BUSINESS STRATEGY ASSIGNMENT

Strategic Audit

SINGAPORE TELECOM

Syndicate 2 Members of Syndicate : Tamadara Hilman (29112042) Adithya Nugraha(29112149) Yulianita Rahayu (29112060) Aditia Sovia Pramudita (29112061) Ratu Sonia Gardenia (29112065)

SCHOOL OF BUSINESS AND MANAGEMENT BANDUNG INSTITUTE OF TECHNOLOGY 2013

I. Current Situation A. Current performance The most profitable Singapore firm, with profit of S$1,88 billion for financial year 1998 and S$1,95 billion for 1999. Singapores Telecom infrastructure scored poorly in the choice and regulation subindex in the survey of Asia Pacific Telecommunications Index in 1999. They offering limited choice of service providers and having a regulator that was not responsive and transparent. Ranked 7th out of 26 international carriers in 1999 Data Communcations survey that rated telecom providrs on value, quality reliability, speed of repairs, billing, and general responsiveness for frame relay and leased-line services. Singapore Telecoms growth rate is relatively unstable, the growth earnings were flat. B. Strategic Posture 1. Mission To be a total service provider with a range that covers the entire spectrum of the telecom business 2. Objective To maintain its exceptional record of profitability and as much market share as possible. 3. Strategies Focus on the achievement os short- and medium-term profitability Pursuit of globally competitive service and effeciency standards High investment in proven technologies Establishment of a worldclass telecom infrastructure

II. External Environment A. Societal Environment Political Legal Trend in deregulation (T) Government support by providing sophisticated industrial policy (O)

Economics Possibilities of financial crisis (T) General movement toward more open and competitive markets (O) & (T) Economic growth (O) Singapore has the highest GDP in Asia (O)

Sociocultural More sophisticated and demanding customers (O)

Technological Techonological advancement (T) Singapore have the most advanced information technology infrastructure (O)

B. Task Environment 5F Porters Threat of new entrance = MEDIUM (O) The telecommunication industry was growing rapidly, but the government will not easily allow a free entry of carriers in the future for domestic market, because Singapore is a small country state and the industry will suffer if there are to many competitor. The government support liberalization through introducing competition by issued limited licenses for moblie phone services and fixed telephone services in order to bring positive benefits. Bargaining power of buyers = HIGH (T) There are several competitors emerging like MobileOne & StarHub, and they also provide same function of product and sometimes offering cheaper price, then it could be a price war between the firm. Customer will be able to shop around for services which offer better value for money. Threat of subtitutes products or service = LOW (O) Nowdays telecommunication is one of the primer needs so there are no subtitutes product in this business. Bargaining Power of Suppliers = LOW (O) Suppliers of telecommunication equipment know that firms are wary of them if they are at the same time telecommunication operators. As doing this has the potenstial of competing againts their customer, so they usually would refrain from forward integration. Rivalry amongst competing firms = HIGH (O) From the case we know that the first direct competitor to Singapore Telecom is MobileOne. In the case we can conclude that these two firm are very competitive to win the customers, they constantly monitor each others performance and make countermoves. In domestic rivalry, Singapore Telecom also faces international as well as domestic competitors in its globalization drive in countries which are opening up their markets to foreigners.

III. Internal Environment A. Corporate Structure In March 1999, Singapore Telecom announced a major restucturing, they moved to divisional corporate organization, whose primary aim was to focus on growth areas such as overseas ventures and new business areas such as e-commerce, system integration, multimedia, and Internet-based service. So, they divided into three new units: 1. Consumer business unit : covering residential customers and small and medium-sized enterprises 2. Corporate business unit : dealing with corporate accounts 3. Global business unit : concerned with Singapore Telecoms overseas investment.

There is also a new Chief Operating Officer (COO) position and three customer unit under the COO. And Chief Executife Officer who focus more on growth areas such as overseas venture and new business areas such as e-commerce, system integration, multimedia, and Internet-based service.

B. Corporate Culture In the corporate culture, they always emphasis on providing execellent of service and high quality product. They also constanly seek new business opporrtunities to generate more revenues. (S)

C. Corporate Resources 1. Marketing - Have a strong image of a former monopoly in the mobile market and fixed-line market. (W) - Always concern in providing execellent service for customers (S) 2. Finance - Take advantages of their existing assets, such as billing system, telecom networks, and real estateto generate revenue through services such as facility management and billing service (S) - Pursue global and regional expansion through investments (S) - Have a good financial return from overseas project (S)

- Implement stricter cost control measures to protect its bottem line, including recing the salaries of senior managers and management flying economy instead of business class (S) - Decreasing total revenue (W) 3. R&D - Have a great quality of sing-tel infrastructure (S) 4. Operations - Implement the lates technology to offer innovative service (S) 5. Human Resources - There is no information about HR in the case, but we assume that they have experienced and expertise in Singapore telecommunication (S). 6. Information System - Advanced information system to support its growth, reduce and control cost (S)

V.

Financial Analysis PROFITABILITY 1994 1995 19,9 10,5 7,91 8,74 23,2 22,5

1993 Net Profit Growth Earnings Per share Return on Total Assets 6,59 22,2

1996 12,6 9,85 22,3

1997 12,4 11,07 20,3

1998 11,8 12,37 17,5

1999 3,7 12,82 15,1

Profitability
25 20

Percentage

15 10 5 0 1993 1994 1995 1996 1997 1998 1999

Net Profit Growth Earnings Per share Return on Total Assets

Turnover Growth

1993 11,2

1994 15,6

1995 10,2

1996 13,7

1997 6

1998 16,5

1999 -1,2

Turnover Growth
18 16 14 12 10 8 6 4 2 0 -2 -4

Percentage

Turnover Growth

1993 1994 1995 1996 1997 1998 1999

1993 Return on Shareholders Funds Operating Return on Net Fixed Assets 27,4 44,7

1994 32,8 47,4

1995 35,9 49,1

1996 36,1 49,2

1997 34,6 47,1

1998 30,3 44,6

1999 26,4 40,4

Activity Ratio
60 50

Percentage

40 30 20 10 0 1993 1994 1995 1996 1997 1998 1999 Return on Shareholders Funds Operating Return on Net Fixed Assets

1. The Net Profit of Singapore Telecom is increase but not significantly, and net profit growth has been decreasing in 2009, its because first direct competitor to Singapore Telecom, MobileOne captured significant market share is 32% within two years. 2. Singapore Telecom has refocused its overseas investment on Asia with rapidly changing technology for change are consumers themselves, who expect consistenly high quality of services. VI. Analysis of Strategic Factors (SWOT) A. Situational Analysis 1. Summary of Internal Factors Strength : Always concern in providing execellent service for customers

- Take advantages of their existing assets, such as billing system, telecom networks, and real estateto generate revenue through services such as facility management and billing service - Pursue global and regional expansion through investments - Have a good financial return from overseas project - Implement stricter cost control measures to protect its bottem line, including recing the salaries of senior managers and management flying economy instead of business class - Have a great quality of sing-tel infrastructure - Implement the lates technology to offer innovative service - have experienced and expertise in Singapore telecommunication - Advanced information system to support its growth, reduce and control cost Weaknesses : - Have a strong image of a former monopoly in the mobile market and fixed-line market - Decreasing total revenue

2. Summary of External Factors Opportunity : Telecommunication become one of the primary needs Government support by providing sophisticated industrial policy General movement toward more open and competitive markets Economic growth Singapore has the highest GDP in Asia

More sophisticated and demanding customers Singapore have the most advanced information technology infrastructure

Threat : Trend in deregulation Possibilities of financial crisis General movement toward more open and competitive markets Techonological advancement There are several strong competitors, such as StarHub and M1

B. Review of Mission and Objective The current mission appears appropiate. The objectives needs to be quantified and given time horizons.

VII. Strategic Alternatives and Recommended Strategy Corporate Strategy To formulate the corporate strategy, we use the external factors from the EFAS Table (Table 2) and the internal factors from IFAS (Table 1). Based on the SFAS Matrix result so the corporate strategic alternatives are : a. Growth Strategy b. Stability Strategy c. Retrenchment Strategy

IFAS 1 Internal Strategic Factors Strenghts s1 Always concern in providing execellent service for customers Take advantages of their existing assets, such as billing system, telecom networks, and real estateto generate revenue through services such as facility management and billing service Pursue global and regional expansion through investments Have a good financial return from overseas project Implement stricter cost control measures to protect its bottem line, including recing the salaries of senior managers and management flying economy instead of business class Have a great quality of sing-tel infrastructure Implement the lates technology to offer innovative service Weight Rating Weighted Score 0.4

0.100

s2 s3 s4

0.125 0.075 0.075

4 3 3

0.5 0.225 0.225

s5 s6 s7

0.050 0.090 0.050

3 4 3

0.15 0.36 0.15

Internal Strategic Factors

Weight Rating

Weighted Score 0.24 0.225

s8

have experienced and expertise in Singapore telecommunication

0.060 0.075

4 3

Advanced information system to support its growth, reduce and s9 control cost Weaknesses Have a strong image of a former monopoly in the mobile market and w1 fixed-line market w2 Decreasing total revenue TOTAL SCORES

0.100 0.200 1.000

3 4

0.3 0.8 3.575

Table 2 EFAS External Strategic Factors Opportunities o1 o2 o3 o4 o5 o6 o7 Threats t1 t2 t3 t4 t5 TOTAL SCORES Telecommunication become one of the primary needs Government support by providing sophisticated industrial policy General movement toward more open and competitive markets Economic growth Singapore has the highest GDP in Asia More sophisticated and demanding customers Singapore have the most advanced information technology infrastructure Trend in deregulation Possibilities of financial crisis General movement toward more open and competitive markets Techonological advancement There are several strong competitors, such as StarHub and M1 0.1 0.125 0.075 0.075 0.05 0.1 0.05 0.1 0.075 0.1 0.075 0.075 1 4 3 3 3 3 3 4 3 3 3 3 2 0.4 0.375 0.225 0.225 0.15 0.3 0.2 0.3 0.225 0.3 0.225 0.15 3.075 Weight Rating Weighted Score

Based on the IFAS and EFAS, we can conclude that Singtel should do Growth Strategy. We choose Horizontal growth and expand their business abroad. We prefer choose acquisition when they expand their business. Business Strategy To formulte the business strategy we can use QSPM analysis as below :

Table 3 Differentiation Weight Strenghts Always concern in providing execellent service for customers Take advantages of their existing assets Pursue global and regional expansion through investments Have a good financial return from overseas project Implement stricter cost control measures to protect its bottom line Have a great quality of sing-tel infrastructure Implement the lates technology to offer innovative service have experienced and expertise in Singapore telecommunication Advanced information system to support its growth, reduce and control cost Weaknesses Have a strong image of a former monopoly in the mobile market and fixed-line market AS TAS Cost Leadership AS TAS

0,100 0,125 0,075 0,075 0,050 0,090 0,050 0,060 0,075

4 4 3 3 3 4 3 4 3

0,4 0,5 0,225 0,225 0,15 0,36 0,15 0,24 0,225

4 4 3 3 3 4 3 4 3

0,37 0,2 0,22 0,225 0,15 0,15 0,17 0,21 0,115

0,100

0,3

0,25

Differentiation Decreasing total revenue Opportunities Telecommunication become one of the primary needs Government support by providing sophisticated industrial policy General movement toward more open and competitive markets Economic growth Singapore has the highest GDP in Asia More sophisticated and demanding customers Singapore have the most advanced information technology infrastructure Threats Trend in deregulation Possibilities of financial crisis General movement toward more open and competitive markets Techonological advancement There are several strong competitors, such as StarHub and M1 TOTAL Weight 0,200 AS 4 TAS 0,8 0 0,4 0,375 0,225 0,225 0,15 0,3 0,2 0,3 0,225 0,3 0,225 0,15 6,65

Cost Leadership AS TAS 4 0,7

0,1 0,125 0,075 0,075 0,05 0,1 0,05 0,1 0,075 0,1 0,075 0,075

4 3 3 3 3 3 4 3 3 3 3 2

4 3 3 3 3 3 4 3 3 3 3 2

0,4 0,3 0,18 0,115 0,2 0,2 0,2 0,25 0,115 0,3 0,2 0,2 5,42

Based on the analysis, we can conclude that Singapore Telecom should do cost leadership. Portofolio Analysis Based on the BCG matrix below, we can see that each there are some strategies depend on each business unit. - Dogs: sale of equipment and public message - Question Mark: Directory advertisement, IT and engineering, and postal service - Cash Cow: International Telephone - Star: National telephone, Public data and private net, and mobile communication.

Based on the diagram above the firm can decide what direction that the company will do in the future. Functional Strategy From the Table 5, we can formulate the startegy as below : a. Marketing Expand the business to grow their market share in regional and global section Sponsoring big and global event to support their brand awareness Create a second line product to avoid brand image of monopoly company Create differentiation in products and services Create diversification in products Using discount for uncompetitive timing b. Finance Make some cooperations with other telecommunication company related to international service Invite big investor to join the business c. Operation Minimize production cost Create more efficient resources d. Research and Development Provide excellent service and innovative technology for sophisticated customers

 Development in R&D to create innovative products

e. Human Resources Create advanced tecnology by utilizing experienced and expertise employee in telecommunication

VIII. Implementation 1. To increase profitability Singapore Telecom should Horizontal growth and expand their business abroad. We prefer choose acquisition when they expand their business. 2. 3. R&D needs to be improved, as does marketing, to attract more customer quickly. Create advanced tecnology by utilizing experienced and expertise employee in telecommunication.

Table 4 TOWS Matrix

Strength 1. Always concern in providing execellent service for customers 2. Take advantages of their existing assets, such as billing system, telecom networks, and real estateto generate revenue through services such as facility management and billing service 3. Pursue global and regional expansion through investments 4. Have a good financial return from overseas project 5. Implement stricter cost control measures to protect its bottom line, including reducing the salaries of senior managers and management flying economy instead of business class 6. Have a great quality of sing-tel infrastructure 7. Implement the latest technology to offer innovative service 8. Have experienced and expertise in Singapore telecommunication 9. Advanced information system to support its growth, reduce and control cost Opportunity 1. Telecommunication become one of the primary needs 2. Government support by providing sophisticated industrial policy 3. General movement toward more open and competitive markets 4. Economic growth SO Strategy 1. Expand the business to grow their market share in regional and global section (O1, O4, S3) 2. Provide excellent service and innovative technology for sophisticated customers (O6, S1, S7) 3. Create advanced tecnology by utilizing experienced and expertise employee in telecommunication (O6, S6, S8) 4. Make some cooperations with other telecommunication 1. WO Strategy Create a second line product to avoid brand image of monopoly company (O6, W1, W2) 2. Create differentiation in products and services (O3, W2) Weakness a. Have a strong image of a former monopoly in the mobile market and fixed-line market b. Decreasing total revenue

5. Singapore has the highest GDP in Asia 6. More sophisticated and demanding customers 7. Singapore have the most advanced information technology infrastructure Threat 1. Trend in deregulation 2. Possibilities of financial crisis 3. General movement toward more open and competitive markets 4. Techonological advancement 5. There are several strong competitors, such as StarHub and M1

company related to international service (O3, S4) 5. Sponsoring big and global event to support their brand awareness (O2, S4)

ST Strategy 1. Development in R&D to create innovative products (T5, S7, S8) 2. Invite big investor to join the business (T3, S3, S6) 3. Create diversification in products (T4, S7, S8)

WT Strategy 1. Minimize production cost (T5, W2) 2. Using discount for uncompetitive timing (T3, T5, W2) 3. Create more efficient resources (T4, W2)