A Critical Evaluation of the Marketing

Orientation Issues Facing Claro Colombia

From: The Marketing Manager
To: Board of Directors
Date: Aug 2014
(Word count 2450 words)

Executive summary
Claro is a subsidiary of Amrica Mvil, the leading provider of telecommunication
services in Latin America with operations in 18 countries in the Americas and the
Caribbean. For the purpose of this audit, the researcher has decided to take into
consideration just the mobile business line of Claro specifically in Colombia where its
the leader.
Although, numerous issues were found as the lack of coaching and hiring mistakes
when it comes to employees that are delivering a poor customer service, there are new
competitors emerging in the market, Claros prices are the highest among its
competitors and its Market share has reduced in the last two years. Moreover, the
Colombian government is aiming to reduce Claros monopoly position through sever
regulations, changes in telecommunication policies and sanctions. These issues are
leading the company to an important damage in its reputation.
It was founded that Claro is lacking marketing orientation since its lacking competitive
advantage for the current market and reputation damages are hampering the
companys leading position. Besides, it hasnt been able to achieve organizational
goals on knowing the needs and wants of target markets and delivering the desired
satisfactions better than competitors do.
The report also proposes a set of recommendation to counter this marketing orientation
problem ass facing viral online attacks, benchmarking successful Customer
Relationship Management, use a concentrated marketing strategy and revision their
pricing strategy.

Table of Contents
EXECUTIVE SUMMARY

1.

FINDINGS OF MARKETING STRATEGIC AUDIT

1.1.

Hiring and Lack of coaching

1.2.

Poor Customer Service

1.3.

New competitors emerging in the market

1.4.

High Prices

1.5.

Market share reduction

1.6.

Key Issue: Government position, economic sanctions and legal processes

1.6.1.

Governments position

1.6.2.

Mobile number portability

1.6.3.

Unlocking mobile devices

1.6.4.

ETBS case

1.6.5.

Other sanctions

1.7.

2.

Key Issue: Reputation damages

CRITICAL ASSESSMENT OF THE CONCEPT OF MARKETING ORIENTATION

10

2.1.

What is Marketing orientation?

10

2.2.

Understanding marketing orientation

11

2.3.

Relationship with performance

12

3.

RECOMMENDATIONS

13

3.1.

Talk to the customer through social Media

13

3.2.

Benchmark successful Customer Relationship Management experiences

13

3.3.

Use concentrated marketing

13

3.4.

Revision of pricing strategy

14

4.

CONCLUSION

15

5.

REFERENCES

16

6.

APPENDICES

19

6.1.

Appendix 1: Company Overview

19

6.2.

The strategic Audit

19

6.2.1.

Appendix 2: PESTEL Macro Economic Analysis

19

6.2.2.

Appendix 3: Porter Five forces

20

6.2.3.

Appendix 4: SWOT Analysis

21

6.2.4.

Appendix 5: Companys Figures

23

6.2.5.

Appendix 6: Colombia Mobile Market Share Q1 (2013)

23

1. Findings of Marketing Strategic Audit

The audit conducted on the mobile business line of Claro in Colombia (available on the
section 6.2.) highlighted some issues faced by the organisation. The following major
Challenges have been identified:

1.1. Hiring and Lack of coaching

The Company hires personnel constantly but most of the customer-facing employees in
the operational level are hired through outsourced agencies for periods no longer than
6 months. That leads the company without fully qualified personnel: The recruitment
figures fail to the point of damaging the quality needed to keep customers well informed
and have assertive replays accurately to their queries within the proper time.

1.2.

Poor Customer Service

According to La-Repblica (2013) Claro would have to pay millions of Colombian

Pesos for each month in which the indicator of customer service for users is breached.
This is due to more than seven million users would have been affected by alleged
delays in customer service provided by mobile operators, including Claro, in both
physical offices and call centres between September 2012 and September 2013.

1.3.

New competitors emerging in the market

As remarked by Kienyke (2013), Colombia has expanded in recent years the number of
mobile operators. Traditional operators such us Claro, Movistar and Tigo, are not alone
anymore. Since 2012, the market has been focusing on mobile virtual network
operators (MVNO), which are mobile carriers that do not have their own networks, it is
otherwise rented to the traditional operators.
Although the latters have not been able to get a great amount of market share they
have been more innovative breaking the standards of the industry for example by
charging customers by seconds of usage rather than by minutes as Virgin
mobile.(Vega, 2008)

1.4.

High Prices

According to kienyke (2013), In April 2013, Virgin Mobile was officially launched in
Colombia, the first mobile operator to offer voice collection consumption in seconds
rather than in minutes as traditional companies did. A good indication for customers,
with more options, announcing the charge for seconds as a good pretext for other
operators to lower their rates, which were still very high according to the mentioned

sourced. The same author stated that prices have a huge implication in demand due to
the elastic behaviour of Colombians given to high competition in the sector.
Claros High rates are the main reason why the company has been criticized, which
currently has a full rate of COP 239 to call all operators in the country, 5% more than its
main two rivals Tigo and Movistar (kienyke, 2013).

1.5.

Market share reduction

The company remains to hold the highest market share, with 59.1% of subscriptions in
the third quarter of 2013. The operator's share has weakened distinctly from its 67%
share about the end of 2009. Part of this due to improved performance from its
competitors and the introduction of rivals in the form of MVNOs. (BMI, 2014)

1.6.

Key Issue: Government position, economic sanctions and

legal processes

1.6.1. Governments position

Several decisions have been sanctioned in 2013 so as to reduce Claro's marketing
position by the government (BMI, 2014).
Asymmetric mobile termination rates have been applied to Claro in February 2013,
aiming to force them to pay higher access charges than its rivals and hoping to put
pressure on Claro's markets supremacy by obliging it to increase prices for consumers
(BMI, 2014).
Different considerations have been approved Colombia's government, pointing to even
out the market. Claro's strong position is the consequence of a well-known strategy
and a know-how supporting it (BMI, 2014).
1.6.2. Mobile number portability
Despite being the biggest mobile phone company in Colombia, the company has faced
strong headaches penalties such as COP 87,750,000 put by the Superintendencia de
Industria y Comercio (SIC), the regulatory body for industry and commerce, for
violating the rules of free competition (Semana, 2013) and preventing the processes of
Mobile Number Portability (MNP) for users who want to migrate from their network
(Dinero, 2013).
Since MNP was allowed, there have been countless complaints for obstacles imposed
by Claro. On top of that, Dinero (2013) Stated that Claro had bulged the alleged
number of migrant users to their network. Meanwhile, its competitors Colombia-Movil
(Tigo) and Telefnica-Mviles (Movistar) reported an alleged anti-competitive
7

behaviour by the investigation, which apparently had executed a possible strategy to

generate a distorting effect on the portability numbers with purpose of showing mobile
users that its network is being benefited by the MNP (Dinero, 2102).
1.6.3. Unlocking mobile devices
As stated by Kienyke (2013), when the Communications Regulation Commission
(CRC) decreed that from October 1, 2011 all mobile operators should sell their mobile
phones unlocked, Claros competitor Tigo, was already selling its mobiles unlocked
since 2009, Movistar, another competitor, availed the decree without any problem,
while Claro, Comcel then, did not adopt the measure. After the due date Claro was
selling its mobile phones locked. Journalists from the W-news, at that time, tried to
communicate with the companys president, who did not respond. Reluctantly, Comcel
adopted the measure for the same period in which the rebranding was being advertised
(kienyke, 2013).

1.6.4. ETBS case

Claro is currently facing a legal dispute against the Bogot Telecommunications
Enterprise (ETB), amounting to US 75 million, and still not been overcome despite that
has passed through several courts in favour of ETB (Semana, 2013).
Claro insists that will go to all possible instances to show that they do not have to return
the capital resources to ELB (Semana, 2013).

1.6.5. Other sanctions

Claro has been sanctioned because the information on its website on 4G technology
was insufficient for the consumer and could incur them to error (Sysmaya, 2014).
Furthermore, Claro was also sanctioned for charging mobile content and applications
without the consent of the users (Pautalsio, 2014).

1.7.

Key Issue: Reputation damages

When Comcel was renamed Claro, Ricardo Galan, its brand analyst at that time stated
that the company needed to focus on the improvement of customer to have a better
reputation. However, this promise seems no to have been met so far (ConfidencialColombia, 2014).
In Colombia Its believed that billionaire Carlos Slim called business wizard, main
Claros shareholder, bought the company in conjunction with another one called
Telmex simply as a financial move aimed at Duplicating its stock market value
(Confidencial-Colombia, 2014).

Customers feel cheated saying that the clauses are not being applied clearly and fairly
and that when customers want to retire, the company charges very high fares that the
client had not considered before or knew of its existence (Confidencial-Colombia,
2014).
Company's reputation has been threatened with serious damages as recently its easy
to find web campaigns against Claro on social networks like Facebook and Twitter.
Semana (2013) argues that not even national serious issues as peace achievement
have gotten the attention that Claro has gotten with its poor service. Its customers have
become a solid group for one cause and against the flood social networks with their
voices in protest: "Sure, today we have no signal, not tomorrow", "Join and support this
cause against Claros bad service "," the worst service Claro Colombia.

2. Critical

Assessment

of

the

concept

of

marketing

orientation
2.1.

What is marketing orientation?

For McDonald (1995) a company is said to be marketing-led or to have a market

orientation (MO) when its focused on customers and their wants so its better
positioned to make a profit. He remarks that marketing orientation is opposed to selling
what the company wants to produce because the company needs to know in advance
its customer demand.
According to Kotler & Armstrong (2013), MO is defined as managing the customer and
demand effectively, remarking it as the science and art of selecting target markets and
constructing money-making relationships with them through the creation, development
and communication of superior customer value from the marketing manager who is
supposed to have clear what the target market is and how can be customers served
best.
However, according Hooley et al. (1990) the vast majority of companies fail to develop
and exploit the benefits of marketing orientation which is a characteristic of a limited
number of companies.
Piercy (1992) describes marketing orientation as strategies regarding the critical
decision of market segmentation and market definition plus the identification of
potential bases for differentiation against competitors.
On the other hand, Avlonitis (1999) stated that the understanding of MO remained
vague since some studies have suggested a behavioural notion for the concept and
some others concluded that MO represents a philosophical nature. He concluded that
the companys-specific-factors have a facilitating effect but the market-specific had a
coercive effect in the development of marketing orientation.
Kotler and Armstrong (2013) make a very interesting point when they argue that some
authors think of marketing management orientation as finding as many customers as
possible and increasing demand, and by trying to serve all customers, they may not
serve anyone well, given that marketing managers cannot serve all customers in every
way.

10

2.2.

Understanding marketing orientation

The above definitions include the application of several activities headed by the
company towards its market that would accomplish marketing goals and increase
organisational performance (McDonald, 1995; Hooley et al., 1990; Piercy, 1992).
Organisations that are considered to be marketing oriented must engage in market
exploration

and

segmentation,

customer

needs

analysis,

positioning

and

responsiveness to their varying requests. Moreover, to achieve competitive advantage

and overcome competitors actions, organisations might attempt to distinguish its
service offering (Naude et al., 2003).Furthermore, For Kotler & Armstrong (2013) it is
very important to position and differentiate, developing a value proposition which are
the benefits that the brand promises to please customer needs.
According to Naude et al. (2003) there are different the terms used interchangeably to
a large extent to mean MO n such as "market-oriented", "marketing -oriented", "marketdriven" and "customer-oriented". On the other hand, an anonymous marketing expert
mentioned by Kotler and Armstrong, (2013) used to say according to the authors that
true MO does not mean becoming marketing-driven; it means that the entire company
obsesses over creating value for the customers and views itself as a bundle of
processes that profitably define, create, communicate, and deliver value to its target ok
customers. What Kotler and Armstrong (2013) agree with the latter concept is that
all companies departments should cultivate a smoothly doable value chain and think
customer, we are all marketers and need to understand marketing and its role in
creating customer value without having into account his/her department, everyone shall
do marketing as this commitment is needed to engage customers.
Naude et al. (2003) found that communication, socialization, and workplace satisfaction
where the most significant determinants to be the perceived MO of direct
managers/supervisors and local managers in handling internal marketing, which is a
managerial issue that goes beyond the traditional functional approach (Gummesson,
2000; Ballantyne, 1997). On top of that, internal MO requires huge cultural variations
which not only cause discomfort among the personnel, but also involve considerable
resources.
Going on the same line, another remarkable concept was developed by Sin et al.
(2002) who found six dimensions for MO consisting of: Trust, bonding, communication,
shared Value, empathy and reciprocity.

11

2.3.

Relationship with performance

Different research efforts have been focused on the examination of the connexion
between the degree of MO implementation and organizational performance (Anttila et
al., 1995; Cadogan and Diamantopoulos, 1995; Avlonitis, 1999). All these have created
important indication of a relationship between the two concepts.
Germain and Dorge (2000) go deeper stating that firms involved in formalised strategic
planning inside marketing are probable to have enhanced financial performance.
Other study by (Hooley et al., 1990) also proposes a relation between them, regarding
the stress given to marketing actions, marketing organizations nature, marketing level
of training, , and degree of proper marketing planning.
On the other hand, other authors (Panayides, 2004; Baker et al., 1994) question that
the relationship between these two concepts have led to studies that have shown
mixed results culminating in inconclusive evidence. The exploratory study proposes a
positive association between performance and market segmentation. MO and
differentiation do not appear to be meaningfully related with enhanced performance,
even though cross-functional consumer focus displays an important connexion.
Other positive comparisons between concepts have been developed. For example,
Alrubaiee and Al-Nazer (2010) studied the relationship between MO and customer
loyalty trough studies with regression analysis that showed a positive impact.
Dibb and Stern (2000) unravel the complexities faced by marketing instructors when
developing their courses. Dealing with these complexities requires the instructor to
consider exactly what is taught and how to balance material from different sources. In
transferring knowledge the instructor must consider the balance between the three
areas of the marketing trifid which they defined as the contributions of researchers (is
it true?), teachers (does it make sense?) and practitioners (does it work?).

12

3. Recommendations
After exploring the concept of MO some recommendations for the company focused on
this report emerged.

3.1.

Talk to the customer through social Media

According to Kotler and Armstrong (2013), experts agree when they state that in case
of online attacks, organizations should protect their image without fuelling the fire, and
solve it with prevention, diplomacy and engagement. Therefore, the best strategy may
be monitor the attacks and answer to customer concerns, which are most of the times
based on unresolved anger. This could sound as a very simple idea but it has shown
interesting results. For instance, FedEx and Boeing have accepted mistakes and
turned negative customer experiences to positive ones, advertising apologies and
answering over YouTube and Twitter or even inviting customers to their facilities. On
top of that, many organisations as Dell have created specialist teams that engage
unhappy customers when having online chats (Dell, 2014).
A strong campaign to clean reputation might be an interesting solution to explore.

3.2.

Benchmark successful Customer Relationship Management

experiences

Vodafone, which is also a multinational mobile operator is proud of its CRM when
retaining valuable customers, showing unique experiences. To provide value, its
customers are segmented on their mobile phone use whether is personal or business.
Moreover, Vodafone collects information from several sources as customer purchase
and demographic information and develops successful loyalty programs(Hooley et al.,
2011). Even though both companies have different markets around the globe, this kind
of benchmarking is extremely useful as both of them share lots of similarities given that
they offer almost the same products and services with similar technology standards
sharing similar concerns as challenging customer retention and attraction of new ones
due to the increasing competition in the sector. This strategy is consistent whether in
Retail shops, call centres and online services (Hooley et al., 2011).

3.3.

Use concentrated marketing

Concentrated Marketing might be an interesting solution to explore. Wholes foods

Market is a successful example of it as it grows faster than its competitors
(Bandyopadhyay et al., 2005). Having into account the issues mentioned previously,
Claro does uses undifferentiated marketing which could be one reason for their
13

decrease in market share. The researcher suggests this approach as the organisation
will have a better marketing position given that will develop a larger knowledge of
consumer requirements in the niches it aims marketing more efficiently(Kotler and
Armstrong, 2013).

3.4.

Revision of pricing strategy

This strategy is not only suggested but forcibly forecasted as one of Claros new risks
is the governments decision to remove long-term contracts (Garca and Hernndez,
2014). Therefore, Claro will have to change the pricing strategy that consisted of selling
the mobile device at a low rate, but charging customers highly for their monthly contract
fee. According to Kotler et al (2009) by offering lower priced product any company can
successfully reposition in the market.

14

4. Conclusion
The mobile line of business of Claro Colombia presents different issues, exposed here,
which were identified from the audit as the lack of coaching and hiring mistakes when it
comes to employees that are delivering a poor customer service, there are new
competitors emerging in the market, Claros prices are the highest among its
competitors and its Market share has reduced in the last two years. Though, Claro
remains the market's leading operator, it faces uncertainty as antimonopoly laws
imposed by the government are being implemented to reduce its dominance. These
issues are leading the company to an important damage in its reputation. It was also
found that Claro is lacking MO through dedifferentiation as it hasnt been able to
achieve organizational goals on knowing the needs and wants of target markets and
delivering the desired satisfactions better than competitors do.
The report also proposes a set of recommendation to counter this MO problem ass
facing

viral

online

attacks,

benchmarking

successful

Customer

Relationship

Management, use a concentrated marketing strategy and revision their pricing strategy.

15

5. References
Alrubaiee, L. and Al-Nazer, N. (2010). Investigate the Impact of Relationship Marketing
Orientation on Customer Loyalty: The Customers Perspective. International Journal of
Marketing Studies, 2 (1), p.155174.
Anttila, M., Moller, K. and Rajala, A. (1995). Assessing market orientation of high
technology companies: a study in the Finish electrical and electronic industry.
Marketing for Today and for the 21st Century, 16 (19), p.13831392.
Avlonitis, G. J. (1999). Marketing orientation and its determinants: An empirical
analysis. European Journal of Marketin, 33 (11), p.10031037. [Online]. Available at:
http://search.proquest.com/business/docview/237023291/fulltext?accountid=131694
[Accessed: 12 August 2014].
Baker, M., Black, C. D. and Hart, S. (1994). Competitive Success in Sunrise and
Sunset Industries. The Marketing Initiative, p.7889.
Ballantyne, D. (1997). Internal networks for internal MARKETING. Journal of Marketing
Management, 13, p.343366.
Bandyopadhyay, S., Gupta, K. and Dube, L. (2005). Does brand loyalty influence
double jeopardy? A theoretical and empirical study. The journal of product brand
management,
p.414423.
[Online].
Available
at:
http://search.proquest.com/business/docview/220601140/24D5E38CBF1A4CF3PQ/1?
accountid=131694 [Accessed: 14 August 2014].
BMI. (2012). Colombia telecommuntications report. 2012. [Online]. Available at:
http://media.proquest.com/media/pq/classic/doc/2605993231/fmt/pi/rep/NONE?hl=eco
nomies%2Ceconomy%2Ceconomies%2Ceconomy%2Cin%2Cin%2Ccolombia%2Ccol
ombia%2Ctelecommunication%2Ctelecommunications%2Ctelecommunication%2Ctele
communications&cit%3Aauth=&cit%3Atitle=Colombia+Telecommunications+Report++Q2+2012&cit%3Apub=Colombia+Telecommunications+Report&cit%3Avol=&cit%3Ais
s=&cit%3Apg=1&cit%3Adate=Second+Quarter+2012&ic=true&cit%3Aprod=ABI%2FIN
FORM+Complete&_a=ChgyMDE0MDgxNDE3MTEzOTEzNDo4NjgwMzMSBzEwMDU
4O [Accessed: 14 August 2014].
BMI. (2014). Colombia Telecommunications Report Q3 2014. Business Monitor
International, London.
Cadogan, J. and Diamantopoulos, A. (1995). Narver and Slater, Kohli and Jaworski
and the Market Orientation Construct: integration and internationalisation. Journal of
STRATEGIC MARKETING, 3 (1), p.4160.
Claro.
(2014).
Claro.
[Online].
Available
http://www.claro.com/paises/quienes_somos.html [Accessed: 31 July 2014].

at:

Confidencial-Colombia. (2014). Tomates para Claro. [Online]. Available at:

http://confidencialcolombia.com/es/1/1108/6516/Tomates-para-Claro-Claro-CarlosSlim-Mal-Servicio-Tomates-para.htm [Accessed: 14 August 2014].
Dell. (2014). Meet the Team - Dell Community. [Online]. Available
http://en.community.dell.com/p/meettheteam.aspx [Accessed: 14 August 2014].

at:
16

Dibb, S. and Stern, P. (2000). Further thoughts on the marketing trifid: The case of
marketing orientation. Journal of Marketing Education, 22 (3), p.214.
Garca, J. and Hernndez, M. (2014). Ponen fin a clusulas de permanencia para
celulares. [Online]. Available at: http://www.eltiempo.com/archivo/documento/CMS13728416 [Accessed: 14 August 2014].
Germain, R. and Dorge, C. (2000). The effects of formal strategic MARKETING
PLANNING on the industrial firms configuration, structure, exchange patterns, and
performance. Industrial Marketing Management, 29, p.219234.
Gummesson, E. (2000). Internal MARKETING in the light of relationship marketing and
network organizations. Internal Marketing: Directions for Management, p.2742.
Hooley, G., Lynch, J. and Shepherd, J. (1990). The marketing concept: putting the
theory into practice. European Journal of Marketing, 24 (9), p.723.
Hooley, G., Piercy, N. and Nicouland, B. (2011). Marketing Strategy and competitive
positioning. 5th ed. Prentice Hall.
Kienyke. (2013). Cmo va la telefona celular en Colombia? [Online]. Available at:
http://www.kienyke.com/kien-bloguea/asi-va-la-telefonia-movil-en-el-pais/ [Accessed:
31 July 2014].
Kotler, P. and Armstrong, G. (2013). Principles of Marketing. 15th ed. Pearson
Education.
La-Repblica. (2013). Seis operadores mviles, a responder por mala atencin al
cliente. [Online]. Available at: http://www.larepublica.co/empresas/seis-operadoresm%C3%B3viles-responder-por-mala-atenci%C3%B3n-al-cliente_111286 [Accessed:
31 July 2014].
McDonald, M. H. . (1995). MARKETING PLANS. London: Oxford.
Milln, R. (2008). Analisis del Plan Estrategico del Grupo Telefonica. [Online].
Available
at:
http://www.ramonmillan.com/tutoriales/planmarketinggrupotelefonica_parte1.php
[Accessed: 14 August 2014].
Naude, P., Desai, J. and Murphy, J. . (2003). Identifying the determinants of internal
marketing orientation. European Journal of Marketing, 37 (9), p.12051220.
Panayides, P. M. (2004). Marketing in Asia-Pacific Logistics Companies: A
Discriminant Analysis between Marketing Orientation and Performance. Asia Pacific
Journal of Marketing and Logistics, 16 (1), p.4268.
Pautalsio, L. (2014). Colombia multa a Claro, Movistar y Tigo por cobro de
aplicaciones y contenido sin autorizacin de usuarios. [Online]. Available at:
http://seniales.blogspot.co.uk/2014/04/colombia-multa-claro-movistar-y-tigo.html
[Accessed: 14 August 2014].
Piercy, N. (1992). Market-Led Strategic Change. Oxford.

17

Semana. (2013). Los clientes que se le fueron a Claro. [Online]. Available at:
http://www.semana.com/economia/articulo/los-clientes-fueron-claro/352008-3
[Accessed: 28 july 2014].
Sysmaya. (2014). Internet Movil Colombia Claro Comcel - Cuidado. [Online]. Available
at:
http://www.sysmaya.net/blog/post/2901/internet-movil-colombia-claro-comcelcuidado.html[ Accessed: 26 july 2014].
Vega, D. (2008). LOS OPERADORES MOVILES VIRTUALES, LA TELEFONIA FIJA Y
LOS POSIBLES ACTORES EN COLOMBIA. Universidad Nacional de Colombia, p.23.
[Online].
Available
at:
https://db3efde3-a-62cb3a1a-ssites.googlegroups.com/site/didiervega/tesis/tesis.pdf?attachauth=ANoY7crfQmWUwp
ZKzuY70rh7E9oBkJzUE9AezQ2XvKpYm2u4jPtZ53Mc3KK_XKnp_iBQfXLsk322WLPda-OOCgyHnXJKdAMLSLLm5ZBy_fDBZqTHe_0Rz-GgnmLKG_kkJNQtu4GUMykGsH0GEF50Uv_j2MZpnK_njNSgBrbL3A-PWmb0Lv_Km1FL4Qbk5WxyuZQSjlsX_yOXn4RjH82Ff3SueThfA4A%3D%3D&attredirects=0
[Accessed: 28 july 2014].
Visnagar, P. (2013). Global country report on Columbia. [Online]. Available at:
http://www.gtu.ac.in/ABP/GCSR PDF 2012/739 - Columbia.pdf [Accessed: 14 August
2014].

18

6. Appendices
6.1.

Appendix 1: Company Overview

Claro is a subsidiary of Amrica Mvil, the leading provider of telecommunication services in Latin America
with operations in 18 countries in the Americas and the Caribbean, which has:
More than 225 million mobile customers
More than 28 million fixed lines
13 million broadband accesses
More than 10 million TV subscribers for a population of more than 823 million (Claro, 2014)
For the purpose of this audit, the researcher has decided to take into consideration just the mobile
business line of Claro specifically in Colombia.
As stated by BMI (2014), Claro is the largest mobile operator in Colombia with 59,5% of the market share.
As part of a regional strategy, Amrica Mvil acquired Telmex International operations in Colombia in
2011, in which it holds a 99.3% stake. In June 2012, Amrica Mvil rebranded its operations in Colombia
under its Claro brand.
According to Semana (2013), the company has coverage in 1,121 municipalities in the coffee country, 80
of which have no competition from other operators like Tigo and Movistar.

6.2.

The strategic Audit

6.2.1. Appendix 2: PESTEL Macro Economic Analysis

DETAILS

PRIORITY

IMPLICATIONS

High

POLITICAL/LEGAL

Inclusion of some of the most important global

players in the Colombian mobile market that control

world mobile industry such as Telefonica and

It

is

important

to

maintain

strong

relationships with the government in office.

Government can impose several restrictions

America Mvil.

and changes in its regulation that can affect

Telecommunication operators develop a strong

the revenue of the company.

relationship with the government due to the

Low

This

initiatives

to

remove

VAT

on

regulations of the sector as licenses, authorizations

broadband domestic connections would

for the implementation of infrastructure or special

boost demand

permissions.

Government has initiatives to remove VAT on

broadband domestic connections.

ECONOMIC

Salaries in Colombia are growing faster than the

inflation rate (Visnagar, 2013)

New free trade agreements are having a positive

That gives the population higher purchasing

power.

New

infrastructure

and

FDI

become

19

effect in the telecommunications infrastructure

telecommunications

through foreign direct investment (BMI, 2012).

competitive in the region and offers higher

Investment rate is increasing from explicit backing

standards for customers.

sector

more

from the International Monetary Fund representing

confidence (BMI, 2012).

SOCIAL

The number of mobile users is everyday growing,

generating

even

more

benefit

awareness in

global trends that make them more exigent

customers. Customers are becoming mature in the

telecommunications sector given the amount of

and that pushes the string of competitors.

Customization of data and mobile plans

information they get.

given the high quality demand of each

Global trends in smartphones and related gadgets

client.

as well as applications that need a state-of-the-art

Colombians are more and more aware of

The dependency on mobiles encourages

device and mobile data provided by network

operators to improve technology as it is

operators.

needed every time, everywhere.

There is a growing trend in digital life fostered to

some extent by mobile operators and the use of
mobiles (Milln, 2008).

TECHNOLOGICAL

This is one of the most important aspects for a

As technology is changing, companies as

telecommunication company. Thats why massive

Claro need to be prepare for constant

investment in modern technologies is made as well

change to avoid marketing myopia.

as the maintenance services to the current ones.

Customers are becoming more exigent

Change from landlines to mobile lines is a global

everyday

trend.

technology,

4G,

which

is

the

ultimate

technology

for

due

to

the

generation

accessibility

of

pressure

to

companies to be updated.

telecommunications is already implemented in the

Colombian market (BMI, 2012).

ENVIRONMENTAL
Every day the eco-trend grows which means an

The company has to be aware of these trends to

important impulse for the telecommunication sector

save the planet.

through the saving of paper and its implications

It use decreases movement of people allowing

The increase in Mobile technology everyday

reductions of CO2 emissions and damaging

gases

6.2.2. Appendix 3: Porter Five forces

THREAT OF NEW ENTRANTS (HIGH)
Details

The barriers to enter this sector are high due to its high cost and special legal regulations by the government.

Product differentiation plays an important role when entering this sector because a huge amount of capital would be
needed in marketing to generate market share.
Implications

Therefore, a new competitor would need economies of scale to achieve low costs and be competitive in the market.

In addition to that, every time that there is a new competitor Claros reaction is aggressive, taking advantage of their

20

monopoly position.
COMPETITIVE RIVALRY (HIGH)
Details

Strong rivals with almost the same technology and service. Nevertheless, Claro is the market leader with 61.9% of
subscribers in the country (MinTic, 2012).

Price competition is strong among the competitors. Though, Claros prices are the highest.

Broadest mobile network in the country. It has coverage in rural municipalities that the other providers cannot.
Implications

Rivals represent a high risk for the company, threatening its market share.

Claros has a competitive advantage when it comes to the network coverage.

THREAT OF SUBSTITUTES (MEDIUM)
Details

Claro has imperfect Substitutes (given that they are fixed and cannot be transported with the customer): Such as Broadband
Internet through skype for example, landlines, or calling cards.
However, the mayor threat for Claro are internet services such as whatsapp, skype or viber that offer a free or low cost
service. Even though they work as part-substitutes in the sense that they need mobile internet service to be run which is also
provided by Claro.
Implications
Imperfect Substitutes: However, as it has been explained in the company overview, Claros services includes all these, so the
risk is lower since customers can find the substitute inside the organisation.
Mobile substitutes: These internet services or apps make the company lose profitability because the client is not going to
spend more money than the basic contract due to their use.
POWER OF SUPPLIERS (LOW)
Details
Suppliers in this case are:

Mobile phones fabricants like: LG, Samsung, Nokia, Sony Ericson, Motorola and Apple.

Electric network suppliers.

Implications

Due to the numerous companies that produce mobile phones, none of them has a great power. However, that depends of the
technology and demand that they have.
BARGAINING POWER OF BUYERS (MEDIUM)
Details
There are two different types of buyers for Claro: Pay-as-you-go customers and post-paid customers:
Buyers are aware of quality, services and prices in the market.
Implications
The company needs to have a different

MO for each of those segments to target them the right way.

Pay-as-you-go customers do not have high switching costs because of the lack of a contract but post-paid customers have
high switching costs due to the contracts signed that are usually from 12 to 24 months.
As customers have lots of information about the market it implies a risk for switching to the competitors.

6.2.3. Appendix 4: SWOT Analysis

STRENGTHS

Great amount of money invested in advertisement

Financial muscle. America Mvil which is its parent company is a key player in the Latin-Americas mobile sector

21

Diversity of mobile Plans

Market position. Largest operator in the market

Advanced technology. Broadest mobile network in the country. It has coverage in rural municipalities that the other
providers cannot.(semana,2013)

Know-how with 19 years of experience within the Colombian market as they were the first network operator.
WEAKNESSES

High prices

High rate of complaints from customers

Intermittence of mobile network

Hiring of personnel and coaching: High staff turnover and lack of proper coaching in the customer service department

Most of its growth has come from the pay-as-you-go segment

OPPORTUNITIES

Mobile number portability policy from Colombian government

Robust demand of mobile phones and need of a mobile operator.

THREATHS

High level of rivalry among current competitors

New competitors emerging in the market and are moving forward quickly with innovation.

Its market share is decreasing given that its rivals are strengthening

Is the target of the government due to its dominant position (BMI, 2014)

Subject of economic sanctions for over-charging its subscribers(BMI, 2014)

22

6.2.4. Appendix 5: Companys Figures

6.2.5. Appendix 6: Colombia Mobile Market Share Q1 (2013)

23