Application Exercises (E) Use Yips framework to analyze whether your firms industry is a global industry ?

? (E) Analyse the Intl competitiveness of your industry in India using Porters

I am working as a Presales Manager with Tejas Networks Ltd. We are into optical networking industry, basically targeting large telecommunication service providers and infrastructure companies. We are further foraying into wireless 4G base stations for expanding our target segment. Telecommunication equipment industry is largely a global industry, as it requires high entry cost of R&D and manufacturing. Also, due to expansion of operators such as Vodafone, Bharti, Singtel, NTT across the globe requires a global presence to address the market worldwide.

Industry Globalization Drivers

Yip identifies four sets of industry globalization drivers that underlie conditions in each industry that create the potential for that industry to become more global and, as a consequence, for the potential viability of a global approach to strategy.
1) Market drivers 2) Cost globalization drivers 3) Competitive drivers 4) Government drivers

Market Drivers
One aspect of globalization is the steady convergence of customer needs. As customers in different parts of the world increasingly demand similar products and services, opportunities for scale arise through the marketing of more or less standardized offerings. How common needs, tastes, and preferences will vary greatly by product and depend on such factors as the importance of cultural variables, disposable incomes, and the degree of homogeneity of the conditions in which the product is consumed or used. This applies to consumer as well as industrial products and services. Industry Outlook In telecommunication equipment industry, the demand has become highly global due to expansion of the customers across multiple geographies. Most of our customer has expanded presence in 3 to 4 continents, hence the demand has become fairly standardized. Also, since the high barrier of enterance in the industry due to huge R&D and manufacturing cost, it is not feasible for only expanding in domestic markets.

Cost Globalization Drivers

The globalization of customer needs and the opportunities for scale and standardization it brings will fundamentally alter the economics of many industries. Economies of scale and scope, experience effects, and exploiting differences in factor costs for product development, manufacturing, and sourcing in different parts of the world will assume a greater importance as determinants of global strategy. At bottom is a simple fact: a single market will no longer be large enough to support a competitive strategy on a global scale in many industries. Global scale and scope economics are already having far-reaching effects. On the one hand, the more the new economies of scale and scope shape the strategies of incumbents in global industries, the harder it will be for new entrants to develop an effective competitive threat. Thus, barriers to entry in such industries will get higher. At the same time, the rivalry within such industries is likely to increase,

reflecting the broadening scope of competition among interdependent national and regional markets and the fact that true differentiation in such a competitive environment may be harder to achieve. Industry Outlook There is continuously growing demand to provide cost effective telecommunication services. For developed countries, it is the growth in bandwidth across existing services due to the smartphone burst, wheras for developing or under-developed countries covering the areas has become critical for delivering other services overriding these networks. So the requirement to drive down cost has been critical, and hence also reflected with the growth of Chinese vendors. The shift has been so drastic in last one decade, that China from nowhere has emerged and captured nearly 30-35% of telecommunication market.

Competitive Drivers
Industry characteristicssuch as the degree to which total industry sales are made up by export or import volume, the diversity of competitors in terms of their national origin, the extent to which major players have globalized their operations and created an interdependence between their competitive strategies in different parts of the worldalso affect the globalization potential of an industry. High levels of trade, competitive diversity, and interdependence increase the potential for industry globalization. Industry evolution plays a role, too. As the underlying characteristics of the industry change, competitors will respond to enhance and preserve their competitive advantage. Industry Outlook The competitive drivers for the telecommunication industry are major. All the competitors have lesser than half of their shares coming from domestic markets. It is increasingly critical to go global to expand reach to compete.

Government Drivers
Government globalization driverssuch as the presence or absence of favorable trade policies, technical standards, policies and regulations, and government operated or subsidized competitors or customers affect all other elements of a global strategy and are therefore important in shaping the global competitive environment in an industry.

Industry Outlook Since Telecommunication form the basic necessity for each country, the policies across the globe are made favorable for their expansion. Also, huge investment by various governments has further enchanced the growth of the industry.

International competitiveness of Telecom industry in India using Porters

Analyzing Indian telecom industry using the below Porters diamond model.

1. Factor Conditions:
-

Presence of skilled labor pool for carrying out R&D and manufacturing. Rapidly developing software services sector. Increasing disposable income of consumers. Increasing demand due to changing lifestyles and growing attraction for mobiles with new features.

2. Demand Conditions: -

India has a large middle class of 300 million, Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid. Teledensity (~43.5%) offers huge future potential. Operators are still in expansion mode, as compared to saturated developed markets.

3. Firm Strategy, Structure and Rivalry: Intensive competition in the country has made it possible by presence of all global vendors, Various European/US vendors quality competing with Chinese vendors prices, making the market hugely dynamic, and leading to cost effective cutting edge technology services.

4. Supporting Industries: Competent manufacturers have produced the lowest priced products for the Indian market. They are further using these products to deliver services in other developing markets such as Africa and Latin America. Global players are setting up manufacturing bases in India for better operation management. Many telecom and equipment and software companies are based in India.

5. Government The government extends full support to industry through reform processes. They are implementing policies such preferential market access to enhance the local manufacturing industry. Policies are in place to enhance service providers(100% FDI) support and also provide cost effective services to end customers.

Thus the Porters Diamond confirms that the Telecommunication equipment industry in India has high globally competitiveness, and positive for external growth.