Porter's five forces analysis of the B2B broadband industry

Competitive Analysis in B2B Broadband Industry

Competitive analysis of B2B broadband industry

Porter's five forces model is a framework upon which an industry can be analyzed. It also helps to create business strategy by deriving the attractiveness of a market. The model uses five components, referred to as forces, which are threat of substitute products, industry rivalry, threat of new entrants, bargaining power of suppliers, and bargaining power of customers (Porter, 1980). The first three are forces from horizontal competition from competitors while the last two are forces from vertical competition from customers and suppliers.

Threat of new entrants

The B2B broadband industry is one that is growing year on year meaning new companies may be seeing opportunities for growth and gaining market share. Over the last two years, the expansion in the B2B broadband industry has been at about 13%. This high growth is a threat for the entry of new players who may be interesting in making revenue from the continued growth of the industry. Business customers increasingly prefer tailor-made broadband offerings. This means there are opportunities for companies to offer unique packages thus creating a threat for new entrants to gain market share by being willing to budge in order to gain market share. Busby Telecoms, however, has the benefit of being a market player for a longer period than new entrants meaning they understand the industry landscape better and therefore are able to customize their products better thus increase their market share better (Wolfe, 2007).

Threat of substitute products and services

The B2B industry is one that is highly dependent on custom solutions for customers. This means that of the $200 trillion that the industry is worth worldwide, companies will need to establish themselves better through dynamic pricing and unique business models that support reverse aggregation and other strategies to tailor products. This provides the opportunities for competitors to gain market share by tailoring their products and services.

Bargaining power of customers

Since the B2B broadband industry is heavily reliant on tailor-made products to help companies gain market share, customers have very high bargaining power. They have the opportunity to bargain their speeds, prices, and other features provided by broadband providers. Busby telecoms also suffers the same problem since buyers are able to force prices down and are also highly sensitive to price changes.

Bargaining power of suppliers

B2B broadband companies are also heavily reliant on suppliers to provide essential inputs such as labor and materials for setting up connections. Suppliers are often looking to increase their market share since there are many companies that provide broadband services to business and individual consumers as well. Therefore, suppliers do not have a high bargaining power. Rather, Busby Telecoms has a better chance of getting suppliers to drop prices in order to assure them of continued business.