Changing Business Environment In India- Group 9 154m49
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THE CHANGING BUSINESS ENVIRONMENT OF INDIA Presentation by: Sukeerat Gill Vijay Pal Singh Viney Singh Tushar Malhotra (Group 9)
1
Part 1- What is Business Environment and its factorsSukeerat (1-20) Part 2- Investing in the new IndiaVijay Pal (21-62)
Part 3- Telecom IndustryViney (63-81) Part 4- Case Study- Airtel (changing business environment)Tushar (82-112) 2
BASIC CONCEPT
Business environment refers to the total of all things external to firms ands industries which affect their organization and operation. Business environment encomes the climate or set of conditions, economic, social, political, or institutional in which business operations are conducted. 3
NATURE OF BUSINESS ENVIRONMENT
AGGREGATIVE- Business environment is the totality of all the external forces which influence the working and decision-making of an enterprise. INTER-RELATED- Different elements of business environment are closely interrelated and interdependent. RELATIVE- Business environment is a relative concept. It differs from country to country even region to region. 4
CONTD…
INTER-TEMPORAL-Business environment is also an inter-temporal concept as it changes over time. UNCERTAIN- Business environment is largely uncertain because it is very difficult to forecast the future environment. CONTEXTUAL- Business environment provides the macro framework within which the business firm operates. 5
Types of Business Environment Internal
External
Culture Mission & Objectives
Micro
Top Management Structure Power Structure
Macro
Company Image & Brand Equity Human & Other Resources
6
Elements of Micro Environment
Customers Competitors Suppliers Marketing Intermediaries Financiers Publics
7
Elements of Macro Environment
Political & Legal Social & Cultural Economic Financial Technological & Physical Natural Global 8
SIGNIFICANCE OF BUSINESS ENVIRONMENT
FIRST MOVER ADVANTAGE- Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors. EARLY WARNING SIGNAL- Environmental awareness makes a firm aware of impending crises so that the firm can take timely action. CUSTOMER FOCUS- Environmental understanding makes the management sensitive to the changing needs and expectations of customers. STRATEGY FORMULATION- Environmental monitoring provides relevant information which serves as basis for strategy making.
9
CONTD…
CHANGE AGENT- Business leaders acts as agents of change by understanding the aspiration of people and other environmental forces through environmental scanning. PUBLIC IMAGE- A business firm can improve its image by showing that it is sensitive to its environment and responsive to the aspirations of public. CONTINUOS LEARNING- Environmental analysis serves as broad based and ongoing education for business executives. 10
Environmental Analysis
Environmental analysis is the process through which an organization monitors and comprehends various environmental forces so as to determine the opportunities and threats that lie ahead. Environmental analysis will help you understand what is happening both inside and outside your organization and to increase the probability that the organizational strategies you develop will appropriately reflect your organizational environment. 11
Process of BEA Scanning
Monitoring
Diagnosis
Forecasting
12
Importance of BEA
Linkage between environment and organization Threats and opportunities Serves as warning signal Organization equilibrium Strategic decision making
13
Limitations of BEA
Based on assumptions Not absolute truth Time consuming Expensive
14
SWOT Analysis
PEST Analysis
15
S W O T
: : : :
Strengths Weaknesses Opportunities Threats
SWOT analysis are undertaken by business at the start of planning. 16
A SWOT starts with an external analysis of the business environment, called a PEST Analysis. P : Political E : Economical S : Socio-Culture T : Technological
17
Taxation policy Industrial policy Privatization/ Deregulation Ruling party‟s rules and regulations
18
Demographics Changing values in society Changes in consumer tastes and preferences Levels of education
19
Alternative means of providing services Government and Industrial expenditure on R & D Changing communications technology New production technology
20
INVESTING IN THE NEW INDIA A Different World
PRESENTED BY:VIJAY PAL SINGH
21
Characteristics of the New India 1.
2. 3.
4.
5.
Liberalized markets Stable & low inflation High & broad based economic growth Internationally competitive corporate sector Young and educated workforce 22
Characteristics of the New India-Continued 6.
7. 8. 9.
A rapidly growing middle class Rising foreign direct investments Democracy and the rule of law New business opportunities
23
India – A Compelling Investment Story
3 key facts
1. Economic liberalization has unleashed corporate India Unleashed dynamic corporate culture after 40 years of state control New home grown companies fuelling export boom 2. Favorable demographics fueling growth Sixty percent of India is working population Growth in middle class: 300 million strong 3. Domestic consumption boom is the engine driving growth 24
As A Result
India on a sustainable growth path, established by strong economic indicators: World’s 4th largest economy, GDP of US $ 1 trillion 8-9% GDP growth over the last 5 years and is expected to grow at 5.5-6% even during recession In the last decade --among the top 6 fastest growing economies Now it is the second fastest growing economy in the world Indian economy has doubled since 1991 Foreign exchange reserves in excess of US $ 240 billion 25
A Strong Economy
India today is a much stronger economy with 67.5% of GDP contributed by private consumption • Growing foreign exchange reserves (at $240 bn) • Longer term rupee is expected to strengthen India has the potential to become the 3rd largest economy in the world by 2032 ( Goldman Sachs). By 2050, expected to be the second largest economy in the world—ahead of the US
26
Economic Liberalization
Balance of Payments crisis in 1991 forced liberalization of economy Reforms have decreased restrictions on FDI and opened competition in most industries • Improved the overall investment climate by liberalizing many restrictions on investment, including foreign investment, repatriation of profits, deregulating interest rates, and opening up the insurance sector to private sector participation Declining Rates of Taxes and Import Tariffs • Rationalizing the tax regime, including lowering tariff barriers, simplifying the trade regime, reducing marginal tax rates, and simplifying tax 27 procedures
Liberalization--continued
Deregulation of Industries
• Simplifying the process of setting up businesses. In particular, the business licensing requirement has been abolished for most industries.
Reducing the role of government in industry Privatization is hesitant but deliberate and methodical to minimize dislocations Developing the infrastructure sector by encouraging private participation in power, telecom, ports, and roads, and reforming the power sector to improve efficiencies. Implementing labor reforms, including amendments to the Industrial Disputes Act allowing easier closure and layoffs of workers in economically unviable companies, and changes in the wage ceilings set in the Payment and Wages Act
28
Monetary Policy/Inflation
Sound monetary policy has provided an environment for real growth Low money supply growth has provided a stable inflationary and hence growth environment Despite occasional spikes the general trend in inflation has been down Inflation currently at around _% pa 29
Diversification of Economic Growth
Economic growth is increasingly diversified across several sectors Unlike the past, growth is not restricted to just a few sectors Decreasing dependency on agriculture India is rapidly becoming both, a manufacturing and a services driven economy 30
Economic Growth DiversifiedContinued
Growth in manufacturing = 12.3% pa and services = 11% pa Vibrant and dynamic private sector While China has grown through FDI and a topdown approach, India has grown through entrepreneurship. Because India still has retained some capital controls, the Indian economy is less susceptible to international shocks than China 31
Consistent Growth
Consistent growth-- over 8% in the last 5 years Greater consumer confidence has increased the willingness to borrow. However, consumer finance is still in nascent stages. Due to low loan penetration, consumer lending has a tremendous potential for growth
32
Demographics—Key to Growth
54% of Indian population under 25 years 80% under 45 years 25% of all people under 25 years in world are in India India’s youth bulge and recent job creation is leading to consumption driven growth The younger generations’ habits differ greatly from the previous generations’, causing radical shifts in consumption patterns 33
Demographics--continued
By 2013, net addition to the productive population (aged 25-44 years ) will be 91 million or 33% increase. the share of the working age population (15-64 years) in total population will grow from the current 59% to about 65%, translating into 882 million by year 2020. India also has a large number of young graduates with strong technical and English language skills A young highly skilled workforce is powering India’s high value industries.
34
Demographics--continued
According to the Vision 2020 document of the Planning Commission of India, the country will witness continued urbanization. The urban population is expected to rise from 28% cent to 40% of total population by 2020. Future growth is likely to be concentrated in and around 60 -- 70 large cities having a population of one million or more A whole new consumer class A rapidly growing middle-class 35
A Vibrant Middle Class
Key driver for investment opportunities is the growth of the middle class •Increased from 10% to 22% of population from 1990-2008 •Expected to grow from 22 % to 48% from 2008-2015 India is China with a 5 to10 year lag. 36
A Rapidly Growing Middle Class
Over the years, spending power has steadily increased in India. Over the next five-seven years, 180 million people are expected to move into the consuming and very rich classes. (= 2/3 of US population) On average, 30-40 million people are ing the middle class every year 37
Education– A Driving Force
Government spending on education has doubled in the past three decades The number of universities has more than trebled over the same period Education is driving the development of advanced industries such as • Information technology, engineering and pharmaceuticals
The availability of a skilled workforce is encouraging foreign companies to set up research and development facilities in India As well as call centers and other outsourced services 38
Policy Reversals?
Policy reversals highly unlikely India will continue on current liberalization path It is expected that the Indian economy will grow by at least 6-7% a year for the next 10 years ? More than twice as fast as the US, the UK or Europe. 39
What Does All This Mean?
Higher savings, higher investment, higher growth and higher profits in the next decade Represents huge consumption spending in of the demand for mobile phones, televisions, scooters, cars, and other consumer goods A consumption pattern associated with rising incomes Growth is not constrained by future liabilities associated with ing an ageing population as in many developed countries Tremendous investment opportunities to earn high returns on capital by participating in the growth momentum that exists in India
40
Implications of Changes
These changes in the Indian business scenario coupled with broad-based economic growth, have resulted in investment opportunities across a variety of industries and across various stages of company growth cycles Factors such as high productivity, high quality systems and processes, as well as the significant labor-cost arbitrage, form the long-term basis of India’s competitive advantage. Recent reforms will accelerate growth in these areas and offer attractive opportunities for investments from the US.
41
Changing Face of Indian Companies • •
• •
India is now among the lowest cost producers of several commodities (e.g. steel, aluminum, cement, autos, auto ancillaries, pharmaceuticals) Indian IT has shown how it can become globally competitive. Corporate India acquiring companies globally in order to scale up. Tata – Corus steel; many other examples Corporate earnings growth of 20% +
42
Which industries? Where Are the Opportunities?
Indian industry is rapidly becoming a key outsourcing partner to global companies in areas such as • business services • pharmaceutical research and development • design and manufacture of original automotive parts.
43
Opportunities-Continued
Originally, these partnerships because of low labor costs, but increasingly Indian firms are being tapped for their expertise in various highend disciplines including • • • • •
IT system architecture Product design Process re-engineering Financial analysis Specialized engineering 44
Opportunities in Internationally Competitive Industries
Industries that have the greatest potential to be India’s most internationally competitive industries: • • • • • • •
Technology Engineering Telecommunication products Automobiles and automobile ancillaries Textiles Semiconductor design, and Life sciences (pharmaceuticals; biotech) 45
Foreign Direct Investments
As a result of all the various changes mentioned, foreign direct investment (FDI) in India amounted to over $ 247.292 bn(March23 ,2009) .
46
FDI by Sectors--Opportunities
Sectors that have attracted the highest FDI flows are: • • • • • • • • • •
Services sector Electrical equipment Telecommunications Transportation Power +Oil refineries Chemicals Construction Drugs & Pharmaceuticals Food Processing Housing & Real estate
47
Is Political Uncertainty a Problem? No
Several (five?) coalition Governments since economic reforms started in 1991. But no difference to continuation of economic reforms Debate now on the speed of economic liberalization, not the direction Reforms can always be faster, but….learn to live with political reality Political uncertainty mostly a problem for the politicians. Rapid economic growth will continue
48
Politics--Continued
Unlikely that India will have single party rule in the near future Current government a coalition between Congress Party and the other smaller/regional parties Coalition politics not necessarily a minus a long term reality
49
Resulting in A Much Better Investment Environment
Indian saver is a huge under-investor in Indian equities – only 3 million investors, but over 30 million individuals file income tax returns Equities is a better place to invest; because •
Better tax environment
Short term capital gains tax reduced to 10%
Valuations are not cheap but are fair compared to the earnings growth
50
Opportunities in the Equity Markets
Infrastructure-- Critical to the continued success of India Opportunities in power, cement and construction Consumer Goods-- Compelling demographics Opportunities in tea, sugar, retail, real estate, hotels IT – stable companies with steady growth in mandates Engineered products – low labor plus high skilled workforce Pharma – world class companies with compelling cost advantage
51
In Summary
Markets may have run up, but India story far from over Economic growth to sustain over 10 year time horizon Valuations are keeping pace with growth Indian markets more stable compared to other emerging markets Markets in the short term could be volatile and could correct further Every correction an opportunity to build a long term portfolio 52
Infrastructure Investments
Critical sector for India’s economic growth Infrastructure investment will further raise growth • Investments of $ 400+ Billion over next few years • Critical to removing bottle necks which are constraining growth
Stimulate economy further by spreading growth to underserved rural areas • Rural roads critical for agriculture growth 53
Benefits of Investments
Several benefits associated with infrastructure investments in India. Specific tax exemptions and concessions available Prolonged Income Tax Holidays and other direct and indirect tax concessions Automatic permission is available for investments and repatriation. 54
Benefits (Continued)
Sustained liberalization of investment policy . Availability of domestic capital, both debt and equity. Unprecedented allocations by the Central Government from the budget for Infrastructure sector Resulting in major initiatives by prominent global players from US, Europe, Japan, Korea, Taiwan in infrastructure projects
55
Attractive Business Opportunities In
Oil and Gas
• Midstream & downstream • Refineries • Pipelines
Telecoms
• Wireless/mobile telephony • Email/internet • Videoconferencing
Power
• Generation/transmission/distribution • Renewable energy (solar, wind, biomass)
Airports
• Construction/operation/upgrading of existing airports • New airports
56
Attractive Business Opportunities—Cont.
Ports
• Leasing of existing assets • Construction/operation – terminals, cargo berths, storage facilities
Roads • • • •
Expressways Widening existing roads Bridges Toll roads
Railways
• Equipment manufacture • Construction • Operation & management
Real estate
• Integrated townships • Commercial malls • Hotels—particularly 3 star
57
What Can Go Wrong?
Infrastructure bottlenecks could put brake on growth Potential for political instability: coalition government, tensions with Pakistan Stronger currencies in US and EU could impact emerging market inflows Foreign investor outflow would hurt valuations and liquidity Corporate governance and transparency need to improve Interest rates have risen and bear watching Economic benefits and better education need to filter down to the lower income citizens and rural poor Spread of HIV virus Looming water shortages
58
Considerations for Doing Business in India 1.
2.
Local Presence is critical • Choose a local partner to help you through all problems • Experience in navigating the complexities and intricacies of the Indian markets • Ability to identify attractive opportunities • Access to high quality management • Assist in getting myriad of government permits and licenses, even now, after all the liberalization Strong network important • Who you know is very important—provide key insights into political and economic matters • Will enable you to identify tomorrow’s opportunities
59
Considerations—(Cont’d) 3.
4.
5. 6.
Understand that things just take longer to transact even when permissions are there. Indians act on their own time schedule Be prepared for a culture shock--the sheer size and enormity of India's social problems should not put you off-- solving these may actually be a long term business opportunity ―Yes‖ does not always mean ―yes‖ and ―no‖ does not always mean ―no‖– and a ―no‖ headshake means ―yes‖ Important to maintain sensitivity to local sensibilities e.g. religion, caste, and particularly Indian paranoia about being spoken "down" to by the West (a colonial hangover) 60
Considerations—(Cont’d) 7.
8. 9.
10.
Power/infrastructure bottlenecks Corruption Strong labor unions/boisterous workforce Democracy can be a source of delays too
61
Make the breakthrough
But once you can break through the Indian barriers, the opportunities to make profits are enormous - higher than in China. India is a real value creator for investors
62
TELECOM INDUSTRY Presented by- Viney Singh
63
Introduction Telecom in the real sense means transfer of information between two distant points in space Telecom is a huge and varied fastness of technologies, companies, services that is truly global in nature
Telecom stands as one of the most essential elements of the business world in of “Connecting the World”
64
History of Telecom Industries
65
Cont…………..
66
Overview of Telecom Industies
Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers. 67
The Indian telecom sector can be broadly classified into Fixed Line Telephony and mobile telephony. The major players of the telecom sector are experiencing a fierce competition in both the segments. The major players like BSNL, MTNL, VSNL in the fixed line and Airtel, Vodafone, Idea, Tata, Reliance in the mobile segment are coming up with new tariffs and discount schemes to gain the competitive advantage. The Public Players and the Private Players share the fixed line and the mobile segments. Currently the Public Players have more than 70% of the market share.
68
India
India has a 700 million people living in 638,000 villages • per-capita income of $ 0.40 per day)
As per DoT statistics 500,000 villages have telephone access.
69
Growth of Telecom in India
70
Growth of Telecom in India
1994 National Telecom Policy – 1994 announced Aug 1995 Kolkata became the first metro to have a cellular network 1997 Telecom Regulatory Authority of India was setup
March 1999 Policy – 99
National Telecom announced
71
Growth of Telecom in India
2000 TRAI Act amended & separate tribunal proposed Jan 2001 TDSAT started functioning
Jan 2001 Limited mobility allowed to Basic Services (CDMA spectrum allotted to Basic Service Operators)
72
Growth of Telecom in India
Oct-2002 BSNL entered in to GSM cellular operation w.e.f 19th October, 2002. Made incoming call free & initiated tariff equalization process Tariff for GSM cellular mobiles reduced
73
Teledensity-Rural & Urban Teledensity 70 60
Rural
Urban
60.04
Total
50
48.52
40
39.45
30
26.88 23.21
20.74
20
7.9
5.88
1.73
1.86
2007(Nov)
Year
7.02 1.57
2007
5.11 1.49
2006
4.29 1.21
8.95
2005
3.58 0.93
18.31 12.74
2004
12.2
2003
1999
0
2000
6.94 2.32 0.52
10.37
2002
8.36 2.86 0.68
2001
10
14.32
74
Mobile Services : Fuelling the growth Nov-06
Nov-07 39.31 15%
40.35 22%
143.11 78%
Fixed Line
Fixed Line
Wireless
Wireless 225.46 85%
Total telephone connections as on November 2006: 183.46 million November 2007: 264.77 million
75
Role Of TRAI & TDSAT in Indian Telecom Growth TRAI Setup in 1997 Protection of Consumer Interest Nurture Conditions for Growth of Telecom in India Major Activities • Reduced levies on Operators. • Reduced upper limit in tariff (Local, STD & ISD) and other Inter-operators tariffs. • Policy guidelines on new services like 3G, WiMAX, Internet Telephony.
76
Role Of TRAI & TDSAT in Indian Telecom Growth
TDSAT An integrated & comprehensive dispute settlement mechanism.
Set up on 29th May 2000 & started hearing w.e.f. Jan 2001
83% cases disposed off from 2001 till 2007
TRAI & TDSAT provided healthy atmosphere for healthy growth of Telecom sector (Teledensity from 1.57 in 1997 to 24 in December 2007)
77
78
Opportunities Rural tele-density is less than 10%. Overall tele-density is only 24%. Broadband penetration is just 0.25%, hence vast scope. As globalization is increasing, more percentage of global business for Indian telecom. Technologies like 3G, WiMAX, will open up new frontier of business.
79
Challenges
No. of operators are increasing per circle: hence more competition
Cost/ Customer is very high in rural areas Spectrum – a scare commodity
Availability of Contents in local language
Telecom Manufacturing in India.
80
Growth- the way ahead • Network expansion – 250 million by 2007 - Already achieved – 600 million by 2012
• Rural connectivity – 100 million by 2010 – 200 million by 2012
• Broadband – 20 million broadband connections and 40 million internet connections to provide by 2010 – Broadband connections to provide on demand across the country by 2012
81
BHARTI AIRTEL Presented by- Tushar
82
AIRTEL Established in 1995 by Sunil Mittal, Airtel is the largest telecom service provider in Indian telecom sector. With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total market share of GSM service providers. Providing GSM services in all the 23 circles, Airtel was the first private player in telecom sector to connect all states of India. Also, Airtel is the first mobile service provider to introduce the
83
Success Story of BHARTI
Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields of business It all began as a Small Industry Bharti Tele-Ventures is today acknowledged as one of India's finest companies, and its flagship brand 'Airtel', has over 12 million customers across India Recently, Bharti has successfully launched an international venture with EL Rothschild Group owned ELRO Holdings India Ltd., to export fresh Agri- products exclusively to markets in Europe and USA
84
84
Market Strategy of Airtel
We positioned Airtel as an inspirational and lifestyle brand, in a way that trivialized the price in the mind of the consumer. It was pitched not merely as a mobile service, but as something that gave him a badge value. Airtel strategy is to be a leader in -Innovations -network -offers and services 85
Competitive Analysis (Positioning Strategy)
Vodafone has veered towards warmth and emotions. Vodafone used the powerful visual imagery of a dog.
Airtel is focused on functionally and efficiency. Airtel choose to use music, which is not nearly as effective.
86
Competitive Analysis (Target Audience)
They are targeting middle class person as their target audience. It can be justified by their product like chota recharge.
A group or class of persons enjoying superior intellectual or social or economic status
Up market professionals
87
Vision 2010
By 2010 Airtel will be the most ired brand in India: • Loved by more customers • Targeted by top talent • Benchmarked by more businesses
88
Vision 2020 To build India's finest business conglomerate by 2020 ing education of underprivileged children through Bharti Foundation Strategic Intent:
• To create a conglomerate of the future by bringing about “Big Transformations through Brave Actions.” 89
Mission
“ We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more”
90
Company History
1995 – mobile service brand in Delhi and HP and BT acquires a stake. 1996-97 – Formed Bharti BT VSAT Ltd. 2001-02 – Launches IndiaOne , 8 new licenses in the East, becomes largest operator, launches Airtel tune 2003-04 – Association with Ericsson, IBM. 2006-07 – Forays into Sri Lanka and US, tie up with Google and Microsoft 91
Subsidiary Companies Bharti Hexacom Bharti Comtel Bharti Aquanet Bharti Broadband Bharti Infratel Bharti Telemedia Bharti Airtel(UK,US,Canada, Hongkong, USA, Lanka)
92
Share Capital
Rs 8,340.15 million raised through the IPO 2002 Went Public Shares in issue • 1,898,101,604 as at September 30, 2008 Market Capitilization • Approx. Rs. 1,371 billion P/E • 19.98 EPS
• 36.16
93
Some Key highlights… Amount in Rs. Balance Sheet Cr Total Share 1897.91 Capital Net Worth 20241.49 Total Debt 6570.34 Investments Net Current Assets Total Assets
Income (Sep '08) (Mar '08) Statement 10952.85 Quarterly Annual 8274.37 25703.51 -5922.94 Net Sales Other 28.43 235.86 26811.84 Income PBDIT 3151.06 10736.89 94 Net Profit 1604.78 6244.20
Subscriber Growth Group Company wise % market share - Nov'2008 Name of Total Sub Sr, No. % Market Share Company Figures 1 Bharti Airtel 8,29,20,593 33.25% 2 Vodafone Essar 5,87,64,164 23.57% 3 BSNL 4,04,87,511 16.24% 4 IDEA 3,28,09,720 13.16% 5 Aircel 1,53,75,258 6.17% Reliance 6 Telecom 95,82,695 3.84% 7 Spice 37,05,894 1.49% 8 MTNL 38,21,277 1.53% 9 BPL 18,82,324 0.75% 95 All India 24,93,49,436 100.00%
Customer Growth across the years Year
Overall Subscriber Airtel Subscriber Base Base
Market Share
Mar-04
2,61,54,405
42,16,317
16.12087
Mar-05
4,10,25,940
1,04,78,585
25.54136
Mar-06
6,91,93,321
1,95,79,208
28.29638
Mar-07
12,14,31,166
3,71,41,210
30.58623
Mar-08
18,44,13,702
6,19,84,721
33.61178
96
Income and Expenditure(Rs. Cr) 30000
25,874.20
25000
Big Margin
20000 17,987.30
15107.75
15000
11,272.22 10000 6,446.06
10621.14
7206.71
5,156.34
5000
63.15 0 Mar '04
35.76
Total Income (Rs. Cr.) Mar '05
Mar '06
Mar '07
Mar '08 Total Expenses (Rs. Cr.)97
Operating Profit (Rs. Cr.) Operating Profit (Rs. Cr.)
10662.41
7260.54
2997.67 27.22 Mar '04
Mar '05
4038.57
Mar '06
Mar '07
Mar '08 98
For the current year
86%
• Customer Growth Rate
58%
• Increase in Revenue
79%
• Increase in EBITDA
100%
• Growth in Profit
99
TARGETING Elite Up market professionals Entrepreneur with business plans Low income mass category Youth Women and senior citizens by post paid connection
100
“Express Yourself” In 2003, Airtel repositioned its brand with “Express yourself” campaign Changed its logo to give more energetic and younger look Highlight capability of Airtel‟s performance and network coverage Launched in regional language
101
THE FIRST MOVER ADVANTAGE Electronic recharge Hello tunes Airtel Live! Portfolio manager Song catcher Easy music Black berry handsets
102
Competitor Analysis Competitor Analysis 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Bharti
Rcom
IDEA
Best OP Margins & Net Profit Margins among Peers
MTNL
OP Margin Company
Sep-07
Sep-08
Net Margin Sep-07
Sep-08
Bharti
43.00%
38.00%
26.40%
19.30%
Rcom
37.90%
31.60%
23.90%
13.20%
IDEA
32.80%
26.60%
14.10%
6.50%
MTNL
23.70%
22.90%
7.00%
6.80%
Source: CMIE November 2008
103
Threat of New Entrants Low Because Huge License Fees to be paid upfront & High gestation period Spectrum Availability & Regulatory Issues Infrastructure Setup Cost - High Rapidly changing technology Previously Low, Now High
104
Threat of New Entrants High Because Entry through 3G New Entrants are ready to enter with Huge Capital Considering the attractiveness of the market New Entrants from Non telecom companies with the ease of Previously Low, Now Outsourcing High
105
SWOT Strengths
Largest Telecom Player in India - ~80Mn, 22.6% Market Leader Strong Leadership – Sunil Bharti Mittal Recognized Globally Strong Financials Focus on Core Activities – Outsource the rest Strong Brand Image – Marketing Team
Weakness
Outsourcing of Core Systems Little bit expensive
106
SWOT Opportunities Bharti Infratel –
Cutting Down cost in Rural area Current Tele-Density – 30.6 is still low among developing countries Low Broadband Penetration, Rural Telephoney
Threats
India centric – Major revenues from India Intense Competition & Shortage of Bandwidth New Players coming in India Uncertain Economic conditions 107
Strategy Partner with leading players in telecommunication across the globe. Managed to work with the best of domain specialists globally and emerge as a world class entity. Operational contracts with strategic investors ranging from private equity investors to global telecom giants.
108
Outsourcing deals in 2004 Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel„s then 13 mobile circles. IBM was given the mandate to handle the back office requirements of Airtel‟s presence in India
109
Performance till date Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets – Ambani‟s, Tata‟s, Birla‟s and Vodafone. Has coped well with regulatory changes.
110
Future Strategies
Translate its expertise in Indian markets to other emerging economies. This could call for acquisitions globally. Technology leadership is a must – Airtel must ensure that its reliance on GSM technology does not render it obsolete. Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited. 111
112
1
Part 1- What is Business Environment and its factorsSukeerat (1-20) Part 2- Investing in the new IndiaVijay Pal (21-62)
Part 3- Telecom IndustryViney (63-81) Part 4- Case Study- Airtel (changing business environment)Tushar (82-112) 2
BASIC CONCEPT
Business environment refers to the total of all things external to firms ands industries which affect their organization and operation. Business environment encomes the climate or set of conditions, economic, social, political, or institutional in which business operations are conducted. 3
NATURE OF BUSINESS ENVIRONMENT
AGGREGATIVE- Business environment is the totality of all the external forces which influence the working and decision-making of an enterprise. INTER-RELATED- Different elements of business environment are closely interrelated and interdependent. RELATIVE- Business environment is a relative concept. It differs from country to country even region to region. 4
CONTD…
INTER-TEMPORAL-Business environment is also an inter-temporal concept as it changes over time. UNCERTAIN- Business environment is largely uncertain because it is very difficult to forecast the future environment. CONTEXTUAL- Business environment provides the macro framework within which the business firm operates. 5
Types of Business Environment Internal
External
Culture Mission & Objectives
Micro
Top Management Structure Power Structure
Macro
Company Image & Brand Equity Human & Other Resources
6
Elements of Micro Environment
Customers Competitors Suppliers Marketing Intermediaries Financiers Publics
7
Elements of Macro Environment
Political & Legal Social & Cultural Economic Financial Technological & Physical Natural Global 8
SIGNIFICANCE OF BUSINESS ENVIRONMENT
FIRST MOVER ADVANTAGE- Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors. EARLY WARNING SIGNAL- Environmental awareness makes a firm aware of impending crises so that the firm can take timely action. CUSTOMER FOCUS- Environmental understanding makes the management sensitive to the changing needs and expectations of customers. STRATEGY FORMULATION- Environmental monitoring provides relevant information which serves as basis for strategy making.
9
CONTD…
CHANGE AGENT- Business leaders acts as agents of change by understanding the aspiration of people and other environmental forces through environmental scanning. PUBLIC IMAGE- A business firm can improve its image by showing that it is sensitive to its environment and responsive to the aspirations of public. CONTINUOS LEARNING- Environmental analysis serves as broad based and ongoing education for business executives. 10
Environmental Analysis
Environmental analysis is the process through which an organization monitors and comprehends various environmental forces so as to determine the opportunities and threats that lie ahead. Environmental analysis will help you understand what is happening both inside and outside your organization and to increase the probability that the organizational strategies you develop will appropriately reflect your organizational environment. 11
Process of BEA Scanning
Monitoring
Diagnosis
Forecasting
12
Importance of BEA
Linkage between environment and organization Threats and opportunities Serves as warning signal Organization equilibrium Strategic decision making
13
Limitations of BEA
Based on assumptions Not absolute truth Time consuming Expensive
14
SWOT Analysis
PEST Analysis
15
S W O T
: : : :
Strengths Weaknesses Opportunities Threats
SWOT analysis are undertaken by business at the start of planning. 16
A SWOT starts with an external analysis of the business environment, called a PEST Analysis. P : Political E : Economical S : Socio-Culture T : Technological
17
Taxation policy Industrial policy Privatization/ Deregulation Ruling party‟s rules and regulations
18
Demographics Changing values in society Changes in consumer tastes and preferences Levels of education
19
Alternative means of providing services Government and Industrial expenditure on R & D Changing communications technology New production technology
20
INVESTING IN THE NEW INDIA A Different World
PRESENTED BY:VIJAY PAL SINGH
21
Characteristics of the New India 1.
2. 3.
4.
5.
Liberalized markets Stable & low inflation High & broad based economic growth Internationally competitive corporate sector Young and educated workforce 22
Characteristics of the New India-Continued 6.
7. 8. 9.
A rapidly growing middle class Rising foreign direct investments Democracy and the rule of law New business opportunities
23
India – A Compelling Investment Story
3 key facts
1. Economic liberalization has unleashed corporate India Unleashed dynamic corporate culture after 40 years of state control New home grown companies fuelling export boom 2. Favorable demographics fueling growth Sixty percent of India is working population Growth in middle class: 300 million strong 3. Domestic consumption boom is the engine driving growth 24
As A Result
India on a sustainable growth path, established by strong economic indicators: World’s 4th largest economy, GDP of US $ 1 trillion 8-9% GDP growth over the last 5 years and is expected to grow at 5.5-6% even during recession In the last decade --among the top 6 fastest growing economies Now it is the second fastest growing economy in the world Indian economy has doubled since 1991 Foreign exchange reserves in excess of US $ 240 billion 25
A Strong Economy
India today is a much stronger economy with 67.5% of GDP contributed by private consumption • Growing foreign exchange reserves (at $240 bn) • Longer term rupee is expected to strengthen India has the potential to become the 3rd largest economy in the world by 2032 ( Goldman Sachs). By 2050, expected to be the second largest economy in the world—ahead of the US
26
Economic Liberalization
Balance of Payments crisis in 1991 forced liberalization of economy Reforms have decreased restrictions on FDI and opened competition in most industries • Improved the overall investment climate by liberalizing many restrictions on investment, including foreign investment, repatriation of profits, deregulating interest rates, and opening up the insurance sector to private sector participation Declining Rates of Taxes and Import Tariffs • Rationalizing the tax regime, including lowering tariff barriers, simplifying the trade regime, reducing marginal tax rates, and simplifying tax 27 procedures
Liberalization--continued
Deregulation of Industries
• Simplifying the process of setting up businesses. In particular, the business licensing requirement has been abolished for most industries.
Reducing the role of government in industry Privatization is hesitant but deliberate and methodical to minimize dislocations Developing the infrastructure sector by encouraging private participation in power, telecom, ports, and roads, and reforming the power sector to improve efficiencies. Implementing labor reforms, including amendments to the Industrial Disputes Act allowing easier closure and layoffs of workers in economically unviable companies, and changes in the wage ceilings set in the Payment and Wages Act
28
Monetary Policy/Inflation
Sound monetary policy has provided an environment for real growth Low money supply growth has provided a stable inflationary and hence growth environment Despite occasional spikes the general trend in inflation has been down Inflation currently at around _% pa 29
Diversification of Economic Growth
Economic growth is increasingly diversified across several sectors Unlike the past, growth is not restricted to just a few sectors Decreasing dependency on agriculture India is rapidly becoming both, a manufacturing and a services driven economy 30
Economic Growth DiversifiedContinued
Growth in manufacturing = 12.3% pa and services = 11% pa Vibrant and dynamic private sector While China has grown through FDI and a topdown approach, India has grown through entrepreneurship. Because India still has retained some capital controls, the Indian economy is less susceptible to international shocks than China 31
Consistent Growth
Consistent growth-- over 8% in the last 5 years Greater consumer confidence has increased the willingness to borrow. However, consumer finance is still in nascent stages. Due to low loan penetration, consumer lending has a tremendous potential for growth
32
Demographics—Key to Growth
54% of Indian population under 25 years 80% under 45 years 25% of all people under 25 years in world are in India India’s youth bulge and recent job creation is leading to consumption driven growth The younger generations’ habits differ greatly from the previous generations’, causing radical shifts in consumption patterns 33
Demographics--continued
By 2013, net addition to the productive population (aged 25-44 years ) will be 91 million or 33% increase. the share of the working age population (15-64 years) in total population will grow from the current 59% to about 65%, translating into 882 million by year 2020. India also has a large number of young graduates with strong technical and English language skills A young highly skilled workforce is powering India’s high value industries.
34
Demographics--continued
According to the Vision 2020 document of the Planning Commission of India, the country will witness continued urbanization. The urban population is expected to rise from 28% cent to 40% of total population by 2020. Future growth is likely to be concentrated in and around 60 -- 70 large cities having a population of one million or more A whole new consumer class A rapidly growing middle-class 35
A Vibrant Middle Class
Key driver for investment opportunities is the growth of the middle class •Increased from 10% to 22% of population from 1990-2008 •Expected to grow from 22 % to 48% from 2008-2015 India is China with a 5 to10 year lag. 36
A Rapidly Growing Middle Class
Over the years, spending power has steadily increased in India. Over the next five-seven years, 180 million people are expected to move into the consuming and very rich classes. (= 2/3 of US population) On average, 30-40 million people are ing the middle class every year 37
Education– A Driving Force
Government spending on education has doubled in the past three decades The number of universities has more than trebled over the same period Education is driving the development of advanced industries such as • Information technology, engineering and pharmaceuticals
The availability of a skilled workforce is encouraging foreign companies to set up research and development facilities in India As well as call centers and other outsourced services 38
Policy Reversals?
Policy reversals highly unlikely India will continue on current liberalization path It is expected that the Indian economy will grow by at least 6-7% a year for the next 10 years ? More than twice as fast as the US, the UK or Europe. 39
What Does All This Mean?
Higher savings, higher investment, higher growth and higher profits in the next decade Represents huge consumption spending in of the demand for mobile phones, televisions, scooters, cars, and other consumer goods A consumption pattern associated with rising incomes Growth is not constrained by future liabilities associated with ing an ageing population as in many developed countries Tremendous investment opportunities to earn high returns on capital by participating in the growth momentum that exists in India
40
Implications of Changes
These changes in the Indian business scenario coupled with broad-based economic growth, have resulted in investment opportunities across a variety of industries and across various stages of company growth cycles Factors such as high productivity, high quality systems and processes, as well as the significant labor-cost arbitrage, form the long-term basis of India’s competitive advantage. Recent reforms will accelerate growth in these areas and offer attractive opportunities for investments from the US.
41
Changing Face of Indian Companies • •
• •
India is now among the lowest cost producers of several commodities (e.g. steel, aluminum, cement, autos, auto ancillaries, pharmaceuticals) Indian IT has shown how it can become globally competitive. Corporate India acquiring companies globally in order to scale up. Tata – Corus steel; many other examples Corporate earnings growth of 20% +
42
Which industries? Where Are the Opportunities?
Indian industry is rapidly becoming a key outsourcing partner to global companies in areas such as • business services • pharmaceutical research and development • design and manufacture of original automotive parts.
43
Opportunities-Continued
Originally, these partnerships because of low labor costs, but increasingly Indian firms are being tapped for their expertise in various highend disciplines including • • • • •
IT system architecture Product design Process re-engineering Financial analysis Specialized engineering 44
Opportunities in Internationally Competitive Industries
Industries that have the greatest potential to be India’s most internationally competitive industries: • • • • • • •
Technology Engineering Telecommunication products Automobiles and automobile ancillaries Textiles Semiconductor design, and Life sciences (pharmaceuticals; biotech) 45
Foreign Direct Investments
As a result of all the various changes mentioned, foreign direct investment (FDI) in India amounted to over $ 247.292 bn(March23 ,2009) .
46
FDI by Sectors--Opportunities
Sectors that have attracted the highest FDI flows are: • • • • • • • • • •
Services sector Electrical equipment Telecommunications Transportation Power +Oil refineries Chemicals Construction Drugs & Pharmaceuticals Food Processing Housing & Real estate
47
Is Political Uncertainty a Problem? No
Several (five?) coalition Governments since economic reforms started in 1991. But no difference to continuation of economic reforms Debate now on the speed of economic liberalization, not the direction Reforms can always be faster, but….learn to live with political reality Political uncertainty mostly a problem for the politicians. Rapid economic growth will continue
48
Politics--Continued
Unlikely that India will have single party rule in the near future Current government a coalition between Congress Party and the other smaller/regional parties Coalition politics not necessarily a minus a long term reality
49
Resulting in A Much Better Investment Environment
Indian saver is a huge under-investor in Indian equities – only 3 million investors, but over 30 million individuals file income tax returns Equities is a better place to invest; because •
Better tax environment
Short term capital gains tax reduced to 10%
Valuations are not cheap but are fair compared to the earnings growth
50
Opportunities in the Equity Markets
Infrastructure-- Critical to the continued success of India Opportunities in power, cement and construction Consumer Goods-- Compelling demographics Opportunities in tea, sugar, retail, real estate, hotels IT – stable companies with steady growth in mandates Engineered products – low labor plus high skilled workforce Pharma – world class companies with compelling cost advantage
51
In Summary
Markets may have run up, but India story far from over Economic growth to sustain over 10 year time horizon Valuations are keeping pace with growth Indian markets more stable compared to other emerging markets Markets in the short term could be volatile and could correct further Every correction an opportunity to build a long term portfolio 52
Infrastructure Investments
Critical sector for India’s economic growth Infrastructure investment will further raise growth • Investments of $ 400+ Billion over next few years • Critical to removing bottle necks which are constraining growth
Stimulate economy further by spreading growth to underserved rural areas • Rural roads critical for agriculture growth 53
Benefits of Investments
Several benefits associated with infrastructure investments in India. Specific tax exemptions and concessions available Prolonged Income Tax Holidays and other direct and indirect tax concessions Automatic permission is available for investments and repatriation. 54
Benefits (Continued)
Sustained liberalization of investment policy . Availability of domestic capital, both debt and equity. Unprecedented allocations by the Central Government from the budget for Infrastructure sector Resulting in major initiatives by prominent global players from US, Europe, Japan, Korea, Taiwan in infrastructure projects
55
Attractive Business Opportunities In
Oil and Gas
• Midstream & downstream • Refineries • Pipelines
Telecoms
• Wireless/mobile telephony • Email/internet • Videoconferencing
Power
• Generation/transmission/distribution • Renewable energy (solar, wind, biomass)
Airports
• Construction/operation/upgrading of existing airports • New airports
56
Attractive Business Opportunities—Cont.
Ports
• Leasing of existing assets • Construction/operation – terminals, cargo berths, storage facilities
Roads • • • •
Expressways Widening existing roads Bridges Toll roads
Railways
• Equipment manufacture • Construction • Operation & management
Real estate
• Integrated townships • Commercial malls • Hotels—particularly 3 star
57
What Can Go Wrong?
Infrastructure bottlenecks could put brake on growth Potential for political instability: coalition government, tensions with Pakistan Stronger currencies in US and EU could impact emerging market inflows Foreign investor outflow would hurt valuations and liquidity Corporate governance and transparency need to improve Interest rates have risen and bear watching Economic benefits and better education need to filter down to the lower income citizens and rural poor Spread of HIV virus Looming water shortages
58
Considerations for Doing Business in India 1.
2.
Local Presence is critical • Choose a local partner to help you through all problems • Experience in navigating the complexities and intricacies of the Indian markets • Ability to identify attractive opportunities • Access to high quality management • Assist in getting myriad of government permits and licenses, even now, after all the liberalization Strong network important • Who you know is very important—provide key insights into political and economic matters • Will enable you to identify tomorrow’s opportunities
59
Considerations—(Cont’d) 3.
4.
5. 6.
Understand that things just take longer to transact even when permissions are there. Indians act on their own time schedule Be prepared for a culture shock--the sheer size and enormity of India's social problems should not put you off-- solving these may actually be a long term business opportunity ―Yes‖ does not always mean ―yes‖ and ―no‖ does not always mean ―no‖– and a ―no‖ headshake means ―yes‖ Important to maintain sensitivity to local sensibilities e.g. religion, caste, and particularly Indian paranoia about being spoken "down" to by the West (a colonial hangover) 60
Considerations—(Cont’d) 7.
8. 9.
10.
Power/infrastructure bottlenecks Corruption Strong labor unions/boisterous workforce Democracy can be a source of delays too
61
Make the breakthrough
But once you can break through the Indian barriers, the opportunities to make profits are enormous - higher than in China. India is a real value creator for investors
62
TELECOM INDUSTRY Presented by- Viney Singh
63
Introduction Telecom in the real sense means transfer of information between two distant points in space Telecom is a huge and varied fastness of technologies, companies, services that is truly global in nature
Telecom stands as one of the most essential elements of the business world in of “Connecting the World”
64
History of Telecom Industries
65
Cont…………..
66
Overview of Telecom Industies
Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers. 67
The Indian telecom sector can be broadly classified into Fixed Line Telephony and mobile telephony. The major players of the telecom sector are experiencing a fierce competition in both the segments. The major players like BSNL, MTNL, VSNL in the fixed line and Airtel, Vodafone, Idea, Tata, Reliance in the mobile segment are coming up with new tariffs and discount schemes to gain the competitive advantage. The Public Players and the Private Players share the fixed line and the mobile segments. Currently the Public Players have more than 70% of the market share.
68
India
India has a 700 million people living in 638,000 villages • per-capita income of $ 0.40 per day)
As per DoT statistics 500,000 villages have telephone access.
69
Growth of Telecom in India
70
Growth of Telecom in India
1994 National Telecom Policy – 1994 announced Aug 1995 Kolkata became the first metro to have a cellular network 1997 Telecom Regulatory Authority of India was setup
March 1999 Policy – 99
National Telecom announced
71
Growth of Telecom in India
2000 TRAI Act amended & separate tribunal proposed Jan 2001 TDSAT started functioning
Jan 2001 Limited mobility allowed to Basic Services (CDMA spectrum allotted to Basic Service Operators)
72
Growth of Telecom in India
Oct-2002 BSNL entered in to GSM cellular operation w.e.f 19th October, 2002. Made incoming call free & initiated tariff equalization process Tariff for GSM cellular mobiles reduced
73
Teledensity-Rural & Urban Teledensity 70 60
Rural
Urban
60.04
Total
50
48.52
40
39.45
30
26.88 23.21
20.74
20
7.9
5.88
1.73
1.86
2007(Nov)
Year
7.02 1.57
2007
5.11 1.49
2006
4.29 1.21
8.95
2005
3.58 0.93
18.31 12.74
2004
12.2
2003
1999
0
2000
6.94 2.32 0.52
10.37
2002
8.36 2.86 0.68
2001
10
14.32
74
Mobile Services : Fuelling the growth Nov-06
Nov-07 39.31 15%
40.35 22%
143.11 78%
Fixed Line
Fixed Line
Wireless
Wireless 225.46 85%
Total telephone connections as on November 2006: 183.46 million November 2007: 264.77 million
75
Role Of TRAI & TDSAT in Indian Telecom Growth TRAI Setup in 1997 Protection of Consumer Interest Nurture Conditions for Growth of Telecom in India Major Activities • Reduced levies on Operators. • Reduced upper limit in tariff (Local, STD & ISD) and other Inter-operators tariffs. • Policy guidelines on new services like 3G, WiMAX, Internet Telephony.
76
Role Of TRAI & TDSAT in Indian Telecom Growth
TDSAT An integrated & comprehensive dispute settlement mechanism.
Set up on 29th May 2000 & started hearing w.e.f. Jan 2001
83% cases disposed off from 2001 till 2007
TRAI & TDSAT provided healthy atmosphere for healthy growth of Telecom sector (Teledensity from 1.57 in 1997 to 24 in December 2007)
77
78
Opportunities Rural tele-density is less than 10%. Overall tele-density is only 24%. Broadband penetration is just 0.25%, hence vast scope. As globalization is increasing, more percentage of global business for Indian telecom. Technologies like 3G, WiMAX, will open up new frontier of business.
79
Challenges
No. of operators are increasing per circle: hence more competition
Cost/ Customer is very high in rural areas Spectrum – a scare commodity
Availability of Contents in local language
Telecom Manufacturing in India.
80
Growth- the way ahead • Network expansion – 250 million by 2007 - Already achieved – 600 million by 2012
• Rural connectivity – 100 million by 2010 – 200 million by 2012
• Broadband – 20 million broadband connections and 40 million internet connections to provide by 2010 – Broadband connections to provide on demand across the country by 2012
81
BHARTI AIRTEL Presented by- Tushar
82
AIRTEL Established in 1995 by Sunil Mittal, Airtel is the largest telecom service provider in Indian telecom sector. With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total market share of GSM service providers. Providing GSM services in all the 23 circles, Airtel was the first private player in telecom sector to connect all states of India. Also, Airtel is the first mobile service provider to introduce the
83
Success Story of BHARTI
Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields of business It all began as a Small Industry Bharti Tele-Ventures is today acknowledged as one of India's finest companies, and its flagship brand 'Airtel', has over 12 million customers across India Recently, Bharti has successfully launched an international venture with EL Rothschild Group owned ELRO Holdings India Ltd., to export fresh Agri- products exclusively to markets in Europe and USA
84
84
Market Strategy of Airtel
We positioned Airtel as an inspirational and lifestyle brand, in a way that trivialized the price in the mind of the consumer. It was pitched not merely as a mobile service, but as something that gave him a badge value. Airtel strategy is to be a leader in -Innovations -network -offers and services 85
Competitive Analysis (Positioning Strategy)
Vodafone has veered towards warmth and emotions. Vodafone used the powerful visual imagery of a dog.
Airtel is focused on functionally and efficiency. Airtel choose to use music, which is not nearly as effective.
86
Competitive Analysis (Target Audience)
They are targeting middle class person as their target audience. It can be justified by their product like chota recharge.
A group or class of persons enjoying superior intellectual or social or economic status
Up market professionals
87
Vision 2010
By 2010 Airtel will be the most ired brand in India: • Loved by more customers • Targeted by top talent • Benchmarked by more businesses
88
Vision 2020 To build India's finest business conglomerate by 2020 ing education of underprivileged children through Bharti Foundation Strategic Intent:
• To create a conglomerate of the future by bringing about “Big Transformations through Brave Actions.” 89
Mission
“ We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more”
90
Company History
1995 – mobile service brand in Delhi and HP and BT acquires a stake. 1996-97 – Formed Bharti BT VSAT Ltd. 2001-02 – Launches IndiaOne , 8 new licenses in the East, becomes largest operator, launches Airtel tune 2003-04 – Association with Ericsson, IBM. 2006-07 – Forays into Sri Lanka and US, tie up with Google and Microsoft 91
Subsidiary Companies Bharti Hexacom Bharti Comtel Bharti Aquanet Bharti Broadband Bharti Infratel Bharti Telemedia Bharti Airtel(UK,US,Canada, Hongkong, USA, Lanka)
92
Share Capital
Rs 8,340.15 million raised through the IPO 2002 Went Public Shares in issue • 1,898,101,604 as at September 30, 2008 Market Capitilization • Approx. Rs. 1,371 billion P/E • 19.98 EPS
• 36.16
93
Some Key highlights… Amount in Rs. Balance Sheet Cr Total Share 1897.91 Capital Net Worth 20241.49 Total Debt 6570.34 Investments Net Current Assets Total Assets
Income (Sep '08) (Mar '08) Statement 10952.85 Quarterly Annual 8274.37 25703.51 -5922.94 Net Sales Other 28.43 235.86 26811.84 Income PBDIT 3151.06 10736.89 94 Net Profit 1604.78 6244.20
Subscriber Growth Group Company wise % market share - Nov'2008 Name of Total Sub Sr, No. % Market Share Company Figures 1 Bharti Airtel 8,29,20,593 33.25% 2 Vodafone Essar 5,87,64,164 23.57% 3 BSNL 4,04,87,511 16.24% 4 IDEA 3,28,09,720 13.16% 5 Aircel 1,53,75,258 6.17% Reliance 6 Telecom 95,82,695 3.84% 7 Spice 37,05,894 1.49% 8 MTNL 38,21,277 1.53% 9 BPL 18,82,324 0.75% 95 All India 24,93,49,436 100.00%
Customer Growth across the years Year
Overall Subscriber Airtel Subscriber Base Base
Market Share
Mar-04
2,61,54,405
42,16,317
16.12087
Mar-05
4,10,25,940
1,04,78,585
25.54136
Mar-06
6,91,93,321
1,95,79,208
28.29638
Mar-07
12,14,31,166
3,71,41,210
30.58623
Mar-08
18,44,13,702
6,19,84,721
33.61178
96
Income and Expenditure(Rs. Cr) 30000
25,874.20
25000
Big Margin
20000 17,987.30
15107.75
15000
11,272.22 10000 6,446.06
10621.14
7206.71
5,156.34
5000
63.15 0 Mar '04
35.76
Total Income (Rs. Cr.) Mar '05
Mar '06
Mar '07
Mar '08 Total Expenses (Rs. Cr.)97
Operating Profit (Rs. Cr.) Operating Profit (Rs. Cr.)
10662.41
7260.54
2997.67 27.22 Mar '04
Mar '05
4038.57
Mar '06
Mar '07
Mar '08 98
For the current year
86%
• Customer Growth Rate
58%
• Increase in Revenue
79%
• Increase in EBITDA
100%
• Growth in Profit
99
TARGETING Elite Up market professionals Entrepreneur with business plans Low income mass category Youth Women and senior citizens by post paid connection
100
“Express Yourself” In 2003, Airtel repositioned its brand with “Express yourself” campaign Changed its logo to give more energetic and younger look Highlight capability of Airtel‟s performance and network coverage Launched in regional language
101
THE FIRST MOVER ADVANTAGE Electronic recharge Hello tunes Airtel Live! Portfolio manager Song catcher Easy music Black berry handsets
102
Competitor Analysis Competitor Analysis 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Bharti
Rcom
IDEA
Best OP Margins & Net Profit Margins among Peers
MTNL
OP Margin Company
Sep-07
Sep-08
Net Margin Sep-07
Sep-08
Bharti
43.00%
38.00%
26.40%
19.30%
Rcom
37.90%
31.60%
23.90%
13.20%
IDEA
32.80%
26.60%
14.10%
6.50%
MTNL
23.70%
22.90%
7.00%
6.80%
Source: CMIE November 2008
103
Threat of New Entrants Low Because Huge License Fees to be paid upfront & High gestation period Spectrum Availability & Regulatory Issues Infrastructure Setup Cost - High Rapidly changing technology Previously Low, Now High
104
Threat of New Entrants High Because Entry through 3G New Entrants are ready to enter with Huge Capital Considering the attractiveness of the market New Entrants from Non telecom companies with the ease of Previously Low, Now Outsourcing High
105
SWOT Strengths
Largest Telecom Player in India - ~80Mn, 22.6% Market Leader Strong Leadership – Sunil Bharti Mittal Recognized Globally Strong Financials Focus on Core Activities – Outsource the rest Strong Brand Image – Marketing Team
Weakness
Outsourcing of Core Systems Little bit expensive
106
SWOT Opportunities Bharti Infratel –
Cutting Down cost in Rural area Current Tele-Density – 30.6 is still low among developing countries Low Broadband Penetration, Rural Telephoney
Threats
India centric – Major revenues from India Intense Competition & Shortage of Bandwidth New Players coming in India Uncertain Economic conditions 107
Strategy Partner with leading players in telecommunication across the globe. Managed to work with the best of domain specialists globally and emerge as a world class entity. Operational contracts with strategic investors ranging from private equity investors to global telecom giants.
108
Outsourcing deals in 2004 Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel„s then 13 mobile circles. IBM was given the mandate to handle the back office requirements of Airtel‟s presence in India
109
Performance till date Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets – Ambani‟s, Tata‟s, Birla‟s and Vodafone. Has coped well with regulatory changes.
110
Future Strategies
Translate its expertise in Indian markets to other emerging economies. This could call for acquisitions globally. Technology leadership is a must – Airtel must ensure that its reliance on GSM technology does not render it obsolete. Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited. 111
112
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