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    Stc Five Forces Model and Competitive Advantage Essay

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    Rivalry Among Competitors In 2005 Saudi Arabia became a member of WTO and opened up the Saudi Telecommunications market to foreign competitors. The Saudi Arabian Telecommunication market has become increasingly competitive. In addition to competing on prices all the major competitors are striving to offer differentiated products and services aimed at increasing their market shares. The competition is apparent in the decline in STC’s income despite higher revenues. Table 1 – Level of Competition (2008)| | | | | | | | | | | | | |  | Local services| Domestic fixed long dist| Inter-national fixed long dist| Wireless local loop| Data| DSL| Cable modem| VSAT| Leased lines| Fixed Wireless Broadband| |  | C| C| C| C| C| C| … | C| C| C| | | | | | | | | | | | | | |  | Mobile| Paging| Cable TV| Fixed sat| Mobile sat| GMPCS| IMT 2000| Internet services| Inter-national gateways| |  | C|  | … | C| C| C| C| C| C| | It is also noteworthy that Saudi Arabia is one of the three countries in the region which has reached a status of full competition according to ITU across all telecommunication fields, the other two being Jordan and Bahrain.

    As such it is clear that the Rivalry among competitors is high and thus keeps the prices down and requires for all rival in the market to come up with innovative and differentiated ways to attract customers. Threat of New Entrants The growth in Telecommunications globally has many factors one of which makes the threat of new entrants high. Which the shift is from wired to wireless services has made it possible for many entrants to come in. However the market currently seems saturated. The number of fixed telephone lines has been particularly stable and risen only 0. 2 % CAGR over the last five year from 16. 2 per 100 inhabitants to 16. 22. Mobile phone subscriptions in Saudi Arabia are overwhelming at 174. 43 per 100 inhabitants (Note that mobile phone users in different from mobile phone subscriptions) with a growth rate of 37. 4 % CAGR from 2004 to 2009 (140 per 100 inhabitants for digital mobile phone subscriptions). However internet is still unsaturated with only 7. 32 subscriptions and 38. 10 users in each 100 inhabitants. Hence where the saturation in mobile communication keep the threat of new entrants low however the extremely low penetration in Internet services leaves the threat of entrants very high.

    However in internet and broadband the threat of entrants is high especially with the advent of WiMax technology. Overall the threat of entrants in the Saudi Telecom market as of 2009 can be considered moderate. The threat of entrants force is not considered major and is not pulling down prices and driving the competitiveness of the mobile sector in Saudi Arabia any longer where as it was the major force from 2005 to 2007. However STC providing best services with lowest rates for Internet Services is a proof of high threat of entrant in the Internet sector. Threat of Substitutes The threat of substitutes is also very high.

    It is a contributing factor in keeping prices low and competitiveness high in the Saudi Telecom industry. With VoIP services users can make virtually free calls. Such services are allowed in Saudi Arabia over private networks and otherwise (ITU). Many alternative solutions keep on popping up on the scene and challenging the traditional communication channels. Once the benefits of such services are well known and information flow is faster it has a high power of challenging all major players in the market. In addition to that such services are becoming increasingly innovative and have started to offer amazing quality.

    Satellite phones can either be considered a competitor or substitute. However for our discussion it is considered a substitute which has a possibility of threatening the mobile phone market if innovation leads to more functionality in Satellite phone handsets with probable introduction of satellite internet. Overall the force of threat of substitutes has high impact on the Saudi telecommunications market competitive scenario. Power of Buyers Approximately 59. 4 % of the Saudi population is between 15 to 64, with a per capita GDP of $ 21,300. Customers tend to demand products that are high in quality and reasonably priced.

    The shifting costs are negligible to zero as such the power of buyers is moderate to high. The evidence shows that the prices have been driven down as such it is obvious that the Power of buyer has been and remains high. Power of Suppliers Network Equipment Providers (NEPs) are companies that provide communication solutions to Service Providers like fixed or mobile operators as well as to Enterprise customers. If you place a call on your mobile phone, surf the internet, join a conference call or watch a video on demand through IPTV (internet protocol TV) – it is all NEPs technologies that are enabling such kind of services.

    The key players per type of customer segment are Service Providers; Alcatel-Lucent, Ericsson, Huawei, Juniper, NEC, Nokia-Siemens, Nortel, ZTE, Emerson Network Power and Enterprise Sector Providers; Avaya, Cisco, Motorola, Siemens Enterprise Communications Consolidation among communication service providers due to convergence leads to greater dependence on a few large clients of suppliers, which means lower bargaining strength of suppliers.

    Due to pressures on their profitability, service providers are increasingly looking at lowering their operating costs and capital expenditures (lowering cost per subscriber), and this is putting pressures on NEPs margins. Switch from PSTN to Next-Generation Network and increasing use of standardized network components (COTS) compared to more proprietary equipments is continuously reducing the bargaining power of suppliers. Also software is to increasingly replace traditional network components.

    Overall the Power of suppliers is low in the Global telecommunication market as such the same impact is exhibited in Saudi Arabia. Reources & Capabilities FORWARD strategy International Expansion Mobile Network Coverage – 92 % Introduction and ability to cater to VIP and Business sector Niche Penetration with low prices (Loyal Customers) Good Distribution Network High Market Capitalization Good Capital Base Core Competencies Catering to VIP and Business Sector Niche leads to strong small market niche of high paying and loyal customers High Market Capitalization and Capital Base eads to ability to drop prices High Mobile Network Coverage and ability to use multiple distribution channels leads to ability to cover more customers and penetrate deeper Competitive Advantage All three Core Competencies are basis First mover advantages that together form the Competitive Advantage. This passes the Competitive Advantage Test of being Relevant or Appropriate, Non Imitable, Non Substitutable, Durable and provides Competitive Superiority. This Competitive Advantage is the First Mover Advantage creating strong base and ability to compete through both price and differentiation.

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