PPT on Reliance-jio

Strategic cost management (case study)

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. As The Title So The Service 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 telecom circles in India.

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 service . With its multi-service operator (MSO) licence, Jio will also serve as a TV channel distributor and will offer television-on-demand on its network.

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 .Collectorate'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 Stadium  (Mumbai),  Punjab Cricket Association IS Bindra Stadium  ( Mohali ),  Himachal Pradesh Cricket Association Stadium  ( Dharamshala ),  Chinnaswamy Stadium  ( Bengaluru ),  Feroz Shah Kotla  (Delhi), and  Eden Gardens  (Kolkata) in India

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 JioSwitch - Transfer content

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 first quarter of the financial year 2016-2017. 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. Even if many subscribers leave the association with Reliance, still Reliance would be left with significant market share. What an Idea, Reliance!

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 existing technology doesn’t obsolete!) Mukesh Ambani is betting on one single thing: User base.

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 that this will garner hefty profits in the coming future. It is a bold move by Reliance and only time will decide its impact. Till then enjoy the free 4G internet.

14. 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.

15. 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.

16. 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

17. 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 31 st of December 2016. Nationwide free voice calls to any network. No roaming. HIGHLIGHTS

18. 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.

19. 5 Myths about a Reliance Jio 4G SIM

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. APPLICATION OF STRATEGIC COST MANAGEMENT CONCEPTS

26. 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

27. 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 loss can be offset only when consumption of data increases manifold . SWOT - WEAKNESS

28. 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

29. 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 investment and  it is not possible to remain in market without it . SWOT - THREAT

30. 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

31. Strategic Positioning Reference: The Winning Edge Study Material 32 Superior Inferior High Low Product Cost

32. 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

33. Strategic Concept 34 TIME BUILD HOLD HARVEST Profit Time Curve Build - Hold - Harvest

34. 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 of over 50 per cent, based on huge expected data demand and growth 

35. Survival Triangle 36 Generic and low cost product Indian Telecom industry being very competitive Jio gave special emphasize on keeping the cost low and in the initial stages almost neglible

36. 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

37. 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

38. Service 39 Support: Call centre Online Galleries and stores

39. 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, a potential customer base of around 1 billion customers in more than 80 countries can be reached.

40. 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

41. 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

42. Revenue Management Jio adopted the Cheaper and Better mantra Attracting more subcribers Faster – Cheaper – Better Mantra

43. Performance Evaluation through EVA 44 EVA EVA Jio is at busniess vialibility category , however , soon will in the on the mend tab when revenues will be initiated .

44. Balanced Scorecard 45 Vision & Strategy

45. 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.

46. 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

47. Biblography : http://economictimes.indiatimes.com/news/company/corporate-trends/reliance-jio-expects-to-gain-over-50-per-cent-of-revenue-market/articleshow/57445933.cms http://www.ril.com/DownloadFiles/ComposingFinalFiles/Reliance%20Jio%20Infocomm%20Limited.pdf https://www.quora.com/What-is-the-business-model-of-Reliance-Jio https://en.wikipedia.org/wiki/Jio

48. 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 . SUGGESTIONS