Etisalat: An Analysis of Porter's Five Forces Framework

This paper analyses the external environment of Etisalat using Porter's Five Forces Framework. It examines the threat of new entrants, power of suppliers and buyers, availability of substitutes, and competitive rivalry in the telecom industry. Etisalat is a leading telecommunication company operating in 16 countries across the Middle East and Africa. The company has a major business hub in UAE for more than forty years which helps the company to support the new innovation in the technology sector. The company is popular for their fastest broadband services which are the fastest speed of about 300Mbps. The paper concludes that the level of competition in UAE is high and Etisalat has a risk from the potential competitors.

C M CS ASS M SE ONO I IGN ENT

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Contents
Introduction....................................................................................................................................3
Porters Five Forces Framework......................................................................................................4
Threat of Entrant.........................................................................................................................4
Power of Suppliers......................................................................................................................5
Power of Buyers.........................................................................................................................6
Availability of substitute.............................................................................................................7
Competitive Rivalry...................................................................................................................8
Conclusion....................................................................................................................................10
References....................................................................................................................................11

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Introduction
Etisalat is the telecommunication company; it is the world leading company in the
telecommunication industry. The company operates in 16 countries across the Middle East and
Africa. It is the 14th largest mobile network operator in the world that was founded as a joint
stock company which works with the British company and international Aeradio. In 2012, it was
the most powerful company in the United Arab Emirates but company structure was changed
after obtaining the 60% ownership of the company by the United Arab Emirates. In 1991, the
Central government granted the companies by providing the wires and wireless services in the
country. As per the Law, the company allowed to issue a license for importing, exporting and
manufacturing the telecommunication equipment. Law "Federal no. 1" is applicable to the
telecommunication industry with the purpose of the economic growth of the country. Therefore,
the corporate network and trade lines are improved from 36000 to 73,700. In 2011, the company
has 140th ranked out of 500 global companies in financial terms and it also has sixth-ranked in
the world largest companies by Middle East Magazines for the revenue and capitalisation
(Etisalat, 2018). The company has a major business hub in UAE for more than forty years which
helps the company to support the new innovation in the technology sector. The company made
the good image in UAE among the first five countries to own the 3D television services. The
company focusing on providing the 4G LTE network to the customers, it also has the fastest
broadband and fixed line network at the speed of 30mbps in the Middle East. The company is
popular for their fastest broadband services which are the fastest speed of about 300Mbps.
Etisalat has the high and effective technology expertise that helps the company to capture the
market segment across the UAE. It makes their presence in Egypt and Saudi Arabia by providing

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the fastest services of broadband and mobile networks. The company won the many awards as
the best wholesaler and best operator in the market(Etisalat, 2018).
In this paper, the focus will be given to the external environment in which the Porters five forces
framework model will be explained.
Porters Five Forces Framework
Porter's Five Forces Framework is a model which is used to explain the reason why the other
companies able to achieve a different level of profitability. This model is used to analyse the
company structure as well as its market strategy. The company relation with the internal and
external stakeholder is also analysed. The five forces used to measure the competitive strategy,
attractiveness, and profitability in the market. It focuses will be on the competitive behaviour of
the company to achieve the market opportunity. These forces are Competition in the Industry,
Power of suppliers, Power of Customers, Threat of new entrants, and Potential of new entrants
into the industry (Adi, 2015).
Threat of Entrant
It has been analysed that the telecommunication industry has a less threat of new entrant because
in this industry a huge amount of investment is required for entrance. This industry requires a
large amount of capital to cover the fixed cost. If the bank supports the new companies by giving
loans on less interest then it increases the threat of new entrant. New companies those have a
large amount of capital is the competitor of the company (Al Badi, 2015). New competitors have
an opportunity to grab the market by entering the new service or equipment. Etisalat has less
threat of new entrant the company because it requires a large amount of capital to invest in the
equipment. When there is less opportunity for financial investors then the rate of new entrance is
less but when financial investors support the companies then the rate of new entrants increases.

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In the inflation period, Banks support the companies by giving the loan on lower interest but in
deflation, Banks providing loans at the higher rate. Loan at the lower rate increase the threat of
new entrant but the loan at the higher rate decreases the threat of new entrant. Telecom license is
essential for entering into the market but license requires the large amount of capital (Xavier and
Ypsilanti, 2008).
Power of Suppliers
It has been evaluated that the company suppliers have the substantial power over the operators.
The supplier has the power to bargain for the equipment because without the equipment
operators cannot do the work. Operators require the equipment to transmit the data and voice to
the public. The operators would not able to transmit the data and voice without using the
equipment. There are many types of equipment which helps the operators to transform the
information and voice data. The mobile handset, billing software and fiber-optic cables are the
equipment for transforming the data. In the world, there are many manufacturers or suppliers of
the equipment. The world leading companies are the manufacturers or suppliers of the
telecommunication equipment such as Nokia, Cisco, Alcatel-Lucent, Tellabs, Nortel, and
Ericsson and others. Etisalat has also used this equipment for gathering and transforming the data
and voice data. Ericsson and Alcatel-Lucent are the main suppliers of the company. Ericsson and
Alcatel-Lucent provide the telecommunication equipment to the company for transforming the
data and voice (Dakare, 2015). The company has many vendors to dilute the barging power of
the suppliers. Talented engineers can manufacture the new equipment but the company has a
limited number of talented engineers. The company has a limited number of managers who have
the information about new technology. Well-versed managers help the company to hire and offer
the minimize salary to the engineers. The company faced the problems of a limited number of
engineers and managers. The company has a profit to hire the engineer instead of dealing with

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the suppliers (Ma, Huang, Kumar, and Strijnev, 2015). The company controls the barging power
of supplier by hiring the engineers. There are many suppliers in the telecom industry which is
beneficial for the company. The company has many options to choose the best dealer for their
company (Dobbs, 2014).
Power of Buyers
It has been analyzed that the customer bargaining power is high. There are many companies of
telecommunication which provide the services to the customers. In the present scenario, buyers
have many options to buy the services as per their demand and deal with the company who has
new services at the reasonable prices. Market competition increased the choices of telecom
products and services for the consumers. Choices increased the bargaining power of the buyers.
By increasing the competition in the market, the companies provide the product and services at
reasonable prices. Barging power of the customer influence the prices but it depends on the
customer ability. Customer ability can rise or drop the cost of the product and service of the
company. Customer raises the prices of product and services by increasing the high demand
quality (Gerpott, May, and Nas, 2017). The company has a threat from strong customers but
Etisalat is a threat to the weak customers. Weak customers of the company suggest the company
to decrease their prices by decreasing the product cost with the product quality. The company has
many customers tend to go for low prices instead of reliable services. Before emerging DU,
Etisalat is the only manufacturer company in the telecom market so that the company has a
power to control the market prices. After emerging of Du, the company forced to compete with
the DU by providing a large number of offers. The company completed a lot of offers of unique
products at the cheaper prices to compete the Du offers. However, customers of the company are
disappointed in the poor quality of the product and services. In this case, DU takes the

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advantage, provides the good quality of the product, and services at cheaper prices (Nagle, and
Müller, 2017).
Power of the customer also based on the market segments. The different market segment has a
different power of the buyer. Residential telecom has the less barging power of buyer because
they have a minimum option for selection but the other market segment, buyer have a large
number of options for selection. A large number of enterprises in a market increased the barging
power of buyer (Jayaswal, and Jewkes, 2016).
The variance of data is also a factor on which the power of the buyer is base. Telecom industry
provides the data and telephone services to the customers (Afolabi, and Ojo, 2015). There are
many competitors in the market; they offer the same data and services to the customer but they
represent the data with some minor changes to attract the customers toward their services. The
industry provides the many options to the customers which increase the barging power of the
buyers.
Availability of substitute
It has been seen that the customers have several alternatives for the same product. Those
companies who provide the similar product or services to the customers are the substitute
companies of each other. There are many non-traditional telecom industries which pose the
substitute threat. The similar product provides by the two or more suppliers will increase the risk
of a substitute. In the present scenario, cable TV and satellite operators are competing for buyers.
Cable TV operators provide the services to the families because they have a direct line to the
home (Aamer, 2016). Satellite operators provide the broadband services to the customers with
the high-speed internet connection, which is suitable for the large enterprises, but in present,
everyone uses the broadband. Hence, Cable TV operators have a threat from the Satellite

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operators. In the telecom industry, there are main two suppliers DU and Etisalat. DU and Etisalat
provide the same services to the customer. Etisalat has the threat of Du because DU provides the
same services at the reasonable prices. New companies enter the market with some new services
to attract the customer toward their company. In the telecom industry, new companies include
the energy utility company and railways that lay miles of the large network along the tracks as
well as the pipeline assets (Van Alstyne, Parker, and Choudary, 2016). The creation of high-
speed internet is the threat for the traditional companies. Broadband services companies or
internet providers are the substitute companies of the traditional companies (Curwen, and
Whalley, 2016). Internet services provided by the company snatch the buyers of the traditional
companies because customers attract toward the high-speed of the internet. Satellite operators
and Cable TV are now competing for buyers
Internet providers companies reduce the revenue of traditional companies. The introduction of
internet message reduces the revenue of traditional companies. Many applications rely on the
internet for the instant messages that reduced the revenue of traditional messages. Instant
messages rely on the internet which reduces the value of traditional messages. Etisalat has the
threat from DU Company that offers the new services to the customers at the cheaper prices. In
the present scenario, Traditional telecom industry stake in the internet provisions and
applications. It is not necessary that the internet has hundred percent shares in the telecom
industry, traditional telecom also has the share in the market. Cable TV and satellite operators
also have the share in the market (Mathooko, and Ogutu, 2015).
Competitive Rivalry
It has been evaluated that the level of competition in UAE is high. Potential competitors are
those who are from the specific industry and supply alternative products or services. In UAE, the

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level of competition is high in the terms of capital market and industrial deregulation. Etisalat
has a risk from the potential competitors. DU, Telkom, Cell C, and MTN Group are the main
competitor of the company. The competition decreased the profit of the company (Agba, and
Effiom, 2015). There are a lot of competitors of the company who are not in the market of UAE
but they are able to offer their products in the world. Etisalat faced many problems due to many
competitors of the company. They offer the products and services at a cheaper price,
international delivery and global lines (Charter, and Tischner, 2017). The level of competition in
the UAE market is high in the terms of capital. It is an opportunity for the new companies to rush
in and occupy the part of the market that was initially controlled by Etisalat. But the new telecom
companies have a risk to enter the market because they have to compete the Du and Etisalat
(Wollschlaeger, Sauter, and Jasperneite, 2017).
Nowadays, everyone uses the internet and phone services for the instant messages. The instant
messages reduce the value of the traditional messages. Internet providers are the competitors of
the traditional telecom companies in the telecom industry. Internet provider snatches the
customer toward their service by providing the good quality of products and services. Internet
providers reduce the customer of the company which decreases the profit of the company.
Etisalat doing its best to prevent them from these competitors. The company needs to preserve its
good image in the market and to generate the more profits (Jerbashian, and Kochanova, 2017).
The other reason for reducing the profit of the company is that the company face some barriers
because of its specialized equipment. The company has some specialized equipment that cannot
move from one place to another. Broadcasting and switching the equipment are not easy to
transfer from one place to another. It is difficult for the company to exit a particular market for
others or enter into a new market to attract the new customers.

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Conclusion
It has been concluded that the company has a less threat of new entrant. To enter the telecom
market, the company requires the high capital to cover the fixed cost. Telecom industry has big
equipment which requires the high investment. The company has less threat but if the financial
investor supports the new companies then they can easily enter the market. The company has less
risk of new companies that are beneficial for the company to more focus on the quality of
services provided to the customers. Suppliers of the company have the substantial power of
barging because operators' does not provide the services to the customer without transmitting the
data. Suppliers of the company have many options to select but the company can control the
barging power of supplier by hiring the engineers and dealing with the vendors. Buyers of the
company also have the barging power because the telecom industry has many companies who
provide the similar data at cheaper prices for competition. Many competitors of the company
provide the similar product and services to the customer. DU is the main competitor of the
company who offers the services at the cheaper prices to attract the customers. Etisalat has the
risk for their competitors because they snatch the buyers of the company. New companies enter
the market with the new services such as the internet. Internet providers are the threat to the
company. Internet providers provide the high-speed internet for instant messages to the customer
which attract the customers toward their services. Internet and new companies are the substitutes
of the traditional telecom. Internet reduces the value of the traditional telecom by providing the
high-speed data. The companies provide the same data with some minor changes. The new
competitors can enter into the market but the company has the good image and revenue. The new

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company can enter into the market but for the competition, it has to compete with Etisalat. The
company has an opportunity to expand with the new services in the market.
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