2012

Md. Mesbah Uddin

[BANGLADESH’S MOBILE TELECOM INDUSTRY &

GRAMEENPHONE LIMITED: A STRATEGIC ANALYSIS]

From the dawn of human civilization people use many ways to communicate with each other

and those ways of communication were changed or updated time to time because of new

innovation and demand. The power of telephony is forging a new enterprise culture, from

banking to agriculture to healthcare. The opportunities that lie in the telecom industry seem

endless and lucrative due to the continuous innovation and growing demand for mobile-

telephony. Nowadays mobile phones have become an indispensable part of Bangladeshi's

everyday-life and we never want to leave this device at home while we head for our

work.……………

2

Bangladesh’s Mobile Telecom Industry & Grameenphone Limited

A Strategic Analysis

Prepared For

Dr. Nazmul A. Majumder

Course Instructor

Strategic Management (MBA/EMBA 600)

Department of Business Administration

East West University

Section-2

Session: Summer 2012

Prepared By

Md. Mesbah Uddin

2010-3-95-078

East West University, Bangladesh

July 31, 2012

3

Letter of Transmittal

July 31, 2012

Dr. Nazmul A Majumder

Course Instructor: Strategic Management (MBA/EMBA 600)

East West University, Dhaka

Subject: Submission of the report on “Bangladesh’s Mobile Telecom Industry &

Grameenphone Limited: A Strategic Analysis”

Dear Sir,

Here is the research report on ―Bangladesh’s Mobile Telecom Industry & Grameenphone

Limited: A Strategic Analysis‖ as you asked us to prepare for the partial fulfillment of the

―Strategic Management‖ course. With great pleasure we are submitting this report as an

integral part of the course.

Working for this report has definitely enriched our theoretical and practical knowledge about

the External and Internal Environment of a business, corporate level strategy & CSR policy

of an organization, and proper implementation of the formulated strategies- which ultimately

strengthened our overall understanding of the Strategic Management. This task also enhanced

our skills in writing research report.

As per your direction, we tried our level best to highlight our findings by applying strategic

management concepts and models. We tried to gather a collection of information to make our

report specific and coherent, and make the report as reflective as possible.

We are really thankful to you for giving us such a splendid opportunity to present you the

report, which is authentically based on our team effort and we appreciate this kind of work.

We also appreciate to provide any information or clarification if necessary. Thank you for

your consideration.

Sincerely Yours,

Md. Mesbah Uddin

2010-3-95-078

4

Table of Contents

Executive Summary ....................................................................................................................... 6

Chapter One: Introduction ............................................................................................................. 7

1.1 Mobile Telecom Industry in Bangladesh ................................................................................... 8

1.2 Grameenphone Limited (GP) .................................................................................................... 9

1.3 Objectives .............................................................................................................................. 11

1.4 Outline of the Report ............................................................................................................. 11

Chapter Two: External Environment Analysis ............................................................................... 12

2.1 Macro Environment Analysis .................................................................................................. 12

2.1.1 Demographic ...................................................................................................................... 13

2.1.2 Socio-cultural ...................................................................................................................... 13

2.1.3 Political/Legal: .................................................................................................................... 14

2.1.4 Technological ...................................................................................................................... 15

2.1.5 Economic ............................................................................................................................ 16

2.1.6 Global ................................................................................................................................. 17

2.2 Porter’s Five Forces Analysis .................................................................................................. 18

2.2.1 Bargaining power of Buyers: ............................................................................................... 18

2.2.2 Bargaining power of Suppliers: ............................................................................................ 18

2.2.3 Industry Substitutes: ........................................................................................................... 19

2.2.4 Threat of New Entrants: ...................................................................................................... 19

2.2.5 Rivalry among competitors: ................................................................................................ 20

Chapter Three: Internal Environment Analysis of Grameenphone ................................................ 21

3.1 Core Competencies ................................................................................................................ 21

3.1.1 Excellence in Network: ........................................................................................................ 22

3.1.2 Branding and Market Position: ............................................................................................ 22

3.1.3 Innovative Products and Services: ....................................................................................... 22

3.1.4 Better Customer Services: ................................................................................................... 23

3.1.5 Top Management: .............................................................................................................. 23

3.2 SWOT Analysis ....................................................................................................................... 23

3.2.1 Strengths: ........................................................................................................................... 24

3.2.2 Weaknesses: ....................................................................................................................... 24

3.2.3 Opportunities: .................................................................................................................... 24

3.2.4 Threats: .............................................................................................................................. 24

5

Chapter Four: Grameenphone’s Competitive Strategies and Implementation .............................. 26

4.1 Corporate-Level Strategies: .................................................................................................... 26

4.1.1 Entry Strategy: .................................................................................................................... 26

4.1.2 Diversification Strategy: ...................................................................................................... 27

4.2 Strategy Implementation in Grameenphone .......................................................................... 28

4.2.1 Strategic Control: ................................................................................................................ 29

4.2.2 Organizational Design: ........................................................................................................ 29

4.2.3 Corporate Governance: ....................................................................................................... 29

4.3 CSR Policy of Grameenphone ................................................................................................. 30

4.3.1 GP’s CSR Practices: .............................................................................................................. 30

Chapter Five: Conclusion & Recommendations ............................................................................ 33

Chapter Six: References ............................................................................................................... 34

Appendix ..................................................................................................................................... 38

6

Executive Summary

From the dawn of human civilization people use many ways to communicate with each other

and those ways of communication were changed or updated time to time because of new

innovation and demand. The power of telephony is forging a new enterprise culture, from

banking to agriculture to healthcare. The opportunities that lie in the telecom industry seem

endless and lucrative due to the continuous innovation and growing demand for mobile-

telephony. Nowadays mobile phones have become an indispensable part of Bangladeshi's

everyday-life and we never want to leave this device at home while we head for our work.

Hence we have preferred the mobile telecom industry of Bangladesh for our current study

and chosen Grameenphone Limited (GP) as the case. There are six mobile phone operators in

Bangladesh. These are Grameenphone (GP), Banglalink, Robi, Airtel, Citycell and Teletalk.

Citycell was the first mobile phone operator, while Grameenphone Limited is the largest

mobile operator in Bangladesh in terms of revenue, coverage and subscriber base. There are

many unexploited opportunities in mobile telecom industry, like around 40% of the

population yet to be connected, buying habits as well as talking habits of the people,

availability of cheap skilled workers, trust & dependence on foreign companies & products,

relatively flexible regulations, advancement in ICTs & government patronization for foreign

investment, development of Hi-Tech park, opportunities for Value Added Services and

diversified products, there is a vast demand for high speed internet, and last but not the least

the country is eagerly waiting for 3G technology- new and existing companies can be

benefited from these opportunities. Moreover, the mobile telecom industry in Bangladesh is

moderately attractive with huge growth potential. GP has positioned itself in the best way to

explore these opportunities with its core competencies and competitive strategies. It also has

resilience in its diversified business model. GP‘s strategy implementation is best in the

industry and its corporate governance is up to the international standard. It also has

excellence in CSR activities which is clearly evident form its ubiquitous presence in social

development in Bangladesh. Thus GP has achieved excellence in all of its business activities

and proudly earned the leadership position in Bangladesh telecom industry.

7

Chapter One: Introduction

From the dawn of human civilization people use many ways to communicate with each other

and those ways of communication were changed or updated time to time because of new

innovation and demand. Those innovations were done by some gifted human beings for the

well being of human society. Their work also inspired others to do research and invent new

things which changed the history of human civilization. Telephone was one of these

inventions that revolutionized the way of communication. ‗Mr. Watson, come here, I want to

see you‘, this was the first message ever transmitted from one place to another, through a

device called telephone and the eminent scientist Alexander Graham Bell (1847-1922) is

credited with inventing the first practical telephone (Wikipedia, 2012d).

During the last decade, telecommunication sector has grown up as one of the most

competitive sector in the business world. Mobile phone service providing is one of them

(Hossain & Iftekhar, 2011). Mobile phones are spreading ubiquitously across the planet.

They are considered a common manifestation of the latest phase of globalization, along with

Chinese consumer goods and Indian information technology services. With about 3.5 billion

subscribers and users worldwide, mobile phones have out-diffused virtually every prior

technology, including bicycles, radios, television (TV) sets, wallets, wireline phones, and

wristwatches, and have done so in twenty-five years (Kalba, 2008). The power of telephony

is forging a new enterprise culture, from banking to agriculture to healthcare. The

opportunities that lie in the telecom industry seem endless and lucrative due to the continuous

innovation and growing demand for mobile-telephony.

We have come a long way since the invention of telephone and today it is a part and parcel of

our everyday life. However, mobile phones are also playing a great role in

telecommunication. Nowadays mobile phones have become an indispensable part of

Bangladeshi's everyday-life and we never want to leave this device at home while we head

for our work. Thanks to the telecom-revolution and its relentless evolution that together has

made it possible even in developing country like Bangladesh. This is the dominant device

that we now express ourselves through, get our work done and share our pains and pleasures

with (Moon, Fahmi, & Murtuza, 2010). Hence we have preferred the mobile telecom industry

of Bangladesh for our current study and chosen Grameenphone Limited (GP) as the case.

8

1.1 Mobile Telecom Industry in Bangladesh

Bangladesh is the first South Asian country to adopt cellular technology back in 1993 by

introducing Advanced Mobile Phone System (AMPS) (BTRC, 2011a). In fact, the

liberalization of Bangladesh‘s telecommunications sector began back in 1989 but it took

several years to launch the services. In 1996 the then government awarded three GSM

licenses aimed at breaking the monopoly and making the cellular technology affordable to the

general masses (Appendix: Table 1). Since then the country's cellular industry never looked

back, now it has turned into the largest infrastructure provider within telecom sector and has

created new opportunities by generating employment, facilitating education and health

services for common people (BTRC, 2011a; Wikipedia, 2012f).

There are six mobile phone operators in Bangladesh. These are Grameenphone (GP),

Banglalink, Robi, Airtel, Citycell and Teletalk (Wikipedia, 2012f). Citycell is the first

mobile phone operator in Bangladesh. Today GP is the market leader and Banglalink is the

market challenger, in terms of number of subscribers they have, in Bangladesh mobile

telecom industry (Appendix: Fig. 1). In Bangladesh, mobile phone subscribers are increasing

very rapidly (Appendix: Fig. 2). In February 2009 total subscriber was 45.21 million which

reached 76.43 million at the end of June 2011; at the end of December 2011 the figure

reached 85.455 million and finally 92.120 million at the end of May 2012 (BTRC, 2011b,

2012; Wikipedia, 2012f).

Telecom voice market in Bangladesh is dominated by Mobile phone operators and its

percentage is 97% while land phone is 3% only, of which BTCL represents 2% and all

private land phone is 1% (BTRC, 2011a). According to the BTRC‘s (2011a) information,

contributions of mobile industry to the National Exchequer are worth more than BDT 20,000

crore (FY 2008), 8% of the National Revenue. It has generated direct and indirect

employment of 675,000 people till 2006-07 FY which has increased further in recent years.

The successful regulation of BTRC, ensuring competitive environment among the telecom

operators, has reduced the cell phone tariff in Bangladesh to one of the lowest in the world

(BTRC, 2011c). A total of around US $ 430 million was invested in the country's

telecommunication sector, particularly by fast-growing mobile phone companies in FY 09.

Mobile communications sector in Bangladesh has helped boost the economic and social

development in the country in three main ways: (1) by providing value-added services and

creating employment from direct/indirect firms in the telecommunications sector, (2)

9

increased productivity in businesses as a result of mobile phone usage and (3) increasing the

involvement and engagement of its population with news and current affairs (BTRC, 2011a).

The government has identified the Information and Communication Technology (ICT) as one

of the thrust sectors for rapid economic development, unemployment, & poverty alleviation

(Ashaduzzaman & Ahmed, 2011). Internet penetration in Bangladesh is the lowest in the

region. Among the 6 million internet users, around 90% uses Mobile internet which means

more mobile penetration will create more internet access for the people of Bangladesh

(BTRC, 2011a). Increased mobile penetration will help in upward access to Voice & Data, E-

health service for 24 hours in remote areas. It will open the door for Medical advice, E-

education, E-Governance, E-payment, E-banking and Agri-service. Thus this sector has

opportunities for growth & diversification and the participants can survive profitably in the

long run if adopt appropriate strategies in the competitive market.

1.2 Grameenphone Limited (GP)

Grameenphone Limited is the largest mobile telecommunications operator in Bangladesh in

terms of revenue, coverage and subscriber base (GP, 2012a). Grameenphone converted to a

public limited company on June 25, 2007. Trading of the company‘s shares started at Dhaka

and Chittagong Stock Exchanges from 16 Nov. 2009. The shareholding structure comprises

of mainly two sponsor Shareholders namely Telenor Mobile Communications AS (55.80%)

and Grameen Telecom (34.20%). The rest 10.00% shareholding includes General public &

other Institutions. GP also has a fully owned subsidiary named Grameenphone IT Limited

(GP, 2012a).

GP was founded by Iqbal Z. Quadir, a Bangladesh-born Wharton graduate, in 1996 and

began its service from March 26, 1997, the Independence Day of Bangladesh (GP, 2011;

Isenberg, Lane, & Knoop, 2007; Salam, 2012). In August 1995, the Bangladesh Ministry of

Posts and Telecommunications (MOPT) invited tenders for three cellular licenses (Isenberg,

et al., 2007). Mr. Quadir has successfully convinced Grameen Bank and Telenor for

participating in the bid. After a study by Telenor Consult, the consulting arm of Telenor, both

Telenor and Grameen Bank found the feasibility study persuasive. On October 8, 1995,

Telenor gave green signal to Mr. Quadir for participating in the bidding process for a mobile

operator license (Isenberg, et al., 2007). They have own a cellular license in the bid and

incorporated as a private limited company on October 10, 1996 (GP, 2011). According to the

10

Prof. Yunus‘s suggestion the company is named as ―GrameenPhone‖, a simple name that

carried a nationally recognized brand name and would not confuse rural people with complex

words like ―telecommunications.‖ (Isenberg, et al., 2007)

GP has 38.412 million mobile subscriptions (BTRC, 2012) and 4,696 employees (Telenor

Group, 2012). It is also the largest taxpayer of the country, paid BDT 1,121 crores to the

national exchequer during the first quarter of 2012 in the form of taxes, VAT and duties. This

sum up GP‘s accumulated contribution to the national exchequer to BDT 25,638 crores since

its inception (GP, 2012b).

GP offers core voice services and a number of value-added services on both a contract and

prepaid basis (Telenor Group, 2012). GP operates a digital mobile telecommunications

network based on the GSM standard in the 900 MHz and1800 MHz frequency bands, under a

license granted by the Bangladesh Telecom Regulatory Commission (BTRC) (GP, 2012a).

GP serves both rural and urban customers across Bangladesh, where mobile telephony is a

major driver of socioeconomic development. It built its network on a nationwide basis. As of

December 2011, GP‘s network covered 99% of Bangladesh‘s population and 90% of the total

land area, and the network infrastructure included more than 13,000 base stations located in

about 7,200 sites in operation around the country (GP, 2012a).

The company is one of the first mobile phone operators to launch GSM service in the

country. GP was also one of the first operators in Bangladesh to offer the subscribers mobile

to mobile service, EDGE, prepaid service, voice SMS and ―over-the-air‖ top-ups. In January

2008, Grameenphone became the first mobile operator in Bangladesh to offer

BlackBerryTM services (GP, 2012a). It has been also a pioneer in bringing innovative

mobile-based solutions to Bangladesh (Telenor Group, 2012). Notable among these is the

Healthline, a 24 hour medical call centre manned by licensed physicians. Other innovations

(Appendix: Fig. 3) include Studyline, a call centre-based service providing education related

information, Mobicash, for electronic purchase of train tickets, Billpay, for paying bills

through mobile phones and over 500 community information centers across Bangladesh.

These centers bring affordable Internet access and other information based services to people

in rural areas.

GP‘s financial performance is among the best in the country and it consistently paying high

dividend to its investors. On its 15th Annual General Meeting the shareholders approved the

205% cash dividend (including 140% interim cash dividend) for the year 2011 among other

11

agenda. GP reported BDT 2,322 crore revenues for the first quarter of 2012 with 12.3%

increase from same period of 2011. Net profit after taxes for the first quarter of 2012 was

BDT 520 crores with 22.4% margin compared to BDT 287 crores with 13.9% margin of the

first quarter of 2011. Higher profit for this period was mainly due to revenue growth, efficient

cost management and reduced depreciation expenses. EBITDA margin for the first quarter of

2012 was 55.1%, which also has increased by 7.3 percentage points compared to 47.8% of

the same period last year. As a result, Earnings per share (EPS) for the first quarter of 2012

stood at BDT 3.85 compared to BDT 2.12 of the first quarter of 2011. (GP, 2011, 2012a,

2012b)

1.3 Objectives

The objectives of this study are to analyze the external and internal environment of mobile

telecom industry of Bangladesh taking Grameenphone Limited (GP) as the case. Then review

the corporate level strategies, strategy implementation process and CSR policy of GP.

1.4 Outline of the Report

This report has tree major parts: introduction, body and concluding part. In introduction we

gave a brief account of Bangladesh‘s Mobile Telecom Industry and Grmeenphone limited.

This part also contains the objectives of the study and outline of this report. The body is

composed of external analysis, internal analysis, and analysis of competitive strategies &

strategy implementation in GP. External analysis starts with analyzing the macro/general

environment of telecom industry of Bangladesh followed by analyzing the competitive

environment of the mobile telecom industry through Porter‘s five forces analysis. In internal

analysis, we have discussed the core competencies of GP and then performed SWOT

analysis. In competitive strategy section we have discussed the corporate strategies, strategy

implementation and CSR policy of GP. The concluding part consists of conclusion &

recommendations, references and appendix. There is also an executive summary in the

beginning of the report. While writing the report, we have used EndNote X3 as citation

manager and APA 5th

bibliographic style.

12

Chapter Two: External Environment

Analysis

External environment analysis is very much important as we cannot or should not develop

strategies in a vacuum (G. G. Dess & Lumpkin, 2003). The strategies must be responsive to

the external business environment otherwise the firm could become the most efficient

producer of obsolete items- which have no value in the market. To avoid such mistakes, firms

must monitor and scan the environment as well as analyze competitors. In order to adapt in

changing environment, a company must have its antennae tuned to signals of change from the

external environment, decode them, and quickly act to refine or reinvent its business model

and even reshape the information landscape of its industry (Reeves & Deimler, 2011).

Mobile phone markets are one of the most turbulent market environments today due to the

increased competition and rapid change of technology (Karjaluoto et al., 2005). The mobile

market is also becoming increasingly important in developing countries, with benefits such as

increased employment and wages (Chowdhury, Parvin, Weitenberner, & Becker, 2006).

Bangladesh has a big market for mobile telecom business and the industry is expanding

quickly. The estimated total population of Bangladesh was 152,518,015 on 16th July (Morol,

2012) and the total number of active mobile phone subscribers are 92,120,000 at the end of

May 2012 (BTRC, 2012), i.e. around 60.40% of total population use mobile phones. An

internal and external analysis of the Bangladesh business environment in which

Grameenphone currently competes can provide a wider understanding of the strategies the

company has employed to sustain its market position. Here we have briefly analyzed the

general and competitive environment of telecom industry in Bangladesh.

2.1 Macro Environment Analysis

The macro environment is composed of factors that can have dramatic effects on the firm

strategy (Dean, Brown, & Bamford, 1998). Typically, a firm has little ability to predict trends

and events in the general environment, and even less ability to control them (G. G. Dess &

Lumpkin, 2003). The general environment consists of six segments- demographic, socio-

cultural, political/legal, technological, economic and global (G. G. Dess & Lumpkin, 2003).

A brief description of these segments is given below.

13

2.1.1 Demographic

Demographics are the most easily understood and quantifiable elements of the general

environment. They are the root of many changes in society. Demographics include elements

such as the aging population, rising or declining affluence, changes in ethnic composition,

geographic distribution of the population, and disparities in income level (Colvin, 1997; G.

G. Dess & Lumpkin, 2003).

According to the Population and Housing Census 2011, total population of Bangladesh is

149,772,364 with an annual growth rate of 1.37% (Morol, 2012). The projection shows that

the population is likely to grow up to 222 million around 2051, and stabilize at 250 million by

2081, even if replacement level fertility is achieved by the year 2015 (Nabi, 2012; Ruiz &

Michalski, 2009). The fertility rate fell from 6.6 births per woman in 1975 to 2.4 in 2009, a

huge drop attributed to the introduction of a major policy initiative in 1976 that emphasized

population and family planning as integral to national development (UNDP, 2011).

Bangladesh is largely ethnically homogeneous and its name derives from the Bengali ethno-

linguistic group, which comprises 98% of the population (Wikipedia, 2012c). About 90% of

Bangladeshis are Muslims and the remainders are mostly Hindus. Average life expectancy is

67.2 years and 61.4% of the population belongs to 15-64 years range and thus are the

potential target for the mobile operators (Wikipedia, 2012c). The mobile telecom sector is the

fastest growing sector of the country and still there are around 60 million people who are yet

to use cell phone. This implies that there are a lot unmet needs that could be a great potential

for the industry. The literacy rate of the country is 67% which implies that major portion of

the population have the academic depth to adopt new products and services, but they are

highly price sensitive and prefer low prices for their poor economic condition (Salam, 2012).

These statistics show that demographic trends are continuously diversifying, indicating why it

is becoming ever so important to target specific customer groups, determine their needs, and

then satisfy them (Murray, 1998).

2.1.2 Socio-cultural

Socio-cultural forces influence the values, beliefs, and lifestyles of a society. Examples

include a higher percentage of women in the workforce, dual-income families, increases in

the number of temporary workers, greater concern for healthy diets and physical fitness,

greater interest in the environment, and postponement of having children (G. G. Dess &

Lumpkin, 2003).

14

In Bangladesh people have more leisure than work, and they love to gossip & talk whenever

have time. The phenomenal growth of the telecom industry over the last two decades has

considerably changed the way people interact. Mobile telecom has played a significant role in

appealing consumers' emotions and stressing the importance of social conversations and

staying connected to family & friends using aggressive advertising and promotional activities

and thus strengthened our social relationships (Wikipedia, 2012e). Here people love city

dwelling rather then quiet village stay. The proportion of urban population in Bangladesh has

increased from 5.2% in 1961 to 25.1% in 2008, and most of the urban growth is taking place

in the major cities of the country e.g. Dhaka, Chittagong, Rajshahi and Khulna (Nabi, 2012).

According to the article (Nabi, 2012), 57% of people will be living in cities in Bangladesh by

2050 and Dhaka may become one of the densest cities of the world. The national population

growth rate is 1.34%, while the national internal migration rate is 4.5% per annum (Nabi,

2012).

Gender discrimination in Bangladesh begins at birth as most parents want to have male

children (Shahidullah, Islam, Majid, & Shams, 2004). There are glass-ceilings for woman at

work though they are the half (50%) of our total population. Despite many barriers, more and

more women are taking higher education today and doing jobs. Women‘s work participation

rates have doubled in Bangladesh since 1995 but they are still extremely low at 26 percent

(World Bank, 2008). The last decade has witnessed an impressive rise of women in the

workforce in Bangladesh, especially in a variety of male-driven corporate sectors (Hassan,

2012).

2.1.3 Political/Legal:

Political processes and legislation influence the environmental regulations with which

industries must comply (G. G. Dess & Lumpkin, 2003). Some important elements of the

political/legal arena of Bangladesh include The Corporate Governance Guidelines of 2006,

SEC Act of 1993, The Company Act of 1994, The Labour Act of 2006, The Consumer Rights

Protection Act of 2009, etc.

In order to ensure development of telecommunication services in Bangladesh and to regulate

them, Bangladesh Telecommunication Regulatory Commission (BTRC) was formed as an

independent statutory body under the Telecommunication Act 2001 (MOF, 2011; Wikipedia,

2012f). All relevant powers, responsibilities and pertinent matters related to

telecommunication regulation have been vested with the Commission. Tariff regulation is one

15

of the most important responsibilities of the BTRC to provide the telecommunication

facilities to the general people at an affordable price (BTRC, 2011d).

High taxation regime for the telecom sector has compelled the mobile operators to subsidize

Tk 605 on every single SIM in Bangladesh (FE Report, 2012b). According to Robi Axiata

official, all mobile operators except the Grameenphone are incurring loss due to this taxation

on SIM (FE Report, 2012b). There is some problem with the 2G licensing also. License

tenure of four mobile operators has expired on November 10, 2011 (FE Report, 2012d). The

renewal decision has not been finalized as some issues around the license renewal are

pending before the court and thus the final conditions for renewal are still unclear (Johnsen &

Rusten, 2012; Telenor, 2011).

2.1.4 Technological

Developments in technology lead to new products and services and improve how they are

produced and delivered to the end user. Innovations can create entirely new industries and

alter the boundaries of existing industries (G. G. Dess & Lumpkin, 2003). Internet technology

provides better opportunities for companies to establish distinctive strategic positionings than

did previous generations of information technology (Porter, 2001). ICTs can reduce

communication costs, break down geographical borders and make an important development

impact by overcoming barriers of social, economic, and geographical isolation, increasing

access to information and education, and enabling poor people to take part in more of the

decisions that affect their lives (M. A. Rahman, 2007) and thus technology can empower the

Poorest (Kelly, 2008).

There is digital divide between developed and developing countries. But the mobile phone

sector has made possible the availability of data enabling services across Bangladesh and

mobile internet has helped, and will likely continue, to bridge the digital divide between

people with access to information and services (BTRC, 2011a; CIPE, 2010). With the support

from the Government and increasing private investment, Bangladesh has stepped into a new

digital era, replacing analogue technology. Six mobile operators and nine PSTN operators

have been allowed to operate to facilitate the customers with voice services (MOF, 2011, pp.

238-239). For narrowing the gap and for the liberalization of innovative VoIP technologies, a

number of IP Telephony licenses have been issued. A good number of internet service

providers, new entrant WiMAX operators and also the mobile as well as PSTN operators are

playing the same role for data service (MOF, 2011, pp. 238-239). Infrastructure operators and

16

the gateway operators (IGW, IIG, & ICX) are the important parts of the telecom-skeleton of

Bangladesh. Rural telecommunication has been given the topmost priority and BTRC is

striving to ensure access for each of the citizens. IP telephony license (IPTSP) has been

opened for ISP operators as an overlay service and already 40 licenses have been issued

(MOF, 2011, pp. 238-239). Bangladesh is connected to SEA-ME-WE 4 or South-East Asia –

Middle East – Western Europe 4 through submarine cable and also a member of the proposed

SEA-ME-WE-5 (Wikipedia, 2012f). The country is planning to send her first ever

satellite Bangabandhu-1 into space in 2015 (Wikipedia, 2012f). Third Generation (3G)

cellphone technology is knocking at our door. The government is seeking opinions from the

public on the guideline for 3G cellphone service as it moves to issue five licenses for the

advanced technology (FE Report, 2012d).

IT industries are also flourishing in Bangladesh. Currently, more than 50 software and IT

service companies in Bangladesh are exporting software and providing their services to 30

different countries which include among others USA, UK, Australia, Canada, Denmark,

KSA, Japan, Sweden, UAE, Germany, Italy, Netherlands, Norway, Switzerland, France and

Nepal, and earned US$ 45.31 million in FY 2010-11 (MOF, 2011, p. 238). Some important

users of Bangladeshi software are Nokia, Japan Airlines, World Bank, HP, US Postal

Department and US Department of Agriculture (MOF, 2011, p. 238).

2.1.5 Economic

The economy has an impact on all industries, from suppliers of raw materials to

manufacturers of finished goods and services, as well as all organizations in the service,

wholesale, retail, government, and nonprofit sectors (G. G. Dess, Lumpkin, & Eisner, 2007).

Key economic indicators include interest rates, unemployment rates, the Consumer Price

Index, the gross domestic product, and net disposable income (G. G. Dess, et al., 2007;

Pearce-II & Robinson-Jr., 2003).

Telecommunication has a significant social, cultural and economic impact on modern society.

In 2008, estimates placed the telecommunication industry's revenue at $3.85 trillion or just

under 3% of the gross world product (Wikipedia, 2012e). Because communication

technologies deliver tangible economic empowerment to individuals, low initial purchasing

power does not create a barrier. According to Iqbal Z. Quadir, ―Connectivity is productivity;

productivity translates as the ability to pay‖ (CIPE, 2010).

17

The overall economic performance of Bangladesh in FY 2010-11 provided grounds for

optimism with 6.66% growth in GDP, compared to 6.07% in FY 2009-10 and 5.74% in FY

2008-09 (MOF, 2011, pp. 1-2). In FY2010-11, per capita GNI and per capita GDP stood at

US$ 818 and US$ 755 respectively, up from US$ 751 and US$ 687 respectively a year earlier

(MOF, 2011, pp. 1-2). The year-on-year inflation reached 10.17 percent in June 2011 from

8.70 percent in June 2010, food inflation rose to 12.51 percent in June 2011 from 10.88

percent in June 2010, while non-food inflation increased moderately to 5.73 percent from

5.24 percent in June 2010 (MOF, 2011, pp. 3, 28). The weighted average rate of interest on

commercial lending increased to 12.39 percent in June 2011, from 12.37 percent in June 2010

and the deposit rate increased to 8.85 percent from 7.40 percent over the same period (MOF,

2011, p. 5). The BD taka has depreciated by more than 15% against the US dollar during the

year 2011(Ahmed, 2012; S. Rahman, 2012). Though the exchange rate was steady at Tk. 68-

Tk. 69 between 2004 and 2010, even in the beginning of 2011 the dollar was sold at Tk. 71

for import payments (S. Rahman, 2012). According to the Bangladesh Economic Review-

2011, the number of economically active population (above 15 years) is 5.37 crore, out of

which, a labour force of 5.10 crore (male 3.85 crore and female 1.25crore) is engaged in a

number of professions, i.e. unemployment rate is 5% (MOF, 2011, p. 27).

2.1.6 Global

There is an increasing trend for firms to expand their operations and market reach beyond the

borders of their home country. Globalization provides both opportunities to access larger

potential markets and a broad base of factors of production such as raw materials, labor,

skilled managers, and technical professionals.

The world has come out of the recession of 2007-2009 stronger than anticipated (MOF, 2011,

pp. 1-2). The economy of Bangladesh has successfully tackled the contagion effect of global

economic crisis and managed to maintain a sustained growth. The foreign exchange reserve

remained steady at above US$ 10 billion during this period (MOF, 2011, pp. 1-2). There are

incentives from both government and public sectors which helped the telecom sector to grow

and it is now one of the biggest sectors of Bangladesh. As a populous country, its huge ICT

market has attracted many foreign investors to invest in this sector (Wikipedia, 2012f). BTRC

is committed to ensure effective control on telecommunication and to introduce new services

and to create a favorable atmosphere for the local and foreign investors who intend to invest

in the telecommunication sector in Bangladesh (MOF, 2011, pp. 162-167). In order to attract

18

big transnational companies or world-class investors with a view to facilitating hi-tech and

knowledge-based industries, construction of infrastructure facilities for Hi-Tech Park on

231.685 acre of land at Kaliakoir, Gazipur is going on (MOF, 2011, pp. 162-167).

2.2 Porter’s Five Forces Analysis

The industry environment has more direct impact on a firm‘s strategic competitiveness and

above-average returns, compared to the general environment (Grigorova, Müller, &

Hüschelrath, 2008). So, before getting into a market, every company should have an

assessment of the market environment, how that market could react in different

circumstances. Porter‘s (2008b) five forces model has the ability to determine the

competitiveness of a market. According to Porter (2008a),‖ awareness of the five forces can

help a company understand the structure of its industry and stake out a position that is more

profitable and less vulnerable to attack‖. Industry structure drives the competition and

profitability- no matter whether the industry is emerging or mature, high tech or low tech,

regulated or unregulated and the strategy should be formulated in such way that the company

can defend itself against these forces or influence them in its favor (Porter, 2008a). Porter‘s

five forces are (i) bargaining power of buyers, (ii) bargaining power of suppliers, (iii) threat

of substitutes, (iv) threat of new entrants, and (v) rivalry among competitors. An awareness of

these factors is critical in formulating strategies and is also helpful in neutralizing competitive

threats and increasing power over customers and suppliers (G. G. Dess, et al., 2007). The

mobile telecom industry of Bangladesh in respect to Porter's five forces is discussed below:

2.2.1 Bargaining power of Buyers: There are six mobile telecom operators in

Bangladesh and they offer almost homogenous services which have low switching costs

between operators and thus has provided buyers with extremely high bargaining power.

The bargaining power of buyers in this industry is very high, with the exception of remote-

area customers who have no alternative network available in their vicinity.

2.2.2 Bargaining power of Suppliers: All the mobile operators other than Teletalk

have international identity and have experience to work in the global platform. The

companies have the opportunity to acquire necessary equipments from different international

chains across the globe. The bargaining power of suppliers in the mobile industry varies

depending on the brand name and strategic importance of the supplies as well as the size of

19

the Company, such as Ericsson and Nokia Siemens in the mobile telecom machinery industry

is that type of suppliers who enjoy strong power in the industry. On the other hand there are

many potential suppliers and vendors in telecom industry e.g. Cisco, Siemens Enterprise

Communications, Alcatel-Lucent, Huawey and Motorola, Nortel, Oracle, Nokia, Samsung,

Juniper, Converse, HP, Sun etc. According to Salam (2012) in 2010, Huawei, the Chinese

telecom equipment manufacturer, was one of the major suppliers of telecom equipment in

Bangladesh and its major clients include Grameenphone, Banglalink, Robi, Citycell, Teletalk

and BTCL; while VimpelCom (a.k.a 'BeeLine') provided voice and data services to Djuice of

Grameenphone and Banglalink, and ACME Tele Power Ltd. (India) provided solar power

support to Grameenphone. Recently, Huawei Technology played an important role in

modernizing GP‘s network infrastructure on the new 3G platform (GP, 2011). All of these

available resources ensure competitive price and abundant supply support to the country's

telecom industry. Therefore, the bargaining power of suppliers in the industry is moderate to

weak.

2.2.3 Industry Substitutes: Mobile telecommunications is a high-tech industry and the

substitutes that would replace the products or services of today are strongly related to the

factor of innovation. In case of Bangladesh mobile telecom industry, substitutes exist in the

form of government fixed-land lines and some upcoming PSTN operators. Some additional

substitutes include VoIP service providers (VSP), Skype, Google Talk, wireless Internet

providers such as WiMax based companies etc. However, there is no strong competitive

substitute for mobile telecom industry as the existing alternatives are either nearly obsolete or

in embryonic stage and thus poses very little threat to the industry. So the threat from

substitutes is weak in Bangladesh.

2.2.4 Threat of New Entrants: Mobile Telecom is capital and resource intensive

business which poses a significant entry barrier for potential players in Bangladesh. Existing

companies have created significant brand positioning and economies of scale in network

coverage- which also act as entry barrier. Government rules and regulations- like imposition

of huge tax on SIM card, strong tariff control by the authority, can also create difficulties to

entrants; in addition the price battle between the competitors brought the tariffs to its lowest

in this region. But the major barrier to entry in Bangladesh mobile telecom market is to

obtain a radio spectrum license from BTRC. So potential direct entry to the industry is

relatively restricted at the moment, due to control over licenses. However, companies are

20

finding other ways to enter the industry, i.e. through merging with existing operators. For

example, Bharti Airtel acquired 70% stake of Warid Telecom and rebranded as ‗Airtel‘ in

order to enter the Bangladesh market (Salam, 2012). Hence it seems that the threats of new

entrants in mobile industry are moderate to weak.

2.2.5 Rivalry among competitors: There is an intense battle in price ground between

the six mobile operators. Grameenphone is leading the industry and standing in an

advantageous position than others. Each company is trying to increase the market share by

lowering call rate, superior network coverage and better Value Added Services. The

competition has driven the industry's average revenue per share to a very low level.

Considering the intensity of the competition - the rivalry among existing competitors is very

high.

Form the five forces analysis we can say the mobile telecom industry in Bangladesh is

moderately attractive with great growth potential.

Summary: Form the general environment we can identify many unexploited opportunities.

New and existing companies can be benefited from the huge population of the country-

around 40% of the population yet to be connected through mobile phone services, buying

habits as well as talking habits of the people, availability of cheap skilled workers, trust &

dependence on foreign companies & products, relatively flexible regulations, advancement in

ICTs & government patronization for foreign investment in ICTs, development of Hi-Tech

park, opportunities for Value Added Services and diversified products, Internet penetration is

one of the lowest and there is a vast demand for high speed internet, and last but not the least

the country is eagerly waiting for 3G technology. Form the five forces analysis we can say

the mobile telecom industry in Bangladesh is moderately attractive and still has huge

potential for growth. There are already six giant companies trying to find their position. It has

been clearly noticed that as the market is growing, proportionately all the operators are

getting new subscribers depending on their nationwide coverage. And due to the high growth

rate of the industry each company is being benefited, despite strong bargaining power of the

customers and intense rivalry between the competitors.

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Chapter Three: Internal Environment

Analysis of Grameenphone

We live in an era of risk and instability. Globalization, new technologies, and greater

transparency have combined to upend the business environment and give many CEOs a deep

sense of unease. Today the experience curve and the scale curve are not the key indicators of

success, if it were Nokia would still be leading the smartphone market (Reeves & Deimler,

2011). Traditional approaches to strategy assume a relatively stable world. They aim to build

an enduring competitive advantage by achieving dominant scale, occupying an attractive

niche, or exploiting certain capabilities and resources. But in the era of globalization, new

technologies, and greater transparency- sustainable competitive advantage no longer arises

from positioning or resources (Reeves & Deimler, 2011). According to Reeves & Deimler

(2011) it stems from the four organizational capabilities that foster rapid adaptation: (1) The

ability to read and act on signals of change, (2) The ability to experiment rapidly and

frequently- not only with products and services but also with business models, processes, and

strategies, (3) The ability to manage complex and interconnected systems of multiple

stakeholders, (4) The ability to motivate employees and partners. Thus internal environment

analysis is very much important to identifying a firm‘s flexibility, adaptive capability,

strengths and weaknesses to exploit the opportunities and neutralize the threats. The core

competencies of GP and a SWOT analysis of the firm are given below:

3.1 Core Competencies

For a firm to gain a competitive advantage, it must have superior core competencies that are

relevant in the marketplace (Hanson, Dowling, Hitt, Ireland, & Hoskisson, 2008). Core

competencies are resources and capabilities that the firm utilizes in an exceptional manner- in

comparison to its competitors- to gain a competitive advantage (Hanson, et al., 2008).

Hanson, et al. (2008) also defined core competencies as, ‗resources and capabilities that serve

as a source of competitive advantage for a firm over its rivals‘. According to Thompson &

Strickland (2003), a core competence is something that a company does well relative to other

internal activities, a distinctive competence is something a company does well relative to

22

competitors. Core competencies of a firm can sometimes become core rigidity for it (G. Dess

& Picken, 1999; Ingram & Baum, 1997). In this view, if the firm continues its strategic focus

on the core competence when it is no longer relevant in the external environment, this then

disadvantages the firm by restricting the development of new core competencies, and thus the

development of a new competitive advantage (Hanson, et al., 2008).

According to Porter (1996), ―a company can outperform rivals only if it can establish a

difference that it can preserve.‖ From GP‘s case, we can clearly identify the following

important core competencies- which make the firm a leader in its chosen industry.

3.1.1 Excellence in Network: Network has always been a strong point for GP and seen

as the best network by the mobile phone users in Bangladesh. To retain this position, GP has

upgraded its entire network with future proof technology (GP, 2011). The modernized

network is ready for facilitating 3G technology and broadband services. As of December

2011, GP‘s network covered 99% of Bangladesh‘s population and 90% of the total land area,

and the network infrastructure included more than 13,000 base stations located in about 7,200

sites in operation around the country (GP, 2012a). It invested BDT 373 crores during first

quarter of 2012 for network capacity and quality enhancement. With this, GP‘s cumulative

investment since inception now stands at BDT 17,465 crores (GP, 2012b).

3.1.2 Branding and Market Position: GP has positioned in Bangladesh with ―Stay

Close‖ slogan, creating a differentiated image of the quality and reach of its network (GP,

2011). It is the largest mobile telecom operator in Bangladesh in terms of revenue, coverage

and subscriber base. GP has 38.412 million mobile subscriptions, i.e. 42% of total market

share (BTRC, 2012). This brand reputation is valuable, as it provides meaningful

differentiation to its competitors, and has directly contributed to higher levels of customer

satisfaction.

3.1.3 Innovative Products and Services: Innovation in products and services is one

of the core competencies of GP. In the products and services side, the Company introduced

‗My Zone‘, first of its kind in Bangladesh, which offers discount on call tariff depending on

customer‘s location (GP, 2011). A number of products, diversified promotional tariff

offerings and innovative Value-added Services (VAS) were launched during the year 2011,

e.g. dynamic pricing, allocation based discount offer in tariff, Bangla contents in low cost

handsets ‗Grameenphone C200‘, modified Prepaid price plans for ‗Apon‘ & ‗Bondhu‘, GP

23

branded QWERTY handset ‗Q100‘, Android Handset ‗Crystal‘ for both consumer &

Business segment, 1-sec-pulse prepaid package ‗Spondon‘, mobile Facebook for valued

customers, Micro SIM card for iPhone and iPad users, and organized ‗Internet Festival‘

jointly with Prothom Alo (GP, 2011). Other innovations include Healthline, Studyline,

Mobicash, Billpay, Cellbazaar etc. (Appendix: Fig. 3).

3.1.4 Better Customer Services: GP always strives to provide quality services to its

valued subscribers. Grameenphone established a Customer Experience Lab, which is helping

the Company to gain valuable customer insight about its products and services (GP, 2011).

The corporate website of the Company has been revamped with many new tools and

applications to make life easy for its customers (GP, 2011). Bangla versions of the website

along with WAP version were also lunched. One of the major features of the website has

been the eCare system, which enabled the customers to avail many services online (GP,

2011). In addition, GP is in touch with the subscribers round the year through various

customer touch points such as 93 Grameenphone Centers (GPC) - a flagship sales and service

point under one roof- especially designed to cater customers‘ need 365 days a year. GP has

expanded its distribution footprint and is serving the customers with around 342,000 retail

points with increased focus in the rural markets.

3.1.5 Top Management: GP has a strong professional management team which is the

best in the in the industry and highly valued by all the stakeholders. The top management is

well experienced from international mobile telecom industry as well as from multinational

corporations (MNCs) and, is a core competency of the company.

3.2 SWOT Analysis

To understand the business environment of a particular firm, we need to analyze both the

general environment and the firm‘s industry and competitive environment (G. G. Dess, et al.,

2007). One of the most basic techniques for analyzing firm and industry conditions is SWOT

analysis. SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the

environmental Opportunities and Threats facing that firm (Pearce-II & Robinson-Jr., 2003).

SWOT analysis is a widely used technique through which managers create a quick overview

of a company‘s strategic situation. The SWOT analysis of Grameenphone is given below

(Appendix: Table 2):

24

3.2.1 Strengths: Grameenphone has always been committed to providing quality services

and it has been one of the main strengths for GP from the beginning. Other strengths include-

GP‘s clear strategic direction, its a multinational company, it‘s the market leader with a 42%

market share, skilled & dedicated workforce (4,970 employees in GP & GPIT), best indoor

coverage, 99% population coverage, 90% geographic coverage, network infrastructure

included more than 13,000 base stations located in about 7,200 sites in operation around the

country, strong financial position (credit rating: AAA for long term loan and ST-1 for short

term loan), multiple financing alternatives, wide range of product and product innovation

skills, strong brand image and reputation in the industry, strong company culture, superior

customer care (BTRC, 2012; GP, 2011, 2012a).

3.2.2 Weaknesses: The weaknesses of GP are relatively high tariff rate for users,

multicultural management, poor leadership development from local talents for top level

position, poor negotiation & conflict management skills for solving regulatory problems,

unfair labor practice with no specific guideline for recruitment (Azad, 2012; FE Report,

2012c; Staff Correspondent, 2012), and huge capital expenditure for modernization of

network (Telenor, 2011).

3.2.3 Opportunities: There are potential in the industry for increasing the customer base

and market shares. There is also a vast demand for high speed internet and BSCCL has a plan

to lease out a portion of its spare capacity (only 30% percent of bandwidth is being utilized)

(MOF, 2011). BTRC is planning to approve mobile banking (BTRC, 2011d), which could

serve as a solution for 76% of the population in Bangladesh that are unbanked (Telenor

Group, 2012). The government is going to issue five licenses for 3G cellphone technology-

four licenses will be given to four local mobile phone operators, including state-owned

operator Teletalk, and one to the foreign operator through auction process (FE Report,

2012d).

3.2.4 Threats: There are few threats from political/legal side, e.g. unstable political

condition, increasing regulatory surveillance and government legislation, imposition of

additional taxes and charges on talk time and SIM cards. M&A between Bharti Airtel and

Warid Telecom and introduction of 3G mobile technology by Teletalk also poses threat to

GP. Rapid changes and advancement in existing cellular technology, changes in customers‘

needs, proliferation of substitutes in the market etc also pose threats to the company. IP

25

telephony, by VoIP service providers, is the new threat in telecom industry (FE Report,

2012a). It has the potential to buoy a raft of new household brand.

Summary: GP‘s core competencies make it the leader in the market. GP has a valuable

inventory of strengths that will help it succeed. Its strengths will also help it capitalize on

emerging opportunities. GP has many threats and opportunities from the external

environment, and also have some weaknesses that it should overcome in shortest possible

time.

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Chapter Four: Grameenphone’s Competitive

Strategies and Implementation

In this section we will discuss the corporate-level strategies, implementation of strategies and

CSR policy of Grameenphone.

4.1 Corporate-Level Strategies: ―Corporate-level strategy is an action taken to

gain a competitive advantage through the selection and management of a mix of businesses

competing in several industries or product markets‖ (Majumdar, 2012). Corporate-level

strategy addresses two related issues (G. G. Dess, et al., 2007): (1) what businesses should a

corporation compete in, and (2) how can these businesses be managed so they create

synergy? The corporate-level strategies of GP are discussed below:

4.1.1 Entry Strategy: The global marketplace provides many opportunities for firms to

increase their revenue base and their profitability (G. G. Dess, et al., 2007). Moreover, in

today‘s knowledge-intensive economy, there is the potential to create advantages by

leveraging firm knowledge when crossing national boundaries to do business. A firm has

many options available to it when it decides to expand into international markets e.g.

Exporting, Licensing, Franchising, Strategic Alliance, Joint Venture, and Wholly Owned

Subsidiary.

Telenor‘s corporate strategy has been characterized since the 1990s by almost prescient

acquisitions in underserved wireless markets ready to blossom (Ruiz & Michalski, 2009). The

first wave of acquisitions took place in early nineties, when Telenor decided to expand their

operations into the Eastern European market. In the mid-nineties their focus swiveled towards

the underserved markets of South East Asia, starting with Bangladesh in 1996 and moving

later into Thailand, Malaysia, and Pakistan. Telenor entered into Bangladesh in a joint

venture agreement with Grameen Telecom- Telenor (62%) and Grameen Telecom (38%).

Joint venture involves the formation of a third-party legal entity where two or more firms

contribute their assets(G. G. Dess & Lumpkin, 2003).

27

4.1.2 Diversification Strategy: A primary approach to corporate-level strategy is

diversification and it is a form of growth strategy (Majumdar, 2012). Diversification

strategies are used to expand firms‘ operation by adding markets, products, services, or stages

of production to the existing business- which allow the company to enter in lines of business

that are different from current operations (Majumdar, 2012). There are two key alternative

approaches for diversification: related and unrelated. With related diversification,

corporations strive to enter product markets that share some resources and capabilities with

the existing business units (G. G. Dess & Lumpkin, 2003). Here value is created by

leveraging core competencies, sharing activities, pooled negotiation power, and vertical

integration. The synergies come from horizontal relationships among the business units. Cost

savings and enhanced revenues can be derived from tow major sources (G. G. Dess &

Lumpkin, 2003). First, economies of scope can be achieved from the leveraging of core

competencies and the sharing of activities. Second, market power can be attained from

greater, or pooled, negotiating power and from vertical integration. On the other hand, with

unrelated diversification, there are few similarities in the resources and capabilities among

the firm‘s business units but value can be created in a variety of ways. These include

restructuring, corporate patenting, and portfolio analysis approaches (G. G. Dess & Lumpkin,

2003). Here synergies derived from vertical or hierarchical relationships between the

corporate office and the business units.

In case of GP, we can find the firm adopted both related and unrelated diversification to

propel its growth in Bangladesh telecom industry. Its related diversification is evident in its

innovative products and services offerings- leveraging the core competencies and sharing

activities, which gave it sheer market power (Appendix: Fig 3). Other diversification

activities include: (i) Grameenphone IT Ltd. (GPIT), (ii) Wholesale Business, and (iii)

Financial Services (GP, 2011) - these are unrelated to core voice and ancillary services of

mobile telecom business.

(i) Grameenphone IT Ltd.: GPIT is the leading fastest growing IT Company registered with

the Registrar of the Joint Stock Companies and Firms of Bangladesh under the Companies

Act 1994. It is a 100% subsidiary company of GP. As a leading IT company, GPIT is

providing end to end solutions for Bank, Financial Institute, FMCG, Pharmaceuticals and

Telecom Industry- in addition to managing GP‘s IT infrastructure, services and solutions

(GPIT, 2012).

28

(ii) Wholesale Business: Wholesale Business is dedicated to provide ―Shared Telecom

Infrastructure‖ products and services to other telecom operators as well as other businesses

like WiMAX operators, ISPs, etc (GP, 2011). A number of new innovative wholesale

products and services were introduced into the market in 2011, which catered to the

immediate demand of the market. GP has signed agreements on different infrastructure

sharing products with Telecom operators (e.g. Robi, Banglalink, Airtel Bangladesh etc), ISP

operators (e.g. Bangladesh Internet Exchange, Agni Systems, Drik ICT Ltd. etc.) and

WiMAX operators (e.g. Bangladesh Internet Exchange etc) in 2011.

(iii) Financial Services: GP continued to see greater acceptance and growth of mobile

financial services for executing basic transactional services via mobile phone infrastructure.

In addition to its existing services (i.e. bill payment, railway & sports ticketing etc.), GP has

launched the initial phase of an inward foreign remittance disbursement service on behalf of

two leading banks in the country focusing on cash-to-cash disbursement of remittance

payments in the last mile of distribution (GP, 2011). GP‘s BillPay service processed and

settled several million utility bills for nine major utility companies in the country and

continued to build significant market share in its areas of operation. According to a study

conducted by the Boston Consulting Group for Telenor in 2011 the introduction of mobile

financial services to Bangladesh could serve as a solution for 76% of the population in

Bangladesh that are unbanked (Telenor Group, 2012). The economical and societal

contributions of the new business activity include adding a 2% increase to the total GDP by

2020, creating 500,000 new jobs and improving health care access.

All these corporate-level strategies gave GP a competitive edge over its rivals. GP‘s

diversification strategies ensures above average return from its investment by reducing its

exposure in single business, and optimizing business portfolio.

4.2 Strategy Implementation in Grameenphone

Strategy implementation is the translation of chosen strategy into organizational action so as

to achieve strategic goals and objectives (managementstudyguide.com, 2012). Strategy

implementation is also defined as the manner in which an organization should develop,

utilize, and amalgamate organizational structure, control systems, and culture to follow

strategies that lead to competitive advantage and a better performance.

29

Companies typically realize only about 60% of their strategies‘ potential value because of

defects and breakdowns in planning and execution (Mankins & Steele, 2005). Research

shows that enterprises fail at execution because they go straight to structural reorganization

and neglect the most powerful drivers of effectiveness— decision rights and information flow

(Neilson, Martin, & Powers, 2008). The ability of frontline employees to execute a

company‘s strategy without close central oversight is vital as the pace of technological

change accelerates and as companies grow rapidly and become increasingly decentralized

(Gadiesh & Gilbert, 2001). According to Rogers & Blenko (2006), ‗A good decision

executed quickly beats a brilliant decision implemented slowly‘. Many companies adopt early

balanced scorecard concepts to improve their performance measurement systems- which

enable the company to align its management processes and focus the entire organization on

implementing long-term strategy (Kaplan & Norton, 2007). The balanced scorecard provides

a framework for managing the implementation of strategy while also allowing the strategy

itself to evolve in response to changes in the company‘s competitive, market, and

technological environments (Kaplan & Norton, 2007). Let‘s focus on GP‘s strategy

implementation.

4.2.1 Strategic Control: Organization must have effective strategic controls if they are to

successfully implement their strategies. This includes systems that exercise both

informational control and behavioral control (G. G. Dess & Lumpkin, 2003). An

organizational control system is also required. This control system equips managers with

motivational incentives for employees as well as feedback on employees and organizational

performance. GP has strong informational and behavioral control- attributed by its good

corporate governance.

4.2.2 Organizational Design: Organizational design is the process of deciding how a

company should create, use, and combine organizational structure, control systems and

culture to pursue a business model successfully. GP has an efficient organizational structure

which is given in the appendix (Fig. 4).

4.2.3 Corporate Governance: Corporate governance is the system by which companies

are directed and controlled (Wikipedia, 2012a). It involves regulatory and market

mechanisms, and the roles and relationships between a company‘s management, its board, its

shareholders and other stakeholders, and the goals for which the corporation is governed. In

the fast-paced world of telecommunications, vibrant and dynamic corporate governance

30

practices are essential ingredients to success. GP believes in the continued improvement of

corporate governance. This in turn led the Company to commit considerable resources and

implement international corporate standards in its day-to-day operations. In GP, Corporate

governance is ensured through a structured process that directs controls and holds the

organization accountable (GP, 2011). In pursuing these objectives, the Board of Directors of

the Company is committed to high standards of Corporate Governance through a culture of

accountability, transparency, well-understood policies and procedures. A detailed compliance

report on Corporate Governance as recommended by the SEC of Bangladesh is shown in

appendix (Table 3).

4.3 CSR Policy of Grameenphone

Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into

a business model, while CSR policy functions as a built-in, self-regulating mechanism

whereby a business monitors and ensures its active compliance with the spirit of the law,

ethical standards, and international norms (Wikipedia, 2012b). When attempting to gain

market power over competitors, CSR practices can add value to a business‘ strategy

(Spadafora & Majumdar, 2011).

There are very few literatures about CSR practices in developing countries like Bangladesh,

and therefore the global models cannot be replicated there as the macro environmental

conditions are very much different from that of developed countries (Majumdar, 2010).

However, there are five recognized domains in the existing CSR models, e.g. economical,

legal, ethical, philanthropic, and environmental (Majumdar, 2010). CSR practices in

Bangladesh are still in its infancy and most of the businesses in Bangladesh are family

owned, first-generation businesses (Alam, Hoque, & Hosen, 2010). Here philanthropy gets

the main attention from the corporate bodies (Majumdar, 2010), without having any definite

policy about the expenses or any solid motive regarding financial gains in many instances

(Alam, et al., 2010).

4.3.1 GP’s CSR Practices:

The following discussion, on different aspects of GP‘s CSR practices in Bangladesh, is based

on GP‘s Annual Report-2011 (GP, 2011).

31

GP always works with the community and strives to address the development needs of the

country while doing business in an environmentally responsible manner (Appendix- Fig 5).

Accordingly, GP‘s policies and practices are structured and reflected in its ‗Corporate

Responsibility‘ initiatives and those are contributing towards the development of

underprivileged segments of the society. GP‘s CSR program covers many aspects of life with

special focus on health, education, entrepreneurship and environment through its ventures

like Village Phone, Community Information Centre (CIC), HealthLine, StudyLine, etc. GP

partnered with Jaago Foundation to initiate ‗Online Classroom‘, undertook a project to

provide specialized dermatology services for the rural community, joined hands with Mobile

Alliance for Maternal Action (MAMA) to deliver vital health information to new and

expectant mothers, also provided support to establish hotline for Women Support and

Investigation Division of Dhaka Metropolitan Police, and National Legal Aid Services

Organization (NLASO) under Ministry of Law.

GP‘s Climate Strategy aims to become a Green Company by shifting towards low carbon

operations, practicing green standards internally and developing a greater momentum in the

community with people. Its ambition is to reduce 40% carbon footprint and become a Green

Company by 2015. GP initiated ‗Building a Greener Network‘ initiative back in 2007 to

transform GP‘s Network and Office Building to an environment friendly & energy efficient

solution, and to reduce carbon emissions by saving energy and fuel consumptions. Overall

50% energy has been saved from network modernization project through swapping of

network equipments; dismantling of all air conditioners from sites by installation of DC

Ventilation System, approximately 43% network energy consumption has been reduced, and

GPHouse is saving yearly 60% energy comparing to the traditional building system.

GP has been a vibrant example in Bangladesh Telecom Industry considering effective

management of Health, Safety and Security issues of employees and its value chain partners.

As a responsible company, GP respects all HSSE provisions of Labour Law as well as

standards in this field and gives its best effort to provide for all employees the best working

conditions and necessary protection.

Village Phone, when started in 1997, was a unique idea that brings modern mobile

communication services and new business opportunities to communities that may have been

overlooked by traditional telecommunication access. Inspired by the success of Village Phone

Program, GP introduced Community Information Center (CIC), where the rural people can

32

have access to wide range of state-of-the-art services such as Internet, voice communications

and all other information services.

Summary: GP‘s corporate-level strategies gave it a competitive edge over its rivals. Its

diversification strategies ensures above average return from its investment by reducing its

exposure in single business, and optimizing business portfolio. Strategy implementation is

very much efficient in GP which is attributed by its strategic control system, unique

organizational structure and good corporate governance practices. From GP‘s case we can

say, CSR is no longer exclusively practiced in developed countries- companies in Bangladesh

are showing interest and commitment in CSR. GP has concern about all the five domains of

CSR, and it helped GP to earn its leading market position in Bangladesh‘ mobile telecom

industry.

33

Chapter Five: Conclusion & Recommendations

From this long discussion about the mobile telecom industry in Bangladesh, it can be said

that this industry still has potential for growth with profitability. Though there are some

problems in political and legal ground, the industry is lucrative enough for rapid growth and

expansion in ICTs- which can contribute to the dream of ‗digital Bangladesh‘. Our case

organization, GP has positioned itself in the best way to explore all opportunities from the

environment with its core competencies and competitive strategies. It also has resilience in its

diversified business model. GP‘s strategy implementation is best in the industry and its

corporate governance is up to the international standard. It also has excellence in CSR

activities which is clearly evident form its ubiquitous presence in social development in

Bangladesh. Thus GP has achieved excellence in all of its business activities and proudly

earned the leadership position in Bangladesh telecom industry.

From this study, we have the following recommendations for GP:

It should revise its tariff plan according to the market trend

It should develop a recruitment policy based on the rules and regulation of

Bangladesh

It should focus on leadership development from local tenants

It should hire professionals for negotiation and conflict management

It should develop more resilience in its business model to absorb the uncertainty

stems from the macro environment

Should focus on efficient diversification by grabbing all the feasible opportunities in

the industry, e.g. mobile banking and financial services, 3G services, IP TV services,

VoIP services, high speed broadband Internet etc.

34

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38

Appendix

Table 1: Brief History of Telecom Sector in Bangladesh (BTCL, 2011; Salam, 2012)

Year Events

1853 Telegraph branch under Posts and Telegraph Department, British India.

1971 Reconstructed as Bangladesh Telegraph and Telephone Department under Ministry of Posts and

Telecommunications.

1975 Reconstructed as Telegraph and Telephone Board.

1979 Reconstructed as Bangladesh Telegraph and Telephone Board (BTTB) with right to issue license for

telecom and wireless services.

1981 Digital Telex Exchange in Bangladesh.

1983 Automatic Digital ITX started in Dhaka.

1985 Coinbox Telephone service introduced in Bangladesh by BTTB.

1989 GENTEX Telegraph messaging service introduced in Bangladesh.

1989 Bangladesh Rural Telecom Authority got license to operate exchanges in 200 upazilla.

1989 Sheba Telecom got license to operate exchange is 199 upazilla.

1989 Cellular mobile phone company Pacific Bangladesh Telephone Limited and Bangladesh Telecom got

license.

1995 Card Telephone service introduced in Bangladesh by BTTB and TSS (TSS - Telephone Shilpa

Sangstha is the premier manufacturer of Telephone sets of Bangladesh).

1995 Regulatory power of BTTB (Bangladesh Telegraph and Telephone Board) transferred to Ministry of

Posts and Telecommunications.

1995 2nd and 3rd ITX installed in Dhaka.

1996 Grameenphone got cellular mobile Telephone license.

1996 Telecom Malaysia International Bangladesh got cellular mobile license.

1998 Telecom Policy.

2000 Global Telecom Service (GTS) Telex Exchange venture with British Telecom.

2001 Telecommunication Act, to establish Bangladesh Telecommunication Regulatory

Commission (BTRC).

2002 Information & Communications Technology (ICT) Policy.

2004 Teletalk cellular mobile launched.

2005 Egypt based Orascom acquired Sheba Telecom and established the brand name of 'Banglalink'

2006 Next Generation Network (NGN) introduced in BTTB (Bangladesh Telegraph and Telephone Board).

2008 BTTB (Bangladesh Telegraph and Telephone Board) converted into Bangladesh Telecommunications

Company Limited (BTCL) with 100% shares owned by Government.

2010 NTT DoCoMo bought 30 percent stake in Aktel and rebranded as 'Robi'

2010 Bharti Airtel acquired 70 percent stake in Warid Telecom and emergence of the brand 'Airtel'.

39

Table 2: SWOT analysis of Grameenphone Limited

Strengths Weaknesses

Clear strategic direction

Multinational Corporation

Strong Company Culture

Superior customer care

Market leader with a 42% market

share

Skilled & dedicated workforce (4,970

employees in GP + GPIT)

Brand image & reputation for best

network and quality services

99% population coverage, 90%

geographic coverage

3,000 base stations located in about

7,200 sites

Wide range of product and product

innovation skills

Strong financial position (credit rating:

AAA for long term loan and ST-1 for

short term loan)

Multiple financing alternatives

Comparatively high tariff rate

Huge capital expenditure for network

upgradation

Multicultural management

Poor local leadership development for

top level position

Poor negotiation & conflict

management skills for solving

regulatory problems

No specific guideline for recruitment

and unfair labor practice (Azad, 2012;

FE Report, 2012c; Staff

Correspondent, 2012)

Opportunities Threats

The potential to increase the customer

base

The potential to increase market share

Growth opportunities in broadband

Internet

Mobile Banking

3G cellphone technology

Political instability

The proliferation of substitutes

Technological advancement

Changes in customers’ needs

Increasing regulatory monitoring and

government legislation

IP telephony by VoIP service providers

(VSP)

M&A between Bharti Airtel and Warid

Telecom

Introduction of 3G by Teletalk

40

Table 3: GP’s Status of compliance with the conditions of the Securities and Exchange

Commission (GP, 2011)

41

Figure 1: Percentage of Active Mobile Phone Subscribers by Mobile Operators at the end of

May 2012. The total number of subscribers was 92.120 million- among these GP has 38.412

million, Banglalink has 25.252 million, Robi has 18.733 million, Airtel has 6.667 million, Citycell

has 1.713 million and Teletalk has 1.342 million subscribers (BTRC, 2012).

Figure 2: The total number of Mobile Phone subscribers in different time periods (BTRC,

2011b, 2012; Wikipedia, 2012f)

GP42%

Banglalink27%

Robi20%

Airtel7%

Citycell2%

Teletalk2%

Other4%

45

76.43

85.45592.12

0

10

20

30

40

50

60

70

80

90

100

No

. of

Mo

bile

Ph

on

e Su

bsc

rib

ers

Mill

ion

s

Time

Feb-09

Jun-11

Dec-11

May-12

42

Figure 3: Products and Services offered by Grameenphone Limited (GP, 2011).

43

Figure 4: GP's Organizational Structure (GP, 2011)

* Not a member of the Management Team

**Deputy CEO has a special role on Stakeholder Relations of the Company

Figure 5: Corporate Responsibility at Grameenphone (GP, 2011)