STRATEGIC MANAGEMENT AND PESTLE ANALYSIS OF TELECOM INDUSTRY

QUESTION

a) Select a company as directed in class. My Company is Telecom
b) Conduct an external analysis using relevant strategic tools (Porter’s Five forces model, SWOT and PESTL and from your analysis using these tools comment on the implications for the company, including the following:
• Key industry dynamics/drivers/forces
• Key trends from the macro-environment that are likely to influence the industry and the company
• Key competitors and competitive intensity

c) From your external analysis identify the main strategic issues/problems for the industry and analyse those which are significant for the company. You will need to discuss the various aspects relating to these points in relation to the organisation. Discussion is not the same as “listing” items. You should conclude whether this is a good industry to compete in and whether the company is in a good position.
the layout of the report should be:

a. Brief description of the company
This should include a brief history of the company, its products/services, industry, markets/customers, major changes in strategic direction, policy, corporate culture, etc.

b. Vision/mission statements, goals, objectives
Report what you consider to be the company’s current vision and mission (these may be stated within company documentation or you may have to deduce these from their strategic actions and other statements in company literature). Also report the company’s current goals and objectives as part of the vision/mission (or from your conclusions based on past strategic direction). You may also include the company’s current strategy and strategic intent.

c. Analysis of the company’s operating environment
i) External Environment

the external analysis should be focused on the telecommunication industry and then do Telecom as example of this industry.

SOLUTION

About Telecom Corporation of New Zealand

Telecom Corporation of New Zealand, headquartered in Wellington (New Zealand) was established in the year 1987. In 1990 Telecom turned out to be one among the foremost company throughout the globe to be completely privatised (telecomgroup.co.nz, 2012). In the present day, the company holds a noticeable level of operational scale in the telecommunications industry of New Zealand. Moreover, the company offers telecommunications and ICT (Information Communication Technology) services within New Zealand as well as Australia. Telecom Corporation also provides internet, mobile and fixed line calling along with data and voice facilities. The organization’s service portfolio encompasses domestic, national, worldwide value-added telephone services, cellular services, data and internet services and several mobile services. Additionally, it also provides IT consulting, execution and procurement and lastly, equipment sales and installation facilities (telecomgroup.co.nz, 2012). The corporation provides its services through several divisions including Xtra, Gen-i and PowerTel. Further, this particular essay presents environmental analysis of Telecom Corporation New Zealand by making use of three widely used and highly effective tools namely; SWOT Analysis, PEST Analysis and lastly, Porters Five Force Analysis.

 

SWOT Analysis

SWOT Analysis is acknowledged as a strategic planning technique adopted to analyse the Strengths, Weaknesses, Opportunities, and Threats related to a project or company as a whole (Hill and Westbrook, 1997). The continuing sections provide SWOT Analysis of Telecom Corporation of New Zealand.

·       Strengths

 

There are several strengths associated with telecommunication industry New Zealand like cutting-edge fiber-optic technology, high-effectiveness cable equipment, superior customer service and efficient sales and asset leverage (Malerba and Orsenigo, 1993). Other strengths associated with Telecom Corporation are effective communication, high Research & Development, continuous innovation, loyal customers, proficient management team, wide range of products and services and lastly, powerful financial position.

 

 

·       Weaknesses

Some common weaknesses associated with the telecommunication sector of New Zealand are corroded cable lines, dull sales and slow service (Kavassalis, 1996). Moreover, other weaknesses related to Telecom Corporation New Zealand in particular are diseconomies to scale, low market share and lack of diversification.

 

 

·       Opportunities

There are several opportunities available for Telecom Corporation of New Zealand including new technologies, incrementing customer interest, decline in the level of competition, acquisitions, emerging marketplaces and expansion overseas, increase in product and services portfolio.

 

 

·       Threats

A slow economy, incrementing competition and augmented government regulations are few threats which are common within the telecommunication industry (Malerba and Orsenigo, 1993). Moreover, other threats faced by Telecom corporation are cheaper technology, economic slowdown, external variations (including government, taxes, etc), changes in exchange rate, threat posed by competitors and price wars.

 

 

PEST Analysis

A PEST analysis for the telecommunication companies or industry is split into the four distinct groups namely; political, economic, social and technological (Barney, 1991). Further, the continuing sections provide PEST analysis of Telecom Corporation New Zealand.

 

  • Political Factors

The political forces related to the telecom segment are the ways in which the government interferes in the industry procedures and activities (Kavassalis, 1996). Telecom Corporation has to abide by various laws imposed by the government on the tariffs and products offered by the company. All new and existing technologies and products need to follow a strict set of rules laid by the government.

  • Economic Factors

Economic growth, interest rates and inflation could all affect the Telecom Corporation New Zealand (Malerba and Orsenigo, 1993). There exists the need to offer best facilities to the customers that to at a price lower than the competitors. However, the company had to increase the prices at the time of worldwide recession.

 

  • Social Factors

Some of the major social forces which have affected the telecom segment New Zealand are those associated with safety and effectiveness (Malerba and Orsenigo, 1993). There has been an increase in the desire for mobile phones which include basic features like alert for messages, camera, internet etc. as well as several exceptional features like 3g, conference calls, instant messaging etc. Safety and easy accessibility with respect to mobile phones must also be considered by the company. Telecom Corporation makes sure that all the operations of the company are carried out taking into account the environment in which it operates.

 

  • Technological Factors

The rate of technological modification is vital in the telecommunication segment. In this continuously changing business environment, company like Telecom Corporation needs to make sure that it offers products and services that are exceptional and innovative (Armstrong, 1997). The company must ensure that it develops to new models of communication devices and phones at a continuous fast rate. There exists the need for the company to remain up-to-date about the latest techniques and what customers prefer the most.

 

Porters Five Force Analysis

According to Porter (2004), there are five key forces that shape and influence every business and industry. Further, the paragraphs below present Porter’s Five Force Analysis of Telecom Corporation of New Zealand.

  • Threat of New Entrants

 

There is no doubt in the fact that within the capital-intensive telecom segment the most prevalent barrier to entry is finance. In order to cover huge fixed costs there exists, the need to put in large amount of funds. Additionally, it’s vital to remember that expert operating abilities and management familiarity is fairly infrequent to compete with big giants like Telecom Corporation, making entry even harder (Malerba and Orsenigo, 1993).

 

  • Power of Suppliers

It might appear that telecom equipment suppliers have significant bargaining power over Telecom Corporation (Mansell, 2006). But, in reality it’s not such since there are several large equipment producers around. There are sufficient vendors, possibly, to reduce bargaining power.

 

  • Power of Buyers

With incremented choice of telecom services and products, the bargaining power of customers is increasing (Mansell, 2006). The telephone and data facilities don’t differ much, in spite of which organizations are selling them. Thus, the Telecom Corporation faces high power of buyers since they can anytime switch to other company offering better and advanced services that to at a price lower than the former.

 

  • Availability of Substitutes

Services and products offered by telecom segment face serious substitution threats. The satellite and Cable TV operators are now competing for buyers. There are a number of companies which offer similar products like Telecom Corporation. Moreover, the increasing use of internet is turning out to be a viable means for cutting voice call rates.

 

  • Competitive Rivalry

There exists high level of competition within the telecom segment since there are number of renowned companies offering similar products (Armstrong, 1997). New technology is stimulating a range of substitute products and services. Nearly everyone today pays for phone facilities, thus all the companies nowadays need to attract users with lower prices and exciting facilities (Armstrong, 1997). However, this tends to bring down the overall profitability of the industry. Telecom Corporation being a part of this highly competitive industry must make sure that it offers products that are innovation and better than the competitors so as ensure long tern existence and sustainability.

 

Conclusion

To conclude, it can be clearly stated form the above discussion that Telecom Corporation New Zealand operates within a very competitive and rapidly altering environment. There exists the need for the company to keep pace with the changing environment and facilitate its customers with exceptional and unparalleled products and services that to at a price lower than the competitors. Further, the organization must also make sure that all its products and services are offered keeping in mind the customers preferences, environment in which it operates and the society as a whole.

 

 

 

References:

About Telecom (2012) [Online] http://www.telecomgroup.co.nz/telecomgroup, Date Accessed: 25/03/2012.

Armstrong, M. (1997) Competition in Telecommunications, Oxford Review of Economic Policy, Vol. 13, No. 1, pp. 64-82.

Barney, J. (1991) Firm Resources and Sustained Competitive Advantage, Journal of Management, Vol. 17, No. 1, pp. 99–120.

Hill, T.  and Westbrook, R. (1997) SWOT Analysis: It’s Time for a Product Recall, Long Range Planning, Vol. 30, No. 1, pp. 46–52.

Kavassalis, P. (1996) The Internet: A Paradigmatic Rupture in Cumulative Telecom Evolution, Industrial and Corporate Change, Vol. 5, pp. 1097-1126.

Malerba, F. and Orsenigo, L. (1993) Technological Regimes and Firm Behaviour, Industrial and Corporate Change, Vol. 2, pp. 45-71.

Mansell, R. (2006) The New Telecommunications: A Political Economy of Network Evolution, London: Sage Publications.

Porter, M. E. (2004) Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York; London: Free Press

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