SK Group is a multi-industry organization doing operations as public limited and offering services in the field of energy and chemicals, telecommunications, constructions, trading and broadband provider. Dealing in the different industries worldwide, the firm was founded in 1953 and has its headquarters in Seoul, South Korea. The organization has over 4516 employees attached with the telecom sector operations. It has shown a strong amount of revenue of 17.520 Trillion Korean Won, which reflects the company’s strength in the industry (Sktelecom, 2017). Keeping into consideration the telecommunication industry on a global level, Porter’s five forces analysis can be a practical tool for sustaining prospect solutions to control threats and exploit new opportunities.
Competitive Rivalry in the Market
The competitive rivalry in the telecommunication sector is high because the telecom services industry is growing every due to the increasing urbanization and meeting the ever-changing informational and technological means. With the advent of digital transformation and financial technology, the sector is experiencing competition from various companies’ presence in the market and offering customers a range of services. The major competitors of the SK group telecommunication sector are Vodafone Group, TELUS Communication, United States Cellular VEON and Partner Communications. SK Telecom is trying to lead the market by capturing a market capitalization of 22.96 billion US dollars. At the same time, other firms have capitalized on the market of 52.38, 29.10, 3.26, 3.15 billion and 844.66 million US dollars, respectively (Marketbeat, 2021). Therefore, the exclusive presence of such dominating firms in the industry makes the environment more complex.
Threat of Substitutes
The threat of substitutes in context to the telecommunication industry is considered to be high because of the industry nature as it depends majorly on the advancement in technology. Furthermore, consumers have the options to avail themselves of services from the non-traditional firms and internet service providers that are also offering similar services, posing a threat of substitution. For example, high-speed internet systems with a strong link into homes are obtainable from cable operators, and satellite connection can be utilized to accommodate enhanced client networking needs. In addition, the internet is increasingly becoming a dependable platform for reduced charges video or voice conversations, which is a source of concern for telecommunication firms. (Mavengere, 2014). Therefore, the risk of having substitutes is reasonably high in the sector.
Threat of New Entrants
The threat of new entries in the telecom industry is relatively low because of the fact that many firms around the world are already operating and competing with each other and have raised the barriers to entry high enough to breakthrough. Firstly, the amount of capital needed to establish the setup, including the machinery and equipment, is considered the top hurdle in the entry. Moreover, new firms have to deal with the federal regulations for compliance, and the brand image constructed in the mindset of consumers is quite difficult to handle, resulting in barriers to entry for the new firm. Patent and licensing could be another factor while stepping into the industry (Wulansari et al., 2015). Hence, keeping the new entry low.
Bargaining Power of Buyers
Buyers have strong negotiating power in context to the telecom industry because of the existence of major firms operating from around the world, and consumers take benefit from the high competition prevailing in the industry. However, the product offerings are ultimately the same with basic facilities that are the need for the major demand in terms of product. As a consequence, consumers expect lower rates and a bit of differentiation from service providers. Moreover, the availability of choices and low switching costs in the market influence the buying power (Mannan et al., 2017). Following this approach, consumers bargain more seriously and negotiate to get favourable deals.
Bargaining Power of Suppliers
The suppliers usually hold moderate bargaining power in the context of the telecommunication industry. It is because telecom firms are dependent on phones, fibre cables, and advanced technology equipment that are provided by the manufacturers or suppliers to run the operations smoothly. This allows a lot of influence on the equipment manufacturers when it comes to bargaining with firms in terms of the agreement. But, on the other hand, the availability of several suppliers possessing different resources and technological machinery makes the bargaining power of firms weak (Tanskanen, 2015). Also, the skilled human resource factor for the continuity of operations is a concerning factor for firms. Thus, making the supplier’s bargaining power moderate in context to the telecom industry.
References
Mannan, M., Mohiuddin, M.F., Chowdhury, N. and Sarker, P., 2017. Customer satisfaction, switching intentions, perceived switching costs, and perceived alternative attractiveness in Bangladesh mobile telecommunications market. South Asian Journal of Business Studies.
Marketbeat, 2021. SKM – SK Telecom Co., Ltd Stock Competitors. [online] Marketbeat.com. Available at: https://www.marketbeat.com/stocks/NYSE/SKM/competitors-and-alternatives/.
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.
Sktelecom, 2017. SK Telecom Co., Ltd. – AnnualReports.com. [online] Annualreports.com. Available at: https://www.annualreports.com/Company/sk-telecom-co-ltd.
Tanskanen, K., 2015. Who wins in a complex buyer-supplier relationship? A social exchange theory based dyadic study. International Journal of Operations & Production Management.
Wulansari, N.E., Rismayani, R. and Pramudiana, Y., 2015, November. Study on structure and performance of telecommunication services industry in Indonesia. In 2015 Conference of Telecommunication, Media and Internet Techno-Economics (CTTE) (pp. 1-8). IEEE.