The Telecommunication Industry - Coursework Example

Research Paper on Telecommunication Industry s Introduction The telecommunication industry comprises of an internal andexternal environments that are crucial for all its operations. These factors impact these companies both positively and negatively. There are also trends that are on the verge of transforming this industry and how people communicate and transmit information. However, these companies also face a lot of problems that when neglected, may lead to the death of the telecommunication industry. The environments affecting this industry include: Internal Environment Otherwise known as the microenvironment, internal environment refers to the factors and players within and outside the company that influence its activities and operations. This environment is under the control and leadership of the business. It include: Management and employees The microenvironment consists of the management, all departments and the employees working in them. All employees are instrumental in the success of the company. Strikes and boycotts by the employees will result to losses. On the other hand, salary increments and promotions will encourage hard work and commitment. Suppliers They supply companies with all the resources they require to produce goods and services. Suppliers can directly affect a company through delays or supply shortages. Furthermore, increase in supply costs will automatically lead to price increase of goods and commodities. Intermediaries These are organizations or individuals that help to promote, advertise, distribute and sell the company’s goods to the final consumers. They include financial institutions like banks, marketing and advertising firms like media houses and distribution firms like warehouses. Customers In order to survive, companies need customers to buy their goods and services. Customers can be characterized as government markets, households and individuals, institutional markets like colleges, international markets and business markets. Competitors For a company to be successful, it must offer higher customer value than its immediate rivals. Telecoms like other companies need to closely monitor the activities of their rivals and offer strategies to counter their every move. External Environment This refers to factors outside the organization that directly or indirectly affects the company. It consists of other players within or outside the telecommunication industry, that have some form of influence over the practices of an organization. The external environment include: Global Economic Trends Though considered to be a fairly stable industry, the telecommunication sector has not been resilient to global economic changes in the last decade. A research carried out by Bloomberg between October 2007 and March 2009, shows that there was decline of economic indices from 2007 to 2009. Telecommunication indices also followed suit, recording a 49% decline in revenues (See Appendix). Another research by EY Survey from 2000 to 2010 showed that telecommunication deals fluctuated due to changing economic times (See Appendix). The data obtained showed that the industry experienced boom due to economic prosperity at the onset on the 21st Century. From 2001 to 2003, there were global financial problems which resulted in plummeting of telecoms’ revenues from $ 500,000,000 to $ 100,000,000. Economic recovery from 2004 to 2007 also led to increase in this industry’s revenue. Thereafter, economic recession in 2007 resulted in a steady decline of this industry’s revenue. (EY, 2010) Global Political Trends Recently, the International Telecommunication Union- a UN agency has been pushing forward for more regulation of key areas in both telecommunication and ICT industries. Due to growing concerns about the effects of internet on economic structures and social and cultural fabric of nations, world leaders met at the World Conference on International Telecommunications held in Dubai to expand the legal authority and jurisdiction of ITU in the telecommunication and ICT sectors. Data privacy, international mobile roaming and cyber security are among the issues that the agency will be monitoring in the telecommunication sector. (ITU, 2013) Social Trends in Telecom Sector Companies tend to consider the people’s social and cultural fabric before offering their services to them. Consumer tastes, beliefs and practices are all tied down to their culture. Most governments have put laws against companies destroying the social fabric of their nations. For example, pornographic content is unacceptable among the underage. Technological Environment Adoption of new and advanced technology ensures that companies are always ahead of their competitors. As the number of subscribers increase each day, telecommunication companies are forced to upgrade to better and faster technologies to cater to all their customers. Organizations should concentrate on equipping new technologies from the storage, hardware and software standpoints. Failure to acquire the latest technology will have adverse effects on a telecommunication company which requires strong and fast machines to cope up with the large traffic and data that it has to maintain and transmit each second. Synergies in Telecommunication Sector With the uncertainty of the global financial system, there have been merges among telecommunication companies to reduce the risks of getting losses and also expand their market outlay. Even though most companies were affected by the global financial crisis, there were others which recorded meagre losses and recovered easily. Telecom giant AT&T is busy making plans to acquire Vodafone in order to penetrate the European market. Vodafone also has a history of acquiring smaller companies. Last year, it bought out Kabel Deutschland in Germany for $10 billion. Recently, the UK based mobile giants also acquired Ono, a cable operator in Spain for €7.2 billion. (Zekaria, 2014) Merging of companies in the telecommunication will result into a monopolistic type of market. Lack of competition will mean that the big company will offer sub-standard services and charge higher prices for these services. Consistencies in the Telecom Sector Despite the changes that this sector has been constantly undergoing especially in technology, this industry has been consistent in the type of services it has been offering. The services can be categorized as either communication or data based. They include internet broadband connections, voice over internet protocol, PSTN- Fixed line and carrier Access and Selection (Voice). Future Trends in Telecommunication Industry The telecommunication industry has experienced massive transformation in the last decade than in its entire lifespan on earth. At the beginning of the 21st century, less than 15% of the population on earth had telephones, but by 2009 the number had risen to 70%. This transformation also led to the migration from public switched telephone network to mobile phones. One of the projected future trends is that these companies will be forced to migrate to other industries like the entertainment and internet based sectors. Companies such as AT&T have stepped out of their comfort zones and are already offering television services via the internet. Most experts in this sector also believe that there will be a steady increase in the number of subscribers all over the world. This is mainly due to the boom of mobile phones and expansion of telecom giants to foreign markets. According to ITU, wireless service subscriptions were 5.9 billion in the last quarter of 2011, but as of 2013, the figure had risen to 6.8 billion. The number of subscriptions in 2003 and 2008 were 1.4 billion and 4 billion respectively. Experts also speculate a decline in the cost of all telecommunication services. This is especially true in third world countries where communication and data services are much higher than in the developed nations. Most global companies are targeting the developing countries. To out-compete their rivals, these companies will cut down the costs of their services. There is also the migration of businesses and commercial activities to Voice over Internet Protocol (VOIP) services. Going by this trend, traditional ways of communicating would be rendered obsolete. This is mainly because data services are far much cheaper than other telecommunication services. There is also shift from the wired residential phones to wireless mobile phones. ITU estimated a decline in the number of landlines from 1.2 billion in 2009 to 1 billion in 2013. Going by these numbers, it seems that people are migrating from old communication services to newer and sophisticated ones. Impact of these Trends on the Telecom Industry in the Future Due to increase in the number of users projected in the near future, there will be an increase in jobs in this industry and in other sectors related to it. More jobs would lead to lower crime rates. Furthermore, more money means more revenue for the governments, which they will use for development purposes and for the improvement of the lives of their citizens. Lowering the prices of their services will attract more people into in the industry including low income earners. Low costs will boost both research and educational sector as people will be able to access a lot of information at very low rates. Migration by people to newer ways of communication will result in phasing out of traditional methods of communication like landlines. Conclusion Telecommunication industry has been undergoing changes to suit the ever growing demand for data and information access. Operators in this industry need to look for ways to integrate new technologies and adopt the latest trends within and outside the industry. Otherwise, people will resort to voice over internet protocol services like Skype to communicate. Failure to do so would only result to the extinction of the telecommunication industry. Appendix References 1. EY Survey (Feb. 4, 2010). Valuation drivers in the telecommunication industry: Financial trends. Retrieved from http://www.ey.com/GL/en/Industries/Telecommunications/Valuation-drivers-in-the-telecommunications-industry---Financial-trends 2. IBM Global Business Services (2014). Telco 2015: Five telling years, four future scenarios. Retrieved from http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03304usen/GBE03304USEN.PDF 3. International Telecommunication Union (2013). Trends in Telecommunication Reforms 2013: Transnational Aspects of Regulation in a Networked Society. Retrieved from http://www.itu.int/dms_pub/itu-d/opb/reg/D-REG-TTR.14-2013-SUM-PDF-E.pdf 4. Plunkett Research Ltd. (2014). Introduction to the Telecommunication Industry. Retrieved from http://www.plunkettresearch.com/telecommunications-market-research/industry-trends 5. UKESSAYS (). Vodafone largest mobile telecommunications. Retrieved from http://www.ukessays.co.uk/essays/companies/vodafone-largest-mobile-telecommunications.php 6. Zekaria, Simon (Mar. 17, 2014). Vodafone Buys Ono, But Will AT&T Buy Vodafone. Retrieved from http://blogs.wsj.com/corporate-intelligence/2014/03/17/vodafones-ono-buy-refocuses-attention-on-att/ Read More