Business Policy and Strategic ManagementAn analysis of ISP industry using External Analysis tools

Discussion Outline An introduction to the ISP industry by ……. An external analysis of the ISP Industry in India

using Porter’s 5(6) forces by …… An external analysis of the ISP industry in India

using Strategic Group mapping by ….. Conclusions by …..

Introduction to the ISP Industry Services provided by the ISP’s include:

Email(including local server based POP clients) The World Wide Web(Internet) Bulletin Boards Voice and Fax services Web Hosting services Web page design and consultancy services Bundled packages/commercial packages(e-commerce)

Why ISP’s?

Porter’s 5 Forces Rivalry within Industry - HIGH Threat of Substitute Products - HIGH Threat of New Entrants – HIGH Bargaining Power of Suppliers - LOW Bargaining Power of Customers - HIGH

I- Rivalry within Industry - HIGH

Main Players

National Players

International Entrants

Local/Regional Players

OSP

Areas of Competition

Price

Quality of Service

Access/Speed

Services

Customer Service

Content

Security

•Heavy competition.

•A standard pricing is expected by consumers.

Price

•Very important

Quality of Service

•Can the company keep up with speed of change of technology?

Access/Speed

•A lot of customers require to be online 24x7.

•Newer customers require online help.

Customer Service

•Online subscriptions or discounts at particular web-pages affect consumer decisions.

Content

•For larger businesses, security is a key issue.

Security

Areas of Competition

Consumer Priorities in Indian Market

•HIGH

Price

•HIGH

Quality of Service

•LOW-MID

Access/Speed

•HIGH

Customer Service

•LOW

Content

•HIGH when required

Security

II -Threat of substitute services/providers- HIGH

Telecom Companies

Cable Companies

Portal Companies

Telecom Companies - HIGH• Telecom companies can provide the same services as

ISP’s.• They are significantly costlier and have lesser reach.

Cable Companies - LOW• They have larger reach, but have greater difficulties

upgrading their technology for the same.

Portal Companies - LOW• Companies like yahoo in some countries have tied up with

local ISP’s.

General Threat Perception

Threat perception in IndiaTelecom Companies - HIGH• Especially after the advent of 3G services providing decent speed as

well as mobile internet services.

Cable Companies - LOW• Almost non-existent in India as of now.

Portal Companies – LOW• Sify had/has tied up with several local ISP’s to provide internet

services. No other notable mentions however.

III- Threat of new entrants: HIGHBarriers to entry - LOW• Very Little technical know-how is actually needed to get into the industry

Capital requirement - LOW• Capital requirement is low as a lot of activity can be outsourced.

Risk - LOW• Due to frequent mergers and consolidation plans, an easy exit plan is

feasible. Therefore, risk of investment is low.

Government Regulations – LOW• There is little to no government regulation for setting up an ISP.

III-I - Barriers to entry - LOW Since technology as well as bandwidth can be

outsourced from either of telecom or cable companies, the capital investments required to venture into ISP industry are quite low.

Lack of severe government regulations further ease an entrants journey into an industry.

IV- Bargaining Power of Suppliers LOWGovernment - HIGH• Government is a major supplier for licenses for setting up an ISP.

Telecom companies - LOW• The telecom companies hold little bargaining power simply because

of the huge number of firms providing telecom services.

Backbone providers - HIGH• Backbone providers are few in number and therefore have high

bargaining power.

Why did we put the bargaining power of suppliers low when two important suppliers actually have high bargaining power?

The answer is simple: The only sustain-worthy supply needed is local copper connections(wires) which are provided by telecom companies.

The Government license is obtained/renewed once in several years.

The hardware/backbone is upgraded once in several years.

Bargaining Power of Consumers:LOW/HIGH

Consumers

Large Business Firms

Internet Cafes/Small Internet based Firms Average Consumer

Consumer bargaining power

Large Business Firms - LOW• Large business firms have little power, once they opt for an ISP. Backward

integration of services including local hosts and inter/intra office framework is difficult. Therefore, they tend to stick on to a particular ISP.

Internet Cafes/Small Internet Firms - HIGH• They typically have contracts with local ISP’s. This probably makes them

most valued consumers since they can afford backward integration of services while also having significantly higher usage.

Average Consumer• They have low switching costs and therefore high bargaining power.

Strategic Group Mapping

Stats

COMPANY MARKET SHARE

BSNL 56.76 %

MTNL 14.29 %

Bharti Airtel 8.07 %

Reliance Communications 7.56%

Hathway Communications 1.94

Stats as of March 2011

Stats

Technology Usage PercentageDSL 48.98%

Cable Modem 4.39%

Leased Line 0.19%

Ethereal LAN 3.74%

Fibre 0.22%

Radio 6.88%

Dial-Up 35.32%

Others 0.27%

Stats as of March 2011

Strategic Mapping

Strategic Mapping - ISP

Conclusion Mergers and Acquisitions Additional Services Specialization Pricing Models

Conclusion:

Rivalry within

Industry

Bargaining power of

Consumers

Threat from new entrants

Threat from substitute products

Bargaining power of suppliers

Thank You for Attending