The Competitive Advantage of T-Mobile - Essay Example

? Global Strategy Contents Contents 2 Introduction 4 Corporate structure 5 Overall Scope of the Organisation 6 Comparison of Value Chain of T-Mobile with other operators 8 Value adding to the competitive advantage of T-Mobile 8 Five Forces 9 Rivalry among the existing firms 10 Threat of Substitute Products 10 Potential Entrants 10 Bargaining Power of the Buyers 11 Bargaining Power of the suppliers 11 VRIN 11 PESTLE Analysis 12 Rumelt’s 4 Criteria 13 Consistency 13 Consonance 13 Feasibility 14 Advantage 14 SWOT Analysis 14 Conclusion 16 Executive Summary 17 References 18 Introduction T-mobile is a Germany based telecommunication services organisation which is based in the city of Bonn. Germany. The portfolio of services of T-Mobile includes mobile services, fixed phone network, internet as well as ICT and TV services. The company ensures that the best quality of services is provided to the customers so that the company is able to maintain a dominant position in the markets. The company caters to The United States, Canada, Europe as well as the Virgin Islands and Puerto Rico. The company on one hand provides the telecommunications services and on the other hand is the producer of the wireless telephones, cellular telephones as well as tablets. The company has dominant presence in the European Markets of Germany, Poland, Hungary, Australia, Netherlands, Czech Republic, Macedonia, Croatia and Montenegro. The company has a subscriber base of 150 million which makes it one of the largest players in the industry. The company is a publicly listed company and is being listed in all the stock exchanges of Germany and in one of the stock exchanges of the USA. T-mobile has an employee base of more than two thirty thousand and has many subsidiaries outside the region of Germany in the places mentioned. The company earned revenue of 58.2 billion euro in the year 2012. The history of the company dates back to the year 1985 when the first telecommunication services were introduced in the country of Germany. The government postal services also conducted the telecommunication systems under the name of Deutsche Bundespost. The first GSM network of Germany started its operations from 1989. The company which was in those days controlled and operated by the government was privatised in the year 1996 under the name of Deutsche Telekom. In 2002 the company was renamed to T-Mobile by changing it German form and making it more anglicised. In the year 2010, T-Mobile started a joint venture with the subsidiary in France. In Germany however, the operations of the various subsidiaries of the company were merged. This gave rise to a new entity that mainly operated in the market namely Telekom Deutschland GmbH. Thus the T-mobile was no longer existent in the country of Germany. Corporate structure The corporate structure of the company has been built in such as way as to make the company sustain in the long-run. The company has to comply with the German Corporate Governance Code because the company is based in this country. There are seven broad departments in the organisation that take the responsibility of the various areas of the businesses of T-Mobile. Some of the areas however are cross functional and are interlinked. There are the departments like the Marketing, Human Resources, Finance, Operations, Legal and Compliance as well as the Data Privacy Departments. Each of these Departments is controlled by Board of Directors. These boards are also segmented based on the geographical location and area of operation. These departments are Germany, T-Systems and Europe & Technology. The company had an internal focus all through the tenure of its business (Thompson, 2012, pp. 198-234). The managers and the chief strategists of the company ensured that the company maintained a good level of revenue and recorded a comfortable rage in the EBITDA of the company. These figures went down in the year 2012 because the company has to meet several financial targets in the particular fiscal year. The company was able to meet the various kinds of debt obligations that it had and thus the level of revenue for the company decreased in this particular year. In 2012, T-mobile also underwent a deal with the MetroPCS network in order to make a dominant position in the US markets. This strategy was taken by the company to make sure that it has a leading role in the spectrum auctions and to increase the base of the customer in this market. Overall Scope of the Organisation The value chain devised by Michael Porter is considered to be one of the most appropriate tools for carrying out the analyses of the processes of a particular company in a step by step manner. This provides an idea about the forward and backward linkages of the company in the process of value addition from the beginning till the service reaches the end user. Thus the inter relationships between the different processes play an important role in the strategic decision making of the organisation. The entire value chain is focused on the end use of the customers. The value chain of the company is such that the activity that the company is involved in revolves round the value chain. Thus each of the business units of T-Mobile would occupy a distinct position in the value chain (Glueck and Janch, 2004, pp. 19-38). The inbound logistics of T-Mobile would include the equipment and machines that are necessary for undertaking the telecommunication services. T-Mobile has to acquire the rights of the spectrum in a particular country. These are the necessary resources that the company needs to accumulate in order to maintain a distinct position in the telecommunication industry. The next level in the value chain would include the infrastructure for ensuring the proper setting up of the telecommunication services. Along with that the managers of the company has to ensure that the operations are set up in the most efficient manner (Linneman and Stanton, 1991, pp. 74-91). The outbound logistics of the company would include the provision of the services to the different customers through the network set ups by the company (Barney and Hesterly, 2011, pp. 55-69). The marketing and the supply division of the company would ensure that the largest numbers of the customers are reached within the network of T-Mobile. The company is also involved in the process of the production of the mobile handsets and tablets. This means that the hardware part of the company also has a separate value chain. The flow of the handset value chain would be similar to any other kind of manufacturing company. The inbound logistics would be the raw materials that would be required for the production process. The operations would include the process where the raw materials would be converted to the products that would be useful for the end customers. The outbound logistics would include the process in which the company would distribute the final products to the end users. T-mobile has its own billing portal through which the payments are made by the customers and it directly reaches the finance department. The human resources department also forms a major part of the value chain. The employees help in providing the customers the best services. The marketing team has a leading role in the promotion of the brand and to increase the customer base of T-Mobile. Comparison of Value Chain of T-Mobile with other operators Most of the organisations playing in the telecommunication service provider markets do not have their own handset producing business units. T-Mobile is thus one of the unique in the group which has its own unit for producing the handsets. Therefore the value chain of T-Mobile would be somewhat different from that of the other organisations. The value chain of the company is comparable to that of Vodafone which is in the same industry. The market access of Vodafone in the entire value chain is much better compared to that of the company. This is because Vodafone caters to a large number of markets while T-mobile is limited to the western parts of the globe (Sterman, 2000, pp. 201-215). On the other hand the kind of research and development that Vodafone incurs is also more compared to that of T-Mobile. Thus with the introduction of 3G the company had been able to access the larger markets than T-Mobile as the markets for the company in discussion is limited to the Western countries. T-Mobile on the other hand has partners with the famous social networking website twitter and thus t-Mobile would enter into the internet services and the networking discipline as well. Value adding to the competitive advantage of T-Mobile T-mobile has a competitive advantage in the scenario of 4G. The main reason behind this is that the company has offered to the customers the devices like the sim-cards and the data cards at the lowest possible cost. This makes the switching costs for the customers using other brands much cheaper. Thus the company is able to switch a large number of users to non-users (Martin and Thompson, 2010, pp. 216-254). With the use of the smart phones in the present day the customers prefer to use the 3G and the 4G services and have an access to the internet wherever they move around. Thus the company is competent enough to provide the 4G services to its customers. Since the company does not have any presence in the Eastern Markets the introduction of T-mobile into the Indian market would add to the subscriber base and would add to the revenue of the company in the long run (Lovelock, 2001, pp. 249-276). Five Forces Porter’s five forces would provide an insight into the different scenario of the telecommunications markets. The model as provided by Michael Porter would help in the understanding of the dynamics of the industry. Figure 1:Five Forces Model Source: Porter, 2008, pp. 62-71 Rivalry among the existing firms Apart from T-Mobile a large number of players operate in the industry like the Orange, Vodafone, France Telecom, Telefonica, TIM as well as O2. Most of these players have extensive dominance in most of the advanced economies as well as the developing economies. Thus the company has enough threat regarding the competition that is existent in the market. In the Indian markets where the company has the intension of expansion, there would also be a huge amount of competition. The major players in the market are Bharti Airtel, Telenor, Vodafone, Docomo, Aircel, Reliance, Idea as well as BSNL. These are the major players in the market and almost has equitable market share with Airtel leading. Threat of Substitute Products Since most of the telecommunication companies are also the internet service provider’s threat of competition in the market is comparatively less. The people at the present day communicate more through the social networking sites. This has reduced the consumption of the telecommunication services. There are several other means of the internet like the broad band in the Indian markets that may pose a threat to T-Mobile (Schermerhorn, 2009, pp. 131-156). Potential Entrants China mobile is one of the leader service providers but does not have any presence in the Indian markets. Thus there would be a possibility that China mobile would try to enter the Indian markets. Apart from these major players the threat is somewhat limited because in order to operate in a market for telecommunications governmental licenses would be required. There would also be a lot of establishment cost which any entrant would avoid at the first instant (Barney, 1991, pp. 99–120). Bargaining Power of the Buyers The bargaining power of the consumers is relatively less in the telecommunications market because there are a large number of players in the oligopoly market of telecommunications. Thus the market players are engaged in price competition by which the standard market price for the variety of services is determined. Therefore the pricing of the products is done by the companies due to the competition with the other players. The bargaining power of the buyers is low. Bargaining Power of the suppliers In the spectrum auctioning the major supplier of this resource is the government. Thus the bargaining power of the government is quite high in this case. On the other hand, the bargaining power of the raw material suppliers like the equipment parts and the other input suppliers is moderate to low. VRIN Resource Valuable Rare Hard to Imitate Non Substitutable Implications Service Capability No Yes Yes Yes Temporary Competitive Advantages. Economy of Scale and Cost Leadership Yes No Yes Yes Temporary Competitive Advantages. Expertise in Technologies Yes Yes Yes Yes Sustained Competitive Advantage. Differentiation and Brand value Yes Yes Yes Yes Sustained Competitive Advantage. Global Distribution Network Yes Yes Yes Yes Sustained Competitive Advantage. Research and Development No No No No Sustained Competitive Advantage. Leading global carrier relationships Yes Yes Yes Yes Sustained Competitive Advantage. Dominance in Large Market No Yes Yes No Temporary Competitive Advantages. Cost and Quality control Yes No Yes Yes Sustained Competitive Advantage. Effective Engineering Skills Yes Yes Yes Yes Sustained Competitive Advantage. Capital Management in effective Profitable Manner Yes No No Yes Sustained Competitive Advantage. Vertical Integration Yes Yes Yes Yes Sustained Competitive Advantage. PESTLE Analysis Political Government of India highly supports several global telecommunication companies to promote FDI in the Indian Telecom Sector. Economical Global recession and recent financial crisis affected the economic environment of the country. Low purchasing power affected the buying behaviour of people (Schmitt, 2000, p.79). Social Technology savvy generation will welcome T-Mobile in India. Need for differentiated mobile service provider is increasing due to intimate family bonding of Indians. Technological India is technologically developing country. The organization can get each and every required technological resource in this country that is required for each and every business operation (Ferrell, 2012, p.39). Legal Government has developed several policies for business organizations, such as wage distribution, employment and environmental policies. The organization has to maintain all these things in order to overcome legal issues. Environmental High radiation and spectrum can affect the environmental and ecological balance. Therefore, it is important for the organization to maintain environment sustainability in business process to reduce several external issues. Rumelt’s 4 Criteria Richard Rumelt suggested that there are basically 4 criteria that are essential for the evaluation and the control of the strategy that a company intends to implement. These four criteria has been analysed in the following section. Consistency This means that there should not be any variation in the policies and the goals of T-Mobile and the strategy to enter the Indian markets. The company intends to satisfy the customer at every stage of its service. The huge customer base in India would help the country in getting in catering to the variety of customers at all levels (Rumelt, 1991, pp. 167–185). Consonance The chief strategists of T-Mobile have to find out the various trends that define the Indian Markets. There individuals trends of the customers and their inclination towards the usage of the interne services would help the country in introducing 3G or 4G services. The forecasting of the consumer behaviour trends would help T-Mobile to understand the prospects of the company in the new market and the acceptability of the brand and its products among the diverse customer base. Feasibility The feasibility of the strategy is being tested by the knowing whether the company is depleting its resources more than it is necessary or would lead to problems that cannot be solved. The resources that T-mobile chiefly requires and is essential for the business expansion in India are the requirement of spectrum rights. T-Mobile has to find ways to acquire it in an effective manner. There might be political problems on part of T-Mobile as well. Advantage The competitive advantage that T-Mobile has is the worldwide popularity as one of the leading players of the telecommunications sector. As the firm tries to enter the market, the company has to spend less for the promotion of the brand compared to a brand that would start as a new entity in the business. Nokia was a pioneer in the mobile phone market and almost had the major part of the market share. However in the present day when 70-80% of the users have opted for smart phones, Nokia has not been able to meet the consumer needs and the market share was taken away by Apple or Samsung by and large. SWOT Analysis Following SWOT Analysis will help to determine the internal strengths, weaknesses and external opportunities and threats of T-Mobile. Strengths Hugh brand image and strong client base is the major strength of the organization. Strong brand equity and differentiated service portfolio of the organization increased the preference of target customers. Strong supply chain and distribution network brings efficiency in the business processes. Strong presence in several global market and high financial stability of the firm. Weaknesses Inadequate wireless service and too much dropped call can influence the clients or customers to switch over different brand. In adequate customer service. Lack of presence in emerging and developing countries. Opportunities Capturing the wireless market by providing 4G internet services. Improvement of the quality of customer service as the Indians always prefer high degree of customer service (Steinback, 2010, p.59). Adoption of cost leadership strategy in business process depending upon recent economic environment and market demand. Threats Intense market competition can pose real threat to the organization. Recent recession affected the purchasing power of people. It can affect the business profitability of the organization. Several legal and environmental barriers can affect the business operation process of the organization. Conclusion From the above analysis using the various tools the key finding of the research has been understood. The company would have extremely good prospects if it intends to expand in the Indian Markets. There would be enough scope for the expansion of the brand and the customer base would be huge. Since 3G and 4G are the main products that the company would like to promote in the Indian Market there would be huge acceptance. However the company has to maintain a very good strategic position in the market because the telecommunication market in India is an oligopolistic market and the other players would take a low cost pricing strategy when T-Mobile tries to enter the market. T-Mobile thus has to make their subscription package in such a way which is lower than what the other companies are offering. If this is not done the users of the other brands would not switch. Along with this the company has to conform to all the legal and regulatory aspect of the country it intends to enter because there are a lot of regulations in most of the countries relating to the auction of the spectrum. Finally there should be huge promotion and advertisement of the brand in order to convert the nonusers of T-Mobile to users. Executive Summary T-Mobile is one of the leading telecommunication service providers in the world. The company is based in Germany and has operations in the Europe and America. The country intends to have a global presence. This report provided a thorough analysis of the strategic position of the company in the telecommunications industry. In the introductory part of the report the brief internal and external position of the company has been provided with a review of the historical position of T-Mobile. The next part analysed the value chain for the company. This has provided an idea about the chain of processes that the company goes through and the resources that contribute to the value addition for the company. The value chain had been compared with the value chain of the competitors to point out the various features. These specialities of T-mobile would add to the competitive advantage of the company. In the subsequent step the strategic analysis tools like Porter’s Five Forces and VRIN has been done to capture the entire market scenario and point out the position of the company in the holistic framework. The next part of the essay makes a Rumelt’s 4 criteria analysis to review the strategies that the company intends to take and the barriers that it may face in the way of implementation of the strategies. The essay has been concluded with the Key findings and the recommendations that T-Mobile should apply in order to succeed in the strategy. Secondary research has been conducted in the process and the literature by eminent scholars has been looked into to get an insight into the issue. References Barney, J., 1991. “Firm resources and sustained competitive advantage”. Journal of Management, Vol. 17, No. 1, pp. 99–120. Ferrell, O., 2012. Marketing Strategy. New Jersey: Pearson. Schmitt, B., 2000. Experiential marketing. London: Kogan Page. Steinback, D., 2010. Winning Across Global Market. London: Routledge. Rumelt, R., 1991. “How Much Does Industry Matter?” Strategic Management Journal, Vol 12, pp. 167–185. Sterman, J. D., 2000. Business Dynamics: Systems thinking and modelling for a complex world. New York: McGraw-Hill. Brassington, F. and Pettitt, S., 2000. Principles of Marketing. Harlow: Prentice Hall. Linneman, R. E. and Stanton, J. L., 1991. Making Niche Marketing Work. New York: McGraw Hill. Lovelock, C., 2001. Services Marketing: people, technology, strategy. London: Prentice Hall. Schermerhorn, J. R., 2009. Exploring Management. New Jersey: John Wiley and Sons. Barney, J. and Hesterly, W., 2011. Strategic Management and Competitive Advantage: Concepts and Cases. New York: Pearson Customs Publishers. Martin, F. and Thompson, J., 2010. Strategic Management: Awareness and Change. London: Cengage Brain. Porter, M., 2008. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Berlin: Simon and Schuster. Thompson, A., 2012. Essentials of Strategic Management: The Quest for Competitive Advantage. New Jersey: McGraw Hill Education. Glueck, W.F. and Janch, L. R., 2004. Business Policy and Strategic Management. New York: McGraw Hill Publishing. Read More