China Telecom Group Corporation is the largest communications enterprise in China. The company is state-owned and registered itself with the capital of about 213.1 billion Yuan and 800 billion Yuan assets. The annual income of the company is over 430 billion Yuan. China Telecom Corporation is the largest technology leading broadband internet and mobile communication network. It can easily provide the cross-regional, fully integrated information and customer services through efficient systems across the globe. It is also the world’s biggest LTE-FDD 4G service provider and has leading operations; Fiber Operators, fixed telephone operators and IPTV Operators. The company is currently serving to more than 700 million users across the globe (China telecom, 2019).
The company is operating in highly specializes industry, where many complexities and technicalities are involved. The company has to make strategic decisions to lead the market position with the help of industrial analysis. Porter five forces model help the company in identifying the strategic position of the company. The model analyses the external factors which will help in decision making process. Here is the detailed Porter five forces analysis of China Telecom Corporation Limited;
Bargaining Power of Buyers
The bargaining power of the consumers is an important force for the companies. The consumers are the end users upon whom profitability of the companies are highly dependent. The power of buyers in the telecommunication industry of China is limited. This is mainly due to the few enterprises are available in the sector. The consumers have low price sensitivity and do not prefer much customization. China Telecom is leading the industry which is clearly seen by its huge consumer base. This huge consumer base helps the company in setting the prices with government intervention. Furthermore, China Telecom is providing the best services with its efficient internet network, that attracts global customers towards the company (Ekansh, 2019).
Bargaining Power of Suppliers
China is known as the hub for the low-cost production and manufacturing. China Telecom requires several components, equipment, raw materials and labour force to run the efficient operations. The suppliers of the company provide the services and products in economical rates to the company. They want to be associated with the big name of the industry. The labour force in China is not that expensive and abundantly available. Moreover, the switching cost for the companies to other suppliers is low. This also limits the bargaining power of the suppliers in the telecommunication industry. However, China Telecom maintains healthy relationship with its suppliers (Research system, 2019).
Threats of New Entrants
Threats of the new entrants are low in the telecommunication industry of China. The new entrants need to have high capitalization amount for starting-up the operations. The high infrastructure cost is very expensive for the new entrants. The industry is having big players working which makes it difficult for new entrants to compete with them. Economies of scale are mostly achieved by existing players in the industry. This makes it difficult for the new firms to achieve and gain benefit from it. Moreover, strict rules and regulations have made the industry a difficult place for setting-up new business (Ekansh, 2019).
Threats from the Substitute Products:
The telecommunication industry has high threats from the substitute products. This is mainly because the industry s highly dependent on technology and innovation. Hence, the chances are high for the substitution when any other competitor introduce high technological service. It is necessary for China Telecom Corporation to invest more in its R&D. This will help the company keep up its pace with rapid growth and changing consumer preference. China Telecom is leading the industry with its LTE and 4G. But it needs to look forward for 5G or advance technology to maintain its position (Research system, 2019).
Rivalry of Existing Players:
The competition in the industry is high. China Telecom is working globally, thus, face the competition from both domestic and international competitors. The policies of the government and the WTO market allowed the foreign companies in China. This increases the competition to great extent. Moreover, main competitors of the company are ZE, China Mobile, Huawei, Lucent, Alcatel, Ericson etc. However, China Telecom Corporation is able to make its own position in the industry and working hard to maintain that (Ekansh, 2019).
References
China telecom, 2019. About the company. [Online], Available at: http://www.chinatelecom.com.cn/corp/01/, [Accessed on: 2nd January, 2020].
Ekansh, 2019. Porter five forces analysis. [Online], Available at: https://www.coursehero.com/file/p7eot5u/PORTER-FIVE-FORCES-ANALYSIS-1-Competitive-Rivalry-HIGH-Alina-PGP33361-Chinmoy/, [Accessed on: 2nd January, 2020].
Research System, 2019. Internal and external analysis. [Online], Available at: https://research-system.siam.edu/images/independent/MARKETING_STRATEGY_ANALYSIS_OF_TENCENT_HOLDINGS_LIMITED/CHAPTER_3.pdf., [Accessed on: 2nd January, 2020].