China's Telecommunications Industry Case Study

It is important for organizations to consider the factors of their external

macro-environment and internal industry anaysis before making business decisions. There are many factors affecting the strategies of firms. Indeed, environmental analysis must be continuous and feed all requirements of planning. Research by Johnson and Scholes (2002) refers an organization's external macro-environment is made up of four aspects, such as

Political, Economic, Social and Technological factors (PEST). This framework is

important because it focuses on the future development of an organization rather than

past. Additionally internal industry analysis porters 5 forces are.

Introduction

Starting from the year 1994, China's telecommunications industry has undergone three extensive reforms. The first occurred in 1994; China Unicom was established, to break the monopoly state dominated by China Telecom. In 2002, China Telecom was further split into four companies, which created two duopoly markets in the fixed-line service and mobile service area. China's telecommunications industry experienced the third reform in 2008.

Currently there are six major telecom carriers in China, China Mobile, China Telecom, China Netcom, China Unicom, China Railcom, and China Satcom. In 2008, the Chinese government allowed China Telecom, China Mobile and China Unicom to offer full-range services, allowing them to operate in mobile, fixed-line and broadband markets and offer packages for services. At the same time, all three carriers received 3G licenses.The industry today has grown more rapidly than the Country's Gross Domestic Product (GDP). According to statistics from the Ministry of Industry and Information Technology (MIIT), the telecommunications industry in China recorded 5.9% and 21.4% year-on-year increases in revenue and business capacity in the first half of 2010, and contributed approximately 6% of the country's GDP in 2010. The length of optical cable in China reached almost 10 million kilometers at the end of 2010, a growth of 6 million kilometers from the past five year resulting in an annual growth rate of 20%. The number of mobile phone base stations increased from 362,000 in 2005 to 1.4 million at the end of 2010, an annual growth rate of 31%. The turnover of the telecommunications industry increased from 1.1 trillion yuan in 2005 to 3.1 trillion yuan in 2010, an increase of 170%, annual growth rate of 22 percent.

Industry Analysis (Porters 5 forces)

1. Barriers to entry

Foreign services suppliers that want to enter China's domestic market have to enter by foreign direct investment (FDI). Export is not an option. According to current China's

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