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Key competencies of SingTel

Discuss about the Strategic Management for Singtel Telecommunications.

The telecommunication industry was initially based on the traditional telephone calls to generate revenue. Today operators today are focussing on the benefits of 4G.  Thus mobile and internet services have become important to the revenue that these companies make. Porter (2008, p. 13; Hubbard & Beamish 2011, p. 13), argues that the internet has become the most important element of the value chain in the communication sector.  In 2000 the Singapore government introduced full market competition by removing limits on licenses with operators having the freedom to decide the range of services to offer.

Singtel has five main components in the supply chain: suppliers, infrastructure, operations, products, and distribution. The company runs its telecommunication network in areas of mobile, fixed broadband, digital sales and managed services. Under this value chain, the company has three business units’ group digital life, group consumer and group enterprise (Sigtel 2016, pp. 6).

Group consumer is the largest business unit accounting for 61.3% of the company’s revenue.  The investments are vast within Singapore but extend to other countries like Australia, Thailand, India, Indonesia, Philippines, Bangladesh and Africa. The services under this business unit provide pay TV, fixed broadband, mobile, and voice data. The consumer division in Singapore has a customer subscriber base of 4.1 million subscribers, 0.6 million on broadband, 0.4 million pay TV subscribers. This makes SingTel to rely on a broad market that has kept the company moving.

Group enterprise accounts for 36.7% of the company’s revenue, by providing IT solutions to both corporate and the government.  With these, they provide services in cyber security, Enterprise cloud services and smart cities. This is further driven by the fact that the country is under transformation to a smart nation across the Asian region.

Group digital life is the next trend that the company is focussing on interconnectivity nature of the consumer.  The mobile and Internet usage within the country is growing fast which made the company position itself in three major areas of digital marketing, video streaming, and data analytics. With these three segments, the company uses three brands of HOOQ, Amobee and data spark.

Singtel is one of the market leaders in Singapore in mobile and broadband markets. The company has 47% market share in the mobile market with a total market share of approximately 3.98 million customers. The company operates a 4G network within the country and was the first telecommunication company to make it accessible t customers. This enables internet users to browse at high speed of 150mbs.

Macro environmental analysis of the Indonesian market

The company has further enjoyed benefiting from the infrastructure within the country by giving 52% of the shares to the government. Due to this, the provider posses licenses for all mobile services under a non-exclusive basis. With this, the operator has increased its operation base and spread across Australia to give similar services. With the exclusive rights that the company has, it controls patent rights within that give competitive advantage. Since the government is the regulator, the licensing

As one of the market leaders in the sector, Signet has three approaches that target its growth strategy to increase profitability. The company has started by initiating foreign investments in other countries. With this, the company has advanced its acquisition advanced info service, Bharti, Airtel Group, Globe Telecom and Telkomsel. This has thus increased the profitability of the company and made it a global giant in Singapore. This strategy is aimed at growing the international market to increase business opportunities due to

The telecommunication industry has changed since the last 20 years from government monopoly to open industries. This has increased competition due to the emergence of international giants in the sector.

The telecommunication industry has become one of the booming industries in the world.  The business environment consists of both the micro and macro environments that a business operates. The micro environment entails the competitors, customers, marketing intermediaries and competitors; they are the strengths and weaknesses that the organization has partial control over (Barney 1991, p. 9). However, macro environment entails external factors like economic trends, demographic factors, technological factor, political factors and cultural factors. They are the opportunities and threats that any business experiences with lack of control over them. The macro environment of an industry is analysed through carrying out a PESTLE analysis (Hoy & Stanworth 2003, p.21).

Political factors are a result of government regulations that impact the telecommunication industry. Singapore law restricts tariffs that are set by the telecommunication industry. Every country protects its citizens by setting certain regulations that tend to control the industry. Laws and legislations passed by the government affect the industry by setting restrictions and tariffs that need to be observed (Rothaermel 2012, p. 7).

Economic factors are based on GDP and the interest rates that exist within a particular economy. Businesses that are in serious competition need to stay and resist economic challenges. Tariffs are also a result of the economic trends within the country. Economic policies like debts and fluctuations affect the business directly. The cash flows are based on the dollar, Euro and Rupiah which affect conversion rates and thus affecting the industry. Indonesia and Singapore also enjoy bilateral relations that have made Singapore the top investor in Indonesia which increases opportunities for SingTel (Reutterer, Mild, Natter and Taudes 2006, p. 47).

Social factors are based on the way customers utilize the available services. It has become a global concern that the onset of mailing and digital imaging changed the sector. The rise of Skype and social media changed the traditional communication sector with people also changing communication trends. Trends in communication in Indonesia match trends in other markets where telecommunication services are investing heavily in band width and internet services to satisfy customers. The country has a steadily growing population at a rate of 1.1% which gives market for the provider. Majority of the population are young people who need modern technologies.  The increasing youthful population utilises more data than the larger population.  SingTel has to invest heavily in modern technologies like 4G that will enable the youth to utilise the services (Cavusgil, Knight & Riesenberger 2008, p.12; Barney 2001, p. 43).

Technological factors have been a major contributor on how telecommunication companies operate and survive in the market. Technology has changed the world making companies to invest heavily in new technologies to satisfy the customer base. The country’ demographic nature has made 4G investment expensive. However the need for higher speed means it has to invest in 4G. Singtel Indonesia has increased its connectivity by being the first internet provider in the country to set up 4G services. Furthermore, the technology sector has developed with several smart phone brands existing within the country. The country has laid an infrastructure in the communication industry that is fostered by the effective broadcasting strategy adopted by the government (Foss and Knudsen 2003, p. 297).

Environmental factors are based on the geographical location of the country. The public opinion of Singtel within Indonesia is good making the provider enjoy goodwill within the country. The business environment is rapidly changing due to new inventions that each country is trying to develop to increase service delivery. This, therefore, enables SingTel to supply customers with cheap material at a lower cost. However, the Indonesian geographical island structure has made it expensive to install cables across the country.

Legal factors relate to the legislations that affect the industry, the country introduced company law that allows every company to be a legal entity. The framework for the telecommunications industry comprises specific laws and government regulations that are developed and issue from time to time. The telecommunications law sets guidelines that reform the industry by detailing principles and provisions in the line of business. The two countries also enjoy bilateral relations and being members of Non-Aligned Movement and APEC. Therefore Singapore enjoys very few legal regulations in Indonesia and thus makes investment easier than any other country.

The market is easy to enter so long as a competitor meets the requirements as per the law. The tax system within the country is rated between 10 to 15%, and therefore this has a net effect on the tariffs that companies set. Singtel is also affected since it has to set a tariff that meets the profit margin enables payment of company tax.

Indonesia is one of the largest growing economies with opportunities in the communication sector. The young population have disposable income while the country has outpaced its GDP in the recent years providing more income. The telecom providers have to provide a reliable connection across the country and the population. This youthful population demands for cellular data and high connection speed leading to the need for 4G. This population on the other hand has increased cellular subscriptions providing a highly competitive market.  Singtel faces major competition from Telkomsel, Strahub and M1. The major competitors have a higher market share within the country with Star-hub offering a higher dividend yield of 5.56% as compared to SingTel’s 4.78%. This therefore attracts investors who may increase the capital base of the company.

Porter’s five forces reveal that the company has to struggle with competition which gives customers available options within the market customers have a higher bargaining power due to the availability of transparency in pricing making customers analyse the price. The business environment has high barriers to entry as a result of infrastructural costs and the economies of scale owned by the top three companies. Bargaining power of suppliers is high due to the need for the company to invest in new technologies and compete. Low switching costs with the industry have increased threat of substitutes. Furthermore customers are sensitive to prices and continue switching when a new price is offered by any other provider.  Competitive rivalry within the industry is high due to the bargaining power of the consumers which leads to price wars.

The key drivers of the market are population growth and the emergence of smart phones. This has led to large utilization of telecom services making companies reap more. Therefore SingTel is competing by identifying drivers within each business segment that it operates. For the group consumer, the company has increased coverage quality to ensure speed that satisfies customer experience. In the group enterprise the company has started the cyber security line and further formed partnership with Microsoft for application services. Furthermore, the demand for the premium over the top video has led the company to partner with Sony Pictures Television and Warner Bros that will enable development of a new revenue stream.

SingTel has good financial ratios that have led to the higher investment in mobile networks to increase revenue. The company has taken advantage of its higher net profit margin to increase the market share. The company is diversifying its services across different markets. The company gets 74% of its revenue from regions that are outside the mother country. This reduces the vulnerability and the risks that the company may face from selected markets.  The company takes advantage of any growth opportunity that can develop in these regions.

The company can enter into the partnerships and joint ventures which accounted for the companies increased profit in 2015. Joint ventures are important especially if the company ventures with leaders in specific countries. This is because some of these partners have not fully exploited the available market opportunities in the area. For example in India only 32% of the customers use mobile data which provides a large unexploited market.

An analysis of the business environment of SingTel using Ansoff’s matrix reveals strategic opportunities that have made the company more productive than other companies. The company keeps growing by penetrating new markets every time. The company traces its roots back in the US and today it has invested in many Asian countries by entering emerging economies. It is one of the major operators in Asia with a bigger presence (Porter & Kramer 2006, p. 81; David & David FR 2008, p. 47).

Kotler & Armstrong (2007, p. 7) suggest that the need to stay relevant in business means that firms become innovative and develop products that are new to the market. New products create more opportunities to the company which results in a larger customer base. The company changed its business segments and developed three business units: Group Consumer, Group Enterprise and Group Digital Life. The company has also developed applications used for different purposes in business.

Carmen (2009, p. 33) argues that entry into new markets can be difficult for a new firm or product.  To enter a new market has to establish a particular niche that it can exploit to be able to control the market. Firms that are already in the market develop strategies that ensure that no new entrants can manage entering the market. Allowing new entrants increases competition which reduces profit margins within the firm. The decision to penetrate a new market is the achievement of long term strategic decision that sees the company move to the next level. Companies consider different factors that determine the decision to make when entering a foreign market. There are two major market entry models used by organizations to enter a new market through exports or contractual agreements (Thompson, Strickland, & Gamble 2005, p. 23; Waterschoot 2000, p. 187).

SingTel has been in the world of telecommunication for quite some time having started from offering telecommunication calls to a wide range of products today. The company has existed independently by running telecommunication services. However, the rise of technology and   invention of new products within the telecommunication sector have led to development of new products in the market. New trends in communication are forcing companies to offer platforms that meet the needs of the customer. An educated young generation has led to service providers putting every foot forward to develop technology that can keep them in businesses (Manoj &. Shilpa 2013, p. 19; Burton 1995, p. 5)

Therefore SingTel can enter into joint ventures with other companies that exist in the market, or it can penetrate a market directly. Depending on the type of product that the company is offering the market, the company can enter into a venture with other firms or it can develop an independent product that can suit the need of the customer (Murray, Ju, and Gao, 2012, p. 55). Ventures help a business to access new markets, share the risks, costs and critical experience that the other business has. Vaidya(2009, p. 12) argues that to penetrate new markets ventures are the easiest option that a company can use. Working with Bharti Airtel, Sony Pictures, Globe Telecom, PT Telekomunikasi, Selular and Advanced Info Service increases market share. Merchant & Schendel (2000, p. 739) suggests that joint ventures should be chosen carefully since they can result in the creation of a new competitor and thus reduce the diluted profit. They are also not always profitable since they are affected by factors like, technology, market place developments, and economic down falls. Therefore the need for proper planning and responsibility sharing is critical in success of any joint venture.

Conclusion

The business environment is dynamic and keeps changing every time. The telecommunications sector is one of the industries that face changing patterns based on many factors. Companies based in this line of business keep developing new products that meet different needs of the customer. A large customer base and youthful population attracts many companies to join the communications sector (Jobber 2006, p. 12). The population is segmented along business lines that need to be analysed every time.  Entering into business ventures is one way of penetrating new markets and increasing the market share.

References

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