THE COMPETITOR’S STRATEGY ANALYSIS

THE COMPETITOR’S STRATEGY ANALYSIS

Introduction to Industrial Analysis

Generally, Porter‟s 5 Forces provide a good, simple yet powerful, framework for developing an understanding of the competitive forces or pressure within DiGi‟s industry that influence its pricing decision. Great competitive forces put more pressure on it while weaker competitive forces subdue the pressure.

Threat of New Entrants

In general, telecommunications is not an easy entry industry despite the rumors of easy award of 4Gspectrum to new entrants. Several barriers are recognized:

·    License: Every potential entrant will need to obtain a license through MCMC. However, it is somewhat difficult and expensive to get an approve license due to MCMC‟s strict requirements and procedures. Yet, once obtain, a licensee may apply for the renewal of its individual license prior to expiry.

·      High Capital Investment: Other than an expensive license, telcos also required high fixed costs and spend relatively large on network equipment and to maintain development. It might reach a few billion Ringgit Malaysia.

·     Sole Right for Certain Projects: The government of Malaysia had granted sole right for certain projects to existing telcos (e.g. Telekom has sole right to both partnership of submarine cable for the broadband service and also HSBB). However, apart from TM, other Network Facilities Provider (NFP) licensees: Maxis, Celcom, DiGi and Time dotcom can build their own network and cable landing stations should they choose to invest in the facility. Similarly, broadband license are also granted to some private telecommunications operators.

·     Advance Technology: The advanced technology required in telecommunication industry not only incurred high capital investment but also need professional knowledge and skills (human resources) to ensure success in the industry. It is not easy to copy or imitate.

Threat of Substitute Products

As highlighted before, DiGi operates through 2 business lines: Voice and Data Services. Mild threats of substitute products for both of the business lines are recognized:

Voice Services (mainly mobile): Many traditional and modern substitutes – letter, fixed home line telephone, fax and email. From 2000 onwards, broadband Internet services, which enable faster and always-on connection to the worldwide web, offer more promising growth potential. In addition, the pressure on the very low cost to use the phone calling through internet or communicate through online messenger had threatened the mobile service industry. The attractiveness of internet services making it more affordable to the masses.

Data Services (focusing on broadband): Consumers have become more demanding in quality broadband service and this create an opportunity for new entrants to provide a substitute product for consumers in lower price or better performance than the existing ones.

Industrial Rivalry

Malaysia mobile market is oligopoly nowadays after the consolidation in 2003. The telecommunications industry has also been undergoing gradual liberalization since 1985, when Telekom, the Malaysian government-dominated enterprise, granted a number of licenses to private sector telecommunication operators. Gradually, the industry witnessed more competition in various segments of mobile, fixed line and telephony services, and the functioning of the sector became more transparent.

Early 2010 seem to favour Celcom when at the 2010 Frost & Sullivan Malaysia Telecoms Awards, Celcom triumphantly clinched 3 awards at the 2010 the much coveted 'Service Provider of the Year, 'Broadband Service Provider of the Year' Award and 'Mobile Service Provider of the Year' Award thus further reaffirming its strength as one of the market leader.

         Yet, within the industry, together with Telekom, Maxis, Celcom and DiGi continue to compete on differentiation of products and services through improvement and introduction of new innovative features aspects such as call rates, package price and so on. They try to gain competitive advantage through low call rate and price. Each of them also invests a lot on advertising to promote their product successful maintaining their place in Malaysia Top 10 Advertising high spenders list from Jan – June 2010 as shown. At the same time, WiMAX are also gaining ground and acceptance among customers.

Top 5 Opportunities and Threats

No.	Opportunities	Rationalization	Conclusion
1	Globalization	Important as it is greatly contributes to frequent international roaming demand with instant communication and information seeking	DiGi can response by capitalizing on it and kept offering roaming and broadband product, services broadband and internet services.
2	Higher standards of living among Malaysians	Important indication that most Malaysian can afford minimum one mobile and broadband	It is high quality telecommunication services at competitive prices.
3	Rising telecommunication penetration and demand	Important statistics as higher penetration = higher demand for DiGi’s product and services	It is high quality telecommunication services at competitive prices.
4	High capital investment	Important factor as entry barrier. High cost for new entrée to compete with existing giant in the industry.	. DiGi have high capital investment largely contributed by its largest shareholder.
5	Advance technology	Mild important factor as human talent is one of the key area for DiGi’s continual success and survival.	DiGi are able to response by focusing on recruiting new blood while provide intensive training to existing staffs and succeeded in maintain a competent yet loyal workforce at an affordable cost.

No.	Threats	Rationalization	Conclusion
1	High switching cost	Important because supplier relationship management can make or break DiGi as they practically control DiGi’s product and service’s selling.	DiGi can response by keeping close relationship with their existing suppliers.
2	High bargaining power of consumers	Important because power of bargain for lowest price and high quality switch to consumers due to non-existent of information asymmetry.	DiGi can response by offering high quality telecommunication services at competitive prices.
3	High inflation Increased prices	Important because high inflation will decrease demand for communication tools.	DiGi can response by offering high quality telecommunication services at competitive prices.
4	Continuous technology advancement in wired and wireless telecommunications	Important because DiGi is still trailing behind Maxis and Celcom. Once outdated, it is hard to bounce back in a short duration.	DiGi can response by continuous R&D to prevent ongoing outdated overnight and keeping selling price low.
5	2010 dub the broadband year of Malaysia	Important because plenty of new devices ad packages flooding the market place and tense rivalry.	DiGi can response since they had invested RM350 million for mobile broadband expansion as part of its plans to improve its infrastructure.

Top Strength and Weaknesses

No.	Strengths	Rationalization	Conclusion
1	Affiliation with Telenor Wider Overseas Coverage	Important because affiliation with Telenor brings collective strength to DiGi in terms of technology know how and industries updates plus knowledge and helps to widen overseas coverage.	DiGi major strength since they are keeping good working relationship with members to Telenor Group.
2	Experience management personnel from overseas	Important because global experience management personnel brings new innovation to DiGi.	DiGi major strength since they had been capitalizing on their experience management personnel from overseas.
3	Innovation	Important because creativity and innovation play a great role to increase supply of voice and data services to individual and corporate customers.	DiGi major strength because their R&D had always exceeded customer expectations through innovation offering to customers.
4	Increasing number of subscribers leading to strong financial performance	Important because number of subscribers ensure survival and sustainability of DiGi.	DiGi major strength since they had been focusing on ensuring excellent customer experience, keeping close tab on number of subscribers, attract new subscribers and reward current one s handsomely
5	Good reward system to subscribers	Important factor to motivate current and potential subscribers.	DiGi minor strength as they have a string of past, current and upcoming good reward system.
6	World class R&D	Important because R&D is the key to keep up and ahead with continous technology and advancement in wired and wireless telecommunications.	DiGi minor strength as their self-claim world class R&D had wow Malaysians with a number of innovate products and services.
7.	Facilities – auto reloads, online payments, etc	Important because facilities bring convenience to customers and cost	DiGi minor strength as other competitors are also offering the same service to customers.

No.	Weaknesses	Rationalization	Conclusion
1	Dependency on strategic sharing between mobile producer, application writer and etc.	Important because DiGi products / services cannot operates without complementary product / mobile producer, application writer, etc.	DiGi major weakness because they did and still highly depend on product development through join venture with mobile producer, application writer and etc to serve customer better.
2	Latest of on new technologies seldom / late to reach end users	Important because low customers awareness towards DiGi products / services not reduce in consumption but indirectly giveaway potential customers to competitors.	DiGi major weakness because they seldom promote new offerings compare to competitors.
3	Lack of base station as compared to others operators	Important factor because lack of base station leads to poor line reception which weaken customer satisfaction and loyalty thus reduce in subscribing.	DiGi major weakness as they have to either build or share base station with competitors to expend coverage area.
4	DiGi ambassadors lask of involvement	Mild important factor because DiGi ambassador serve as free of charge and influential marketing tools for DiGi.	DiGi minor weakness as there is lack of involvement among these ambassadors to effectively and aggressively promote DiGi other products/services.

Digi’s Strategies Analysis

In building business strategies, there is no one method. The most common approach of building avision, then trying to work out how to reach the vision, is just one of a number of alternative views of strategy.

DiGi’s Possible 4 Types of Strategies

 From SWOT, DiGi‟s possible 4 Types of Strategies are as such:

·               Market Penetration

·               Market Development Intensive Strategies

·               Product Development

·               Forward Integration

The first 3 are collectively known as Intensive Strategies while the last one is a form of Vertical Strategies. However, the subsequent section only focuses on deliberation of Intensive Strategies.

DiGi’s Intensive Strategies – Market Penetration

Market penetrations seek to increase market share for existing products in existing markets through greater marketing efforts that encourages more usage/spending among consumers.

DiGi’s Intensive Strategies – Market Development

Market development is the term used in introducing existing products to new markets which can be new geographic areas or currently underserved communities. DiGi recognized 2 sources of new markets which are potential or new foreign workers and rural communities

Supporting Factors Market Development

According to Malaysian Communications and Multimedia Commission (MCMC), back in August2007, cellular coverage area was 95% (Peninsula) and 77% (East Malaysia) making the rest of Malaysia blind spots and experiencing dropped calls May 2010 national population coverage for cellular improved to 94% (MCMC, 2010) while MCMC under USP target to reach 97% national population coverage for cellular by 2011.

Rural, remote, suburban, low cost housing areas and tourist spots high Foreign Worker patron during public holidays are a few areas that need broader access to communication infrastructure although affordability is low. As a USP, DiGi is entitled to claim certain qualified expenses from the MCMC in relation to USP projects. In June 2010, DiGi and Celcom signed a Memorandum of Understanding (MoU) on infrastructuresharing at both company (DiGi and Celcom) and group level (Telenor and Axiata) benefiting DiGi on access to Celcom‟s well publicized whole Malaysia coverage. Refer below for current DiGi coverage.

DiGi’s Intensive Strategies – Product Development

Product development seeks to increase sales and profit by improving/modifying present products/services or developing new ones for its existing markets. This is especially important in the era whereby global consumer multitask with their mobile device.

Figure 7.3 Digi’s Product Development

Some might use less Voice Services but more on Data Services to surf the net, chat using MSN Messengers, Facebook, Twitter, Mobile TV, GPS for navigation. They also to install tons of other apps such as mobile wallet without caring much on what operating system it runs on as long as they can do their stuff on it. iPad or Mobile Internet Devide (MIDs) is not a choice because it hardly fits into their trousers pocket or handbag. In other words, consumers are gradually switching to basic phones/mobiles to smartphones with computer functions that fulfill their needs and want and DiGi had jumped into the bandwagon as well by strategically having joint venture with handheld mobile providers to include latest technologies and internet function into their product.

Digi Telecommunications Sdn Bhd Launches TOC Green Data Center in Malaysia

Digi Telecommunications Sdn Bhd has strengthened its commitment to green its business with the launch of its Technology Operations Centre, or TOC, a green data center in Malaysia. The purpose-built data center of three and a half storey with 60,000 square feet of usable space for data servers and telecommunications switches also houses the Company's Fast Recovery Center and office spaces. With an investment of more than MYR 80 million, the TOC is built to support DiGi's growing data capacity needs for the next 10-15 years.

It was designed using the GBI as its guiding principles and incorporates cutting edge Green Technologies aimed at reducing usage and increasing energy efficiency, the company said. The building design incorporates environmental-friendly features such as no raised floors, dedicated cooling for server racks to maximize cooling efficiencies, rainwater harvesting, solar reflective roof paint coating, and a steel formwork system to reduce timber usage. Its most visually notable feature is its vertical vegetated wall that acts as an effective barrier against solar radiation and insulates the building, thus significantly reducing heat build-up and cooling energy costs.

DiGi Telecommunications Sdn Bhd Announces Strategic Partnership with Google 

DiGi Telecommunications Sdn Bhd has announced a strategic partnership with Google to offer Gmail SMS. Gmail SMS joins SMS-based Internet applications and services that offer DiGi customers an alternative yet convenient means to access their favorite online apps. This strategic partnership with Google also positions DiGi as the first mobile operator to offer the Gmail SMS service in Malaysia.

The partnership with Google empowers at DiGi to offer the SMS option to millions of Gmail users in Malaysia to significantly extend their chat community through real-time chat via SMS, regardless of any mobile device type. One of the most important aspects of Google's overall mission is to make information accessible and useful to people. SMS has long been a common means of mobile communications in Malaysia and many Malaysians still rely on their non-smartphones. Gmail SMS makes instant communication between Gmail and a mobile phone possible via SMS.

Analyze and Evaluate the Suitable Strategies

DiGi’s Analyze and Strategic Evaluation

Balanced Scorecard

The last part of this paper use Balanced Scorecard, which is an important strategy-evaluation tool to evaluate DiGi vision, mission and strategy from 4 perspectives which are financial performance, customer knowledge, internal business processes and learning and growth

DiGi Balanced Scorecard/Strategy Map

The figure below shows the Strategy Map (Kaplan and Norton, 2004) that will be use to illustrate DiGi Balanced Scorecard

Figure 7.4 Digi’s Staretgy Map