This group represents all the essential and peripheral suppliers to the industry, which provide the necessary tools for the upkeep and running of the industry itself. The majority of suppliers to the market include those that provide cabling material and satellite operations linked and other resources necessary for the industry’s network capability.
Other areas include manufacturing suppliers of telephony products and peripherals like fixed line phones, faxes, papers, mobiles, and nowadays and other accessories as well as more tangible requirement such as other telephony products, as well other organisation specific requirements. It is clear that like the buyers to the industry, many of its suppliers are fragmented and therefore have less power over the industry, as independent organisation.
Thus allowing the industry and the key players within it, to exert pressure on suppliers and dictating action in the interest of the buyers because of the scale of business and revenues the sector represent. The significance of the low bargaining power of suppliers and the fragmentation within this group is that or the telecom market this represents relatively low switching costs and therefore improved sourcing efficiencies, such that they can effectively become price makers as opposed to price taker. Suppliers can address these issues through collaborative strategies between the various suppliers to the industry.
Therefore these suppliers have the ability to exert a degree influence over the domestic telecom sector, which is reflected by research into BT (1999) in the emergence of new global suppliers. Threat of substitutes The very nature of the telecommunications industry is fundamentally communication, in its various guises. What is certain is that the industry focus remain, on the delivery and distribution of communications traffic locally, nationally and internationally, and the application of communication via various products and services.
In this day and age communication is at the forefront of business and general consumers remaining the most popular method of communication. The industry itself is by no means under any immediate or significant threat from substitutes although they do exist. The main substitutes to the industry in terms of the delivery of communications remains postal services. Today’s twenty-four hour business environment and advancing technology has continued to put increasing pressure on postal services, to the extent of making postal services redundant to a degree.
This is the result of firms applying new technology to communications needs and requirements, thus reducing inefficiency and time delays in the work place and home. I however, do not believe this to be truly the case; there will always be some paper-based communications, even through many organisations are striving to create the so-called “paperless office”. Other substitutes exist in the form of alternative network service providers, which largely provide cheaper calls and seemingly better cost for final consumers than the more traditional network providers such as BT in the UK market.
The current spate of deregulation and liberalisation, in the telecom market especially in the local, national and international loop network, has encouraged further competition to market pushing down costs for final consumers. Competitive Rivalry The basis of competitive rivalry is of a major concern to organisations in general and with specific reference to the telecom market. This can allow the key players assess and compare basis of direct rivalry between themselves and competitors using this in conjunction with the other influences of the five forces model in order to develop competitive strategy.
Thus allowing the key players to develop a competitive strategy that would set on a level playing field with their closest rivals and go far as strengthen the position for the organisation in its sector to the detriment of closest rivals. Within the UK market I believe that competitive rivalry between the key players is based on six main areas of rivalry, based on research conducted, which include: The factors stated above represent a clear basis of rivalry in the UK telecom market, which arguably reflect the basis of rivalry in the global industry.
The main areas of interest for the domestic market currently, looks at the role of Technology, Innovation and Global development which hold the key to the long term success in the market as a whole and for those within it for the foreseeable future. Those organisations, which apply themselves in new Technology and Innovation proactively, through investment in research and development, are likely to stay at the forefront of market, by creating competitive advantage and building on resources, competencies and their capabilities ahead of the market.
Therefore these operators have the potential to influence the direction of the market. The Internet and the 3g Mobile phone are major areas of competitive rivalry, for telecom operations because of the huge potential of these technologies particularly in today’s online age. These are by far the biggest growth segment for telecom operators in the UK and arguably in the global market, which represent potentially huge revenues. It is of no wonder that telecom operators have continued to invest heavily into these areas and build competencies and competitive advantage in these areas.
Global area is another key area that the telecom operators must exploit to enhance revenues, growth and profitability prospects and to ensure their position in the market. The UK telecom market is fairly saturated and shows only marginal growth prospects. However with deregulation and liberalisation taking hold within the global market, thus allowing operators with the capabilities to seek out new opportunities globally that will help to build and enhance overall performance resources and competencies.
With a global presence theses operators can therefore target new customers such as Multinational organisation, which represents huge revenues and opportunities for these operators. One of the implications that new competition in the domestic market has brought as a result of greater deregulation and liberalisation is the downward pressure on costs to final consumers. Effectively competition has caused the operators in the market to reflect on their pricing strategies.
This is particularly the case of former state monopoly’s such as BT in the UK telecom market, which has needed to address its pricing such that they are more competitive in light of increasing competition. Consumers themselves have relatively low switching costs, in moving from one operator to another and therefore reflect the need for operators to remain competitively priced. One source of competitive advantage that tends to be overlooked as a source of competitive rivalry looks at Knowledge as a Commodity.
The ability of telecom operators to retain and recruit key personnel can be definite source of competition between rivals, particularly personnel in key fields such as Management, I. T and R&7D. Overall competitive rivalry remains fierce and this intensity is unlikely to change in the years to come. Global opportunities and Technology remain the backbone of competitive rivalry but in the coming years the internet and 3G Mobiles are likely to be the focus of the telecommunication industry as we strive to move further into the online age.