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Strategy talks about the direction and scope of organization over the long term (Johnson and Scholes, 2002). Particularly, for corporate strategy, Andrews (1987) says it is a form of decisions that determines and bring out its objectives, goals and essential policies for achieving those goals, which define the company‟s business and the kind of company it is or is to be (De Wit and Meyer, 2010). However, in nowadays competitive environment, business should look forward to descriptive approach of strategy (Mintzberg, Ahlstrand and Lampel, 1998) in order to set the strategy in the context of learning approach instead of planning and predictive. Therefore, this report will discuss synthesis of ideas relating to strategy issues after the discussion on strategic analysis of DiGi, an organization selected in this case study in order to answer the assignment topic for UGB319 „Corporate Strategy‟ subject.
1.1 Background and performance of DiGi
DiGi Telecommunications Sdn Bhd (DiGi) is a mobile service operation under DiGi.Com Berhad which is a listed company in Bursa Malaysia Securities Berhad and is part of the global telecommunications provider, Telenor Group. DiGi commenced operations in May 1995 when it launched its fully digital GSM1800 services, the first digital mobile communications service in Malaysia. DiGi‟s vision is “to be seen as stars in excellent customer experience”; while DiGi‟s mission is “every day we go the extra mile, in small and big ways, to exceed our customers‟ expectations, by delivering mobile and internet services that are; “Made for me”, “Make it Easier” and offer the “Best deal” (DiGi 2009 annual report). In the last six years, DiGi‟s revenue has more than doubled to approximately RM4.9 billion with a subscriber base of 7.7 million. DiGi focuses on “making it easy”,
Tan Khim Cai (089080979/1)
At the end of year 2006. „Quality internet for less‟ is now a proposition synonymous with DiGi‟s mobile internet services.277 % (year 2006-2007) to 9.2 Strategic Issues of DiGi Since 2007. 2009).4 Mbps 3G/HSPA network in late 2008.848% (year 2007-2008) and decrease in profit for -14. Since the launch of its 14. DiGi presence as a leader in prepaid services resulted in a number of firsts that have set industry benchmarks for simplicity and innovation.277 24.181% (year 2006-2007) to 6. DiGi‟s mobile broadband and internet offering „Broadband Done Right‟ and „Internet Done Right‟ has been well received by the market.UGB319 Corporate Strategy.848 Year 2008-2009 1. 2009).385 6. DiGi revenue growth rate decrease from 16.2009 Year 2006-2007 Growth rate for revenue (%) Growth rate for profit after tax (%) 16.181 Year 2007-2008 9.018 % for year 2008 to 2009. Then.937% (year 2008-2009). Based on the Table 1. DiGi is facing the decreasing of revenue and profit growth rate and decrease in profit for the year 2009. 1. 2007).018 (Source: adapted from DiGi‟s 2009 annual report. Part 2 keeping it relevant and providing the best deals to ensure excellent customer experience in mobile and internet services (DiGi annual report. DiGi profit after tax growth rate decrease from 24. there is a decrease in their profit due to the increased traffic and network operating costs as well as mobile internet expansion costs and higher allowance for doubtful debt due to the economy factor (DiGi Annual Report.385% (year 2007-2008) and 1.937 -14. see appendix 1) Tan Khim Cai (089080979/1) Page 2 . Table 1: Growth rate for DiGi revenue and profit from year 2006 . DiGi face reduced subscriber and increasing of consumer demand for better product and services and shifting regulatory ground (DiGi Annual Report. Then.
TM can implement their project. the government link corporation will affect DiGi operation and market share with their capital and technology.UGB319 Corporate Strategy. 2009). government has introduced the National Broadband Plan ambition to achieve 50 % household broadband (DiGi annual report. Recently. research and development without concern on their capital. Tan Khim Cai (089080979/1) Page 3 . 2010). 2008). Therefore.6 % share inside (TM capital structure. This situation might due to the close competitor. Besides. organization is required to glance over their external environment to recognize weak signals (Henry. This alliances and cooperation by government may give advantages to TM in carry out their operations.1 PEST analysis In a competitive environment today. government is a key stakeholder in affecting the operation of DiGi such as in tax policy. 2010). this plan does not show any positive effect for DiGi growth to increase in 2009. Thus. Part 2 2. 2008). PEST analysis (see appendix 2) is use to identify the drivers of changes in external and the possible of strategic drift that are affecting DiGi‟s performance. with the government share inside TM.0 STRATEGIC ANALYSIS OF DIGI 2. In relation to political or legal factor. employment law and environmental regulation (quickmba. Telekom Malaysia (TM). 2010). However. it must be kept under surveillance to see if it might flux into a trend that can affect the organization (Henry. After weak signals are identified. which is a government link corporation where government have 28. This plan give opportunities to DiGi for narrow the gap in broadband penetration for the government to achieve its National Broadband Plan‟s objectives of 50% by the end of 2010 (Brekke.
Tan Khim Cai (089080979/1) Page 4 . However. Therefore. 2011). economical effect also play important role in determine the success of DiGi‟s strategies and operations. Level of economic development. 2009. Part 2 Next. DiGi has to sacrifice their level of profit due to their promotional effort such as “DiGi prepaid easy win contest”. 2011). this does not increase the revenue and profit growth rate of DiGi. for example. DiGi has invested more capital in increasing traffic and network operating costs as well as mobile internet expansion costs (DiGi annual report. In today Malaysia. interest rates. during economy downturn. the growth rate of population. For example. 2010) in order to attract more customer. 2010) which finally make their profit growth decrease. DiGi revenue will be affected from this segment (Brekke.UGB319 Corporate Strategy. educational attainment level and level of social cohesion (tutor2u. 2011) will give direct effect in consumer buying power and therefore affect DiGi‟s sales. Even though the overall market share for cellular segment and broadband has been growing rapidly (Malaysia Telecommunication Industry. This situation will give DiGi opportunities in penetrating their market into many categories and do the segmentation and targeting the customer. This situation will give more stress to DiGi in providing better services. exchanges rates (tutor2u. “mobile number portability (switch to DiGi)” and decrease in fee charges such as “quality internet for less” (DiGi annual report 2009. people are more educated and lifestyle has change (Malaysia budget. custumer from different social cultural will act and behave differently. Besides. impacts of global financial downturn are expected to ripple throughout 2009 for DiGi and if the economy continues to slow down. 2009). 2011). where their customer live in. It is important for DiGi to know the Malaysia social cultural. Furthermore. more educated customer and change in lifestyle will demand for better and greater service and compare DiGi with other telecommunication company.
this situation will make DiGi face the crisis of getting smaller market share than before.2 Porter’s Five Forces Porter‟s five forces were developed by Porter and are used in analysis of industry structure and industry attractiveness (Henry. 2010). YES telecommunication company currently has spent around RM 2. if DiGi do not have or lack in technology research and development. As a result. Porter‟s five force framework is used within DiGi in order to examine the competitive environment impact upon their organization. Part 2 Furthermore. REDtone has introduce its WiMax which deliver better speed than other (WiMax. DiGi need to invest more in technology in order to increase the stability of DiGi‟s network during festive periods due to the overloads incident (Dennelind. 2011). particularly in this telecommunication industry. Therefore. 2. which deliver five times faster than the current 3G technology (Tee. Tan Khim Cai (089080979/1) Page 5 . technology also important where it can bring competitive advantages and is a major driver of globalisation (marketingteacher. Finally. advance technology introduces by DiGi‟s competitors will slightly and slowly took over DiGi‟s market share. 2008). For example. For technology element. This framework (see appendix 3) tries to get the variation of competition while remaining pervasive and rigorous (Henry. it is very hard for DiGi to introduce new product. Then. For example. 2009). Without R&D and incentives from government. 2010). research and development (R&D) from government and technology incentives are important (quickmba. growth rate of Malaysian population are getting lower from 2009 to 2010 (population statistic. 2008). DiGi will be outdated and unable to launch its product which able to compete with its competitors. 2011).UGB319 Corporate Strategy.5 billion to YES 4G infrastructure. 2011).
Then. Maxis has services multiple platforms for Small and Medium Enterprises (SMEs) and large corporations in Malaysia. Next. YES launch its 4G services in 2010 with their theme “4G innovation network” (BusinessTimes. 2011. 2011. Maxis. one of the largest Asian telecommunication companies. With these competitors. DiGi along with rivals such as Telecom Malaysia (TM). there is still new entrant recently such as REDtone and YES. These competitors faced by DiGi are strong and have their owned competitive advantages over DiGi. However. DiGi position in this industry still in uncertainty. REDtone with their WiMax broadband and YES with their 4G technology (TM capital structure. Part 2 In relation to the rivalry among existing firm in industry.UGB319 Corporate Strategy. Celcom is a company under Axiata. threat of new entrant is relatively low because of the legal restriction by government and high cost in penetrating the market and technology. TM is government-link corporation. DiGi face problems with their market share which may overtaken by the competitors instead of overtaking the competitors‟ market share. some people even use more than two telecommunication service such as prepaid line. WiMax. Tee. 2010). Then. Celcom. Even though new in the industry. alternative sources of supplies and low switching cost (Johnson and Scholes. Maxis profile. these two telecommunication companies provide a better speed and service to customer which is a threat for DiGi. For example. mobile internet Tan Khim Cai (089080979/1) Page 6 . For example. bargaining power of buyer is high due to the concentration of buyers. hotlink. Besides. REDtone and Yes. 2011. 2010). 2002). data solutions and discounted Voice over IP (VoIP) services (REDtone. REDtone has entered this industry in 2004 with their high speed internet services. Celcom. As a result. 2010). there are common and many people nowadays using mobile phone or smart phone which require different package of services. 2011.
12 or RM 0. from TM. switching cost to other resources and number and size of the resource suppliers (Campbell.UGB319 Corporate Strategy. Then. Supplier of DiGi may refer to the electrical and electronic industry for DiGi to penetrate their network station and supply in term of technology from other countries where DiGi can find the alternative and there is no scarcity of the resources. Even though these services do not directly substitute DiGi Tan Khim Cai (089080979/1) Page 7 . Part 2 and home fixed line internet like Streamyx. Celcom. the bargaining power of supplier is moderate.10 for different packages and free call to all Telecom Malaysia fixed line (TM Voice Deals. Bargaining power of supplier may depend on the uniqueness and scarcity of the resources that supplier provide. For DiGi. 2010). Maxis. Bargaining power of supplier refer to the prices determines by the interaction between the supplier and the organization because businesses must obtain resources in carry out their daily activities (Campbell. Maxis and Hotlink for the phone line or Telekom Malaysia. Stonehouse and Houston. 2002). 2010). REDtone and YES for the internet service provider. threat of substitute for DiGi service product is moderate where the competitive products provide homogeneous benefit in generally such as voice call and internet (TM. there are also different alternative and low or zero switching cost for DiGi‟s customer to switch DiGi‟s services to other such as Celcom. Stonehouse and Houston. 2002). These situations finally cause DiGi to follow the industry trend and promotions‟ efforts which lead DiGi to sacrifice some of their profit. there might be little supplier in the market which able to provide high quality of services and technology to DiGi. 2002). Finally. Substitution can reduces demand for DiGi‟s services as customers switch to the alternative (Johnson and Scholes. the TM home fixed line provide a lower charge for calling to mobile phone with RM 0. However. For example. This situation sometimes will make DiGi have lesser power over their supplier.
Besides. 2010). Besides. inappropriate value chain activities will cause a company cost to increase. Part 2 mobile services. these will replace DiGi partially. people can just carry a card and make call around with DiGi‟s competitors‟ telecommunication service. With the “iTalk”.30 for mobile call back service (TM iTalk. For DiGi. The analysis of these activities is crucial because it is the cornerstone of competitive advantage and enables an organization to determine the costs and value that come out from each of its value activities (Henry.4 Resource Based View Resource based view is the organization‟s internal capabilities in formulating strategy to achieve a sustainable competitive advantage in its industry (Henry. 2008). see appendix 4 (Henry. TM also provides different reload cards and charges a lower price for people to call to overseas which can substitute DiGi mobile voice call service. they also invest in developed programs to engage. 2010). 2008). “iTalk” only charges RM0. 2008).3 Value chain analysis Every organization. 2. the ongoing of huge investment will finally cause DiGi to face the problem increase in cost and decrease in profit in year 2009. For example. 2008).UGB319 Corporate Strategy. they has invested RM 300 million to RM400 million in expanding their mobile internet footprint and RM 318 million to RM 418 million was focused on capacity and quality enhancement of their 2G network and service development (Dennelind. 2. while Tan Khim Cai (089080979/1) Page 8 . Resources are the inputs that enable an organization to carry out its activities. Thus. Therefore. develop and build their employees (DiGi annual report. either with huge or small type of operation will have their own way in value added or value chain activities that go to make up a product or service.10 for normal access and RM 0.
people and customer service. DiGi focus and leverage on its key strengths: brand values. 2008). 2009). but.UGB319 Corporate Strategy. too much effort and investment in making DiGi‟s employees become competencies and capable will cause DiGi to incurred extra expenditure and lead to the decrease in profit. From the analyses of those strategies. 3. 2009). Resources of an organization are important. people and customer service is strategies carried out by DiGi for their differentiation strategy. 2007. DiGi saw greater emphasis operational efficiency initiatives in year 2009. To carry out these strategies. in year 2008. DiGi seems to modify their value chain activities for cost efficiency and become cost leadership in its industry. with the continuous slowdown of economy. continuous investments and excellent customer experience. 2008 and 2009). Tan Khim Cai (089080979/1) Page 9 . Then. the continuous investment and excellent customer experience with their brand value. They also balanced their cost optimization exercise with prioritized investments to expand and improve their network and achieve even higher levels of excellent customer experience (DiGi annual report. This is because DiGi‟s employees are seen as their most important asset (DiGi annual report. DiGi has launched “Work@” program which provides greater flexibility and promotes worklife balance for their employees (DiGi annual report. Part 2 Competencies is the efficient configuration of resources that provides an organisation with competencies (Henry.0 DIGI’S CURRENT STRATEGIES As the worldwide economic downturn. Then. DiGi has introduced strategies including cost efficiency. For example.
X (University of Xpax)” and additional package for secondary school called “S. DiGi has launched “D campus” plan. For example. in long run. however. Then. DiGi promote their “friends and family” where customer can call and message their “friends and family” number with low charge (FnFTM. Tan Khim Cai (089080979/1) Page 10 .O. differentiation strategy is to provide services unique or different from competitors in term of dimensions widely valued by customers (Johnson and Scholes. For example. Then.X and S.O.O. 2002). if DiGi really carry out a good differentiation strategy. 2002). 2011).O. With the Celcom U. 2011). 2011. It is true that DiGi has utilized this strategy with their excellent customer experience and service and brand value.X plans. In reality practice. Celcom also have their own specially designed package for university student called “U. other competitors also able to imitate DiGi differences. 2011). however. they may use their low price service to achieve competitive advantage over their competitors. and Celcom have their Xpax plan which provide customer lowest rates to fifteen friends on all networks (Xpax plan. this plan has boost DiGi image inside universities across Malaysia. 2011). a specially designed plan for university student with low rates (DiGi Prepaid campus.UGB319 Corporate Strategy. Part 2 For DiGi. SOX. it is difficult to sustain this competitive advantage because the competitors may be able to do the same (Johnson and Scholes. DiGi targeted market share in student will be affected.X (School of Xpax)” (UOX. other competitors will keep on imitating each other pricing and promotional method in order to attract customer.
DiGi should identify and make new segmentation in the business to business (B-t-B) market (Hollensen. it is difficult to make their value chain to become cost efficiency to introduce low price for customer (annual report. In order to sustain in this telecommunication industry. 2002). DiGi also able to provide its current customer with better quality of services based on their new technology from investment. DiGi will unable to charge high price compare to the B-t-B market. Thus. 2008). This is because if DiGi only target its current customer with the investment DiGi has made. This situation also applied in contrast. a business should not get “stuck in the middle” for cost leadership and differentiation (Campbell. corporate management of DiGi should rethinking the concept of its corporation that suggested by Prahalad and Hamel (De Wit and Meyers. 2009. 2010). 2003) and maintain its low-end market for current and ordinary customers. if DiGi implement the high and continuous investment of technology and make their cost efficiency for lower price services simultaneously. DiGi able to provide Tan Khim Cai (089080979/1) Page 11 . Thus. DiGi is using Porter‟s generic strategies including cost leadership and differentiation. In fact. DiGi will tend to suffer from its profit. As a result from the segmentation and targeting.UGB319 Corporate Strategy. Part 2 4. Therefore. if DiGi want to implement its differentiation strategy with excellent customer experience and brand value. At the same time. if DiGi want to promote low price services. 2010). Then. DiGi should implement related diversification for their growth strategy (Henry. DiGi is able to provide its B-t-B market such as corporate and SMEs customer with high quality of services. it is paradox for them to make an ongoing huge amount of investment which eventually higher their cost.0 SYNTHESIS OF IDEAS RELATING TO THE STRATEGY ISSUES Based on the analyses from DiGi strategies. with the investment DiGi has made.
Part 2 different services to different market in order to suite with their customers‟ requirements and needs. DiGi can implement strategic alliances (Henry. DiGi has the good strategies for their cost leadership and differentiation in their excellent customer service and brand value. In a conclusion. 5. DiGi also can provide services to huge corporate like insurance company and enterprise business that rely heavily on telecommunication service. Good strategies do not able to promise the successful of an organization. Thus. For the implementation of diversification for growth strategy. for example. Eventually. Word count: 2995 words Tan Khim Cai (089080979/1) Page 12 . the successful of DiGi will depend upon the ways DiGi implement their strategies and their inspection for the strategies.UGB319 Corporate Strategy. Moreover. it will enable DiGi to gain more revenue and a valuable intangible asset. 2008) with certain corporate and SMEs company such as broadcast for huge event. their position and image in this industry. there is evidence to suggest that strategy. particularly in corporate level plays an important role in an organization success or failure. good strategies should be implemented in a strategic ways with the cooperation among employees and a regularly inspection in order to make modification and changes for the learning process in strategies instead of keep the strategies on track.0 CONCLUSION With the discussion in this report. both B-t-C and B-t-B market will enable DiGi to gain more market share and revenue. in football match and car racing event. it is depend on the ways the strategies being carried out and the uncontrollable external environment. With these alliances and B-t-B customer.
366.062.UGB319 Corporate Strategy.140.896 1.595 2006 RM 3. Part 2 APPENDIX Appendix 1 DiGi’s financial summary 2009 RM 4.653 Revenue Profit before tax Profit after tax Appendix 2 PEST analysis Political factor impact on DiGi Technology factor impact on DiGi DiGi’s operation Economic factor impact on DiGi Social factor impact on DiGi Tan Khim Cai (089080979/1) Page 13 .087.362.455 1.471 2008 RM 4.652.536 1.139 805.475 1.909.814.565 1.314 1.000.546.635 1.715 2007 RM 4.445.
Part 2 Appendix 3 Porter’s Five Forces Threat of new entrants Bargaining power of suppliers Rivalry among existing firms Bargaining power of buyers Threat of substitute Appendix 4 Value Chain Analysis M A R > G I N Inbound Logistic s > Operation s > Outbound Logistics Support by > Marketing and Sales > Service Procurement.UGB319 Corporate Strategy. Human Resource Management. Firm Infrastructure Tan Khim Cai (089080979/1) Page 14 . Technology Development.
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