Organizational Strategic Management: SWOT Analysis (Essay Sample)
Saudi Telecom Company operates in the telecommunication industry with its headquarters in Riyadh, Saudi Arabia. Saudi Telecom Company was formed in 1998 and it is among the largest telecommunications firms in the Middle East. The firm offers telecommunication services to people of North Africa and the Middle East. In recent years, the firm has expanded its operations into a number of GCC countries, Asia, and Africa. The firm now has established offices in India, Kuwait, Turkey, Malaysia, Bahrain, and South Africa. In addition, the firm has 17,000 employees according to 2019 records. The telecommunication industry just like any other sector has its external environment that should be scanned to apply strategic management in order to reap from the available opportunities as well as identify possible threats.source..
ORGANIZATIONAL STRATEGIC MANAGEMENT
Organizational Strategic Management
Saudi Telecom Company operates in the telecommunication industry with its headquarters in Riyadh, Saudi Arabia. Saudi Telecom Company was formed in 1998 and it is among the largest telecommunications firms in the Middle East. The firm offers telecommunication services to people of North Africa and the Middle East. In recent years, the firm has expanded its operations into a number of GCC countries, Asia, and Africa. The firm now has established offices in India, Kuwait, Turkey, Malaysia, Bahrain, and South Africa. In addition, the firm has 17,000 employees according to 2019 records. It provides a wide range of services that include 4 G and 3 G services, card telephone, post-paid and pre-paid mobile services, on demand video streaming, and transmission circuits (leased). Saudi Telecom Company enjoyed monopoly in its business until the second licensure of Etihad Etisalat. Additionally, the company received the Customer Experience Management Award 2020 during the London world conference on customer experience as the best telecommunication operator (SWOT & PESTLE 2020).
The telecommunication industry just like any other sector has its external environment that should be scanned to apply strategic management in order to reap from the available opportunities as well as identify possible threats.
Strengths – Saudi Telecom Company’s strengths include a wide services’ portfolio, an established market ranking across the Middle East, strong value of its brand in Arab and global markets, and a competitive edge compared to competitors.
Weaknesses – the threats include reducing liquidity of its assets, limited presence internationally, and dwindling bottom line ((SWOT & PESTLE 2020).
Opportunities - Saudi Telecom Company’s opportunities include the rise in use of smartphones, expansion and growth to the Asian markets, the increase in 4G’s adoption, and the rapid evolvement of technology (Al-Aali & Kamel 2015). In addition, the company operates in an environment that has favorable demographic profile and increasing population. With the demand in ICT infrastructure in cities, the company stands great prospects for increasing its customer base and hence increasing profits in return. There are also high revenue markets in Indonesia and India. These markets are under-penetrated and have great potential so the firm can reach them through its indirect and direct subsidiaries. Moreover, Saudi Telecom Company can expand its operations via international acquisitions. Strategic alliances can enable global penetration leading to growth and expansion. Finally, the firm is better placed to provide bucketed offers as well as cross-sell its services and products.
Threats – the threats include market share decline because of increasing competition for both fixed-line and GSM market. There is an over 100% level of penetration in the local market for GSM. Besides, there is the threat of declined margins because of price erosion. Other threats include the reduction in fixed line segment’s growth and the USD’s further appreciation in respect to operational currencies. Additionally, Saudi Telecom Company has the external threat of competitors that include Zain Saudi, Telenor, and Etisalat and the effect of minimization of termination charges (Al-Aali & Kamel 2015).
Competitive Strategy through Applying the Porter 5 Competitors’ Forces
The Saudi Arabia telecommunications’ industry remained a monopoly until 2004 where only Saudi Telecom Company offered its services. Nonetheless, the Global System for Mobile Communications (GSM) sector landscape has undergone transformation with the entrance of Mobily (Etihad Etisalat) in 2005 as well as Zain in 2008. Besides, the fixed-line sector has seen the licensure of Verizon, Batelco, and PCCW Communications (Falcom Equity Research Report 2009). The Global System for Mobile Communications (GSM) sector remains concentrated with three main players, although competitiveness has risen because of relatively high price elasticity and consumer centered nature of this industry (Falcom Equity Research Report 2009). The Porter’s Five Forces Framework offers a better comprehension of Saudi Telecom Company.
Bargaining Power of Customers – the customers’ bargaining power can be regarded as medium. Saudi Arabia is the largest telecommunication marketplace in the Gulf Cooperation Council (GCC) with an estimated population of more than 27 million, mobile phones’ penetration of approximately 120% and 16% penetration of fixed line. With increasing per capita income levels, and the youth making a major demography’s portion, the sector is anticipated to grow and expand at a steady rate in future. With the PSTN (public switched telephone network) and Global System for Mobile Communications (GSM) segments, the customers’ bargaining power has risen. Nevertheless, a medium rating is appropriate because the industry is consolidating and the levels of penetration are substantially high, particularly for the mobile segment (Falcom Equity Research Report 2009).
Bargaining Power of Suppliers – the suppliers’ bargaining power is medium. In this industry, the suppliers are infrastructure providers and telecom network. The relatively segregated supply-side industry’s structure as well as rising technical innovation minimize the suppliers’ bargaining power. Nonetheless, they make a crucial part in telecommunication infrastructure’s and network’s set-up.
Threat of Substitutes – the threat of substitutes for Saudi Telecom Company is low. The telecommunication industry is made up of fixed line, internet, and mobile services that work as substitutes amongst themselves. Therefore, presented with the telecommunication’s diversified nature as well as its essence in the economic and social development, substitutes’ threat is low. Nevertheless, with low cost and popularity of mobile and internet services, the demand and popularity of fixed-line market is anticipated to reduce (Falcom Equity Research Report 2009).
Threat of New Entrants – the industry is capital intensive in nature with huge sunk costs (that include initial costs for setup and license costs). Thus, there are high entry barriers making the threat of new entrants low. Additionally, with the fixed line and mobile Saudi Arabia market with high levels of penetration, the penetration of internet is low, yet it potential for expansion in future. Services based on internet such as IPTV, broadband, Voice IP, and E-governance are anticipated to expand further and are potential sectors for exploration.
Industry Rivalry – although the Saudi Arabian telecommunication industry is fairly concentrated, the competition level among the main players is high, with an increase in providers of fixed line services. In addition, this segment’s rivalry is anticipated to be comparatively high (Falcom Equity Research Report 2009).
Recommended Management Practices from Macro-Environment Analysis
Saudi Telecom Company operates in an environment where industry rivalry is high with increased providers of fixed line services. In addition, the industry’s rivalry is comparatively high. In order to check on the high industrial rivalry and competition, the firm can increase its market share, reduce its operational costs, and timely delivery of services and products with the aim of realizing increased profits. The firm may make some price changes, initiate marketing services, introduce new products, or withdraw from a certain market. The reactions taken should correspond to the responses taken by rival firms (Bourbita 2015). Saudi Telecom Company has capabilities and resources that are expensive-to-copy and valuable. Such a strategy can help to gain a competitive edge by possessing unique capabilities or resources that are hard to imitate, valuable, and rare (Kozlenkova, Samaha, & Palmatier 2013). The company has all attributes, assets, capabilities, information, knowledge, organizational processes and so on to achieve expensive-to-copy and valuable services and products. The firm should control its resources in order to enable a creation and implementation of these strategies to enhance its effectiveness and efficiency. Moreover, the company should manage practices that focus on teamwork, customer’s satisfaction, open communication, resilience and flexibility, stakeholders’ involvement, quality assurance, and managent by objectives. Such practices can help reduce efflux of customers, increase market returns as well as increase competitive forces for expanded market share. In addition, the strategy would minimize the threat of competitors, such as Zain Saudi, Telenor, and Etisalat as well as minimize termination charges.
Strategic Direction of the Organization and Appropriate Recommendations
I believe the organization is targeting the maturity phase. In absence of competitive strategies in place, firms are likely to spend more on marketing and related costs. Low penetration in the market is one of the key causes of poor performance. Saudi Telecom Company has diversified its products to the market. This has led to increase of the client base. Saudi Telecom Company has diversified several operating segments that include GSM, PSTN, data, and unallocated services. GSM entails mobile, fourth and third-generation services, messages, international roaming, and prepaid cards....
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