Strategic Management Report on Ufone

Course instructor: Ekhlaque Ahmed

Submitted by: Mehwish Aqeel (8403)

BUSINESS SCOPETelecom business is purely service based business where customer have lots of options available, if there is any mishaps occurs customer switch the product without waiting because switching cost is very cheap in this sector. Therefore for marketer if they want to achieve the edge over competitor they must be innovative, best quality service provider and cost efficient. They must find that area which are still hidden or cannot be recognized yet, because when we talk about service industry all you need to be efficient day by day with the passage of time.

WANT TO BE IN: The undertaking must be the leader of the sector. So accordingly work hard to achieve that vision.

THE BUSINESS WE AREUfone is the telecom service provider. Alike its competitor it also deliver all the value which are core of this service. Only the distinction is on the value chain of the company which differ it either positively or negatively from its competitors. This distinction will further elaborate in next part.

RegionsThe corporation provides telephonic and internet services nation-wide. The percentage of exposure of the services is high in rural areas but there is very less coverage in urban areas. So further development is required in those areas where reach of telecom is difficult. This will allow this company to cover large chunk of the market. Apparently the initial cost of investment would be higher but the future revenue cover all the incurred cost, if plan strategically.

Market Structure

Channel GSM cellular service provider

End user/

Applications

Call and internet

(Purely intangible)

Subsidiary of PTCL

Function – what needThe primary function is to provide the high technology, better quality service which is the core benefits like signals, voice quality, fast feedback setup, customer care and so forth.

Then the actual benefits and augmented benefits like competitive pricing, better quality than that of rivals, fast in technological change and adaptation. Since the market is highly fragmented and all the competitors are same in every level therefore need to be customized and find not only just the gap but also the mismatch. Because there are functions in which Ufone are scarce that’s why not at the top in market among its competitors.

Added Value and Technology No market can be on decline or at saturation level until and unless marketer thinks so. In any phase of any product’ or service’ PLC company could break through. Evidence is provided in past studies (like in case Haier, Cannon etc). If these company boom in their decline stage then Ufone can also be the market leader in telecom sector. All Ufone need to be competent, added values and adapt technological change.

Customers & users - whose needs“What important for you, does not mean important for your customers”. Those companies who understand this philosophy will be able to breakthrough in the market. Company needs to answer the critical question; what do our customers want? What are the most important aspects? Do we really know that? If not then it is an assignments for further knowledge improvement. How do we Score? Who are our competitors, current as well as potential, their key strengths and weaknesses?

It is dissimilar in the case of Ufone, as compare to the market leader of telecom- Mobilink, Ufone spends lot in advertising by hiring famous celeb of humor, spend lot in developing creative content in advertising but as a result its backward in leading in market. Why is it so? It is because, customer don’t need flashy or eye catching advertising if they are not satisfied with the service. Therefore, Ufone need to spend more on R&D to understand what customers really want rather than wasting high budget on adverting. It important to advertise your offerings but it does not hide the lacking of the product or services because in the end customer make choices on the basis of product and associated services not on the basis of good and catchy advertising.

Create customersUfone could create customers by teamwork and loyalty towards company with their core values and brand values i.e. providing superior services of value chain.

Core Values:

Professional Integrity Customer Satisfaction

Brand values:

Evolving Innovative Trustworthy Quality Conscious

COMPANY ANALYSIS

Operational analysisUfone’ operational performance has been very encouraging. Despite the stiff competition in Pakistan telecom market which has led to reduction of prices to bare minimum level, due to its aggressive policies and exercising strict control over expenses the company managed to improve its revenue and after-tax profit by 87% and 54% respectively, as compared to last year.1

Future plans keeping in view the growth potential of the cellular industry there is no option but to be aggressive in order to remain a potent force in the cellular industry. In 2007-08 UFONE made an investment of USD 232 Million in order to increase its market share of subscribers. UFONE has also finalized a huge network expansion contract amounting to about USD 550 million in order to extend cellular network to new cities, towns and highways and enhance its current installed capacities in existing cities.2 A strong focus of Ufone is on maintaining high quality of service, which is always a benchmark of Ufone, increasing usage and exploring new revenue streams on value added services, market visibility through various market initiatives to fulfill subscribers’ satisfaction and demand and above all to increase the value of investment for the shareholders.3

Organizational and managerial responsibility (Authority areas)The structure of Ufone comprises of Board of directors who are being reported by CEO, Chief Executive Officer. CEO is a great supervision to the 8 Major operations of the company. These operations are divided into departments that are:

1. Finance Department CNC (Credit exposure for Ufone postpaid connection) Budgeting and Planning Accounts Revenue Assurance

2. Marketing Department Brands Marketing Strategy and Analysis VAS – Value Added Services

3. Information Technology Department Billing IT Development

4. Customer Operations Department Customer Care Call Centre Business Centre Govt. Relations

5. Engineering Department BSS – Business Support System NSS – Network Switching Subsystem IN – Intelligence Network

6. Sales Department Corporate Sales Franchises & Retail Outlets Sales operations

7. Human Resource Department Recruitment and Compensation Benefits Training HR Operations Strategic Planning Department

Competitor’s business scope -POP and POD The competitors of Ufone’ are Mobilink, Telenor, and Warid.

Point of parity (POP)

All competitors provide the same packages at almost similar rates but strategically all are different.

Point of differentiation (POD)

The point of differentiation lies in the technology and in value chain of each competitor therefore they are having different position and different market shares.

Relation with other businessesUfone is having advantage of PTCL subsidiary since PTCL got the monopoly and due to its sole entity in the market in land line service provider Ufone can cover those rural areas which are not yet reached and covered by competitors.

Business exposureUfone, subsidiary of PTCL therefore considered as is the leading company in the telecom sector also it’s expands its boundaries in internet service providers and in 3G.

Business in which we are not in:

Ufone is not catering the corporate customer so it is the business in which they are no in also Ufone don’t have 4G.

Market size - OverallThe value of market segment of Ufone is given below:

Market segment

2010 2011 2012 2013 Growth P.A

355.6 367.3 409.2 445.7 8.919%

Market share – DivisionSegment: All over Pakistan esp. in urban areas.

Value (BLN RS)

Target group division: Income wise

Lower – Middle1 to Upper Lower2

Justification: 1. In Pakistan from beggar to business man all are having cell phones.

2. From Upper Lower onwards elite class prefer of having Mobilink.

Target group division: Age wise (division 100% of Ufone’ offer)

13 – 19 Teenagers – available (60%)

20 – 27 – available (20%)

27 – 38 - available (30%)

38 – 45 - nil

46+ (onwards) - nil

Justification: One of the factors of having low position in market is because the leader i.e. Mobilink1

is targeting the business and elite class and also having past set up as a first GSM. On the other hand, its comparison with Telenor, Ufone rates are slightly higher than Telenor2. Since the target audience of Ufone and Telenor are usually teenager’ oriented that’s why Telenor got low cost advantage. Also, Zong acquires 4G but Ufone have 3G.

COMPETITION / SEGMENT MATRIX

Competition Segment Overall

Mobilink 37 Million users 29.8%

Telenor 28.47 Million users 25.2%

Warid 1 Million users 25.2%

Zong 25 Million 15.4%

Historical Growth Rs409 billion 52.8%

Projected Growth Rs445.7 billion 71.7%

Company Profitability 33.5% 75%

Findings:

Ufone’ share 19.3% Ufone earns Rs.25 billion PKR Serves 24 million customer Operates in all countries, around the globe1

Market is bigger than perceived Company has more competitors Ufone got third position (2013) and 26% market share Before the arrival of Telenor Ufone is on second position but in 2009 Ufone lost its market

share and Telenor got second position. Since then Telenor is on second position and Ufone is at third position.

Telenor is trying to dominate on different segments, therefore increase its market share It can highlight that major chunk can be lost if not keep focus on value chain Lost in 4G

Reasons:

The main problem in the current era faced by the telecom industry in Pakistan is increased taxes imposed by government. The company’s existing in telecom sector are facing major decline due to the fact. In the budget, government had increased the rate of GST on telecom sector significantly and analysts are of the view that it may have an advance impact on telecom usage and resultantly, the GST collection may drop considerably from the sector.

Most people are dissatisfied with the current level of prices that Ufone is offering. In fact, prices are the major reason why people don’t prefer Ufone (in comparison with Telenor). Other than price customers also don’t prefer Ufone because of the limitation of packages that it offers.

Even though a Mobilink is present in the industry before the entry of Ufone, the penetration of Ufone has resulted in a greater number of new mobile customers. We can say that Ufone has attracted both the existing customers, and to a larger extent, has captured the market segment that was previously not using mobiles but now Telenor is snatching that share.

Despite bidding for 15MHz in the 3G spectrum, Ufone could only win 5MHz due to lack in technical aspects.

Driving forces for Ufone Technology ; 4G FAST CUSTOMER SERVICES, QUALITY and COMPETITIVE rates are the main driving

force for Ufone. Since competition is very high therefore Ufone need to be focused towards business class as

well, but prior to that regain its lost share from Telenor then go for Mobilink. Governmental regulations (national/international) & economic blocks have a major impact

like privatization in PTCL so Ufone can make most of it. Key player in the industry is service providers therefore more focused towards customer

satisfaction. High competitions therefore try to take steps for cost cutting by eliminating unnecessary

activities. Increasing coverage throughout Pakistan. Making availability of connections easy. Expanding dealership network in rural areas. Making Packages more attractive rather advertising. Switching cost is very low. Therefore find a trade off and fits in strategy. Improve whole value chain and tailor it as customer want Must look business as customer wants.

Taking advantage

Trend Potential impact Ufone Mobilink Telenor ZongWorld-wide (instant) communication

Influence on Sales and Margin

Yes Yes Yes Yes

Application segmentation

Customization No Yes Yes Yes

Price decrease Margins/sales under pressure

Comparatively low

No Yes Yes

SWOT AnalysisSWOT is the analysis in which we compare internal strength and weaknesses to external opportunities and threats. For every company its SWOT must be unique which mean not generalized (as of competitors) in case of Ufone the SWOT is:

S Subsidiary of Ufone; Govt. support, 3GW Inadequate understanding of customers; control on advertising budget, 4GO Upaisa’ return, Value added services, Rural areas’ coverage, Unidentified services, can target

corporate sectorT Declining market share; Zong

After SWOT analysis we need to compare every factor with each other for the further understanding of the outcome. This comparison leads the clear picture to the manager of costs and benefits.

Given below matrix is summarized the SWOT findings:

(S-O) (W-O) Launch new products glancing the high

demand Develop market share on the basis of trade

off and strategic fit

Research required for the understanding of customer actual need

Hire more competent technical staff to beat the innovation

Acquire 4G license(S-T) (W-T)

Acquire new technical assistance via government support

Subsidiary operating structure allows for greater diversification and increased efficiencies

Arrival of new competitors Its near to be beaten by Zong as well

PEST AnalysisP Due to government intervention, telecom sector is paying high amount of tax. That is why

since last year price of prepaid or post paid is increased.E The FDI is nil since past years, the economic down turn affects this sector a lot. But due to

high demands of “sim” this sector is still showing profitability in their income statement.S In our society every age bracket or almost every age bracket having cell phone i.e. sim is

essential for them.T All the competing telecom company is providing same technological features so this area

needs some unique technological advancement.

Porter Five Forces Model1. Threat of New Entrants: Low due to 3G and 4G in technology2. Threat of Substitutes: High due to alternatives3. Bargaining Power of Buyers: High due to low switching cost4. Bargaining Power of Suppliers: Moderate5. Current Rivalry: Strong