Poter’s Five Forces Model: This framework is developed by Michael Porter in 1979 and it enables an organization to analyse the effectiveness of five competitive forces on the profitability and efficiency of their business. This model is used by BT Group for attaining the competitive advantage by formulating effective strategic planning. This organization is one of the largest telecommunication operators in the UK operating its business globally in over 170 countries. Factors of ‘Porter’s five forces model in context to this firm are demonstrated below-
Threat of new entrance: The sustainability of a firm is affected by ability of new ventures to enter into the market. Threat of new entrants is low in context to BT Group as an entrance into the telecommunication industry requires high capital investment. Even the regulatory requirements for entering of new players in such an industry is complex. As these factors serve as a barrier for new entrance which provides a competitive advantage to the existing companies. Even the firm has a loyal customer base which further strengthens its sustainability in the market and makes entrance challenging to newcomers.
Bargaining power of suppliers: This force is used to analyse the availability of suppliers of company’s required input in the market. If there are a low number of suppliers available than it will be easy for them to increase prices of product as bargaining power of company is reduced, on the contrary, large number of suppliers increase the bargaining power of a firm. In context of BT Group, bargaining power of suppliers is moderate. It stabilizes the negotiating strength of suppliers because of which cost of raw materials purchased will be minimized and hence profitability of the business will increase.
Bargaining power of Buyers: It refers to the pressure of business faces due to its customers which leads a firm to provide high-quality service at low prices with better query handling services. In the perspective of BT Group, the bargaining power of buyers is high because the switching cost for the product is low and there is a large number of sellers available in the market. Market knowledge of the customers are increasing and they are becoming more price-sensitive one of the major reason behind this is availability of standardised product or services in this global era. Hence, it serves as a threat to a company.
Rivalry among competitors: It focuses on operations of existing competitors of business into the market. Sales of the company are highly affected by the existence of competitive rivalry. Existing competitors of BT Group are- Orange, Telenor, Vadafone, Telekom, Deutsche,
Telefonica and Virgin Group. Marketing campaigns and price cuts these competitors have a huge impact on a firm. Hence, rivalry among competitors is high for this organization which can be avoided or minimized by increasing product innovation and R&D among businesses.
Threat of substitute goods: When the need of customers is satisfied by some new products it is indicated as ‘Threat of substitute goods’ in business. Substitute of products provided by BT Group are desktops, chatbots, but still, they cannot provide the same benefits as demanded by users. Hence, the threat of substitute goods is very low for businesses because no viable substitute is available in the market that provides expected benefits at a competitive price.Order Now