Bouygues Telecom is a French Telecommunication Company with headquarters in Paris. The company was founded in 1994 and launched the services in 1996. It engages in the provision of telecommunication and Internet services and digital content. The firm is the third oldest telecom service provider in France.
Bouygues Telecom is the subsidiary of Bouygues S.A., a French industrial group based in Paris. The company provides a mobile network, 4G, 5G internet, and broadband equipped on fiber optics (Bouygues, 2021). It is the number 1 mobile network in rural areas in 2G / 3G / 4G in municipalities with less than 10,000 inhabitants (Bouygues, 2021). Porter’s five forces analysis is a valuable tool to assess the business and financial risk Bouygues is exposed to in the global telecommunication sector.
Competitive Rivalry in The Market
The competition in the industry depends on some key factors, such as the industry concentration and size of competitors. The scale of the company plays an integral part in its ability to pressure its rivals. Bouygues is considered one of the largest telecommunication operators in France, third in the country based on revenue (Statista, 2016).
The market is saturated, and there are options available for the consumers. The major companies in Italy including are Bouygues, SFR, Orange, and Iliad. Bouygues is the 3rd largest operator in the French market in terms of market share, thanks to its fleet of more than 2 million customers (Bouygues, 2021). It is the industry runner, and it provides it an advantage over rivals. Therefore, the competition level is high.
Threat of Substitutes
The substitute is a product offered that offers the same service as the firm’s product. The availability of better alternative products is moderate to high. It is mainly because of the telecom industry’s dependency on technology and innovation. The threat is increased when there is a low switching cost, and better alternatives are also widely accepted.
The 5g technology is changing the industry. Bouygues launched its 5G services in parts of France ahead of its rival Orange in 2020, and the Telco aims to deliver nationwide coverage by the end of next year (Wood, 2020). The company needs to expand and innovate new products so it can keep its market share intact. Therefore, the threat of substitution is moderate to high.
The Threat of New Entrants
The threat of new entrants is assessed to be moderate to high. The threat of new entrants into an industry is related to entry barriers within the industry and geographic boundaries (E. Dobbs, 2018). One of the significant problems in regulation and initial capital requirement. To cover fixed operating costs, startups need a considerable amount of cash. The only threat companies have a new international player entering to local marketing.
Companies set up joint ventures with private equity firms to increase business, such as Bouygues with Cellnex in France and Iliad with InfraVia in France (ITU, 2020). New types of players have been emerging for a while, leveraging opportunities provided by market liberalization, competitive, regulatory frameworks and the relaxation of licensing regimes. Considering the factors mentioned above, the threat of new players breaking into the sphere is moderate.
Bargaining Power of Buyers
The bargaining power of the buyers depends upon the nature of the industry and the value buyers bring. The major factors which affect buyers’ power are buyers’ concentration, switching cost, and available substitutes. The buyers of telecommunication products are individuals and corporates. The most influential factors in their decision-making are price sensitivity and the perceived quality of service (Kim et al., 2011).
Price sensitivity is a function of the overall buying behavior of buyers in the market, the income of the buyers, and the value that is accorded by these buyers to the products and services offered by the participants in the telecommunications industry. The buyer can exert its power if it can switch and better products are available in the market. The individual buyer has a restricted purchasing power as compared to corporate buyers. Overall the bargaining power of buyers is low.
Bargaining Power of Suppliers
If suppliers have more bargaining leverage against the firm, they are more powerful and can dictate terms (Brown, Fee, & Thomas, 2009). In the industry, suppliers have moderate to low bargaining power. There are two major suppliers in the telecommunication industry one material or equipment provider, and the other is a human resource provider. The supplier market is saturated, Chinese companies compete with other suppliers, and their competition decreases equipment prices (Foreign Policy, 2019). It provides an edge to the industry. If the buyer’s product is better than the other group of the supplier, the company will need to hold, affecting its position.
The workforce suppliers are the second element; it is affected by the availability of a qualified and experienced telecommunications sector workforce and the consolidation in the regional labor market in the telecommunications sector. Therefore, suppliers have low bargaining power.
References
Bouygues. (2021). Ensemble. Available at:https://www.bouyguestelecom.fr/choisir-bouygues-telecom/ensemble
Bouygues. (2021). Our history. Available at: https://www.corporate.bouyguestelecom.fr/nous-decouvrir/notre-histoire/
Bouygues. (2021). Strategic plan: Ambition 2026. Available at: https://www.corporate.bouyguestelecom.fr/nous-decouvrir/plan-strategique-ambition-2026/
Brown, D. T., Fee, C. E., & Thomas, S. E. (2009). Financial leverage and bargaining power with suppliers: Evidence from leveraged buyouts. Available at: Journal of Corporate Finance, 15(2), 196-211.
E. Dobbs, M. (2018). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Available at: Competitiveness Review, 24(1), 32-45
Foreign Policy. (2019). The Improbable Rise of Huawei.. Available at: https://foreignpolicy.com/2019/04/03/the-improbable-rise-of-huawei-5g-global-network-china/
ITU. (2020). The telecoms industry landscape is changing. What remains for traditional operators? Available at:https://www.itu.int/en/myitu/News/2020/08/18/09/11/Changing-telecoms-industry-landscape-traditional-operators-horizontal-layers
Juan P. T. (2021). WindTre’s 5G network reaches 59 Italian provinces: Report. Available at: https://www.rcrwireless.com/20210125/5g/windtre-5g-network-reaches-59-italian-provinces-report
Kim, K. K., Ryoo, S. Y., & Jung, M. D. (2011). Inter-organizational information systems visibility in buyer–supplier relationships: the case of telecommunication equipment component manufacturing industry. Available at: Omega, 39(6), 667-676.Steven, A. B., Dong, Y., & Corsi,
Statista. (2016) Leading telecommunication operators in Europe by revenue in 2016. Available at: https://www.statista.com/statistics/221386/revenue-of-top-20-european-telecommunication-operators/
Wood. (2020) Bouygues switches on 5G, squeezing ahead of Orange. Available at: https://telecoms.com/507686/bouygues-switches-on-5g-squeezing-ahead-of-orange/