Nippon Telegraph and Telephone Corporation is a telecommunication company based in Tokyo, Japan and commonly known as NTT. The company operates in different segments that mainly include regional, long distance, international, mobile and data communications services (Blooberg, 2019). The company has total assets of ¥21,675.8 billion with total revenues of ¥11,799.6 billion for the year 2018. The operating income of NTT for the year 2018 is ¥1642.8 billion and the numbers of employees that are employed in the company are 282,550. The company is considered one of the most successful companies in the telecommunication market of Japan (NTT, 2019). It has been fostering continuous innovation and creativity for its customers. Porter’s five forces model is provided with respect to the telecommunication industry of Japan to give useful and valuable information to NTT.
Competitive Rivalry
The Japanese telecommunication industry is the most significant telecom industry all around the world due to the involvement of the absolute level of innovation in technology and high-profit margins. The intensity of the innovation required makes it a complex industry and the number of competitors are limited to three. The major three competitors of the industry are NTT, au (Mobile Phone Company, and Softbank. NTT is the market leader of the telecom industry in Japan with a share of 45.3% while it is 31 % for au (Mobile Phone Company). The third competitor of the industry is SoftBank and it is not lagging behind and taking a share of 23.6% is the industry (Statista, 2019). The competitors are giving tough competition to each other but the absence of a large number of competitors in the telecom industry, the competitive rivalry in the industry is moderate.
Bargaining Power of Suppliers
The suppliers of the industry have only three buyers that reduce their value for bargaining with them. The suppliers do not have options other than to sell to those three companies in the telecom industry. The telecom companies take advantage of their strong position and bargain with the suppliers with the dominant position (Eurotechnology, 2015). The other supplier of the industry are the experts or the employees for running the business. Keeping in view the level fo companies, it is not difficult for companies to hire skilled employees and upgrade the skills of existing employees. Therefore, the bargaining power of the suppliers is weak with respect to telecommunication sector in Japan.
Bargaining Power of Buyers
The bargaining power of the buyer is highest when there are multiple operators and low differentiation among the products. There are only three companies that are offering telecommunications services in the country that reduces the options for buyers. The absence of a large number of options reduces the bargaining power of the buyer. But it is important to understand that the telecommunication service is not a high involvement product and customers at a personal level switch quite easily in case of non-satisfaction from a particular company (Eurotechnology, 2015). This neutralizes the impact of less number of options for buyers. Therefore, the overall bargaining power of buyers in the industry is moderate.
Threat of Substitutes
The telecom sector has evolved over the past few decades with an exceptional level of innovation and creativity. The traditional products are being replaced by modern innovative products. The landline has been replaced by wifi technology and internet technologies are also ever changing. There is evolvement of products within the industry but there is no evolvement of substitutes for the telecommunication industry. In fact, the industry is getting further deep with advancement and adaption of technology (Rajasekar & Al Raee, 2013). In the case of Japan, technology has created an exceptional level of innovation in the Japanese telecom sector. Therefore, the threat is low for substitutes in the telecom sector of Japan.
The Threat of New Entrants
The ease of entry in a particular sector increases the threat of new entrant while the complexity decreases it. The telecom industry of Japan gives several critical and difficult hurdles for new entrants. This is one of the major reasons for only three companies in the market. There are two major factors that contribute towards the complexity of the Japanese telecom industry for the new entrants. The first is the requirement of massive capital to set up an infrastructure for a telecom company. secondly, the depth of innovation and the complexity of technology is not easy to adapt that actually reduces the motivation of the new entrant (EuroTechnology, 2013). For a new entrant to e successful, the company must have the ability to deal with complex innovations which are not quiet general. Therefore, the threat of new entrants is low.
References
Bloomberg. (2019).Company Overview of Nippon Telegraph and Telephone Corporation. Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=398118
EuroTechnology. (2013).Track record and results of our work in Japan’s telecommunications markets. Available at: https://www.eurotechnology.com/industries/telecommunications-and-mobile/
EuroTechnology. (2015).Japan telecommunications industry (66th edition) – Market analysis & tutorial. Available at: https://www.eurotechnology.com/store/jcomm/
EuroTechnology. (2019). Japan telecommunications markets are among the world’s largest, most profitable, most advanced and also most liberalized. Available at: https://www.eurotechnology.com/insights/telecom/
NTT. (2019). About NTT Group. Available at: http://www.ntt.co.jp/about_e/group.html
Rajasekar, J., & Al Raee, M. (2013). An analysis of the telecommunication industry in the Sultanate of Oman using Michael Porter’s competitive strategy model. Competitiveness Review: An International Business Journal, 23(3), 234-259.
Statista. (2019). Mobile phone market subscription distribution in Japan 2018, by the provider. Available at: https://www.statista.com/statistics/892503/japan-mobile-phone-market-subscription-share-by-operator/