ideahhg
TRANSCRIPT
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A TRAINING REPORT
ON
At
For the partial fulfillment of the award of
Master of Business Administration
Submitted To Submitted by
MR. SUHEL ISHRAT POOJA SEN
DEPT. OF MANAGEMENT M.B.A-II Sem.
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GUIDE CERTIFICATE
This is to certify thatNISHA SAHUStudent ofM.B.A II Semester ofJAIN GROUP OFCOLLEGES, Gwalior Colleges has completed his summer training of dated from 23/10/2012
to 10/12/2012 and this report is submitted by his for the completion of the training requirement
under my guidance and supervision.
Date: MR. SUHEL ISHRAT
(Faculty Guide)
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STUDENT DECLARATION
I NISHA SAHU, student of M.B.A II Semester ofJAIN GROUP OF COLLEGES, Gwalior,
hereby declare that the project is my original piece of work and not the copy of any such work
undertaken by someone else, all the information, facts and figures presented in the report are
first hand in nature. They are actually based on my intense efforts conducted in IDEA
CELLULAR LTD.
Date: MR. SUHEL ISHRAT
(Faculty Guide)
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ACKNOWLEDGEMENT
The present work is dedicated to the persons who not only taught me, but continue inspire me in
knowing the clandestine facts of workmanship. I bow in honor before these great teachers. The
accomplishment of the present study became possible by the invaluable assistance and guidance
of my professional guides to whom I may gratefully indebted. Firstly I would like to express my
sincere gratitude to my faculty guide MR. SUHEL ISHRAT without whose invaluable
guidance, moral support and encouragement my work would have ever assumed the present
shape, research. I were indebted to my parents and friends for their moral support and possible
efforts they made for me.
Date: POOJA SEN
M.B.A
II Sem
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Table of Content
1)Objective of the project....................................5-6
2)Overview of telecom industry.7-17
Telecom Industry in India
History of Indian Telecommunications
Classification of Telecommunication services
The Key players in the Telecom Market in India Subscribers
Market Share of the Telecom Company in India
3)Introduction of Idea Cellular18-26
Introduction
Our Service Areas
Established Service Areas
New Service Areas
Holding
Mission
Board of Directors
Corporate Leadership Team
Circle Heads
Brand Information
4)Research Methodology.27-31
Definition of Research
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Types and Techniques
Tools used
Limitation of the study
5)Data Analysis & Interpretation.32-39Questionnaires for the customer
6) Telecom Market Share in Gwalior..40-45
7) Distribution channel of idea.46-56
Introduction
Distribution Strategy
Selecting members within a channel
Motivating Channel Members
Sales Organization structure
Distribution channel of idea in Gwalior
Visit with TSM
Customer Interaction when visit with FOS
8) Channel Management..57-61
9) Observation and Finding62-64
10) Bibliography .65-67
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Objective Of the
Project
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OBJECTIVES OF THE PROJECT
1. To find out the customer market share in Gwalior.
2. To find out the telecom market share of different companies in Gwalior.
3. To find out the consumer satisfaction towards the different plans offered by the company.
4. Managing the distribution channel of idea cellular.
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Overview of telecom
industry
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Telecom Industry in India
The telecom industry is one of the fastest growing industries in India. India has nearly 200 million
telephone lines making it the third largest network in the world after China and USA. With a growth
rate of 45%, Indian telecom industry has the highest growth rate in the world.
- Much of the growth in Asia Pacific Wireless Telecommunication Market is spurred by the
growth in demand in countries like India and China.
- Indias mobile phone subscriber base is growing at a rate of 82.2%.
- China is the biggest market in Asia Pacific with a subscriber base of 48% of the total Subscribers in
Asia Pacific. Compared to that Indias share in Asia Pacific Mobile Phone market is 6.4%. Considering
the fact that India and China have almost comparable populations, Indias low mobile
penetration offers huge scope for growth.
History of Indian Telecommunications
Started in 1851 when the first operational land lines were laid by the government near Calcutta (seat of
British power). Telephone services were introduced in India in 1881. In 1883 telephone services were
merged with the postal system. Indian Radio Telegraph Company (IRT) was formed in 1923. After
independence in 1947, all the foreign telecommunication companies were nationalized to form the
Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of
Communications. Telecom sector was considered as a strategic service and the government considered
it best to bring under state's control.
In 1990s, telecommunications sector benefited from the general opening up of the
economy. Also, examples of telecom revolution in many other countries, which resulted in better quality
of service and lower tariffs, led Indian policy makers to initiate a change process finally resulting in
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opening up of telecom services sector for the private sector. National Telecom Policy (NTP)
1994 was the first attempt to give a comprehensive roadmap for the Indian telecommunications sector.
In 1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to act as a regulator
to facilitate the growth of the telecom sector.
Telecommunication sector in India can be divided into two segments: Fixed Service
Provider (FSPs), and Cellular Services. Fixed line services consist of basic services, national or domestic
long distance and international long distance services. The state operators (BSNL and MTNL), account
for almost 90 per cent of revenues from basic services. Private sector services are presently available in
selective urban areas, and collectively account for less than 5 per cent of subscriptions. However, private
services focus on the business/corporate sector, and offer reliable, high- end services, such as leasedlines, ISDN, closed user group and videoconferencing.
Cellular services can be further divided into two categories: Global System for Mobile Communications
(GSM) and Code Division Multiple Access (CDMA). The GSM sector is dominated by Airtel, Vodafone-
Hutch, and Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Opening up
of international and domestic long distance telephony services are the major growth drivers for cellular
industry. Cellular operators get substantial revenue from these services, and compensate them for
reduction in tariffs on airtime, which along with rental was the main source of revenue. The reduction in
tariffs for airtime, national long distance, international long distance, and handset prices has driven
demand.
India added 13.82 million new mobile subscribers in February 09, down from 15.41 million a month
earlier, according to Indian telecom regulator TRAI. Indias total number of mobile subscribers rose to
376.12 million at end-February from 362.30 million at the end of January.
While China added 18.55 million new mobile phone subscribers in the first two months of 2009 and
total wireless subscriber base stood at 659.78 million as of end-February 2009. China Mobile subscribers
sent 607.1 billion SMSs last year, up by over 100 billion from the last year, and downloaded more than
76 million full music tracks.
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Indias GSM subscribers totaled 277.5 million by end-February, accounting for nearly 75% of
total wireless market share. According to figures released by the Cellular Operators Association of India
(COAI), GSM players added 10.84 million new subscribers in March, taking total GSM subscriptions for
the fiscal year to 288.3 million. The numbers exclude subscriptions for Reliance Communications, the
CDMA service provider that recently launched GSM services, because the company does not reveal GSM
numbers separately. If the estimates of 2.5 million to 2.7 million GSM subscribers for Reliance
Communications are added, the total monthly increase for GSM subscriptions will be 13.54 million.
At this rate, Indias GSM subscriber base is growing at more than double the monthly growth rate of
China, which is adding around 6 million customers every month.
Though March has more days and companies push sales at the end of the financial year, we expect to
see monthly incremental growth of 14 to 15 million consumers in 2009-10. Our estimate is that mobile
penetration will go up from 35% currently to 50% by the end of this financial year, said TV
Ramachandran, COAI secretary- general.
COAI has predicted that India will have around 500 million GSM subscribers by the end of 2009-10 and
over 800 million by 2012. The country would hit the one billion markets in a few years after that.
This table shows the present status of GSM players in India, where Bhari Airtel is leading then at 2nd
position Voafone-Essar group is present after that Bharat Sanchar Nigam Limited with customer of 4 Cr
is present. Idea Cellular with 43022799 is present then Aircel, Reliance GSM, MTNL and BPL are at 5 th,
6th, 7th and 8th position respectively.
The pie chart below shows that percentage of market capture in terms of customer.
COMPANY USERS AT MARCH 2009
AIRTEL 93923248
VODAFONE 68768998
BSNL 46684049
IDEA 43022799
RELIANCE TELECOM 11145176
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Airtel
35%
Vodafone
25%
BSNL
17%
Idea
16%
Reliance
4%
MTNL
2%
BPL
1%
Market Capture by telecom players
The Chart shows that in GSM service 35% of the total market captured by Airtel, 25% market captured
by Vodafone, 17% market captured by BSNL, 16% market captured by Idea and then rest are follows.
Market research firm Gartner Inc. Forecasts India will spend 739 billion rupees ($16.34 billion) on
telecom services and equipment in 2006, up 27.3 percent from this year. Forecasted Growth of Indian
Telecom Spending Through 2009:-
http://www.lightreading.com/complink_redirect.asp?vl_id=7426http://www.lightreading.com/complink_redirect.asp?vl_id=7426http://www.lightreading.com/complink_redirect.asp?vl_id=7426http://www.lightreading.com/complink_redirect.asp?vl_id=7426 -
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Revenue of Telecom Industry in India:-
Continuing its robust growth, the Indian telecom industry saw its gross revenues growing 2.6 percent to
more than Rs.40, 000 crore in the quarter ending March 31, said the sectoral watchdog here on
Monday.
According to the Telecom Regulatory Authority of India (TRAI), the gross revenue of the telecom
sector for the period under review stood at Rs.40, 444.66 crore, as against Rs.39, 408 crore in the
previous quarter. The state-owned operators -- Bharat Sanchar Nigam and Mahan agar Telephone
Nigam -- together earned Rs.10, 599 crore, while private players raked in Rs.29, 846 crore. TRAI said
India's total subscriber base reached 429.72 million by March-end, as against 384.79 million for the
quarter ending December, registering a growth of 11.68 percent.
Tele-density, too, increased 36.98 percent from 33.23 percent in the previous quarter.
The subscriber base of wireless and wire line increased to 391.76 million and 37.96 million respectively.
However, rural wire line decreased from 10.68 million to 10.58 million, a decrease of 0.93 percent.
According to the watchdog, the ARPUs (average revenue per user) continued to fall, decreasing 6.82
percent from Rs.220 in December-end to Rs.205 in March.
The number of Internet wire line subscribers increased 5.3 percent to 13.54 million in the fourth quarter
as against 12.85 million in the same period a year before.
India rupees (millions) 2004 2005 2006 2009 CAGR 2004-2009 AGR 04-05 AGR 05-06
Telecom spending 501,009 581,101 739,910 1,419,062 23.1% 16% 27.3%
Source: Gartner Inc.
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BSNL & MTNL
26%
Private Players
74%
Percentage of Total Revenue in Q2
Sales of cellular companies in India (Jun 09):-
2818
9040
3031
1085330
Idea Airtel Reliance MTNL Spice
Sales in Crore
Gross Profit cellular companies in India (Jun 09):-
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715
4032
123
2620
28
Idea Airtel MTNL Reliance Spice
Profit In Crore
Classification of Telecommunication services
1. Basic services2. Cellular services3. Internet Service Provider (ISP)
The Key players in the Telecom Market in India
Cellular Service provider:
1. BSNL2. Airtel3. Vodafone4. Idea5. Reliance6. Tata indicom7. Aircel8. Spice9. MTNL
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Subscribers
Wireless subscribers crosses 200 million mark
Tele density reaches 21.20%
The total number of telephone subscribers has reached 241.02 million at the end of August 2007 as
compared to 232.87 million in July 2007. The overall teledensity has increased to 21.20% in August 2007
as compared to 20.52% in July 2007.
In the wireless segment, 8.31 million subscribers have been added in August 2007 while 8.06 million
subscribers were added in July 2007. The total wireless subscribers (GSM, CDMA & WLL (F)) base
reaches 201.29 million at the end of August 2007.
The wire line segment subscriber base stood at 39.73 million with a decrease of 0.16 million at the end
of August 2007. Circle wise wire line subscriber base of service providers is given at following chart.
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Market Share of the Telecom Company in India
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Introduction
Of
Idea
Cellular
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INTRODUCTION
As India's leading GSM Mobile Services operator, IDEA Cellular has licenses to operate in 11 circles. With
a customer base of over 17 million, IDEA Cellular has operations in Delhi, Maharashtra, Goa, Gujarat,
Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh and
Kerala. IDEA Cellular's footprint currently covers approximately 45% of India's population and over 50%
of the potential telecom-market.
As a leader in Value Added Services, Innovation is central to IDEA's VAS Factory. It is the first cellular
company to launch music messaging with 'Cellular Jockey', 'Background Tones', 'Group Talk', a voice
portal with 'Say IDEA' and a complete suite of Mobile Email Services.
Idea Cellular is a wireless telephony company operating in various states in India. It initially started in
1995 as a join venture between the Tatas, Aditya Birla Group and AT&T by merging Tata Cellular and
Birla AT&T Communications.
Initially having a very limited footprint in the GSM arena, the acquisition of Escotel in 2004 gave Idea a
truly pan-India presence covering Maharashtra (excluding Mumbai), Goa, Gujarat, Andhra Pradesh,
Madhya Pradesh, Chattisgarh, Uttar Pradesh (East and West), Haryana, Kerala, Rajasthan and Delhi
(inclusive of NCR).
The company has its retail outlets under the "Idea n' U" banner. The company has also been the first to
offer flexible tariff plans for prepaid customers. It also offers GPRS services in urban areas.
IDEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange
(BSE) and the National Stock Exchange (NSE) in March2007.
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IIDEA Cellular is a leading GSM mobile service operator with pan India licenses. With a
customer base of over 44 million in 17 service areas, operations are soon expected to start in Chennai
Metro; Kolkata & West Bengal, North East & Assam, and J&K.
A frontrunner in introducing revolutionary tariff plans, IDEA Cellular has the distinction of offering the
most customer friendly and competitive Pre Paid offerings, for the first time in India, in an increasingly
segmented market. From basic voice & Short Message Service (SMS) services to high-end value added
services such as Mobile TV, Games etc - IDEA is seen as an innovative, customerfocusedbrand.
IDEA 'Women's Card' caters to the special needs of women on the move, and 'Youth
Card' covers the emerging youth segment. IDEA 'My Gang' - the widely popular community user group
product recently bagged the prestigious 'Golden Peacock Award 2008' under the Most InnovativeProduct category at the "19th World Congress on Total Quality".
A brand known for many firsts, IDEA was the first to launch GPRS and EDGE in India.
IDEA has partnered with Research in Motion (RIM) to offer Blackberry services on its network. IDEA
'Net Setter'- Plug & Play, EDGE enabled USB Data Card offers affordable data connectivity with faster
speed and consistency.
IDEA offers seamless coverage to roaming customers traveling to any part of the country, as well as to
international traveling customers across over 200 countries. IDEA Cellular has partnership with over
400 operators worldwide to ensure that customers are always connected while on the move, across the
globe.
IDEA has received several national and international recognitions for its path-breaking innovations in
mobile telephony products & services. It won the GSM Association Award for "Best Billing and Customer
Care Solution" for 2 consecutive years. It was awarded "Mobile Operator of the Year Award - India" for
2007 and 2008 at the Annual Asian Mobile News Awards.
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Our Service Areas
The Indian telecommunications market for mobile services is divided into 22 "Service Areas" classified
into "Metro", Category "A", Category "B" and Category "C" service areas by the Government of India.
These classifications are based principally on a Service Area's revenue generating potential. Our 17
operational Service Areas are broken up into Established and New Service Areas
Established Service Areas
The established service areas are Delhi, Andhra Pradesh, Gujarat, Maharashtra, Haryana, Kerala,
Madhya Pradesh and Uttar Pradesh (West).
Licenses for the Maharashtra and Gujarat Service Areas were awarded in December 1995, with network
rollout and commercial launch achieved in 1997. In January 2001 the mobile operations in Andhra
Pradesh Service Area were integrated with IDEA through a merger with Tata Cellular Limited.
In June 2001, the mobile operations in Madhya Pradesh Service Area were fully integrated
with IDEA through an acquisition of RPG Cellcom Limited. In October 2001, the license for Delhi Service
Area was acquired during the fourth mobile license auction, with network rollout and commercial
launch in November 2002.
In January 2004, Escotel Mobile Communications Private Limited ("Escotel"), was acquired
with its original licenses in the Service Areas of Haryana, Uttar Pradesh (West) and Kerala. All these
Service Areas were re-branded and integrated with IDEA in June 2004
New Service Areas
The New Service Areas are Uttar Pradesh (East), Rajasthan, Himachal Pradesh, Bihar, Mumbai,
Karnataka, Punjab, Orissa and Tamil Nadu ,Licenses for Uttar Pradesh (East), Rajasthan and Himachal
Pradesh were acquired through the acquisition of Escotel (Escorts Telecommunications Limited).
Brand Idea was launched in Karnataka and Punjab, through the acquisition of
Spice Communications. Idea launched its services in Mumbai and Bihar in 2008. The Mumbai launch was
the largest Metro City launch in India. In Bihar, Idea acquired 500,000 subscribers in just over 100 days.
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Holding
Initially the Birlas, the Tatas and AT&T Wireless each held one-third equity in the company. But following
AT&T Wireless' merger with Cingular Wireless in 2004, Cingular decided to sell its 32.9% stake in Idea.
This stake was bought by both the Tatas and Birlas at 16.45% each.
Tata's foray into the cellular market with its own subsidiary, Tata Indicom, a
CDMA-based mobile provider, cropped differences between the Tatas and the Birlas. This dual holding
by the Tatas also became a major reason for the delay in Idea being granted a license to operate in
Mumbai. This was because as per Department of Telecom (DOT) license norms, one promoter could not
have more than 10% stake in two companies operating in the same circle and Tata Indicom was already
operating in Mumbai when Idea filed for its license.
The Birla thus approached the DOT and sought its intervention, and the Tatas
replied by saying that they would exit Idea but only for a good price. On April 10, 2006, the Aditya Birla
Group announced its acquisition of the 48.18% stake held by the Tatas at Rs. 40.51 a share amounting to
Rs. 44.06 billion. While 15% of the 48.14% stake was acquired by Aditya Birla Novo, a company in-charge
of the Birlas' new business initiatives, the remaining stake was acquired by Birla TMT holdings Private
Ltd., an AV Birla family owned company. Currently, Birla Group holds 98.3% of the total shares of the
company.
Idea has successfully launched 3 more new circles (states) in India viz. Rajasthan, Himachal Pradesh and
UP (East) to make itself a pan-India player. Recently, Idea got licenses to operate in Mumbai & Bihar.
They are awaiting the spectrum from Dot.
Mission
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Key People
Board of Directors
Mr. Kumar Mangalam Birla (Chairman)
Smt. Rajashree Birla
Mr. Saurabh Mishra
Mr. Sanjeev Aga (Managing Director)
Mr. Arun Thiagarajan
Ms. Tarjani Vakil
Mr. Mohan Gyani
Mr. Gian Prakash Gupta
Mr. R.C. Bhargava
Mr. P. Murari
Mr. Biswajit A. Subramanian
Dr. Hansa Wijayasuriya
Management Team
Corporate Leadership Team
Mr. Sanjeev Aga, Managing Director
Mr. Akshaya Moondra, Chief Financial Officer
Mr. Anil K. Tandan, Chief Technology Officer
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Mr. Prakash K. Paranjape, Chief Information Officer
Mr. Pradeep Shrivastava, Chief Marketing Officer
Mr. Navanit Narayan, Chief Service Delivery Officer
Mr. Vinay K. Razdan, Chief Human Resource Officer
Mr. Ramjet K. Mukarji, Chief Corporate Affairs Officer
Mr. Rajesh K. Srivastava, Chief Materials & Procurement Officer
Mr. Ambrish Jain, Director - Operations
Mr. Himanshu Kapania, Director Operations
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Brand Information.
The brand Idea
It is almost impossible to disintegrate brand Idea from the corporate Idea. Brand values are the
company values and vise versa.
Brand Vision: It goes without saying that the brand vision of idea mirrors the companys vision. The
brand mission statement is...... To be the most customer-focused mobile service brand, continuously
innovating to help liberate our customers from the shackles of time & space.
IDEA - Brand Values
Innovate. Stimulate. Liberate....
It is these brand values, which have made us a formidable player in the telecom industry. Innovations
that stimulate the customer and liberate him from the shackles of time and space are the core of our
brand. This is what we strive for. Nothing more, nothing less, nothing else.
IDEA - Brand Mission
The India footprint Idea
Anywhere connectivity - bringing India closer.
The Technology Advantage Idea
Tomorrow's technology to enrich today.
The Customer Focus IdeaMake a single interaction a lasting relationship.
The Employee Focus Idea
Nurture the roots that nurture our ideas.
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Brand Initiatives
Our aim, through media buying and planning, is to create year round impact. With the objective ofstrengthening our brand, we work with strategic communication partners on campaigns like sponsorship
of the Idea International Indian Film Academy awards and the television programs Idea Rocks India,
Idea Star Singer and Idea Andhra Idol. We seek engagement with subscribers on a variety of levels,
from major celebrity fashion shows to small local events timed to coincide with new product offerings.
Since August 2003, we have commissioned a Brand Track Index Study to evaluate
the health of our brand. The Brand Track Index Study is a monthly study conducted by TNS, a marketing
consultant engaged by us to evaluate our brand using face-to-face interviews on a random sample of
mobile users a well as those intending to purchase mobiles within the next three months. According to
the study our brand is perceived as reliable/trustworthy and one that offers cheaper and good
promotional offers. We have improved our rating in the Brand Track Index calculated by the study in
the past year reflecting, we believe, the growing strength of our brand.
The main communication medium for the Idea brand is television, where we seek
strategic Idea brand coverage in various formats. Billboards and hoardings are used as a secondary
medium, customized for specific regional preferences to communicate effectively at the local level. We
also use other mass communication media such as the press and radio to communicate price plans and
other tactical and customer information.
All our key initiatives are subjected to a rigorous testing and launch process to ensure
accountability for all advertising spend and improve the chances of success of a new product. This
process is followed up with extensive briefing of call center agents and sales personnel and real-time
tracking of the impact of the communication and feedback from subscribers.
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ORGANISATION AT A GLANCE
Idea Cellular Limited is amongst the leading mobile operators and currently operates in 11 Circles which
comprise one metropolitan Circle, three category A Circles, six category B Circles and one category C
Circle. In addition, it holds licenses for the Metropolitan Circle of Mumbai and the category C Circle of
Bihar. Its ranked amongst the top three operators in six of the Established Circles. It is currently one of
the fastest growing mobile operators and has consistently grown in the Established Circles and New
Circles with a market share of Net Adds of approximately 16.7% in the period between April and
December 2006.
It is an experienced and well-positioned GSM service provider with original licenses in seven of 13 Circles
as a result of which it benefits from various incumbency advantages. It has a history of expanding,
integrating and rebranding Circles, as it did with, for example, the Uttar Pradesh (West), Haryana and
Kerala Circles. In November 2002 it commercially launched in the highly competitive Delhi Circle and has
gained a market share of 11.5% as at December 31, 2006. It is well positioned to capitalize on the
growth opportunities in the Indian telecommunications market and will be able to leverage its existing
strengths in all 13 Circles and into additional Circles where it commence operations.
It is now part of the Aditya Birla Group, which is sole promoter and is currently amongst the largest
business groups in India in terms of market capitalization. Since November 2005, companies belonging
to the Aditya Birla Group have been major shareholders and it has benefited from the Aditya Birla
Groups strong and committed support. Since that time it has invested over Rs. 25 billion in expanding
and rolling-out network in the Established Circles and the New Circles. Following this investment, in thelast nine months its subscriber numbers have grown significantly, increasing by approximately 68.9% to
approximately 12.44 million subscribers as at December 31, 2006 from approximately 7.37 million as at
March 31, 2006, and cell-sites have increased to 8,600 as at December 31, 2006 from 4,763 as at March
31, 2006. As at December 31, 2006 its network covered 1,627 Census Towns and 1,980 other population
centers. For the financial years 2005 and 2006, gross revenues were approximately Rs. 22.68 billion and
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Rs. 29.73 billion, respectively, and EBITDA was approximately Rs. 8.29 billion and Rs. 10.86
billion, respectively. Its growth to date has been the product of a combination of organic growth and
acquisitions.
It is expanding its coverage in the Established Circles and the New Circles, and also is pursuing new
licenses to create a pan-India footprint. It has recently received License for the Mumbai Circle and,
through Aditya Birla Telecom Limited, License for the Bihar Circle. The Mumbai Circle is attractive
because Mumbai is the commercial capital of India and also because of the community of telephony
interests including the benefit of traffic flows with other Circles, particularly Maharashtra, Delhi and
Gujarat Circles. It has also recently obtained an NLD license which will reduce operating costs.
In addition, it has nine License Applications pending for further Circles which, if obtained, will give
complete access to the Indian market. The table below explains the market share of Idea in respective
circles:
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Idea closes in on US$ 1 billion sales mark
Idea Cellular is set to become a billion-dollar company. On the back of expanded operations and
increased subscriber base, the 11-circle operator is expected to earn over Rs 4,300 crore in revenues
during FY07. This will be a growth of almost 45% over the previous fiscals revenues of Rs 2,965 crore.
According to industry analysts, the company is on track to touch the billion-dollar mark as the
number of users on its networks has almost doubled to over 14 million during the last financial year.
Idea will be the sixth Indian operator to achieve the milestone after Bharti Airtel, BSNL, Hutchison Essar,
Reliance Communications and Tata Teleservices. It expect to enjoy 45% CAGR in revenues and 47%
CAGR in EBITDA, market research firm CLSA said in a note on Idea Cellular. It estimates the companys
revenue for FY07 at Rs 4,310 crore and net profit at around Rs 420 crore. The rise in revenues was also
due to operations in new circles of Rajasthan, Himachal Pradesh and Uttar Pradesh (East) within a span
of two months. In these new circles, Idea has added over six lakh users in the past four-five months.
Idea expects to close the fiscal 07-08 with nearly 25 million users, an analyst said. Ideas growth
was stunted until June last year due to some differences between joint venture partners the Tatas and
Birlas. However, after the Birlas bought out the Tatas, the companys revenues saw fast growth. In the
nine months ended December 07, Idea earned Rs 3,000 crore in revenues and in the next three months,
it made another Rs 1,500 crore.
With rollouts in Bihar and Mumbai expected this year and incumbency advantage in some key
circles like Delhi, Idea is poised to grow fast. Entry into newer circles and NLD operations will boost the
topline in FY08, said another analyst.
Pune-based Idea, which listed on bourses in March 07, is the sixth largest Telco in India. Largest
player Bharti Airtel, which offers services in all the 23 circles, had reported revenues of $1.1 billion
during the third quarter of FY07.
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Products and Services
It offers pre-paid and post-paid mobile services in the Established Circles and the New Circles under the
brand names of Idea ChitChat and Idea, respectively. It seeks to identify new business opportunities
and be the first mover amongst its competitors for value added services (VAS). It was the first mobile
operator to offer an extended validity post-paid product, which now forms a sizeable percentage of its
post-paid base.
In addition to its core mobile voice services, it offer its subscribers features such as:
1. Easy to use missed call alerts;
2. GPRS enabled entertainment services like MMS, Video Tones, WAP, Wallpapers, Java Games
and Mobile Magazine;
3. GPRS enabled information services like internet browsing, data cards and mobile email;
4. Voice and SMS based entertainment services like Ring Back Tones, Background Music, Voice and
SMS Chat, Ringtones, Horoscopes, Expert Advise and Subscription Services;
5. Call-forwarding (allowing a subscriber to divert incoming calls to another telephone number);
6. Call conferencing (allowing a subscriber to speak to two or more persons simultaneously);
7. Voice mail (allowing callers to leave voice messages for the subscriber);
8. Regional, on-net, national and international roaming options for the subscribers;
9. GPRS roaming available with key national and international operators; and
10.Fixed Cellular Terminal for corporate needs, GSM gateways, vehicle tracking; and Automatic
Meter Reading.
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Awards and Recognitions
It has received several awards and acknowledgements, including:
1. An award at the GSM Association Awards ceremony in Barcelona in February 2006 in the Best
Billing or Customer Care Solution category for its Bill Flash service. Its the first, and remain
the only GSM based service operator in India, to win an industry-wide, international GSM
Association Award;
2. Being cited as one of the top 20 companies to watch out for in 2007 in Business Today. Business
Today is one of Indias premier business news publication; and
3. Winner of Golden Peacock Innovative Product/Service Award in Delhi Circle in 2002.
Growth Opportunities
1. Indian telecom market crossed 200 million telephone subscribers.
2. In the last two years 75 million new subscribers added.
3. About 5 million subscribers being added every month since Dec. 2005
4. Highest growth rate in the world, for the first time surpassing China
5. This growth has facilitated the expansion of BPO industry which employs 5 lakh people - 400
employees added per day
6. 45 MHz of additional spectrum from defence to be made available for growth of mobile services
in the beginning of the year 2007
7. GSM spectrum between 15 MHz and 37 MHZ allotted in different service areas
8. CDMA spectrum between 2.5 MHz and 15 MHz allotted in different service areas
9. Nokia, LG, Ericsson have set up their manufacturing facilities in India
10.Motorola, Foxconn, Aspocomn etc., have also decided to set up their manufacturing base with
an investment of about US$ 650 million
11.FDI of US$ 2 billion in telecom manufacturing by 2007
12.A center of excellence in telecom technology in Public Private Partnership (PPP) mode by 2007
13.Handset for Rs. 1,500 launched, expected to go further down to Rs. 1,000.
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Growth Strategies
It believes that its well positioned to grow in the rapidly expanding Indian telecommunications industry.
It believes its growth strategies have and will continue to enable it to:
Build on its strong position in the Established Circles
As at December 31, 2006, the footprint of its Established Circles alone covered approximately 46.6% of
Indias subscriber base. It enjoys a strong market position, distribution strengths, brand recognition and
the use of the 900 MHz band in seven of the eight Established Circles. This platform, now leveraged
through increased investment in its network and its brand, has delivered growth in market share upon
which it believe it can build to strengthen its position in its Established Circles. For its New Circles and
the Bihar Circle, and for the licenses for which it have applied in category B and C Circles, mobile
penetration as at December 31, 2006 is 7.7%, which is lower than the 14.5% in the Established Circles.
This should mean that the entry barriers are less formidable and the market opportunities greater.
Additionally, its strong position in its established Circles should provide it with advantages in contiguous
Circles. For example, when it launched in the Uttar Pradesh (East) Circle it benefited from its strong
market position in the neighboring Circles of Uttar Pradesh (west) and Madhya Pradesh. It therefore
believes that its leading position in the Maharashtra Circle will work to its advantage in the intensely
competitive Mumbai Circle.
The DoT intends to release further Spectrum in the 900 MHz and 1800 MHz ranges to commercial
mobile operators once the Indian defense services and other agencies vacate these ranges and it
anticipate that this could happen in the next three to six months. The additional Spectrum should ensure
that its not bandwidth constrained in any of its 13 Circles and thereby facilitate organic expansion.
Although the opening up of additional Spectrum will also allow further competitors to enter its 13
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Circles, it believe that its well positioned to face the increase in competitive pressures. It will
evaluate 3G opportunities as and when they become available.
Derive synergies and economies of scale from an expanding operation
Since its incorporation in 2002, it has grown both organically and through acquisitions and takeovers. In
January 2004, it operated in only 5 Circles whereas now it has operations in 11 of Indias 23 Circles and
has recently received License for the Mumbai Circle and, through Aditya Birla Telecom Limited, License
for the Bihar Circle. It believes that standardizing and centralizing its operations, wherever appropriate,
will help eliminate duplication and improve operational efficiencies. It has, for example, standardized its
approach to customer care. It has successfully centralized several applications; including Enterprise
Resource Planning using Oracle Financials, interconnect billing using customized software, a call
management system and a fraud management system. In order to improve network utilization and to
optimize its capital and operating expenditures it also intend to:
1. Re-align key elements of capital expenditure towards optimal capacity utilization for a mass market
strategy. For example, it ensures that its equipment vendors charges, which are based on number of
subscribers, should only apply to subscribers actually using the network;
2. Take advantage of scale in procurement by:
- aggregating multi-year procurement strategy for larger capital expenditure needs of its 13 Circles,
which enables it to derive benefits from economies of scale with its vendors; and
- delegating smaller-scale equipment acquisitions to its 13 Circles, thereby enhancing efficiency
3. Utilize the available frequency Spectrum more efficiently through a variety of frequency optimization
techniques;
4. Continue to obtain bandwidth for capacity to carry calls from location to location within its network at
substantial discounts from the benchmark rates specified by TRAI; and
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5. Reduce the cost of operating a cell-site, for example by maximizing cell-site sharing, by
using solar power for Base Transreceiver Station (BTS) sites and outdoor BTS to reduce power
consumption.
Build a meritocratic organization with a strong focus on people
Its an equal opportunity employer and encourages diversity. The values it embraces integrity,
commitment, passion, seamlessness and speed. It places emphasis on employee development and it
has, for example, committed itself to an average of 10 days training per employee this financial year. As
part of the AdityaBirla Group, it makes full use of the facilities of Gyanodaya, the Aditya Birla Groups
renowned management institute located outside Mumbai, to ensure adequate training and team
building. It regularly evaluates its employees engagement levels to help ensure that subscribers
experiences exceed expectations.
It, and also the Aditya Birla Group, is seen as employers of choice. The Aditya Birla Group offers career
opportunities to high performing talent across its locations world-wide, which contributes to its
attractiveness as an employer.
Focus on customer service to enhance brand appeal
It places significant emphasis upon delivering an efficient and friendly experience at all contact points in
the subscriber life cycle. Its tariffs are designed to be transparent and easy to understand. It has
developed call centers to focus on its subscribers needs for service and to cross-sell its various products.
It has consistently focused on innovative products that address existing and latent needs of its
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subscribers. For example, it has recently promoted a free one-year life insurance cover of Rs.
10,000 to a section of customers who subscribe to its Dialler Tone VAS. The simplicity of application
for and the security provided by the cover matched the profile of the segment of customers to which it
was targeted. At present, approximately 44% of its employees serve in customer-facing roles.
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Introduction
Statement of Problem
The countrys mobile service providers have been adding a combined 6.5 million subscribers every
month, making India the fastest growing telecom market in the world. But ARPUs (Average Revenue Per
User) of Indian mobile companies, which are already the lowest in the world, is continuing to head
further south, even as companies are registering a significant increase in their overall revenues. IDEAs
ARPU fell 1.6 per cent to Rs 317 from Rs 322 a month a subscriber in the third quarter of 2006-07.
However, compared with the corresponding quarter of 2005-07, the figure fell a worrisome 15.1 per
cent. This decline has become a trend now; it has been declining continuously for past 3-4 years. So this
is a cause of concern for the company.
The ARPU (Average Revenue Per User) for the Indian Telecom Industry is continually falling. The call
rates in India are lowest in the world and therefore there is a pressure on service providers to increase
the ARPU because their profit margin is decreasing continually. So they need to introduce other services
and find out other means to increase the revenue.
Explanation of the Problem
Every company needs to analyze the products that are major contributors of revenue and profits. While
most manufacturing companies look for the contribution from each product segment, the service
providing telecom companies search for the same nuance in the average revenue per user (ARPU),
which is indicative of the revenues that these companies generate from each of its service offering like
cellular mobile services, dialup or broadband services.
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Idea Cellular has seen a steady decline in its ARPUs on account of increased competitive
pressures. A part of the fall in the ARPUs can also be attributed to the reduction in regulatory charges
like the revision in interconnection usage charges, the reduction in access deficit charge (ADC) and also
due to a shift in customer profile. The company has over the years witnessed a marked increase in its
prepaid customers (as a percentage of total subscriber base), which has caused a reduction in its
blended ARPUs. However a fast paced subscriber addition and an increase in the minutes of usage
(MOU) per subscriber per month has led to an increase in the overall revenues of the company. As it is
explained below:
Idea Cellular: ARPU and MOU
ARPU (Rs per subscriber per month) FY03 FY04 FY05 FY06 CAGR
Prepaid 1330 1149 779 707 -19.0%
Postpaid 426 381 307 304 -10.6%
Blended 727 541 414 391 -18.7%
MOU (per subscriber per month)
Prepaid 414 583 463 523 8.1%
Postpaid 103 199 185 224 29.6%
Blended 207 279 248 289 11.8%
Service Revenue (Rs m) 9,403 12,965 22,464 29,489 46.4%
Source:Company Prospectus
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What is ARPU
A cellular mobile service provider derives its revenues by way of tariff charges for outgoing calls made by
subscribers on its network. As such, revenue for a cellular mobile service provider is simply a multiple of
average revenue per subscriber per month (ARPU) and number of subscribers. Let us now understand
what determines the ARPUs and subscriber base. Average revenue per subscriber per month, or ARPU,
is the amount of money that a cellular mobile service provider generates per subscriber per month. It
can be obtained by dividing the total wireless revenues by number of subscribers and then dividing the
output by number of months in a period. To even out the volatility in ARPUs, if any, it is better to arrive
at the figure by averaging the wireless revenues and subscriber base for the latest two years. However,
considering the rapid pace of subscriber addition for Indian cellular mobile service providers, ARPU
calculated as dividing the trailing 12-months wireless revenues by latest subscriber base.
How are ARPUs calculated
ARPU is calculated as service revenue (excluding activation charges and infrastructure sharing revenues)
divided by the average number of subscribers for the relevant period. ARPUs can also be calculated as
minutes of usage (MOU) per user per month multiplied by revenue per minute. In most cases, ARPUs
are calculated for a month.
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Do MoU and ARPU grow or fall together
Growth in MoU does not necessarily increase the ARPU. Most of such growth is due to reduction in cost
per unit thereby encouraging usage but as the revenue per minute is lowered, the ARPU does not grow
at the same pace. In fact it has been observed that ARPUs have been consistently falling in spite of
double-digit growth in MOU.
Importance of ARPUs
Tariffs and minutes of usage drive the ARPUs. The tariffs are representative of the competitive pressure
in the market, as increased competition will drive the tariffs down to their more competitive levels. In
certain cases, tariffs may also fall on account of a reduction in the regulatory charges as levied by the
regulatory body (TRAI in this case). The minutes of usage are indicative of the usage of the service by
subscribers and in turn representative of the network utilization of telecom companies. Thus, the ARPUs
are an important tool for analyzing the subscriber and devising strategies to maximize revenues through
various tariff plans. The tariff plans are framed in such a way that they appear attractive to new
customers and also incentives the existing prepaid customers to switch to postpaid tariff plans. This
helps the company to maximize its reach with prepaid customers as also to convert prepaid customers
to relatively higher revenue yielding postpaid customers.
Lower ARPUs and margins
Idea has a lower ARPU compared with Bharti Airtel and Hutchison Essar. Though it has a slightly higher
ARPU than Reliance Communications', it takes a hit in its operating profit margin (OPM). Idea has a
lower OPM at 33.6% compared with Reliance Communications and Bharti Airtel both of which have
OPM of close to 40%. The lower ARPU can be attributed to the company's (a) lower market share; (b)
absence in the lucrative Mumbai circle and (c) high share of pre-paid customers (88%). The margin is
lower due to the lower ARPU and the launch of three new circles in the last year, which dragged down
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the OPM. Going forward, as the operations in the new circles stabilise in the medium term,
the OPM would stabilise too.
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Research
Methodology
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Definition of Research
The word research is derived from the Latin word meaning to know. It is a systematic and a replicable
process, which identifies and defines problems, within specified boundaries. It employs well-designed
method to collect the data and analyses the results. It disseminates the findings to contribute to
generalize able knowledge. The characteristics of research presented below will be examined in greater
details later are:
Systematic problem solving which identifies variables and tests relationships between them,
Collecting, organizing and evaluating data.
Logical, so procedures can be duplicated or understood by others
Empirical, so decisions are based on data collected
Reductive, so it investigates a small sample which can be generalized to a larger population
Replicable, so others may test the findings by repeating it.
Discovering new facts or verify and test old facts.
Developing new scientific tools, concepts and theories, which would facilitate to take
decision?
For the proper analysis of data simple statistical techniques such as percentage were use. It helps in
making more generalization from the data available. The data which was collected from a sample of
population was assumed to be representing entire population was interest. Demographic factors like
age, income and educational background was used for the classification purpose.
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Sample size
For carrying out any research or study on any subject it is very difficult to cover even 10% of the total
population. Therefore the sample size has to be decided for a meaningful conclusion. For designing the
sample size, it was thought proper to cover a very small percentage of population in various age groups.
The method used for sample technique was non probability convenience sampling method. This method
is used because it is known previously as to whether a particular person will be asked to fill the
questionnaire. Convenient sampling is used because only those people will be asked to fill the
questionnaires that were easily accessible and available to the researcher.
Considering the constraints, it was decided to conduct the study based on sample size of 100 people in
specific age groups. Scientific method is not adopted in this study because of financial constraints and
also because of lack of time; also the basic aim of doing the research is academic, hence most
convenient way is selected.
TYPES & TECHNIQUES
The study conducted is a conclusive descriptive statistical study; the researcher comes to the decision
which is precise and rational. The study is conclusive because after doing the study the researcher
comes to a conclusion regarding the position of the brand in the minds of respondents of different firms
groups. The study is statistical because throughout the study all the similar samples are selected and
group together. All the similar responses are taken together as one and their percentages are calculated.
Thus, this, conclusive descriptive statistical study is the best study for this purpose as it provides the
necessary information which is utilize to arrive at a concrete decision.
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TOOLS USED
To know the response I have used the questionnaire method in sample survey. If one wishes to findwhat people think or know, the logical procedure is to ask them. This has lead marketing researchers to
use the questionnaire technique for collecting data more than any other method. In this method
questionnaire were distributed to the respondents and they were asked to answer the questions in the
questionnaire. The questionnaires were structured non-disguised questionnaire because the questions,
which the questionnaire contained, were arranged in a specific order besides every question asked was
logical for the study, no question can be termed as irrelevant.
The questionnaire, were non-disguised because the questionnaire were constructed so that the
objective is clear to the respondent. The respondents were aware of the objective. They knew why they
asked to fill the questionnaire.
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LIMITATIONS OF THE STUDY
The research will be conducted in a limited area.
The internet information can be irrelevant.
Time will be a major constraint.
The respondent will be limited so cannot be treated as a whole population.
The respondent may be biased.
Due to language problem it is possible that the respondents are not be able to understand thequestionnaire and can cause misleading results.
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Data Analysis &
Interpretation
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Questionnaires for the customer
DATA ANALYSIS & INTERPRETATION
Q1. Which cellular service do you use?
Airtel34%
idea
28%
Reliance
17%
BSNL
16%
TATA indicom
5%
Tata indicom 5
Options Percentage of respondents
Airtel 34
Idea 28
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Q2. Which service you r using?
Options Percentage of respondents
Prepaid 95
Postpaid 5
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Q4. Are you using lifetime or general plan?
Option Percentage of respondents
Lifetime 73
General 27
lifetime
72%
General
28% 0% 0%
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Q5 Are you satisfied with the lifetime plan which you are using?
Option Percentage of respondents
Yes 78
No 22
YES
78%
No
22%
0% 0%
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Q6. Which facility attracts you most in the lifetime plan?
Option Percentage of respondents
Call rates 15
Massage Tariff 1
Night Tariff 1
Validity 83
Call Rates
15%
Massage
Tarrif
1%
Night Terrif
1%Validity
83%
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Q7. Rate of the satisfaction level with the services of your present lifetime plan?
Option Percentage of respondents
Fully satisfied 14
Satisfied 47
Average 27
Dissatisfied 8
Highly dissatisfied 2
Fully satisfied
15%
Satisfied
51%
Average
30%
Dissatisfied
2%
Highly dissatisfied
2%
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8. Why you chose lifetime plan?
Option Percentage of respondents
For incoming purpose only 23
For money saving 48
For the facilities provided in the plan 29
For incoming
purpose only
23%
For money saving
48%
For the facilitiesprovided in the plan
29%
0%
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Telecom Market share
in Gwalior
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Here we have prepared some questionnaires from the retailers point of view and tried to find
out the market share of the following telecom industry in Gwalior:
1. Idea
2. Smart
3. Airtel
4. Vodafone
Findings:-
In the survey of Gwalior city found this result by approaching different- different retailer who deals in
the communication products and find out result in Gwalior city with the help of questionnaire. This
finding is based on only last month result because we have to find out what is happened in last month
after new launch of Vodafone in Gwalior.
In chart-1 result shows that clearly that over 50% of the retailer pushes idea to the customer whereas
Airtel is also good in Gwalior, 31% of the retailer pushes it.
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Chart -2 shows about Customer choice. Idea is leading here with 41% while Vodafone (35%) shows a
great fight in this because it is launch recently in Gwalior and providing some great offers to attract new
customer for building its reputation and market in Gwalior.
While Airtel seems to be at 3rd position with 22% of customers choose it.
Chart-3 shows about the company which care most customer and retailers, here also Idea has a big lead
over other GSM service providers with 61% of retailer told idea is best and 33% told Airtel is best while
Smart is very poor and Vodafone is new in market so it is difficult to tell about Vodafone.
Idea
61%
Airtel33%
Smart
4%Vodafone
2%
MOST CARE
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Chart -4 shows about Most Recharge sold in last month, because of a good market and leading
in customer in Gwalior Idea leads with 73%. Means 73% retails told that Idea recharges they sell most in
last month whereas Airtel and Vodafone recharges sold only at 12 and 13 % shops.
Idea
73%
Airtel
12%
Smart
0%
Vodafone
15%
RECHARGE SOLD
Chart-5 shows the total no of activation of Sims in last month. Vodafone has done a great job with 1038
activation at approx 50 shops because of new exciting offers (99 value voucher which gives Unlimited
calling to any Vodafone number in MP&CG for one months and many more).While idea is on 2 nd with
679 and Airtel on third with 496.Smart is at last with only 166 activation because of its poor network.
Idea Airtel Smart Vodafone
679
496
166
1038
ACTIVATION
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Chart - 6 shows the overall rating given by retailer, which shows a close competition between
Idea and Airtel but idea has rated more than Airtel. In this rating 1 is for highest and 5 is for lowest. Idea
got 1.38, Airtel got 1.69, Smart got 3.9 and Vodafone got 2.9.
Idea Airtel Smart Vodafone
1.381.69
3.9
2.9
RATING BY RETAILER
HIGHEST=1 LOWEST=5
Chart -7 shows average stock available at retailer. An idea has a good market and no of activations is
also more than any other provider so retailers have more stock of idea than any others. Vodafone has
facing some problems in stock so average stock of Vodafone is only 3, idea has average stock of 19,
Airtel has 12 and Smart has 14.
Idea Airtel Smart Vodafone
19
1214
3
AVG SIMS AVAILABE
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Chart -8 shows average balance in forms of both i.e. electronic recharge and paper recharge
available at retailer. Total number of idea customer is more in Gwalior so retailer has to make a huge
balance for idea so average balance available at retailer of Idea is 6067 Rs, Airtel is also improving very
quickly so it has average balance of 4493 Rs and smart and Vodafone has 3433 and 2798 Rs respectively.
Idea Airtel Smart Vodafone
6067
4493
3433
2798
AVG BALANCE AVAILABLE
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Distribution Channel of
Idea
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Distribution channel of idea
Introduction
Distribution is all about getting your product/service to the right people at the right time with special
consideration for profit and effectiveness. Successful marketing does not end when a business has
developed a product/service and has found its appropriate target audience with a view to selling it at
the 'right price'.
The next issue that needs to be faced is how they are going to distribute and sell this product/service to
these people- the consumers.
When a product/service is purchased by a consumer, it may have been bought directly from the
business, or it may have been through a number of intermediaries (wholesaler, retailer, etc):
theseareknownasdistributionchannels.
Small businesses need to acknowledge the different types of distribution channels to utilize sales
potential. After reading the article, you may learn that you could increase sales or profit by using a
different distribution channel to the one that you currently use.
Distribution channels are influenced largely by the type and size of the business and so some of the
channels explained may not be feasible for your particular business.
Consequently, you may take note that these channels could be adopted in the future to accommodate
for any changes and to help your business grow.
http://www.bizhelp24.com/marketing/how-why-to-price-your-products-successfully-7.htmlhttp://www.bizhelp24.com/marketing/how-why-to-price-your-products-successfully-7.htmlhttp://www.bizhelp24.com/marketing/how-why-to-price-your-products-successfully-7.htmlhttp://www.bizhelp24.com/marketing/how-why-to-price-your-products-successfully-7.htmlhttp://www.bizhelp24.com/marketing/how-why-to-price-your-products-successfully-7.html -
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Distribution Strategy
And trusted to act Distribution strategy is influenced by the market structure, the firm's objectives, and
its resources and of course its overall marketing strategy. All these factors are addressed in the section
on selecting Distribution Channels.
The first strategic decision is whether the distribution is to be: Intensive (with mass distribution into all
outlets as in the case of confectionery); Selective (with carefully chosen distributors e.g. specialty goods
such as car repair kits); or Exclusive (with distribution restricted to up market outlets, as in the case of
Gucci clothes).
The next strategic decision clarifies the number of levels within a channel such as agents, distributors,
wholesalers, retailers. In some Japanese markets there are many, many intermediaries involved.
Next comes a sensitive strategic decision whether to go single channel or multi-channel. Some
producers, like Manchester United FC, use multi-channels - they use many different routes, direct and
indirect, to bring their products to their customers. Multi-channel Systems like this are common where
intensive distribution is required. So direct marketing is combined with indirect marketing through
intermediaries.
Then comes the next level of strategic decisions concerning strategic relationships and partnerships.
Two common strategies are Vertical Marketing Systems and Horizontal Marketing Systems.
Vertical Marketing Systems involve suppliers and intermediaries working closely together instead of
against each other. They plan production and delivery schedules, quality levels, promotions and
sometimes prices. Resources, like information, equipment and expertise, are shared. The system is
usually managed by a dominant member, or 'channel captain'. VMS is more flexible than vertical
integration where the manufacturer actually owns the distribution channel, for example, Doctor
Martens boot manufacturers own their own retail store.
Horizontal Marketing Systems occur where organizations operating on the same channel level (e.g. two
suppliers or two retailers) co-operate. They then share their distribution expertise and distribution
channels. This can speed up the time taken to penetrate the market. There is room for creative alliances
here. See Southwestern Bell's alliance with Granada TV Shops in the Hall Of Fame.
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Resources available affect distribution strategy. Who can handle outbound logistics, marketing
and sales, and servicing? Can the supplier afford to deliver small quantities, can it provide more trucks,
can its sales force 'push' products into national retail chains? Can the organization deal with thousands,
maybe even millions of customers - can it cope? Does it want to devote huge resources here or would it
prefer to utilize someone else's resources in return for a slice of the profits?
Difficult marketing dilemmas which make distribution strategy both critical and interesting. The sections
on Distribution Channels explore this in more detail.
Selecting members within a channel
Having decided to go through intermediaries the next question is whether to use agents or distributors
and also how many. Unlike distributors, agents don't hold stocks - they only act as sales agents finding
customers, collecting orders and passing them on to the supplier in return for a percentage commission.
How would you select a distributor or an agent? Here are some criteria:
1. Market Coverage, 2. Sales Forecast, 3. Cost, 4. Other Resources, 5. Profitability, 6. Control, 7.
Motivation, 8. Reputation, 9. Competition, 10. Contracts
1. Market Coverage: - does the profile of existing customers match your target market profile? - is the
number of customers big enough to meet the required distribution penetration? - is the existing sales
force big enough to cover the territory? - are they dependant on a single individual? - are the existing
delivery fleet and warehouse facilities adequate?
2. Sales Forecast: How many can they sell? What are their forecasts based upon? Do they give a 'best,
worst and average' forecast? Will they invest in large stock commitment? Do they have budgets to run
promotions? Some suppliers even ask their distributors for a marketing plan showing how they intend to
market the supplier's products.
3. Cost: What will it cost in terms of discounts, commissions, stock investment and marketing support?
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4. Other Resources: Does the target market require anything special such as technical advice,
installation, quick deliveries, and instant availability? If so can the distributor provide it?
5. Profitability: How much profit will the distributor generate for the supplier?
6. Control: Do they have a reporting system in place? How do they deal with problems? How often is
review meetings scheduled? Can you influence the way they present your products?
7. Motivation: Does the agent or distributor convey a sense of excitement and enthusiasm about the
product? What about its sales force - what's their reaction?
8. Reputation: Has it got a good track record? This includes the number of years in business, growth and
profit record, solvency, general stability and overall reliability. Is it dependant on one key player?
9. Competition: Do they distribute any competitor's products?
10. Contracts: Some distributors demand exclusivity. Some agreements tie the supplier in for certain
periods of time. Check for flexibility in case things go wrong.
The bottom line is: Can the agent or distributor be motivated, controlled and trusted? Motivated to sell
your product among a range of others. Controlled to back results feed or change strategy if requested.
As a reliable ambassador of your product?
Motivating Channel Members
Imagine these three scenarios:
You are a producer of 'Grand Pens' a brand of fountain pens.
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A customer seeks advice from a pen shop on which pen to buy and the retailer strongly
recommends yours.
A customer asks a retailer, who stocks your pen, for another brand called 'Bad Pens'. The retailer
recommends and offers your pen as superior.
A retailer actively solicits business for you by asking customers buying other products to come and have
a look at the exquisite 'Grand Pen'.
This retailer is obviously very motivated. 'Mindshare', as it is called in the USA, has to do with how
important your product is in the distributor's mind relative to the other lines they carry. Winning the
battle for the distributor's share of mind can be more important than many other marketing strategies.
It applies in industrial markets and consumer markets where intermediaries play important roles in thedistribution channel.
In reality, maintaining continually high levels of motivation among intermediaries presents a challenge.
It requires a reasonable quality product, creative promotions, product training, joint visits between
producer and distributor, co-operative advertising, merchandising and display.
Most of these apply to agents as much as distributors and retailers.
Keeping the intermediary stimulated is important. Positive motivators, like sales contests are preferred
to negative motivators like sanctions such as reduced discounts and the threat of terminating the
relationship. A positive reward works better than a negative punishment. Ideally there should be a
shared sense of responsibility - a partnership - a strategic partnership. The supplier and intermediary are
there to help each other. Vertical Marketing Systems are a good example.
Clear communications, covering sales goals, review meetings, reporting procedures, marketing strategy,
training, market information required, suggestions for improvements, all help. Regular contact through
visits, review meetings, dinners, competitions, newsletters, thank you letters, congratulatory awards all
help to keep everyone working closely together.
These are all non-financial incentives which provide a form of psychic income as opposed to financial
income. That's not to say that financial incentives aren't useful motivators, it just means that there are
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other motivations there too. In fact the money spent on financial incentives is often spent
more effectively when the sales person is rewarded with a plaque, a gold pen or a holiday in the
Bahamas rather than just the cash which tends to get soaked up and lost in a sea of ordinary household
daily expenditure.
Non cash rewards appeal to the higher levels of Maslow's Hierarchy of Needs - belonging, esteem and
self actualization.
Despite this, conflict can occur when too many distributors are appointed within close proximity of each
other, or the producer engages in a multiple channel strategy of direct marketing as well as marketing
through intermediaries.
Carefully motivating distributors is vital if goods are to flow smoothly through the channel and reachsatisfied customers
Sales Organization structure
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Sales Head(Circle office)
ZBM (GwaliorZone)
ASM (Centre)
TSM/TSEs
ASM (North)
TSM/TSEs
ASM (South)
TSM/TSEs
ASM ( West)
TSM/TSEs
Distribution channel of idea in Gwalior
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Distributor point
of Gwalior
Each Distributor
share
Each target
3.00 cr. per month 2800
1.D.B ENTERPRISES 42,28,571 5700
2KRISHNA SALES 34,28,571 1200
3MAA VAISHNAB
ENTERPRISES
35,30,571 1000
4 JAI SHIV 40,00,571 1800
5R.R ENTERPRISES 4,31,000 800
6 RAJ SALES 4,67,000 800
7 MAYA 4,25,595 700
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Distributor Operations
Distributor Revenue/ month Activations /month Retailers covered
Maya Agency Rs 75 Lakhs 1600 325
D B Enterprises Rs 1.25 cr 5700 200
Raj Agency Rs 40 Lakhs 800 175
Understanding operation at distributors end (Prism, Activation)
Runners for collection documents
FOS- collection, delivery, relationship building, communicating new schemes on day to day basis.
Billing system for Retailers
Plan 99 175 105 245
Claim per
sim
20 Rs 35Rs Tie-up
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Slabs Activations Billing 99 175
A 50 55 85 105 145 50 35
B 25 to 49 55 85 105 145 40 25
C 10 to 24 55 105 130 175 30 10
D 1 to 9 55 105 130 175 20 0
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Channel Management
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Channel management
Channel Management. Yet another sales and marketing phrase that is thrown around like everyone
knows what it means. But so few companies really comprehend channel management in a way that
really helps them. Its really no wonder. Sales channels (being the conduits by which we distribute our
products to the end-user) come in many shapesfrom direct, to the web, to the traditional retail
environment. And, were just doing whatever we can to get any business from any of them! But is that
the most efficient and effective approach?
Thats where Channel Management comes in. Channel management, as a process by which a company
creates formalized programs for selling and servicing customers within a specific channel, can really
impact your businessand in a positive way! To get started, first segment your channels by like
characteristics (their needs, buying patterns, success factors, etc.) and then customize a channel
management program that includes:
1. Goals: - Define the specific goals you have for each channel segment. Consider your goals for
the channel as whole as well as individual accounts. And, remember to consider your goals for
both acquisition and retention.
2. Policies: - Construct well-defined polices for administering the accounts within this channel.
Be sure to keep the unique characteristics of each segment in mind when defining policies for
account set up, order management, product fulfillment, etc.
3. Products: - Identify which products in your offering are most suited for each segment and
create appropriate messaging. Also, determine where your up sell opportunities lie.
4. Sales/Marketing Programs: - Design support programs for your channel that meet THEIR
needs, not what your idea of their needs are. To do this, you should start by asking your
customers within this segment, how can we best support you in the selling and marketing of
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our products? That being said, the standard considerations are product training, co -
op advertising, seasonal promotions, and merchandising. Again, this is not a one-size fits all, so
be diligent about addressing this segments SPECIFIC needs in these areas.
Defining a channel management strategy for each segment allows you to be more effective within each
segment, while gaining efficiency at the same time. Still, maintaining brand consistency across all
channel segments is critical to your long-term success. So find a good balance between customization
and brand consistency and youll be on your way to successful channel management.
Visit with TSM
We met with distributor & FOS and made understand that how to deal with retailers and how to sale
our product and how to follow our channel perfectly and effectively and how to gave them satisfaction
with company polices.
Areas Covered: Bada ,Murar,Hazira
23 retailers covered
Tasks Handled: Relationship Building, Issues Handling, Report generation, details about new
schemes, Target achieved status
Observations:
Idea Branding poor at some stores ( Visit by Airtel Sales Head)
Process started
We went to distributor point where we saw there were some people (FOS & distributor) who had a
chain by which they worked together. Every FOS had particular market in that market they collected
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money and gave them sim card and paper Boucher& e-Boucher and gave that money to the
distribute point.
Customer Interaction when visit with FOS
We went to new retailer with FOS and convince them to joint with telecom market, and gave them
some beautiful offer to started their business with low amount
Tasks: Distribution of Stocks (SIMs, Vtopup), revenue collection, issue handling, collecting
documents
Areas Covered:fruit mandi, Hazira
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Description of the process started
This is the description of the process of distribution of the SIM and recharches and during the wholeprocess our work was to manage the channel and by managing the channel to increase the revenue of
the outlets.
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Observation and
Findings
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OBSERVATION & FINDINGS
55% of the people use only mobile, and 40% of respondents use both the services & only 5%
people use the telephone service. It shows the popularity of cellular phone services.
34% of respondents are using the idea services, which is the highest percentage of users of
cellular phone. Airtel takes 2nd place in Gwalior with 28% of users. Then comes reliance and
BSNL, and tata indicom having least customers in the Bhopal.
Prepaid service is most popular in the cellular services with 95% of customers. The remained
uses postpaid services.
In current situation 73% of respondents are using lifetime plans, where the rest are using
general plan of the cellular companies.
64% of respondents are satisfied with the call rates of the lifetime plans; it is because telecom
companies have slashed their call rates few months ago. Still in this situation 36% of
respondents did not satisfy with the call rates which service they are using.
In the lifetime plan of cellular companies most of the respondents are using this service because
of its validity period with 83% of answer. Where 15% of people like this services because of its
call rates.
78% of customer satisfied with the lifetime plans of cellular companies, and which are not
satisfy with the service they are mostly BSNL and TATA indicom users.
Most of the people are using lifetime services because of money savings with the percentage of
48. Where 29% of people like this service because of the facilities provided by the operators.
And 23% of people are using this service because of incoming only.
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CONCLUSIONS
In Gwalior it is found that idea is the market leader in the lifetime plan segment. People like the lifetimeplans provided by the companies. And airtel having 2nd highest customers in Gwalior.
TATA indicom having least customers in Gwalior, where Reliance and BSNL having almost equal percent
of customer
But they are not aware about the bound of cellular companies with TRAI, that cellular companies can
deliver their services till their license have validity, they have to renew it for providing further service.
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SUGGESTIONS
In the lifetime plans, cellular companies should reduce the call rates.
They should provide other facilities like massage and minimum call rates in the same network.
They should make aware the customers that they have limited license period.
They should not take other hidden charges.
There should not be any compulsion that customer have to recharge their card in 180 days with
certain amount. This is the main drawback of the lifetime validity plan.
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Bibliography
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BIBLIOGRAPHY
Books:
Philip Kotler, marketing management prentice Hall of India Pvt. Ltd. New Dehli.
C. R. Kothari Research methodology, vishwa publication, New Delhi.
Saxena Rajan marketing management Tata McGraw-hill publication Co. Ltd. New Delhi.
H. V. Verma marketing of services Global business press, New Delhi.
Business today magazine of February issue, 2008.
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Web Resources:
www.trai.gov.in
http://www.tataindicom.com/t-aboutus-ttsl-organization.aspx
http://www.rcom.co.in/webapp/Communications/rcom/Aboutus/aboutus_home.jsp
http://www.ideacellular.com/IDEA.portal?_nfpb=true&_pageLabel=IDEA_Page_AboutIdea
http://www.bsnl.co.in/about.htm
http://www.bsnl.co.in/service/tariff_excel_pre.htm
http://210.212.144.243/utility/tariff.htm
http://www.trai.gov.in/trai/upload/PressReleases/15/pr16jan06.pdf
www.airtel.in
http://www.rcom.co.in/webapp/Communications/rcom/index.jsp
http://www.tataindicom.com/t-aboutus-ttsl-organization.aspxhttp://www.rcom.co.in/webapp/Communications/rcom/Aboutus/aboutus_home.jsphttp://www.ideacellular.com/IDEA.portal?_nfpb=true&_pageLabel=IDEA_Page_AboutIdeahttp://www.bsnl.co.in/about.htmhttp://www.bsnl.co.in/service/tariff_excel_pre.htmhttp://210.212.144.243/utility/tariff.htmhttp://www.trai.gov.in/trai/upload/PressReleases/15/pr16jan06.pdfhttp://www.airtel.in/http://www.airtel.in/http://www.airtel.in/http://www.rcom.co.in/webapp/Communications/rcom/index.jsphttp://www.rcom.co.in/webapp/Communications/rcom/index.jsphttp://www.airtel.in/http://www.trai.gov.in/trai/upload/PressReleases/15/pr16jan06.pdfhttp://210.212.144.243/utility/tariff.htmhttp://www.bsnl.co.in/service/tariff_excel_pre.htmhttp://www.bsnl.co.in/about.htmhttp://www.ideacellular.com/IDEA.portal?_nfpb=true&_pageLabel=IDEA_Page_AboutIdeahttp://www.rcom.co.in/webapp/Communications/rcom/Aboutus/aboutus_home.jsphttp://www.tataindicom.com/t-aboutus-ttsl-organization.aspx