Essay About High Capital Requirement Of Entryhigh Brand And External Environment Analysis

The Analisis for Telstra
[pic 1][pic 2]FD-Handling Team何佳妮  周立立  邓立ⅠEXTERNAL ENVIRONMENT ANALYSIS                                     The telecommunication industry in Australia has experienced rapid developing period, however, because of the constant technology innovation and shifting consumer behavior, it is hard to predict the further direction. There are some obvious features lying in the industry like the changes in consumer demand from fixed-line service to wireless service on macro environment which is illustrated in detail in the case. The first step we choose to do for the Telstra’s strategic plan is the external environment analysis, because its benefits include increasing managerial awareness of environmental changes and understanding of the context in which industries and markets function, which can improve resource allocation decisions and facilitate risk management. The external environment changes, in a way, have important impact on the strategic plan for the company. We use the porter’s five forces model to analyze the competitive environment which more focus on the micro aspect.Porter’s five forces[pic 3]Threat of new entrants High capital requirement of entryHigh brand identityExisting switching costLittle product differentiationLegislation or governmentUpgrading to the telecommunication industry requires a large amount of capital including backhaul costs, associated civil works costs and advertising costs. The major players have cost advantages and an established customer base with integrated products. Although the switching cost of customers is less, there is little space for new entrants. Besides, the Australia government holds the power of controlling spectrum licenses. All these high barriers to entry indicate the less possibility of new entrants and the potential profitability of the firms in the industry.Bargaining power of customersAlthough there are a few main players in the industry, they all have an established customer base. (Figure1) With the decrease in the cost of switching suppliers, the companies are forced in the price war. Besides, the brand of Telstra is not powerful enough to attract their customers especially it used to be viewed as opportunistic.On the contrary, there is concentration of buyers and a large number of small operators in the industry, so the customers can get access to alternative sources of supply. Additionally, based on the development of 4G and the demand of different ages, there is a threat of backward integration by the buyer.