Analysis Of Optus Limited: Internal & External Factors Affecting Its Operation In Australia

Optus in Australia

 This report concerns itself with the management of Optus Company Australia. The objective of the report is to conduct an analysis of Optus limited company and expound on some of the tenets that impacts  on the organization  and influence decision making. The report will also examine some of the internal and external factors that affect the business across Australia and how they affect the business structure and its strategies.

Optus Limited is one of Australia’s biggest telecommunication company in Australia. The company is owned by  SingTel which has its headquarters in Singapore.The success behind Optus limited is that for starters it owns and operates its network infrastructure and uses the wholesales services of other brans like Telstra and National Broadband Network.

The company offers services to users directly and also acts as a wholesaler to other brands  such as Amaysim and Exetel. Among the wholesale services that  Optus ‘yes’ brand  offers includes  4G mobile and Satellite

Due to constant changes in the environment that business operates in, organizations have to think way beyond their current market share. As a result in the formulation of its strategies organizations must take into account its external environment. A critical analysis concerning the strategy being implemented by Optus indicates that the company has adopted a strategy that aims at achieving higher growth and profitability for the organization (Hollensen, 2007.).The analysis has also indicated, just like other organizations Optus is faced by external environmental factors that impact on its operations and some of this factors the organization has no control over them (Kotler & Armstrong, 2010). The analysis of environmental factors affecting Optus has been done through the use of various tools which include PESTEL analysis and Porter five forces.

 Porter’s five forces analysis has been used in this report. It assesses the current position of the organization and the ways in which

It is analyzed that political conditions are one of the main conditions affecting the performance of Optus Limited directly. Competition has also been pointed out as a condition that is affecting Optus operations in Australia.

To examine the domestic and external contextual factors affecting Optus Porter, Five force analysis was used. This model was introduced by Porter E. Michael to assist in the assessment of organizational strategies in their quest to break even in an ever-changing business environment. This analysis was used in the case of Optus limited, and the following deductions were made

•    Bargaining power of Buyers. A closer look at the Australian market reveals that the bargaining power of buyers is higher due to the large number of mobile telephony and satellite services that offer s basic products that are a necessity to consumers. This has been made so since these consumers have a variety of options to choose from thus pushing the bargaining power to its peak.
•    Rivalry among existing industries.  Competition between firms offering similar products is also being experienced within the Australian telecommunication industry. As a result the threat of rivalry in this market is significantly higher. Optus will have to compete with companies such as Telstra, which offer similar products and are out to take control of the market share. Optus will, therefore, need to come up with a strategy that will see it controlling the having a bigger market share and at the same time offering high and quality products.
•    Threat of New entry. Looking at the Australian telecommunication market the threat of new entry is significantly low. The market does not have any room for new players as larger firms have made it hard for the new players to adapt to the product differentiation strategy existing in the market. Another shortcoming for a new entrant in the Australian telecommunication market is that the existing large firms enjoy high levels of brand loyalty. This means that new entrants into the market will be forced to utilize the existing brands that are used by already existing brands before breaking from the status quo.
•    Bargaining power of suppliers. A critical analysis of the Australian telecommunication market reveals that the industry is controlled by a group of big firms that have also own a majority of the market share. This concentration of the market by a click of big players has, in turn, increased the bargaining power of suppliers to a moderate level.
•    The threat of substitute. A sneak pick at the Australian telecommunication with regards to consumption pattern of customers reveals that the threat posed by substitute products in this market is insignificant. This is because daily consumable products are vital and thus there demand is high. Moreover, there are no substitutes available to them since consumers have to use these telecommunication products on a daily basis.

Optus is still stands out to be one of the most profitable businesses in Australia and its neighboring countries.

While focusing in the formulation of strategies that would bring back profitability Optus must take into account its macro-environment. (Feenberg, 2001).  The Australian telecommunication market presents a series of external environmental factors that directly impacts on the profitability curve of Optus. In addition this factors weighs a lot of the operations of the firm since it has no control over them (Kotler and Armstrong, 2010)

In this regard, PESTEL analysis was used to assess some of this factors that affect the firms profitability. PESTEL is an acronym of six factors that may affect the profitability strategy of an organization if not factored in during the drafting stage. These factors include;

1.    Political factors. Policy changes by the government in Australia that does not favor the telecommunication industry may have adverse effects on the operations of Optus in this market and in turn affect the profit margin of the firm. This means that any changes initiated at the national or local level that do not favor a stable business environment may have serious implications on the operations of the firm (Burt and Starlin, 2003). For instance, in the recent past, the Australian government launched a controversial policy that targets major market players such as Coles and Optuss in eliminating competition. According to them, market dominance by these two major players has pushed small telecommunication companies that are still struggling to perform out of the market.This policy has had a negative effect on the profitability curve of  Optus
2.    Economic:Economical factors such as inflation rate, exchange rates, and interest rate and trade regulations may adversely affect the profitability of any firm. A critical look at Australia telecommunication market reveals that a decline in the economic market conditions has negatively affected the performance of Optus regarding productivity. Also  the economic  indicators such as  weakening of Australian dollar and depreciation of currency exchange rates has affected the profit margin of the firm just not only in Australia but globally (Optus Annual Report,2016)
3.    Technological:Technology has become a driving force for major companies today. Despite it being considered as a tool for enhancing productivity in big firms like Optus, It also comes with disadvantages that may drag an organization into billions of losses (Arthur, 2009). In the Australian telecommunication industry technology has had a significant effect especially on big companies like Optuss. For instance, Optus in the recent past has adopted the use of green refrigeration technology to store perishable products for a longer period thus making it available for consumers at all times.
4.    Social:As a company seeks to widen its market share it will need to consider factors such as cross-cultural communication and other social factors that may affect its profitability in the market. Looking at the Australian telecommunication industry, the social factor is having a direct influence on the market. Firms like Optus have to go an extra mile to develop ties with the community through community engagements (Burt. & Starlin,2003).
5.    Environmental:The environmental factor is one that directly affects the operations and productivity of Optus in the larger Australian telecommunication market. An analysis of the market implies that Optus is affected due to its business which involves transmitting of electromagnetic waves in form of mobile signals from transmitters that sometimes are considered dangerous to humans and plants alike. This has in turn affected the profit margin in these business areas of the firm.
6.    Legal;The legal factor has also adversely affected the Australian telecommunication industry. An assessment of Optus with regards to its performance under these new policies which include adoption of fair policy has affected its profit margin and operations in the long run. (Wether and Otter, 2014).

Critical Issues Affecting Optus Operation

A critical analysis with reference to the strategy being implemented by Optus indicates that the company has adopted a strategy that aims at achieving higher growth and profitability for the organization. The analysis has also indicated, just like other organizations Optus is faced by external environmental factors that impacts on its operations and some of this factors the organization ( Albaum & Duerr,2008)

In regard to the PESTEL Analysis Optus will need to come up with strategies that will be flexible to in order to fit in any economic situation and the ever changing needs of consumers. For instance the firm will need to constantly monitor the economic indicators and come up with strategies that will quickly adapt to any change. This will also give them a clear view of the market’s position with reference to economic indicators. The analysis has also shown that firms that are reluctant to embrace technology may lose customers to upcoming players in the market who have embrace technology and are using it to their advances. Also firms should note that consumer preferences and taste changes according to technological advancement. As a result, organizations should package itself   and ready to embrace technology in all aspects of its operations.

Conclusion

In summary, the performance of Optus id impacted by environmental factors. These factors can be understood through PESTEL and Porter’s Five Forces. The bargaining power of consumers in Australia is high and there are many substitute services from other companies. Optus competes with companies such as Telstra and these is affecting its performance. However, there is a low threat of entrants which boosts its performance. The Australian telecommunication market presents a series of external environmental factors that directly impacts on the profitability curve of Optus. High inflation rate, exchange rates, and interest rate and trade regulations may adversely affect the profitability Optus. Enhanced technology enhances the performance of Optus. In addition to these, the social and legal factors also enhances the company’s performance.

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