Strategic Management Analysis of Airtel

8/17/2019 Strategic Management Analysis of Airtel

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Report

on

Strategic Management

Analysis

of

Prepared & Compiled by:

Aditya Raval (15020841063)

Arjun Parekh (15020841070)

Rishabh Gupta (15020841100)

Ronak Sharma (15020841101)

Shaini Sachdeva (15020841109)



Table of Content

Sr. No. Main Heading Page No.

1. Vision 3

2. Mission 3

3. Values 34. Strategy 3

5. Introduction - Airtel 4

6. Corporate Structure 4

7. Telecom Industry 58. External Analysis 8

9. Internal Analysis 910. PESTLE Analysis 10

11. VRIO Analysis 13

12. Corporate Level Strategies 1413. Results & Interpretations, and Suggestions 16

14. Conclusion 19



Vision:

Airtel’s vision is to enrich the lives of their customers. Their obsession is to wincustomers for life through an exceptional experience.

Mission:

Hunger to win customers for life.

Values:

Airtel aims to work towards their vision, driven by their values of AIR - Alive,

Inclusive & Respectful.

Alive: Airtel is alive to the needs of their customers. They act with passion, energy

and a can-do attitude to help their customers realize their dreams. Innovation and

an entrepreneurial spirit drives them - if it can’t be done, they’ll find a way.

I nclusive:

Airtel is for everyone - Airtel champion diversity, recognizing the breadth

and depth of the communities they serve. They work with them, anticipating,

adapting and delivering solutions that enrich their lives. They do this by having an

open mind and embracing change.Respectful: They live the same lives as their customers, sharing the same joys and

the same pains. They never forget that customers are why they exist. They act with

due humility, always open and honest, to achieve mutual respect.

Strategy:

How will airtel ‘Win Customers for Life’

1

Win through

go-to-market

excellence

Quality customer additions

Revenue market share profile

Revenue market share profile

2

Win with data

and digital

services

Prime spectrum to yield data growth

Data and digital revenue growth with industry-first initiatives

3G/4G network rollout



3

Win with

valuable

customers

Postpaid and sticky user base

Company owned retail stores

Enterprise and DTH solutions through service excellence

4Win with a

war on waste

Cost efficiencies

Subscriber acquisition and retention costs and reduce churn

5Win with

people

High performance culture

Employee centricity

Introduction - Airtel:

Bharti Airtel Limited is a leading global telecommunications company withoperations in 20 countries across Asia and Africa. Headquartered in New Delhi,

India, the company ranks amongst the top 4 mobile service providers globally in

terms of subscribers. In India, the company's product offerings include 2G, 3G and4G wireless services, mobile commerce, fixed line services, high speed DSL

broadband, IPTV, DTH, enterprise services including national & international long

distance services to carriers. In the rest of the geographies, it offers 2G, 3G wirelessservices and mobile commerce. Bharti Airtel had over 307 million customers across

its operations at the end of November 2014.Airtel is credited with pioneering the business strategy of outsourcing all of its

business operations except marketing, sales and finance and building the 'minutesfactory' model of low cost and high volumes. The strategy has since been adopted

by several operators. Airtel's equipment is provided and maintained by Ericssonand Nokia Solutions and Networks whereas IT support is provided by IBM. The

transmission towers are maintained by subsidiaries and joint venture companies of

Bharti including Bharti Infratel and Indus Towers in India. Ericsson agreed for the

first time to be paid by the minute for installation and maintenance of theirequipment rather than being paid up front, which allowed Airtel to provide low call

rates of ₹1/minute (US$0.02/minute).

Corporate Structure:

Airtel has two distinct Customer Business Units (CBU) with focus on B2C (Businessto Customer) and B2B (Business to Business) segments. Airtel's B2C business unit

deals with servicing the retail consumers, homes and small offices providing mobile,fixed line, DTH and m-commerce services while the B2B unit deals with largecorporate accounts.



Mobile Services

Bharti Airtel offers GSM mobile services in all the 22-telecom circles of India and isthe largest mobile service provider in the country, based on the number of

customers.

Telemedia Services

The group offers high-speed broadband with the best in class network. With fixed

line services in 87 cities, it helps to stay in touch with friends & family and to beupdated round the clock.

Airtel Business

Airtel business provides a broad portfolio of services to large Enterprise,

Government, Small & Medium businesses and carrier customers. It is India's leading

and most trusted provider of communication and ICT services, offering services thatinclude voice, data, network integration, data center & managed services, enterprise

mobile applications and digital media.

Telecom Industry

Introduction

India is currently the world’s second-largest telecommunications market and has

registered strong growth in the past decade and half. The Indian mobile economy is

growing rapidly and will contribute substantially to India’s gross domestic product

(GDP), according to report prepared by GSM Association (GSMA) in collaboration

with the Boston Consulting Group (BCG).

The government has enabled easy market access to telecom equipment and a fair

and proactive regulatory framework that has ensured availability of telecomservices to consumer at affordable prices. The deregulation of foreign direct

investment (FDI) norms has made the sector one of the fastest growing and a topfive employment opportunity generator in the country.

Market Size

Driven by strong adoption of data consumption on handheld devices, the total

mobile services market revenue in India is expected to touch US$ 37 billion in 2017,

registering a Compound Annual Growth Rate (CAGR) of 5.2 per cent between 2014and 2017, according to research firm IDC. According to a study by GSMA,

smartphones are expected to account for two out of every three mobile connectionsglobally by 2020 making India the fourth largest smartphone market.



The broadband services user-base in India is expected to grow to 250 million

connections by 2017, according to GSMA.

India saw the fastest growth in new mobile-phone connections with 18 million net

additions in the third quarter of 2014, followed by China with 12 million newadditions, according to a report by Swedish mobile network equipment maker

Ericsson.

International Data Corporation (IDC) predicts India to overtake US as the second-

largest smartphone market globally by 2017 and to maintain high growth rate overthe next few years as people switch to smartphones and gradually upgrade to 4G.

In spite of only 5 per cent increase in mobile connections in 2015, overallexpenditure on mobile services in India is expected to increase to US$ 21.4 billion

in 2015, led by 15 per cent growth in data services expenditure, as per research firm

Gartner.

The Indian telecom sector is expected to generate four million direct and indirectjobs over the next five years according to estimates by Randstad India. The

employment opportunities are expected to be created due to combination of

government’s eff orts to increase penetration in rural areas and the rapid increasein smartphone sales and rising internet usage.



Internal Analysis

Strengths

1. 4G: Airtel being the first mover in to 4G market, has an advantage and use itas its strength to gain larger market share. Mobile Data will contribute around

60% of total revenues by 2020, as per the reports. Hence airtel can use thisadvantage as its strength.

2.

Renowned Telecom Company: With its 19+ years of rich experience intelecom industry this MNC had travelled far to become world’s 3rd largesttelecom operator overseas with operations in nearly 20 countries.

3. High Brand Equity: It is one of the pioneer brands in telecommunicationhaving a high brand recall and with a whopping subscriber base.

4. Extensive infrastructure: With the formation of Indus tower & due to itspartnership with Idea & Vodafone, the infrastructure of Airtel has extended

in all parts of the country resulting into nationwide penetration.

5.

Strategic Alliances: The Company has top notch stakeholders, namely SonyEricsson, Nokia and Singtel, and the recent one being Apple. Such strategicalliances boost the brand equity and the bottom line of the company.

6.

Torchbearer of the Telecom Industry: With its number 1 spot due to itsexcellent services in developing economies, Airtel has interconnected the lifeof people in a highly efficient way. Thus, where Vodafone is an externalentrant, Airtel is a leading nationwide player in India and the torchbearer ofthe telecom industry in India.

Weaknesses

1.

Outsourced Operations: Outsourcing operations helped Airtel in loweringits cost. But on the other hand, they are running the risk of being dependenton some other companies which may affect its operations.

2. Pan India 4G License: Airtel doesn’t have pan-India 4G license whileReliance JIO possesses pan India license. This is one of the weaknesses due to

which Airtel can lose out on a chunk of 4G market.

3.

Venturing into Africa: Although it’s been 4 years that Airtel has acquiredZain’s Africa business, but Airtel is still struggling to turn around the u nitwhich was bought at a whopping 9 billion dollars.

4.

High Debt: With its acquisitions turning out to bad investment, and creditbeing high and margins being low, Airtel group is under high debt. Airtel doesnot have as deep pockets as Vodafone.

5. Accessibility of Customer Support: Airtel doesn’t let its customers accesscustomer support directly. Customers need to go through various options to

connect to IVR customer support. This is one of the weaknesses of airtelcompared to other network providers.



PESTLE Analysis

The Indian telecommunications has been zooming up the growth curve at a feverishpace, emerging as one of the key sectors responsible for India’s resurgent economicgrowth. It is the fastest growing telecommunication market in the world.

Political

The ministry of telecom industry hiked FDI limits to 100% that has enabledIndian promoters of telecom sector to spark off the competition by selling theirstakes to foreign investors. Due to increase in FDI, Airtel will be able to modulatethe foreign stakes in their companies that have already acquired a range between67-69% of their assets.

Airtel’s infrastructure gives them the first mover advantage.

Airtel is a dominating brand in terms of regulation. Airtel already have the tie-up with foreign partner SINTEL that is going to help

in investing more in infrastructure and latest technology to provide the bestservices to their subscribers.

With the tremendous growth and increase in globalization of telecom sector,Airtel already launched its mobile services in Srilanka in Jan 2009.

Also Airtel has already acquired Zain for Africa operations which are the secondbiggest overseas purchase by an Indian company.

Economical

Indian telecom was growing in the range of 20-30% approximately in the year2002-03 but this figure has moved to 40-45% during the last couple of years.



Approximately 30% of the service tax revenue is contributed by telecom sector.

Telecom sector is also one of the major sectors that provide direct employmentto many people that indirectly help in the economic growth of India.

Airtel has benefitted as cost of 3G license has lowered down. During recession in 2008, government made a policy to reduce the custom duty

on convergence product from 10 to 5 % that helped in establishing parity devicesused in communication sector, and also helped Airtel in reducing their cost forDTH expansion.

During the same recession period, raw materials for the manufacture of specifiedelectronic hardware items had been exempted from excise duty that lowers thenetwork equipment costs and provided benefits to major services providers andenabled Airtel to expand their network coverage to more rural areas at a lessercost.

Government has announced per second billing tariff for the subscribers alongwith per minute billing plan. Though this per second billing plan is not beneficialfor the operators as it reduces the sector’s annual revenue by 10% approx. Toovercome this situation, Airtel has launched low tariff per minute plans alongwith per second plan. As large number of subscribers make longer duration callsand per second plan thus becomes of no use to them. Airtel could also launch payper character for SMS services just like Tata DoCoMo to increase the VASrevenue.

Social

Change in lifestyle:o

Fast changing lifestyles are forcing telecom companies to enlarge thebreadth & depth of their services.

Regional shift in population:o

The rural Indian consumer managed to remain an attractive proposition,especially in the demand for telecom services. As 70% of Indian populationstill resides in rural areas, improvement in telecommunicationinfrastructure and services will reduce isolation, increase businessviability, farming productivity and easy access to educational and medicalservices.

Employment opportunities: The telecom sector offers a variety of career options.The certificate courses for employment in the industry are:

o

Certificate in Telecom Engineering, IT, Computer Science, ManagementInformation Systems, Computer Forensics.

Demographic and cultural aspect of the environment also influences customerneeds and market size. Likes and dislikes of a teenager and adult might not bethe same, so the company will have to try its best to meet the requirements. Tomeet these requirements, Airtel being the leading private broadband serviceprovider in the country has introduced the ultra-fast speed of 50 Mbps for thebroadband users on VDSL2 technology that will allow users, the convenience todownload a full feature film in less than 3 minutes. Besides that it provides valueadded services such as PC secure (anti-virus software), online storage etc.



Advertisements play a very important role in selecting the network.

Cost factor is a major concern to customers. E.g. calling rates, roaming chargesetc. Most of the customers are influenced by the latest fashion trend. A companyneeds to be updated with the latest technology and fashion trend.

Nowadays customers have a notion regarding brand and status symbol.

Customers have become cautious regarding selection of telecom network.

Increasing competition due to large number of players in the telecom industryhas forced in reduction of tariffs. That’s why A irtel has introduced many lowtariff plans such as Youth plan for young people, ladies special, friend’s prepaidplan, family celebration plan as per the customer requirements. It focuses onsegmentation strategy to understand the need gaps of specific consumersegments and to create special segmented products for them.

Technological

Airtel is the first 4G service provider in India and hence it has competitiveadvantage over its competitors.

Bharti Airtel is first wireless service provider that supplies roaming services,international and long distance communication services as well as value addedservices.

It has high speed optic fiber network. This network spans 126,357 km all overIndia. Bharti Airtel’s international network infrastructure includes ownership ofthe i2i submarine cable system and consortium ownership in five globalundersea cable system.

As Mobile Number Portability (MNP) has allowed the customers to retain theirexisting mobile numbers despite changing the service provider, this haseventually increased the competition among the service providers as thesubscribers can switch to any other network if they are not happy with thecurrent service provider. Airtel has the edge over its competitors as theirservices are far better than the other service providers.

Environmental

Radio frequency waves emitted from the mobile phones harms body cells and

damages the DNA. This is not yet proved that such changes were risk to humanhealth. Due to rising terrorist activities and hacking of confidential data on air, India

Department of Telecommunication (DoT) has made several amendments relatedto security features that states that telecom companies should have good policiesfor security and they should be responsible for the security of the network.

Legal

TRAI has also ruled out against Airtel and other telecom companies to support

net neutrality. Still talks are going on and TRAI might favor telecom companies.



Moreover government has tightened norms regarding telecom policies due tofrequent terrorist attacks, their misuse of cellular network and their hacking intothe network.

Mobile number portability (MNP) implementation would enable subscribers tomove to different service provider retaining the same number. This

implementation would hamper Bharti Airtel as customers would keep switchingto any possible networks available.

In India legal obligations are defined regarding 3G auctions and bidding whichproves to be in favor of Bharti Airtel as this auction is not available to the newentrants.

VRIO Analysis of Bharti Airtel

VRIO framework can be understood as below:

Value: "Is the firm capable enough to exploit an opportunity or neutralize anexternal threat with the available resource/skill?"

Rarity: "Is control of the resource/skill in the hands of a relative few?"

Imitability: "Is it difficult to imitate, & will there be considerable costdisadvantage to a firm trying to acquire, develop, or replicate theresource/skill?"

Organization: "Is the firm organized, ready, and able to exploit theresource/skill?" or "Is the firm organized to capture value?"

All these questions have been measured on a scale of Low, Medium & High.

Resource Value RarityCost to

Imitate

Organized

to Capture

Value

Competitive

Implication

Strength/

Weakness

Technological

know how

High Medium High Medium Temporary

Competitive

Advantage

Strength

License of

Spectrum

Medium Low - Medium Competitive

Parity

Weakness

Human

Resources

High Medium Medium High Temporary

Competitive

Advantage

Temporary

Strength

https://en.wikipedia.org/wiki/Value_(economics)

https://en.wikipedia.org/wiki/Rare

https://en.wikipedia.org/wiki/Imitation

https://en.wikipedia.org/wiki/Organization

https://en.wikipedia.org/wiki/Organization

https://en.wikipedia.org/wiki/Imitation

https://en.wikipedia.org/wiki/Rare

https://en.wikipedia.org/wiki/Value_(economics)



Customer

Relations

High High Medium High Sustained

Competitive

Advantage

Strength &

Distinct

Competence

Managerial

Expertise

High Low High High Temporary

Competitive

Advantage

Temporary

Strength

Service Levels

of Airtel

High Medium Medium Medium Sustained

Competitive

Advantage

Strength &

Distinct

Competence

Corporate Level Strategies

Corporate Level Strategies at various levels differ and hence both at National andat International level have been analyzed:

1.) Corporate Level Strategy at Local Level i.e., for India

2.) Corporate Level Strategy at International Level

1.) Corporate Level Strategy for India

Division of various business unit segments:

Mobile Services Division

Tele-Media Services Division Enterprise Division

o

Carrier Business Unito

Corporate Business Unit

a) Mobile Services Division:

The Mobile Services division is probably the most valuable division of BhartiAirtel.

Airtel has the largest user-base (customers) in India and hence the largestmobile service provider in India.

Airtel offers GSM mobile services in all the 23-telecom circles of India.

Airtel provides 4G services in 296 cities, as of now, in India

It provides myriad Value Added Services (VAS) such as hello tunes, m-commerce, wireless internet, mobile apps like Wynk, etc.



b) Tele-Media Services Division: The Airtel Telemedia Services division provides high speed broadband internet

and related services. It launched its DTH services in 2008 and currently has 1 crore active users as it

claims, capturing 19% of market share, only second to Tata Sky (20%).

Airtel provides landline service in 94 cities across India.

c) Enterprise Division:

The Enterprise Services division provides a diverse portfolio of services to largeEnterprise and Carrier customers.

Further divided into two units:I. Carrier Business Unit.

II. Corporate Business Unit.

I) Carrier Business Unit

The Carrier Business Unit provides long distance wholesale voice and dataservices to carrier customers as well as to other business units of Airtel. Thisis the major chunk of Airtel’s revenues.

II) Corporate Business Unit: The Corporate Business Unit provides end to end telecom solutions to

India’s large corporate. This will contribute as a major chunk as businesses

are expanding and that growth will fuel Airtel’s growth.

It provides customized solutions for each business/industry and specializedB2B plans.

2.) Corporate Level Strategy for International Market

At International level, airtel needs to have different strategy to be the leader intelecom sector. At International level there are two needs:

Need for Localization (Local Responsiveness / Multi-Domestic Strategy /Glocalization)

Need for Cost Responsiveness

1) Localization: It’s a ‘Focus’ strategy but on a wider scope of customers i.e., Differing ‘Focus’ for

different customer segments. Focusing on the needs of customers of particularsegment and providing solutions to customers according to their requirements.

Airtel has always focused enough on different local needs, in different nationsand it has always been central to their strategies.

Hence the kind of services, offers, plans and VAS that they offer in India is quitedifferent than what they provide in other nations.



Creating Value through Diversification:

Airtel seeks to create value through diversification by moving across businessesthat are both operationally related and similar in corporate structure

Main objectives behind this are:

High Resource Sharing. [Economies of Scope]

Significant Cost Reduction. [Economies of Scale]

Operational Similarity

It looks at operational relatedness since a number of its businesses operateacross similar technologies and thus the platform for a given product can be useddirectly for extending the service from a completely new product.

For e.g., the cables for a telephone connection provided by Airtel can be used toprovide broadband service to the customer without any significant change in

infrastructure. This leads to ‘economies of scale’ and ‘economies of scope’.

The skills required from the technicians are also not very different and thuseconomies of scope are quite possible.

Targeting the Same Industry: In pursuing this strategy, Airtel will have to be cautious of the fact that it can lead

to diseconomies of scope.

This can arise primarily from the very fact which Airtel is banking on – similarity

across its businesses. This is the very reason that Airtel just cannot afford to ‘goeasy’ on any of its domains and needs to keep up to speed in all its businesses.

2) Cost Responsiveness: Regional Pricing strategy: Price the offering according to the local/regional

market.

The price varies from country to country as well as state to state.

Priced depending upon the needs of the customer segment.

Pricing also depend on the demography of that customer segment.

Result & Interpretations, and Suggestions

1.) 4G Technology:

4G technology is the next paradigm shift for Indian Telecom Industry. Capturing amajor chunk of this market in the early stage can provide, Airtel, a solid

competitive advantage over its competitors. Following are some strategic



suggestions from our side which Airtel can leverage to become market leader in

4G segment. Primarily the strategies focuses to:

Increase 4G adoption among customers

Changes required in market communication to attract 4G data users

Overcoming barriers to 4G adoption and leveraging first mover advantage in 4G

technology to gain market leadership in 4G

Winning customers for life (customer retention & increasing customer-lifetimevalue).

Changing market communication to attract 4G data users:

‘Do More in Less Time’ & ‘Do More in Same Price’ to combat the perceptions of

4G being pricey and consuming more data.

Roll out compensation to existing 4G customers for deficiency in service to create

a strong & positive word of mouth.

Contract celebrities/superheroes that have image of being ‘speedy’.

Associate Airtel 4G with F1 racing & sponsor other racing events.

To capture market share in new phone purchases:

Key partnerships with e-tailers, smartphones retailers (multi-brand) and mobile

manufacturers.

Connecting with school going students early on, as they are the next, potential

new phone buyers.

Barriers to 4G Adoption:

Perception that 4G is pricey and consumes more data.

Majority customers, who recently purchased a 3G smartphone, won’t upgrade to

4G devices.

Lack of 4G Availability in regions where there is demand.

Strategies to Overcome these Barriers:

Airtel can forge strategic partnership with mobile manufacturing companies topromote Airtel 4G in Mobile device Exchange schemes, besides purchases of New

Mobile phones by providing opportunity too Subscribe to (purchase) Airtel 4G USIM card (Non Airtel Customers)

o

Switch to Airtel 4G USIM card (Existing Airtel Customers)

Airtel needs to take aggressive approach to promote 4G, to gain first mover

advantage and capture highest market share, before the competitors enter the

market. For that Airtel can

o

Offer free 4G data to its existing 2G and 3G customers (primarily 3Gcustomers) for a month and for longer period to customers having high 3G

usage to make them switch to 4G.



o

An SMS to high data-usage customers providing them info on how much

lesser time would they have required to do the same tasks they did on 3G.

Efficiently using the first mover advantage to convert its technological leadership

into Market leadership Airtel can:

Come up with advertisements focusing on the benefits of 4G along with the priceof 4G which is similar to that of 3G.

Sponsor College Festivals to increase 4G adoption in youth and partner withmedical institutes/hospitals, firms, to capture the high net-worth customers.

Deploy a referral (affiliate) scheme by providing 4G data benefits to referredcustomers and referring customers, to promote both Airtel mobile app and 4G.

Become more sensitive to customers, offer automatic compensation to

customers for deficiency in service, to increase brand credibility & customerloyalty, as cost of acquiring new customer is higher than the cost of retaining one.

2.) Africa Operations:

Due to African countries’ weakening currency, political uncertainty and fall in crude

prices, Airtel is facing some serious losses. Looking at its target of 100 million

customers by 2013, it has only managed to garner 78.3 million subscribers.

Following are some suggestion from our side which can help turn around its Africa

operations.

In all the countries it operates, Airtel conducts business in local currencies.However, its debt obligations, equipment purchases and service providers are

billed in dollars, translating into the rise in foreign exchange losses. Oursuggestion is to create a financial contingency plan to hedge against currency

fluctuations.

Airtel operates in 17 markets of Africa. Our suggestion is to exit and sell assets inthe markets with political uncertainty and legal tangles. The money from selling

the assets can either be applied in its other markets or to pay back the loan of$8.5b it undertook to fund its Africa operations.

3.) Call Drop Issues:

Back home, a burgeoning problem for most telecoms including Airtel is ‘call drops’.

Just recently, TRAI conducted random call drop test and Airtel, along with other

major telecoms, failed.



In the light of ‘call drops’ coming into the lime light and being a major issue, we

would suggest Airtel to invest into improving the infrastructure and solve thisproblem. This would serve three purpose at the price of one.

First and most obvious, it would solve the problem of ‘call drops’.

Second, it would be the first company to do it and hence would get the first mover

advantage. Sooner or later, under TRAI’s regulation, all telecoms would have to

solve this issue, so might as well be first one to do it.

Third, in the age of social media, Airtel’s improved performance would provide

it free positive publicity.

Conclusion

Out of India’s over 1 billion mobile user base, only a little over 350 million usersenjoy internet. But this is set to change. India is on course to overtake US in termsof mobile users with 402 million users by the end of 2016. If the above-mentionedstrategies are followed, Airtel stands chance to capture a major chunk of this ever-growing mobile internet user base. Also Airtel can also emerge as a pioneer inbringing 4G technology in India. Similar to India, Airtel, with a well thought strategy,can capture Africa’s over 1 billion population as its prospective subscriber s. Tillnow, Airtel has a well-established strategies to ‘Win Customers for Life’. A proper

OGST model helps companies realize its objectives and Airtel is one of thosecompanies.

Strategic Management Analysis of Airtel

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