U Mobile Cannot Predict External Environmental Changes

Published Date: 02 Nov 2017

Introduction

Based on U Mobile SdnBhd, this report has discussed about the application of the strategic management process, which consists of strategic analysis, strategy formulation and strategy implementation. The report is produced for Mr Mathew Teale, the Module Leader for Introduction to Strategic Management. The aim of this report is to help the author to better understand the strategic management process by clearly explaining, analyzing, and evaluating strategic management process, where it defines the process of analyzing the situation faced by the organization, and on the basis of this analysis formulating a strategy and finally implementing that strategy (Henry, 2008). Besides, it also includes an understanding of the strategic position of an organization, making strategic choices and strategies for the present and the future (Johnson et al., 2008). The objective of the organization to use strategic management process is to achieve competitive advantage over its competitors in the industry. U Mobile SdnBhd is a company that provides 3G mobile communication services to customers, which includes prepaid and postpaid plans, and broadband internet connection services; domestic coverage and international roaming and voice and SMS packages. It had started its operations since 1998 in Kuala Lumpur, which is a subsidiary of Berjaya Corporation Berhad operated by Tan Sri Vincent Tan. At that time, it was known as MiTV Networks Sdn Bhd. On 18 September 2007, it changed to its present name, known as U Mobile Sdn Bhd. Its major shareholders are U TelemediaSdnBhd and Straits Mobile Investment Pte Ltd (www.u.com.my). As comparison with Digi and Maxis in telecommunication industry, U Mobile is a new entrant and has big challenge in this market. Firstly, the author has discussed about general environment, competitive environment and internal environment of U Mobile SdnBhd, which are in strategic analysis. Besides, strategy formulation which is business level strategy, corporate level strategy and international strategy and globalization of U Mobile SdnBhdalso were also explained by the author. Lastly, the author has discussed about strategy implementation which is organizational systems and strategic change, strategic leadership and corporate governance. The research for this report is based on article, book, website and news.

Strategic analysis helps U Mobile in scanning and monitoring their external environments and internal environment to evaluate how the organization’s position and exploit the opportunities in business environment (Henry, 2008). Without using strategic analysis, an organization will experience difficulties in formulating and implementing the right strategies in order to achieve its goals.

General Environment

According to Henry (2008), general environment also can refer to micro-environment. It is because changes that occur in general environment will affect the organizations and their industries by pointing trends that can impact on the organization’s competitive environment. Thus, it is important for U Mobile to scan its general environment for signals.

Scenario Planning

U Mobile cannot predict external environmental changes if they do not use the scenario planning, which is a disciplined method for imaging future that is important for the organization in strategic management process (Schoemaker, 1995). It is an internally consistent view of what the future might changes (Porter, 1985). In terms of U Mobile’s service network disruption, U Mobile did not practice scenario planning and received a lot of complaint from the customers. It met drastic losses and high dissatisfaction of customers (biz.thestar.com.my). In order to avoid the future system network disruption, scenario planning helps U Mobile to identify, evaluate and enhance back up plans in business environment. Therefore, U Mobile has to ensure and manage the system network properly by hiring professional technical to manage it. Besides, scenario planning helps U Mobile in government changes, project risks, vendor risks, and investment risks. Due to government changes in changing policies, undertaking scenario planning by maintains the good relationship with government will help U Mobile to work out win-win strategies.

SWOT analysis

One of the strength of U Mobile is they have been part with Berjaya Group , which has a wider group of business in Malaysia, such as resorts, gambling, food and beverage and property, and is under operation by Tan Sri Vincent Tan. In 2012 years, Berjaya Group had gained higher revenue which was RM7.04 billion. The other strength of U Mobile provides cheap monthly broadband fees to their customers. In order to support strength of U Mobile, it is important to use value chain analysis by its marketing and sales department. Marketing and sales department of U Mobile also play important role which can provide and bring powerful innovation and creativity to promote their services, in order to attract and satisfies the customers by giving more reliable, speed and coverage area voice services and broadband to customers. Besides, resource based view analysis also is important to U Mobile to analyze and identify strategic advantages of organization and also support its strength. For U mobile, employees are greater asset to organization in terms of bringing ideas, innovation and creativity. Hence, U Mobile gives training and development to all employees to increase motivation and inspiration especially the management in order to increase the productivity and effectively. Without strength, it is hard for U Mobile to compete with its competitors.

On the other hand, U Mobile is not completely known in details if compares to other famous competitors such as Digi and Maxis. Moreover, there only has certain network in Malaysia. In term of its instability of internet services which provided by U Mobile, it makes a bad reputation for U Mobile by complaint of a lot of customers. Due to Multimedia Communications and Multimedia Commission of Malaysia, U Mobile is under surveying through the problem of weakness of network services. It is important to U Mobile to fix this problem to recover its reputation because U Mobile may not be able to renew their broadband provider licensing after expiration.

Nevertheless, there have a lot of opportunities for U Mobile growth in telecommunication service industry. U Mobile has the opportunity in expanding its branches to Kedah, Terengganu, Sabah and Sarawak. Besides, Government Malaysia had initiated a HSBB project, which was broadband service with 10Mbps (Megabits per seconds) to 100Mbps speeds and up to 1 Gbps (Gigabits per seconds) to customers. It was an infrastructure that government investing MYR2.4 billion (approximately$700 million) and TM investing MYR8.9 billion (approximately $2.5 billion). However, it is an opportunities for U Mobile to upgrade its network services in order to satisfy the customers.

It is big competitive in telecommunications industry with each other when they are provided free text messaging and calls to customers. It is depends on good network services and good customer services which can attract customers the most. Furthermore, population of other competitors also is a threat for U Mobile. Population of Digi, Celcom and Maxis are more than U Mobile due to U Mobile is a new entrant in this industry. In 2011 year, Digi has reached 95% of 2G network and 54% 3G network population coverage.

PEST analysis

PEST analysis consists political, economic, social and technological which provides a comprehensive list of influences on the possible success or failure of particular strategies (Johnson et al., 2008). It helps U Mobile to analyze the external environment that will ultimately find their way into the competitive environment. Without a clear sense of PEST analysis, U Mobile will hard to make the decisions that allow for effective action.

The Malaysian Communications and Multimedia Commission (MCMC) had set the rules and regulations of Telco users must register their SIMCARDS since 2008 year. It was because there had a lot of crime happening through phone calls and text messaging by unknown people without registers their information. If U Mobile dint follows the rules, the government will take action which Malaysian Communications and Multimedia Commission (MCMC) fines about RM920, 000 to U Mobile, Maxis, Celcom, TuneTalk because of the false prepaid SIMCARD registration. Besides, license and spectrum of U Mobile also are under control of Malaysian Communications and Multimedia Commission (MCMC).

The economic environment will affect U Mobile’s business in strategy plan which economy growth downturn, the unemployment rate increased, interest rates increased, higher inflation and Gross Domestic Product (GDP) decreased. GDP always affects by domestic demand. In 2012 year, Malaysia’s GDP has grown 5.0% from the previous year. Due to high inflation, sales and profit of an organization will grow slower.

Social factors include changes within the environment are often referred to as social-cultural. Customer’s taste changes will always affect U Mobile to change and get new technology and best customer services to satisfy the customers. For example: smart phone and internet technology are becoming a latest social trend which attracts current customers the most. In terms of technology of smart phone, normal SIMCARD has to convert to Micro-Sim size. Malaysia nowadays has fairly young generation. If Malaysia’s population is growing, U Mobile also will grow their market in Malaysia. Besides, internet information helps in health care, education, and social mobility. Moreover, higher standard of living will influence customer’s demands on lifestyle. Standard living in Malaysia has increased in recent years.

Technological factors that have always changed in general environment will give U Mobile impact in telecommunication industry. New technologies will lead U Mobile to innovate and create new services and products to customers. Besides, it leads the U Mobile to forecast organization growth and gain market share in future. In order to satisfy the customers, it is important to U Mobile to provide technical team for products installation, maintenance and repair to attract and satisfy the customers.

 

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Competitive Environment

An organization’s competitive environment always have influenced by the changes which occur in the general environment (Henry, 2008). Thus, it is important to U Mobile to identify its general environment and competitive environment. Competitive environment consists Porter five forces.

Porter’s Five Forces

Porter five forces help U Mobile to identify the assessing the competitive environment in terms of five competitive forces which are the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products and services and the intensity of rivalry among firms in an industry (Porter, 1980).

U Mobile is a new entrant for Digi, Maxis and Celcom. Instead, there always has new entrants enter into the market and will influence U Mobile’s profit and position. It is difficult to exploit into a new market if there have many competitors in the market. Tune Talk is a newcomer to telecommunication industry and has signed up over 20,000 mobile subscribers in less than a month. Consequently, this entry barrier will affect business of U Mobile which also is a new entrant in the market. U Mobile has to provide awareness and good services to generate customer loyalty, while maintaining a good relationship with government.

Besides, increased of suppliers bargaining power will impact on profitability and pricing of U Mobile. Apart of mobile industries competitive, this is a price war between them to find the appropriate suppliers and maintains a good relationship with them. Therefore, U Mobile has to focus on mobile tower companies, SIM cards suppliers and mobile phone handsets suppliers, and always negotiates price with them. Instead, if there has lot competitors of suppliers in this industry, it will decrease the power of suppliers and will increase the power of buyers. Buyers in this section are referring to organization. Moreover, U Mobile has to concentrate in buying volumes. If U Mobile purchases SIM cards from its suppliers with huge volumes, the importance of U Mobile’s business to the supplier will be increased.

Telecommunication Malaysia always offers services with similar function and features to customers or even better between the competitors. Substitute services can reduce demands and satisfaction of customers by giving more choices to them (Johnson et al., 2008). Although the substitutes services are expensive, it still effective as long as it has good performance to customers.

Lastly, rivalry among telecommunication industry in Malaysia is high which Digi, Maxis, Celcom, Tune Talk, and U Mobile are compete against each other with providing good services to customers. It can be increased when they have identified new opportunity to them to improve their market position. U Mobile has to consider on provide new package or new offer if the services are lost attraction of customers. Meanwhile, U Mobile has to modify the services to attract the customers.

Strategy Formulation

After U Mobile had analyzed the general environment and competitive environment, and understand position and identify opportunities in the market, now is the way to U Mobile to formulate the strategies. Strategy Formulation is a careful analysis of the organization’s internal environment and the needs of the external environment will allow the organization to assess where it can best achieve a strategic fit between the two (Henry 2008). It should be undertaken with a view to allow U Mobile to achieve competitive advantage. Strategy Formulation consist business level strategy, corporate strategy and international strategy and globalization.

Business Level Strategy

According to the Henry 2008, business level strategy can define as separating out and formulating a competitive strategy at the level of the individual business unit. U Mobile is using this strategy to compete in its industry and gain position in the market.

Generic Competitive Strategies

Generic competitive strategies help U Mobile to compete and reach a strong position in this industry with effectively five competitive forces in order to gain a large profit and return for the organization (Porter, 1980). Generic competitive strategies consist three strategies which are overall cost leadership strategies, differentiation strategies and focus strategies.

When an organization has achieve the lowest costs in its industry and target its products and services in the market, it will come across the overall cost leadership strategies (Henry, 2008). U Mobile had using this strategy which it always provides cheap monthly broadband fees and cheap calls rates and text messaging to customers. It helps U Mobile to compete against its competitors because it can charge lower prices. Nevertheless, it still earns the profit. Low cost producer always can win in this price war due to customer always choose the cheapest prices.

Corporate level strategy

Corporate strategy is more concentrates on the nature of business in organization and the way to allocate resources across the business (Henry, 2008). It is important for U Mobile to achieve success in the business by identifying investment of time, energy and other resources. U Mobile had used the corporate level strategy to create value and managed their business in the long run to achieve their goals and purpose with growth strategies and corporate parenting.

Growth Strategies

In order to grow U Mobile’s position and profit in this market, growth strategies help U Mobile analyzes level of risk which they can prepare to face it, and pursue their resources and capabilities and their management expertise. There are four strategies that can help U Mobile which are market penetration, market development, product development and diversification.

Hence, market penetration helps U Mobile seeks to increase the market share to its existing markets by utilizing its existing services. In order to achieve market penetration, U Mobile has to attract new customers and get existing customers to increase their usage service in this industry by improving their products and service quality and provided more promotion to customers. Due to the complaint of customers about the network service disruption, U Mobile has to improve the network services to increase their usage services and provide more promotion to attract new customers.

Due to new branches of Penang and Malacca which had opened on 16 December 2011 and 21 May 2012, U Mobile had pursued the market development strategy which means U Mobile enters new market with the existing promotion, packages and services. It helps U Mobile to target new customers with convenient and easy access products and services. Nevertheless, U Mobile has to understand and identify the new market even have extensive knowledge of its existing products and services, it still has risk if U Mobile do not completely experiences in geographical areas.

Besides, U Mobile also has pursued product development which is the new Nano SIM card in this market. Product development is the strategy which developing new products in its existing markets. The new Nano SIM card is the new product of U Mobile which can use to install in my phone 5, the Apple mobile phones that are famous in existing markets. The ability to innovate is crucial in developing Nano SIM card for rapidly changing customers' market. It is important for U Mobile to pursue product development strategy because an organization has to always face the industry life cycles. U Mobile still growing in its industry life cycle which is a growth stage in industry life cycle.

Instead, there has only offered little opportunity for growth if U Mobile plans to stay on existing markets and services. Thus, diversification occurs when U Mobile seeks to expand its scope of activities by moving into new products and new markets. Wireless is the new opportunity and services for U Mobile to attract new customers in the new market. Due to Streamyx of Telekom, U Mobile can create own wireless services to attract new customers in order to enter new market which customers prefer online at home with quality of internet services.

Corporate Parenting

Corporate parenting is referring to the organization’s headquarters or corporate parent and it plays an important role for organization to move forward in the beginning and support financial to the organization. For U Mobile, Berjaya Group is its corporate parent which has a wider group of business in Malaysia. At the beginning, it is important for Berjaya Group to lead the U Mobile to help it in order to enter into the market. Berjaya Group had helped U Mobile by capitalizing in financial, nationwide distribution channels, local business network and joint ventures with others companies (Annual Report Berjaya Group, 2012). Hence, U Mobile has the opportunity to increase its competitiveness in the market. Besides, Berjaya Group provides training to U Mobile especially management team to lead them to manage the business.

International Strategy

U Mobile had using international strategy to expand its market in order to gain new customers and spread its business risk across a wider market base (Gamble J.E. et al, 2005). However, it is difficult to let U Mobile to control its quality of products and services due to geographical distance and different cultures. Therefore, entry mode strategies occurred.

Entry Mode Stategies

Entry Mode Strategies consist exporting, licensing, franchising, wholly owned subsidiaries, and joint ventures and strategic alliances. Due to U Mobile’s international strategy, it had using joint ventures and strategic alliances to enter international markets in order to develop new technologies. In December 2007, KT Freetel of South Korea and NTT DOCOMO of Japan had merged and held a total of 33% stake in U Mobile. Besides, U Mobile also had merged with STTC Limited, a wholly owned subsidiary of Singapore Technologies Telemedia, which is a leading communication company with operation globally. With this strategy, U Mobile can have advantages with fully utilizing 3G experience in the market.

Strategy Implementation

If it is incorrectly analyzed the strategy formulation, it is hard to come across to the strategy implementation. In order to implement the strategies effectively, it is requires U Mobile to be sufficiently flexible in its organization design (Henry, 2008). Strategy implementation consists leadership, organizational structures and corporate governance.

Organizational Structures

Organizational structures concerned with the division of labor into specialized tasks and coordination between tasks (Chandler 1962). It is the formulation of a new strategy which brings forth the need for a new structure. U Mobile had used divisional structure in the organization. Divisional structure comprises individual business units that include their own special functional and have direct responsibility for their own performances (Henry 2008). U Mobile had practices decentralization which the director of U Mobile makes the decision always and helps him to set a business level strategy based on his understanding the demands of services and market in the telecommunication industry. The branches of U Mobile in Malaysia have responsibility for its own profits while can determine its performances to corporate profitability. Hence, it helps the U Mobile to make effective resource allocation decisions.

Organizational Culture

Organizational culture is the pattern of basic assumptions which are beliefs, principles, traditions, goals and ways that a given group has designed, discovered or developed in learning to scope its problems of external adaptation and internal integration (Schein 1984). With strong cultures, U Mobile can coordinate, motivate and guide the employees to achieve organization’s goals. In order to strength the cultures, U Mobile had provided the reward system for employees and carried out the spirit of organization. Instead, a weak organizational culture, such as employee’s bad attitude will affect U Mobile. Hence, it is important for U Mobile for providing reward system and goals to employees to achieve strong cultures. Organizational culture may change and innovation however, it may also be an impediment to change.

Strategic Control Systems

U Mobile has own reward systems to employees which can ensure they are actively working to achieve the corporate goals of the organization. It is important for directors and management team of U Mobile to assess the performances of employees and the organization. Besides, U Mobile had the extensive system of internal control which can make sure that employees and management will follow the policies, guidelines and procedures. Apart from this, clear organization structure with delineated reporting lines is important to U Mobile. Hence, U Mobile had provided training and development for employees to ensure their ongoing capable workforce in order to develop organization’s policies and guidelines. Furthermore, U Mobile had established a Risk Management Committee, which with the overall responsibility to review and monitor the risk management activities of U Mobile, in order to further enhance the system of internal control, while ensure the strategic management is completed. When U Mobile had met the environment’s changes, strategic control helps U Mobile easy to state and measure precise objectives.

Strategic Leadership

According to the Borneo Post on March 2013, U Mobile had been awarded the Global Leadership Award in telecommunication industry. The award shows its best implementation of strategic leadership in expanding network and brand in the market. In order to achieve goal and target of U Mobile, management teams have to focus on communication between employees to develop organization’s goals clearly and guide employees to moving forward. Besides, Jaffa SanyAriffin, who is the chief executive officer (CEO) of U Mobile also had been awarded by ShahulHameedShaikDawood, the CEO of The Leaders International and world-renowned leadership guru, Arthur F Carmazzi at the gala event which at the Kuala Lumpur Convention Centre. With a good leader, U Mobile can be lead in innovation and creativity by achieving goals and target of organization to bring success to organization.

Corporate Governance

Corporate governance is the way in which organizations are directed and controlled, or the process by which corporations are made responsive to the rights and wishes of stakeholders (Henry 2008). The director of U Mobile had responsibility to provide clear, balanced and meaningful assessment of financial reports to Bursa Malaysia. As a leader, it is important to select suitable accounting policies and then apply them consistently.

Conclusion

Hence, it is important to let U Mobile practice strategic management process, by analyzing and evaluating strategic analysis, strategy formulation and strategy implementation in order to achieve corporate goals and objectives. Apart from this report, the author had learnt how to analyze and identify the general and competitive environment to formulate the strategy. Besides, the author had learnt and used scenario planning to identify the possible future, in order to analyze the SWOT analysis and PEST analysis. By using both analyses, U Mobile had analyzed the strength to support the organization’s goals and understood the environment methods which were always changed. Due to strategy formulation, the author had learnt how to formulate the strategy by analyzing business level strategy and corporate level strategy in order to expand the business and market share. Lastly, strategy implementation is the last part of the process which helps the U Mobile to identify the organization structure and organizational culture, in order to improve leadership and strategy control system. Without the strategic management process, it is hard to let organization grow business and position in the market, while hard to compete with the competitors in the industry.