Industry
The telecommunication industry falls in departments of information and communications. It is composed of telecommunication companies and providers of others services such as the internet and plays a vital role in ensuring transformation in mobile communications and flow of information to the society. Telstra owns and operates a total of 360 retail stores all spread across Australia (Telstra, 2018). Telstra has invested millions in redesigning the stores to suit the requirements of the locals. However,109 of the stores by Telstra are owned and managed by Vita Group a listed company that has market capitalization of about $600 million (O’leary 2003).
Telstra is an Australian based company and is ranked as the largest provider of telecommunications and manages and runs telecommunication networks across Australia (Telstra 2018). The company provides internet services,3G network, and subscription services for TV users.
Telstra may be seeking to venture into the Indian market to expand its market as the domestic market is already saturated. Also, the existence of many untapped opportunities in India’s telecommunication provides another motive for entering such a demand. Telstra will also consider benefiting from the technology capacity in India now that India has been ranked as the leading exporter in the software industry.
Telstra has been there for more than a hundred years, has all the resources needed to thrive in a foreign market. The vast pool of its staff who have experience in the industry is an asset in delivering quality services (Telstra 2018). Telstra also prides itself on its vast financial resources both from the government’s support and the company’s activities. In this case, where high initial costs are required in offering 3G services in India will not be a problem for Telstra.
The mining services by Telstra will provide sound technology solutions making it possible to provide high bandwidth networks and software capabilities in the Indian market (Rick 2015). This will help Telstra in advancing its interests in identifying opportunities for growth that leverage Telstra’s core strengths (Pearce 2016).
Political elements entail the policies adopted and used by the government regarding the economy, products and services and political decisions affected that affect crucial areas of business operations, education, and labor (Bush 2017). The political environment in India can be said to be stable. To sum this up, India has a federal republic democracy based on political stability with government policies that are relevant and effective. The calm political atmosphere means that Telstra can operate comfortably in the Indian market due to the presence of a conducive business environment.
Company overview
The Indian tax system has been recognized as one that enables businesses to expand quickly over a short period due to the many benefits it offers such companies. It is through some economic reforms enacted in India since 1991 that have seen the country adopt industrial policies. The State has also gone notch higher by reducing the number of mandatory licensing to six and legalized a liberal policy towards free trade which means India allows an open business for international firms. The case of India where inflation rates vary around 9% may change the redistribution of income. Telstra being a global company means that it can provide its services as now that India is liberalized. However, high levels of inflation in the Indian market may hurt the operations of Telstra due to high cost with regards to factors of production.
Changes in social patterns in a particular country may have significant implications on demand for company’s products. Also, it is such changes in social trends that affect the willingness and the ability of people to work. The demographics of India indicate that the population is aging. With a total population of 1 billion people, it is estimated that 31% of the gross population is under 14 years, whereas 63% are between the age of 15 and 64 years and this is a clear indication of an aging population (Kumar 2014). It is therefore imperative to state that a significant proportion of the total population is identified as the working population.
It is the new technology that is responsible for developing new products and processes. India has an already established large market in the telecommunication industry. India has also been linked to being an exporter of software which has seen the country’s software export grow by more than 50 percent (Kumar 2014). It was reported that India’s software industry is approximately worth 5 billion dollars as of 2000. Telstra will enjoy from India’s software industry that is readily available and cheap for Telstra.
It is the statutory factors that are responsible for impacting either positively or negatively on the legal environment where a particular company operates. Recently, tremendous changes have been established in India that affects the operations of companies in India. For instance, there have been changes in the minimum wage where it has been increased, and there are more requirements for firms that wish to recycle (Kumar 2014).
Objectives of entering a foreign market
Some of the environmental elements entail weather and climate variations. The general trend demanding environmentally friendly products is having implications on the demand patterns while creating business opportunities. The climatic environment in India is characterized by extended monsoons and extended dry seasons, and this poses a challenge that needs to be met by organizations. Thus, there is a need for infrastructure that makes businesses viable in such adverse environments.
India has been ranked as the second largest telecommunications market in the world recording robust growth over the past decade (Hill et al. 2010). The demand for data consumption on mobile devices has led to the growth of the telecommunication industry. India is projected to have more than 180 million users of smartphones by 2019, and this will contribute to more than 13% of the international market for smartphones (IBEF 2017). In this case, Telstra will be better positioned to reap from such an Indian market.
The stiff competition in the telecom industry in India is expected to continue. For instance, Bharti Airtel seeks to acquire Tata Teleservices in more than 19 circles with regards to mobile operations as a move to reduce competition in the industry (The Hindu 2017). Other players include Jio and Reliance all competing to gain the attention of customers. In this case, Telstra has to compete favorably by using product differentiation strategies and introducing new products in the Indian market so that it can remain relevant.
Porters five forces
Suppliers power
There is a price war going on amongst the different mobile operators such that suppliers are chosen with a lot of care to ensure that they do not drag the profitability of the firm (Dlabay and Scott 2011). Thus, suppliers in the telecommunication industry have little bargaining power (Buckley 2009). There is less bargaining power from the suppliers because there are many suppliers such as the manufacturers of sim card. For instance, the sim cards used by mobile operators are produced in India, and only a few are imported. Also, it is important to note that the consumers of sim cards do not procure the sim card a single supplier thus the bargaining power of suppliers is less in such an industry in India.
New entrants
The capital requirements in this industry are quite exorbitant. For instance, the costs associated with maintaining a tower is estimated to range between Rs.60000 per month (Singh 2015). If the tower is rented, then the company will have to incur a fee of about Rs.40000 for active networks on a monthly basis. Bharti, for instance, has invested more than Rs.230 billion to develop a cellular infrastructure that harbors more than 45,000 towers spread across India.
Internal environmental analysis
Intensity of rivalry
With regards to the fiber network, an optical fiber considered to be one of the largest in India was constructed by BSNL an incumbent operator who happens to be a long-distance operator. However, other private players such as Bharti and Reliance have also managed to build their optical fiber networks and connect mainly towns, and their presence in rural areas is lacking. Thus, it is extremely difficult and cost inefficient for new entrants to construct their optical fiber to connect remote areas.
Buyers power
The buyers for the telecom industry mainly fall into two categories that are individuals and corporate clients such as IT firms and financial institutions. Product differentiation with regards to companies such as Airtel and Reliance products are identical making it difficult for such companies to sustain their product differentiation for a long time. Thus, buyers have the choice of switching over.
Substitutes in the selected industry
The pool of internet subscribers in India has been reported to increase by more than 18% in comparison to the 10% for GSM/CDMA network. There are proposals and concerns from the Industry and within DoT to establish Net telephony. DoT is also considering to allow operators to operate without an access license and this involves companies of both the broadband and internet, for instance, Google and Skype. Such companies will be allowed to provide telephony services for both international and domestic calling. With regards to relative prices, it is crystal clear that internet telephony will be consuming on revenues that initially belonged to the providers of GSM/CDMA services.
India’s teledensity stands at 48%, and the rural teledensity is estimated to be more than 20 %. The number of broadband subscribers grew from 0.18 million to more than 6 million as of 2009, and by December of the same year, the number of subscribers was about 8 million. Such a large market means that Telstra can tap into the market and provide its products and services at affordable rates to the Indian population.
India was ranked as the last country in the world to have access to 3G technology. Based on some of the estimates it was clear that more than 132 countries around the world have the 3G technology in place. Telstra being a leader in the provision of 3G technology in Australia will be strategic in leading and establishing new products in India where demand for 3G services is high (Battersby 2011).
Resources of Telstra
The need and demand for quality services will make service providers improve on the quality of their services to avoid loss of subscribers. With Telstra venturing the Indian market means competition with other players will be stiff and this translates to better quality for consumers in this market.
Value-added services
Other services incorporated in mobile services include mobile TV, commerce applications, and mobile banking among others (Battersby 2011). Telstra having specialized in telecommunication services and products can fill the gap by also offering other services such as the subscription channels and internet services at discounted rates.
Threats
It is reported that more than ten companies are providing mobile services in India and globally the average amounts to four. The market is also closely monitored by the government. Also, it is difficult to enter the telecommunication industry due to limiting requirements of substantial financial budgets. For instance, the auction of 3G license reached an all high of Rs.15800 crores. This will be a challenge for Telstra since the initial costs of entering the market for the 3G platform is quite high.
Exporting
Exporting entails transferring tangible commodities and services beyond national boundaries. In this case, Telstra would begin its expansion into the Indian market by exporting some of its products into the Indian market before moving into other modes of entry. Shipping has several benefits such as Telstra will maintain its primary production facilities in Australia while it transports its services to India. In this mode, Telstra will avoid the substantial costs associated with establishing production facilities in India. Also, Telstra will benefit from the advantages associated with economies of large-scale and from the international sales volume (Kemp 2011). Thus, exporting will enable Telstra to benefit from the cost economies and location economies in India.
Licensing
It is a formal arrangement between a licensor or the global company and a national government giving the licensee the right to use a product and technology, copyrights or patent rights in exchange for payment from the licensee (Czinkota et al. 2011).
Telstra can benefit from such a deal as it will not have to cover costs and risks associated with establishing it in the Indian market. Telstra will benefit following India’s government allowing licensing as one mode of attracting international firms in India.
Franchising
This refers to an agreement whereby the franchiser gives the rights to use the brand name to the franchisee by selling such rights for a lump sum. One advantage tied to franchising is the fact that the Telstra does not necessarily need to incur development costs or encounter the risks related to expanding in a foreign market.
Telstra’s capability
Joint venture and strategic alliances
A strategic alliance entails two companies combining their value chain operations with the aim of establishing a competitive advantage. In this case, Telstra will ally with Airtel to gain a significant share and control of the Indian market (Czinkota et al.2011). A joint venture, on the other hand, refers to an investment that exists between a global firm and a national company where the global firm has the majority of the shares to have a significant say in the management but not substantial to dominate the venture.
Product
Telstra having to be the first company to establish the GSM network in Australia by introducing the digital mobile can do the same in India. Telstra can provide mobile services with both the post and prepaid options such as the Telstra pre-paid. Telstra can also tailor its products for different markets. For instance, the youths can be given discounts on internet subscription. The use of voice internet is gaining recognition in international markets, and Telstra can spearhead in the provision of such a service in the Indian market (Hill et al.2010) Telstra can provide the Indian market a network similar to Next G network, a wireless network that has a wide coverage reaching approximately 99% of the population. In place of cable and fiber networks, Telstra can also provide satellite internet for Indian customers that are far way to access ADSL services.
Price
The best way for Telstra to charge the price for its products is through price variation where it can offer discounts to encourage many customers to subscribe to its services. This is handy now that India is a new market and most people do not know more about the products offered by Telstra. Also, Telstra can compare its prices to what is being provided by the competitors such as Airtel and thus sell its products at a premium. Telstra can provide a low-cost internet such as the “Belong” an internet service provider considered to be of low-cost.
Distribution
Telstra being a global company with vast financial resources may opt to establish its distribution channels where it recruits people on the ground to do personal selling with the locals as a way of ensuring that it has a strong presence in the market. For instance, through Telstra’s joint venture with Tata in India Telstra can use the Tata’s network in distributing its products in the market.
External analysis
Promotion
Telstra may consider promoting and marketing its products by using media so that it can attach its products to the tastes and preferences of the locals. The use of radio and television is crucial since they reach a broad audience and have a vast coverage. Telstra can position itself in the market by giving lower rates in some regions at particular times during the day as such a move can help Telstra gain a market share in the Indian market.
People
Telstra is a strong brand and, in this case, a strong image will need to be developed in creating lasting impressions in consumers’ minds. Telstra will have to use the services of salespeople who will create initial contact with clients and inform them about the products sold by Telstra.
Process
Telstra’s salespeople can use forms to register Telstra’s subscribers as a way of registering customers for their service (Lee 2011) This is important in helping Telstra customize products based on the information filled by customers.
Physical evidence
The brand and identity scheme by Telstra is one of its kind (Mason 2017). The “T” features from Telstra that have a variety of colors makes Telstra brand most valuable and has made the company a valuable brand in Australia.
It is essential for the policies that govern manufacturing and research and development of telecom in India to use sectoral treatment as opposed to being guided by the general policy model. Also, the government should provide the financial boost needed for long-term projects and advocate for favorable rates of interest when it comes to borrowing. A particular focus should be channeled towards telecom exports and marketing of the Indian companies offering telecom services forming key agenda for international trade.
Conclusion
The Indian market with regards to telecommunication products has a long to go and presents numerous opportunities for a company such as Telstra. The 3G platform is one of the opportunities that Telstra can take advantage of now that India has a high number of mobile subscribers that consume data. The government, on the other hand, should provide a conducive business environment. This can begin by lowering the license fee to launch 3G services.
References
Battersby, L 2011. Telstra wants to get more customers online,https://www.smh.com.au/business/telstra-wants-to-get-more-customers-online-20110220-1b10v.html
Buckley, P 2009. Business history and international business. Business History, 51(3), pp. 307-333.
Bush, T 2017. PESTLE Analysis:Environmental Factors Affecting Business. https://pestleanalysis.com
Czinkota, M, Ronkainen, I & Moffet, M 2011. International business,3rd edn.,Wiley.
Dlabay, L. & Scott, J., 2011. International business.2nd edn., South-Western Cengage.
Hill, C, Cronk, T & Wickramasekera, R 2010, International Production,Outsourcing and Logistics 3rd edn., McGraw Hill.
Hill, C, Cronk, T & Wickramasekera, R 2014,Global Business Today: Asia Pacific Edition, 3rd ed.,McGraw Hill.
IBEF 2017, Telecom Industry in India,https://www.ibef.org/archives/detail/b3ZlcnZpZXcmMzcxNTQmNDY2
Kemp, M 2011. International Trade Theory,2nd edn., Routledge.
Kumar, P 2014 ‘Telecom Services: Emerging Trends, Opportunities and Risk’, International Journal of Business and Administration Research Review, vol.1, no.5, pp. 34-41.
Lee, T 2011. Telstra reveals social networking strategy,
https://www.theaustralian.com.au/australian-it/telstra-reveals-social-networking-strategy/story-e6frgakx-1226116285981
Mason, M 2017. Telstra still Australia’s most valuable brand, Available at: https://www.afr.com/business/media-and-marketing/telstra-still-australias-most-valuable-brand-20170127-gtzssc O’leary, G 2003. Telstra sale: background and chronology, https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fprspub%2F5NFA6%22 Pearce, R 2016. Telstra eyes growth opportunities in resources sector, https://www.computerworld.com.au/article/602305/telstra-eyes-growth-opportunities-resources-sector/
Rick, M 2015. Telstra launches world’s first 600Mbps-capable Category 11 device, https://exchange.telstra.com.au/telstra-launches-worlds-first-600mbps-capable category-11-device/ Singh, H 2015. Porter’s five forces model for Indian Telecom industry, https://www.slideshare.net/harnoor992/porters-five-forces-model-for-elecom-industry
Telstra 2018, About us, https://www.telstra.com.au/aboutus The Hindu 2017,Competition in telecom sector to remain intense over 12-18 months: Moody’s, https://www.thehindubusinessline.com/info-tech/competition-in-telecom-sector-to-remain-intense-over-1218-months-moodys/article9908226.ece
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