Strategic Management Analysis Of Telecom Industry Commerce Essay

Purpose – The paper aims to emphasize a positive change toward the strategic management and decision making. It brings out a few lacking that are important to know for the industry.

Design/methodology/approach – The paper opted for an exploratory study including interviews and group discussion with employees representing middle and senior management. Data is increased by applying the analytical tools, the descriptions of internal processes, and organizational structures, magazine articles and the web.

Findings – The paper provides practical understandings about the strategic management analysis and organizational structure.

Practical implications – The paper includes detailed analysis of the various factors that need to be catered for. That includes SWOT analysis of the organization and deep study of structuring of organization.

Originality/value – The paper fulfills the need of exploring the strategic management and organizational structure study.

Keywords: Strategic Management, Organizational Structure.

Introduction

Telecom industry is the collection of all industries and companies providing phone service, data or entertainment to consumers and businesses. It is the fastest growing industry in Pakistan and with highest per year growth rate in tele-density Worldwide (Atta 2008b, P.1 of 1) it has become a backbone in Pakistan’s economy. Telecom industry provides many employment and investment opportunities due to high revenues generated via large number of telephony subscribers. Along with opportunities, this industry also provides vast facilities to communicate and connect globally in a better, reliable and modern manner.

Background:

Telecommunication services in Pakistan were started in 1947 when Posts & Telegraph Department was created. As an extension, Pakistan Telephone & Telegraph Department was established in 1962 to provide fixed telephone services.

Pakistan Telecommunication Corporation (PTC) started under PTC Act 1991. This overlapped with the Government’s competitive policy and encouraged the participation of the private sector, resulting in award of licenses for card-operated pay phones, cellular companies, paging and, lately, data communication services. Pursuing a progressive policy, the Government announced its plans to privatize PTCL in 1991.

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In Pakistan, the Pakistan Mobile communications Ltd (“Mobilink”) started its operations in 1994. Mobilink (subsidiary of the Orascom Telecom Holding) with more than 31.6 million subscribers is Pakistan’s leading cellular and Blackberry service provider. Other major competitors are Telenor 23.4 million, and Warid (Abu Dhabi Group) 16.38 million, Ufone 18.93 million and Zong (China Mobile Company) 6.76 million. By April 2010, there were 97.6 million mobile phone subscribers in Pakistan. PTCL launched its mobile and data services firms in 2001 i.e. Ufone and PakNet respectively. In 2006, Government of Pakistan decided to privatize 26 % of PTCL. Etisalat, with a large margin in the bet was able to get the shares.

Purpose:

The purpose of this report is to understand the organizational structure and strategic management process by utilizing analytical tools- SWOT analysis. Improvements in strategic management process and decision-making will be suggested.

Aims and Objectives:

Conduct interviews and discussions with middle and senior level management personnel from the telecom industry

Conduct SWOT analysis over feedback received from the interviews and discussions

Study the organizational structure of Telenor and Ufone

Reach out mobile subscribers to get feedback and to help define QoS targets and KPIs

Provide suggestions about improvement in strategic management process and decision making

Scope:

Survey: Design questionnaires and conduct interviews with middle and senior level management

Data Analysis Tools: Strength Weaknesses Opportunities Threat (SWOT)

Organizational Structure: Vertical Differentiation (Hierarchical Levels, Span of Control, Integrating Mechanisms, Centralization and Decentralization, Standardization and Mutual Adjustment and Professionalism)

Research Methodology

Document/Literature reviews:

The first method we adopted in the implementation of our research methodology was reviewing work already done in the field closely resembling our analysis. This was done on the basis of multiple documents most notably of other telecommunication companies and analysis done on the basis of different circumstances factoring in the company’s strategic management and decision making process.

Mixture of Quantitative and Qualitative Survey:

The purpose of qualitative analysis is to get a complete detailed description whereas in quantitative analysis we classify features, count them, and even construct more complex statistical models in an attempt to explain what is observed.

Qualitative analysis allows for fine distinctions to be drawn because it is not necessary to shoehorn the data into a finite number of classifications. It is also used to investigate the why and how of decision making, not just what, where, when. This also justifies the reasoning behind getting smaller but focused samples rather than getting larger samples.

Quantitative analysis basically leads to the systematic empirical investigation of social phenomena via statistical, mathematical or computational techniques. Its main objective is to develop and employ mathematical models, theories and/or hypotheses pertaining to phenomena. In easier terms it basically means that quantitative researcher asks a specific, narrow question and collects numerical data from participants to answer the question.

Official Perception surveys:

These surveys will be qualitative surveys conducted on the basis of information gathered by senior officials from managerial level employees in the telecommunication industry. These surveys will be in the form of descriptive questions and will be used to analyze different factors involved in the company’s decision making process.

This analysis will be done in the form of Key Informant Interviews and will be held taking into account a senior officials own analysis of the company’s strong and weak points.

Customer Satisfaction Surveys:

These surveys will be quantitative surveys distributed amongst people in the form of questionnaires. This will be done in the form of Random Selection Surveys hence to cover major portion of our required research.

Literature Review

Strategic Management Process:

Strategic management process defines the strategies of the organizations. It is the process by which managers choose a set of strategies for the organization that will assist it to achieve better performance and QoS targets. Strategic management is an ongoing process that has three main stages namely: strategic formulation, strategic implementation and evaluation. Organizations use strategic analysis tools for the strategic management process

Organizational Structure:

Organizational structure determines hierarchy and the reporting structure in an organization. These may be classified into different types based on a variety of things mainly scale of the organization and the scope of its operations. Traditional structure organizations are based on functional division and departments, various types of structures under these structures are Line Structure (Used in Small Organizations), Line and Staff Structure (Used in Large Organizations), and Functional Structure (Division based on the functions a person perform). Divisional structured organizations are based on functional division and departments they have. These may be classified as Product Structure, Market Structure and Geographic Structure. Some other kinds of organizational structures are Matrix Structure, Network Structure and Team Structure..

Literature review has been conducted for this research article to understand the concepts underlying strategic management process and the organizational structure. This will help to carry out the required work of survey, SWOT analysis, and for making the suggestions based on the conducted research.

Results

Strategic Management Process

Strategic management involves managers from all levels of the organization to formulate and implement strategies to provide superior fit between organization and its environment to achieve set goals of the organization. This involves action and decision-making. Three stages of strategic management process are strategic planning, implementation and evaluation. The nine steps encompassing these three stages are Assessment, Strategy, Objectives, Strategic Maps, Performance Measures, Initiatives, Automation, Cascade and Evaluation. The process can be described by the flow chart presented in figure 1 below:

Figure : Strategic Management Process

Strategic Management Process is accompanied with SWOT analysis, which provides data to formulate and implement strategies and changes to achieve the target goals and QoS. SWOT analysis helps to examine internal (strength and weaknesses) and external (opportunities and threats) elements of a business. SWOT analysis can help the management team in a business to discover:

What the organization does better than the competitors do?

What competitors do superior than the organization?

Whether the business is making most of the available opportunities?

How a business should react to changes in its external environment?

SWOT analysis for Telenor Pakistan and Ufone Pakistan has been conducted as case study.

SWOT Analysis of Telenor Pakistan

Telenor Pakistan is a possession of the Telenor group, an international service provider in terms of voice, data plans and communication services across Europe and Asia. It is amongst the largest mobile service operators in the world over 179 million mobile subscribers (2010). Telenor Pakistan has recently reached the landmark of 30 million subscribers in Pakistan. It is now second in terms of market share in Pakistan after Mobilink. Case study of SWOT analysis for Telenor Pakistan has been discussed as follows:

Strengths:

Telenor introduced the concept of “Mobile TV” for the very first time in Pakistan

Telenor provides desirable packages for every market sector like djuice for youth and price conscious class and persona for upper and elite class

State of art technology like the latest underground fiber optical network

Telenor Pakistan stands at number 2 in terms of market share and coverage after Mobilink

Telenor Pakistan introduced the concept of free international roaming during Hajj program

Telenor operate with more than 30 million subscribers all over the Pakistan

Weaknesses:

There is no institute in Pakistan that provides formal education in the fields of networking and other core technical capabilities so Telenor needs to have a major chunk of their personnel trained from institutions outside of Pakistan

The customer service centers are not coming up to national and international standards as most of the customers’ calls go unattended because of the poor call center performance

The postpaid connection provided by Telenor Pakistan is comparatively expensive compared to other competitors like Warid Telecom and Ufone Pakistan

Due to the buffering problem, Telenor mobile TV has poor visual quality

Franchise distribution system is not up-to standards- This stands as the common problem for all mobile services operators. Record keeping is also an associated problem

Opportunities:

Participation within the growing Telecom industry and extension of coverage area

Attract more subscribers and increase market share

Product line and packages expansion focusing at various age groups and social classes

Cost discount strategies

Product innovation and attraction

To become customer size specialist

Threats:

Monopoly of PTA and inclination towards state owned telecom service providers

At any time PTA can modify the services of telecom sector

Cutthroat competition operating in kinked demand oligopoly

Implementation of WTO policies will result in open & competitive pricing in services sector exclusively in telecom

There is an imbalance between prices of inputs & outputs

SWOT Analysis of Ufone Pakistan

Ufone is a Pakistani GSM cellular service provider, a subsidiary of Pakistan Telecommunications Company Limited. Its operations started from Islamabad on January 29 2001. Ufone has progressed and attracted customers and expanded its coverage area by adding new cities and highways/motorways. After the privatization of PTCL, 26% shares of Ufone were sold to Etisalat. Around $65 million rupees have been invested by Ufone to setup its up-to-date technical infrastructure to provide fast data services and high quality voice. On its establishment, Ufone cater most importantly for the middle class, by announcing low rates and different packages with Urdu names like Jazba etc. Ufone has extended its customer support in a very planned and appropriate manner with a strategic network of dealers and outlets for people.

Strengths

Ufone is host to value added services and data connectivity

Ufone offers the most reasonable prices for its users

Ufone represents as the subsidiary of PTCL

Prepaid roaming in Pakistan was first launched by Ufone along with the Multimedia Messaging Service (MMS) and GPRS services

Ufone’s Prepaid packages are now considered to be one of the most favorite packages by the youth market

GPRS Roaming facility is available across 85 countries with more than 115 Live Operators

Ufone has got the best e-marketing department in competition to the other mobile operators

Weaknesses

Ufone’s biggest weakness is that it cannot meet the demands of its customers

Centralized structure of the organization has failed to provide proper direction over instruction and policies

Ufone is not close to expected profitability

It is a subsidiary of PTCL so it is dependent on PTCL and government for policies

The franchise network of Ufone is not able to meet the demand of increasing number of mobile subscribers

Ufone has not provided innovative services to its subscribers compared to other operators

Its coverage in South region is quite good but in north its coverage is poor

Ufone got some internal problems after its privatization to Etisalat when some employees became unhappy with the pay scale

Opportunities

Ufone has enormous ability to expand globally, but since it is a government owned organization, the economic situation in Pakistan does not permit this

With the precise marketing strategy and planning they can gain much more subscriber’s market

The demand for value added services in increasing with development in the IT & Telecom sector, Ufone should come up with improvements in its value added services in order to gain leading edge in the market

“Ufone kiosk” can be launched to enable services like ATM machines for Ufone customers

Ufone should expand their Franchise network in remote areas to provide competition to Mobilink and Telenor which are constantly increasing their franchise network

Ufone should expand its network coverage to the Northern areas of the country as well with the reason that in those parts of the country not too many companies are giving services and if Ufone gets success in providing its services there then it will definitely attract a huge chunk of people and its number of subscribers can increase

Threats

Government interference in terms of taxes

PTCL should provide more financial support to Ufone to enhance profitability of its subsidiary company

Being a responsibility, Ufone is supposed to provide good pension benefits to its employees, which sometimes appears like a great idea, but they are now facing problems as large amount of people are beginning to collect

Ufone, like many large companies with quality employees’ healthcare welfares, is suffering from a large financial hit

Some pressure groups are objecting on the towers that are installed in domestic areas. According to their point of view it is not good for health for the people who are directly exposed to the radiations caused by the towers

Pakistan is experiencing serious problems regarding the economy now days which will ultimately also affect Ufone. The current downturn in market is not beneficial for any sort of business may that be telecommunication

Organizational Structure

Organizational structure defines the reporting and hierarchical structure in an organization. Literature review presents an explanation about the organization structure and the different types of it. Case studies of Organization structure for Telenor and Ufone Pakistan will be presented here.

Organization Structure of Telenor Pakistan:

The organizational structure of Telenor Pakistan is functional structure. The key features are listed as follows:

There are eight departments, Finance, Customer Services, Commercial, Technical, Information Technology, Human Resources, Administration and Legal Affairs, each supervised by a Senior Executive Vice President or Executive Vice President. Each of these departments follow a flat structure to boost mutual processes and co-operations between lower staff and managers

Each department has several sections and a manager is in-charge of each section. He controls the overall operations of that section

Responsibility of each executive in charge includes all the services that are related to him

Wide span of control in entire organization makes it convenient for the lower staff to reach top managers and boost coordination between them

The categorized stages of organizational chart of Telenor Pakistan is shown in figure 2 below, the complete organizational structure has been attached as appendix A:

Figure : Categorized Stages of Organizational Structure of Telenor Pakistan

There are seven categorized levels. Tasks and duties of each person is evidently defined at the time of joining the organization. Duties can be changed later, but staff has good knowledge about their job responsibilities from the time they join the organization. There is no communication or motivational issues because of the layered structure and the open culture prevailing at each stage. There are no examples of de-motivation however in certain areas like Customer Relationship Department or Customer Service Centre different customer queries and objections can raise frustration levels when qualities of service targets are not being met. Managers in these sectors interfere to solve problems.

On every occasion an employee has an idea, he/she is stimulated to approach the management or people at higher level of hierarchy and share it with them. Boxes are also situated at various places where personnel leave their ideas, suggestions and concerns. To stay anonymous is their legal right.

The Communications Department tries to reach to certain decisions if the ideas can be executed and then debates them with the employees concerned. There is also a formal platform at the group level known as SEED where innovation is encouraged and new ideas about revenue concepts and cost effectiveness can be discussed. Employees are welcome to contribute and submit their innovating ideas. If the ideas that are shared are feasible then they are executed in the organization. Employees are then rewarded accordingly for their helpful contributions.

Organization Structure of Ufone Pakistan

The departmental and organizational structure for Ufone Pakistan has been shown in figure 3 below:

Board of Directors

CEO

Project Director

Marketing &

Sales

Finance

Information System

Customer Care

Engineering

Quality

Assurance

Information technology

HR

&

Admin

Figure : Organizational Chart of Ufone Pakistan

The organizational structure of Ufone Pakistan is hybrid in nature where there is a formal control on every employee in the organization. The chain of command is decentralized and each personnel in the organization have his/her own tasks and responsibilities, which he/she has to fulfill.

The key characteristics of the Organizational Structure are as follows:

Ufone has a lean or horizontal structure

The company has a decentralized structure making the flow of information easy and simple

Ufone has different departments where every department has its head and all heads are interconnected

Concept of departmentalization remains constantly in practice at Ufone

Different departments work within their functional divisions to contribute towards the success of the business and to attain the set targets

Ufone has 83 sub-departments that are working efficiently. All interact with each other towards the smooth running of the organization

The organizational structure of Ufone consist of of Board of Directors who are reported by the Chief Executive Officer

CEO is a great supervision to the eight major departments of the company. These are Finance, Marketing, IT, Engineering, Strategic Planning, Human Resource, and Sales Departments

Discussion and Reflective Comments

Case studies for strategic management process and organizational structure has been discussed for Ufone and Telenor. A comparison between these two organizations has been made because these two organizations had remained in close competition to each other in terms of subscriber’s market. Recent reports have shown that Telenor Pakistan has passed the landmark of 30 million subscriber base having a market share of 26%. It has shown consistent growth due to the technological development and efficient strategic management process. On the contrary, Ufone’s market share in terms of subscribers has shown decline, which is now 19%. The major factor for this is the policy making at executive and senior managerial levels. Policy making for Ufone is generally done by officials representing the government as Ufone is a subsidiary of government owned Pakistan Telecommunications Company Limited. Besides this, at the time of privatization of PTCL, it was anticipated that PTCL and Ufone would be turned into large profit and efficient organizations, but Etisalat group could not bring about many changes towards the operational and strategic management process.

Telenor’s subscribers’ base, technological growth, marketing and network coverage has surpassed those of Ufone with a significant margin and today Telenor is presenting close competition to Mobilink, which is considered as a mature organization in Pakistan’s Telecom Industry. An important distinction between Mobilink and Telenor is the post-paid connection base, which is normally defined by business and corporate users. Telenor lags behind Mobilink in terms of post-paid subscribers by a huge margin reason being that Telenor’s postpaid connection is expensive and provides much lesser value added services compared to Mobilink.

In the discussion about organizational structure, a point worth noting is that Telenor has a functional structure where each department has a set of functions well defined. However, a Hybrid structure combining both functional and horizontal structure is recommended as it can provide enhancement in coordination and communication between cross-functional teams and can also provide improved customer service. Besides this, the structure should be defined such that it is able to accommodate any changes that might seem appropriate. These changes can be easily accommodated in horizontal structure.

Since Telenor is a part of Global Telenor Group, employee exchange program should be introduced at middle and senior level management in order to share the level of managerial and technical skills and expertise. Besides this, stock option could also be provided as a motivation to the employees.