Five Forces - Vodafone

Five forces analysis

The telecommunication services market will be analysed taking:

* fixed line and wireless service providers as players

* individual and corporate end-users as key buyers

* telecommunications equipment providers as key suppliers

Buyer power

The small number of large incumbent players and the high number of buyers, such as the consistent international demand for communication and the popularity of telecommunication services, weaken buyer power as the loss of a single customer will not impact greatly on market players and the market remains relatively unaffected by the weakening economy.

On the other hand the low level of product differentiation that leave players competing on quality, reliability, brand awareness, functionality and value pricing, and the low customer loyalty (buyers are largely price-driven) strengthen buyer power.

Switching costs vary, and include the difficulty of leaving a long-term service contract early and the cost of unlocking a locked SIM card.

Overall, buyer power is assessed to be moderate.

Supplier power

This market is characterized by large companies which may:

* own and operate their own physical network (the so called asset based carriers). Their suppliers are usually a limited number of large companies, granting them an extremely strong position within the market.

* use telecom services offered by virtual network operator by purchasing access to an asset based carriers’ hardware. Their suppliers are network owners which once again are large companies.

Switching costs with this market are often high, as exiting long term supply contracts can be difficult. This is mitigated by the fact that specialized suppliers are dependent on the income from the telecoms industry. National governments, in the form of regulatory authorities, are also important in this market, as they are the sole suppliers of bandwidth and licenses are allocated through periodic auctions.

Supplier power is assessed...