Pricing Strategy Review in Telecom Sector (2)

PRICING STRATEGY

REVIEW in TELECOM

SECTOR

CONTENTS

S.No. Topic Page No.

1. Chapter 1: Introduction

2. Chapter 2: Research Methodology

3. Chapter 3: Industry Profile

4. Chapter 4: Analysis & Discussion

5. Chapter 5: Conclusion & Suggestion

7. Chapter 6: References

CHAPTER-1

Introduction

In the global telecommunications industry, the only constant is change. So today’s

telecommunications executive needs to understand the environment in which the

industry operates in order to make key decisions that influence the direction of

their organizations. One of the key challenges for telecommunications executives

is to extract value out of changing markets. In order for executives to forecast

market developments correctly and to determine their organization’s optimal

positioning and pricing strategy, they need a targeted, high-level strategy and

marketing training.

Telecommunications Strategy and Marketing is a programme specifically designed

to meet the needs of telecommunications executives. It helps us to understand key

concepts such as the product and technology evolution curve, the importance of

innovation – both technical and commercial – and the importance of pricing

strategies.

Key Benefits

1. Build strategic planning tools for forecasting telecommunications markets

and designing optimal positioning, pricing and distribution strategies.

2. Develop essential marketing skills targeted for the telecommunications

industry, enabling us to understand and respond to customers’ needs more

effectively.

3. Improve ability to identify opportunities, position business units and assess

the competition.

Steps Involved In Developing a Pricing Strategy

1. Development of marketing strategy

Perform marketing analysis

Segmentation

Targeting

Positioning.

2. Marketing mix decisions

Define the product

Distribution

Promotional tactics

3. Estimate the demand curve

Understand how quantity demanded varies with price. Because there exists a

relation between price and quantity demanded, it becomes quite necessary to

comprehend the impact of price on sales of a good by projecting the demand curve

for the product.

For products available in the market, experiments can be performed at prices above

and below the current price in order to determine the price elasticity of demand.

Inelastic demand indicates that price increases might be feasible.

4. Calculate cost

Include fixed and variable costs associated with the product. If the firm has

decided to launch the product, there likely is at least a basic understanding of the

costs involved; otherwise, there might be no profit to be made. The unit cost of the

product sets the lower limit of what the firm might charge, and determines the

profit margin at higher prices.

The total unit cost of a producing a product is composed of the variable cost of

producing each additional unit and fixed costs that are incurred regardless of the

quantity produced. The pricing policy should consider both types of costs.

The cost that has to be incurred includes marketing strength, access to low cost

materials and effective production. The experience of your enterprise and the

complexity of introduction problems such as lack of adherence to industry

standards, unavailability of materials, poor quality control, regulatory problems

and the inability to explain the benefits of the offering to the prospect are some of

the major problems.

5. Understand environmental factors

Evaluate likely competitor actions, understand legal constraints, etc.

6. Determine pricing

Using information collected in the above steps, select a pricing method, develop

the pricing structure, and define discounts.

These steps are interrelated and are not necessarily performed in the above order.

Nonetheless, the above list serves to present a starting framework.

Pricing Objectives

The firm's pricing objectives must be identified in order to determine the optimal

pricing. Common objectives include the following:

1. Current profit maximization - seeks to maximize current profit, taking into

account revenue and costs. Current profit maximization may not be the best

objective if it results in lower long-term profits.

2. Current revenue maximization - seeks to maximize current revenue with no

regard to profit margins. The underlying objective often is to maximize long-term

profits by increasing market share and lowering costs.

3. Maximize quantity - seeks to maximize the number of units sold or the number

of customers served in order to decrease long-term costs as predicted by the

experience curve.

4. Maximize profit margin - attempts to maximize the unit profit margin,

recognizing that quantities will be low.

5. Quality leadership - use price to signal high quality in an attempt to position

the product as the quality leader.

6. Partial cost recovery - an organization that has other revenue sources may seek

only partial cost recovery.

7. Survival - in situations such as market decline and overcapacity, the goal may

be to select a price that will cover costs and permit the firm to remain in the

market. In this case, survival may take a priority over profits, so this objective is

considered temporary.

8. Status quo - the firm may seek price stabilization in order to avoid price wars

and maintain a moderate but stable level of profit.

For new products, the pricing objective often is either to maximize profit margin or

to maximize quantity (market share). To meet these objectives, skim pricing and

penetration pricing strategies often are employed.

Skim pricing attempts to "skim the cream" off the top of the market by setting a

high price and selling to those customers who are less price sensitive. Skimming is

a strategy used to pursue the objective of profit margin maximization.

Skimming is most appropriate when:

Demand is expected to be relatively inelastic; that is, the customers are not

highly price sensitive.

Large cost savings are not expected at high volumes, or it is difficult to

predict the cost savings that would be achieved at high volume.

The company does not have the resources to finance the large capital

expenditures necessary for high volume production with initially low profit

margins.

Penetration pricing pursues the objective of quantity maximization by means of a

low price. It is most appropriate when:

Demand is expected to be highly elastic; that is, customers are price sensitive

and the quantity demanded will increase significantly as price declines.

Large decreases in cost are expected as cumulative volume increases.

The product is of the nature of something that can gain mass appeal fairly

quickly.

There is a threat of impending competition.

As the product lifecycle progresses, there likely will be changes in the demand

curve and costs. As such, the pricing policy should be reevaluated over time. The

pricing objective depends on many factors including production cost, existence of

economies of scale, barriers to entry, product differentiation, rate of product

diffusion, the firm's resources, and the product's anticipated price elasticity of

demand.

Pricing Methods

To set the specific price level that achieves their pricing objectives,

managers may make use of several pricing methods. These methods include:

Cost-plus pricing - set the price at the production cost plus a certain profit

margin.

Target return pricing - set the price to achieve a target return-on-investment.

Value-based pricing - base the price on the effective value to the customer

relative to alternative products.

Psychological pricing - base the price on factors such as signals of product

quality, popular price points, and what the consumer perceives to be fair.

In addition to setting the price level, managers have the opportunity to design

innovative pricing models that better meet the needs of both the firm and its

customers. For example, software traditionally was purchased as a product in

which customers made a one-time payment and then owned a perpetual license to

the software. Many software suppliers have changed their pricing to a subscription

model in which the customer subscribes for a set period of time, such as one year.

Afterwards, the subscription must be renewed or the software no longer will

function. This model offers stability to both the supplier and the customer since it

reduces the large swings in software investment cycles.

Price Discounts

The normally quoted price to end users is known as the list price. This price

usually is discounted for distribution channel members and some end users. There

are several types of discounts, as outlined below.

Quantity discount - offered to customers who purchase in large quantities.

Cumulative quantity discount - a discount that increases as the cumulative

quantity increases. Cumulative discounts may be offered to resellers who

purchase large quantities over time but who do not wish to place large

individual orders.

Seasonal discount - based on the time that the purchase is made and

designed to reduce seasonal variation in sales. For example, the travel

industry offers much lower off-season rates. Such discounts do not have to

be based on time of the year; they also can be based on day of the week or

time of the day, such as pricing offered by long distance and wireless service

providers.

Cash discount - extended to customers who pay their bill before a specified

date.

Trade discount - a functional discount offered to channel members for

performing their roles. For example, a trade discount may be offered to a

small retailer who may not purchase in quantity but nonetheless performs the

important retail function.

Promotional discount - a short-term discounted price offered to stimulate

sales.

CHAPTER-2

Research Methodology

To gain a perspective on the pricing strategies that are followed various firms all

over the world, a basic theoretical knowledge of the pricing strategies will be

discussed with subsequent delving into the intricacies of consumer behavior in a

heavily competitive market like telecom industry.

Objectives of study

This project seeks to fulfill the following objectives:

1. To identify the difference between market performance of Airtel industry and

Vodafone.

2. To study the market of Airtel Industry and Vodafone on big scale

telecommunication sector.

3. Understand the basic concepts of pricing strategy as an effective weapon in the

arsenal of producer.

3. To compare various parameters of pricing strategies of Airtel and Vodafone.

4. To study the various kind of pricing strategies being implemented in the market

for telecom industry.

5. To study customer buying behavior and factors which influence the purchase

decision process.

6. To know how the company has been successful in encountering the aggressive

Pricing Strategies of competitor’s.

7. To research the basic consumer perception and reaction to such pricing

strategies

Data Collection Method

Secondary Data

Secondary Data refer to the data that has been already collected and readily

available from other sources. The secondary data which has been used to carry out

this study are as follows:

Books

Company’s Profile

Newspaper

Internet

CHAPTER3

Telecom Sector In India

World telecom industry is an uprising industry, proceeding towards a goal of

achieving two third of the world's telecom connections. Over the past few years’

information and communications technology has changed in a dramatic manner

and as a result of that world telecom industry is going to be a booming industry.

Substantial economic growth and mounting population enable the rapid growth of

this industry. The telecom industry is one of the prime contributors to India's GDP.

The once monopolistic market is today, highly competitive. This has necessitated

the growth of India telecom infrastructure. The world telecommunications market

is expected to rise at an 11 percent compound annual growth rate at the end of year

2010. The leading telecom companies like AT&T, Vodafone, Verizon, SBC

Communications, Bell South, Qwest Communications are trying to take the

advantage of this growth. These companies are working on telecommunication

fields like broadband technologies, EDGE (Enhanced Data rates for Global

Evolution) technologies; LAN-WAN inter networking, optical networking,

voiceover Internet protocol, wireless data service etc. Economical aspect of

telecommunication industry: World telecom industry is taking a crucial part of

world economy. The total revenue earned from this industry is 3 percent of the

gross world products and is aiming at attaining more revenues. One statistical

report reveals that approximately 16.9% of the world population has access to the

Internet. Present market scenario of world telecom industry: Over the last couple of

years, world telecommunication industry has been consolidating by allowing

private organizations the opportunities to run their businesses with this industry.

The Government monopolies are now being privatized and consequently

competition is developing. Among all, the domestic and small business markets are

the hardest. Than 125 million telephones network is one of the largest

communication networks in world, which continues to grow at a blistering pace.

The rapid growth in the telecom sector can be attributed to the various pro-active

and positive policy measures taken by the government as well as the dynamic and

entrepreneurial spirit of the various telecom service providers both in private and

public sector. The telecom sector has shown impressive growth during the past

decade.

Today, two striking features of this growth viz. increasing preference for mobile

phones and higher contribution of private sector in the incremental growth have

predominated the telecom sector. The share of mobile phones (including WLL

mobile) has overtaken the share of landlines with 62% in the total number of

phones. The private sector's contribution is also increasing rapidly. Currently more

than 30 lakh phones are being added each month and it is targeted that by the end

of 2008 the total number of phones may reach a level of350 million taking the tele-

density to more than 30% which is currently at 24.63%.

Network Expansion: The total number of telephone subscribers has reached

281.62million at the end of January 2008 as compared to 232.87 million in July

2007. The overall tele density has increased to 23.63% in January 2008 as

compared to 21.20% in August2007.

Wireless Service: The wireless segment saw a surge of 8.77 million subscribers

last month compared to 8.17 million in December2007. This pushed the total

wireless subscribers base to 242.40 million by Jan 31 2008.

Wire line Subscribers: The wire line segment subscriber base stood at 39.73

million with a decrease of 0.16 million at the end of January 2008.

Teledensity: The gross subscriber base reached 206.83 million at the end of March

2007.The Teledensity is 24.63%at the end of January 2008 as compared to 18.31%

at the end of March 2007, registering an increase of 6%.

Increasing Role of Private Sector: The private sector has played a significant role

in the growth of telecom sector. The share of private sector has risen to 85 per cent

in December2007 from 64.14 per cent in November 2006.

Tariff Rebalancing Measures: There has been a dramatic fall in the tariffs due to

increased competition. The minimum effective charges for local calls have fallen

considerably in recent months especially for cellular service. The long distance

domestic as well as international charges have also fallen considerably.

Telecom Regulatory Authority of India (TRAI): TRAI was established under

the Telecom Regulatory Authority of India Act, 1997 enacted on March 28, 1997.

The goals and objectives of TRAI are focused towards providing a regulatory

framework that facilitates achievement of the objectives of New Technology

Policy (NTP) 1999.TRAI has endeavored to encourage greater corporation in the

telecom sector together with better quality and affordable prices.

AIRTEL

Airtel is a brand of telecommunication services in India operated by Bharti Airtel.

Airtel is the largest cellular service provider in India in terms of number of

subscribers. Bharti Airtel owns the Airtel brand and provides the following

services under the brand name Airtel: Mobile Services (using GSM Technology),

Broadband& Telephone Services (Fixed line, Internet Connectivity (DSL) and

Leased Line), Long Distance Services and Enterprise Services

(Telecommunications consulting for corporate). It has presence in all 23 circles of

the country and covers 71% of the current population (as of FY07).

Leading international telecommunication companies such as Vodafone and

SingTel held partial Vision "As we spread wings to expand our capabilities and

explore new horizons, the fundamental focus remains unchanged: seek out the best

technology in the world and put it at the service of our ultimate user: our

customer."These are the premise on which Bharti Enterprises has based its entire

plan of action. Bharti Enterprises has been at the forefront of technology and has

revolutionized Tele communications with its world-class products and services.

Established in 1985, Bharti has been a pioneering force in the telecom sector. With

many firsts and innovations to its credit, ranging from being the first mobile

service in Delhi, first private basic telephone service provider in the country, first

Indian company to provide comprehensive telecom services outside India in

Seychelles and first private sector service provider to launch National Long

Distance Services in India. Bharti had approximately 3.21 million total customers –

nearly2.88 million mobile and 334,000 fixed line customers. Its services sector

businesses include mobile operations in Andhra Pradesh, Chennai, Delhi, Gujarat,

Haryana, Himachal Pradesh, Karnataka, Kerala, Kolkata, Madhya Pradesh circle,

Maharashtra circle, Mumbai, Punjab, Tamil Nadu and Uttar Pradesh (West) circle.

In addition, it also has fixed-line operations in the states of Madhya Pradesh and

Chhattisgarh, Haryana, Delhi, Karnataka and Tamil Nadu and nationwide

broadband and long distance networks.

Bharti has recently launched national long distance services by offering data

transmission services and voice transmission services for calls originating and

terminating on most of India's mobile networks. The Company is also

implementing a submarine cable project connecting Chennai-Singapore for

providing international bandwidth.

Bharti Enterprises also manufactures and exports telephone terminals and cordless

phones. Apart from being the largest manufacturer of telephone instruments, it is

also the first telecom company to export its products to the USA. Bharti Tele-

Ventures' strategic objective is “to capitalize on the growth opportunities that the

Company believes are available in the Indian telecommunications market and

consolidate its position to be the leading integrated telecommunications services

provider in key markets in India, with a focus on providing mobile services”.

The Company has developed the following strategies to achieve its strategic

objective:

Focus on maximizing revenues and margins;

Capture maximum telecommunications revenue potential with minimum

geographical coverage;

Offer multiple telecommunications services to provide customers with a

"one-stop shop “solution;

Position itself to tap data transmission opportunities and offer advanced

mobile data services;

Focus on satisfying and retaining customers by ensuring high level of

customer satisfaction;

Leverage strengths of its strategic and financial partners; and

Emphasize on human resource development to achieve operational

efficiencies.

Businesses

Bharti Tele-Ventures current businesses include -

Mobile services

Fixed-line

National and international long distance services

VSAT, Internet services and network solutions

Broadband services with DSL and Wi-Fi network

Competitive Strengths

Bharti Tele-Ventures believes that the following elements will contribute to the

Company's success as an integrated telecommunication services provider in India

and will provide the Company with a solid foundation to execute its business

strategy:

Nationwide Footprint - approximately 92% of India's total mobile

subscribers resided in the Company's fifteen mobile circles. These 15 circles

collectively accounted for approximately 56% of India's land mass;

Focus on telecommunications to enable the Company to better anticipate

industry trends and capitalize on new telecommunications-related business

opportunities.

The strong brand name recognition and a reputation for offering high quality

service to its customers;

Quality management team with vision and proven execution skills; and

The Company's strong relationships with international strategic and financial

investors suchas SingTel, Warburg Pincus, International Finance

Corporation, Asian Infrastructure Fund

VODAFONE ESSAR

Vodafone was formed in 1984 as a subsidiary of Racal Electronics Plc. Then

known as Racal Telecom Limited, approximately 20% of the company's

capital was offered to the public in October 1988. It was fully demerged

from Racal Electronics Plc and became an independent company in

September 1991, at which time it changed its name to Vodafone Group Plc.

Following its merger with Air Touch Communications, Inc. (Air Touch), the

company changed its name to Vodafone Air Touch Plc on 29 June 1999

and, following approval by the shareholders in General Meeting, reverted to

its former name, Vodafone Group Plc, on 28 July 2000.

Vodafone Essar, previously Hutchison Essaris a cellular operator in India that

covers 16telecom circles in India Despite the official name being Vodafone Essar,

its products are simply branded Vodafone. It offers both prepaid and postpaid

GSM cellular phone coverage throughout India and is especially strong in the

major metros. Vodafone Essar provides 2G services based on 900 MHz and 1800

MHz digital GSM technology, offering voice and data services in 16 of the

country's 23 license areas. Vodafone Essar, previously Hutchison Essaris a cellular

operator in India that covers 16telecom circles in India. Despite the official name

being Vodafone Essar, its products are simply branded Vodafone. It offers both

prepaid and postpaid GSM cellular phone coverage throughout India and is

especially strong in the major metros. Vodafone Essar provides 2G services based

on 900 MHz and 1800 MHz digital GSM technology, offering voice and data

services in 16 of the country's 23 license areas stakes in Bharti Airtel.

Airtel v/s Vodafone

Airtel and Vodafone are major players in telecommunications sector in India and

abroad. Whereas Airtel is owned by Sunil Bharti Mittal, Vodafone in India is a

joint venture between Vodafone and Essar, but people know it as Vodafone only.

Airtel is far ahead of Vodafone in terms of number of customers, presence in

circles, and variety of services offered, it is Vodafone that is ahead of Airtel when

it comes to luring customers with aggressive marketing ploys. The use of the now

legendary zoozoos (animated characters) in commercials has won Vodafone

millions of new customers and admirers who don’t’ even subscribe to the

company. On the other hand, Airtel relies on superstars like Sachin Tendulakar,

Shah Rukh Khan, Kareena Kapoor, and A R Rehman to promote its services.

Airtel provides GSM, broadband internet, IPTV, DTH and telecommunications

solutions to large corporations whereas Vodafone is mainly involved with mobile

telephony. While Airtel has presence in all 23 telecom circles of the country,

Vodafone has presence in 16 circles only. Both Airtel as well as Vodafone offer

prepaid and postpaid services and both are providing 2G and 3G services to its

customers.

Strategies of Airtel and Vodafone

Target the rural India

The main targeted customers of Vodafone are from rural India. By offering cheap

and light mobile sets Vodafone attracts most of the customers of small villages and

towns.

Offering cheap handsets

Vodafone offers cheap and free connections to all customers. The cost for these

sets was Rs-799-849-1099\set and onward.

Free support and services

In every district and big towns Vodafone opens its service centers to provide better

support and services.

Strong logistics and supply chain

Vodafone has a strong logistic and supply all over India.In every small town the

potential customers can easily purchase the Vodafone SIM & Sets.

Targeting youngsters in metropolitans

Vodafone attracts youngsters by offering colorful handset at very low prices.

Market segmentation

Geographical segment (rural India)

Demographic segment - middle income groups

Target marketing

People living in small towns and villages.

Poor and middle income groups.

Youngsters in big cities.

Businessmen

Positioning

Creating brands

Ads and promotions

Marketing mix

Price : low price strategy

Place : maximum outlets and service centers

Product : verities available for various groups

Promotion: various schemes for pre-paid and post-paid

Services Provided

By Bharti Airtel

Mobile services with GSM technology

Fixed-line connections

National and international long distance services

VSAT, Internet services and network solutions

Broadband services

By Vodafone

mobile services with GSM technology

fixed-line telephone services

Universal Internetworking

VoIP (Voice over Internet Protocol)

Interactive Television

Visual Communication

Broadband Portal

Brand associations:

Airtel: It is perceived to be reliable player which has good connectivity and an

India roll-out. People value it for its consistency in providing network services. It

scores high on internet usage and easy recharge facility too. But it fares poorly on

flexibility in plan change and call cost are considered to be on higher side.

Vodafone: it also scores high on the connectivity option but also has a good public

image of providing VAS. It scores low on call rates (it means high call rates), on

internet usage and plan flexibility.

Market Share

These are the total market share of mobile user or people captured by the mobile

provider company. There two major company in mobile phone service sector

Vodafone and Airtel who respectively hold the market share with other company

as 17% and 20% of total market user segment of mobile customer.

CRITERIA AIRTEL VODAFONEMinimum recharge voucher

Rs-15/Talktime-Rs8

Rs-10/Talktime-7

Minimum message card coupon

Rs-34340 messages per month

Rs-35350

Message card Rs-8816000msg per month

Rs-89

New SIM card cost(minimum)

Rs-60 With talk time of Rs-

Rs-40 to 60

Airtel 5 and Vodafone Bonus

Airtel Special Five Plan:

Airtel Special 5 is a new product from Airtel Mobile which offers very low calling

rates for your Special 5 Airtel Mobile numbers. You can maintain your Special 5

numbers, which could be those Airtel mobile numbers you call the most. Up to 5

Airtel mobile numbers can be enrolled as Special 5 feature.

For prepaid connections, Local Airtel to Airtel calls are charged 20 paisa per

minute and STD Airtel to Airtel calls are 50 paisa per minute. Special Five tariffs

are not applicable while roaming. Prepaid Customer can change his special 5

mobile numbers up to 5 times in a Month. Rs 5 will be charged for every number

change.

Postpaid is available only on Special 5 bill plan. Benefits will be applicable post

bill plan migration which will take effect from the nearest next bill cycle.

Vodafone Daily Bonus (Rs-4)

This is a typical brainchild of telecom czars to have come up with innovative usage

plans that slowly and gradually sucks up Rs.4 on a daily basis from your talk time.

For the subscribers of Mumbai, Delhi, Rajasthan, Tamil Nadu, Gujarat and some

other circles Vodafone has come out with four different plans of Rs.4 each,

dedicated to SMS and Call services, both.

Vodafone Rs. 4 Tariff Plan

Tariff Plans (All schemes of Rs.4/-) Validity

100 local / national SMS 1 day

8 local / STD minutes (Any network) 1 day

Local Vodafone calls @20 ps/minutes 1 day

Night Calling 40 minutes (11 pm to 8 am) 1 day

For the above tariff schemes, the Vodafone customers can subscribe to any of the

plans priced at Rs.4/- with validity of 1 day, depending upon their desirable usage

profile. You simply need to have a minimum balance of Rs.4 in your prepaid

account to activate this daily validity pack. But, are such budget chota packet

recharge plans really cheap? Not really, if you calculate Rs.4 deduction from your

overall balance spanning across the month, it sums up to Rs.120 for a 30 day

period. Your prepaid balance will be lower by Rs.120/- per month, irrespective of

whether you use the desired plan on a daily basis or not.

CHAPTER 4

ANALYSIS AND DISCUSSION

Implications for consumers

2%

87%

9% 2% 1%

Age Group

UNDER 1515-2525-3535-4545+

The population that mainly of the age group from 15-25. The primary reason that

this group came to be the biggest contributor is that people belonging to this age

group are the ones who actively engage in deciding their choices. Mainly

constituting of students going to schools and colleges these are the ones who are

most aware of the currently available plans, different pricing schemes from

different operators and are most susceptible to changing operators if and when they

get a better choice based on their criterion like call rates, network connectivity and

several other reasons.

People belonging to age group 45 and above are the ones who are quite set in their

routine; they had taken their connection based on advice and were unaware of

better schemes available from other operators. They seemed to be quite happy with

their operators and were not interested in changing their service providers once

MNP (Mobile Number Portability) sets foot in India

63%

37%

GENDER

MaleFemales

Majority of males who were interested in knowing more about the currently

prevailing plans and showed more knowledge of the schemes than their female

counterparts. Female population was less knowledgeable about the different

operator plans currently available in the market but was major spenders compared

to their male counter parts. The average billing estimate for female population was

more than Rs. 500 per month while the average bill/recharge for male population

lied in the range Rs. 200-500. This showed overall indifference of female

population towards the advertising campaigns from various operators therefore

special steps can be taken to take them active consumers as in they decide in the

process of choosing an operator according to their needs.

73%

15%

10% 2%

Occupation

StudentSelf-EmployedSalariedOther

Majority of students and not the salaried category though general sense dictates

that it should be the other way round. A reason that can be given about the above

phenomenon is that salaried consumer working in a firm is provided with a

connection by the company itself and therefore has no say in buying the

connection. Students on the other hand, mainly staying away from homes for

studying purpose, take a better informed decision after consulting with their peers.

They are more engaged in the process of choosing the best plan for themselves to

minimize costs.

Implications for Industry

AIRTEL

VODAFONE

IDEA

MTNL

RELIANCE

TATA DOCOMO

OTHERS

0 5 10 15 20 25

1

SERVICE PROVIDER

SERVICE PROVIDER

Bharti Airtel emerged as the major player in the market wide ranging popularity

from students as well as working population. It is the largest cellular provider in

India, and also supplies broadband and telephone services - as well as many other

telecommunications services to both domestic and corporate customers. It has

found acceptance from corporate sector using the blackberry services right up to

the lowly skilled labor class which has to move a lot depending on the work. It

shows that the brand image of Airtel is more of reliability operator which provides

excellent service. This is in spite of the fact that call rates for Airtel is at a premium

compared to other emerging operators like idea and reliance.

Vodafone is the next big operator which has a good market share. It lags behind

Airtel because it is perceived to have less no. of plans and schemes which alienate

people. An effective strategy here for Vodafone would be better market penetration

tactics which will build its image as Vodafone already has competitive services

available to counter Airtel.

Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea

Cellular to create a new independent tower company called Indus Towers.This new

business will control more than 60% of India's network towers. IPTV is another

potential new service that could underpin the company's long-term strategy.

55%

25%

15% 5%

Monthly Usage

< Rs 200Rs 200-500Rs 500-1000> Rs 1000

Monthly usage pattern of the consumers that vary from Rs.50–500 with Rs, 500-

1000 being the next most popular category. It shows that the respondents were

users with good income or family support and were able to spend more.

60%25%

15%

AMOUNT OF RECHARGE

Small Top Up (<= Rs. 50 )Medium Top Up ( Rs. 50-500 )Large Top Up (>= Rs. 500 )

Moreover the trend showed that people in favor of weekly or monthly recharges.

On basis of this the pricing strategy can be improvised to provide support packs

with higher call value available for weekly duration so that the consumer get an

incentive to purchase more talk time.

Implications for Business Managers

SWOT ANALYSIS

Strengths

Being one of the largest companies in India the company has achieved a

degree of focus in its core business of its products.

It has a strong brand name, superior quality products and an enviable

distribution network.

It has a clear and well-defined organization structure and limits of financial

authority.

Increase in advertisement spends affect the company’s margins.

The company‘s bottom line falls victim to the bloated and highly paid

workforce, which affects its margins.

Weakness

Little efforts over the Advertising of products.

Distribution channel is not accurately categorized.

Premium priced products, hence can’t compete in low price segment.

No separate strategy for rural market.

Opportunities

The company's financial performance can receive a major boost from its cost

reduction efforts.

There is a lot of scope of product and market diversification.

Exports of products will also have huge chances in the coming years.

Airtel’s business has ample scope for gaining market share from the

unorganized sector. Rural penetration too holds vast potential to bring about

growth.

Threats

The slowdown in the economy has restricted topline growth of most FMCG

majors and for Airtel also it will be difficult to maintain historical growth

rates in such a depressed scenario.

Company’s major raw materials are influenced by government policies /

controls as well as vagaries of the monsoons. Fluctuations in the prices of

raw materials would have significant impact on costs and margins of the

company.

Moreover, inordinate hike in Broad Band Internet products would also

increases company’s production and distribution cost.

CHAPTER-5

Conclusion & Suggestions

Conclusion

Based on the study the following points can be concluded:

After analyzing the findings of the study we concluded that Airtel emerged has the

clear cut market leader with well thought out segmentation of market i.e. the target

is business person but lagged behind its competitors as far as customer service and

availability is concerned. Maximum no. of people spends RS 500 on their

connections. As Airtel is the only company having the maximum no of mobile

connections so it must seriously look into the loop holes of the existing customer

service department.

As we know that now Airtel has already launched its product with logo “Aisia

zaadiaurkahan” has already became popular in market. So we can say that in spite

of so many competitors in the market Airtel is having a good position just because

every time, it tries its best to understand the need of its important customers.

From the comparison and deep analysis of every aspect of business of both the

companies we can conclude that Bharti Airtel has to more work in every field of

communication business.

It is the time not only to survive but to sustain in the market for a long time.

For this Airtel has to work on its all marketing strategies, marketing, promotion,

brand image.etc.

Airtel has to take Vodafone. Very seriously and update its own strategies from

time to time and when the need arises.

With aggressive marketing strategies Airtel has to target rural India as 70% of

population of India lives in these areas. The other segment may be costumers of all

age groups.

There are specific set of targets that a company needs to achieve e.g. Airtel fares

well on connectivity option but low on call rates. Therefore a well thought out

strategy needs to be evaluated by each operator to achieve maximum possible

expansion.

Value added propositions like weeklong-extra value add-on packs can prove to be

successful strategy to boost revenue. It may help company expand and once the

market matures, the move towards higher revenue services can be made.

Suggestions

Following are the few suggestions for improving the market share and image of the

products concerned.

Modification must be brought about in AIRTEL, in terms of quality. Its

demand should be increased.

The brands must be made available easily in, PCO & general stores.

Company must undertake extensive promotional activities like

advertisements must be released in different Medias to create brand

awareness.

Free samples should be distributed among the prospects. Sales promotion

tools like gifts, contests and coupons must be given to retailers as well as

customers and prospects.

Catalogues should be distributed among customers.

Price should be as competitive as other company maintains

Distribution of new connection should be in reach of customer pocket

CHAPTER-6

References

Book:

Principles of Marketing –Philip Kotler & Kevin keller

Websites:

http://www.airtel.in/wps/wcm/connect/about+bharti+airtel/bharti+airtel/

about+bharti+airtel/

http://en.wikipedia.org/wiki/Vodafone_Essar

http://marketingteacher.com/lesson-store/lesson-pricing.html

http://www.differencebetween.com/difference-between-airtel-and-vs-

vodafone/