Strategic Management BBMM506
Thus, to understand the profitability of the industry, managers opt for Porter’s Five Forces as the most effective strategic management tool. This paper explores how Telstra Corporation’s managers can apply Porter’s Five Forces to examine how the competitive forces can influence its performance in the telecommunication industry. Besides, it provides for real-time recommendations aimed at boosting Telstra competitive advantage and long-term gain. Therefore, this paper aims to develop a strategic plan to enhance the survival of Telstra Corporation amid the stiff competition. Table of Contents Introduction 3 Porter’s Five Forces Analysis 4 The Bargaining Power of Suppliers: 5 Threats of Substitutes: 6 The threat of New Entrants: 6 Buyers’ Bargaining Power 7 Rivalry among Competing Firms 8 Key Findings and Recommendations 8 Introduction Telstra is one of the leading and the most established telecommunication companies in Australia.
In fact, experts have shown that there is concern among the competing firms regarding the rate at which the country is witnessing advanced evolution in the technical and communication fields. Although challenging, the companies have understood the driving factors such as innovation, competition, and the changing customer needs and wants. Therefore, for Telstra to remain relevant and profitable in the global market, its managers need to focus on strategies and policies highlighted by Michael Porter. Porter’s Five Forces Analysis Michael Porter was a renowned economist and a strategist as well. He designed a framework that, for years now, has been useful in investigating the competition levels existing in any selected industry. Thus, most competitors such as Vodafone depend on leasing network capacity from Telstra, giving it a full market control of up to 94.
Dobbs 2014). Although it has enjoyed this position for a while now, most of the firms in this industry have began sourcing for their raw materials from different distributors hence, likely to manipulate the capability of the Telstra to remain outstanding in the market. For instance, in the case of significant suppliers, Telstra may not be in a position to regulate its prices as the suppliers show stronger negation command within the same market – telecommunication. As a result, these suppliers will lower the overall profit margin garnered by crucial companies like Telstra. In fact, the Australian telecom market has high levels of barriers for new businesses to make their way into the industry. However, over the past few years, Optus has gained an expansive base resulting from more than 6 million customers, 30% margins, and a free cash flow of up to 500 million (Du Preez and Van Zyl 2015).
Well, the Australian telecommunication company has limited access to most willing business entities but this does not mean Telstra is safe. Actually, among the four players – Optus, Vodafone, Hutchison and the Telstra, the introduction of new outlets especially the multimedia division has brought significant pressure to Telstra. The Optus Vision which is part of this strategy has resulted to a growth of up to 22% of the total revenue invested by the four companies. Ideally, Australia is not as much populated as other major developed countries, enhancing the capability of the buyers to decide on what products they consume. Although this remains a threat to most firms especially with the increasing demands from customers such as discounts, Telstra can still address it using the following strategies: First, by building a broader customer base, Telstra be able to streamline its production and sales.
Secondly, to launch new products that focus on customer perspective and desires. It will divert the attention of the consumers from demanding discounts from the established products. Rivalry among Competing Firms: Intensive rivalry among competing companies is detrimental to the profitability of businesses in the industry. Secondly, there is moderate threat originating from the availability of substitutes due to established brands that continue to circumnavigate the Australian market. Thirdly, the Australian telecommunication industry faces the low potential of new entrants due to strong policies that have created barriers to new companies. Besides, customers enjoy high bargaining powers, hence, giving them a leeway to determine which company’s they chose their products. Finally, as opposed to buyers’ capability, the suppliers, on the other hand, have the moderate influence on the decision they make regarding what they distribute to their customers.
Overall, Telstra can enhance its corporate structure intending to rationalizing its specific segments. SA Journal of Industrial Psychology, 41(1), pp. Gerrand, P. The Trollope of Australian telecommunications. Australian Journal of Telecommunications and the Digital Economy, 4(3), p. Kempster, S.
From $10 to earn access
Only on Studyloop