The telecommunication industry is one of the largest industries in the world with a wide range of players. The competitive nature of this telecommunication industry makes it perfect for analysis. This investigation explores the performance of the top ten industrial players within the industry. A strategic group map is developed to compare these firms’ profitability against the market value of each firm for fiscal year 2015.
Strategic Group Map
Fig. 1: Strategic Group Map for the Telecommunication Industry (Source: China Daily, 2015)
Evidence from the strategic group map in figure 1 above indicates that the competition is stiff. A number of small companies in terms of market value are outperforming those with larger market values. For instance, Vodafone has a market value of $ 88 billion and an annual profit of $ 7.74 billion (China Daily, 2015). In contrast, AT&T has twice the value of Vodafone at a market value of $ 173 billion and an annual profit of $ 6.2 billion (China Daily, 2015). A similar incident is evident between Deutsche Telekom with a market value of $ 85 billion and an annual profit of $ 3.9 billion while Nippon Telegraph & Telephone Corp. has a market value of $ 71.5 billion and a profit of $ 5.2 billion (China Daily, 2015). A Porter’s Five Forces Model becomes necessary to better understand the competitive environment within the telecommunication industry.
Five Forces Model
Buyer’s Bargaining Power
The three largest companies by market value are located in densely populated regions. China Mobile is located in China while Verizon Communications and AT&T are located in the United States, which are regions with a high population. The general income levels f...
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...$ 14.8 billion (Rajasekar & Al Raee, 2013). In the U.S., the threat of substitution is real with the difference between Verizon Communication and AT&T being $ 3.4 billion.
Market competition is stiff in the telecommunications industry (Rajasekar & Al Raee, 2013). Most players focus on reducing operational cost and improving revenue due to the increasing competition within the industry.
In conclusion, the rivalry within the telecommunication industry is stiff. Major industry players focus their attention on retaining their customers. Buyers bargaining power is realistic in most of the countries. Supplier bargaining power differs greatly, thereby offering China Mobile a strategic advantage over rivals. However, this information may not be adequate for a new entrant to use to invest in the industry. Further industry analysis is necessary.
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