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
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.
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)

[1]
Akash Ambani (Chief of Strategy)

Products Mobile telephony, Wireless broadband

Owner Mukesh Ambani

Parent Reliance Industries
Subsidiaries LYF
Website www.jio.com
 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.
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.
 JionetWiFi

Prior to its pan-India launch of 4G data and telephony services, Jio has started
providing freeWi-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 inWest Bengal,Lucknow in Uttar
Pradesh,[41] Bhubaneswar in Odisha, Mussoorie in Uttarakhand.Collectorate's Office
in Meerut,[44]and at MG Road inVijayawada 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
inWankhede 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
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]
JioMoneyWallet - An online payments/wallet app
JioSwitch - Transfer content
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

 History
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 (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
 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 doesnt believe so. It is offering free 4G data which means
itll 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. Indias 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!
2) 100 million mark: Mr. Ambani has expressed his ambitious plans of
to reach 90% of Indias 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 Jios 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, itll recover the
cost within 5 years and start reaping huge profits after that (only if the
existing technology doesnt obsolete!) Mukesh Ambani is betting on one
single thing: User base.
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 isnt 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 players 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.
 HIGHLIGHTS

During the first month of operations, Jio activated 16

million subscribers, a record which beats WhatsApp,
Facebook and Skype in user-acquisition.

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.
During the first week of launch, Jios applications were ranked within top 15 in Google Play store and
Apples Appstore.
 HIGHLIGHTS

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.

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 RILs plans because theyre 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.
 HIGHLIGHTS
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 nations population by 2018.
Jios 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

Nationwide
free voice
calls to any
network. No
roaming.

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 Jios services like
data, voice, video and other applications
are available free of cost till 31st of
December 2016.
 FACTS- GROWTH OF INTERNET USERS IN INDIA
Indias 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 worlds third largest Internet user base. According to DoT,as on March 2016, India has
302.55 million internet connections.
5 Myths about a Reliance Jio 4G SIM
 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.
 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.
 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.
 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.
 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.
 APPLICATION
OF
STRATEGIC COST MANAGEMENT
CONCEPTS
 SWOT - STRENGTH

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 - WEAKNESS
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 - OPPORTUNITY
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 - THREAT
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.
 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
 Strategic Positioning
Superior
(1) (2)
Differentiation Differentiation &
Advantage Cost Advantage
Product
(3)
(4)
Low Cost
???
Advantage
Inferior
High Low
Cost

32 Reference: The Winning Edge Study Material

 Strategic Positioning
Jios 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
 Strategic Concept
Build - Hold - Harvest

TIME

BUILD HOLD HARVEST

Profit Time Curve
34
Reliance Jios 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
 Survival Triangle
Generic and low cost product
Indian Telecom industry being very
Cost/ competitive Jio gave special
Price emphasize on keeping the cost low
and in the initial stages almost
Value neglible

Quality
Functi-
onality
36
 Calculation of Value
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
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
Support:
Call centre
Online
Galleries and stores

39
 Strategic Alliances
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
40 reached.
 Cost Drivers: Structural
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
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
Faster Cheaper Better Mantra
Jio adopted the Cheaper and Better mantra
Attracting more subcribers
 Performance Evaluation through EVA

On On
the the
mendmend Star
Star Performer
Performer Jio is at
(Reward busniess
(Reward
for for
improving) (Reward for
(Reward for
vialibility
improving) performing)
performing) category ,
EVA

however , soon
will in the on
the mend tab
when revenues
Business viability
Business viability under Living
Livingon
on past glory
past glory will be initiated
under doubt (No .
doubt (No reward) (No
(No reward)
reward)
reward)

44 EVA
 Balanced Scorecard
Financial
Perspective

Customer Vision & Strategy Internal Business

Perspective Process

Learning &
Growth

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.
Expected returns at 1000000000 subscibers

No of subcribers Rate Volume

one time
1,000,000,000 99 99,000,000,000 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
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
 SUGGESTIONS

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 customers 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.