Maxis Investment Strategy Analysis

3033 words (12 pages) Essay in Marketing

06/06/17 Marketing Reference this

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Maxis invested RM1.24 billion to upgrade and modernize their 3G network in year 2009 in order to increase the population coverage from 50% to 57%, which representing the single largest yearly deployment at any time in Maxis’ history.

In quarter one of 2010, Maxis mobile internet users grew 1.2 million to 6.4 million, with a large increase in customers accessing the internet from their mobile devices.

The statistics showed that more than 50% of the Malaysia’s population is made up of under 25 year olds, a sizeable number of whom enter the ‘phone owning’ category each year. It is because the youth segments are now the largest and fastest growing segment.

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Maxis was a leader in launching new services into fields widely regarded as having a huge long term growth potential such as location based services, mobile commerce and entertainment. As we can see that, Maxis significantly increased the 3G service coverage since its launch in July 2005, catering to more than 740 sites across Malaysia.

Maxis is a leading regional content player with 39.2% of non-voice revenue as part of mobile revenue and 7.1 million active mobile internet users, more than 50% of its customer base. As a result, Maxis became most attractive high-growth, low-penetration markets, while diversifying the market base.

3.1.2 Economic

In year 2010, Malaysia’s economy was expected to grow up. This improved outlook is expected to stimulate consumer and business spending for telecommunication services. Malaysia’s resolve to achieve a broadband household penetration rate of 50% by 2010 too augurs well for Maxis’ growth in the immediate future.

As Malaysia’s leading mobile communications service provider and a responsible corporate citizen, Maxis seeks to balance out its economic ambitions with responsible corporate practices that impact their stakeholders and their communities.

The Malaysian telecommunications industry remains flexible even though the challenging global economic climate. In 2009, the overall growth of the mobile industry was satisfactory and the mobile subscriber penetration crossed 100%.

The basic salary of the Maxis employees are fixed for the duration of contract. It can be reviewed into account the individual performance, the inflation price index, and information from independent sources on the rates of salary for similar positions in other comparable companies.

Maxis is returning to list on Bursa Malaysia in November or December and its draft prospectus is posted on the Securities Commission website. Maxis was taken private in 2007 and de-listed from Bursa the same year. In 2009, in a challenging global economic climate, Maxis delivered another strong year.

3.1.3 Political/ Legal

The government had chosen Telekom Malaysia Bhd (TM) and Maxis Broadband Shd Bhd (Maxis) at 14th December 2010 signed a landmark 10 year agreement for TM to undertake the High Speed Broadband (HSBB) services to Maxis. As we know that, this project was able to offer more count stands by end of 2012.

Under the term of the agreement, Maxis expand on its commitment to Malaysia because of TM wholesale will provide HSBB service to Maxis. Hence, Maxis is the first service provider to subscribe to TM’s HSBB service. As we all know that, our Malaysia government limits the level of playing field for foreign players in the industry. The country’s major telecom players, Maxis and Celcom won the bid together with subsidiary of Time Dot Com and MiTV Corp for the 3G license. However, DiGi was not awarded a 3G license as it has a high foreign ownership.

The Maxis website contents are owned or controlled for the purposes by Maxis or its content suppliers and are protected by copyright, trademarks and other laws. The compilation of all content on the website and the service are the exclusive property of Maxis or its content supplier and protected by copyright.

Maxis also strict to avoid broadband user abuse, so that Maxis set each customer must be at least 18 years old to be a Maxis customer. Sub-users under this age must have permission from the account holder to access the Maxis Broadband service. Before using the Maxis Broadband service, the person must obtain permission from the registered customer. Customers also must not attempt to gain unauthorized access to any computer system. Hence, customers must fulfill the term of conditions just can be a legal Maxis user.

Maxis Companies responsibility for all legal matters affecting Maxis, including litigation, legal compliance, legal support on corporate activities, contracting and telecommunications law issues.

3.1.4 Sociocultural

Maxis are provides guidelines for the manner in which all employees should conduct themselves at the work place, while performing their daily duties for Maxis and as a Maxis employee.

Key drivers of this growth included the availability of more sophisticated smartphone models in Malaysia and the vociferous growth of social networking. Maxis was the first to offer the revolutionary iPhone to Malaysians, achieving annual targets, and it continued to drive the sale of BlackBerry models.

Maxis has Business Value Plus Plans for business people. Business Value Plus Plans have so many ways to help save money when talking on the phone. Data Plans exclusive to iPad for iPad users to enjoy online entertainment with a much lower price. Maxis prepaid Hotlink come out with a new plan which is much cheaper than other competitors.

Maxis focused on minimizing carbon footprint to care for the environment. As such, Maxis is in a strategic partnership with Malaysia Airline Systems in projects to reduce our impact to the environment, as well as an internal recycling campaign. At their work place, efforts are taken to reduce wastage and disposal, reuse existing resources and recycle fully exhausted materials.

Broadband penetration in Malaysia is gaining momentum year-by-year as the citizens are shifting towards knowledge-based nation. The surge of bloggers in Malaysia, fueled by the local bloggers community of Nuffnang and Advertlets helps to boost the broadband adoption among Malaysians.

3.1.5 Technological

Malaysia is set to get a HSBB internet backbone allowing speedy internet access by utilizing fiber optic technology to transfer data. It will allow network operators to participate in and compete with each other in this new network. TM had already commissioned foreign principal vendors to spearhead the project. The RM11.3bil national HSBB project is a public-private-partnership between TM and the Government to develop next-generation, high-speed broadband infrastructure and services for the country.

As we know that, HSBB offers bandwidth at network speeds of 10Mbps and above, through fixed line only, as compared to regular broadband services which are delivered at network speeds ranging from 384Kbps to less than 10Mbps through fixed line which also known as DSL and wireless mode, such as 3G, HSDPA, WiMAX and WiFi.

In 13 February 2009, Maxis and IBM entered into a five-year Information Technology services relationship to enable Maxis to fast-track the transformation of the Company’s IT services and solutions to deliver multifaceted, innovative and enriching experiences to subscribers.

Maxis commercially launched the first-in-the-world contactless integrated mobile payment services that utilizes Near Field Communication technology, with partners Nokia, Visa, Maybank and Touch ‘n Go to pay for purchases and transportation charges using mobile phones in year 9 April 2009.

Maxis make efforts to upgrade and broaden the skills of their people by moving them across various functions of the business as job rotation. Maxis encourage them to take time off to pursue post graduate business and technology studies at top universities in order to keep knowledge levels contemporary.

3.1.6 Global

Maxis is brings excellent coverage in almost every corner of the country and their services are rapidly expanding. In addition to voice, GPRS and EDGE coverage, Maxis also offer Maxis 3G in Penang, Langkawi, Alor Setar, Kuantan, Genting, Klang Valley, Johor Bahru, Kota Kinabalu, Kuching, Kota Bahru, Ipoh, Malacca and Kuala Terengganu.

In India, Global Communication Services Holdings (GCSHL), a wholly-owned subsidiary of Malaysian telco, Maxis Communications Berhad, has applied to the Foreign Investment Promotion Board (FIPB) to increase its direct and indirect shareholding in Aircel from 26 percent to 73.9 percent.

Mobile Content Challenge and Maxis Scholarship for Excellence initiatives were specifically developed in line with the Government’s call to raise Malaysia’s profile globally by grooming bright, young Malaysians.

In year 2009, Maxis and the Western Union Company announce to launch of mobile money transfer service In Malaysia. It allows 11 million Maxis subscribers and 1.9 million foreign workers in Malaysia to send cross-border remittances directly from their mobile phones.

In year 2009 which began in a period of global recession. As governments the world over put into action a series of policies to revive demand as well as reduce uncertainty and systemic risk in financial markets, modest signs of growth appeared in several economies in the second half of the year.

3.1.7 Physical environment

The issues that Maxis concern is effective and efficient services, operating hours, and user-friendly facilities.

Maxis’s main challenge today, of adapting effectively to a rapid changing and often hostile environment of telecommunication networking industry. Everything change too fast until the company is unable to cope with rapid pace as a result Maxis shifts at the top management team in order to confront changing business environment and global competition.

As we all know that, change in Maxis in order to deal with changing market environment and to shift to the updated telecommunication technology, 3G.

With more demand than ever for IT to quickly and accurately achieve and support corporate objectives, IT organizations of Maxis must cope with a continuous barrage of changes-changes in product requirements, technology, development processes, and deployment environments. As a result Maxis deliver newer technology assets and applications to their current customers and attract new customer base through proactive management of change.

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Cannot be denied that, environmental changes can cause the competitive strength of Maxis to erode if it does not adapt. Although this may be untried and risky, Maxis need to willing take this risk in order to be a successful firm to complete with other competitors.

3.2 Industry conditions (Porter’s Five Forces Analysis)

3.2.1 Threat of new entrants (high entry barriers)

High capital investment for competitor entry telecommunication industry. Companies in this industry required high fixed costs and spend relatively large on network equipment and maintain development. Besides, technologies required also have considered as barriers for companies entering the telecommunication.

Maxis’s reputation has been built around their superior customer service and quality network. Due to high expectations and standards that come with the Maxis brand it is not without reason that customers are more demanding of Maxis. As a result, Maxis always think that their business on being the customer’s first choice.

The key challenge of Maxis is to nurture customers and continue to add value to the relationship. Maxis proven capability to innovate and the service experience that they are core competencies which are their most stable competitive edge.

Maxis perform well in 2009, their revenue reached a record RM8,611 million which showed that they are the first mobile operator to cross the 12 million subscription mark in Malaysia and hard to have competitors to complete with Maxis.

Capital requirement usually build up a firm which is high capability to compete in the industry. However, telecommunication is a high competitive industry in order to gain large market share. Thus, potential entrants have to ensure the sufficient financial resource since having huge capital will be a competitive advantage to compete.

3.2.2 Bargaining power of suppliers (limited number of suppliers)

Telecommunications industry in Malaysia is dependent on imports for the majority of its network components as most of the network equipment cannot be sourced locally.

Maxis’ networks utilize standard equipment which is available from a limited number of suppliers. Most of the GSM equipment for Maxis’ mobile network operations is purchased from Motorola, Siemens and Trisilco Folec, and Maxis maintains close working relationships with its key network equipment suppliers.

Siemens is now a sub-contractor to Motorola for network switching systems. Maxis left only two main supplier- Ericsson and Trilsilco Folec. The bargaining power of their supplier becomes strong. Moreover, their supplier is from overseas.

In future, Maxis believes that comparable equipment and support is available from other established suppliers. Maxis has been purchasing from these suppliers for approximately six years. Maxis also purchases certain network components from various other key suppliers, such as Nortel.

As we all know that, powerful supplier of Maxis may exert bargaining power by increase selling price or reduce the quality of the products. However, powerful of Maxis’s supplier must also depend on the position of market situation.

Since the suppliers of Maxis are limited, hence the Maxis’s suppliers are powerful when the product they provide are differentiated or it has built up by switching cost. These may arise when there is occasional requirement by the buyers in this industry such as high invested in submarine fiber optic cable, and replace the copper cable and old satellite dishes that may provide reliable broadband connectivity.

Maxis have high competitive environment causes exist entrants need to invest in high modernization technologies to enable the company to support and compete in this industry. Therefore, it is crucial for the service providers to make sure the quality of the technology equipment, yet it makes the supplier group become more powerful.

3.2.3 Bargaining power of buyers (high price sensitivity)

In the era of globalization, advance of technology could increase the bargaining power of buyer, high available of information make it easier for buyer to evaluate sources of materials about telecommunication. There are many alternatives product such as fax, email, and internet which enhance the bargaining power of buyer to the mobile service provider.

For the moment, high level of competition between the major telecommunication companies that exists in current market leads to low switching cost for the buyer to change their mobile service provider. Customers are high price sensitivity, easy to switch brand. It also mean customer will not faithful to Maxis if they find out other brand give better services than Maxis, they will going to change brand.

It can be make Maxis became profitability or fruitlessness in telecommunication industry within a certain period. The buyers in this industry are all services customer and said to have low bargaining power to the services provider. This is because TM is the sole provider of fixed line telephone services in Malaysia, other mobile operator such as Digi , Maxis, Celcom account for approximately 85% of mobile services in Malaysia.

As a result, this contributes to concentration of the buyers industry. Besides this, the buyers have high switching cost in this industry. As a result, the industry is more profitable when the buyers have low bargaining power which means the buyers are unable to affect the setting of prices in the industry.

Maxis have come out many Business Value Plus Plans for business people. It has so many ways to help save money when talking on the phone. Maxis want make sure that, the customers can enjoy using Maxis services with a much lower price than other competitors.

3.2.4 Threat of substitute product

Maxis have many substitutes for mobile industry for instance from traditional way which are using the letter, fixed home line telephone, fax and email to communication with other people till currently mostly everyone using broadband Internet services, which enable faster and always-on connection to the worldwide web, offer more promising growth potential.

Furthermore, the pressure on the very low cost to use the phone calling via internet or communicate via online messenger had threatened the mobile industry. The attractiveness of internet services making it more affordable to the masses. For example, nowadays many people using MSN, Facebook, Skype to communicate or wishing for festival via online rather than use hand phone to send it.

Threat of substitute product also will directly affect the profitability of Maxis. Substitute product is the product or services in other industries that is different from the existing product or services but serves the similar needs. Hence, threat of substitutes exists when a product’s demand is affected by the price change of a substitute product. This threat is supposed to be a strong point for Maxis because these substitute products such as letter or e-mail are unable to fulfill or completely replace the mobile services.

3.2.5 Intensity of rivalry among competitors

Telecommunication industry consists of only several mobile operators such as TM, Maxis, Digi, Celcom, Umobile and so on due to the entry restriction that imposed by the government. Profitability of the industry also affected greatly by the intensity of competition among existing competitors in the industry.  

Therefore, rivalry among competitors telecommunication industry in Malaysia is oligopoly structure nowadays and the level of competition in this particular industry is believed that to be low one. Maxis have two main competitors, they are Digi and Celcom.

Cannot be denied that, Maxis lead the telecommunication industry. They are largely compete on differentiate their product and services on how to improve their features and implementing innovation to the customers.

In addition, Maxis will definitely compete on the call rates, package price and so on with other two main competitors. Hence, Maxis try to gain competitive advantage through low call rate and price such as Youth Club. As we all know that Maxis, Digi and Celcom are invests a lump sum of the money on advertising to promote their products and to attract more customers choose them.

There is high exit barriers in this industry due to the high investment budget and responsible to customer will make companies strive to survive in the industry. Technology advanced leads fast industry growth and opportunities, increase the competition among companies. Therefore, Maxis can sustain be a leader to lead the mobile service industry.

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