BT Group, formerly British Telecom, is a public limited company operating in the Telecommunication industry offering the products and services of fiber optic network, home security, broadband, mobile, and fixed-line telephones. Dealing in the telecommunication sector, the firm was originated in 1846 and founded as BT group plc in 1984, having its headquarters in London, United Kingdom. As of 2020, the company has shown a strong revenue figure of 22.905 billion pounds and has occupied an employment figure of almost 105,000 (BT, 2020). From the global telecommunication industry perspective, the assessment of Porter’s five forces would be a suitable method for developing prospect strategies to better understand the company standing position.
Competitive Rivalry in the Market
The competitive rivalry in the telecommunication industry is considered to be high because of the presence of several firms providing Telecom and media services to meet the demand of communities across the globe. As a consequence of this increase, numerous companies and institutions have dominated the sector to provide telecommunication services, and BT group is becoming one of the world’s leading service providers catering to customers in over 180 countries. BT has the largest broadband service market share, accounting for 35 percent of all fixed broadband customers across the country in 2018. The major competitors of BT group globally are AT&T, Verizon, Deutsche Telecom, Vodafone and Orange with the revenue of 161.5, 117.5, 80.5, 43.7 and 42.2 respectively, according to (Statista, 2021). Thus, the existence of such giant firms in the market leads to tough competition in the industry.
Threat of Substitutes
The threat of having substitute services is distinctly moderate to high in the telecommunication industry, primarily due to the industry’s reliance on research and advancement in technology. VOIP has emerged as the most severe threat among the various replacements that have evolved. Skype and other similar applications have become increasingly common among the millennial population and are quickly becoming the predominant mode of communication. As a result of technical breakthroughs, many alternatives to landline telephones have arisen (Wong, 2021). Many of these are more accessible and provide much greater value to the customer, making landline phones less important. Therefore, the accessibility of substitutes in the telecom industry is considered moderate.
The Threat of New Entrants
The threat of new entrants in the telecommunication business is relatively low because of the operating firms in the market already providing services and captured the market set the barriers high enough to restrain new firms. One of the most significant deterrents to joining the telecom industry is the initial and ongoing high financial expectations. Many firms who wants to step in need technical strength and resources to sustain, otherwise the risk of exit barriers in terms of loss might be huge. Because of the high fixed costs, only prospective entrants with a wide range of resources attempt to enter this sector. Furthermore, gaining the license to operate and meeting the requirements is difficult (Grishunin and Suloeva, 2016). The big firms enjoy Sunk cost advantage as they have recovered the setup expenses by capturing the primary market. Thus, making the entry options for the newcomers are low.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the telecom industry is moderate because of the similarities in the product and services provided by the telecom firms in the market. However, since consumers and firms that use services rely on more specialized goods that are tailored to their needs and requirements and are usually signed into long-term contracts, also the market category is vulnerable to considerable switching cost (Shafei and Tabaa, 2016). Keeping in view, such patterns of customers make the bargaining power of consumers moderate in the telecom industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the telecom industry is low to moderate because of the presence of several local and international manufacturers and suppliers in the market. Leading suppliers in the sector include wireless telecommunications equipment, switchboards, optic cable manufacturers, and billing machines. Organizations’ bargaining effect is limited when it comes to dealing with agreements because there are so many suppliers with multiple options. (Tanskanen, 2015). Moreover, the switching costs of the firms with other suppliers in terms of product and services needed are considered to be low, which also puts a limitation on the supplier bargaining power. Therefore, in context to the telecom industry, the bargaining power of suppliers is moderate.
References
BT, 2020. Annual Report. [online] Bt.com. Available at: https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2020/2020-bt-annual-report.pdf.
Grishunin, S. and Suloeva, S., 2016. Development of project risk rating for telecommunication company. In Internet of Things, Smart Spaces, and Next Generation Networks and Systems (pp. 752-765). Springer, Cham.
Shafei, I. and Tabaa, H., 2016. Factors affecting customer loyalty for mobile telecommunication industry. EuroMed Journal of Business, 11(3), pp.347-361.
Statista, 2021. World’s largest telecom companies by revenue 2017 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/221382/revenue-of-top-30-global-telecommunication-operators/.
Tanskanen, K., 2015. Who wins in a complex buyer-supplier relationship? A social exchange theory based dyadic study. International Journal of Operations & Production Management.
Wong, R.T., 2021. Telecommunications network design: Technology impacts and future directions. Networks, 77(2), pp.205-224.