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Reliance Jio: ‘DICE’ for Disruption

CASE STUDY, STRATEGY
ET Cases, 24 Pages
AUTHOR(S) : Syed Abdul Samad and Dr. Nagendra V. Chowdary

Case Preview

Reliance Jio: ‘DICE’ for Disruption

By the end of February 2017, within six months of its launch, Reliance Jio Infocomm Limited (RJIL) added more than 100 million subscribers to its telecom network (Jio). “In its first 170 days, Jio has added on an average nearly seven customers on its network every single second of every single day. This is an unprecedented level of acceptance of any technology company anywhere in the world,” said Mukesh Ambani (Mukesh), Chairman, Reliance Industries Limited (RIL).

RJIL, a subsidiary of RIL, officially launched its cellular phone network for the public on September 5th 2016 that shook grounds of the Indian Telecom Industry (ITI) incumbents and changed the industry ecosystem forever. It offered mobile and data services with unprecedented speeds, to its customers at throwaway prices, creating ‘volume-led value’ for its stakeholders, and recorded the fastest growth in its customer numbers. Its ‘carpet bombing strategy’ disrupted the ITI – with its Devices, Industry, Consumer Behavior and Ecosystem (DICE) strategy – and force-led all the incumbents to have a relook at their strategies. It also created a piping platform for media and entertainment firms to broadcast their content. Would its ‘DICE’ strategy give RJIL a competitive advantage? Can RJIL sustain the competitive advantage, if any, for a long-term?

INDIAN TELECOM INDUSTRY (ITI)

Considered among the oldest in the world, ITI’s roots can be traced to the 19th century that began with the introduction of a Telegraph line in 1850 , by the British East India Company, followed by landline telephone services in 1881 by the Oriental Telephone Company Limited of England and a few other companies.

1947–1990: Government Monopoly

The Indian Telegraph Act 1885 entitled the Government of India (GoI) as the sole operator/licensor of telecom services in the country. Post India’s independence in 1947, GoI nationalized and brought all the telecommunication companies under the Ministry of Communications (later renamed Ministry of Information and Communication Technology) to form the Department of Post, Telephone and Telegraph (PTT)..............

1994–2004: Growth

Initiatives to liberalize the ITI started in the 1980s but were not fruitful until the next decade. However, few structural changes did happen during the 1980s. In 1985, the Department of Telecommunication (DoT) was separated from PTT and was entrusted with the responsibility to form regulations, plan, implement and manage telecom services across the country..........

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2004 – 2016: Growth and Consolidation

Broadband Policy 2004 and NTP 2012 were rolled out in the respective years, with an aim to increase rural teledensity, provide internet access to all villages, increase broadband speeds and subscriptions. While the overall teledensity and broadband subscriptions grew rapidly...........

3G & 4G Era

In 2008, India witnessed the launch of 3G-enabled mobile and data services by MTNL and BSNL, followed by private players in November 2010. However, the spectrum auctioned was limited to 5MHz per operator as compared to 20MHz globally. This resulted in fierce competition, where even major players such as Airtel and Vodafone were not able to acquire a pan-India 3G spectrum.................

RELIANCE JIO’S DISRUPTION

Reliance Industries Limited

Reliance Industries Limited (RIL) was co-founded by Dhirubhai Ambani (Dhirubhai) and Champaklal Damani in 1960, as Reliance Commercial Corporation. The partnership ended in 1965 and Dhirubhai continued the business. In 1966, it was incorporated as Reliance Textiles Industries Pvt. Ltd., headquartered in Mumbai, India................

Reliance Jio Infocomm Limited (RJIL)

RJIL is RIL’s subsidiary which provided broadband and 4G telecom services in India, using its national LTE17 network with coverage across all 22 telecom circles. RJIL didn’t offer 2G or 3G service and instead used Voice over LTE18 (VoLTE) to provide voice service on its network...........

Launch of Jio 4G Services

RJIL planned to commercially launch its 4G Services (Jio) by the end of 2015 but postponed it to the first quarter of 2016. However, on December 27th 2015 (birthday of founder Dhirubhai) a beta-launch of the product was taken up by the company and Jio was released internally to its partners, staff and family......

Jio Services and Offers

Jio was commercially launched for the public on September 5th 2016 that took the industry by storm. It offered all its services (voice, SMS and 4GB data/day) for free till December 31st 2016, under its ‘Reliance Jio Welcome Offer’...........

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Industry – Losses and Consolidation

RJIL created a tremor in the ITI with Jio’s larger than life launch. The telecom market witnessed a huge change in terms of fallen tariff rates and reduced data charges, changing the economics for many telecom players..........

Consumers and Consumption Behavior

“We Indians have come to appreciate and applaud Gandhigiri (Gandhism). Now, we can all do Datagiri (data-ism), which is an opportunity for every Indian to do unlimited good things, with unlimited data,” said Mukesh in a statement boasting about the data benefits offered to his Jio customers..........

Challenges

Though the company created an immense value proposition for the customers, grew subscribers, changed ITI’s structure and disrupted other industries to an extent, RJIL has led to a drop in the industry revenues since its launch, affecting its own and other operators’ profitability (Exhibit XVI)............

Assignment Questions

I. How would you characterize the nature of competition in the ITI, that panned in the last two decades? What are the five major themes that have defined the nature of this competition?

II. Debate on how a firm’s strategy can shape an industry’s structure. Do you think the DICE strategy had an impact on the industry structure and did it give Jio a competitive advantage?

III. ...................

Exhibits

Exhibit I: Telecommunications Growth in India Over the Years

Exhibit II: FDI Inflows in Indian Telecom (in INR crore)

Exhibit III: Cellular Operators in India and their Market Share

Exhibit IV: Milestones of Mobile Telephony in India

Exhibit V: Indian Telecom Regulatory Framework

Exhibit VI: Consolidation in the ITI (2004-2014)

Exhibit VII: Telecom Industry’s Revenues, PAT, Debt and Profitability of Major Players

Exhibit VIII: RJIL’s Additional Products

Exhibit IX: RJIL’s DICE Strategy

Exhibit X: Reliance Jio Phone – Top Selling Feature Phone Globally

Exhibit XI: Jio vs Airtel Tariffs

Exhibit XII: Jio’s Growth

Exhibit XIII: Improvement in Market – Jio Effect

Exhibit XIV: Benefits to Users

Exhibit XV: Impact on the Ecosystem

Exhibit XVI: Post Jio – Dip in Industry Revenues and Company Losses

 

Teaching Note Preview

Reliance Jio: ‘DICE’ for Disruption

Synopsis

On September 5th 2016, Reliance Jio Infocomm Limited (RJIL), launched its 4G mobile network and recorded the fastest growth in its customer numbers in the country. While it created ‘volume-led value’ for its shareholders, it offered a compelling customer value proposition with an unprecedented bundling of Value-Added Services at very low prices (free voice and SMS services and cheap 4G data packages). Its ‘carpet bombing strategy’ disrupted the Indian Telecom Industry with its Devices, Industry, Consumer Behavior and Ecosystem (DICE) strategy and altered the economics of all the incumbents and force-led them to have a relook at their strategies (exit or consolidation). However, it currently stares at a few challenges like decreasing network speeds, competition, and resistance from other operators, technical glitches in its apps and fickle brand loyalty of customers.

This teaching note discusses how RJIL had created a disruptive product offering in the Indian Telecom Industry (ITI) and how it had changed the structure of the entire industry. Did Jio manage to acquire a competitive advantage with its disruptive offering? If so, can RJIL sustain the competitive advantage for a long-term?

Preamble to the Case Analysis and Suggested Classroom Orchestration

The first segment of case analysis helps the participants in getting to know the nature of competition in the Indian telecom industry and the factors thereof reponsible for the same. The second segment analyzes the disruption that happened in the ITI with the entry of Jio and the effect on the various areas of the industry, and the third segment analyzes whether the company gained any comeptititve advantage out of its disruption and whether it could sustain it for a long-term. The case analysis was carried out as presented in Exhibit (TN)-I..............

Exhibits

Exhibit (TN)-I: Suggested Classroom Orchestration

Exhibit (TN)-II: Choosing the Right Strategic Approach

Exhibit (TN)-III: Jio’s ‘DICE’ Strategy: Structuralist or Reconstructionist?

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Abstract

Can a firm's strategy alter an industry's structure? By September 2018, within two years of its launch, Reliance Jio became the third-largest mobile network operator with its DICE strategy. On September 5th 2016, Reliance Jio Infocomm Limited (RJIL), launched its 4G mobile network Jio (Jio) to a thunderous response from the consumers, so much so that, it registered 215 million subscribers within 22 months of its launch - recording the fastest growth in its customer numbers in the country.

It offered mobile voice and SMS services to its customers free of cost, and 4G data with unprecedented speed at lowest-ever prices. While it created 'volume-led value' for its shareholders, it offered a compelling customer value proposition with an unprecedented bundling of Value Added Services (VAS) at very low prices. The nine-month marathon of freebies and ultra-low tariffs attracted the data-hungry Indian customers to flock towards Jio's services. Its 'carpet bombing strategy' disrupted the Indian Telecom Industry with its Devices, Industry, Consumer Behavior and Ecosystem (DICE) strategy and altered the economics of all the incumbents and force-led them to have a relook at their strategies. While few companies consolidated to form stronger entities to match up to Jio's forces, a few made an exit from the Indian telecom industry/mobile services unable to sustain losses.

While RJIL had been a disrupting force in the telecom industry, it currently stares at few challenges - decreasing network speeds, competition and resistance from other operators, technical glitches in its apps and fickle brand loyalty of customers - that could rob off its competitive advantage (if any) and hinder its future growth. Would its 'DICE' strategy give RJIL a competitive advantage? Did Jio manage to acquire a competitive advantage? Can RJIL sustain the competitive advantage, if any, for a long-term?

Pedagogical Objectives

  • To understand the Indian telecom industry and characterize the nature of competition in the industry and discuss and debate on how a firm’s strategy can shape an industry’s structure
  • To understand Jio’s ‘DICE’ strategy and analyze whether the company had gained any competitive advantage out of it
  • What would it take for Jio to overcome the challenges and sustain its competitive advantage (if gained) for a long-term

Case Positioning and Setting

This case can be used in the MBA/MDP for either of the following:

  • Strategy Course – Competitive Strategy: To analyze RJIL’s strategies and debate on how its disruptive strategy has changed the structure of the fiercely competitive Indian Telecom Industry
  • Marketing Course – Competitive Advantage: To understand whether RJIL’s strategies have created a competitive advantage for the company or not and would it be able to sustain it for a long-term


  • This Case Pack Includes:
    - Abstract
    - Case Study
    - Teaching Note (**ONLY for Academicians)


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