SM Assigment-updated.docx

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[TYPE THE COMPANY NAME] Strategic Management Assignment Name : Mani Selvan admin [Pick the date]

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[Type the company name]

Strategic Management Assignment

Name : Mani Selvan

admin

[Pick the date]

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Contents1.0 Introduction...........................................................................................................................................2

1.1 Business Description......................................................................................................................2

1.2 Market Composition......................................................................................................................2

1.3 Digi Vision Statement....................................................................................................................3

1.4 Digi Mission Statement..................................................................................................................3

1.5 PESTEL Analysis..............................................................................................................................3

1.6 Digi Potential Issues.......................................................................................................................5

2.0 Analysis............................................................................................................................................7

2.1 Porter Five Forces....................................................................................................................7

2.2 BCG Matrix...............................................................................................................................9

2.3 SWOT Analysis.......................................................................................................................13

3.0 Recommendation..........................................................................................................................15

4.0 Implementation and control..........................................................................................................16

5.0 Reference............................................................................................................................................20

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1.0 IntroductionDigi Telecommunication Sdn Bhd (Digi) is a mobile telecommunication company service provider in Malaysia. They started their operation in 1995, with the headquarters in Shah Alam, Selangor. Currently, Telenor ASA of Norway owns 49% of the share. The other shareholders are Goldman Sachs International (Goldman Sachs), Employee Provident Fund(EPF), Time Dot Com and SBT Fund HG22. (Digi Annual report,2011)

Digi was the first telecommunication company in Malaysia to launch and operate a fully digital cellular network. They also were the first mobile company that offers GPRS and EDGE in Malaysia on May 2004.

1.1 Business DescriptionDigi currently operates through two main business lines:

1. Voice Services ( fixed and mobile telephony ( postpaid, prepaid and other international services)2. Data Services( Broadband , Mobile Internet, dial up and messaging)

Digi main competitors Maxis, Time dot Com and TM (Telekom Malaysia) have ventured into high speed broadband services. Digi yet to enter the market and it is affecting their market share.

1.2 Market Composition

Source: Malaysian Communications and Multimedia Commission-MCMC,2009)

Note: Data are based on 2009, due to insufficient data for current years.

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1.3 Digi Vision Statement

Digi Vision is to be seen as to have a vision of being a company that is always ‘Changing the Game’ by constantly pushing the boundaries, defining new standards, and ensuring continuous improvements in all parts of our business. (Digi Annual Report, 2011)

The vision statement is good. It is straight forward and concise. The vision also shows how Digi is looking at them in future by bringing more innovative product and packages. Digi are well known for their unique packages for a competitive rate. They also mentioned they are looking at continuous improvement in all part of the business, which is very important for the telecommunication industry, as the technology changes rapidly in this industry. The vision statement does express about “changing game” but do not clearly specify on how to get there.

1.4 Digi Mission Statement

‘We deliver Internet for All’ as part of our commitment to building a connected Malaysia, enabling access to mobile internet services and applications by offering customers the right combination of devices, value pricing, and the best usage experience of mobile internet(Digi Annual report, 2011)

Digi Mission statement clearly indicate how they are going to achieve their vision and what are their plans in improving their business as well to give value add services to their customers

1.5 PESTEL AnalysisPESTEL analysis is used to determine what is the current position and potential of Digi as well other telecommunication providers in Malaysia.

Political

Malaysia has prolonged internal political stability. This ensures the country is free from unwanted chaos and be a good platform for business growth. Apart from that, Malaysian government gives full support to the growth of telecommunication industry. Through National Broadband initiative, the government is ensuring more than 50% of the household broadband penetration by the year 2010. (NITC Malaysia, 2008)

Economy

Need of strong communication channels are becoming increasingly important for the business as well for individuals as the globalization take place. Business need timely information at real time to ensure key decisions are been made effectively. Individuals are traveling more frequently for business as well as personal purpose, effective communication becoming an essential for them to plan their work. Telecommunication industry expands rapidly as the economy due to the globalization is growing leaps and bound.

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Social

Influx of the foreign workers in Malaysia also contributed to the growth of the telecommunication industry especially for Digi. Up to December 31st 2009, more than 1.9 million foreign workers were recorded to be in Malaysia (Immigration Department Report, 2010). The illegal workers are amounted to be in the same amount. Foreign worker are initially considered cannot afford the services. Digi offered them affordable packages to them and made this market as their stronghold.

Malaysian also enjoys high living standard. What was considered luxury before is considered as necessity now. Telecommunication devices which was considered as very expensive before is affordable with wide range product to choose from. Increase in literacy among Malaysian also improved last twenty years. These two factors also improved growth of telecommunication industry.

Technological

Continuous technological advancement in wired and wireless telecommunication also improved market penetration as well as made the devices cheaper.

Legal

There are no legal implications on the telecommunication industry which hinders it from operating freely

Environmental

Presence of more Communication Towers/Base Stations in high rise buildings and residence building is causing a concern among people. More stringent rule is applied to the providers to ensure the electromagnet transmissions are kept under control. This causes number of drop calls to increase and causes dissatisfaction among the subscribers

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1.6 Digi Potential Issues

Based from financial statement from year 2005 till 2010 (2nd Quarter)

Digi recorded slower growth subscriber rate although the total number of the subscriber increased. This could be a worrying sign as competitors could be capturing more customers compared to Digi. (Digi Financials Reports)

Although Digi revenue increases from year 2005 till 2010, the growth percentage is decreasing during the same period. (Digi Financials Reports)

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Voice subscribers are still being the Digi’s biggest contributor to their yearly revenue. Data services are becoming equally important source of revenue for Digi. Data service market are still dominated by Telekom Malaysia and Maxis by promoting their high speed broadband network and services.. Time Dot Com is increasing their presence in data services as well. It is well known to the market that Digi is currently holding the smallest market share among the major players in the telecommunication industries.

Therefore Digi key issue is how they are going to compete for growth and defend their market share from current competitor as well as from new entrants in both Data and Voice services.

Particularly in:

1. What are the strategies Digi should adopt to increase their subscriber growth and increase spending rate within their current customers.

2. What are the strategies Digi should take in improving their Data Service, especially in broadband and wireless broadband, to compete with their current competitors? Maxis and Time Dot Com have collaborated with Astro to provide IPTV. This is a potential threat for Digi in short and long term revenue generation and to increase their market share.

3. How Digi is going to react to price pressure, to sustain their increase their revenue and market share when competitors are lowering their prices to attract more customers.

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2.0 Analysis

In this section we are going to analyses Digi performance based on several strategy. The chosen strategies are

1. Porter Five Forces2. BCG Matrix3. SWOT Analysis

2.1 Porter Five Forces

a) Threat of New Entrants

Telecommunication industry is very competitive with new players are emerging fast. New entrants are equipped with new technology and new marketing strategies that threaten market share of current traditional players. New players such as U Mobile, Time Dot Com, P1 and YES are competing in the very competitive market. Apart from that ASTRO and ABN network which offers IPTV are making entry to the broadband market as well. This situation could further reduce Digi market share growth.

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b) Threat of Substitute Products

Emergence of new product such as Skype, Viber, WhatsApp and other similar products offers free calls among their subscribers. Therefore, customers prefer to use free voice services compared to paid services provided by current providers. As for a Data Services, consumers have become more demanding in quality of the broadband services. This may create an opportunity for new entrants to provide a substitute product for consumers in lower price or better performance than the existing ones.

c) Industry Rivalry

Digi’s main industry rivals are Telekom Malaysia and Maxis. There are always stiff competitions among three of them. New products, product differentiation and introduction of new devices are used to compete for market share. They also invest heavily on innovative advertisement to gain supremacy over the other. ‘Yellow Man” advertisement is an example how Digi uses advertisement to create a strong presence and following among the potential subscribers.

d) Bargaining Power of Suppliers

Suppliers plays very important role in the development of the telecommunication industry. Digi are traditionally depended on Motorola, Siemens,Ericsson and Trisilco Folec for their supplies. Motorola and Seimens are no longer supplies for the telecommunication industry. Therefore Erricsson and Trisilco Folec has increase their bargaining power. New suppliers such as Huawei enters the market thus reduce the power of bargaining of the suppliers.

e) Bargaining power of customers

Customers are becoming more demanding compared to before. Most of them want maximum benefit with the lowest cost possible. High literacy and increased household income among consumers pushing them to be more demanding in obtaining the best possible services from the providers.

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2.2 BCG Matrix

DiGi operates through 2 business lines which are voice and data services. The BCG Matrix will be used to analyze prepaid and postpaid, fixed telephony, smartphones and mobile/wireless broadband and numerous strategic business units (SBU) or product lines.

Typical structure of BCG Matrix are as per below

Digi’s actual BCG matrix

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A) QUESTION MARK: DATA SERVICES: MOBILE/ WIRELESS BROADBAND

Relative market share: LOWAs highlighted before, DiGi was having the smallest market sharein 2009 and the market is also getting crowded with many new entries in 2010such as Time dotCom, YTL, U Mobile and Tune TalkMarket growth rate: HIGHRising penetration rate of broadband subscribers (per 100 householders)(Ministry of Finance, 2010) strong Malaysian government support through National Broadband Initiative (NBI) .Challenge for DiGiTo increase mobile/wireless market share quickly so that it might become Stars and eventual Cash Cows or it will become DogsStrategiesInvesting for mobile broadband expansion as part of its plans to improve its infrastructureMarket penetration: increasing the customer rewards and provides consistent good services toexisting customers.- BonusLink points based on monthly usage bill for postpaid broadband subscribersMarket development: build CBC for rural communities in various areas in Malaysia (Sarawak,Johor, Melaka, Kelantan, Terengganu and Pahang)Product development: bring to Malaysians Huawei portable wireless router – MiFi (MobileWiFi Device) that can have 5 different WiFi (eg combination: iPad, iPod Touch, iPhone,Blackberry and laptop or netbook) enabled devices to connect to the Internet simultaneously

STARS: SMARTPHONES (DATA SERVICES)

Relative market share: HIGH

DiGi is having a high market share for smartphones as they are selling Malaysian Blackberry,

Apple‟s Iphone and Google‟s open-source Android operating system phones such as Samsung

Galaxy S, HTC Legend, HTC Desire, Sony Ericsson Xperia 10 and Motorola Milestones, amongst others

Market growth rate: HIGH

The percentage ownership of smartphones is still low in the country its but popularity is rising rapidly.

Challenge for DiGi

Is to maintain and to strengthen their dominant positions of smartphones as Stars for growth and profitability plus growing it into Cash Cows

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Strategies

Market penetration: Increasing customer rewards and providing competitive services to the customers and to introduce more data centric packages for the consumers to choose from.

Market development: Push the sales of the smartphone aggressively.

CASH COWS: PREPAID AND POSTPAID (VOICE SERVICES)

Relative market share: HIGH

DiGi market share for prepaid and postpaid is relatively high among the traditional players.

Market growth rate: LOW

Declining growth rate for voice services are happening globally but it is still remain as the main revenue contributor for DiGi.

Challenge for DiGi

Is to maintain prepaid and postpaid strong position for as long as possible as Cash Cows

Strategies

Product development

To maintain prepaid and improving postpaid momentum by offering hand phones that are bundled with attractive packages.

To make the packages more affordable among foreign workers and giving them good rates when they call back to their respective countries.

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DOG: FIXED TELEPHONY (VOICE SERVICES)

Relative market share: LOW

This is the Digi lowest market share. Digi is almost nonexistent in this market share

Market growth rate: LOW

Almost stagnant growth compared to other Digi services

Challenge for DiGi

To avoid to maintain this services and keep looking if it can be converted to Question Mark at least

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2.3 SWOT Analysis

SWOT Matrix is a usually used in strategic planning matching tool that provides structure or clarifies strategic analysis. This technique guide complex decision making by effectively removes subjectivity and emotion from the decision making process, and help the generation of several options/strategies for DiGi.

A typical SWOT matrix is shown as below

SO Strategies

Using internal strengths to capture external opportunities by pursuing opportunities that fits

To DiGi's strengths

WO Strategies

Using external opportunities to improve internal weaknesses

ST Strategies

Using internal strengths to reduce/prevent external threats

Identify ways DiGi can use its strengths to reduce its vulnerability to external threats

WT Strategies

Using defending method to reduce internal weaknesses and at the same time avoiding external

Threats

Establish a defensive plan to prevent the DiGi's weaknesses from making it highly susceptible to

External threats

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Strength1. Innovation2. Affiliation with Telenor – extensive overseas penetration3. Experienced staff locally and from overseas4. Excellent reward system for customers5. Increasing customer base6. R&D improvement7. Improved facilities such as online purchase etc.

Weakness1. Dependency on market vendors such as application writer and etc2. Lack of Digi Ambassador Involvement3. Latest information of the technology do not reach customer on time4. Lack of tower and station compared to other providers

Opportunity

1. Emergence of Globalization2. Influx of ForeignWorker in the country3. High CapitalInvestment by the investors and management4. Malaysian HigherStandards of Living and literacy5. Technology advancement in telecommunication lowers pricing of product and services

SO Strategy

1. Market PenetrationIncrease customers reward and bonus and reward for loyalty to DiGi2. Market DevelopmentPartnership with overseas providers to give better and more attractive packages for foreign workers3. Effective marketing strategies to increase customer base

WO Strategy

1. Joint venture with partners and other providers to build and share more towers and base stations.2. Forward IntegrationUse more innovative marketing techniques to attract more customers other than depending only on the ambassadors.

Threat

1. High inflation could causeincreased price in telecommunication product2. High speed broadband players such as Maxis, TM and Time3. High BargainingPower of Consumers5. Continuous improvementin wired & wireless technology

ST Strategy

1. Innovative product development with partners and vendors to reduce overall cost2. Stand ahead of the competitors and encourage consumers to switch toDiGi with attractive packages and loyalty programs3. To produce new and tech savvy product to prevent going outdated overnight

WT Strategy

1. To reduce the number of DiGi Ambassadors to enable the cost to be switch to sponsoringeducational program tostrengthen DiGi name – studentswill subscribe to DiGi in thefuture2. To lower down the calling rate to remain competitive

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3.0 Recommendation

DiGi Strategic Implementation Action Plan

Vision

Digi Vision is to be seen as to have a vision of being a company that is always ‘Changing the Game’ by constantly pushing the boundaries, defining new standards, and ensuring continuous improvements in all parts of our business

Mission

We deliver Internet for All’ as part of our commitment to building a connected Malaysia, enabling access to mobile internet services and applications by offering customers the right combination of devices, value pricing, and the best usage experience of mobile internet

STRATEGIC DECISION

Strategic decision derived from SWOT, PORTER FIVE FORCES and BCG methods is product development – joint venture with handheld mobile providers to include latest technologies and internet function into mobile.

Through product development, at the end of its strategic action, DiGi will be able to increase its subscribers‟ growth and revenue by banking on Data Services (mobile internet).

STRATEGIC OBJECTIVES

More specifically, strategic objectives are:

1. Market positioning: at least defend DiGi current market share and remain as strong competitor to Maxis and TM

2. Innovation: development of new Data Services goods and services

3. Human resources: selection and development of employees to implement the strategic decision

4. Physical resources: adequate/healthy stock (inventory) of smartphones etc

5. Financial and profit: adequate capital and healthy profit plus growth accountable/responsible

Overall Digi need to improve themselves technologically as well as to come up with more innovative product and devices to sustain their position and to improve their market share as well. Maxis and Time Dot Com through their partnership with ASTRO are improving their market share by giving High speed

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broadband services as well as IPTV as well in a competitive pricing. TM are making waves with their UniFi services and their own IPTV. Asia Broadcasting Network (ABN) is offering IPTV as well as broadband as well.

Therefore Digi need to find more innovative way to keep their customer base as well as to gain more market share in the telecommunication market.

3.0 Implementation and control

Balanced Scorecard, which is an important strategy-evaluation tool to evaluate, control and help to implement DiGi vision, mission and strategy from four key perspectives:

1. financial performance, 2. customer knowledge,3. internal business processes 4. Customer learning and growth

11.1 DiGi Balanced Scorecard/Strategy Map

The figure below shows the Strategy Map (Kaplan and Norton, 2004) can be used to illustrate

DiGi Balanced Scorecard:

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FINANCIAL PERSPECTIVE

Long-term shareholder value:

To align to DiGi‟s mission – provide superior returns to shareholders

Indicators: Percentage of dividend that will be given to the shareholders,

Productivity strategy (attained targeted production):

Indicator: improve cost structure

Indicator: To increase asset utilization (especially on new property, plant, equipment and intangible

Assets purchased annually to generate sales) expenses that DiGi must take into account for its product/services

Growth strategy:

Expand revenue opportunities : 4G testing and find avenue to enter high speed broadband market.

Enhance customer value (eg reduce fees to replace standard SIM card with Micro SIM, ease customer to be rewarded – BonusLink points etc)

Indicator: Percentage of attained target sales

CUSTOMER PERSPECTIVE

Indicators to measure outcomes of DiGi strategy plus customer value proposition:

Price – affordable at market price?

Quality – on par with competitors (no of customer complain, frequency of repair etc)?

Availability – short lead time for pre-order of smartphones?

Selection – are there myriad of prepaid and postpaid plans with option to switch to DiGi?

Functionality – on par with competitors‟ product?

Service – friendly and knowledgeable sales and service personnel/dealers at DiGi centres,

concept store (DiGi360°) and service counters (index of impoliteness)?

– new features and services increase value add to customer (% of market share)?

Partnerships – successful joint ventures with mobile handheld mobile providers to include latest

technologies and internet function into mobile?

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INTERNAL PERSPECTIVE

Operations management process:

Supply, distribution and risk management – ensure adequate/healthy inventory of all offered smartphones and its accessories

To produce (through R&D and MIS) on supporting features of smartphones

Indicators: on time delivery, short lead time for pre-order of smartphones, reliable, error and hassle free technology, effectiveness of job, efficiency of business processes

Customer’s management process:

Select, acquire, retain and grow the right target customers

Indicator: % of market share

Innovation process:

R&D to locate opportunity identification (ID) before design/develop new innovation and successful launch it into the market

Indicators: time from new product/services conceptualization to commercialization, break-even time, percentage of sales from new product/services, no of new products/services launch, percentage of customer complain (quality)

Regulatory and social process:

Environment – Building more low emission tower and base stations

Community – high and visibility of CSR effort (DiGi Deep Green) effort (% of praise from

customer/non-customers, industry players and staffs)?

LEARNING AND GROWTH PERSPECTIVE

Human capital: improve moral and motivation of staffs through adequate manpower (new recruits if needed), job rotation or transfer plus suitable training on new needed skills

Information capital: acquire, storing and distribute latest information on telecommunication

(especially smartphones) to staffs

Organization capital:

Company culture – More open and transparent environment

Leadership – Leadership by example

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Alignment – are each department KPI align to DiGi vision, mission, long term objectives and strategy (annual review)?

Teamwork – are teamwork highly encourage and develop (no of team building events, cross-functional teams etc.)

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5.0 Reference

1. Digi Telecomunication (2009). Digi Annual Report 2010. Malaysia: Digi Telecomunication. p1- p60.

2. Digi Telecomunication (2008). Digi Annual Report 2010. Malaysia: Digi Telecomunication. p1- p50.

3. Digi Telecomunication (2005). Digi Annual Report 2010. Malaysia: Digi Telecomunication. p1- p50.

4. Mcknightkaney. (2004). Mapping Your Corporate Strategy. Available: http://mcknightkaney.com/Strategy_Maps_Primer.html. Last accessed 30th August 2013.

5. NITC Malaysia. (2008). National Broadband Initiative (NBI). Available: http://nitc.mosti.gov.my/nitc_beta/index.php/national-ict-policies/national-broadband-plan/national-broadband-initiative-nbi. Last accessed 30th August 2013.

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