Assessment of External Environment
Forces and condition outside the organization that affects the performance and outcome of the business organization is the External environment of the business organization. The control of external environmental factors is out of the hand of business organization. Analysis of external environment depicts the opportunities and threats to business organization. External environment consist of different factors such as political, economic, socio-cultural, technological, legal and environmental. In short we can say as PESTLE Analysis
Politically, it will not be wrong to say that Nepal is in the state of the transition phase. So the political instability seems to be normal during this period. All the sectors in the economy are more or less affected by it, and Ncell also can’t remain unaffected. The major areas that are affected by the political system is in terms of new investment and direct restriction of the authority body.NTA is the regulating body of telecommunication sector in the country. Since the largest telecommunication house, NTC is state owned body; NTA always makes laws in favor of NTC. Due to this factor, private sector like Ncell is facing the trouble of game of politics. The most relevant example is the price factor. Although Ncell is trying to reduce the service tariff, it is unable to reduce due to the restrictions made by NTA. Apart from that, unclear rules and regulations and the less reactive bureaucrats is also the political problem for Ncell. For example, due to the unclear government policy, Ncell is forced to keep its highly precious machines in the duty office Tatopani since 4 months.
Although the economy in the world is shrinking, the disposable income of the people in Nepal is increasing. The inflow of remittance in the country is directly helping in this prospect. The number of people using the cellular mobile phone is increasing day by day. Furthermore, the inflow of Chinese mobile phones at the low cost is also helping people to enjoy the services of mobile technology. Hence in Nepal, the economic environment seems to be favorable.
By analyzing this broad range of peoples, Ncell has developed customized products that best suits them according to their economic status. For example, Ncell has just launched Samsung s-III for the luxury peoples. But at the same time, it has also introduced the scheme of free cell phone with the sim card purchase. Other products like sajilo number, ramro number, sim for couples, etc are the attractive plans that address the economic class of Nepalese people.
The life style of the people is changing gradually due to the effect of western culture. TV shows, movies, songs, etc are the major factors that change the life style of the people. For many people, internet has become the major need. Social networking sites like facebook, twiter, google plus, skype are getting popular these days among nepalese peoples. So by targeting those groups of peoples, it has introduced various internet plans that best suits the needs. The fastest internet of 3.6 Mbps is one of the examples of it, including the fastest internet in Nepal.
Nepal has got a huge variety of peoples in terms of culture. Ranging from Terai to Himalaya and from Mechi to Mahakali, there are hundreds of peoples who have different cultures. Apart from the main stream festivals like dashain, tihar and chhat, the western festivals are also getting popular among the peoples. Christmas, Valentine’s Day, etc, are getting popular these days. So in accordance to these cultures, Ncell has designed its products by focusing on these issues. And there is a trend of peope going abroad. In the city area, most of the house hold has sent their family members abroad. So to make business out of it, has lowered the international tariff.
Technology in the communication sector is a crucial aspect. New technologies are been developing day by day. Ncell is also adopting the new technologies to get updated with the trend. The new services like 3G, GPRS and fastest internet services are already been used by Nepal Telecom. Recently Ncell completed its optical fiber connection with its sub branches across Nepal.
Ncell is quiet rich in terms of technology among the competitor. The major services likec all forwarding, missed call notification, etc are found in the sim card and the technical
Nepal Telecommunication Authority is the governing body for the telecommunication sector. It enacts laws to bind this sector. With the provision of know your customers, it is bound to distribute the sim cards to its customers only after the full and detailed information. It is also restricted to distribute the unlimited number of sim cards since the frequency is limited to them.
With the obvious information that our country is very much diversified geographically, it has vast difference in its tropical points where Kanchan Kali is situated at lowest point of 70 meters above the sea level and highest point of 8848 meters at Mount Everest. There is certainly a big problem to build the towers for network and in the installation of machines to run the service. Due to this hitch, mountains act as a barrier for smooth flow of radio frequency. Hence, NTC has to build more number of towers to capture further coverage, which directly induces to rise of operating cost.
The competitive analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within the business organization’s market, strategies that will provide with a distinct advantage, the barriers that can be developed in order to prevent competition from entering the market, and any weaknesses that can be exploited within the product development cycle.
Porter’s Five Force Model of competitive analysis
Michael E. Porter of Harvard Business School in 1979 developed the framework through which the company or industry can analyze its competitive environment. Porter’s five forces model determines the competitive status with the analysis of five competitive forces which are: Threats of new entrant, bargaining power of customers, bargaining power of customers, Threat of substitute and Level of rivalry.Ncell competitive analysis is also done by analysis the five force model suggested by Michael E. Porter.
1. Entry of Competitors:
It represents how easy or difficult is the situation for new entrants to startup the similar company in the industry. To compete, which barriers do exist, a huge investment is required. Nepal Telecom (NT) was the only state owned firm in the sector. NT held monopoly in the telecommunication market for almost 30 years. But the growth of telecommunication has been restricted by NTA itself for new and emerging services. By imposing conditions that are not conducive through taxes, time consuming bureaucratic practice etc. (Telecom service tax is 10 percent plus VAT 13 percentage makes the service provider bear expensive tariff costs). According to the interview conducted with the personnel of Ncell, the reasons for the restriction in proliferation is because of unprepared technical expertise for the usage of new services and lack of awareness about technology amongst the executives and government bureaucrats.
From the different angle, there is neck to neck competition between the two major brands (NTC and Ncell), it will cost very high for new players to gain the attraction of customers. And from the customer view point, it will cost a lot to switch a brand to another. It will be hassle to change the contact number time and again. Hence the customers are reluctant to switch to other service providers.
2. Bargaining Power of Buyers:
Bargaining power of buyers refers to the strength of the buyer’s position. In context of the telecommunication Industry, buyers / customers are the individuals or organizations using the services provided by the telecommunication companies. Buyers are weak because they do not have significant influence over product and the price. Although there are 6 companies that provide telecommunication facility in the country, the situation is almost oligopoly. The nearest and largest competitor NTC is not able to fulfill the customer’s demand. But on the other hand, Ncell is supplying abundant sim cards. In this sense, the bargaining power of customer is a bit weak.
3. Bargaining Power of Suppliers:
The Suppliers in the telecommunication industry for the mobile operation are the firms manufacturing and distributing SIM cards, recharge cards, CDMA handsets and technologies for activating and providing the service. Ncell and NT select the suppliers from global bidding process. The main players are Zhongxing Telecommunication Equipment Corporation (ZTE) and Huawei. UTL’s handsets and chipsets are supplied by LG, Korea. The power of the companies to select the suppliers shows that the suppliers are weak. On the other hand, the availability of few suppliers forces the companies to have a limited choice and act as the strength of the suppliers.
4. Rivalry among the Existing Players:
NT was only player in the telecommunication industry for almost 30 years. The monopoly of NT ended with the entry of Ncell and UTL. Currently there are 6 players in the telecommunication industry with NT being the dominant player. Nepal Telecom is the leader in the market with maximum number of services and capturing the maximum market share. Ncell, though a leader in ISP, it has its major stake in GSM mobile service and UTL is limited with CDMA service. The huge gap between the services offered by the companies and control of NT over the Telecommunication Industry depicts a week rivalry among the existing players. However, we cannot neglect the fact that Ncell has a competitive edge in providing value added services as well as by using price strategies to attract larger customer base.
5. Threat of Substitutes:
The threat of substitute products occurs when the demand of a product is affected by the price or service provided by the substitute product changes. The cheaper price and easy availability of SIM cards of Ncell and value added services and schemes like one hour free talk-time, free SMS etc… has attracted the mobile users. But simultaneously, the expensive call tariff is another blockade for the extensive growth of business of Ncell. The internet based telecommunication can be the strong substitute product that does not need to pay the charge. So the lower price substitute products could as the strong competitor for Ncell.