Bharti Airtel Case Study

Bharti Airtel Limited is a telecommunication company, it was founded by Mittal with $900 in startup capital in 1995. It reached revenue of $1,113.4 million, a 100% increase over year 2003. Operating margin is 16.4%. By 2004, income was $117 million and Return on equity was nearly 12%.
Bharti Airtel Limited has been rapidly expanding its network in India over years. As its network grows, they need tremendous capital expenditure and management time to maintain the business. Bharti is considering whether to outsource network equipment vendors, Ericson, Nokia and Siemens; and other to IT equipment vendor IBM.

Vertical integration is a process of owning or merging companies from different stages of a supply chain. There are three types of the vertical integration:
- Backward – when a company acquires a supplier of raw or input materials;
- Forward – when company acquires their distributors to become closer to the end customers;
- Balanced – represents both backward and forward types together.
Companies consider two issues when deciding whether to vertically integrate or not: cost and control. Vertical integration enables companies to control and improve their supply chains, reduce transportation costs and capture additional profit margins. However, vertical integration is a difficult and expensive process to implement successfully. Also, it is hard to reverse.
Factors for vertical integration:
- Sufficiently large production quantities to benefit from economies of scale;
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