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1. STRATEGIC COST MANAGEMENT
Topic – CASE STUDY ON RELIANCE JIO
Members:
Paras Thakur 15-F-343
Varun Tolani 15-F-344
Upasana Varma 15-F-350
2. Reliance Jio Infocomm
Limited, doing business as
Jio, is a LTE mobile
network operator in India. It
is a wholly owned
subsidiary of Reliance
Industries headquartered in
Mumbai that provides
wireless 4G LTE service
network (without 2G/3G
based services) and is the
only 100% VoLTE operator
in the country, with
coverage across all 22
3. Type Subsidiary of RIL
Industry Wireless Telecommunications
Founded 2010
Founder Mukesh Ambani
Headquarters Navi Mumbai, Maharashtra, India
Key people Sanjay Mashruwala (Managing Director)
Jyotindra Thacker (Head of IT)
Akash Ambani (Chief of Strategy)
[1]
Products Mobile telephony, Wireless broadband
Owner Mukesh Ambani
Parent Reliance Industries
Subsidiaries LYF
Website www.jio.com
4. Products and Services
4G Broadband
The company launched its 4G broadband services throughout
India on September 2016.Mukesh Ambani, owner of Reliance
Industries Limited (RIL) whose Reliance Jio is the telecom
subsidiary, had unveiled details of Jio's fourth-generation (4G)
services on 12 June 2015 at RIL's 41st annual general meeting. It
offers data and voice services with peripheral services like instant
messaging, live TV, movies on demand, news, streaming music,
and a digital payments platform.
The company has a network of more than 250,000 km of fiber optic
cables in the country, over which it will be partnering with local
cable operators to get broader connectivity for its broadband
5. LYF Smartphones
In June 2015, Jio tied up with domestic handset maker Intex to
supply 4G handsets enabled with voice over LTE (VoLTE)
feature. Through this, it plans to offer 4G voice calling besides
rolling out high-speed Internet services using a fiber network, in
addition to the 4G wireless network. However, in October 2015,
Jio announced that it would be launching its own mobile handset
brand named LYF
On 25 January 2016, the company launched its LYF
smartphone series starting with Water 1, through its chain of
electronic retail outlets, Reliance Retail .Three more handset
models have been released so far, namely Water 2 Earth 1 and
Flame 1.
6. Jionet WiFi
Prior to its pan-India launch of 4G data and telephony services, Jio
has started providing free Wi-Fi hotspot services in cities throughout
India including Surat, Ahmedabad in Gujarat,
and Visakhapatnam in Andhra
Pradesh, Indore, Jabalpur, Dewas and Ujjain in Madhya Pradesh,
select locations of Mumbai in Maharashtra, Kolkata in West
Bengal,Lucknow in Uttar
Pradesh,[41] Bhubaneswar in Odisha, Mussoorie in Uttarakhand.Colle
ctorate's Office in Meerut,[44]and at MG Road in Vijayawada among
others.
In March 2016, Jio started providing free Wi-Fi internet to spectators
at six cricket stadiums hosting the 2016 ICC World
Twenty20 matches. Jionet was made available in Wankhede
7. Jio apps
In May 2016, Jio launched a bundle of multimedia apps on Google Play as part of
its upcoming 4G services. While the apps are available to download for everyone,
a user will require a Jio SIM card to use them. Additionally, most of the apps are
in beta phase. Following is a list of the apps
MyJio - Manage Jio Account and Digital Services associated with it.
JioTV - A live TV channel service
JioCinema - An online HD video library
JioChat Messenger - An instant messaging app
JioMusic - A music player
Jio4GVoice (earlier JioJoin) - A VoLTE phone simulator]
JioMags - E-reader for magazines
JioXpressNews - A news and magazine aggregator
JioSecurity - Security app[
JioDrive - Cloud-based backup tool]
JioMoney Wallet - An online payments/wallet app
8. Affordable 4G Phones
Reliance Jio has teamed up with Google to manufacture affordable
4G handsets. These phones will run exclusively on Jio network. The
two companies are also working on developing a software for smart-
TV services. Both are expected to launch in 2017.
JioFi
Jio has also launched Wi-Fi routers by the name JioFi
9. In June 2010, Reliance Industries (RIL) bought a 96% stake in
Infotel Broadband Services Limited (IBSL) for ₹4,800cr.
Although unlisted, IBSL was the only firm to win broadband
spectrum in all 22 zones in India in the 4G auction that took
place earlier that year.[6] Later continuing as RIL's telecom
subsidiary, Infotel Broadband Services Limited was renamed
as Reliance Jio Infocomm Limited (RJIL) in January 2013.
In June 2015, Jio announced that it will start its operations all
over the country by the end of 2015.However, four months
later in October 2015, the company's spokesmen sent out a
press release stating that the launch was postponed to the
History
10. History (Contd......)
Later in July, a PIL filed in the Supreme Court by an NGO called
the Centre for Public Interest Litigation, through Prashant Bhushan,
challenged the grant of pan-India licence to Jio by the Government of
India. The PIL also alleged that Jio was allowed to provide voice
telephony along with its 4G data service, by paying an additional fees of
just ₹165.8 crore (US$26 million) which was arbitrary and unreasonable,
and contributed to a loss of ₹2,284.2 crore (US$360 million) to the
exchequer.
The Indian Department of Telecom (DoT), however, refuted all of CAG's
claims. In its statement, DoT explained that the rules for 3G and BWA
spectrum didn't restrict BWA winners from providing voice telephony. As
a result, the PIL was revoked, and the accusations were dismissed
11. Strategy of Reliance Jio in 3 points
1) Quality Subscribers: Analysts doubt the strategy of Reliance by citing
that that with its schemes Jio will attract low quality, treacherous customers
who will jump to other networks once the freebies end. But Reliance doesn’t
believe so. It is offering free 4G data which means it’ll occupy the primary
sim slot in the smart phones 4G phones. Also customers will switch to Jio
from their broadband or the Wi-Fi services and possibly will stick to it even
after the promotion period ends. In addition to that it is offering free calling,
so it is aware people will be using the number for calling purposes for the
next three months. Three months is a sufficient time span for people to
experience the super fast speed and the quality services and permanently
transfer to the network. Now assume that Jio reaches 75% of its planned
subscriber base of 100 million. So by the end of the year, Reliance ends up
with 75 million subscriber base. India’s total 4G user number is believed to
touch the mark of 143 million by this year end. So within 3 months of its
official launch, Jio would have acquired more than 50% of the market share.
12. 2) 100 million mark: Mr. Ambani has expressed his
ambitious plans of to reach 90% of India’s population. The
company plans to acquire 100 million subscribers in the
first year of its launch. By luring the population with free
data and calls for the initial few months, many doubt if this
could result in financial gains for the company. But by doing
this it is stretching its operational and strategic bandwidth.
Reliance Jiyo has pumped total 1.5 lakh crore for
4G. Reliance Jio’s 4G network will cover 18000 cities and
town and over 2 lakh villagers. Now assume 50% of the
users opting for 149 Rs plan and the remaining for higher
price plans, Reliance can easily make 400 Rs per
customer. If Jio manages to acquire a subscriber base of
100 million customers, it’ll recover the cost within 5
years and start reaping huge profits after that (only if the
13. 3) Oligopolistic market: The market for service providers is
oligopolistic where the participants fight for market share and profits
on the basis of prices and differentiated products. Reliance jio has
both. It has differentiated its product by setting up a huge bandwidth
to handle the traffic of enormous data. And the plans they are
offering is at amazingly cheap rate. Masses are overwhelmed by the
announcement of unlimited free calling. Jio has an IP network hence
all the calls will be routed through internet just like whatsapp calls
and skype calls. And once the huge optical fibre network
infrastructure is built, there isn’t any marginal cost for the company
for providing call service. In an oligopolistic market if some player
creates such kind of ripple it forces other players to slash the prices.
The strategy of other player’s in the market is solely dependent on
Relaince Jiyo. Well played Jio!
The approach of Reliance Jiyo is benefiting the customers as they
are getting twice the value for money while the Reliance is confident
14.
15. Vodafone had over 200 million subscribers and Idea about 177 million subscribers in August while the
subscriber count of Aircel stood at 89.7 million. Telenor's came in at 53.2 million and that of state-owned
MTNL was about 3.6 million at August-end.
Bharti Airtel's broadband base (3G+4G) read 35 million. Vodafone and Idea together have 25 million
broadband users.
They achieved these numbers in about 15 years while Jio has got 16 million broadband users in less
than a month.
HIGHLIGHTS
During the first month of operations, Jio activated 16
million subscribers, a record which beats WhatsApp,
Facebook and Skype in user-acquisition.
During the first week of launch, Jio’s applications were ranked within top 15 in Google Play store and
Apple’s Appstore.
16. The investment – Reliance has invested
150,000 crores for setting up the
infrastructure. Jio has been declared as
the biggest startup in the world and the
investment reflects the vision of the
company. This will not only boost the
economy but also force other players to
invest and upgrade their network.
HIGHLIGHTS
Future plan to bring 1Gbps broadband to 100 Indian cities is unlike any in the world today.
BSNL is the only company that might put up a challenge to RIL’s plans because they’re the only
broadband operator offering 100Mbps plans in 97 cities. In terms of bandwidth, however, they will
be off by a factor of 10.
Considering the above, 1Gbps coverage in 100 cities will truly revolutionise internet access in India.
17. Biggest fiber optic network – Reliance
has laid 250,000 Kms of high quality fiber
optic cable and established a network
capable of handling even 5G with ease ,
covering 18,000 cities and over one lakh
villages, with the aim of covering 100% of
the nation’s population by 2018.
Jio’s sign-up process is completely digital
as they are using Aadhaar card based e-
KYC process, which takes only a few
minutes to complete. This paper-less eKYC
process has been launched across 4100
cities and towns.
HIGHLIGHTS
18. Call sent as data (VoLTE) – This
is a first in the Indian market and
specifically designed for 4G
technology. They will send calls in
the form of data through 4G itself.
The experience would be
something like a Skype call in
much better quality.
Jio SIMs are available free of cost. You
need not pay any price to any dealer to get
your SIM. Even the Jio’s services like
data, voice, video and other applications
are available free of cost till 31st of
December 2016.
Nationwide
free voice
calls to any
network. No
roaming.
HIGHLIGHTS
19. FACTS- GROWTH OF INTERNET USERS IN INDIA
India’s telecom network is the second largest in the world based on total
number of telephone users
(both fixed and mobiles). Mobile phone user base of 929.37 million.
It has world’s third largest Internet user base. According to DoT,as on March
2016, India has 302.55 million internet connections.
21. Myth-1. SMS is unlimited
While Reliance Jio announced that the SMS will be free on its network, the detailed tariff
plans make it clear that there is a cap on the number of SMS that one can send.
For the tariff plans between Rs. 19 and Rs. 149, the subscribers can send a maximum of
just 100 SMSes on the whole. This means for 28 days. Users of tariff plans priced Rs. 299
and above can send up to 100 SMSes per day.
22. Myth-2. Unlimited night data
This is again a myth. The tariff plans state that there will be unlimited night data and it
might seem to be a nice deal. But, you need to keep a check on the time. The unlimited
night data usage is applicable only between 2 AM and 5 AM.
Bascially, it is only for three hours a day and that too at the wee hours of the day.
23. Myth-3. Enjoy unlimited data plan
Enjoy unlimited data plan This is a point that has to be noted. Everyone believes that there
is unlimited 4G data plan under each tariff that Reliance Jio is offering.
But, you need to understand that you will not get super fast connectivity after 4 GB data
usage per day. Once you cross this limit, the data speed will reduce to 128 kbps.
24. Myth-4. Jio apps access is totally free
Reliance Jio claims that users can enjoy unlimited access to its apps and the services.
The Jio apps include JioCinema, JioTV, JioMags, JioMusic, JioNewspaper, JioCloud, and
JioSecurity. The company is offering a free subscription for these apps until December 31.
However, the fact o note is that he usage of these apps will be counted again your data.
Moreover, these apps can be accessed only while you are connected to the Jio network and
not to Wi-Fi.
25. Myth-5. Rs. 50 per GB
There is a belief that Jio will offer Rs. 50 per GB of 4G data. But, you need to
understand that his is not for the cellular data, but only to JioNet.
Along with 4G services, Jio will be deploying public hotspots called JioNet.
For every plan, you will get cellular data and data that can be used when tethering
to JioNet.
You will get Rs. 50 per GB of data only on crossing the limit of JioNet usage and
not cellular data.
27. Low tariff
Company has launched its 4G service with highly competitive or
rather very low tariff. Company has strong financial capacity to
withstand initial losses
Very wide network
Company has created wide national network with a huge investment
of around $20 billon. The company has used latest technology and
hence capable to give quality service.
Brand Name
Brand Value of company is very high.
SWOT - STRENGTH
28. Late entry into telecommunication sector
The telecom sector had grown exponencially in its initial phases which started
around two decades earlier. Presently market has seen only modest growth and it
has become highly competitive due to entry big players such as Vodafone, Idea
etc.
Operation of Mobile Number Portability Still not smooth
Nowadays mobile number has become identity of a person and hence it is
difficult for anyone to change his mobile number. MNP takes many days for its
implementation and it is hard to manage this transition period. MNP is crucial for
Jio as a large number of customer is expected through migration from existing
service providers.
Highly dependent upon data consumption
As per the current trend around 60 to 70 percent of revenue comes from voice
calling and hence there is a huge potential loss for making voice calling free. This
SWOT - WEAKNESS
29. Large scale availability of smart phones
In last 2 decades the number of people using Smartphone has
increased manifolds. If company is able to provide quality service at
competitive rate it can quickly grab large number of customers.
Increasing rate of data consumption
In its earlier phase almost entire revenue of the mobile service
provider was from voice calling. However since last two years the
proportion of revenue from data users is increasing exponentially
which has resulted in almost 30-40% of the total revenue. Lower data
tariff may further increase data consumption and thus contribute more
to the revenue of company.
International market
There is huge opportunity in many developing countries
SWOT - OPPORTUNITY
30. Saturated market
The initial phase of rapid increase in subscriber is now over. A new entrant like
Jio needs a large customer base to cross breakeven point.
Highly competitive market
After the entry of big players like Vodafone, Idea, etc the market has become
highly competitive.
Changing Government Policy
The changing government policy like cancelling of 2G licences ,imposition of tax
with retrospective effect(on Vodafone), refund for call drop etc, has created
uncertainty in the market causing adverse impact on the investment sentiment.
Rapid upgradation in Technology
From 2G to 3G and 3G to 4G changes have occurred in very short span of time.
Even next generation 5G is approaching shortly. Each upgradation requires huge
SWOT - THREAT
31. Strategic Positioning
Where do you want to position your product?
Cost Leader
Product Differentiation
In order to succeed, a product has to lead in either:
Price
Product Differentiation
32. Strategic Positioning
Reference: The Winning Edge Study Material
32
(1)
Differentiation
Advantage
(2)
Differentiation
& Cost
Advantage
(4)
???
(3)
Low Cost
Advantage
Superior
Inferior
High Low
Product
Cost
33. Strategic Positioning
Jio’s Strategy (Superior product, Low cost
)
Offer a large number of products.
Low cost ( Free services till April, 2017)
Free SMS and Calling
Only charges for Data
Free Apps
Reach every individual
Give priority to market share over profits
35. Reliance Jio’s stages
Build : 2010 – 2015 :
At this stage Jio built its roots strong to spread in Indian market.
Jio owns spectrum in 850 MHz and 1,800 MHz bands in 10 and
6 circles, respectively, of the total 22 circles in the country, and
also owns pan-India licensed 2,300 MHz spectrum. The
spectrum is valid till 2035.
Hold : 2015 – 2016
Provided free services and has no profits
Harvest : 2017 and ahead
As per article on Economics Times , Reliance Jio expects to gain
over 50 per cent of revenue market share with operating margins
37. Calculation of Value
37
Value = Perceived Benefits/Price or cost to the Customer
To increase value, increase the benefits or decrease the price
Preferably do both
Decisions in the Value Chain: Vertical Integration Vs.
Outsourcing – Jio started making Handsets too under the
brand name LYF
Jio followed to keep price low thereby increasing the value
38. Sales & Marketing
38
Pricing: “Reasonable”
Brand Loyalty: Customers may switch to old service
providers after utilizing the free services.
Stores and Galleries Outlets for superior customer service
Marketing at low cost
40. Strategic Alliances
40
JioMoney, the PPI wallet offered by Reliance Payment Solutions
Ltd, and Uber announced an agreement that will enable Uber
riders to pay for their rides using JioMoney and thereby enhance
the digital transaction ecosystem in India.
This leads to long term win-win situations for Jio and Uber.
Nine operators have come together to build a new partnering
operator alliance that will allow partner businesses to more
efficiently bring products and services to customers around the
world. Members of the alliance include BT, Deutsche Telekom,
Reliance Jio Infocomm Limited, Millicom, MTS, Orange, Rogers,
TeliaSonera and TIM. It is expected that it is via these companies,
41. Cost Drivers: Structural
41
Scale Reliance alone added over 16.2 million in November 2016 taking its
total subscriber base to 51.87 million within three months of
launching its commercial services .
Scope Vertical Integration looks high as it has In June 2015, Jio tied up with
domestic handset maker Intex to supply 4G handsets enabled with voice
over LTE (VoLTE) feature
Experience Has good experience as its presence in country it more than 6 years.
Technology Reliance Jio has the longest fibre optic network in the country, ranging
over 2.5 lakh kilometers of fibre
Complexity Has many tariff plans however plans like 303 and 309 seems good
number of subscription
42. Cost Drivers: Executional
42
Work Force
Involvement
Well trained representatives helps to build strong relations with
customers
TQM Not followed yet
Capacity Utilization
Layout Efficiency Jio owns spectrum in 850 MHz and 1,800 MHz bands in 10 and 6 circles,
respectively, of the total 22 circles in the country, and also owns pan-India
licensed 2,300 MHz spectrum. This makes the Jio to enable services all
over India
Product
Configuration
Apple is known for fulfilling the customers requirements before the
customer themselves know about it
43. Revenue Management
Jio adopted the Cheaper and Better mantra
Attracting more subcribers
Faster – Cheaper – Better Mantra
44. Performance Evaluation through EVA
44
On the mend
(Reward for
improving)
Star Performer
(Reward for
performing)
Business viability
under doubt (No
reward)
Living on past
glory (No reward)
On the mend
(Reward for
improving)
Star Performer
(Reward for
performing)
Business viability
under doubt (No
reward)
Living on past
glory (No reward)
EVA
EVA
Jio is at
busniess
vialibility
category ,
however ,
soon will in
the on the
mend tab
when
revenues will
be initiated .
46. Internal Business
•Focusing on improvement of quality
•Penetrating more and more
Customers Peers
•People started using Internet
•Free services for voice call, sms
•Get more into strategic alliance to reach out to customers
Learning and Growth
•Good Customer care services
•Customer satisfaction
Financial Perspectives
•As of now negative EVA evolved , but this will be taking U- turn soon.
47. No of subcribers Rate Volume
1,000,000,000 99 99,000,000,000
one time
subscription
303 3,636,000,000,000 monthly rental
3,735,000,000,000 total annual revenue
1,867,500,000,000 50% of total revenue
http://www.ril.com/DownloadFiles/ComposingFinalFiles/Reliance%20Jio%20Infocomm%20Limited.pdf
Expected returns at 1000000000 subscibers
49. Though competitive tariff is very important to become an important player in the
market, the customer satisfaction is equally or even more important for long term
perspective. Handling customer grievances in effective way and continuous
improvement based on customer’s feedback are key priority areas to become a
dominant player in the market. For eg. BSNL could not be a dominant player in
market due to poor customer satisfaction even though tariff is highly competitive.
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