Dialog telecom is Sri Lanka's largest telecommunications service provider. It is a subsidiary of the Telekom Malaysia International, one of the leading telecommunication service providers in Malaysia and South East Asia. Dialog Telekom is principally engaged in offering mobile, internet and related communication services. In addition to that, it also offers multimedia and mobile internet services to its clients in Sri Lanka. Further, it also offers a complete range of internet services and television broadcasting services in Sri Lanka. The company also holds good expertise in offering its telecommunication infrastructure services.
Dialog launched its services in 1995 as the 4th entrant to Sri Lanka's Cellular Market and was the first digital network in South Asia. Dialog was also the first operator in the region to deliver international roaming in 1997. The company had expanded its network aggressively and invested lot of money to bring advance technology to Sri Lankan telecom sector. The company had regularly introduced new and innovative products to capture huge market share. The company had made huge investment in building telecom infrastructure in Sri Lanka.
In 2010 the company received the highest "Platinum" rating in the countries first-ever Corporate Accountability Index. The company operates on 2.5G, 3G, and 3.5G communications networks, and was the first company to launch commercial 3G and HSPA+ operations in South Asia. The company's market strategy is very aggressive and caters for whole range of subscribers. The company launches new and innovative products to increase its foot print.
There are many factors in the macro environment that effect the decisions of the management of a company. This comprehensive PESTEL profile and Porter's 5 forces model of Dialog Telekom PLC provides an in-depth strategic analysis of the company's macro environment. PESTEL is a study of the political, economic, social, technological, environmental and legal factors in a nation that have an effect on the working of an organization.
A PESTEL study of Sri Lanka's macro environment which has an effect on Dialog telecom is as follows:
Political factors
These refer to government policy such as the degree of intervention in the economy. Political decisions can impact on many areas such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy has such as the road and rail system. Initially the telecom sector was fully owned by the government. It was monopoly of government and all financial decisions for expansion was taken by the government agencies. Even the investment by the government owned Telecom Company was taken by state institutions. The telecom sector in Sri Lanka was deregulated in early 1990s. It brought multiple telecom service providers. The number of telecom service providers stands at 5.
Sri Lanka has very positive investment policies. Inspite of liberalisation started in 1977 the industry did not gain much as limited foreign investment came to the country. Mainly it was due to lot of political interference, bureaucratic work culture and poor governance.
Economic factors
These include interest rates, taxation changes, economic growth, inflation and exchange rates. The Sri Lankan currency had depreciated a lot. The exchange is SLR 108 per US dollar as against SLR 50 to a dollar ten years ago. The fall of the exchange rate happened over a number of years at a gradual pace. Sri Lanka lags the dynamics for attracting for foreign investments as compared to India. The political and local infrastructure needs to be improved to attract investments. The government trade policies and unstable environment has negative effect on the industry.
Social factors
Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. The company's success can be attributed to the skills and dynamism of local people. Sri Lanka has an advantage over its neighboring countries in terms of better social conditions i.e. strategic location, educated and trainable manpower, high literacy rate, low mortality rate and long life expectancy. The company also provides for a wide variety of community development initiatives. It is basically a part of its corporate social responsibility.
As it is common with colonial states the bureaucratic attitude and system inherited from them leads to discrimination and inefficient system.
Technological factors
New technologies create new products and new processes. Newer and better technology helps in reduction of costs, improves quality and also leads to innovation. To make Sri Lanka a hub for international transit services, TRCSL promotes research and development activities. It needs foreign direct investment and technology transfer to make Sri Lanka a viable hub. However TRSCL favours local development efforts.
The country has been slow in embracing new technological changes in a stipulated time period. It took long period for change to digital, CDMA technology from old analogue system.
Environmental factors
Dialog Telekom is actively involved in conservation of Nature and Natural resources in Sri Lanka. It regularly organises environmental awareness and biodiversity education programs for educating people. Dialog along with Central Environment Authority (CEA) and International Union for Conservation Trust (IUCN) organises environment and biodiversity education programme for children. The main purpose of the program is to educate and make people aware of natural resources and biodiversity.
Legal factors
These are related to the legal environment in which firms operates. Legal changes have an effect on a firm's cost and demand. The major change in Sri Lanka's legal environment was the liberalisation of the Telecommunications sector in 2003. The liberalisation offered the company an opportunity to launch its power brand- Dialog global. Sri Lanka compared to its neighboring countries has many advantages of most favorable policies towards foreign investors. In mid 90s, it was a positive change to introduce competitive oriented regulations instead of government funded investments. With the hope of an enduring peace and a general improvement in the country's social and economic well-being, the telecom sector is well positioned for vigorous growth.
TRSCL, the regulatory body takes up multi-dimensional roles. It ensures that service providers follows government policies, accountable to network performance and addresses consumer grievances. It also interacts with them on regular basis for feedback and for future policy changes and implementation.
However TRCSL has been criticized for arbitrary decisions and rules, discrimination and in efficiency.
In early 1990's the telecom sector was deregulated. It gave opportunity to private companies to enter this sector. Today with multiple service providers the competition became tough and customers got chance to select the service provider. Today there are 5 main service providers in the country. Telecom companies also realised that they will have to cater and listen to customers needs to retain and get new subscribers.
Porter's Five Forces is a framework for industry analysis and business strategy development. It studies overall industry profitability. Five forces are:
Threat of new entrants
AIRTEL has been awarded fifth mobile operator license in Sri Lanka. AIRTEL is India's largest mobile operator. It had led to increase in competition. However, TRCSL had announced that no more licenses will be issued in the near future. It creates an entry barrier for any new operator in the market.
Bargaining power of buyers
Sri Lankan are very simple and peace loving people. They are not very aggressive or demanding as compared to Europeans and Americans. The customer protection groups do not exist in Sri Lanka. The standard of quality and support are compromised by the service providers. Most of the buyers are happy with basic level of quality and support system.
People are not very conscious about a particular operator as they are keener on low cost. They don't mind switching to new operator if it is cheap. The cost of shifting to other telecom provider is low, which give leverage to customer and increase their bargaining power. But Dialog Telekom is able to retain certain segment of customers/buyers as it is providing lot of value added services.
Threat of substitutes
In present scenario there is no major threat from substitute for mobile operators as no new technology is available in Sri Lanka. The only threat is from fixed line operators. However the penetration of fixed line telecom system is low as compared to mobile communication. There can be a small substitution effect with the introduction of CDMA licenses. SLT, SUNTEL and LANKA BELL have been awarded CDMA licenses.
CDMA operators are providing limited mobility, hence they can be considered as substitute for user requiring telephone connectivity without mobility. The market for such product is very limited.
Bargaining power of suppliers
Dialog Telekom is dealing with both local and international suppliers for their operations in Sri Lanka. For network connectivity back haul is critical. Dialog Telekom does not own a national network, hence has to depend on local providers. SLT, MTT and few other VSA operators have direct access to the national backbone. It makes them quite powerful as compared to their competitors. Recently Dialog Telekom had acquired MTT to increase its network system. MTT is part of Dialog Broadband Network.
In Sri Lanka the data and voice traffic is low which gives a bargaining edge to upstream providers for ISPs and VAS.
Rivalry among Competing Firms
Inspite of high completion in mobile communication market, the Dialog Telekom have an edge over other service providers. It provides specialized product and services which are different from other telecom firms. It offers various VAS products like Push N talk, emailing via mobile, Ring tones, Push N talk, Star call, Photo techniques etc. These services are very popular among users. Most of the other operators only provide basic services.
Dialog Telekom is making huge investments for new services, network expansion and creating huge capacity for future expansion. It gives an advantage to them for launching new services and providing them an edge over competitors. It competes on value added services and unique products against other operators. Mostly other operators compete on coverage and rates. Due to this Dialog Telekom has surpassed other mobile operators and attracted much more subscribers than Sri Lanka Telekom. It gives them a unique position in the competitive telecom market.
The micro environment of Dialog can be analysed through SWOT analysis, Porter's value chain analysis and a study if the strategic intent.
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective A SWOT analysis may be incorporated into the strategic planning model. Strategic Planning has been the subject of much research.
This comprehensive SWOT profile of Dialog Telekom PLC provides with an in-depth strategic analysis of the company's businesses and operations. It gives an unbiased view of the company's key strengths and weaknesses and the potential opportunities and threats.
Strengths
Aggressive entry by Dialog Global into the International Services Market established it as a premier mobile provider in Sri Lanka. As the first mover in the GSM technology in Sri Lanka it has a competitive advantage.
Massive investments in creating strong infrastructure led to largest and reliable mobile telecommunication coverage providing best services.
Commitment in research and development and new technology introduction.
Subsidiary of Telekom Malaysia group, a telecommunication giant gives them asses to new technological development.
Introduction of unique products and Value added applications.
Customer servicing infrastructure which no other service provider is able to provide.
Dedicated staff of over 150 professionals.
The company provides 24*7 service supports to its customers.
Awarded National Quality award due to commitment to excellence.
Investor confidence in the company is reflected in its share prices, thus boosting the Company's image.
It rewards customers for their loyalty through a comprehensive portfolio of customer reward programs.
Dialog's dividend distribution policy of around 40%-50% of net earnings will result in the company being substantially free cash flow negative over the medium term.
Weakness
Dialog's subsidiaries are still in the early stages of development.
TRSCL is responsible for the slow growth of Sri Lanka's telecom sector.
Inspite of huge investment on advertising and value addition service, it is not focused for bigger market.
Performance as an ISP is quite poor.
Unable to launch product based on low price for specific target class people as compared to the competitors.
Quality of service is decreased due to the rapidly expanding customer base.
High attrition level in call centre and help desk.
No initiatives for development of the workforce.
Opportunities
Telecom sector is rapidly growing industry in Sri Lanka.
Fixed line telephony penetration is very low, hence gives opportunity to provide alternative to communication system.
The acceptability of the value added services by the users hence increasing the profitability of success of any new VAS initiative.
The company has asses to new developed technology as they have strategic agreement with Vodafone.
Opportunity to launch 3rd generation (3G) mobile communication and mobile multimedia technology.
Dialog GSM is one of the first to support High speed packet based model data services. The launch of GPRS in 2001 in Sri Lanka made them the first country in the region and is among the 40 countries in the world to launch this product.
Sri Lanka Telecom losing its monopoly on international calls has led the way as the market was opened up to competition.
Threats
In early 1990's the telecom sector was deregulated. It gave opportunity to private sector companies to enter Telecom sector. Competition among local mobile operators has intensified considerably over the last two years driven. Today there are 5 service providers in Sri Lanka.
Aggressive network expansion has resulted in Dialog's incremental subscriber growth lagging that of the industry.
Competitors pose a threat at different levels.
Political and economical changes and colonial bureaucratic system can create hurdles for the industry.
Customer preference is changing fast due to exposure and awareness to happening in the world market.
Counter terrorist campaign in north Sri Lanka and uncertainty due to political situation in the region. Due to military operation in the North Sri Lanka led to Dialog switching off all base station in the area.
High inflation and volatility in foreign currency exchange rates, badly affect the global business.
Strategic Intent is a statement of the means by which an organization achieves its vision. It is a statement of a design for creating a desirable future.
The strategic intent of Dialog Telekom is to be the leader in the provision of mobile telecommunication based system. The company tries to achieve it through processes which are
Customer driven
Responsive and flexible
Delivery of quality service
Leading edge technology unparalleled by any other
Porter's value chain is a useful tool for defining firm's core competencies and the activities in which a firm can pursue a competitive advantage.
Most of the existing functional strategic are for current operations of Dialog, and cannot be implemented for new business units.
The business strategies should be as follows :
The current marketing strategy has to be modified to cater for cost factor. To attract new subscribers and retain existing customers who only need basic voice and SMS services, the company needs to introduce new packages. Aggressive advertisement and promotion can improve the customer base. New market penetration can be achieved by fine tuning the current market strategy for promotion and advertisement.
Dialog Telekom current financial strategy is doing well and there is no need to make any major changes. They are going to have stability corporate strategy.
Technological strategy is important in order to sustain technological leadership. R&D is critical for Dialog Telekom to enhancing the performance. They should enhance and improve R&D capabilities by having strategic partnership with leading technology Development Company.
As Dialog Telekom has been aggressively expanding and with new acquisition it is essential to streamline the Operational strategy and create common, efficient and affective operations flow. The management changes are needed to accommodate personnel from new entities and amalgamations them into corporate culture.
The human resource management strategy should be reviewed regularly and improved to create strong working environment for employees to grow in the organization. The delegation of responsibilities along will help to manage growing workforce more effectively.
The information strategy needs to be upgraded and developed to align with corporate and business units.
In today's scenario no company can carry out all activities themselves. One to outsource certain operations for efficient and effective managing of company operations. Information technology support, legal services and certain call centre activities should be outsourced.
The R&D work, achievements and innovative products developed Dialog Telekom needs to be patented and secured by copyright acts.
Competitive strategic groups and the strategic routes taken by the industry
The highly competitive mobile market in Sri Lanka has been running with a healthy overall annual growth rate of 50-60% for the last few years. With mobile penetration still relatively low (compared with some of the other Asian markets) approaching 40% in early 2008, the strong growth was continuing. The market has undoubtedly benefited from the liberalization of the market and the competition that comes with having four operators seriously battling for market share.
Today there are 5 main telecommunication service providers. The increase in competition led to customer getting choice to select service provider and the service provider had realised that for the company growth they have to retain existing subscribers. It important to take care of customer preferences or they will move to other service providers.
Strategies adopted by the company to attain competitive advantage
Conclusion
The telecom sector was totally owned and managed by government prior to deregulation. It was government monopoly and in absence of competition there was no focus on customer and operation services. The government telecom system was lethargic and inefficient.
The deregulation brought private partnership and competition in this sector in early 1990's. Moreover with customer exposure to world services, their preferences and aspirations changed. The service provider started looking at the customers demand seriously and improved the network performance and reach. The quality of telecom services improved manifold in last few years.
New strategies were formulated by telecom service providers for expansion, growth and retain customers. Today customer has various choices to select the service provider as per their need and utility. They have the choice of products for fixed line, mobile, internet or wireless.
Dialog Telekom is market leader in mobile telecom industry with 5 million subscribers. The products launched by the company are well received by young population. The company had made huge investment to expand its network system throughout Sri Lanka. The mobile penetration in Sri Lanka had tremendously increased to 38% by end 2007.
Today there are 5 main mobile service providers. The increase in competition has led to customer getting choice to select service provider and the service provider in turn had realised that for the company growth they have to retain existing subscribers. It important to take care of customer preferences or they will move to other service providers. It is equally important to launch new products to attract new subscribers. The launch of 3G services will open new opportunities for Telecom Company to provide more multimedia applications.
The market capitalisation of Dialog telecom as on 31 March 2007 was LKR 188.79 billion (US$ 1.73 billion). It is the first company in Sri Lanka to achieve billion dollar market captalisation. The loyalty of the Sri Lankan customers depends on the ability of the service provider to add value to customer's business processes, contrary to the belief that low price keeps the customer with the service provider.
The Dialog brand is very popular among Sri Lankans. The brand has grown aggressively due to its network expansion and innovative products and services. The company has committed to various Corporate Social Responsibility (CSR) activities involving local population.
