Pricing structure is a complicated issue in the industry. The two major diversified firms (Telstra and Optus) often combine different types of telecommunications products into bundles. These bundles are set at price points depending on their characteristics. For individual products, plans are used with pricing dependent on the characteristics of the plans (allowable usage, types of usage, etc.).
For place, the primary method of marketing is through stores, both own-branded and third-party. These stores market the telecommunications devices and the plans that go along with those products. Optus utilizes Optus World, Network Communications, Strathfield, Telechoice and Allphones to market its products. At times, hardware can be an important component of the place offering. Optus has linked with both the iPhone and the Blackberry in order to attract customers of those two popular devices.
Technological development is a key demand driver in the business. For most its existence, Optus has largely rented its carrying capacity from Telus and was dependent on that network. The company became embroiled in a battle between Telstra and the ACCC with regards to the development of broadband technology, Optus having one proposal for this development and Telstra another (Sutton, 2007). Optus is now going on its own, as one of the SingTel subsidiaries testing the parent company's next generation technology.
Customer service has long been considered a driver of competition in the telecommunications industry. Service standards are low, and consumers often express dissatisfaction with customer service at many telecommunications firms, especially Optus and Telstra. Optus outsources much of its service function to India and has a complex system of response that makes receiving strong customer service difficult.
Competitive Environment Analysis
The competitive environment in the Australian telecommunications industry is intense. Entry to the market is in part regulated by the ACCC, and for most segments the competition takes an oligopolistic form. The relevance of the competitive environment is that it helps to dictate the desirability of the industry to existing and new players. Michael Porter's Five Forces model can be used to explain the competitive environment by analyzing the wide range of factors that contribute to that environment's attractiveness (QuickMBA, 2007). The five forces are buyer power, supplier power, barriers to entry, threat of substitutes and degree of rivalry.
Supplier power in the industry is low. One of the main suppliers in the Australian telecommunications industry is Telstra, who manage the networks and lease them to the private firms in the industry. In order to ensure that Telstra does not overcharge their direct competitors, the rates at which Telstra leases the lines are dictated by the ACCC. Thus, Telstra is almost no pricing power over the lines, especially given the ACCC's desire to encourage competition in the industry.
Buyer power is relatively low. Buyers have little bargaining power and do not buy in volume. They are price sensitive, but the oligopolistic nature of the industry and the managing of rates by the ACCC means that consumers are, for the most part, price takers. The industry's concentration is high, leaving the buyer with few options. The entire mobile market, for example, is divided among three firms (Telstra, Optus and VHA). Buyers are often locked into contracts with high fees for leaving, which reduces their buying power for the duration of the contract.
There are high barriers to entry. Access to the industry is regulated by the ACCC. Technically, the ACCC encourages competition and since firms simply rent capacity from Telstra, the barriers to entry may be assumed to be low. However, there are significant economies of scale in the industry, especially with respect to service and marketing and this has limited the number of active telecommunications firms. Most firms in the industry operate in minor niches, and only a small handful of firms operate in the major segments. Retaliation against new entrants is expected to be high, due to the intense battles for market share and the value of economies of scale. For mobile, the fixed resource of bandwidth is a major constraint that poses a substantial barrier to entry for new firms.
The threat of substitutes is low. Most substitutes for telecommunications products come in the form of other telecommunications products. Two firms, Telstra and Optus, compete in all segments of the industry. Therefore, these firms are able to command the market for each potential substitute. There are few viable substitutes for the immediacy of telecommunications.
The intensity of rivalry is high. There are high exit barriers, in particular because the major firms in the industry are principally engaged in the telecommunications business. There are high fixed costs, in particular for Telstra, meaning that they will continue to be active in the market. Industry growth is low, as both the fixed and mobile telephony markets are saturated. As a result, existing firms are mainly competing to win market share from one another. There are few product differences -- they are all based on the same technology and the same delivery concepts (bundles,...
Reynolds and Bowie (2004) show that the three most important criteria of a Kant-based ethics system are to "act as though the maxim of your action were to…become a universal law of nature," to "act so that you treat humanity…always as an end and never as a means only" and "act as if your maxims should serve at the same time as universal law for all rational beings." These
The in-store staff makes up the bulk of the service, but they are also actively engaged in the sales function. The telephone service staff at VHA has been largely relocated to India and Tasmania in the wake of the merger (Zappone, 2009). Consumer complaints in the industry have seen a dramatic rise of late (Cellular News, 2009). The maintenance function requires a degree of technical skill. The main focus of
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