analysis of di gi telecommuniction

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Executive Summary This paper focuses on DiGi Telecommunication Sdn Bhd, one of the key players in the telecommunications industry alongside Celcom and Maxis. DiGi holds a large subscriber base and is constantly growing its market share. DiGi offers a large variety and package options to consumers. Sources of information used are credible and reliable journal articles, the company’s website and annual report, newspaper articles and relevant published books. A SWOT analysis is conducted to identify the internal and external influences on the organization. The strengths of DiGi are that its mobile plans are one of the cheapest in the market, product innovation is good and DiGi has attractive career development prospects for its employees. The weaknesses of DiGi are the lack of base stations causing poor network coverage, poor customer service and slow dissemination of information to publics. As for the opportunities of DiGi, globalization is a positive advantage for DiGi, living standards in Malaysia are increasing and the number of foreign workers and international students are growing in the country. Threats faced by DiGi are the tight governmental regulations, strong competitors and high bargaining power of suppliers. Based on the SWOT analysis, two strategies are proposed; Strategy 1: ‘Low Price Plan’ focus strategy and Strategy 2: ‘Best Quality Service’ differentiation strategy. Strategy 1 is a mobile plan catered for the growing niche market of foreign workers and students which offers cheap international call rates and more 1

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Executive Summary

This paper focuses on DiGi Telecommunication Sdn Bhd, one of the

key players in the telecommunications industry alongside Celcom

and Maxis. DiGi holds a large subscriber base and is constantly

growing its market share. DiGi offers a large variety and package

options to consumers. Sources of information used are credible

and reliable journal articles, the company’s website and annual

report, newspaper articles and relevant published books.

A SWOT analysis is conducted to identify the internal and

external influences on the organization. The strengths of DiGi

are that its mobile plans are one of the cheapest in the market,

product innovation is good and DiGi has attractive career

development prospects for its employees. The weaknesses of DiGi

are the lack of base stations causing poor network coverage, poor

customer service and slow dissemination of information to

publics. As for the opportunities of DiGi, globalization is a

positive advantage for DiGi, living standards in Malaysia are

increasing and the number of foreign workers and international

students are growing in the country. Threats faced by DiGi are

the tight governmental regulations, strong competitors and high

bargaining power of suppliers.

Based on the SWOT analysis, two strategies are proposed; Strategy

1: ‘Low Price Plan’ focus strategy and Strategy 2: ‘Best Quality

Service’ differentiation strategy. Strategy 1 is a mobile plan

catered for the growing niche market of foreign workers and

students which offers cheap international call rates and more1

mobile internet capacity. Strategy 2 is mainly to improve the

customer service of DiGi which is not currently at its best

state. After careful evaluation of both strategies, it is

proposed that the ‘Low Price Plan’ strategy is the best option

out for the business as it requires lower monetary risks, while

it takes a longer period of time to produce results for Strategy

2.

Two managerial functions proposed to aid the implementation of

the strategy is organising and leading. The mechanistic

organisational structure is used in this case involving high work

specialization, functional departmentalisation and a clear chain

of command. As for leading, transactional leadership is applied

in the early stages of the product implementation, while the

motivational styles used are the goal-setting theory and

Herzberg’s two-factor theory.

The integration of the ‘Low Price Plan’ strategy and managerial

functions of organizing and leading will ensure the success of

the implementation of the strategy which leads to a growth in

DiGi’s business.

2

1.0 Introduction

1.1 Purpose

The purpose of this report is to conduct a strategic

analysis for DiGi Telecommunication. Using the SWOT analysis,

two strategies are proposed and the preferred strategy is

implemented with supporting justifications to improve DiGi

Telecommunication’s position in the industry. Two management

functions, organizing and leading are also proposed to support

the implementation of the chosen strategy.

1.2 Company information

DiGi Telecommunication Sdn Bhd, a subsidiary of DiGi.com, is

one of Malaysia’s leading telecommunication providers, mobile

broadband and mobile internet company since May 1995 (DiGi

Telecommunications Sdn Bhd, 2014). DiGi is the first

telecommunication company in Malaysia to introduce the mobile

number selection service in 2008 and has a subscriber base of

10.5 million as of 2012 (MalaysianWireless, 2013). DiGi offers

products and services including prepaid, postpaid, data plans and

services, international roaming, calling cards and WAP services.

The company’s mission is to “Deliver Internet for All” and a

vision of “Changing the Game” by pushing boundaries, defining new

standards, and improving in their business (DiGi.com Berhad,

2012).

1.3 Assumptions

3

It is presumed that all information sources regarding DiGi

Telecommunication and other statistics are reliable and credible.

The report assumes that DiGi has not implemented the proposed

strategies and is looking for opportunities to grow. Besides,

DiGi is assumed to have sufficient resources to fund the

strategy.

1.4 Methodology

The information obtained to support the analysis and

proposed strategies in this report are from DiGi’s official

website and annual reports, credible internet sources, journals

articles and management textbooks.

1.5 Plan of report

The report first presents the SWOT analysis of DiGi,

followed by the proposal and evaluation of two strategies to

address the environmental situations. The most suitable plan is

then selected with credible justifications and a discussion

regarding the methods of implementation of the chosen strategy is

done. Lastly, the report is concluded and summarised with

emphasis on key points.

4

2.0 SWOT Analysis

SWOT analysis is an assessment technique to analyse

strengths and weaknesses comprising of positive and negative

internal influences; and opportunities and threats which are

positive and negative external influences of an organisation

(Robbins, Bergman, Stagg & Coulter, 2012). An accurate SWOT

analysis is important for effective organisational planning and

goal setting.

2.1 Identification of strengths

2.1.1 Great value plans

DiGi has one of the lowest price plans in the market. The

table below illustrates DiGi’s price plans for the iPhone 5S as

compared to its competitors. On top of cheaper rates, DiGi has a

superior loyalty program called ‘DiGi Rewards’ where they give

out rebates, free talk time, mobile data and SMS (DiGi.com

Berhad, 2012).

Source: Celcom Anxista Bhd, 2014; DiGi, 2014; Maxis Bhd, 2014

Table 1: Comparison of Maxis, Celcom and DiGi price plan foriPhone 5S

2.1.2 Innovation

5

DiGi has a good track record in product innovations. For

example, DiGi was the first Malaysian mobile operator to co-brand

Opera Mini featuring a compression technology that allows non-

smartphone phone users easy access to internet. In 2012, DiGi

established ‘Partnership with WhatsApp’ which offers subscribers

unlimited access to WhatsApp at an affordable rate (DiGi, 2012).

2.1.3 Attractive career development

DiGi provides attractive career development prospects for

employees. They have many initiatives and programs for all levels

across the organization. For example, in 2012, targeted coaching

and development programs were launched to address key skills and

leadership deficiencies of their employees (DiGi, 2012).

2.2 Identification of weaknesses

2.2.1 Poor network coverage

DiGi’s lack of base stations as compared to its competitors

causes poor network and broadband coverage which leads to

dissatisfaction among subscribers and give DiGi a bad reputation.

Based on MalaysianWireless (2013), both Celcom and Maxis have

about 80% 3G coverage with more than 7000 3G base station

compared to DiGi’s 2000-3000 3G sites causing poor indoor

coverage.

2.2.2 Unsatisfactory customer service

Based on several online forums, there evidence show that

DiGi has poor customer service. Customers complain about the long

waiting time in service centres and call centres, slow e-mail6

responses and unfriendliness of DiGi sales representatives

(Complaints Board, 2014). As stated by a DiGi subscriber in

Lowyat.net, cIvIc_noob (2011) mentions that he had to call DiGi

many times to settle a simple phone billing issue.

2.2.3 Slow dissemination of new products’ information to

customers

DiGi lacks marketing activities which delays the

dissemination of new products’ information to publics (DiGi,

2012). As a result, the lack of information has caused DiGi to

lose out on potential customers and market share.

2.3 Identification of opportunities

2.3.1 Globalization

The world is now borderless due to technological

advancements causing an increase in global movements and

interactions of people, goods and services (Najam, Runnalls &

Halle, 2007). Globalization has provided DiGi with an opportunity

expand their business reached in order to provide a platform to

meet these demands.

2.3.2 Higher standard of living

The rising standard of living in Malaysia is increasing the

demand for telecommunication devices. According to the 2012

Household Income Survey, the average monthly household salaries

have risen by 7.2% since 2009 (Borneo Post Online, 2013). It has

become common for people to own at least one mobile device

providing DiGi an opportunity to increase sales revenue.7

2.3.3 Influx of foreign workers and international students

According to national statistics, the influx of foreign

workers and international students is increasing. Since 2011,

there are 1.5 million foreign workers and 90,000 international

students and continuously rising (Chi, 2011; Zakariah, 2013).

Ministry of Higher Education aims to attract at least 200,000

international students to education institutions in Malaysia by

2020 (Chi, 2011). Foreign workers seek low international calling

rates while international students demand cheap mobile internet

service to stay connected to with their loved ones back home

providing DiGi an opportunity to enter this new market segment.

2.4 Identification of threats

2.4.1 Government regulations

According to Deputy Prime Minister Muhyiddin Yassin,

Malaysia's Education Ministry will continue to ban mobile phone

usage in schools (The Straits Times, 2012). The policy decreased

demand for mobile phones and less usage by students causing a

negative impact on DiGi’s sales revenue.

2.4.2 Industrial rivalry

Within the industry, Maxis, Celcom and DiGi continue to

compete on product and service differentiation through

improvement and introduction of new innovative features

(MalaysianWireless, 2011). The need to gain and maintain

competitive advantage over its competitors might place a heavy

burden on DiGi’s bottom-line.

8

2.4.3 Bargaining powers of suppliers

The telecommunications industry in Malaysia is dependent on

imports for its network components. Most equipment cannot be

sourced locally resulting in high bargaining powers of suppliers

(MalaysianWireless, 2011). This has resulted in an increase in

DiGi’s cost, hence reducing profit margin.

3.0 Evaluation of alternative strategies

3.1 Proposed alternative strategies

Based on the S.W.O.T analysis, the following were identified

and a strategy is developed to address each influence:

1. Opportunity: Influx of foreign workers and international

students in Malaysia.

2. Weakness: Unsatisfactory customer service.

3.1.1 Low Price Plan

The first strategy is to take advantage of the opportunity

of influx of foreign workers and international students in

Malaysia, Porter’s generic competitive strategy of focus is

proposed. The focus strategy emphasizes on cost advantage

targeting a growing niche segment which is the low priced mobile

plan catered for foreign workers and students (Robbins et al.,

2012).

The increase of foreign workers and international students

has created a demand for low International Direct Dial (IDD)

9

calls and mobile internet service. To serve the targeted segment

better, a mobile plan is designed to suit their needs, which

includes lower IDD rates and higher data usage for mobile

internet service while reducing other services like SMS and talk

time as it is not prioritized by them. Subscribers can choose to

tailor their mobile plans according to their preferences. For

example, a subscriber who does not use the mobile internet

service can transfer the credits into IDD minutes. This allows

subscribers greater flexibility to manage their mobile plans,

thus improving customer satisfaction.

According to a research done, the advantage of cost focus

strategy is having the highest performance on sales growth (Dess

& Davis, 1984). This strategy allows DiGi to increase revenue and

market share. In addition, the implementation of this strategy

will make DiGi the leader of the new emerging market segment.

The disadvantages are that DiGi sacrifices economies of

scale which would be gained by serving a wider market. The ever

changing consumer preference is also a risk as DiGi has to

undertake for serving a niche market (David, 2011). Lastly, with

the focus on non-local consumers, DiGi runs a higher risk of

default payment in monthly bills.

3.1.2 Quality Customer Service

The second strategy is to rectify DiGi’s weakness of

unsatisfactory customer service. Porter’s generic strategy of

10

differentiation is proposed which focuses on creating a product

or service with distinctive attributes that sets itself apart

from the competition (Robbins et al., 2012). The strategy is to

provide superior customer service to DiGi’s subscribers to

differentiate itself from competitors.

During S.W.O.T analysis, poor customer service was one of

the major weaknesses of DiGi. DiGi’s customers listed long

waiting time at service centres and slow response time for

enquires as their main dissatisfactions. In order to provide

quality customer service, front line staff will be sent for

customer service training programs. More service centres and

retail outlets will be established to provide more location

options and reduce waiting time. Feedback channels like online

chat and forums will also be developed allowing to interaction

with subscribers.

The advantage of this strategy is the improvement of brand

image. In the long run, DiGi may be able charge a premium for its

products or services. Another advantage is that DiGi is able to

increase customer loyalty. Having loyal customers stabilizes the

company's revenue and lessens the impacts of market downturns

(Lam, Shankar, Erramilli, & Murthy, 2004)

The major disadvantage of executing a differentiation

strategy is the high cost required to implement the necessary

measures to differentiate the organization from its competitors

(Hambrick & Fredrickson, 2001). The increase in retail

outlets/service centres and shorter response time to customers’11

enquires more manpower. Together with the increase in feedback

channels, the strategy requires significant capital outlay for

implementation. Another disadvantage is that it takes time to

change the mindset of consumers to create a strong brand image in

consumer’s minds. During the process, the company may not have

sufficient customer demand to offset its higher costs, which may

lead to a loss.

12

3.2 Selection of best strategy

After careful evaluation, it was decided that the focus

strategy, ‘Low Price Plan’ will be implemented as it requires

less monetary loss risks. The strategy allows DiGi to direct

resources to value chain activities in order to build a

competitive advantage. With innovation as one of DiGi’s strength,

DiGi has the ability to identify the needs or preferences of the

narrow segment to create a product to serve the targeted market

efficiently and effectively. If implemented successfully, DiGi

will see an increase in revenues in the short term while second

strategy requires a longer time horizon to have an impact on its

revenues which may incur great losses to DiGi. Moreover, first

strategy aligns with DiGi’s mission of delivering affordable

telecommunication packages for all (DiGi, 2012). Despite DiGi’s

reputation of poor customer service, its subscriber base has

increased steadily in recent years (The Star Online, 2013). As

such, customer service has not impeded DiGi’s sales growth. Thus,

the focus strategy is more appropriate as it allows DiGi to

increase its revenue and market share.

13

4.0 Implementation of selected strategy

4.1 Organising function

To ensure the success of the ‘Low Price Plan’ strategy,

organising - the arrangements and structures of work to

effectively achieve organizational goals; is needed to support

execution plans. According to Courtright, Fairhurst, and Rogers

(1989), the mechanistic design should be used in large

organizations. Thus, it is suitable for the new mobile plan of

DiGi. It is effective as it is a rigid and controlled structure

with standardised tasks and minimal room for ambiguity.

Mechanistic organisations have a high degree of work

specialization, departmentalization and formalization with narrow

span of control, centralized decision making and a clear chain of

command (Robbins et al., 2012). For the ‘Low Price Plan’

strategy, the key characteristics taken into consideration are

work specialisation, departmentalisation and chain of command.

4.1.1 High work specialisation

In accordance to the mechanistic design adopted, high work

specialization is essential as work is divided into separate

jobs, delegated based on skills and executed in sequence (Robbins

et al., 2012). According to Wood and Wood (2002), Fayol states

that besides fully utilising the abilities of each personnel, the

level of productivity increases.

Specialisations needed in this strategy would be market

research. This skill is important for the organisation to further

14

understand the needs of the up and coming niche market of

international students and workforces using proper analysis. The

next important component is product development. This requires

personnel who are well informed of the technical and

technological aspects of the phone plans to be able to develop

new packages. Then, the finance and marketing specialisation is

important for the resource allocation and successful penetration

of the package into the market using the appropriate techniques.

Trade marketing will then use their expertise to work with

business partners such as authorised dealers and service centres.

The sales and customer service personnel who are competent in

communication will focus on the sales of the plan to consumers

and post-purchase services.

In each step of developing the mobile plan specialisation is

important as not every individual opposes good skills in all of

these areas. However, proper time management is crucial as over

specialization can lead to inefficiencies (Nandakumar, Ghobadian

& O’Regan, 2010).

4.1.2 High departmentalisation

Departmentalisation is how jobs are grouped based on

similarities (Robbins et al., 2012). DiGi Telecommunication’s

structure comprises of functional departments such as marketing,

finance, human resource and more (DiGi, 2012).

For easier implementation, functional departmentalisation is

used in this plan, whereby departments are formed based on

15

specific job functions as it aligns with the functional

departments of the organisation.

Besides functional departmentalisation being similar to the

departments of DiGi, it is closely linked to the work

specialisations needed for this strategy. For instance, market

research is done by the market research department, product

development is by the product planning and development

department, financial analysis is conducted by the finance

department, marketing personnel and trade marketing is also under

the marketing and trade marketing department, while sales and

customer service personnel are in the one department. It can be

seen that people with common skills and knowledge are grouped

together under one department making the implementation of the

strategy more efficient and coordinated with greater depths of

specialisation as proven by Courtright et al. (1989) in their

research.

Figure 1: Departments of DiGi in implementing the focus strategy

4.1.3 Chain of command

16

To establish effective departments for the strategy chosen,

a chain of command which is the structure of authority from top

to lower levels in the organisation needs to be clearly defined

(Robbins et al., 2012). According to Wood and Wood (2002), Fayol

states that unity of command- the principle where each person

reports to one manager, is essential to avoid conflicts.

For the focus strategy, the ideal chain of command is where

executives of each departments report to the department manager

while department managers reports to one general manager as

illustrated below. The general manager and department heads will

have weekly discussions to align their strategies to achieve the

goal of being the leading Telco provider for the growing foreign

market, and each department will have their separate meetings to

coordinate their tasks. As stated by Parker and Ritson (2005), a

clear chain of command ensures the smooth flow of authority and

integration among departments.

17

Figure 2: Ideal chain of command for the focus strategy

On a side note, centralisation is inevitably implemented

with this chain of command where decisions are made by higher

levels of management as the general manager is incharge overall.

With this, high formalisation is also brought into the system as

there are many rules and guidelines to follow (Nandakumar et al.,

2010). Subordinates will have to give detailed plans and reports

to be approved by higher management and comply with all the

standard operating procedures of the organisation.

4.2 Leading function

18

Leading plays is needed to implement the strategy as it

involves guiding and working with people to achieve

organizational goals (Robbins et al., 2012). Leading can be

classified into leadership and motivation. Leadership is the

ability to influence, motivate and encourage innovative behaviour

among employees which is significant for implementing change

(Pieterse, Knippenberg, Schipper & Stam, 2010; West, Hirst,

Richter & Shipton, 2004). Motivation refers to a person’s efforts

and drive towards achieving goals which is important for the

success of the organisation (Schaffer, 2008).

4.2.1 Transactional leadership

Transactional leadership focuses on task-related

exchange of actions and rewards between followers and leaders,

while transformational leadership is more people-oriented with

the nature of motivating and inspiring (Pieterse et al., 2010;

Tyssen, Wald & Spieth, 2013). For DiGi, transactional leadership

is more practical to facilitate the implementation of the focus

strategy because the clear and straightforward guidelines create

less room for misinterpretation of the new product. This is a

less complicated way of managing workers; hence lower cost is

required to implement this style of leadership as managers need

not be trained to motivate and encourage their staff. Faster

results will also be obtained with the ‘reward’ and ‘punishment’

system (Groves & Larocca, 2011).

For the reward system, commissions are given to the

salesperson for every line registered under them to encourage19

aggressiveness in sales. To instill teamwork, yearly bonus and

incentive trips are given when departmental targets are reached.

As for the ‘punishment’ system, when annual targets are not met,

the department will need to submit an analysis report regarding

their inability to achieve the target and develop strategies for

improvements.

For immediate effect on the implementation of the new

mobile plan, transactional leadership is vital. However, when the

product and market is more established within the next few years,

transformational leadership will be introduced as it is more

effective in the long run and both leadership styles work well

together (Wofford & Goodwin, 1994).

4.2.2 Goal-setting theory

Goal-setting theory is a process theory of motivation

which proposes that more specific and challenging goals lead to

higher levels of performance (Robbins et al., 2012). Goals are

the future valued outcomes which setting of goal may imply

discontent with one’s present condition and the desire to attain

the outcomes (Locke & Latham, 2006). Although challenging goals

motivate employees to work harder, it has to fit with the

employees’ capabilities and competencies (Lunenburg, 2011). The

“SMART” criteria, which are specific, measurable, attainable,

20

realistic and time-sensitive is to be used as a guideline to

develop good goals (Shahin & Mahbod, 2007).

According to Lunenburg (2011), when goals and rewards

are combined employees are more motivated, hence goals have to be

set for the DiGi employees. For example, employees are given a

target of securing 150,000 subscribers within a year. When the

goal is achieved, rewards like appreciation dinners, and bonuses

are given accordingly. Besides, yearly appraisal is done, so that

employees know their standard of performance and improvements

they have to make in the coming year. With effective goal

setting, it is certain that the ‘Low Price Plan’ strategy will be

a success.

4.2.3 Herzberg’s two-factor theory

Two-factor theory will also aid the achievement the

chosen strategy. This motivation-hygiene theory is divided into

two aspects, the motivators and hygiene factors (Robbins et al.,

2012). Hygiene factors do not lead to job satisfaction but

prevents dissatisfaction (Ewen, Smith, Hulin & Locke, 1966;

Herzberg, 1965). For example, salary is the basic need for every

employee. When the employees are paid on time, they are not

happier, but when the payment is delayed, they will be

dissatisfied. Therefore, hygiene factors such as company policies,

working conditions, salary and interpersonal relationships must be

maintained.

21

Motivators drive employees to achieve higher

performance. Motivators include task achievements, recognitions

and career advancements. DiGi must give ‘Top Sales’ awards to

deserving employees and ‘Outlet of the Month’ recognition to

motivate employees to promote the mobile plan. As mentioned by

Ewen et al. (1966), motivators are the intrinsic factors that can

lead to overall job satisfaction. Herzberg (1965) also asserts

that motivators “serve to provide for the human need to exercise

one’s capabilities or the surplus potentiality of the brain as an

instrumentality for psychological growth” (p. 395). When

employees are satisfied, it will increase productivity and work

quality. Hence, the prevention of job dissatisfaction by hygiene

factors and the enhancement of job satisfaction by motivators

allow DiGi to successfully implement the strategy.

5.0 Conclusion

DiGi Telecommunication has several internal and external

influences that effect the organization. Hence, strategies need

to be imposed to address these influences to improve the

organisation’s overall position. The appropriate strategy to

implement is the ‘Low Price Plan’ focus strategy which targets

the international students and foreign workers, a growing niche

market in Malaysia. For successful implementation, the organising

and leading aspects have to be set to ensure a smooth flow of

execution. This will bring more profits and growth to the

business of DiGi Telecommunications.22

23

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List of Tables

Table 1: Comparison of Maxis, Celcom and DiGi price plan for

iPhone 5S......................................................3

List of Figures

Figure 1: Departments of DiGi in implementing the focus strategy

..............................................................10

Figure 2: Ideal chain of command for the focus strategy.......11

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