A_Business_Strategy_Case_Study_on_Reliance_Mobile

Reliance Mobile: A Business Strategy Review Table of Contents 1. Executive Summary 1. Purpose 2. Key Findings 3. Recommended strategic option 2. Introduction: 1. Outline of business under study 2. External environment and industry of Reliance mobile 3. Reason for undertaking the study 3. Strategic Analysis: 1. Methods and techniques of data collection 2. Analysis of the external environment of the business 3. Analysis of the internal environment of the business 4. Recommended strategic option 5. Implementation of the strategic option 4. Conclusion 5. References 6. Appendices 1. Executive Summary 1. Purpose Reliance Communications is one of the leading mobile phone service providers in India, the largest and most competitive telecom markets in the world. The purpose of this report is to study and analyse the internal and external environments of the mobile phone services industry in India. The analysis in this report should enable us in assessing the past and present strategies of the company and craft a new strategy if any scope of optimisation from the strategies presently being implemented. 2. Key Findings It has been observed from the analysis that Reliance Communication has successfully crafted and implemented ‘Focused Low Cost’ strategies and by providing unmatched value for the customer’s money, compelled the rivals to follow on the same lines. However, it was also noticed that over the years, Reliance Communications has be the best-cost provider in the market and owning the largest network infrastructure is now capable of focusing and explorer new areas and technologies while maintaining its low-cost, high quality image. 3. Recommendations Realising that the ‘Focused low cost’ strategies would not be the appropriate in the current market situation where the spending habit of consumers have changed drastically, it is recommended to craft a ‘Focused differentiation strategy’ and focus on the data services using new technologies like 3G. Keeping its image of being a pioneer in bringing revolutionary changes in the market, it would not be unrealistic to think of a future where customers pay only for data service and not for voice services. 1. Introduction 1. Outline of business under study Reliance Infocomm (now Reliance Communications), was launched in year 2000 as a very ambitious project, designed to connect every home and office in India to each other and to the world. The vision was to provide the latest telecommunication facilities to every Indian at the price of a post card. It was the time when recognising the vital role to be played by telecommunication sector in India’s development, the government of India instigated several changes in the telecommunication regulations and policies. With a market share of 17.72% (31st January 2010) Reliance Communications is the second largest provider of wireless telecom services in India (TRAI, 2010). This review is focused on Reliance Mobile, one of the initial initiatives of Reliance Communications which was launched on 28th Dec 2002. With over 100 million subscribers across India and with a network covering 24,000 town and 600,000 villages, Reliance Mobile is the largest mobile service brand in India. Reliance Mobile has ushered in a mobile revolution by offering advanced multimedia handsets with a wide array of applications that include hourly news updates, high quality headline video clips, downloadable multi-lingual ring tones, seasonal updates including festival specials, city and TV specials, exam results, astrology, mobile banking, bill payment, etc; to the common man at very affordable rates (Reliance Communications, 2010). 2. External environment and industry of Reliance Mobile With a population of over one billion, India represents the largest and fastest growing mobile market in the world. The mobile revenue contribution of the total telecoms revenue in India has increased from 34.0% in 2004 to 75.8% as of November 2009. The household possession of mobile phones is projected to rocket from 18.4% in 2009 to 40.7 % in 2020. This will be sparked not only by the launch of 3G services in short-term, but also the gradual migration to 4G in the longer-term. This will herald a growth in mobile data services in India. However, the threat to growth is price: services will need to be based around tariffs which are accessible to the less wealthy inhabitants of the country (Euromonitor International, 2010). 3. Reason for undertaking the study on Reliance Mobile Reliance Mobile has been very aggressive in coming up with strategies and implementation of strategies. With the market opening up for data services, with the launch of new technologies like 3G and with about five potential competitors, it is essential to closely review the strategy of Reliance Mobile to check for any possible optimisation. 2. Strategic Analysis 1. Methods & Techniques for data collection For the completion of this report we have done the comprehensive study of the secondary data accessible to us. The information available was cross checked with online journals, company reports, records, and economic websites. • Reliance communications internal records and annual reports: The information provided by company on its official web sites along with the data available to us through the website related to the earnings conference of the quarter that ended in March 2009 was used extensively to study about company’s past moves and strategies. • Online Databases: online databases like EBSCO host, Google scholar available to us through Deakin library online search engine were used comprehensively. • Online websites: Information available on respectable websites like Bloomberg and websites of Indian newspapers like financial express were used to gather information about Reliance communications. • Text books and Lectures notes: “Crafting and Implementing Strategy: Text and Readings” textbook by Thompson Strickland was specifically used for studying and understanding about the company’s moves. Information from lecture notes and additional study material was also valuable. 3.2 Analysis of the external environment of the business Macro Environment analysis of Mobile Phone Industry in India: Demographic Environment: With a population of 1.15 billion (Index mundi, 2010), India has highest population densities in the world supporting over 15% of worlds population on only 2.4% of the world’s land area, making India the largest telecom market of the world. (Fact-index, n.d) [pic] Fig 1: Age structure of the Indian population at a Glance, 1976-2020 Source: Euromonitor While other emerging telecom markets see an aging population, Fig 1 shows increasing number of youth in India and this section of population has a higher propensity to spend. Economic Environment: [pic] Fig 2 GDP growth rate of India (2003-2010) Source: Index mundi With India experiencing a continuous economic growth in the last decade, a 14.2% increase in per capita income has been recorded in 2006-2007. The expansion of IT and IT-enabled services has resulted into an increase in employment and disposable incomes of those aged 20-29. The period 1995-2007 has seen 73.9% of increase in consumer spending which is expected to be 58.2% in 2007-2015. (Euromonitor, 2010). Technological Environment: While Indian telecom companies have been providing telecom services using CDMA and GSM network infrastructures based on 2G technologies, the launch of advance technologies like 3G and IPTV are expected to drive the growth in the number of Indian telecom subscriber ( report linker,2009) Social Environment: India is blessed with rich and diverse cultures in form of dances, languages, religions, people, their customs and festivals. With over 33 widely spoken languages, it becomes a mandate for Indian telecom service providers to provide customer care services in multiple languages through regional call centres.(India a site, n.d.) Industry analysis of Mobile Phone Industry in India Driving Forces Analysis: Emerging new Internet capabilities and application: studies show that, the mobile value-added service (MVAS) is set to propel the growth of the Indian telecom sector. Apart from VAS, music and gaming are going to be the major driving forces boosting revenue and growth of telecom sector in India (Enterpriser, 2009). Marketing innovation: Indian mobile phone service providers have used media as tool to implement innovative marketing ideas to make sure the user see value in their offering. Below are a few examples: • By getting involved in social media like twitter and Face book, Tata Docomo came up with the idea of marketing with the consumer and not to them. • Vodafone’s Zoozoos – one of the finest product ever produced in Indian advertising • Idea cellular came up with the ‘use mobile save paper’ campaign. Changing societal concerns and lifestyles: With the highest number of consumers aged 20-29 the preferences have changed from just a mobile phone to a stylish and trendy high-end mobile phone enabled to run maximum numbers of applications (Kandasamy M, 2010). Competitive Forces: With 6 major service providers and handful of new entrants, Indian mobile phones and services industry is highly competitive. Three major service providers (Bharti Airtel, Reliance Communications and Vodafone) share almost equal percentage of market share. Two factors add fuel to these competitive rivalries. First, the low cost for customers to switch brands. Second, all the major service providers are capable to pursue opportunities with aggressive strategies. [pic] Fig 3 Market Share of Service providers 31-1-2010 Source: TRAI Strategic Groups: [pic] Fig 4 Strategic Group Map of Telecom Industry Market share Key Success Factors Technology: The success of any service provider in Indian telecom market highly depends on extensive utilisation of technologies like GSM, CDMA, PMRTS, WLL, Fixed Line and WLL in the latest 3G version. (Economy watch, n.d) Marketing: Innovative marketing ideas are the most important tool used by the service providers to attract and retain customers. Organizational Capability: Infrastructure ownership plays the most vital role in providing low-cost services. Most of the telecom service providers share/rent network infrastructure which adds to agreement complications and cost (Ghosh A et al, 2009). 3.3 Analysis of the internal environment of the business SWOT ANALYSIS Strengths 1. Owner of world’s largest infrastructure of next generation Information Technology infrastructure. 2. One of the first and only telecom company in India to provide CDMA and GSM wireless services. 3. With a huge customer base of 100 million customers it is one of the leading telecom company in India. (Reliance Communications, 2010) 4. Huge network covering 24000 Indian cities and 600,000 Indian villages (Reliance Communication, 2010). 5. Good marketing Strategy, winner of Asian mobile news award 2005, in best mobile operator marketing campaign category (Asurion, 2005). 6. Cost effective mobile services which are within the reach of common man. Weaknesses 1. Relatively new company in telecom industry in India, Started in 2004 whereas its competitors like Bharti Airtel is a decade and half year old company. 2. Lost the bid to acquire Hutch to Vodafone signals the lack of opportunity to invest in Indian market (The Financial Express, 2007). Opportunities 1. Alliance with Krishak Bharti Cooperative limited KRIBHCO to bridge the gap between Rural and urban areas will bring lots of business opportunities as KRIBHCO will market its products and services to 72% of Indian Population. (The economics Times,2009) 2. Attract a huge customer base of approximately 500 million customers if able to win the bid for 3G services spectrum. (The Economic Times, 2010). Threats 1. More and more telecom providers entering Indian market and providing cheaper services. 2. With Bharti Airtel and Vodafone being strong contenders for bidding of 3 broadband wireless access frequencies, Reliance cal loose the availability of spectrum in future when 4 G services will be widely deployed. 3. Legalization of internet telecomy by Indian Government will attract foreign investors possessing threat to Indian companies. 4. Threats for forgery of mobile handsets provided by company. COMPANY’S CAPABILITIES AND STRENGTHS 1. Provides huge variety of entertainment and infotainment services varying from news, cricket, social networking and many more through R world application in mobiles. (Reliance communications, 2010). 2. Largest expansion of network in eleven months from the time of receipt of spectrum from government shows highly efficient plan execution strategy. (Reliance communications, 2009). 3. Increasing Company’s growth by enhancing its 53000 employees capabilities and potential through automation of HR processes.(Subramanian A,2010) 4. Strong Hold in CDMA section and moved into GSM section with a strong infrastructure covering all Indian states.(Behl, T, Subramanian, A, 2009) 5. Innovative promotional strategy using concept of airtime minute as currency.(Reliance Communication, 2009) VALUE CHAIN OF BUSINESS The value chain for reliance communication starts with the addition of GSM services along with the existing CDMA services. Primary Activities • Reliance GSM value chain started with the acquirement of unified access services license to start GSM in 14 circles. • The network was expanded in record time of 11 months for the launch of GSM (Reliance Communications, 2009). • Distribution and Outbound logistics includes leveraging of its existing prepaid distributors, exclusive showrooms etc. • Reliance communications optimized the costs on Sales and marketing by reducing the costs on GSM launch and diverting the costs to providing free minutes scheme to consumers. ( Reliance Communications, 2009) • Reliance has entered into a pact with Chinese wireless technologies in order to provide dual sim phones to its customers through its retail stores.(Reliance Communications, 2010) Support activities • Reliance being one of the market leaders emphasises lot on developing the skills and potential of its employees. It has recently automated its HR process for far reaching profits (Subramanian A, 2010). OVERALL COMPETITIVE STRENGTH OF BUSINESS Reliance communications gives tough competition to other players in mobile industry with its strong marketing strategies and with low cost schemes like free minutes given on launch of GSM. These schemes provide value for service to customers. 4. Recommended strategic option Right from its introductory scheme, Reliance communications has crafted and efficiently implemented strategies which fall under the “Overall Low-Cost Provider Strategy” of the five generic competitive strategies. Few of its past strategies which demonstrate this are as below: i) Dhirubhai Ambani Pioneer Offer: At the time when lowest prices of mobile phones were INR 7500, Reliance communication in its introductory scheme, offered a price as low as INR 3000 of one-time fees and INR 600 per month, to provided the customer with a free digital mobile phone, including 400 minutes of free outgoing calls and further outgoing calls at INR 0.4 per minute. ii) Monsoon Hungama Scheme: This scheme offered mobile phone at an advance payment of INR 500. This resulted in further fall of the GMS mobile price to as low as INR 1500. However, future demographic of India shows increasing number of youthful workers who have a higher propensity to spend. A large share of this population consists of tech savvy professional working in IT and related industries. Future demographic also shows a continuous economic growth over the years. Combined with these factors, the introduction of technology alternatives like 3G ensures that large number of mobile phone customers in India will move towards higher end mobile phone and high speed data services. Looking at this scenario the most appropriate strategy to gain a competitive advantage over the rival, will be to have a Focused Differentiation Strategy, focusing on providing higher end digital mobile phones like iphone, Nokia E series and Nokia N series, etc, along with high speed data services at lower prices, creating buyer values unmatched by the rivals. This strategy will be inline with the company’s vision to facilitate leading-edge information and communication services affordable to all individual consumers and businesses in India (Euromonitor, 2010) 5. Implementation of Strategic Option The implementation of this strategy will not be a big challenge as the actual tasks involved will be similar to the tasks involved in the implementation of previous strategies. The only change will be the change of focus from low-cost voice services to low-cost, high quality and high speed data services. Providing data services at an unmatched low price will be possible as all the data will be entirely carried through Reliance Communication’s self owned network (3G ready CDMA and GSM network). The only challenge is to win the ongoing bid for 3G spectrum in India. The principal strategy implementation tasks are explained below: ➢ Capability Building for Strategy Execution: • Win the 3G bid to cover maximum service area throughout India. • Enter into exclusive agreements with high end digital handset vendors like Apple and Nokia to negotiate the prices to rock bottom by guaranteeing purchase of huge volumes. • Select people for key positions, attract and retain highly skilled people and provide training to the employees from customer care service and technical team to be able to support the new services. ➢ Linking Budgets to strategy: • Budget: The highest share of budget would go into winning the 3G bid. Budgets will be required to fine-tune its existing resources in few of its technical support teams and needs some addition or relocation of resources to set up additional Customer Care Call Centres. ➢ Commitment towards continuous improvement: Timely slogans like “karlo duniya muthi may” (meaning: grab the world in your fist) have in past worked well for the company to attract customers by increasing customer expectations. In implementing this strategy along with a new slogan to attract customers, the company can come up with a slogan to encourage the employees to provide services to “exceed customer expectations”. ➢ Installing support Systems: The company can not have a competitive advantage unless it goes out of its way to the “happy to help” attitude. It has to set up Customer Care and hardware assistance and encourage the hardware vendor to have service centres exclusively for the customers using the high-end data services of Reliance Communication. 5. Conclusion Emerging new technologies and aggressive strategies of new entrants have had a severe impact on highly competitive mobile phone services industry in India. Companies can only survive this turbulence in the market, if they build additional competencies, explore new market areas and strive for continuos improvements. Reliance Communications is no different and it has to usher new trends into the market and compel the rivals to follow. Past records have shown that Reliance Communications has excelled in doing this several times. By looking at the immense capabilities in aggressive and successful implementation of strategies that Reliance Communications possesses, we strongly recommend that it should go ahead with assurance and set new trends in data services. Reliance Communications being the only service provider to own 3G ready CDMA as well as GSM network infrastructure in India, can lead the new segment of providing high speed data services using 3G technology if it follows the strategies suggested in this report. References Asurion 2005, ‘Asurion Honours Best Customer Retention Mobile Operator At The Asian Mobile News Awards 2005’, 16 June, Retrieved 13 April 2010, 1. Behl T, Subramanian A 2009, ‘The new boys of Telecom’, Business Today, 03 May, Retrieved 10 April 2010 from EBSCO host, 2. Economy Watch 2009, ‘Telecom Industry in India’, Retrieved 21 April 2010, 3. Enterpriser, 2009, ‘Mobile VAS to drive Indian Telecom Growth’,12 August, Retrieved 12 April 2010, 4. Euromonitor International 2010, ‘Technology, Communications and Media: India’, 02 February, Retrieved 15 April 2010,< http://www.portal.euromonitor.com/Portal/accessPDF.ashx'c=11\PDF\&f=F-142479-17285711.pdf&code=Z6TlCIq4mVn%2fyVO%2fYzYE7TtUbkI%3d > 5. Euromonitor International, ‘Future Demographics-India’, pp 1-6, Retrieved 09 April 2010, 6. Euromonitor International: Technology, Communications and Media: India, 7. Fact-index, ‘Demographics of India’, Retrieved 15 April 2010, 8. Financial Chronicle 2009, ‘China Wireless in Pact with Rcom to sell Handsets ’, 09 October, Retrieved 05 April 2010 from Reliance communications, 9. http://sifybroadband.techwhack.com/880-reliance-communications-gsm-2, Retrieved 13 April 2010. 10. Ghosh A, Aggarwal V, Marwaha N 2009, ‘ Telecom Infrastructure company in India’, ICRA, Retrieved on 21 April 2010, < http://docs.google.com/viewer'a=v&q=cache:yxiGff3_OwMJ:www.gate4india.com/india_info/download.html%3Ffilename%3D12667195742009-March-TelecomInfra.pdf+telecom+infrastructure+in+india&hl=en&gl=au&pid=bl&srcid=ADGEESi9MG27_tIkBZAmXeFXdKjaDEyTJcZDScpkX6wdXpWTMqiGogVtIZt6 7pVhmpp2jjWMeWHtzNJ_1XF7PLzKyVU77Jka6bGnUjoTtyzxMJ1cqyqNFrnL sdmkxYwNNXB6jb5fqXl4&sig=AHIEtbTLlKsD8E3xxM4k5x9BV0G4XT3enA > 11. Index Mundi 2010, ‘ India GDP: Real growth rate’, Retrieved 11 April 2010, 12. Index Mundi 2010, ‘India Demographics Profile 2010’, Retrieved 15 April 2010, 13. India a site, ‘Indian Language and literature’, Retrieved 18 April 2010, 14. Kandasamy, M 2010, ‘Which indian Telecom Brand has made the most out of new Media'’, 13 March, Retrieved 12 April 2010,< http://mobigyaan.com/which-indian-telecom-brand-has-made-the-most-out-of-new-media> 15. Reliance Communications 2010, business overview, Retrieved 29 March 2010, 16. Reliance Communications 2010, Rworld, Retrieved 03 April 2010, 17. Reliance Communications Ltd 2009, ‘Transcript of Earnings Conference Call for the Quarter Ended March 31 2009’ 30 April, Retrieved 23 March 2010, 18. Report Linker 2009, ‘Indian Telecom Analysis(2008-2012)’, Retrieved 15 April 2010, < http://www.reportlinker.com/p089588/Indian-Telecom-Analysis-2008-2012-.html> 19. Subramanian, A 2010, ‘Relying on HR Automation’, 07 February, Business Today, Retrieved 09 April 2010 from EBSCO host, < http://web.ebscohost.com/ehost/detail'vid=3&hid=113&sid=3661d521-f86b-4fa4-b224-917348a39553%40sessionmgr111&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=48177398#db=bth&AN=48177398> 20. The Economic Times 2009, ‘RCOM ties up with 'Krishak Bharati' to capture rural India ’, 06 November, EBSCO host, Retrieved 11 April 2010, The Economic Times 2010, ‘3G spectrum auction kicks off, first round completed’, 09 April, Retrieved 17 April 2010, < http://economictimes.indiatimes.com/news/news-by-industry/telecom/3G-spectrum-auction-kicks-off-first-round-completed/articleshow/5777881.cms > The financial Express 2007, ‘Reliance Comm falls after bid loss; Vodafone gains on LSE’ 12 February, Retrieved 07 April 2010, 21. TRAI, ‘Telecom Subscription Data as on 31 January 2010’, Retrieved 4 April 2010, 22. Varghese,S 2006, ‘Reliance Infocomm’s Strategy and Impact on the Indian Mobile Telecommunication Scenario’, 31 January, Department of Media and Communications, LSE, Retrieved 03 April 2010, Appendices: Appendix 1 Mile stones and Key events for Reliance Communications • 27 December 2002: Inauguration of Reliance Infocomm. • 05 January 2003: Introduction of Dhirubhai Ambani pioneer offer. • 01 July 2003: Introduction of Monsoon Hangama offer. • 30 September 2003: 1 billion hits in 1 month on RWorld. • 05 April 2004: Introduction of International Roaming to 172 countries. • 04 January 2005: India’s first e-recharge facility on mobile introduced. • 26 June 2005: Anil Ambani named as Chairman of Reliance Infocomm. • 01 January 2006: “Launch of One nation One Tariff” scheme. • 21 March 2006: Became world’s first mobile phone operator to offer data services in more than one language on the same handset • 02 May 2007: Offers mobile handsets at INR 777 through its ‘A classic Bonanza’. • 12 January 2008: Start up GSM spectrum received. • 27 February 2008: Enters International Market by acquiring GSM license in Uganda. • 30 December 2008: Launch of GSM services all over India. • 09 June 2009: Alliance formed with KRIBCO for marketing in rural areas. • 15 April 2009: 11.3 million subscribers added in three months from January to March 2009. • March 2010: Customers base reach 100 million mark. Appendix 2 Acronyms 2G: 2nd Generation 3G: 3rd Generation CDMA: Code Division Multiple Access GSM: Global System for Mobile Communications IPTV: Internet Protocol Television KRIBHCO: Krishak Bharti Cooperative Limited TRAI: Telecom Regulatory Authority of India MVAS: Mobile Value added Services