Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis - II - Question Paper

Bargaining power of buyers

The major buyers of the industry are Government incumbents like BSNL, MTNL, RailTel, Oil and Gas sector, Power sector and Indian Private Telecom Incumbents. As number of buyers in the industry are less their bargaining power is high. There are also other companies in the industry where these buyers can shift and subsequently increase their bargaining strength.

Bargaining power of suppliers

· The industry uses different products for its products like Copper Rods, Polythene Compounds, Galvanized Steel Wires / Steel Tape, Resin, Silica Tubes, etc.

· Human resources can also be considered as the supplier for the industry as the technology part of the production requires specialized and skilled persons.

· All the major players in this industry are manufacturers, not resellers. Hence, the bargaining power of suppliers could be low.

Rivalry among existing players

· There is competition among companies like Aksh Optifibre, Paramount communications, Birla Ericsson Optical, Sterlite Optical Technology, Tamil Nadu Telecom Ltd, Himachal Futuristic Communications Ltd etc.

· There is a high growth potential for optic fiber cable, major buyer for the industry is the government and all these players in the industry are bidding for the tenders, thus during bidding there is intense rivalry among these players.

· The industry has high exit barriers as the industry has specialized assets and the players also attach high strategic importance to being in the business thus competition is high.

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2. a. SWOT Analysis

Strength

· Company is 1 of the leading developers and manufacturers of Optical Fibers and Fiber Optic Cables.

· Company is awarded ‘Top Telecom Cables Company’ in India, thrice in the past 4 years as per the annual V&D 100 survey.

· Company has good order book and good projects and the current order book is estimated to be nearly Rs.300 crore. The company has received orders for jelly-filled copper cables from SAARC countries and Africa recently.

· Sterlite Optical Technologies Ltd. has been awarded preferred supplier status by Siemens, Germany, 1 of the world largest electronics and communication companies.

· Company’s major strength below in manufacturing all its glass in house, as it is the basic raw material for optical fiber. Company also controls the entire value chain from basic commodity raw materials (like silicon tetrachloride, hydrogen etc) to optical fiber cable.

Earning:   Approval pending.