This is the detailed Porter’s Five Forces Analysis of UFONE which has been operating in telecommunication industry since 2001. Even though, it’s a domestic Mobile operator in Pakistan, but it has excellent reputation in the industry. The offerings of UFONE is tailored as per the need of the consumers, therefore it has been attracting people to join the UFONE network.
Ufone or Pakistan Telecom Mobile Limited is a GSM based cellular provider in Pakistan. Its operations started in Islamabad on 29th January 2001 under the brand name Ufone. It was the third cellular company to enter the mobile telecom industry of Pakistan. Up to 2006, Ufone was the whole owned subsidiary of Pakistan Telecommunication Company Limited (PTCL). In 2006, PTCL was privatized and Etisalat became the owner of Ufone. Ufone is one the largest mobile service provider in Pakistan. Based on the number of subscribers i.e. 24 million, Ufone is the fourth largest mobile service provider in Pakistan. This amounts to a market share of 18%. Ufone now operates in 2336 cities and towns of Pakistan as well as covers all the major national highways and motorways. The products of Ufone include postpaid and prepaid connections and UPaisa, a mobile based money transfer service. The revenue of Ufone in 2016 was more than 25 billion Pakistani Rupees.
Following is a detailed Porter Five Forces Model Analysis of Ufone:
Competitive Rivalry – High
There are only five mobile service providers in Pakistan. This spells intense competition amongst them. This competition is in the form of network coverage, call rates, value added services, connectivity, bundle packages, and so on. Each company provides similar services in each category. The competition is now in targeting various market segments through offers and innovative products with the help of creative advertisement. Ufone has been the first to introduce a number of economic creative packages that have helped it increase its subscribers. Free internet, on-net minutes, off-net minutes, and other value added offers along with products are used to retain and attract new customers. In Pakistan, subscribers can switch from one mobile service provider to another with the help of a single text message and also retain the same number. This all has made the competitive rivalry high for Ufone.
Threat of New Entrants – Low
The Pakistani mobile service industry has saturated. There is very little or no room for a new entrant. Also, this industry requires extensive capital investment to ensure coverage of the country in-level with the other providers (Ahsan, 2014). Establishing franchises across the country, extensive marketing of packages and snatching market share from the other players requires time and investment in large amounts. The existing players have fully covered the country, grabbed large chunks of the market share, and are providing economical call packages for the subscribers. All of these factors raise the entry barrier making the threat of new entrants low for Ufone.
Bargaining Power of Suppliers – High
The suppliers of Ufone include telecom equipment providers such as ZTE and Huawei and electricity providers in various regions of the country. Suppliers in both of these aspects are limited and powerful especially electric power providers (Shoaib, 2015). These companies have many other customers and do not rely on Ufone for their sales. They can easily interfere and influence Ufone and disturb its operations financially and physically. Ufone has no other option but to agree to the terms of these suppliers. This makes the bargaining power of these suppliers against Ufone high.
Bargaining Power of Buyers – High
With five players in the industry, each coming up with the most economical and creative offers, the buyers are given a lot of power. The switching cost for the buyers is almost zero. The mobile service user’s numbers are increasing at a rapid pace in Pakistan meaning there is intense competition to capture those new entrants. The buyers frequently switch between service providers in the search of the best rates and coverage (Rizvi, 2013). Buyers can influence the company to reduce its costs. This provides the buyers with a strong bargaining power against Ufone.
Threat of Substitutes – Low
The substitutes of Ufone are landline phones, emails, voice over IP, and other similar communication mediums. All of these have certain flaws such as cost, time consumption, and availability that make cell phones ideal for use. These substitutes still exist but cannot completely serve the multi-purpose functions the mobile service providers are serving. This makes the threat of substitutes low for Ufone.
References
Ahsan, W., 2014. Ufone. [Online] Available at: https://prezi.com/ek8dizjl9wmk/ufone/ [Accessed 03 Sept. 2017].
Rizvi, B.A., 2013. Ufone Strategic Management. [Online] Available at: https://www.slideshare.net/SyedBehrozAliRizvi/ufone-strategic-management [Accessed 03 Sept. 2017].
Shoaib, M., 2015. Strategic Management. [Online] Available at: https://www.slideshare.net/muleyha/sm-assignment-48161441 [Accessed 03 Sept. 2017].