Exploring Management: Hutchison Whampoa - Essay Example

? Strategic Management Executive Summary Hutchison Whampoa is one of the major telecommunication service providers which has dominant present in Europe, Asia and Africa. The company has a huge customer base. The main objective of the company is to maintain sustainability in the business of telecommunication and adhere to fair and transparent corporate governance principles. The company intends to achieve these goals with the formulation of sound human resources policies as well as abiding by the norms imposed by the government of the different countries in which the company operates. The company also intends to tap into the new markets as well as develop their products and services with the most upgraded technology so that the customer base can be retained. This report analyses the industry as well as the company with the help of the various strategic tools like the SWOT Analysis, PEST, Porter’s Five Forces, Porter’s Generic Strategies as well as the Ansoff Matrix. These would provide an insight to the feasible strategic alternatives that are available to the company which would help the company survive in the long-run. Contents Contents 2 Introduction 4 Strategic review 5 Industry Competition 10 Suppliers 11 Buyers 11 New Entrants 11 Substitutes 11 The Generic Strategies 12 Conclusion and Strategic Options 13 Introduction Hutchison Whampoa Limited is a group of companies that has a number of operations across different countries of the world. The company is highly committed to the development of technology and innovation. The brand has international presence in almost 52 countries of the world. 260000 people comprise the human resource strength of the organisation. The company has a customer base of 23.5 million as on 2012 which is experiencing and upward trend since its inception. The company is listed in the Hong Kong stock exchange and has a high market capitalisation. The six main areas where the company’s businesses are specialised are the telecommunications, infrastructure, property and hotels, ports and related services, retail as well as energy. In order to carry out the different businesses the company has to maintain proper business relations with the suppliers and the various dealers. The company strives to maintain a multicultural environment and therefore there is a wide range of mix in the human resources that drive the company towards its goals. The aim of the company is to maintain a very high standard of corporate governance which would ensure accountability and transparency in the process in which the work is carried out. These attitude and work cultures have won the company various accolades and honours. The vision of Hutchison Whampoa Limited is the attainment and maintenance of the highest standard in the corporate governance which would suit the interests and the necessities of the company. At the same time the interests of the subsidiaries also have to be taken care of. Sound corporate governance would ensure that the equity holders of the company are getting the right value for the money that they have invested into the company. The company should strive at enhancing the interest of all the stakeholders of the company. The mission of Hutchison is to attain these agenda by ensuring that all the corporate governance principles have been applied. The board of directors should be of good quality who would exercise internal control in the most effective manner. The disclosure practices of the company should be carried out in the most stringent manner. The company should adhere to its values of maintaining transparency in the corporate practices which results from the accountability of Hutchison to its shareholders. The goal of the company is to improve these practices in the most efficient manner. The company also intends to maintain a sustainable communities and business for a long run. Strategic review Hutchison Whampoa Limited operates in six different sectors which include telecommunication, energy, infrastructure, retail, ports and properties as well as financial services sector. The set of customers for these different markets would be completely different. For example for the telecommunications the target customers would be the retail market for telephone connections. With the advent of the 3G technology the people have started adopting the new communication technology. Thus the telecommunication market for the company is widening. On the other hand the ports would cater to the logistics sector and would target the markets for the companies that take part in the shipping activities. The infrastructure business of the company would target the real estate companies that are engaged in the business of construction as well as the materials supply. The telecommunications business would be targeting different markets across the globe. The this particular business of the company has presence in Hong Kong, Macau, other Asian countries like Sri Lanka, Indonesia, Sumatra, Bali, Java etc. The company has a major presence in European countries like UK, Ireland, Austria, Italy, Denmark as well as Sweden. The company is the leading provider of the telecommunication as well as data services across the world. The company has a considerable brand presence in the Hong Kong which has provided the brand with an opening to the most populous country of the world, China. The brand also has considerable presence in the other market segments. Figure 1: Customer Base of Hutchison Source: Annual Report, 2012, p. 7 The market for the telecommunications segment of the company can also be made on the basis of different services that the company provides. The different services include landlines, mobiles as well as mobile broadband, internet services, international services and the 3G services. The market for 3G for example is widening at the present day. The company has taken various strategies to enter these different market segments. The company caters to almost 76 million customers taking together all the countries in which the company has its operations. Thus the organisation needs to invest in the research and development of the advanced technology that would help the company in meeting the needs of the consumer in near future. The company has developed research teams located in China and India. To understand the present situation of the company a swot analysis would provide an insight into the different nuances of the telecommunications business of Hutchison. Strength: The Company is one of the major players in the telecommunications sector and therefore has a very good customer base. The feedback of the customers is valued by the company and therefore the company has been able to survive in the long run in the markets with intense competition. The company has taken a large number of strategies like setting up of the service centres and concentrating on the focus groups to maintain the satisfaction level of the customers. (Bohm, 2009, pp. 15-21) The operations of the company are carried out in the most transparent manner and the company is always accountable to the shareholders of the company. The training and development centres of the company have helped the human resources department to acquire the best talent from the industry and to nurture and hone their skills in the right direction. Weaknesses: The Company has suppliers and creditors and they are from the different places of the world. Since the operations are in various countries the company has to abide by the jurisdictions of all these countries. This has led to a problem in the accounting standards of the people. The company also does not have enough presence in the Americas which is one of the largest markets for telecommunications. Opportunities: There are several untapped markets where the company can venture and the brand image that the company already has would help the company in getting the market share in these markets. The company is also one of the pioneers of the 4G technology and the scope for development and research. Threat: The switching cost for the change in the telecom service provider would be low for the customers. The number of players in the telecommunications market is also increasing. These companies would devise the pricing strategies to get the market share. Therefore Hutchison would face a threat of losing the existing customer base. The key resources of the company would include the employees, the suppliers of the company as well as the values and principles that drive the company (Glueck, and Janch, 2004, pp. 159-165). The company has a diverse pool of employees from different parts of the world. The leading position in the market and the healthy financial position of the company have helped the company to get the right amount of bandwidth in the different countries. For carrying this out Hutchison has to abide by the regulatory norms of the local government. The company has various stakeholders like the stockholders, the customers, the suppliers or the creditors of the company and the government. The government in this case is one of the most important stakeholders because the bandwidth is allowed by the government. Along with that the consumers have a very dominant role in the selection of the service providers. The newer technologies and the new emerging markets like Brazil and South Korea would determine the future strategies of the company. The environmental influences of the company can be understood with the help of the PEST analysis. Political: The political scenarios of the individual markets in which the company operates are important in the determination of the environment in which Hutchison operates. The differences in the policies of the government and the variations in the methods of the auction system in the countries would have different kinds of challenges for the telecommunication provider. The policies formulated by the government would also determine the kind of barriers that the company would face in the markets which the company intends to enter in future. Economic: Hutchison has a strong financial position that is reflected by the consistent net profit position of the company in the various countries that it serves. The tax structures of these countries of operation various. Thus the company has to chalk out in the most effective way the various investment alternatives that are available. The company also spends enough resources on the research and development which is a major element for the growth of this sector. Social: The use of social media and other forms of communication have become extremely popular. Thus the company has a very good scope as an internet service provider. Along with that there is a need for the company to make the use of telecommunication more community friendly as well as environment friendly. Technological: The changes in the telecommunication sector are continuing on a regular basis. The introduction of the 3G technology and the continuation of the 4G technology would help the company sustain the tough oligopoly market where there are a large number of players. The company’s Chinese subsidiary has a developed research and development lab that helps the company remain updated with the latest research outcomes (Etzel, Stanton and Walker, 1997, pp. 74-86). The main drivers of change in the organisation are the new technological improvements that take place on a continuous basis. For example, the introduction of 3G in the company changed the set up of the company. New technology teams had to be developed and the skills of the existing employees had to be nurtured further. New hardware set ups also had to be created to deliver the new services in a smooth and uninterrupted manner. The opportunities and threats of the organisation can be understood with the help of the SWOT analysis that has been carried out as above. Hutchison operates in a market with a number of players providing telecommunication services. The company has survived the competition since a very long time and has been able to make a dominant position in the market. The five forces analysis of Michael Porter has been carried out as follows. Figure 2: Porter's five forces Sources: Schermerhorn, 2009, p. 146 Industry Competition Hutchison faces quite a huge amount of competition in the telecom industry. The rivals of the company in the telecommunications business include the Telecom Italia which has its headquarters in Italy and is considered to be the largest competitor of Hutchison in the European market segment in terms of the customer base and the network coverage in Europe. On the other hand the China Mobile limited is the telecommunications leader in China and the government of China is one of the major controllers of the company. Suppliers Hutchison operated under the purview of various jurisdictions of different countries. The company has to deal with various vendors and suppliers that provide the necessary inputs for the company. The bargaining power of the suppliers is relatively low because the company has a considerable portion of the market share in which it operates. Buyers The buyers in this segment also have low bargaining power because the companies operate in an oligopolistic market and therefore the market power is shared among the players in the markets. The buyers however react to the company strategies by either accepting or rejecting the schemes that the companies introduce. New Entrants There are a considerable number of potential entrants in the markets. However, the initial establishment cost for the sector is high because of the high level of governmental controls and permissions as well as technological equipments and set up. This has led to an increase in the threat of the prospective new players in the market. Substitutes The threat of substitutes is moderate in the industry. This is because although there are no alternative modes for telecommunications the people in the present day are opting for the other forms of internet services. The changes in the auction system and the regulatory measures relating to climatic problems may pose a problem for the telecommunications industry. The Generic Strategies The company generally offers the various services at a very low cost compared to the competitors in the industry. This has provided Hutchison with a competitive advantage. On the other hand the company prefers to focus on the 4G in which the company prefers to play with a differentiation strategy. The price at which the service packages are provided would put the company at a much advantageous position. Figure 3: Ansoff Product Matrix Source: Meldrum, M. and McDonald, M., 2007, p. 126 In the Ansoff Matrix framework, the company with its existing set of product and services portfolio would try to go for the market penetration strategies into the Asian, European and Australian Markets. On the other hand, Hutchison would attempt a market development strategy in America where it does not have any presence. In order to make more out of the existing markets the company can take the help of the development of new products and in the untapped markets it can go for the diversification strategies to survive in the long run (Farris, 2006, pp. 45-57). Conclusion and Strategic Options The success of the new developed technology depends on the way it is being able to generate the revenue for the customer. Thus the company constantly needs to develop the new technologies to meet the needs of the customers. From the above analysis of the macro and microenvironment that the company operates in, it is clear that Hutchison is a company that has a rich financial background and a brand presence in the markets in which it operates. On the other hand the company has extremely good prospects to grow in the expanding telecom sector. First of all, the company needs to enter into markets of North and South America which would help the company to get an access to a large market of the West. The prospects for the company in this market would be quite high and the company would be able to cater to the needs of the most advanced economies. The higher end products like 3G or 4G would be more acceptable in the US markets rather than the Asian markets which are much more price sensitive. Secondly, Hutchison has to develop the new technology faster than the competitors because the telecommunications sector is a fast moving sector that needs continuous up-gradation. The new technologies and the development through the bandwidth have to be done as per the stipulations set by the government of the countries. Hutchison has to make the business grow in the most sustainable way possible. The stability of the network has to be done in the most environment effective way. Finally, the working conditions for the employees have to be free from any situation of discrimination. The compensation plan for the employees has to be made fair and competitive with the industry standards. In order to implement these managerial strategies the companies need to be fair about the corporate governance policies and need to be transparent to the shareholders of the company. References Schermerhorn, J. R., 2009. Exploring Management. New Jersey: John Wiley & Sons. Hutchison Whampoa Limited, 2012. Annual Report. Hong Kong. Meldrum,M. and McDonald, M., 2007. Marketing in a Nutshell: Key Concepts for Non-specialists. Oxford: Butterworth-Heinemann. Bohm, A., 2009. The SWOT Analysis. Munich: GRIN Verlag. Etzel, M.J., Stanton. W.J. and Walker, B.J., 1997. Marketing. San Francisco, CA: McGraw-Hill Companies. Farris, P., 2006. Marketing Metrics. New York: Wharton School Publishing. Glueck, W.F. and Janch, L. R , 2004. Business Policy and Strategic Management. New York: McGraw Hill Publishing. Read More