Case study
Strategic out sourcing at Bharti Airtel
Vision 2010
By 2010 Airtel will be the most admired brand in India:
Loved by more customers
Targeted by top talent
Benchmarked by more businesses
Vision 2020
To build India's finest business conglomerate by 2020
Supporting education of underprivileged children through Bharti Foundation
Strategic Intent:
} To create a conglomerate of the future by bringing about “Big Transformations through Brave Actions.”
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”
Objectives/Goals
} To undertake transformational projects that have a positive impact on the society and contribute to the nation building process.
} To Diversifyinto new businesses in agriculture, financial services and retail business with world-class partners
} To lay the foundation for building a “conglomerate” of future
SWOT Analysis Bharti Airtel
Ø Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular provider in India, and also supplies broadband and telephone services - as well as many other telecommunications services to both domestic and corporate customers.
Ø Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with whom they hold a strategic alliance. This means that the business has access to knowledge and technology from other parts of the telecommunications world.
Ø The company has covered the entire Indian nation with its network. This has underpinned its large and rising customer base.
Weaknesses
· An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.
· Until recently Airtel did not own its own towers, which was a particular strength of some of its competitors such as Hutchison Essar. Towers are important if your company wishes to provide wide coverage nationally.
· The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of any real emerging market investment opportunity for the business once the Indian market has become mature.
Opportunities
· The company possesses a customized version of the Google search engine which will enhance broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and also provides advertising opportunities in Indian for Google.
· Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market. The new iPhone will be launched in India via an Airtel distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions.
· Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices - for example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited to India, as the company moved into small and remote villages and towns.
· The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy.
· Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy.
Threats
· Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar. Knowledge and technology previously available to Airtel now moves into the hands of one of its competitors.
· The quickly changing pace of the global telecommunications industry could tempt Airtel to go along the acquisition trail which may make it vulnerable if the world goes into recession. Perhaps this was an impact upon the decision not to proceed with talks about the potential purchase of South Africa's MTN in May 2008. This opened the door for talks between Reliance Communication's Anil Ambani and MTN, allowing a competing Inidan industrialist to invest in the new emerging African telecommunications market.
· Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market.
Airtel comes to you from Bharti Airtel Limited, India's largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU's) - Mobile Services, Airtel Telemedia Services & Enterprise
BCG Matrix
| Stars Carriers & corporates | Retail Insurance Broad band DTH&IPTV ? |
| Cash Cows Mobile services | Dogs • Fixed Line Services |
Strategies which should be in the pipeline:
1.Lookout for acquisitions post shakeoutTelecom industry in India has too many players operating. Which is good for thecustomer but the price wars will hit smaller players the most. Airtel must be on thelookout for companies which might fail in due course during this shakeout phase.They must also make contingencies so as not to fall prey of failing competitors lastgasp strategies.
2.Africa and the El Dorado illusion:Africa for Airtel looks like a very good market. However it must be careful of thefickle governmental construct in Africa and constant danger of civil war. Africa over the years has become attuned to the concept of aid, only few nations like Ethiopiahave tried to focus on their economy. In areas like Democratic Republic of Congo andChad where tele-density is low infrastructure should be constructed at one’s own risk.Zain has cut down 70% of its staff, this could be because of the acquisition by Airtel.As of now the extensive market share of Airtel in Africa is due to Zain’s initial presence. They must integrate the whole operation under Bharti as soon as possible.
3. Contingencies to combat recessionThe European JV partners of Airtel could be hit once again if Greece fails, they mustalready have steps in place to move out of that JV in case of drastic fall in profits or tocreate demand to supplement them in case of a crisis.
4.Threat of InternetMobile might be the future of devices but the future of connectivity is the internet.The role of free services like, Skype have created a new threat for the telecomindustry because if the internet gets faster and faster, connectivity through mobiledevices would go beyond WAP and communication would be done through internet.As of now Airtel has two revenue streams in place in form of mobile internet and PCinternet. But as people move out of laptops into handheld devices like the I-Pad, thefuture of communication would no longer be through voice but video for that theinternet is leaps and bounds ahead. Since internet is based on a open source model thecompany would only be able to make revenue through its service. This would bedetrimental to its overall operation as under developed nations would continue toflourish in the obsolete technology.
SMS services are already hit with the operation of sites which allow free SMSservices. This is harmful for the company because SMS by telecom industries is beingsent as part of the bandwidth which cannot be used and also they are not beingcharged for it.If this moves on to voice or video messages the company will be hit badly. They must be careful not to combat Skype by going free as a service but fall back to its
Rockefeller Principle
5.Their strategic alliance with VmWare is crucial and must be played out well becausethe storage space within any hand held device is limited. However if cloud computingis implemented they have to provide faster communication and prevent the disaster of netbooks.
6.With election coming up in a few years they must make provisions for changes in thetelecom regulations if there is a change at the Center.
PROPOSED BUSINESS MODEL FOR AIRTEL:
Airtel has already established itself as the leader in the market by differentiating itself with its focus on building a strong brand through innovation in sales, marketing, andcustomer service, and an innovative cost effective business model.
• Bharti Airtel should partner with existing players in Africa to share infrastructure toreduce operational costs for Zain. They should go for country level discussions for collaboration on fibre optic sharing and tower sharing. Extension into smaller townswill be at lower capital expenditure through sharing.
• Airtel was among the first operators to start infrastructure sharing in India which hashelped it to sustain a low cost tariff business model. Hence, they should follow asomewhat similar strategy for Africa.
• The idea is to engage with Tier two operators and form a new company and shareRadio Access Network (RAN) and related cost burdens. This move will help atachieving some leverage against MTN the maket leader in some of these geographies.
•Airtel has proven that it will do wh
Acquisitions and joint ventures
One of their main competitive advantages is their acquisitions and joint ventures. Startingfrom the time they entered this telecom circle in Delhi till today Airtel is clear with the ideaof making strategic alliances. When Airtel initially rolled out its service in the name Bhartiteleventures in Delhi it also went into an agreement with Siemens to market telephoneterminals under Siemens and Beetel brand names.For a company into the telecom service business cannot maintain growth without expansion.Whenever Airtel entered a new state in India it was only through the acquisition of anexisting player in that state. Airtel entered Andhra Pradesh and Karnatake by acquiring stakein JT Mobiles. It entered Kolkata by acquiring Spice cell. Airtel entered Tamil Nadu byacquiring Sky cell in Chennai circle. This is how Airtel is even trying now to make its global presence by acquiring Zain in Africa.
Outsourcing
Retaining the core business and outsourcing the allied activities is an effective strategyfollowed by Airtel. Due to its rapid growing customer base Airtel outsourced its customer service operations to various BPO’s and signed agreements with major IT companies likeIBM and CISCO to manage the back end operations of its customer service activities.
Supplier Relationships and Integrations
Change is something which any business has to undergo to maintain its competitiveadvantage. Providing voice transfer in telecom business has become an outdated model now.Data transfer is the idea in which all telecom players are concentrating now.After the public sector telecom operator, Airtel leads all other players in providing this datatransfer right from the time it started with its GPRS service for mobile phones and now thelargest private player to provide the new 3G service. Airtel also has expanded its business byentering the broadband service as a part of its forward integration.It has also acquired stake with Indus and also has its own Bharti Infratel which providestower solutions which is a part of backward integration. Also the relationships that Airtelmaintains with its suppliers are all long term relationships. Going back to the initialagreement with IBM which is a 10 year contract, the contract with Siemens which it still hasright from the time of Airtel’s incorporation
BUSINESS MODEL OF AIRTEL
Airtel is probably one of the best run companies in the world (most definitely inIndia). It is the largest telecom player in the country and has the advantage of bothmassive size and a very high-growth industry. It’s worth about $25 billion andgrowing fast.The secret of its success has been its business model. Airtel focuses only and solelyon two things:Customer acquisitionServicing (Retention) and business development/expansionAll other functions i.e. hardware, network management, backend applications (billingetc), value added services and even telecom infrastructure – are outsourced. Airtel pioneered this in the Telecom game.In February 2004, Sunil Mittal, the CEO of Airtel took a bold step in outsourcing itscellular network operations and network management to companies like NokiaSiemens and Ericsson, IT and backend applications to IBM, billing to someone elseetc.
Innovative Business Model:
Bharti Airtel Limited and IBM India Pvt. Ltd have established an Innovative BusinessModel that is now setting new standards across industries around the world. In March
