The Current and Futuristic Position of Etisalat - Assignment Example

The Current and Futuristic Position of Etisalat This review offers a critical examination and assessment of both the current and futuristic position of Etisalat. The methods of analysis employed here include examination of the company’s SWOT and PEST, as well as analytical assessment of the company’s performance and its internationalization strategies. Results of the information gathered regarding both the telecommunication industry, as well as the individual company, shows that the telecommunication industry is a lucrative industry that is thriving all over the world. More to reporting the current standing of the company in terms of its strengths and weaknesses, this report offers viable recommendations that can effectively tackle the problems faced by the company. Moreover, the report offers recommendations on the company’s move to set up shop in new countries. Furthermore, the report looks into the factors that limit the company’s efficiency and effectiveness on a global and national front. According to research carried out, it is notable that entering a foreign market can pose unique sets of problems that a company had not previously in the country of origin (Womack and Jones, p. 12). Introduction Emirates Telecommunications Corporation, which operates under the brand name Etisalat is a service provider in the telecommunication sector. The company is incorporated in the UAE, and is operational in at least eighteen nations especially in the Middle East, Africa and Asia. Mobile Network Code (MNC), a global regulator of the telecommunication industry asserts that, at present, Etisalat is ranked as the fifth biggest operator in the mobile telecommunication sector, having a massive consumer base of close to one hundred and twentymillion people globally. MNC, which offers a list of mobile national codes under ISO 3166-1 country codes, asserts that Etisalat is a key player in the global telecommunication sector, having been founded in the year 1976. As at February 2011, Etisalat gives an account of a net income of AED 31.9 billion ($8.4 billion), with profit margins reaching AED 7.63 billion or $ 2.07 billion. The company is a joint-stock corporation held by local affiliates and internationally reputed companies such as International Aeradio Limited and another company based in Britain. The ownership structure of the company shifted significantly in 1983 when the government of the United Arab Emirates acquired up to 60% of the company’s shares, before trading the remaining 40% in the public market. Until the government acquired shares in Etisalat, the telecommunication sector in UAE was monopolized by Saudi Telecom (STC). However, this changed in 1991 when the UAE central government enacted Federal Law No.1, breaking the monopoly held by STC. This saw Etisalat entering the telecommunication sector by receiving mandate to offer wired and wireless services, both in the UAE and the international market. Through this move, Etisalat gained rights to hand out licenses for using, manufacturing, owning, importing and exporting various equipment utilized in the telecommunication business. Essentially, this law provided Etisalat powers to regulate and be in charge of telecommunication equipment in the UAE. In addition to diminishing the monopoly previously held by STC, the law also gave stipulations for the establishment of a formal telecommunication sector in the UAE. Since this time, Etisalat has grown exponentially and rather rapidly in the short span of time owing to effective management, strategic business ventures such as acquisitions and corporate responsibility initiatives. Between 1976 and 1998, Etisalat’s network grew from 36,000 to 737,000 exchange lines, which allowed for deeper penetration into the market. Notably, the company began internationalizing in early 2001 going by the brand name Ufone in Islamabad. To date, the Financial Times ranks Etisalat among the top most 500 companies globally, when considering aspects such as market capitalization and market ownership. The Middle East magazine, however, the company is considered among the sixth largest companies in terms of market capitalization and profits in the UAE. Outside the oil sector, Etisalat is a fundamental development partner in the UAE. For instance, towards the end of 2011, Etisalat and Pacific Controls set up the Emirates Energy Start joint initiative project, an initiative focused on reducing carbon emission levels in the UAE. Etisalat and Pacific Controls teamed up with the UAE Ministry of Water and Environment to establish countrywide projects to this effect. Such nationalization programs have accorded Etisalat a number of accolades. The company is listed in the Abu Dhabi SE market under ETISALAT. ADSM. Etisalat’s shares in this stock market are listed as ordinary as its ownership is public. Etisalat’s operating profit for the 2009 financial year was AED 8,815 million, which is $2,400.6million, a 34.5% appreciation from 2008 (Womack and Jones, p.46). Analysis While Etisalat is predominantly known for its provision of telecommunication services, the company is also provides non-telecom services under Etisalat Services Holding LLC, which offer supplementary services to other companies. For instance, under Etisalat Services Holding, consultancy services, training and manufacture of SIM cards are provided. Moreover, Etisalat is a key stakeholder in Thuraya, a satellite phone providing that offers satellite coverage in Africa, Australia, Europe and the Middle East. Etisalat owns up to 34.5% of Thuraya. In an effort to restructure its business and gain more strategic position, in 2006, Etisalat let go of most of its non-essential business units through de-mergers. Through these de-mergers, the company streamlined its operations by consolidating its core operational units in the telecoms department. Typically, Etisalat adopted a customer-focused approach by dismissing its earlier approach which upheld technological telecom advancements as the main business concern. Through this restructuring initiative, Etisalat established a campaign aimed at rebranding the company, which culminated in the adoption of a new identity and corporate logo and incorporation of Etisalat Services Holding, which now manages all the non-telecom based units of the business. This detachment of non-telecom business from telecom core business has brought about immense success to the entire Etisalat business front (Investopedia, p 13). The company’s move to internationalize its operations has brought immense changes in the global telecommunication sector. Outside the UAE, Etisalat’s business is carried out under the name Etisalat International Investments, which is tasked with overseeing the company’s stake in other telecommunication providers, in countries across Africa and the Middle East. Some of the key nations, where Etisalat International Investments hold substantial stake in the telecommunication industry is Egypt, Saudi Arabia, Pakistan and Afghanistan. In Sudan, however, Etisalat International Investments oversees stakes held by Etisalat in Sudatel and Qtel, the main internet and fixed and mobile phone services provider in Sudan based in Sudan and Qatar respectively. In the UAE, the company’s headquarters is in Abu Dhabi. Its chairman and CE are Mohamed Hassan Omran and Ahmad Abdulkarim Julfar respectively. Etisalat SWOT Analysis A company’s SWOT analysis matrix allows for the determination of the company’s strengths, weaknesses, opportunities and threats. These standards are essential in gauging the effectiveness of business operations and determining potential problematic areas and formulating systems to mitigate the problems. Strengths Etisalat’s operation in the UAE reaches up to 200% of the market. The company is reputed for its efforts to establish FTTh networks in the UAE. These are Fibre- To- The- Home, which are essentially intricate telecom connections of homes through highly technological fiber optic cables. This resulted in 85% of all homes in the UAE receiving high fibre connections, making Abu Dhabi the number one country to receive fibre technology. The company has superior infrastructure, which enable access and exploitation of applications like online games and IPTV that allow for multiple high bandwidth. This is a critical interface when considering internet, television-based and landline services provided by Etisalat. These technologies provide holistic digital experience for the company’s customers. One of the most notable strengths of Etisalat is its rendering of many services to its customers. More to providing telephone services, the company is a crucial provider of internet service, both locally and internationally. Currently, Etisalat has at least one million internet service subscribers to its name. The company offers a number of internet service options ranging from dialup access on a prepaid and post paid basis, 3G internet access for mobile phones and broadband services. Moreover, Etisalat runs iZone, which is a scheme of hotspots offering Wi-FI services for central locations like restaurants and malls. Moreover, Etisalat enjoys at least 525 roaming agreements that enable connection of 185 nations, which, in turn, enables 3G, voice roaming and blackberry services. One of Etisalat’s biggest strength is its reputation of unveiling appropriate services to relevant markets at appropriate times. Weaknesses Being an international company, Etisalat is bound to encounter problems originating from its international controlling operations shifting focus from sustenance of service quality. Here, through increased internalization, Etisalat’s focus may shift from ensuring quality of services provided to maximizing access to new markets in an effort to increase revenue. As earlier noted, business restructuring in the early 21st Century aimed at mitigating this problem by focusing business units on customer satisfaction rather than advancements in technology and entry into new markets. Managing operations on a global front is also part of the company’s weakness, Here; we note that the operation of an international company is more complex than running a company based in one nation. Opportunity While the company has a commendable record regarding its market capitalization, Etisalat has viable market opportunities in the global telecommunication market. The international market offers immense market pools for any business. By engaging in international business, Etisalat embodies opportunities such as increasing its market capitalization by moving into virgin markets or competing with other service providers in other markets. Technological advances bring more opportunities to the growth of Etisalat as technological advancements in the telecommunication sector are known to result in the development of new mind blowing products and services. Investing in the best technologies presents an appropriate starting point towards the realization of new and high quality service. Later on in this report, we shall look at the penetration of Etisalat into the Brazilian market. Threats The most fundamental threats observed by Etisalat include the entry of new participants in the industry. Etisalat’s competitors pose a key threat to the company’s market capitalization and sustenance. Among the company’s main competitors are Vodafone, Telenor, AT & T and Three Mobile. Competition in the telecommunication sector is exemplified by the new technologies on a regular basis. Customers will, ideally, move towards companies that assure the provision of innovative, updated services. Etisalat’s competitors usually employ strategies such as recruitment of top notch technicians to develop ground breaking, innovative products for circulation in the market. These companies employ intricate promotional programs with a view to position themselves strategically in the market. In addition, internet content poses a serious threat to business. The company employs censorship measures to mitigate threats posed by content of material transmitted through its systems such as pornographic material, media-sharing websites, anti-Islamic websites, websites that advocate gays. In addition, Etisalat undertakes censorship to sieve out IP address links displayed through numerical formats and websites such as Skype that provide voice over IP services. Censorship in itself poses a threat to Etisalat because many view its censorship tactics as rigid and not hold fast to upholding net neutrality by deterring gaming, peer interactions and other modes of net traffic. While some people may consider this trait as part of the company’s strengths, we note that by adopting such a censorship culture, Etisalat discourages subscriptions from persons seeking to enjoy the censored services. Competitive Advantage and Competences Etisalat has extremely competitive advantage over its competitors due to its accessibility to a vat market area all over the world, which provides the company a viable platform to offer its services to a bigger market. In an effort aimed at maintaining and increasing its competitive advantage, expand its business and increase profitability, Etisalat has engaged a system of strategies aimed at realigning its managerial systems and operations. This has been done by adding weight to a new operation module that advocates customer experience and establishment of programs that push for employee satisfaction through empowerment. In addition, Etisalat has largely invested in top of the art information technology systems, which enable significant improvements to the services offered and maintenance of beneficial customers in both the Middle East region and global market. Etisalat operates under the “software AG” module, which is internationally renowned software that allows for state of the art infrastructure when it comes to business operations. Etisalat gave a public announcement that it is now engaged in a long term agreement with software AG. This will ensure that Etisalat has access to the company’s web products that will improve its business by providing viable methods for product advancements, as well as technological investments. Essentially, Etisalat rolled out a Customer Relationship Management program, which is focusefd on its attention on the business systems of billing. This is seen as a critical move towards the benefit of Etisalat’s massive customer base all around the world. Such a strategy, which ensures sustenance of esteemed clientele and increased investments in IT-based systems exemplifies the company’s intimate comprehension of the principle if customer contentment, which translates to not only sustainability of market capitalization and steady and increased profitability, but also greater competitive advantage. Moreover, through the implementation of such a well—formulated plan that looks into resource allocation, careful investments and a well managed system for management of risks, the company increases its success rate, also reducing its probable risk factors. While all these strategies are critical to ensuring profitability and market sustainability, Etisalat also looks into its marketing and managerial systems. Here, the strategy is formulated to provide active system for addressing market-based disputes by transforming the noted challenges into formidable business opportunities. These opportunities, in turn, offer a platform for innovations, making Etisalat more competitive in the market in terms of increased customer margins and profitability. By rolling out a strategic business processing module the company endeavors to place equity and capital on appropriate people and place at the most opportune time (NaukriHub, p. 16). This is noted to bring about expansion on the business front and increased revenue because Etisalat engages in the “dog eat dog” competitive strategy in its operations. Furthermore, Etisalat employs the process strategy scheme, where decision making processes are controlled within managerial systems in an effort to attain their full competitive priorities. Here, the organization utilizes its resources to attain the value for the company by customer involvement, capital intensity, flexibility of resources and structural processes (Pearson Education, p. 129). An impressive process strategy allows for maintenance of beneficial customer relations by adopting process structures that look into ways of ensuring complete customer satisfaction with telecommunications services provided by Etisalat. In addition, it involves clear precision in the allocation of resources, which, in turn, maintains and increases profitability and company readiness to take advantage of crucial opportunities that occur in the regional and international domain. Corporate Strategies and PESTEL Analysis Etisalat publicly trades its shares in the capital markets and undertakes viable investments in other nations such as Iraq, Benin, Sudan, Australia and Egypt. In addition, the company employs up to 21,000 staffs in its worldwide network. Moreover, Etisalat engages in profitable partnerships (NaukriHub p.11). For instance, the company is in talks with the Zain Corporation, seeking a merger in order to increase its customer base and gain an edge in service provision. We cannot fully analyze a company’s strategies without looking at its PESTEL analysis. This is a crucial strategy aimed at uncovering the many factors that affect a company in its environment. While, for local companies, this is easy, however, for international companies, assessing the PESTEL factors that influence its international operations proves difficult. When considering PESTEL analysis, it is important to look at economic, technological, social, political, environmental and legal factors that affect a country and which, in turn affect companies operating in the nation. Companies in Brazil are affected by the PESTEL conditions in nation. Firstly, the prevailing political conditions in the country have a direct impact on the nation’s performance in terms of its strengths, weaknesses and threats. During the course of the last decade, Brazil has experienced significant socioeconomic revolution. Members of the middle class have since then entered the political arena, which has impacted Brazilian politics, which saw the recent refurbishment of the Transportation Ministry because of corruption allegations. The political elite are driven by more than mere political aspirations, but seek to find ways of enriching the lives of the populace. The political arena has shifted into one that does not tolerate corruption and finds ways of dealing with societal vices. Brazilians have also gained a sense of authority whereby they demand appropriate service delivery from the elite. While in previous times, the Brazilian political landscape was considered instable and marred with controversies, the current regime has performed a cleanup in terms of politics, which in turn, provides a viable platform for internal and foreign investors to enter the nation. Brazil’s defense forces have beefed up security in the nation following the recent terrorist threats in the world. This has subsequently provided its citizens and foreigners a sense of security and contentment (Updike, p.125). Economic factors that affect the nation include the performance of its currency on the global front and the overall performance of the economy. The value of Brazilian currency, the real (BRL) has been rising since the 2008 global economic recession. According to the Brazilian Central Bank, the rise in value is as a result of increased investments in the nation’s resources as the nation offers secure investment opportunities. Because of increased investment, the nation’s economy has grown exponentially as it boosts its national currency reserves in anticipation for economic hardships. The preparedness, in regards to financial matters has set Brazil aside from other nations in its region. However, strong currencies have an adverse effect on the exports markets, putting pressure on local companies as their products become very expensive on the international market. While the nation still faces massive unemployment, its GDP has reportedly grown by 3.6% since the last financial year. Its agricultural sector remains the key most important sector, affording Brazil immense foreign currency and increasing investor pools. The nation is second largest coffee producer in the world. The Ministry of Finance oversees the budgetary allocations made by government to various initiatives such as healthcare provision and infrastructure. In terms of social landscape, Brazil is the most densely populated nation in South America, predominantly comprising Europeans, Asians, Amerindians and Europeans. The racial and ethnic diversity of Brazil brings about assimilation of different cultures. Brazilian cities are aligned along export paths around ports. Rio de Janerio and Sao Paulo are internationally renowned as major tourist attraction points, as well as playing host to headquarters of some international corporations. Film production and especially the production of soap operas exemplifies the social landscape of Brazil. With such a profound entertainment arena, the nation is a major attraction in terms of theatre and film. Technological advancements, on the other hand, are part of Brazilian heritage. Through the Ministry of Science and Technology, Brazil has been able to raise its technological landscape to meet the needs of its populace and augment the innovations of the private sector (Updike, p.99). The Ministry is tasked with enhancing technologies and channeling resources to technology innovators and controlling quality standards. In addition, the through the Brazilian Society for Scientific Development, technology lobbyist have been given resources and an avenue to protect national technology against competition from foreign nations. Technological research is predominantly conducted in public universities. However, the government established regulations and incentive programs to enable members of the private sector to participate in research. The technological landscape in Brazil is dominated by a few Brazilian organizations, especially multinationals, which often have research and development departments in their overseas branches. In recent times, however, large companies like Nokia, IBM and Motorola have set up research and development centers in Brazil. Manufacturers and distributors of technology in Brazil enjoy exemptions of up to 55% of certain taxes under the Informatics law. Firms that enjoy these exemptions include companies dealing in telecommunications, digital technology, computers and electronics. In this case, by entering the Brazilian market, Etisalat is bound to receive beneficial incentives to boost its investments and augment its profitability. Brazil’s development of software, fiber optics and electrical appliances also poses a competitive platform to multinational companies in the country. Being a telecoms company, Etisalat will enjoy the technological advancement of Brazil and the innovativeness of its populace, which provides sophisticated human resources and skills. The Brazilian environment features magnificent biodiversity. Different ecosystems sustain this biodiversity and facilitate economic activities such as the tourism sector. With massive demographical growth, the nation’s capacity to protect its environment is diminished. As a result, the Amazon rainforest, which is the largest forest in the world, is experiencing rapid depletion at the hands of illegal loggers. The environment is also under threat as a result of speedy economic growth. The Brazilian biodiversity encompasses the highest known number of invertebrates and vertebrates, mass bird populations, supreme primate populations and reptiles. Moreover, Brazil’s terrain moves from massive water masses, deep forests such as the Atlantic and Amazon forests to blue ocean sceneries. Lastly, the Brazilian legal landscape encompasses labor laws, corporate governance, trade restrictions, judicial systems and laws affecting business operation. Firstly, labor laws in Brazil were adopted from Italian Mussolini’s corporatist codes (Updike, p.119). Here, the government imposes fines on employers who fire employees without just cause, which in this case encompasses factors such as laziness and bankruptcy. The judicial system receives at least 2 million cases where employees sue their employers. The system rarely ever sides with employers, which results in their payment of hefty legal charges and fines. In addition, payroll taxes in Brazil are expeptionally high, which compels businessmen to hire few staffs or make employee payments under the table. Internationalization Strategies As earlier noted, Etisalat has increased its customer base by expanding into the international market. This has seen the company’s customer base grow exponentially and affords its access to more markets and new technologies. After the company has gained immense customer capitalization in the UAE market, it sought to expand its business to the international level. In this strategy, Etisalat set up an ambitious plan outside its central location by moving into regions such as Africa, the Middle East and Australia. Here, the company rolls out intricate strategies to enter a foreign market by assessing the market potential of a region, gathering competitors; information, testing its services on the new market and promoting its services in the new market. In addition, Etisalat engages process planning to map out the legal, technical and technological strategies to employ in the new market. These strategies are usually dependent on the existing forces such as technological advancement and access to customers in new market. In an effort to enter into new market, Etisalat seeks to increase its customer base by going into the Brazilian telecoms sector. Brazil is South African nation, which enjoys modern telecoms technology such as digital television. HSDPA, 3G and VDSL2. However, some regions of the country such as north and north-east sections are not accessible to technology with most of the areas lacking essential technologies such as analogue land line telephones (Cunningham, p.98). This is bound to cause acute problems to Etisalat as it seeks to launch state of the art technologies in these regions and all over Brazil. In an effort to solve the technological hurdle, the Brazilian government has rolled out a plan to integrate new technologies in the entire country by extending 3G services to the affected regions. In order to faciltate this, the government has called upon local and international telecommunication service providers to enter the lucrative market (Updike, p.9). Having massive population, Brazil offers lucrative potential to Etisalat. In addition, the country is traversed by key submarine cables that improve its technological potential. There are a number of submarine cables that connect Brazil to other nations. For example, the Americas II cable, which was launched in 2000 connects Brazil to the US, Atlantis-2 links Brazil to Europe, Africa, linking Brazil with other South American countries. Moreover, Brazil is connected to Argentina and Uruguay via the UNISUR cables. All the aforementioned cables have a bandwidth capacity of at least 1 Tbit per seconds. By choosing to expand its business into Brazil, Etisalat will have to undergo proper business restructuring because the Brazilian constitution controls the participation of international companies in its telecommunication sector. Moreover, the company will note that, in Brazil, television services do not form part of telecommunications, so if it seeks avenues to go into television services, it must abide by the Brazilian legal framework (Updike, p. 18). Observations and Recommendations Observing the legal and technological landscape of Brazil should be of the foremost importance to Etisalat as it seeks to venture into the Brazilian market. Key factors such as the technological advancement of the country, the availability of sophisticated labor and expertise is a compelling factor to venture into the nation. However, when considering legal factors such as the aforementioned stringent labor laws, Etisalat should exercise caution by establishing a viable legal framework to counter the effects of these unfavorable factors. Brazil is a well endowed nation, having massive population that could provide the basis of a strong employee program, but it would not be in the company’s best interest to launch operations in the nation without first gauging the effectiveness of its legal framework in terms of labor provisions. It is necessary for Etisalat to conduct intensive research into all aspects of the Brazilian landscape, from the political, economic, social and technological aspects of the nation. Here, Etisalat realizes that Brazil offers a formidable base for launching new business as it is already well versed technology-wise, as well as having lucrative customer base offered by the many tourists that frequent the nation together with Brazil’s immense population. Conclusion Etisalat strategic planning and viable implementation strategies have increased its profit margins and competitive advantage by adopting CMS and innovative strategies. The company’s strategies have positioned it in a rather profitable situation as it manages its SWOTs in an amiable manner (Cunningham, p.75). However, Etisalat should unveil cost-cutting measures in an effort to lower its overall costs and maximize profits. This move can be achieved by rolling out plans to reduce the size of its outlets all over the world and stretch its operating hours. Moreover, strategic planning should involve increased acquisition of telecoms companies as well as IT-based business to improve on Etisalat’s advantage. Works Cited Investopedia. The Industry Handbook: The Telecommunications Industry. 2011. Print. Retrieved 8 May 2011 http://www.investopedia.com/features/industryhandbook /telecom.asp. Probst G. and Raisch, S. Organizational crisis: The logic of failure, Academy of Management Executive. 19(1) pp. 90–105. 2005. Print. Retrieved 8 May 2011 http://cengagesites.com/academic/assets/sites/Hitt_Chapter1.pdf. 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Telecommunication Regulations. 2006. Priny. http://www.tra.gov.ae/about_tra.php Read More