Porters Five Forces

Virgin Media is top UK based communication industry which is a major part of Virgin group of companies. Virgin Media is one of the top and largest media companies which offer broadband, mobile telephone services, television services and land line telephone services through its fibre-optic cable network to more than 10 million customers with 13,320 employees across the UK, and almost £4 billion turnover. Its registered headquarter is in New York, USA and operational headquarters in Hook, North Hampshire, United Kingdom. Formerly it was known as NTL: Telewest (merging of NTL with Telewest Global) and further merging with Virgin Mobile UK in 2006, it became first quad paly media industry providing all services from one place.

• Virgin Media is the first company in the UK offering TV, broadband, mobile and landline all from one place. The main services of virgin media are:

• TV cable, with all top viewed channels; around 3.4 million subscribers

• Superfast Broadband up to 50MB internet access; behind TalkTalk and BT of 22.2% market share

• Phone packages with cheaper cost; from 1 April 2010, it began to offer free home phone to mobile calls

• Mobile services (contract and pays you go) with over four million subscribers

Virgin Media is very rapidly growing communication industry in the UK just because of its technological improvements and innovation by providing all that communication services more than customers’ expectations and preferences. Virgin Media is UK’s most advanced TV service provider by firstly launching a high definition TV (HD quality) and high specification, HD V+ personal video recorder. Currently Virgin Media is only operating in the UK through its Hook headquarter. It is listed on the NASDAQ stock exchange.

Based on these forces the analytical report of Virgin Media is illustrated as under:

Force 1: The Degree of Rivalry:
The first force to be considered while determining the company’s strategy and movement towards profitability and success is measurement of competition level with the same products and services in the current market. It refers to the same line product competitions which also offer the same products or services as we are offering to the ultimate customers.

In the case of virgin media the rivals are BT, TalkTalk, Vodafone, 3 networks, sky, orange, O2 and so on. There is extreme level of completion in the sector of communication and media industry in the UK. Virgin media being an established and well-known brand image offering all communication services (TV, Mobile and broadband) from one place and large scale of industry owns the best choice of the customers and is in favourable condition. Its high definition technology and innovation all the time differs from all competitors to the top.

According to the latest survey, the position of Virgin Media among its competitors is mentioned as under:

• In the case of TV: 1st position, 55% of UK households are using Virgin
• In the case of broadband: 3rd position 22.2% market share
• In the case of Landline: 2nd position after BT.

After seeing all above facts and figures, there is a high level of completion from its rival companies especially from BT, Talk- talk, and sky. The best way to get rid from these competitors and to get competitive advantage, Virgin must apply contentious change in technology and should offer new and new services to the customers. To get competitive advantage in this situation Virgin Media can apply the following strategies:

By changing prices: Lowering the prices regarding offering services than its competitors can motivate new customers to join with Virgin and it also help to retain the old customers.

By differentiating: Differentiating on offers and service facilities than other rivals can get competitive advantages. It includes advancement in technology, adding and improving some features, implementing innovation, etc.

• Creativity using in channel distribution
• Exploiting relationship with suppliers
• Increasing area of distribution, etc.

Force 2: Threat of New Entrants:
Basically communication and media kinds of industries require high level of capital investment and technology as well as expert human resources and marketing; nobody can enter to the market easily. According to Michael Porter, there is ‘high barrier to entry and exit for communication and energy industries.’ As Virgin Media not only provides one specific services, it consist many services by one place and already established and owns name and fame in this sector, newly entering firms need to go long run to reach up to the point of Virgin Media. This means there is low level of threats from the new entrants. But, we should not be carefree because small and small communication companies like Lebara mobiles, Lyca Mobiles, etc are entering to the market with attractive plans and polices like free phone to the India, cheap international calls, Lyca to Lyca fre calss, etc. These type of features currently attracting many customers who are related to international countries. In London, 40% of populations are originally from outside of the UK. Therefore, we need to make new strategy to get competitive advantage from these small new entrants to continuously lead the market.
However there are some barriers to entry and exit from the market. Barriers reduce the rate of new entry to the industry which is favorable to the already established companies like Virgin Media. The following are some barriers to entrants:
The industrial organization literature, as Gilbert (1989) has stated with definitions of barriers to entry. Bain (1968) proposed to define or measure the height of entry barriers by “the extent to which, in the long run, established firms can elevate their selling prices above the minimal average costs of production and distribution without inducing potential entrants to enter the industry.”
Government policy: Government rules and regulations needs to be follow to enter in to the market. In some countries it is very difficult to enter bringing same products line and services because the government may have already given monopoly to one organization and that organization own all right to provide that specific services within that country. For example In Nepal before 1995, Only NTC (Nepal Telecom Corporation) used to own all right to provide communication services to Nepal. And in some countries there are lengthy procedure and complex rules regarding entering a new firm. But, in the case of UK, anyone can enter in to the communication and media market after fulfilling some rules and regulations under the communication regulation media licensing procedure.
Capital investment: Investment capitals are key barrier to enter in to the industries especially for the sectors of Medias and communication. In this sector, investments are required to make fixed assets by starting high level of sales and generating profits. In this type of industries fixed assets is a sunk cost on which the existing suppliers are anxious. This means they accept lower price instead of scale back volumes.
Network effects: they are powerful barrier to entry by their very nature and reinforce. Already established brand and mover owns advantages and generate barriers and have stronger with time.
Branding, distribution and customer relationships can also generate strong barriers to entry.

Force 3: Bargaining Power of Buyers:
Bargaining power of buyers is regarded as main source of influencing for any organization’s strategy. Buyers are those who can force to change the organizational strategy, product lines and services. Business can do well and get its objectives only if the buyers are satisfied with what they are getting from the products and services of the organization. Virgin media being a communication and media sector of industries and having great level of competition from existing competitors always should consider the bargaining power of buyers greatly.
In the case of virgin media there is extreme level of buyers’ power as same services are providing by various organizations. The only strength of virgin media is its high technological innovation and its coverage of all Medias and communication services from one place. However, virgin media being a well-known, popular, extremely well and innovative technological improved brand; the buyers are ready to join with virgin media at any cost and existing customers are also fully satisfied with what they are getting from virgin media. The buyers power not really affect the strategy and not really force to change the pricing strategy till date but we always should focus to meet the customers’ expectations and desires.

Force 4: bargaining Power of suppliers:
Suppliers of technological components, expertise, as well providers of different raw materials needed to virgin media are its suppliers. The suppliers’ power is in very low level in current situation for virgin media because it is very rich brand, popular and number 1 media. All suppliers want to join with virgin media at any cost for their own benefits. Their bargaining powers really not affect the strategy and the pricing of the company.

Force 5: The Threats of Substitutes:
A threat of substitutes is always assumed as a great threat for the general business environment of the organization. In the current businesses new innovative technologies, new product lines and development of better services are fascinating the customers to switch to the new products. For example, people are greatly reducing the use of landline phones and public telephone because of the development of mobile phones. For this regard porter has identified three main types of substitution:

• Product for product: using of faxes and letters have been substituted by email
• Substitution by need: the development of various software packages there is no need of using secretarial services
• Generic substitution: when people spend too much on same product lines they may move to spend on holidays and improving their housing and other sectors.

In the case of virgin media their main product and service lines are home networking, mobile broadband, digital TV, cable TV, etc. the services are itself innovative nature and hardly new technology is developed to switch from these services, there is favourable situation for this regard. But, in future there are a lot of chances of development of new technology and innovative service lines on these communication and media sectors. Virgin media always should bring new idea and technological improvements contentiously to cope with the threats of substitute products.

Incoming search terms:

• porter five forces example
• virgin media porters five forces
• examples of porters five forces
• examples of porter\s five forces
• porter\s five forces example
• porter 5 forces example
• porters 5 forces virgin media
• competitive advantage for virgin media
• example of porter\s five forces
• example of porters five forces