|← AFMI||Organizational Change →|
Many firms, organizations as well as companies are nowadays faced with lots of risks, especially those that are external to them due to increased competitions that have emerged because of globalization. Due to the high global competition in today’s business environment, firms that wish to survive have to sustain their existence by laying out proper and competent strategic management activities. Development of competent are effective management strategies is vital in the growth of a business, market positioning, customer attraction, carrying out business operations, enhancing the competitive edge of the business as well as making sure that the business meets it target goals and objectives. Therefore, strategic management can be described as a combination of various sets of managerial actions as well as decisions, which are the key determinants of the overall performance of the business in the long run (Blumentritt & Danis, 2006).
In order to survive or sustain the existence of a business in the present highly competitive business environment, the experts in charge of management should be keen and quick to respond to changes that occur within their business operation environment among them being increased competition. In such a case, the management is expected to lay out strategies and engage in a more systematic planning that will see the business respond positively to the unforeseen and changing events in the business environment. This is due to the fact that formal strategic planning enhances the performance of a firm. According to Thomson (2006), an organization’s strategic management entirely lies in its game plan in ensuring that the business grows, occupies/commands a substantial market segment by attracting/retaining potential customers and meets the set mission, vision as well as predetermined targets. Therefore, management strategy or strategic management entails the actions and the decisions that managers in charge have to take and set up plans that will drive the organization towards the intended direction and meet the set goals and objectives (Guttman, 2004).
Looking at strategic management from a different angle, it is possible to relate management strategies of an organization or accompany as partly the outcomes of trial and error learning in an organization, especially if to take into consideration what strategies were successful in the past as well as those that did not succeed (Hitt et al., 2003). In this aspect, the management is able to make a critical review and come with an evaluative assessment that will see the company adopt only those strategies that worked in the past and at the same time look for alternative to replace the strategies that did not yield expected outcomes. Therefore, this makes strategic management to partly qualify as a product of strategic thinking and analysis, concerning the options that are in a given business situation as the exact actions that need to be undertake in light of the surrounding circumstances (Blumentritt & Danis, 2006).
This research paper is going to explore and examine the role played by strategic management in line with the future development of firms, companies and organizations. It will explore this idea by developing knowledge as well as practice by application of various concepts and techniques of strategic management. In specific, it will focus on the Du Telecommunication Company/organization, located in the United Arabs Emirates by looking at the strategic management practices in the UAE business environment, company’s overview and the company’s business environment (SWOT analysis). It will then give an analysis, results and recommendations
Strategic Management practices in the United Arab Emirates business environment
The UAE government in coordination with the seven emirates has implemented various strategic management practices in its business environment. One of these strategic management practices is effective communication. Effective communication strategies have been developed to facilitate easy communication and interaction in the business sector for transparency and accountability. Effective communication has also facilitated faster decision making, formulation of business related policies, implementation as well as development of other strategies in the business environment. The strategies that have been employed to facilitate effective communication in the business sector include development of unified communication standards, leveraging communication and enhancing its utilization in promotion of business policy formulation, decision making and promotion of communication within the business sector (Guttman, 2004).
Another strategic management practice in the UAE business environment is effective legislation including the making process as well as integrated policies. The UAE business environment is experiencing a major boost following the implementation of effective policy making procedures that are geared towards development in the business sector. The government has ensured proper business legislation through enhancing efficiency in the business legislative process and improved quality as well as relevancy of the legislation. Integrated policies have also been developed and these involve policies that are formulated in consideration with a wide scope of business practices being carried out across the UAE business environment (Blumentritt & Danis, 2006).
Another strategic management practice in the UAE business environment is the development of business networks across the seven emirates. These business networks have been developed to facilitate free practices across all the emirates as well as borrowing of business ideas, knowledge, skills and other practices that are desirable. These business networkers have promoted inter-business relations and coordination among various businesses resulting in the improved performance in the business sector as whole. The business network has also encouraged and facilitated formation of partnerships geared towards production of better outcomes in the business sector (Hanson et al., 2008).
There is also development of proper business institutional governance practices. Business institutions can only record better performances if their governance structure is properly laid out. Businesses in the UAE have laid out proper governance systems that ensure efficiency, effectives and accountability on the side of management. The management has been subjected to periodic evaluations and close monitoring to ensure that they are contributing to the improved performance in the business sector. This has been strictly applied to public owned business institutions that are profit oriented. Businesses have also developed effective organizations structures with well refined roles and responsibilities for various business positions. All these development practices have contributed to improved performance of the business sector in the United Arabs Emirates (Guttman, 2004).
Another strategic management practice in the UAE business environment is the efficient management of financial resources in the business sector. Financial resources are key determinants of success and sustainability of the business sector. These financial resources need to be managed well and at the same time well accounted for. The UAE has developed various strategies to ensure that the resources in the business sector are well managed. These strategies include facilitation of government audit in government business institutions and encouragement of the private sector to hire auditors to inspect financial transactions. These practices have ensured accountability in the business sector as well as increased returns for investors. Due to this, more investors have been attracted and pulled into the business sector. The business sector is now one of the major sectors that are contributing to the development and stabilization of the UAE economy (Blumentritt & Danis, 2006).
Customer centered service provision is also another strategic management practice in the UAE business sector. This strategic management practice is geared towards ensuring the business sector provides exactly what the potential customer or target customers want. Customer focus is the key determinant of business success and this strategy has made many brought success in the UAE business sector not only at home but also across the globe (Hanson et al., 2008).
Lastly, there has been development of efficient earning and training institutions to provide human capital in terms of skills of entrepreneurship and managing of various businesses in the business sector. These developments have contributed towards better management practice in various businesses and the ultimate improvement in both performance and sustainability. The acquired skills have also led to development of new innovations/inventions that have seen new products manufacture and delivered to target customers. The knowledge has also enabled the business sector to withstand competition and develop mechanisms to effectively deal with competition (Blumentritt & Danis, 2006).
The Du organization in the United Arabs Emirates
Emirates Integrated Telecom Co. PJSC (EITC) is an organization that is based in the United Arabs Emirates and its main focus is in the telecommunication business sector. There are four business segments that are well elaborate and form the organization’s structure. The first one is the mobile segment and this segment provides mobile telephone services, fixed line, internet protocol TV and the broadband connectivity. The company is widely known by its popular name ‘du’. Since the company is a service provider, it has extended to offer services at various business environments including homes, in businesses, career services as well as at individual level. The specific place, where the company headquarters operates, is called Dubai (Guttman, 2004).
The executive board of the ‘du’ company
Looking at the key personalities in the company, Osman Sultan is the chief executive officer in charge of the entire company. His duties involve coordination of all operations in the entire company. Farid Faraidooni is placed in charge of all commercial activities and works as the chief commercial officer in the company. Technological issues and other advancements that are required in the company are under Yatinder Maha who operates as the chief technology officer. Since this is a telecommunication company, technology advancement, innovations and development of new skills is vital in enhancing service and ensuring that these services are carried out under continual improvement, therefore, this sector is very vital to the development of the company as a whole (Hitt et al., 2003). The company has got its well elaborate human resources that deal with issues of employees, remunerations, recruitments, welfare of workers as well as training among other issues. It is the busiest department as it deals with a wide range of services. This sector is under an officer named Fahad al Hassawi who serves as the chief human resources officer. The customer care department also tends to fall under this sector. The company has got its chief financial officer named Mark Shuttleworth who ensures that all the finances and the company financial resources are not misappropriated. Raghu Venkatamman acts as the chief officer in charge of strategy and investments, while Ananda Bose is in charge of all the corporate affairs, attached to the company. All these basically form the executive board membership (Guttman, 2004).
Products and services
Looking at the products and services offered by ‘du’ organization, the first category is that of mobile phone services. The company provides mobile phone handsets to the market for potential customers. It also provides a wide variety of these handsets on offers and promotions to make the product more affordable to customers. Besides the mobile phone handsets, the company also provides mobile broadband as well. The mobile broadband enables the subscribers to access internet services right from their mobile phone handsets. The broadband technology is made possible through the GPRS system. Other services provided by the company include roaming, broadband packages, home services, customer care, internet protocol television, internet protocol virtual path number and broadcast segment, which delivers broadcasting to media houses, integrated satellite and connectivity to national and international operators (Hanson et al., 2008).
Brief history of company development
In the year 2006, the company was listed on the stock exchange through initial public offer of its shares. At this time, the company was on the financial market under the name Emirates Communication and Technology Company. In the course of this year, the company made other several developments including releasing of the ‘du’ brand. It is during the same year that the company became established or incorporated by entering into an agreement with a company named Etisalat to boost their efficiency and effectiveness of their networks to a level, where they can exchange calls as well as seek other services from one another. In the year 2007, the company launched several other products and services including self acre service (Guttman, 2004). This is the year, when the company managed to convince the Oman Telecommunications Company to accept an agreement to partner so that it can begin to cover voice interconnections. By the year 2008, the company had already launched its first unified roaming tariff in the GCC. In the same year, the company also launched a technology handbook as well as the first media club website in the region of Middle East. In the year 2009, the one 2 one zone was launched by the company, which was a new service that was able to allow the ‘du’ customers make credit transfers to their family members as well as friends (Hanson et al., 2008). During the same year, an agreement was reached between the company and iBwave solutions, which are the world’s famous provider of both planning software as well as in-building service design. The prepaid fixed telephony was introduced by the company in the region. At the same time, the company also introduced ‘du’, which provides integrated telecom services in the area of Burj Dubai. It is during the same year that a free way to access Facebook termed as 0.facebook was introduced by the company. Towards the end of 2010, financial agreement started cropping up between the company and Export –Import bank of China. The latest developments in the company are yet to be published (Guttman, 2004).
According to the annual report release towards the end of 2010, it was quite clear that the company’s management had recorded a breakthrough in quite a number of targets. Acquiring optimum exploitation in capital restructuring is something that cannot be forgotten (Thompson et al., 2006). Others include the decision to franchise, financing agreements with banks, which have all contributed to the overall growth and performance of the company, thus, added value as well as return for the shareholders of the company. The improved performance due to increased market share has also boosted the confidence of the shareholders and possible investors willing to become part of the company through acquisition of shares (Hanson et al., 2008). Looking at the goods and services provided, the company has surpassed quite a number of customers and all the products and service offered by the company have been proved legal, moral and consisted with the set laws and regulations. The company has been able to attain and maintain positive cash flow and this has been enabled through the effective strategies laid in place as well as the performance excellence, recorded by the company in the course of the entire tear. Lastly, the company’s major focus has been on spotting and taking up any available opportunity in the UAE business environment and developing it to become something substantial and profit oriented. This is a strategy that has been welcomed by many investors as well as shareholders of the company since it provides them with value and quality (Thompson, 2006).
The latest results from the fiscal year that ended December 31, 2011, where the company’s total revenue recorded an increment to 25%. However, the net income was realized to drop by 16%. The increment in the total or overall of the company can be best attributed to the fact that the company has worked extra hard towards ensuring increased demand for products, being offered by the company including its fixed as well as the mobile business segments.
The locations and the subsidiaries of the ‘du’ organization
The company is now located in almost all the seven emirates, where various branches have been opened. However, the headquarters, which also happens to be the main branch, operates from the city of Dubai and handles all the disputes, issues as well as coordination of all the branches (Guttman, 2004).
The corporate strategy of the company
Being a highly active service provider in the telecommunication sector of the United Arabs Emirates’ business environment, the company’s corporate strategy is to increase the penetration of high value enterprise accounts as well as consumers. Another main focus of the company in terms of its corporate strategy is to attain profitable growth and at the same time increase the value share. These are just a few strategies of the company but there are other corporate strategies, some of which include revenue diversification by means of mobile data as well as broadband. The company also works towards maintenance of the operation efficiencies as well as the profit margins. Lastly, the company has put some of its focus on ensuring that there are substantial returns on the resources, invested in network, and cash flow generation (Blumentritt & Danis, 2006).
SWOT Analysis - Overview
Emirates Integrated Telecomm is an integrated telecommunication service provider that offers mobile telephony, broadband connectivity, fixed line and Internet protocol television services (IPTV). Despite the competition and economic slowdown, the industry’s positive outlook and new products has ensured top line growth. The strong products on offer, wide network and increasing returns strengthen the company’s market position (Global Data, 2011).
Emirates Integrated Telecom, Co. PJSC - Strengths
Strength - Strong Products and Services
EITC’s variety of products and services gives it the advantage over its competitors. The wide range of products brings with it a broad customer base, ranging from individuals, homes, businesses, government agencies and even international operators and telecommunication carriers. EITC also offers voice calling, Internet, content services, integrated fixed and mobile business solutions and international data networks and wholesale services. This wide range of products helps the company reduce effects of market volatility and increase economic stability (Global Data, 2011).
Strength - Wide network
The company’s ‘du’ network comprises of 30 ‘du’ retail shops, more than 3000 authorized dealers in strategic locations across the UAE and also through the ‘du’ e-shop. In 2010 alone, the mobile customer sector increased by 856,000 to 4.3 million, while the post paid active mobile sector grew by 89% to 260,000. This wide network presence has resulted in the big market share and profitability above other competitors (Global Data, 2011).
Strength - Increasing Returns
The company’s compounded annual growth rate (CAGR) for revenue for 2006-2010 was 100.93%, which was beyond the wireless telecommunication services sector average of 13.29%. This is an indicator that the company has surpassed the average sector growth and gained market share in the 4 years (Global Data, 2011).
EITC had an increase of 32.51% to AED 7074.10m in 2010, from 5338.70m in 2009. The company’s operating income also increased by 323% to AED 841.62m from AED 198.74m in the same period. The company’s net income increased to AED 1310.43m having improved by 396% from AED 264.12m in 2009. This growth shows the company’s financial strength, hence, potential of further growth (Global Data, 2011).
Strength - Vodafone partnership
EITC and Vodafone signed an exclusive non-equity strategic partnership to offer quality service to the customers in the UAE. The agreement allows the company access to Vodafone’s range of services and infrastructure and also the experience of Vodafone’s roaming services, customer relationship and global sourcing. The deal resulted in improved voice and data roaming access in 67 countries. This partnership with the world’s largest communication company has made the company to excel in service offerings and increased market share (Global Data, 2011).
Emirates Integrated Telecom Co. PJSC – Weaknesses
Weaknesses - Reliance on UAE
The presence of the company only in the UAE could be seriously affected if the business environment in the region turns against the company operations. If the economic conditions or demand trends change negatively, the effects would be adverse on the company’s operations (Global Data, 2011).
Emirates Integrated Telecom Co. PJSC – Opportunities
Opportunity - New Launches
EITC launched BlackBerry Torch 9800 smart phone; it also partnered with Nokia to provide a free data package. The company also becomes the first to offer the fastest high speed mobile broadband after the network upgrade of the next generation technology DC-HSPA+ (Global Data, 2011). The company also opened the first VNOC in the Middle East after an agreement with FVC and also signed a deal with Turner Broadcasting systems Ltd., an operator of popular channels such as CNN and cartoon Network. With these new launches the company will be able to expand its areas of operation and also increase its customer base (Blumentritt & Danis, 2006).
Opportunity - Growth in Telecommunication Services
Information by Telecommunication Industry Association (TIA) indicates that a steady growth is expected in the U.S. global telecom market in the future. The global market is expected to grow at a compound annual growth rate (CAGR) of 6.3% with the U.S. set to grow at a rate of 3.7% between 2009 and 2013. This growth is expected to generate an approximately $4.9 trillion in revenue at the end of 2013. China will lead the top ten countries in telecommunications – based revenue with $335b, Japan $200b, Germany $192b, UK $172b, Italy $122b, France $113b, India $107b, Mexico $80b and Spain $77b. The company could, therefore, augment its operational revenue with rapid growth in the global telecommunications service market (Global Data, 2011).
Opportunity - Demand for Mobile Broadband
There is a change in market demands as report shows growth in the broadband demand against dial up subscription in the last 4 years. The global broadband subscriber base grew by 128.26% to 414.68m in 2010 from 181.67 million. TIA estimates that the broadband subscriber market could exceed 586.13m by 2013. A report by analysts projects a 9% CAGR growth for the fixed broadband from 2008 through to 2014 with mobile broadband experiencing three times as much growth to $69b in the same period. The mobile broadband market is expected to reach $1100b by 2012 showing a 6.4% CAGR. This growth could benefit the company in the broadband sector (Global Data, 2011).
Emirates Integrated Telecom Co. PJSC – Threats
Rapid Technological Changes
The company’s areas of operation are characterized by rapid technological changes, which may affect the business operations. For the company to compete effectively, it should continue in new product innovations that meet and exceed customer expectations. The introduction of new standards and technologies could render the current products obsolete or inferior to the market demands, hence, make them unmarketable. The inability to move with technology could compromise the company’s competitive position (Global Data, 2011).
Global Economic Slowdown
The global economic slowdown that began in 2008 could have negative impact on the company. Despite the economic recovery in the first quarter, this was affected by the turmoil in sovereign debt market during the second quarter of the year. World economy expanded at an annual rate of 5.25% in the first half of 2010 and expected to grow by 4.2% in 2011. The Euro region is, however, expected to grow at a rate of 1.5%, while the U.S. is to grow at a rate of 2.3% in the same period. Fears of sovereign debt were experienced in the 2010 in the European region in countries like Portugal, Ireland, Italy, Greece, Spain and Belgium. Such an occurrence could lead to increased deficit, followed by increase in debt and economic downturn, eventually leading to high defaults (Global Data, 2011). The IMF issued a warning about a possible full-blown sovereign debt crisis in rich nations. Continuous adverse economic conditions for long periods end up affecting premiums on corporate bonds, and prices on many stock exchanges fell by 10 to 15%. These conditions could affect corporate IT expansion plans as well as investment and business growth of the company (Blumentritt & Danis, 2006).
The company operates its business in a highly competitive environment and faces stiff competition from other players in the field, despite the leading position of the company, due to their significant presence in the market and same customer target. Emirates Integrated Telecomm faces well entrenched operators in the industry, including CallPlus service Limited, Allot Communications Limited, TPG Telecom Limited, Telecom Corporation of New Zealand Limited and Verison Business. This intense competition could affect the company’s profitability (Global Data, 2011).
The process of strategic management is the core generation of a company’s long term performance through evaluation of a business environment by undertaking a proper scanning and implementation of strategies that will improve performance and enhance performance consistence. Strategic management has been seen to comprise of various ingredients and tactics of science for formulation of plans and practices of the firm as well as art tactics, which entirely apply to the management styles and characteristics, portrayed by managers (Hanson et al., 2008). Other ingredients that have observed to be of more importance or significance include judgment skills, where mangers are required to possess excellent judgment skills to make right decision in some situations. The plan and the expected luck of the management strategy to be implemented should as well be made flexible, so that changes can be made without reconsidering the whole process repeat (Global Data, 2011).
When looking at implementation of strategic management process, the first step is to make an analysis of the both the external and the internal business environment for determination of the resources, competencies as well as capabilities. The development of the vision and the mission of the company facilitate formulation of the business strategy that will be applied towards attainment of the set goals and objectives of the company (Guttman, 2004).
When implementing given management strategies, the main focus is on the effectiveness of the strategy in terms of returns and its ability to attain strategic competitiveness in the business environment. Therefore, the sequence of the process of strategic management involves undertaking effective strategic activities in the context of integrated formulation and implementation actions, which eventually lead to the targeted strategic outcomes or end results. The strengths, weakness, opportunities and the threats that exist within a business environment are key factors that should be considered, when making strategic plans, actions and formulation practices (Global Data, 2011).
Therefore, at this point, the strategy of a firm can be related to its actions as evidence from the market place and the senior managers’ statements concern the current business approaches, its plans for the future as well as the efforts laid in place to make sure that the competitiveness of the firm and its performance are not at stake (Blumentritt & Danis, 2006).
The research revealed that those firms that focus on the practices of strategic management tend to record better performances as compared to firms that ignore the existence of strategic management practices. It was also found that attainment of the appropriate coherence between the business environment of a firm and its management strategies, practices and structure has positively contributed the improved performance of firms. This basically qualifies any strategic management practice as a work in progress asset that can be adjusted to fit the unfolding events in the business environment. These strategies have also been found to undergo major shifts incase fine-tuning proves difficult to fit the unfolding events in the business environment (Hanson et al., 2008).
From the SWOT analysis, it was found that the ‘du’ organization has got wide network, strong products and services as its major strengths. The over reliance on the United Arabs Emirates as the only operating business environment has been seen as the major weakness of the ‘du’ telecommunication company. This company has various threats, some of which include global economic slowdown as well as rapid technological changes that may prove to be challenging to the company in terms of adoption. The opportunities that were found to surround the ‘du’ organization include new product development and the growth recorded in the telecommunication services (Global Data, 2011).
Lastly, the growth trends and the financial performance of the company in terms of returns on investment by revenue generated and the company’s total revenue recorded an increment to 25%. The net income was realized to drop by 16%. This increment in the total or overall performance of the company is attributed to the fact that the company has worked extra hard towards ensuring increased demand for products being offered by the company (Guttman, 2004).
From the research, it is observed that the key to ensuring success in strategic management lies in the ability to enhance coherence in a set of competitive factors that are both internal and external to the business in way that advocates for high performance. Therefore, firms and other business organizations need not only to react to their business environment but should as well do it in a manner that will facilitate implementation of strategic approaches and actions by the firm’s top management. In order to achieve the strategic coherence, the resources of the firm have to be realigned together with the abilities and the competencies available. All these should, then, be further aligned to the opportunities and threats present in a business environment for proper actions (Blumentritt & Danis, 2006).
From the SWOT analysis carried, it seems that the ‘du’ telecommunication company solely relies on the United Arab Emirates business environment. This is very risky given the possibility of economic down falls in the region. Therefore, the best recommendation here is that the ‘du’ organization should try as much as possible to diversify its business environment and venture into other business environment like the UK, U.S., and the Europe region. This will mean that the company would have diversified its risk, just in case one business environment fails, the rest can be used to keep the business going. Keeping the business in one business environment will mean complete closure in case something severe happens to the only business environment (Global Data, 2011). Lastly, the ‘du’ organization should take advantage of its strong products and services to create long terms relations with customers, strengthen its financial base and create more branches to widen its market segment. This calls for faster adoption of new skills and innovations that may arise in the telecommunication sector. Adoption of technological advancement can only be ensured through proper training and scheduling of seminars within the organization (Guttman, 2004).