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Importance of Strategic Management

Discuss about the Strategic Management for Telecommunication Service.

The term strategic management describes the implementation and formulation of the important initiatives and goals adopted by the company (Hill, Jones & Schilling, 2014). In the current business scenario, the importance of strategic management is increasing as it helps to deal with both the internal and external situation of the company. In this study, the company named Telstra has been highlighted. It is one of the largest telecommunication service providing company in Australia. In the current business situation, the changes in customer preferences and increasing eternal changes, the importance of strategic initiatives have become necessary. In this study, both the external and internal environment of the company named Telstra have been highlighted. By discussing the competitive advantages of the company, the study has mentioned the goals and initiatives taken by the organization.

Evaluating the organisation’s environment

In order to analyse the external environment, the porters five forces have been highlighted below

Situation

Analysis

Competitive rivalry

Vodafone, Virgin Mobile and Optus are the three biggest rival of Telstra as these organizations have already expanded the business in the global telecom industry (McDougal, 2017).

Bargaining power of the supplier

In the current Australian market, increasing customer demand and changing preferences, have brought the challenge for the company named Telstra. The network and electronic components are being collected through the third party (Telstra.com.au, 2018). In the competitive business industry, bargaining power of the suppliers is moderate.

Bargaining power of the customers

With the increasing number of competitors, the availability of the suppliers is also high. Therefore, the bargaining power of the customers is high.

The threat from substitute products

It has been identified that the telecommunication products such as video and audio products are available in the market on the other hand, with the increasing number of competitors, the availability of the substitute services such as data plan, recharge offer and internet speed are higher in the market. As an example, Vodafone provides 100GB in $80, which is quite amazing (Vodafone.com.au, 2018). Therefore the threat from substitute products is high.

A threat from new entrants

In the current scenario, with the increasing economic growth, different business organizations have got the chance to develop their business. New telecom organizations have started developing. However, comparing with the position of Telstra, this can be said that the threats from new entrants is low.

From the PESTLE analysis, the important elements such as Economic and Political factors analysis in the organization name have been discussed below.

The rate of inflation, interest, savings, economic cycle and the foreign exchange rate of the company is being influenced depending on the economic situation of the country. If the Australian business industry is being analysed, it will be identified that in the year 2016, the annual growth rate of the company was 2.8% (Telstra.com.au, 2017).  In the year 2017, the income growth was 4.3% (Telstra.com.au, 2017). Therefore, it can be said that the increasing economic status of the country is beneficial for the company. The government intervention and open market are the important influential factors in the telecommunication industry. In the case of the Australian business market, the labour cost is not much. On the other hand, it has been identified that the employment rate in this county is 5.5%, which is quite good (Tradingeconomics.com, 2018). Therefore, this can be said that the economic factors are in favourable condition for the company. Due to the impact of low wages, the company is being able to appoint large numbers of employees with the minimum wages, which can influence its rate of profitability. Inflation is being considered as the important influential factor for every organization. It can be said that due to low inflation cost, the risk for falling in deflation can increase, which will derive the economic condition in weaker situation.

Evaluation of External Environment

Political factors play the significant role in the case of dealing with the business issues. Australia is being considered as one of the important peaceful nations in the world. Therefore, this can be said that the political stability in the country influences the development of business organization named Telstra. Internal business regulations, legal framework and the business initiatives are required in the case dealing with the political situation. Taxation rates and incentive structure of the country influence the organizational growth. After analysing the situation, it has been identified that trade and tariffs regulations in this country are in a favourable condition for the company. Although, Telstra has faced various favourable situations for the stable political situation in Australia, but the biggest threat of the company is NBN co limited. Due to the increasing cost and unfair policies NBN, the customer service is getting hampered.

It has been identified that the value chain analysis is being considered as the important part in business analysis as it helps to define the core competencies of the organization. Through the value chain analysis, the business chain as well as the competitive advantages of the company is being analysed. The creating and delivering process of the products and services are being analysed through the primary activity. In this process, the manufacturing unit, raw materials and other components are being involved. On the other hand, in the case of support activities, the production unit, marketing unit and management units of the company are being involved.  From the internal analysis of the company, it can be said that efficient employees, effective infrastructure and technological support have made the organization strong. In this study it has been identified that Telstra wants to split the infrastructure for taking the preparation to deal with the potential demerger. The company announced to cut near about 8000 jobs for introducing the major restructure. With the changing infrastructure it wants to come with the named Telstra InfraCo (Theguardian.com, 2018). It is true that this change will affect near about thousand employees, however, developing the nations’ leading telecommunication organization such bold steps are required.

In this study, it has been identified that the company named Telstra has developed its business in the market with efficiency. However, due to the availability of financial resources, the increasing number of competitors have created challenges for the company. In order to deal with increasing competitions the company has developed the effective business strategy. It has focused on simplifying its products and developing the digital experiences of the customers. It has also decided to introduce effective cost reduction programs, so that the rate of profitability can be increased. In the current telecommunication business industry, Vodafone, Virgin Mobile and Optus are creating threats for the company. In the year 2017, the business revenue of Vodafone was 59.13 million EUR (Vodafone.com. au, 2018). The business revenue of Virgin mobile in the same year was near about 225.86 million. The business revenue of Optus was 563.64 million (Optus.com.au, 2018). Another way, if the business revenue of the company named Telstra is being analysed, it will be identified that in the same year the business revenue of the company was 28200 million. Therefore, this can be said that among the competitors the company is leading the telecommunication industry in Australia. However, it is facing tough competitions from the Company named Vodafone. It has been identified that in the year 2018, the market share of Vodafone is 14.4%, where Telstra increased its share 39.5% and Optus 24.2%. From the collected information it can be said that with the increasing market share Telstra has become one of the renowned telecommunication service providing organization.

Analysis of Competitive Advantages

If the vision of the company is being analysed, it will be identified that the company named Telstra wants to develop the effective technology for improving the connectivity with the customers. Therefore, this can be said that the aim of the company is to provide the effective customer service (Telstra.com.au, 2017).

  • To achieve top position in the world telecommunication industry by developing the unique technology for satisfying customer needs (com.au. 2017).
  • To embed environmental and social reflections into the business practices for increasing the value of the stakeholders as well as the company
  • To provide the solution to the suppliers in order to deal with environmental challenges
  • To establish the strong image in the global industry for influencing the rate of employment

Cost leadership and differentiation both strategies were introduced by Porter.  Cost leadership strategy is being considered one of the important strategy for developing competitive advantages in the market (D. Banker, Mashruwala & Tripathy, 2014). By adopting this cost leadership strategy, the company can be able to introduce a smooth cost reduction process. On the other hand, the differentiation strategy is being introduced for distinguishing the business organization from the competitive market (Cascetta & Coppola, 2014). In this situation, when the company named Telstra is dealing with excessive competition and increasing customers’ demands in the market, here both the strategies are required to get adopted. Materials have become one of the major risks for the company. From the external market analysis, it has been analysed that due to changing demands of the customers and availability of political support, many organizations have entered the telecommunication industry. Due to this reason, the business organizations are dealing with the identity regarding issues.  Increasing expenses have also become the concern for Telstra. For dealing with the supply process related challenges, the company has decided to reduce the rate of energy consumption through the effective operations and develop the appropriate monitoring, planning and management practices by investing in the reviewable energy. Through this processing the profitability rate can be increased. For avoiding the Tax related issues, conservative tax profile is being maintained by the company. Customer satisfaction is the major concern of every company, therefore customer data is needed to be maintained with privacy (Eid, 2015). These processes indirectly help organization in increasing its profitability rate.

On the other hand as the study has already mentioned that the company has decided to develop effective internal management practices so that the rate of employment can be influenced, therefore, Telstra has taken the initiatives for developing the health, safety and wellbeing. In order to engage a large number of employees in the organizational activities the company has tried to maintain the cultural initiatives. It has also decided to introduce effective leadership practices as it will help to reduce the inequality and all kind of discrimination in the organization. By providing the environmental solution, the company will be able to maintain the sustainable situation that will influence its growth (Tukker & Tischner, 2017). These strategies cannot influence the cost reduction process, but it can be beneficial for influencing the others operations in the organization. Hence, this can be said that both the cost leadership and differentiation strategies are required for managing the current situation of the company.

Telstra's Vision and Core Competencies

The company named Telstra has decided to change the product offering way and make it simpler for reducing the customer pain and increasing digital experience. I strongly believe, this strategy can be beneficial for the company because by simplifying its approaches the company will be able to get conned with the customers directly. This will be easier for understanding the needs and demands of the customers. Another strategy taken by the organization is related to the organizational structure. The company has decided to introduce the standalone business infrastructure for improving its business performance (Berkhout, 2012). I believe, through this initiative the company will be able to grab the attention of a large number of customers in the case of dealing with the business issues. The third strategy, which has been taken by the organization in the making the process of approaching more gentle, I have analysed, through this process, the company will be able to satisfy the needs of the customers. The fourth strategy is being considered as one of the important business strategies as it helps to deal with the issue regarding excessive cost. I believe, by adopting this cost-effective strategy the organizational expenses can be reduced. On the other hand, I also believe, by adopting this strategy, the business organization will be able to increase its rate of profitability. As per my knowledge, I can say that by adopting these strategies, the company will also be able to develop effective leadership strategies in the organization. Through this process the engagement of employees can be increased.

However, I have supported all the above strategies, but it cannot be denied that in the current business scenario, the changing needs and demands of the customers cannot be predicted by anyone. Due to the rapid changes in organizational culture and market needs it cannot be said that the strategies which have been taken by the organization can be beneficial for it in 2022 as the business market is unpredictable.

Reference and bibliography

Barney, J.B., (2017). Resources, capabilities, core competencies, invisible assets, and knowledge assets: Label proliferation and theory development in the field of strategic management. The SMS Blackwell handbook of organizational capabilities, pp.422-426.

Cascetta, E., & Coppola, P. (2014). Competition on fast track: an analysis of the first competitive market for HSR services. Procedia-Social and Behavioral Sciences, 111, 176-185.

  1. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.

Eid, R. (2015). Integrating Muslim customer perceived value, satisfaction, loyalty and retention in the tourism industry: An empirical study. International Journal of Tourism Research, 17(3), 249-260.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

https://tradingeconomics.com/australia/employment-rate)

https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF)

Kurt, A., & Zehir, C. (2016). The relationship between cost leadership strategy, total quality management applications and financial 

McDougal, M. (2017). Insights from the company monitor: Telstra. Equity, 31(11), 15.

Optus.com.au (2018).Retrieved from https://www.optus.com.au/

Telstra.com.au (2018). Retrieved from https://exchange.telstra.com.au/supply-chain/

Telstra.com.au (2018). Retrieved from https://www.telstra.com.au/

Telstra.com.au, (2018). Retrieved from https://www.telstra.com.au/personal?tc=G%7cE%7cD%7cTB%7cTBRAND%7cKWTelstra&gclid=Cj0KCQjw-o_bBRCOARIsAM5NbIMpAGppRoKB68f3-a7BqLBZljdQjVkoKSiBVVDVK-aH6QrUAbblK5kaAgfNEALw_wcB&gcldata-src=aw.ds&dclid=CLbfsd2V0dwCFcMNKgodbZAJ6Q.

Telstra.com.au. (2017).  Retrieved from https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF.

Theguardian.com (2018). telstra.com.au. Retrieved from https://www.theguardian.com/business/2018/jun/20/telstra-to-cut-8000-jobs-in-major-restructure.

Tradingeconomics.com (2018). Retrieved from https://tradingeconomics.com/australia/employment-rate.

Tukker, A., & Tischner, U. (Eds.). (2017). New business for old Europe: product-service development, competitiveness and sustainability. Routledge.

Vodafone.com. au (2018). Retrieved from https://myvodafone.vodafone.com.au

Vodafone.com.au (2018). Retrieved from https://www.vodafone.com.au/plans.

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