The Telecommunication Market in UAE - Essay Example

Strategic Management Executive Summary Etisalat previously dominated the telecommunication market in UAE for quite a number of years. However, its market share has been neutralized by the entry of Du in 2006. Etisalat had taken the entire market hence it was quite easy for the company to remain profitable. Since Du found its way into the UAE market, its market share has been constantly growing as that of Etisalat experiences a reduction. As a result of the declining market position, Etisalat is obliged to consider a change in its strategic management in order to cope with the competition. This paper puts into perspective the interventions that the company is required to consider. This is achieved through the analysis of both internal and external environment of the company. A review of the mission and the vision of Etisalat have been put in the context of the proposed strategic management which encompasses all the major components of the organizations, mainly the management, research and development, and marketing among others. This analysis puts into consideration both the external and internal auditing of the company. Through this analysis, it is possible to elucidate the future interventions that the company can be able to implement. Through the analysis, the company is found to require adopting some strategies. These strategies include aggressive marketing, innovations to counter competition and a change in pricing. The company has the advantage of having been credited as a strong brand in the past courtesy of its magnificent infrastructure and services. Such and many other advantages give Elisalat an upper hand in regaining its market position that had been previously taken up by Du. I. Mission and Objectives Mission and Vision Etisalat is a major telecommunication company in UAE with a magnificent market share throughout the country. UAE is one of over 15 countries where the company has established market. Being the leading telecommunication in Middle East, the company had continually enjoyed a good market share in the country. In addition, Etisalat had a pivotal role to play in the development of the sector in the region. One of the major aspects that the company has contributed to development is through the development and adoption of modern technologies that have made many UAE organizations to have a global reputation. In addition, the company has worked on embracing green technologies hence it is able to meet the environmental concerns that are set for the telecommunication industry. Another strategy that has kept the company ahead of others is the attempt to expand its operations to other countries. Therefore, the company is present in up to fifteen countries spread across Middle East and Africa (Etisalat, 2014). Through the expansion scheme, Etisalat is one of the fastest growing telecommunication operators in the world. Etisalat has a unique mission that provides the focus of the company. It is geared towards expanding its reach to people through provision of modernized services. On the other hand, the vision is to see that people are not restricted by either matter or space in their reach. Through the mission and the vision, the company has been able to grow progressively in providing innovative and magnificent modern technologies (Etisalat Corporate Presentation, 2009). Organization Strategies The management of Etisalat has been very instrumental in its productivity for the years that the company has continued to dominate the market. For over forty years, the company has been a market leader having very profound strategies courtesy of the able and diligent management. The Management: The management team has advanced a number of interventions over time hence facilitating the strategic positioning of the company in the market. Firstly, they have been very aggressive in taping innovative and creative ideas that yields better services for the growing demands of the customers. Secondly, the management has worked diligently on expanding the company to other regions. Notably, the company has established business in Saudi Arabia and Egypt where it has continued to do well. Additionally, the management has a clear vision for the organization; they foresee the future of the company being in the mobile broadband connectivity. Therefore, in preparation for the projected increase in demand, the management has developed strategies towards the anticipated needs. The CEO of the company, Ahmed Abdul Karim Julfar affirmed the company’s continued developments in the region. He said, “We are proud that Abu Dhabi has become the first capital city in the world to be connected with a fibre optic (FTTH — fibre to the home) network, and we have rolled out LTE — 4G networks in the UAE and Saudi Arabia, which will herald a new era in mobile broadband connectivity. Our ‘Broadband for all' vision is simple: to provide high speed mobile connectivity for all to turbo-charge economic growth and social development. The rollout of our nationwide FTTH network in the UAE, and the LTE networks in Saudi Arabia and the UAE, are the first steps on that journey” (Rasheed, 2012). The management has strived to apply innovativeness to the company operations. Julfar has further reported that; “Innovation is our lifeblood. Telecommunications is an accelerator of social and economic growth and development and, in order to drive that change, we must innovate to develop solutions to community-specific challenges.” (Rasheed, 2012). Marketing: Etisalat has continually enjoyed a market that had minimal competition. As a result, marketing was not a major priority to the company. However, the entry of Du in the market has created a different scenario where it has brought intensive competitiveness. Despite the competitive nature, the company has not yet devised a marketing strategy that would help counter the competition. Therefore, a stringent and aggressive marketing strategy is required in order for the company to cope with the heightened competition. Finance and Accounting: Despite the competitive nature of the market since 2006, Etisalat has been making profit courtesy of its widespread business across countries. As a result, the financial position of the company has continued to fair well as shown in the income statement below: Source: Emirates Telecom Corporation, 2014 It is clear from the income statement that Etisalat’s gross profits, EBT, and revenues have continued to demonstrate a growth from 2010 to 2013. The major contribution in this growth can be attributed to the expansion strategy adopted by the organization. The UAE market share has shown a reduction, hence cannot be attributed to the growth. This is because of continued market saturation and competition by Du. Through the accounting and finance departments, the management has been presented with the current global financial position of the company. Research and Development (R&D): A vibrant company that minds its future should be at a position of strengthening its R& D department. Etisalat has prioritized research and development in an effort to take care of the customer needs. Over the years, the company has continued to strengthen its R & D, which has not disappointed. As a result of the organization’s core mandate, they are working on developing a 4G platform that will boost the internet services. The company has been working on infrastructural development in order to ensure that they provide quality internet services to their customers. The CEO, Mr. Julfar believes that, “Telecommunications technology is evolving rapidly, but our objectives are still the same: providing innovative services that transform the lives of our customers and increase business efficiency. This whole sector has transformed from mere voice service provision to providing high speed, broadband data services. It's about enabling future growth, reach, and the evolution of entire communities. The impact in the Middle East will be huge where among a total population of 380 million, over 50 per cent (200 million) are under 25 years old. They are the future and they already speak the language of the internet. There are 220 million mobile phone subscribers and 85 million users (45 per cent) access the internet via mobile devices.” (Rasheed, 2012). Diversification and innovativeness have been key to the organization. The introduction of the mobile commerce platform was a major breakthrough for the company. People feel that the company has made their lives much easier through the e-commerce platform. The management also views the development as an important development in the company. Julfar said the following about the development, “The Etisalat Mobile Commerce platform provides services to the un-banked and under-banked in the emerging markets of Africa, giving people the tools to trade, money transfer and develop micro-economies. In the Middle East, we've partnered with Western Union and MoneyGram International to allow money sent by mobile customers to be collected anywhere in the world.” (Rasheed, 2012). Customer Information System (CIS): Communication with the customers is something that has been well developed by the organization. This is in an endeavor to ensure that the customer needs are addressed as they emerge. In terms of CIS, Etisalat has embraced a creative model that has allowed the customer’s concerns to be efficiently addressed. II. Audit External Analysis of Etisalat In order to underpin the needs of the company, the external analysis of the company is unavoidable. Such will help in developing a strategy that will help the company regain its market share. In this analysis, Etisalat will be analyzed based on the Political, Economic, Social and Technological (PEST) Framework. Political Aspects The organization has faced minimal political interferences, an aspect that has given it a very conducive environment to thrive. Political tensions have destabilized the economic activities in other countries in the region, but UAE was not affected. In addition, the people never took part in the Arab Spring since the government has done its best to invest in developments (United Arab Emirates, n.d). Despite the peaceful environment, the establishment of the Telecommunications Regulatory Authority in 2003 led to the liberalization of the telecommunication industry, thereby, creating a room for entry of competitors. However, through this intervention, the industry has demonstrated substantial growth due to competitiveness (TRA, 2014). Economic Aspects UAE has many economic benefits that have contributed to the success of Etisalat. The fact that the country exhibits an open economy has motivated many companies to invest in UAE. With a growth rate of 4% and a per capita of $ 29,900 many companies have found it appropriate to seek market in this region. These companies obviously require telecommunication services from reputable companies capable of delivering quality services (United Arab Emirates, n.d.). Therefore, this arises as an opportunity for Etisalat to take advantage of. Social Aspects The age of the population is a very important aspect that affects Etisalat. Majority of the in UAE are youthful since the average age is about 30 years. In addition, the majority of the people in the population lie between 24-54 years. Therefore, because this group is highly enlightened, they will seek telecommunication services from a credible and reputable company (United Arab Emirates, n.d.). Technological Aspects Technology has continued to affect every sector of the economy. Mobile and internet services are inevitable in this technological age. Both organizations and individuals are need of these services. Therefore, the demand has continued to rise creating an opportunity for telecommunication companies (United Arab Emirates, n.d.). A Conclusive Remark on the External Analysis Based on the PEST analysis done for Etisalat, there is an opportunity for development of innovative and improved services for the telecommunication sector in UAE. The enlightened population will definitely seek better services from the service providers hence provides an opportunity for Etisalat to develop a management strategy. Internal Audit of Etisalat The realization of the way forward for the company requires the analysis of the internal components of the organization. This will facilitate the organization in realizing the challenges that confront the organization within the UAE market. The management is a very important component of the organization. As reported earlier, they have been searching and adopting new and innovative strategies. In addition, they have been so much concerned with the research and development of the services of the organization. The company has been able to develop strategies and infrastructures towards sustaining its market position. Despite the developments made by the company, Du has taken quite a substantial stake of the ‘company’s market share. As a result of the aggressive nature in which Du has been, they have been able to capture almost 50% of the UAE market. In addition, in 2012 Du was named the best mobile and broadband operator in Africa and Middle East. Innovativeness and pricing strategies are some of the key aspects that have facilitated the exponential growth by Du. As reported by Martin Mabbutt of Nomura Securities in London, "[Du was] coming into a market where prices were very high and it's been pretty easy for them. Quite frankly, you'd have to be really bad not to take a decent share from a market which is that lucrative, you can do two things as an incumbent. You can decide to try to keep a decent amount of market share and drop prices, or you can decide to lose a bit of market share and keep pricing reasonably high in your legacy base." The ability of the competitor (Du) to penetrate the UAE market caused a considerable decline in the average revenue per user for Etisalat. It was also evident that some companies opted to change their service provider from Etisalat to Du hence the market share for the companies has also declined. (George-Cosh, 2010) According to the competitive nature, the company is required to develop initiatives that will see its market share is recaptured. This can be done through intensive marketing of the company’s services. There is also the need to counter the developments that have been advanced by Du by developing more innovative services that take into concern the new age needs. The adoption of aspects such as the Internet Protocol (VoIP) in UAE has greatly contributed to the decline of Etisalat’s customer spending. The company provides that, "If customers continue to utilise illegal and unlicensed VoIP services and/or if Etisalat cannot offer competitive [international calling] rates compared with its international and local competitors, this may have a material adverse effect on its business." (George-Cosh, 2010). It is therefore necessary to have adoption of services that take into perspective the needs that were initially met by these services. Ethics Audit There is a high level of responsibility that the company has demonstrated especially in the adoption of green technologies. In terms of environmentalism, the company has been very proactive where it has engaged in a variety of environmental interventions. In particular, the company has focused on developing environmentally friendly building technologies as well as the adoption of new and renewable energy sources. As a long term strategy that will help the company become more environmentally friendly, it has been able to reduce the emissions of carbon by 80% and energy consumptions by 70% in the future. III. Strategy Formulation Through the analysis, there are aspects that have been revealed that requires to be dealt with. In particular, the issue of competition has featured prominently. From the analysis, it is quite apparent that Du has presented a stiff competition to Etisalat that requires an intervention. Du’s competitiveness in the UAE market has been a factor of competitive pricing as well as other strategies that give the firm a competitive edge. According to Othman Sultan, the CEO of Du has pointed out that, "We do not need to see exactly 50 per cent market share to be considered in the same playground. It is not my priority, however, to see an increase in market share; I am more interested in growth and revenues."  According to Du’s management, their vision has encouraged them to continually advance their services. As a result, the company has grasped quite a substantial market stake that was initially held by Etisalat. In particular, most of the roaming as well as prepaid customers has been attracted to Du. A major strength that Etisalat has continually demonstrated is the market share of the postpaid customers. The rapid acceptability of Du can be attributed to its aggressive and consistent marketing of its services. Shaharyar Umar of Parc has reported that, "Du overtook etisalat in measured advertising expenditure in the UAE in the second half of 2009 and has been maintaining a lead over its close competitor since then. In fact, du is now the top spending brand in the UAE." (Scott, 2011). The telecommunication industry exhibits a lot of dynamisms that are characterized by that saturation of the market (current penetration levels in UAE =97.1%)(Scott, 2011). As a result, the company is obliged to up their game by ensuring that they adopt more aggressive marketing plans. Based on the above positions, the company can benefit from the following interventions: Adoption of Innovative Services The customer demands for better services keep on changing with time. Innovation is the only way that can ensure that these needs are met. The research and development department has an obligation to ensure that such services are developed. It is an advantage that the company has established a strong brand and well as magnificent infrastructure. Such should hasten innovation while providing an efficient platform for better services while phasing out services such as VoIP. Provision of better internet packages can also boost the stake of the company. This would include a better pricing for data bundles that would promote use of mobile internet. The finding that Etisalat is succumbing to competition in the prepaid mobile services should be an awakening call for the management to provide innovative services at affordable prices. Intensified Marketing The findings indicated that lack of proper marketing scheme has cost Etisalat its market stake. In addition, the aggressiveness in marketing by the competitor, Du has ensured Etisalat lose its market position. Through digital advertising among other innovative marketing strategies, the company can make their services known to their customers. A Change of Pricing Regime Customers are sensitive to pricing. The fact that Etisalat has operated for a long time in a market where competition has not been a major concern is the likely cause of lack of price reviews. It is the obligation of the managers to develop pricing strategies ensuring the company remains profitable as it seeks to get more customers. IV. Strategy Implementation at Etisalat All stakeholders are required in the implementation of the new strategic management. The first step entails the development of a plan that will guide the adoption and implementation of the strategy. All the departments in the company will have a role to play in the execution of the strategy. The R & D will be required a little harder to develop strategies that will see the company regain its position in the market. On the other hand, the human resource will ensure that the necessary human capital is provided. The marketing department will have the role of penetrating the market while financial support towards the strategy implementation shall be provided by the financial department. Strategy Implementation Timeline   Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Development of new services                         Development of new pricing                         Marketing activities                         Audit of new strategies                         V. Evaluation of the Proposed strategy Since the competitor (Du) may be provoked to develop a counter-strategy, the company shall conduct an evaluation of the strategy. A regular evaluation will be done at least once after every four months. The company should also conduct an evaluation in order to provide strategies that will prevent or deal with emerging issues such as price wars. Using the advanced infrastructure and a strong brand, Etisalat has the capacity to develop more and better services than its competitor. While the two companies bring forth price wars, the beneficiary will be the consumer. The customers will have a broad choice while more services are being provided. Furthermore, through their infrastructure, it will be appropriate for the company to provide more entertainment and other content through their internet services. References TRA. (2014). About TRA. Retrieved on 19th May, 2014 from: http://www.tra.gov.ae/about_tra.php Etisalat. (2014). Company profile. Retrieved on 19th May 2014 from: http://www.etisalat.com/en/about/profile/company-profile.jsp Emirates Telecom Corporation. (2014). Financials. Bloomberg Business Week. Retrieved on 19th May, 2014 from: http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=ETISALAT:UH Etisalat Corporate Presentation. (26th August, 2009). Slideshare. Retrieved on 19th May 2014 from: http://www.slideshare.net/alatif/etisalat-corporate-profile-1907338 George-Cosh, D. (19th November, 2010). Competition forces change of strategy in Etisalat. The National. Retrieved on 19th May, 2014 from: http://www.thenational.ae/business/telecoms/competition-forces-change-of-strategy-in-etisalat#full Rasheed, A. (21st March, 2012). Etisalat on its 5-year strategy, 4G, and global ambition. Gulf news.com. Retrieved on 19th May, 2014 from: http://gulfnews.com/business/telecoms/etisalat-on-its-5-year-strategy-4g-and-global-ambition-1.997578 Scott, K. (4th August, 2011). Du grabs 43.6% of market share. Gulf news.com. Retrieved on 19th May, 2014 from: http://gulfnews.com/business/telecoms/du-grabs-43-6-of-market-share-1.846999 United Arab Emirates. (n.d.). CIA. Retrieved on 19th May, 2014 from: https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html Read More