INDIAN INSTITUTE OF MANAGEMENT, INDORE

SM-I Individual Assignment

BHARTI AIRTEL

Submitted by:

Ankit Bansal

Section D

2010PGP046

Bharti Airtel Value Chain Analysis

Primary Activities

Under the primary activities, the main activities which give Bharti Airtel a competitive edge are:

Support Activities

Firm Infrastructure: Tower setup, IT infrastructure, Telecom equipments, Networking stations and equipments, ERP and various software to assist in operations

HR Management: Hiring of IT skilled workforce and telecom operators. Hiring of customer support personnel and their training program. Expertise in recruiting the retail staff and quality of their training. Recruiting best in business leaders to take the company forward.

Technology Development: Development of various VAS services. Introduction of mCheck to enable consumers do mobile commerce. Investing in R & D. Creating and setting up of 3G network with new licenses coming in.

Procurement: High initial investment required to setup up physical distribution towers and network stations. Long term contract with third parties are required. Strong Supply Chain Network is required to enable continuous supply of handsets and SIM cards.

Porter 5 Force analysis for Bharti Airtel

Threat from Competition: HIGHCompanies like BSNL, MTNL, Vodafone, TATA, IDEA and Reliance continuously engage themselves in aggressive marketing and expansion and thus trying to eat into Bharti’s market share.

Input

Operation LicensesFinance for operations and setup of infrastructureSetting up Network infrastructure in collaboration with third partySoftware and support required to operate the Mobile telephonyValue added content providers of like games, music etc.

Operations

Develop and expand the infrastructureCustomize software to requirement Develop the sim cardsDevelop the network substationsUse the Mobile serives switching center to divert traffic to mobile or fixed systemsIntegrate various network to achieve economies of scale

Output

Broad Band Services

Fixed Line Services

GSM Services

VAS

Marketing & Sales

Strong SIM distribution channelFirst mover in developing better productsIntroducion of new services to match the customer preferencesInnovative advertising campaginsSales force compensation tied to profit and not revenuesCustomer awareness about latest technology

Services

Coverage area of each airtel outletCustomer SupportTechnical assistance for broad band servicesDuplicate Sim availabilityStrong supplier channel for repairable partsOpening new outlets in new circles

Threat from Customers: HIGHAll the major telecom operators provide similar services. Customers can switch easily to another firm. With number portability a reality it further gives them power to dictate. Lower prices are enjoyed by customers due to severe competition.

Threat from Suppliers: LOW

Long term contracts ensure future supply of handsets and SIM cards. High initial investments by suppliers mean they are dependent on few telecom operators for revenue, hence low bargaining power for them. These networks till now cannot be put to other profitable uses. Many companies are present to provide customer support at lowest prices. Many high end software making companies compete for telecom software develop thereby pushing the prices of these software low.

Threat from New Entrants: LOWHuge initial investments and high gestation period. Highly regulated industry and it is very dynamic in nature. Low spectrum availability and introduction of new strategies by the existing firms.

Threat from Substitutes: LOWFixed Line services are on decline. However the internet telephony is catching up giving telecom operators run for money. Video conferencing, Social Networking websites and Skype is reducing the need for mobile services.

Resource Based Analysis

Using the VRIO model, we can analyze the following resources and capabilities of Bharti Airtel:

1. Financial: It has a good balance of cash and reserves in its balance sheet and also its borrowing power both in terms of equity and debt is good as can be inferred from the fact that it successfully raised funds in 2009 through debt and through equity in 2010. Though valuable, it is not a rare resource giving Bharti Airtel a competitive parity.

2. Physical: Airtel has state of the art towers and networking infrastructure that use the latest software to provide best services at lower cost. Again, it is valuable as well as rare and also costly to imitate, hence, the physical resources is a source of competitive advantage.

3. Technological: It has major network outsourcing and maintenance deals with Ericsson and Nokia Siemens. It has a JV with Indus Power for towers and long term customer support outsourcing deal with IBM. Thus, it has innovative processes which again are rare, valuable and costly to imitate giving it a competitive advantage.

4. Innovation and creativity: Airtel combines telecom services, distribution of products as well as after sale services and has a proven track record of high profit generation. Managing over 23 circles in India is a huge challenge which is rare (not done by many companies), valuable (gives it control of more processes in the value chain) and costly.

5. Reputation: Airtel enjoys a good brand name and reputation in India. Bharti Airtel has the largest market share in the GSM segment. Bharti has been the front-runner in the product innovations field and has obviously been enjoying the first mover advantage. Building such reputation especially in the telecom sector is quite rare and very valuable and quite difficult to imitate.