Telstra is one of the biggest telecommunication service providers in Australia which is engaged in providing different services all over the nation. This company offers a variety of services such as internet access, telecommunication network, market voice, and pay television, mobile, international and local call services and basic access services to businesses and homes etc. This organization was founded in 1975 and it has an extensive history in Australian market, originating together with the Australian Post Firm as Postmaster General’s Department (Telstra Corporation Limited, 2018). Currently, the CEO of this firm is Andy Penn who is making hard efforts to enhance company’s market value. This report covers both external and internal environmental analysis of Telstra along with its competitive advantage analysis.
External Environmental Analysis
Industry Rivalry (Moderate)
In Australian telecommunication market, industry rivalry is moderate as there are various players which pose competition on Telstra Organization. The major competitors are such as Optus, Singtel, Virgin mobile, Vodafone etc. But still, Telstra is able to maintain its dominant place in this industry through product differentiation and improvements in its services. As compared to its competing brands, Telstra is able to enhance both sizes and number of its subsidiaries in the country (Ramli, 2015).
In the case of telecommunication companies like Telstra, bargaining power of customers is high as there are number of alternatives available for them. There is not much merchandise difference among other service providers and Telstra (Dobbs, 2014). Moreover, switching cost is very low for the products in this industry. In this case, it is very important for Telstra to develop and implement effective strategies so that they can get desired boost in their business processes.
Telstra is the telecommunication service provider that retains the supplier power because it is involved in offering the best quality of telecom and network services according to the satisfaction of related customers. The bargaining power is moderate for suppliers who supply latest devices and technologies to the companies like Telstra. Telstra cannot bear to lose to its competing brands as most of the customers determine purchasing these technologies and devices and suppliers are limited (Swanson, 2017).
For Telstra, threat of new entrant is low than players in other industries. The major reason behind this is that the firms entering into this sector may have various entry barriers. Some of the major barriers are such as capital requirements, branding, legislative policies and regulations, excellent networking services, product differentiation etc. The power of new entrants is weak as it is very hard to survive in intense competition.
Threat of substitutes is moderate in Australian telecommunication industry as people are shifting to the telecom and networking services which are more affordable (Mudambi & Puck, 2016). This is the reason that there is the reduction in the prices of Telstra’s competitors. Some major competing brands like Vodafone, Optus, and Virgin Mobile are making threat for Telstra by providing substitutes to the Australian customers.
There are various political factors which have huge impact on the business operations of Telstra in Australian telecommunication sector. Telstra has enjoyed government support for long term even after the organization was privatized. The company has taken the benefits from the diplomatic relations of Australia and its geographical location has enabled to make an infrastructure for largest cable network in Asia Pacific. Apart from this, there are various regulations and laws for telecommunication service providers which Telstra needs to comply with (Morgan, 2018).
In the case of telecommunication business of Telstra, technology plays a significant role as Telstra needs to use effective and updated technologies to provide excellent and desired networking services to its customers. For the business of Telstra, it is vital to use advanced technology so that it can gain more competitive advantage over its competitors. The company needs to adopt new technologies as per the changes and trends (Teh & Corbitt, 2015).
Core competencies are the major characteristics of the products and services of a company which supports it in gaining enhanced brand image (Grant, Butler, Orr & Murray, 2014). As a telecom service provider, the core competencies of Telstra lies in the effective management of telephone network services. The company is using effective and modern techniques in managing its services. Moreover, it is differentiating its product and services considering the telecom services of competitors. It assists it in gaining competitive edge over them. Moreover, the company has developed good relationships with its suppliers that allow them to negotiate on the prices of devices and technologies (Telstra, 2017).
Primary Activities
Telstra has managed its inbound logistics very effectively. The company is acquiring different components from its suppliers directly. Other electronic and network components like tungsten, tin and gold are mined from earth.
Under its operations, the company is engaged in developing new areas for connectivity. It effectively operates and maintains networking facilities. It is using continuous innovation in managing its services (Madhani, 2018).
Telstra has developed an extensive distribution network in Australia. It transports its products from manufacturing locations to its warehouses. Further, they are distributed to the retail stores for final selling to customers.
At Telstra, the products are sold in its retail stores and it does the installation effectively. The company is using different modes of marketing to promote its products.
In addition to providing telecommunication and networking services in stores, Telstra enhances the customer experience via online stores and business centers.
Firm Infrastructure
All the divisions of company like finance, marketing and management are operational.
Telstra has a strong workforce of around 37000 employees who are effectively managed by HRM department by developing a positive organizational culture (Telstra, 2017).
The major requirement of Telstra lies in the development of technology because it catches new opportunities in different areas like digital media and software (Mudambi & Puck, 2016).
This firm procures network and IT equipment from its suppliers to manage their network. It buys spectrum so that it can gain greater bandwidth (Telstra, 2018).
As mentioned above, Telstra telecommunication is facing intense competition from other well-established players in Australia. These players are such as Optus, Virgin Mobile, Vodafone, Singtel etc. Still, the company is able to maintain its position and attain competitive advantage against other players in the industry (Hoffman, 2009). It can be seen that Australian telecommunication industry is facing decline so Telstra has expanded its business in other potential market in Asia-Pacific region, specifically in Hong Kong. There are some service segments like international calls, national long distance calls, nomadic telephonic services which are more intensive to compete in Australian telecommunication sector. These services allow Telstra to capture a great market position against its rivalry brands (Hitt, Ireland & Hoskisson, 2015). Optus, Telstra and Vodafone each firm run separate GSM mobile webs and captures a significant market share in Australian telecom industry. By using effective differentiation and innovation in its services, it is able to gain more competitive advantage over other local and international players.
As mentioned above, Telstra is facing some issues due to competition, changes in the technology and introduction of NBN services. So, it is very important for the organization to set some specific vision and goals and then formulate most appropriate strategies in order to attain them. Strategy formulation of Telstra is discussed below:
The vision of Telstra is “to make it a world class technology firm which empowers its customers to connect anywhere in the world”. The company believes that traditional world of telecom and technology are uniting and innovation in technology is boosting. This is the reason that company is working on building their skills in technology so that they can grab future opportunities in global telecommunication industry (Cameron, 2014). Thus, the company is engaged in creating technology and content solutions which are simple.
In order to deliver its services to final customers and attain a top market position, Telstra has set some business and marketing goals. The goals are stated below:
For attaining above goals and objective, Telstra Company is taking major initiatives and implementing effective strategies i.e. cost leadership and product differentiation.
Cost leadership is one of the most significant strategies in the business operations of Telstra. Considering the needs and expectations of customers, the company has adopted this strategy so that it can attain above mentioned goals. As it provides its products and services by targeting youth segment and students, so company is using cost leadership strategy. Under this, it provides networking and telephonic services on reasonable rates so that every segment can afford. To manage its operations and offer services on reasonable prices, this firm is engaged on using different cost saving technologies in products. Moreover, it is providing different offers and cost benefits to its customers (Campbell, 2017). For example, its bundling offer provides a Telstra TV at no additional cost to the customers on the plan cost of 99$ monthly. This strategy can help the company in attracting a diverse customer segment.
In addition to cost leadership, Telstra Company is using product differentiation strategy so that it can achieve its business goals. In order to do this, it is integrating the uniqueness and providing excellent quality of networking services to its targeted population. The quality of its telecommunication services differentiates itself from other competing brands such as Vodafone, Virgin Mobile and Optus (Banker, Mashruwala & Tripathy, 2014). The major focus of the company is on its primary features like quality assurance, appearance and technology. For instance, it is engaged in increasing internet performance and constantly upgrading its broadband services.
Recommendations and Conclusion
In the limelight of above discussion, it can be concluded Telstra possesses a great position and market share in Australian telecommunication sector. The major offerings of this company include network services, mobile and fixed line connections, and digital television, data and internet services. The above analysis shows that industry environment is good for the business operations of Telstra as it has a dominant position due to effective use of strategies. However, the company is facing competition from other players like Optus and Virgin but still it is able to maintain its performance and market share in Australian market. It has managed its internal capabilities and core competencies effective which allow the company to gain a sustainable competitive advantage against other players. Cost leadership and product differentiation are supporting the organization to meet its goals. These strategies enable the organization to attract more customers towards its telecommunication and networking services.
However, the company is using effective strategies i.e. cost leadership and product differentiation, but here, I would recommend that the company should go ahead with diversification and business expansion strategies. Till now, Telstra has its brand presence in very limited markets so it can use market development strategy. It should conduct market research and choose the most suitable and profitable market for its business expansion. From the above analysis, I would suggest that it should diversify its services in other segments so that it can generate more revenues and profits. Diversifying the business in other segments will help Telstra to diversify the business and financial risks. I found that however, cost leadership strategy supports the organization in increasing its customer base, but diversification will be better in attracting a new customer base for its new products. Thus, it is very important for the organization to use more creative strategies so that it can deal with the issues faced by company like competition, technology changes and changes in the needs and expectations of customers.
References
Cameron, N. (2014). Telstra looks to connect with new brand marketing program, Retrieved from https://www.cmo.com.au/article/536682/telstra_looks_connect_new_brand_marketing_program/
Campbell, I. (2017). Telstra’s Future Mode of Operation-the transformation of the Telstra’s Network-1992/93. Australian Journal of Telecommunications and the Digital Economy, 5(4), 18-69.
D. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.
E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Grant, R., Butler, B., Orr, S., & Murray, P. A. (2014). Contemporary strategic management: An Australasian perspective. John Wiley & Sons Australia, Ltd.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2015). Strategic management: Concepts: Competitiveness and globalization, chapter 3-The internal organization: Resources, capabilities, core competencies and competitive advantages. South Melbourne: South-Western Cengage Learning.
Hoffman, G. (2009). Telstra Competitive Position. Retrieved from https://www.intelligentinvestor.com.au/telstras-competitive-position-82524
Madhani, P. M. (2018). Enhancing Customer Value Creation with Market Culture: Developing 7Cs Framework. IUP Journal of Management Research, 17(3).
Morgan, B. (2018). Legal models beyond the corporation in Australia: plugging a gap or weaving a tapestry?. Social Enterprise Journal, 14(2), 180-193.
Mudambi, R., & Puck, J. (2016). A global value chain analysis of the ‘regional strategy’perspective. Journal of Management Studies, 53(6), 1076-1093.
Ramli, D. (2015). Competition heats up between Telstra, Optus, Vodafone. Retrieved from https://www.smh.com.au/business/competition-heats-up-between-telstra-optus-vodafone-20150526-gh9n5s.html
Swanson, C. (2017). Strategy for success. Superfunds Magazine, (421), 18.
Teh, D., & Corbitt, B. (2015). Building sustainability strategy in business. Journal of Business Strategy, 36(6), 39-46.
Telstra Corporation Limited. (2018). Telstra – mobile phones, prepaid phones, broadband, internet, home phones and broadband internet. Retrieved from https://www.telstra.com.au/
Telstra, (2017). Telstra Annual Report, 2017, Retrieved from https://telstra2018ar.interactiveinvestorreports.com/
Telstra. (2018). Our Business. Retrieved from https://telstra2016ar.interactiveinvestorreports.com/about-telstra/our-business/
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