecom industry is low due to there being many suppliers operating with similar products and stiff competition. This ensures low prices and easy switching between suppliers for customers. The bargaining power of customers is high due to numerous alternatives, low switching costs, undifferentiated products and high sensitivity to price. Customers can easily switch between suppliers. The threat of substitute products is high due to loose customer loyalty, low switching costs and comparable prices/performance of alternatives such as internet providers. The threat of new entrants is low as the telecom industry requires high capital investment and has strict regulatory barriers, making entry difficult. Competitive rivalry within the industry is high

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Ali Sam
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48 views5 pages

Assignment

The bargaining power of suppliers in the Pakistan telecom industry is low due to there being many suppliers operating with similar products and stiff competition. This ensures low prices and easy switching between suppliers for customers. The bargaining power of customers is high due to numerous alternatives, low switching costs, undifferentiated products and high sensitivity to price. Customers can easily switch between suppliers. The threat of substitute products is high due to loose customer loyalty, low switching costs and comparable prices/performance of alternatives such as internet providers. The threat of new entrants is low as the telecom industry requires high capital investment and has strict regulatory barriers, making entry difficult. Competitive rivalry within the industry is high

Uploaded by

Ali Sam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Bargaining power of Suppliers--low

Dominant 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 WARID, MOBILINK, CHINA MOBILE (ZONG), PTML, PTCL,
UFONE, 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 Suppliers


Suppliers are POWERFUL if

Threat forward integration

Suppliers are WEAK if

by suppliers.

Suppliers are concentrated.

There is a substantial cost


to switch suppliers.

Powerful supplier.

Many suppliers in the


market.

Backward integration
threat by purchasers.

There are
concentrated
purchasers.

Bargaining Power of Customers/BuyersHigh

There are a numerous of alternatives available in terms of products and brands for the customer
at low price and product are almost undifferentiated and same 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 irresistible subscriber line touching to
133 million this year, having fast growing 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 uniformity
which are very few in comparison to other customer base. Customers are enjoying power full
bargaining with good quality product at low prices.

Bargaining Power of Customers/Buyers

Customers are POWERFUL if

Customers are WEAK if

Threat of backward integration is

Product is highly different

high

Substitutes are unavailable

Customers have lots of competing

Switching costs are

brands to choose from

Lots of Substitute products are

significant

available in the market.

Low cost to switch suppliers.

Substitute products are comparatively


undifferentiated

Buyers are price conscious.

Customer is unaware
regarding the product

Buyers are not


sensitive to price

The suppliers are


strong.

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 such as 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 very 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 freedom to customer for choosing 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 Substitute Products/Services

Threat of substitutes will be LOW

Threat of substitutes will be

if

HIGH if

There is strong b r a n d

loyalty.

loyalty. There are tight or


strong customer

Switching costs for customers are

high.

Switching costs for


customers are low.

high. The relative price compared to


performance of substitutes is

There are loose customer


relationships.

relationships.

There is little to no brand

The relative price compared


to performance of
substitutes is low.

Threat of New Entrants--Low

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. So, the threat of entry of new telecom operator are very low at that point.

Threat of New Entrants

Threat of new entrants is LOW if

High Barriers to

Threat of new entrants is


HIGH if

entry

Lo w Ba r r i e r s t o E ntr y

Large Initial Capital requirements

Legal and Regulatory

Cost of Doing business is high

Frameworks are loose

There is patented or proprietary

Initial capital
requirements are small

know-how. There is difficulty in

brand switching.

There

is

common

There are restricted distribution

technology.

channels. There is a high scale

little

threshold.

customer Switching Costs

Extensive Legal and Regulatory

are low

Frameworks exist

There

brand

Distribution

is

loyalty

channels

easily accessible.

are

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. This competitive rivalry resulted in low prices and good quality of
products, giving advantageous benefit to customers.

Competitive Rivalry Within Industry

Competitive rivalry within an industry is

Competitive rivalry within an

LOW if

industry is HIGH if

There are few players in the


industry. Players have different
strategies.

about the same size.

Players have

Differentiation between

similar strategies.

competitors and their

There is not much

products are high.

differentiation

There is little to no price

between players

competition there are high

and their products.

market growth rates.

There are many pl a ye r s of

There is much
price competition

Barriers for exit are low.

Low market growth


rates (growth of a
particular company
is possible only at the
expense

of

competitor).

Barriers for exit are


high (e.g. expensive
and highly specialized
equipment).

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