Telstra is a multi-national Australian company and the company’s performances have been growing in double digits. Irrespective of the market downturn, the company has been able to maintain the robust performance through fixed and mobile business lines. A Telstra and investment partner has seen a downturn in their investment policies. The consumers may expect that pricing policy will get increased. The pricing policy us being used as the defense mechanism against the government policies. Communication sector is undergoing through a rapid change. Advancements of technology and customer preferences are due to the increased competition from the different operators. The disruption in traditional market places has caused global corporations to evolve into a new value chain towards china and other states. .
Telstra fundamentally understands the market dynamics of china and its pricing policy.. Indications from the new policies are new network has been driving the competition. The pricing system is under construction and this is a real challenge for all the retail providers. The Telstra Company is making every effort to ensure no customer or supplier is at disadvantage stage (Gerrand, 2010).
Suppliers are more active respondents to provide better and attention to the customer. The digital ecosystem comprises of a broader network and this has a direct impact on demand. Service network providers are under the pressure to provide the customers with innovative plans and make capital investments. Due to the launch of National Broadband Network has been immensely focused towards the shaping of the markets. These changes are going to severely affect the communication regulatory prices.
The global startup is reliant over the technology innovation systems and has been changing the technology in past 20 years. The technology has created a vast number of challenges across all the industries. The communication market has presented the sophisticated items and innovative solutions that emerge from the community requirements (Moorhead, 2017).
Concepts/theories/models
International business theories are different forms which provide a complete history on how to exchange goods and services between two entities and people. Different trade theories have evolved and it is essential to understand the nature of different theories (Moorhead, 2017).
Absolute Cost Advantage- the Company’s Absolute Cost Advantage approach is consistent with the regulatory criteria. A cost based approach must be adopted for the promotion of allocating efficiency in different markets. This is how the company can promote the dynamic and competitive efficiency. Carriers must be able to recover the total costs and prevent the business interests as well. The company has agreed with the Australian commission, which is in context of pricing the service to be consistent and deliver effective pricing systems to functional corporate bodies (Gerrand, 2017).
Constructive Theory-The constructivism theory is a dominant theory of international business which promotes agency and structure must be mutually constituted. The existing social structure of animosity among the operating companies can be withdrawn, if proper measures are undertaken. This change can be brought by mutual confrontation happening between the state and agencies (Easton and Howard, 2005).
Comparative Cost Advantage- The Telstra Company has been making a great number of investments and its benchmarking can provide the quick view of gaining results. The share price of Telstra Company has gone high irrespective of the geographic risk, market sentiments. The company is majorly focused towards earning the economic profit rather than earning based metrics (Deardorff, 2014).
Review of relevant literature
The literature review sets out the preliminary view of stable pricing systems for the voice and SMS services. However, the government commission bodies have created small jurisdictions which have regulated the SMS termination. This is mainly due to lack of stable pricing system. The Telstra company is of the view that a practical approach must be taken. If there are certain evidences that exist between the cost of SMS termination and cost of voice termination, then underlying fact is to determine the costs of SMS termination. Firstly, Telstra considers commission body must not set the SMS termination service prices. However, there are high regulatory risks in the determination of SMS charges. This is mainly due to the robust SMS markets in Australia. The environment needs an alternative messaging system. According to Dong and Wong (Dong and Wong, 2016) -At a practical level, the commission needs to identify the price, terms and cost and time involved with the development of business model and benchmarking the information. There are certainly other approaches like application of few adjustment techniques to voice messages rates and get significant rates.
A SMS service is considered as bundled offers and receives great competition and setting of a regulatory into account and overweighs the risks and costs associated with it. If the authoritative body had to set prices, Telstra agrees on consistent pricing methodology and SMS and voice termination costs must be estimated. Telstra has agreed cost-based pricing method must be used for estimation of the costs of offering voice as well as SMS termination services. A simple, cost relationship can be inferred which will not be appropriate due to the risks associated with under-recovery of costs related to SMS termination. Price can lead to the increased competition. The benchmarking or cost modeling process can be taken (Stojanov and Kandžija, 2013).
Quality of research (relevance of the sources used)
To convert the financial measures of revenue as presented in the company annual accounts which have been collected through economic measures. Few measures will be reported routinely and used through the analysts. Fundamentally, there are A number of measures which must be reported on a routine basis. This is how the accountability of the firms can be measured. Most of the time data received is approximations. The link between the economic profits and accounting profits is timing. Economic profits can be measured ordinarily and economic profits are based on essential timing. Economic benefits of a firm can be measured through the NPV value of cash flows through an investment. In case, where the net present value is zero when compared with the value of current profits (Morrow, 2010). Accounting profits are the measurement of current profits and this is visible from the investment decisions. For Example-Any major investment firm will not be able to return the money during its initial stages and this may show the accounting lines. The Net present value can be positive. However, there are no methods through which economic profits can be measured correctly and accounting profit can give reasonable approximations. A reasonable data are made available to the company wherein results of single year must not be unduly relied over. The value of the assets which is reported through the firm and the net value of the cash flows can provide the estimation of high economic level activity.
Extent of research effort
The company has invited inside views for the appropriate regulatory period and including the commencement and appropriate expiry dates for the SMS and mobile voice termination (Wang, 2011). An expiry date must be included and associated determinations. There are several factors which must be taken into account for the determination of pricing approaches for the MTM and FTM terminations. Telstra company is offering homogenous services, i.e.; mobile based termination services. Telstra argues to keep the pricing strategy in the similar manner irrespective the call is made from the mobile or fixed network. Moreover, Telstra is concerned about the asymmetric pricing system for MTM voice termination and this is under review. The Asymmetric pricing system raises the arbitrage risk and calling externalities risk. This will result in huge inefficiencies. However, Telstra Company is not of the order to adopt the different pricing approach (Okubo, 2008).
An attempt has been made to convert the profitability accounting measures as presented in the organization annual reports to economic resources. The company participates in active research to routinely report and provide a picture of the firm’s profitability. However, there are a number of measures which are utilized due to profitability accounting measures. These are just the economic profitability measures (Matsuoka and Kikuchi, 2012).
Explanation of the link between the event and appropriate concept
The link between the event and appropriate concept has been highlighted here. The Telstra needs to comprehend the link between the accounting and economic profits and this is mainly timing. Here, the cost advantage theory is applicable. Economic profits can be measured ordinarily. If the NPV of a given cash flow is higher than economic profits are made from the investment to realize the economic return. Accounting profits are measurements of current profits from prior investment decisions. This can be explained with the help of an example- a major investment company may not be able to generate the revenue in its preliminary stages and will show huge accounting losses, irrespective of the investment value is positive (Okubo, 2011).
When there are no immediate ways of measuring the economic profits, accounting profits can be measured on an approximation basis.
SWOT Analysis
Strengths- The company is also involved with creating the newly owned infrastructure business through which it can drive business and future opportunity. Radical Transition in customer pricing and plans must be able to deliver the enhance customer experiences. The company is expected to increase the productivity program by $ one billion to $ 2 billion cost out by FY22.
Weaknesses- The company is expected to reduce the number of employees and contractors in different layers of management.
Opportunities- The company Telstra has brought simplified products which will eliminate the customer pains and provide them with digital experiences. The company needs to create the standalone infrastructure business for driving performance and setting up exceptionally well.
Threats- The simplification of the structure and empowering people for serving the customers is mandatory. Another important aspect is a portfolio management and cost reduction programs (Jasi?ski, 2017).
Justification and supporting evidence
The present analysis has been made based on the information sources from third party corporate sources. This includes internal research and annual reports. However, the accuracy of information cannot be confirmed to accuracy. There are a number of estimates and inferences and assumptions in generation of analysis. The 12 CPM target price has been set with regard to the regulatory body determination. The pricing principle has been established for the effective supply (Borders, 2012). A cost and consultation model needs to be established to inform about the supply estimate in the Australian context. For example-There are no equivalent requirements for the regulatory which can demonstrate the reason behind the final determination with relevance to statutory requirements. When arbitrating the dispute, the authority rule is to actually set he pricing system and has an aim of resolving the dispute that exists within the two parties due to non-agreement with terms and conditions of access. The regulatory bodies required to consider the dispute and adopt the pricing methodology to the evidence as provided (Skaar et al., 2015).
The economic profit derived can be more robust and ensures a particular steep with clarity of objectives.
The operators must be provided with adequate time for adjustments of retail prices and a sudden increase or decrease can generate disruptions in the planning and operational telecommunication carriers.
The impact on customer segments can be reduced. For instance- the regulatory bodies consider the decrease in prices and this can lead to the changes in the balance between the monthly subscription rates and/or decrease handset subsidies (Denness, 2013).
To justify- smaller prices will not require the transitional arrangements. In a scenario, when commission is setting the regulated price for voice and SMS termination, different arrangements needed to be made. However, it has been observed, SMS traffic is balanced and public communities use unlimited SMS mobile plans. According to the Telstra, SMS termination rates will have the minimal impact on retail markets (Kotecha, 2018).
The regulatory body is undertaking the separate consultation for supplementary prices and also for the declared price. Telstra had made submissions to the regulatory bodies in charge. The company notes that the overall position of anay supplementary prices must be dealt with conjunction with primary costs for every service (Breckman, 2007).
Telstra has been taking crucial decisions and considers switching costs can be overstated. Furthermore, the switching costs between different technologies will be required to achieve the end-to-end benefits. It has been stated when competing firms are differentiated within each other, switching costs will be active. It has been identified $59 is the connection fee and $ 99 is the differentiation fee (Sheaffer, Golden and Averett, 2009).
Logical sequence
Customers are focused towards acquiring the bundle of voice services from the retail store. This can be effective due to customer preferences as it receives a single bill for the different services and cost savings from the same provider. The price of the package must be provided to the customers at a given discount. The company is of the view to include the local calls, basic access national and long distance calls. The company seeks to identify the relevant product substitutes. The Telstra has been guided through the commercial realities and ensure market can identify the areas of competition. Any geographic market should be corresponding the commercial realities of a given industry.
The company must be aware of trade patterns. There are difficulties when applying the conventional geographic demand with supply side analysis to fixed telecommunications line. The fact holds that fixed line infrastructure is connected with the household. A customer cannot move to another geographic area due to price increase or quality degradation. The company needs to take into account the relocation costs that can outweigh the savings. There are certain difficulties in the application of supply side analysis. For example-The huge investments made in the fixed line networks, which include the sunken characteristics and long lead times which are often involved. This can increase the possibilities which will be faced through the rivals and has limited scope.
It has been observed in the past, customers will be unwilling to change the telecommunications provider which arises due to the lack of information. Switching costs are high when the transition takes place from one service operator to another operator. A report suggests that customer status quo will be acting as barrier in achieving the sufficient scale and effectively competent. When switching costs and information asymmetry is available about the extensive range of available contracts, the company Telstra will be given a considerable advantage as the provider of local telecommunications (Kikuchi, 2009).
The company is creating new digital platforms that may enable the simplification of businesses. This will lead to enhanced customer experience and savings too. The company has also invested in the fixing the customer points and adopting the new technology and ways of working. The new technology platforms devised for the customers shall cover the complete customer lifecycle and ability to move towards simplified and new product suite. This can enhance the customer experience. Significant measures have been undertaken for the development of new digital platforms. Small businesses have started building the products in FY19 and migration of customers is expected by FY20.
Conclusion
The Telstra Company must define the scope for the target market and perform assessments and applications of different pricing systems. However, Telstra suggests that demographic markets must not be segmented through the customer type. Customers can be easily served through the network or the fiber shot upgrade. Telstra provides that relevant markets can be identified by assessing the state of competition in relevant markets. The state of competition cannot be static and applied to descriptions of current behavior and conditions. Dynamic factors must be taken into account like sustainable competition and extent of which the threat of entry constrains the output decisions and pricing systems. At a theoretical level, the perfect competition concept can describe the market structure wherein the consumer or producer does not have the power to make an influence on pricing system. According to the economic theory, the perfectly competitive markets have a large number of suppliers and buyers. All firms have the relevant market knowledge and can freely enter or exit. However, the rival competition existing between the two firms is intense.
As the company is shifting the new platforms, the company will aggressively improvise the experience for customers and address the customer points. The improvisation process for end to end ordering procedures seeks to increase the customer experience. This is visible in the order processes and time taken for the activation. The radical simplification of products and new offerings can eliminate the customer pain point and drive them through the digital innovative platforms. Establishment of standalone infrastructure to drive the performances and set up the plan is the next step. The simplification of business will have an impact over the workforce.
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