America Movil is a group dealing in the Telecommunication industry offering fixed-line, broadband, digital media, and mobile phone services in Mexico and other regions of America and Europe through its subsidiaries. Dealing in the telecommunication industry, the firm was founded in 1986, having its headquarters in Mexico City, Mexico. As of 2018, the company produced a strong figure of revenue of 52.747 US billion dollars and has occupied an employment figure of almost 190.000 (America Movil, 2018). From the opinion of the global telecommunication industry, the assessment of Porter’s five forces would be a helpful system for maintaining prospect strategies to better understand the business standing position.
Competitive Rivalry in the Market
The competitive rivalry in the telecom industry is high because of several service providers globally with the increase in usage of digital means. As a result of this increase, several companies and institutions have captured the market to provide telecommunication services, and America Movil is competing well at the global level, among others. With a market share of 71.9 percent in 2019, Telcel, an América Móvil group, was Mexico’s most significant technology partner. Claro, a subsidiary of América Móvil, was the premier supplier in Colombia, Peru, and Argentina. Vivo, a subsidiary of the Spanish group Telefónica, was the biggest supplier in Brazil (Statista, 2020). The major competitors of the company are the US. Cellular, China mobile, Verizon, and T-Mobile. Therefore, all competitors must attract consumers with cheaper rates and more exciting offerings because almost everyone already spends on phone networks. Thus, the presence of such firms enables the environment of the industry more competitive.
Threat of Substitutes
The threat of having substitute products is considerably high in the telecommunication industry, mainly because the industry is highly dependent on technology and innovation. Non-traditional telecom enterprises’ products and services pose a danger to substitution. Buyers are also competing with streaming media providers. Broadband internet networks are available from cable companies with direct connections into houses, and satellite connections can be used to meet higher customer networking needs. The internet is now becoming a reliable platform for low-cost voice calls, which is equally concerning for telecom companies (Mavengere, 2014). Different internet service providers, not mobile operators, provide the service. Online telephony has the potential to break into telecom providers’ main revenues. Therefore, the risk of substitutes in the telecom industry is moderate to high.
The Threat of New Entrants
The threat of new entrants in the telecommunication business is considered to be low as there are loads of companies are already operating in the country and all over the world, but the barriers to entry are elevated enough for the newcomers to break into the market. It is no wonder that capital investment is the most significant obstacle to access in the capital-intensive telecom sector. Potential candidates usually need a considerable sum of money to meet high expenses in maintaining the physical network. Apart from the capital obstacle, new firms have to deal with the existence of big brands of the telecom industry and the restrictive federal regulations that regulate the operations, access to facilities and ownership of the license (Hawthorne et al, 2016). Hence, minimizing the threat to enter the industry.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the telecom industry is high because of the presence of so many service providers and the range of their offers. Irrespective of the providers who offer telephone and data services, the offerings are ultimately the same. Basic facilities are, for the most part, regarded as a commodity. Customers expect low rates from businesses that provide dependable service as a result of this. Buyer capacity, on the other hand, may differ slightly across segments of the market. Low switching costs enable the buyers to influence more in negotiating (Malhotra and Batra, 2019). Keeping in view these trends, the bargaining power of buyers is high in the telecom industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the telecom industry is moderate. Telecommunications equipment manufacturers have a lot of leverage when it comes to negotiating with service providers. Indeed, telecom companies will be unable to transfer voice and data from one location to another without high-tech broadband swapping facilities, fiber-optic lines, cellular phones, and a billing system. The availability of numbers of manufacturers, holding different resources makes firms’ bargaining power weak in terms of setting the terms (Ayub et al, 2019). Thus, in context to the telecom industry, the bargaining power of suppliers is moderate.
References
AméricaMóvil, 2018. América Móvil – Investors – Reports and Filings – Annual Reports. [online] Americamovil.com. Available at: https://www.americamovil.com/English/investors/reports-and-filings/annual-reports/default.aspx.
Statista, 2020. Largest telco providers by country Latin America | Statista. [online] Statista. Available at: https://www.statista.com/statistics/757317/mobile-revenue-latin-america-companies/.
Mavengere, N.B., 2014. Role of information systems for strategic agility in supply chain setting: Telecommunication industry study. Electronic Journal of Information Systems Evaluation, 17(1), pp.pp100-112.
Hawthorne, R., Mondliwa, P., Paremoer, T. and Robb, G., 2016. Competition, barriers to entry and inclusive growth: Telecommunications Sector Study.
Malhotra, G. and Batra, S.K., 2019. Customer-Switching Behaviour for Telecom Service Provider. International Journal of Business and Economics, 4(2), pp.1-17.
Ayub, S.E., Kwendo, E. and Liyayi, C.S., 2019. Effect of Differentiation Strategies on the Performance of Mobile Phone Service Providers in Kenya. Int. J. of Multidisciplinary and Current research, 7.