Strategic Analysis of Saudi Telecom Company (STC) - A Detailed Report

This report offers a comprehensive analysis of Saudi Telecom Company (STC)'s strategic initiatives. It examines STC's market development strategy, revealing its focus on product and market expansion, market penetration, and brand extension through new services and acquisitions. The financial strategy analysis highlights STC's cash flow management, equity-based financing, and dividend policy. The R&D strategy emphasizes exploration and innovation, including the pursuit of technological leadership through the implementation of 5G services. Furthermore, the report investigates STC's operations, logistics, HRM, and outsourcing strategies, including its customer-driven approach, use of modern technologies, cost leadership in HRM, and vertical integration for customer care services. The analysis provides insights into STC's competitive positioning and future prospects in the telecommunications industry.

What is the firm’s market development strategy? Is the company trying to develop new
products for existing markets or new markets? Can it be described as market penetration
or market saturation, focused on market pull or market push? Is it trying to extend its
product life cycle or extend its brand? What are its distribution and pricing strategies? Is it
using skim pricing, penetration pricing or dynamic pricing?
The market development strategy followed by the Saudi Telecom Company is to work on
product development as well as market development strategies. This is because, they are
introducing financial services, digital contents along with various other information technology
for their clients
As stated by the CEO of Saudi Telecom Company, these new services being designed in the the
company are going to be utilized not for foreign markets but for natural region. It is clear that the
company is following product development strategies. Saudi Telecom Company is also focusing
on acquisition by merging policy as they acquired various companies in 9 different countries
around the world. These include, Malaysia's Binariang, India's Aircel, Indonesia's Axis and many
others. This will help the company to provide its telecommunication services in foreign markets.
Thus, it is seen that the company is following both, market development and product
development strategies.
The company is following the strategy of market penetration because, they are initiating newer
services which are national market centered. More the advancement of new services, the more
market penetration for the company (Bharadwaj et al. 2013). Additionally, these strategies are
based on push factors with investments in promotional campaigns and programs for customer
awareness.
Saudi Telecom Company is focused on extending the company's brands as a telecom services
that is traditional, the company is at its mature stage where there aren't any new opportunities
left. Therefore, brand extension is being focused on which includes new services like the system
of online payment. According to Butler et al. (2014), extending its brand is also beneficial for the
company as for adjusting associated risks in the life cycle diminishing of traditional
telecommunication services.

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The company is following the pricing strategy of penetration pricing due to which it has the
Saudi Arabian government as a major shareholder. As a result, social objective of cover the
whole region with their services gets more preference than others. Strategy of competitive
pricing is being offered by them under penetration pricing that helps to cater to the market across
users with various income levels (Dutta et al. 2017). Distribution strategy of extensive
distribution is taken up by the company that is complementary to their penetration strategy.
What is the firm’s financial strategy? Is it using equity financing or debt financing? Is it
using dividends or striving to achieve stock price appreciation? Could it benefit from an
LBO, MBO, stock splits or stock buyback?
The way by which Saudi Telecom is managing the company can be distinguished that they are
following the cash flow financial planning. Although it needs to be acknowledged that Saudi
Telecom Company has strong financial backbone because they seem to be financially stable in
the country. But there are risks that they can face in case of financial breakdown or some
unwarranted events. Jackson et al. (2014) mentioned it is also very common that cash flow
planning is very risky to deal with especially it can even lead to insolvency if there is inaccuracy
in forecasting the financial outcome. Moreover Saudi Telecom is a publicly traded company
which follows the equity based financing and it gets their revenues from IPO. It was also noted
from a report that this company is using dividends in order to achieve the stock price
appreciation. They are doing good business in Saudi Arabia and the dividend yield for Saudi
Telecom is growing in a good pace. It should be noted that the Saudi Telecom will not get any
kind of benefit from LBO because selling of their stock and assets will only help in gaining
capital but in return their presence in the national as well as international market will diminish.
However Saudi Telecom can use the policy of stock buy back as initiating the stock buyback
when the company is running through a stable phase will reassure the return of the stock in much
higher price (Kang and Montoya, 2014). This will also help to grab the attention of investors thus
ensuring higher flow of capital. On the other side stock splits can also be beneficial as it involves
much higher risks. According to stock splits the current share holders will be given new shares as
per their holdings. This can be a safe practice as the shareholders are already trust worthy.

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What is the firm’s R & D strategy? Is it focused on exploration or exploitation? Is it
striving for technological leadership? Is it using imitation or open innovation?
Developing new services is the key strategy of the R&D department of the Saudi Telecom. This
strategy helped them to launch an array of new services in the market helping the organization to
explore the unexplored market and fulfilling the expectation of the customers of Saudi Arabia.
There are constant changes in the market which shifts the demands of the customers and also
helps to motivate Saudi Telecom Company in launching new services (Wuyts and Dutta, 2014).
During the initial days the main service providing by the organization is just traditional
telecommunications. But later with the changes in demand the Saudi Telecom Company started
providing internet connection and later started with the financial offerings. This changes in
services helped them to stay in the competitive market. Thus it can be easily identified that Saudi
Telecom Company generally gives their more focus on exploration and innovation. Presently
there are several competitions in the market such as Zain, Virgin Mobile etc. and in order to
establish the technological dominance Saudi Telecom is trying to start up the very first 5G
services in Saudi Arabia and thus they will be the very first one to start up with the 5G services
all across the country. Thus if they can be the first one to start up the 5G services then they will
have a huge dominance in the Telecom industry and just might prove themselves to be the leader
of telecom service providing brand in Saudi Arabia. They are also following open innovation
because they are not putting forward some new innovation or any kind of distinctive innovation
rather in this case this innovation is very much common (Jahre and Fabbe-Costes, 2015). The
main challenge Saudi Telecom Company will be facing is time as they need to be the first one to
start up with 5G and leave their rivals behind.
What is the company’s operations strategy? Is it using multiple sourcing, single sourcing or
parallel sourcing?
In terms of following the operational strategy Saudi Telecom Company is following the
customer driven approach keeping in mind the effectiveness of this strategy in penetrating the
market. The needs and demands of the customers are needed to be fulfilled in this strategy and

4RESEARCH ESSAY
when the customers gets satisfied with the service they become a loyal follower of the telecom
brand (Newberry, 2015). Also by providing services that the customer needs they get to engage
with the customers and helps them to take control of the market. Thus it means that the strategies
that are made for the operational policies are also made keeping in mind the present trends in the
market. As a result it can be noted that the auxiliary services of the Saudi Telecom Company is
way focused on the customers. It has been in repetitive instances that Saudi Telecom is a proper
service provider who always keeps the necessities and demands of the customers in mind and
also adopts themselves with the growing changes. However they are not applicable for any kind
of sourcing strategy because Saudi Telecom Company only provides Telecom services to their
customers and providing telecom services does not require any kind of sourcing of materials.
What is the company’s logistics strategy? How has it been influenced by modern
technology, internet and centralization?
The council of logistic management defines logistics as “that part of supply chain process that
plans, implements, and controls the efficient, effective, forward and reverse flow and storage of
goods, services, and related information between the point of origin and the point of
consumption in order to meet customer requirement” (Oestreicher-Singer and Zalmanson, 2013).
The advancement in technologies are making key open strategies for an organization to build
advantages in various functional areas of business operations including collaborations, supply
management and logistics. At any rate the dimension of achievement depends upon the decision
of the right advancement for the technology adaptation, openness of management and culture and
the involved policies. In the logistics management, the communication, information and
automation technologies have correspondence and computerization developments and
contributed towards data gathering, research and transmission, with high precision and steadfast
quality. (Dutta et al. 2017). Technology advancement is an approach to overhaul business
forcefulness and execution. It accept a significant activity in accomplishment of generation
arrange by updating the general practicality and viability of the logistics structure. With the help
of the modern technologies such as automation and artificial intelligence, is increasing the
efficiency of the customer services and minimizing the chances of error. Internet has a very big
role helping them in offering the services to the customers fast and accurate.

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What is the company’s HRM strategy? Is it aligned with differentiation or cost leadership?
Is the company using self-managed teams?
Saudi Telecom Company follows cost leadership strategy in terms of the human resource
management strategy. The overall employees who make up an organization are human resources
which are among the most important resources of the organization. The strategy for dealing with
people are twisting up progressively as many components are proving out to be lesser
competitive advantage than it used to be before. Butler et al. (2014) traditional sources of
achievement, for instance, method development, verified markets, economies of scale can
regardless give competitive impact to other organizations. Similarly, HR are essential for an
establishment to ensure human resource operations are also going up in definitive movement.
Human resource managers intends to ensure that the organization gets and holds the capable and
particularly motivated workforce it needs. This suggests figuring out how to study and satisfy
future people needs and to improve and develop the inborn furthest reaches of people– their
responsibilities, potential and employability – by giving learning and industrious progression
openings. It incorporates the undertaking of the management development, recruitment approach
and training activities associated with the necessities of the business (Bharadwaj et al. 2013).
The Human resource management approach of Saudi Telecom Company is focused on reaching
the maximum productivity from the employees to raise their average rate of production.
What is the company’s outsourcing/offshoring strategy? Is it using full vertical integration
or taper integration? Use transaction-cost economics (TCE) as a conceptual background.
Just a decade back outsourcing was an emerging phenomenon which was relatively new and
were viewed as mixture of uncertainty and anxiety. According to Wuyts and Dutta (2014),
outsourcing in IT has become an integral part of business doing bringing greater value to the
business operations. The main advantage lies in its flexibility of their operations. Outsourcing
helps in freeing up capacity and then allow them to focus on core competencies such as
relationship management and investment in new ventures. The company invests in outsourcing

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their business mainly offshore countries and many clients outsource their business processes
have become quite popular in recent years (Sibirskaya et al. 2015). Global IT offshore
outsourcing is defined as “any contribution to a client organization by one or more external
vendors with a different country of origin in tangible, intangible. The Saudi Telecom Company is
having vertical integration for which their customer care services are being managed by
outsourced third party vendors. This is because third party vendors can offer a more experienced
customer service over the Saudi Telecom Company. By outsourcing their customer service
process their cost, effectiveness is growing.
What is the company’s IT strategy? Is it constantly innovating and increasing customers’
ability to take advantage of new information technologies. Is it using the follow-the-sun
management?
The IT strategy of the Saudi Telecom follows the first mover approach in order to capture the
market and gain attention over the untapped market. For instance the 5G services in Saudi Arabia
is an example of first mover approach and will help them to capture the untapped market of
Saudi Arabia and establish themselves to be the leader of the telecom industry in Saudi Arabia.
Newberry (2015) opined besides following the first mover approach they are also encouraging
continuous innovation process in order to cope up with the changes in the present market. This
helps them to constantly update themselves as well as their services and helping them to meet the
growing expectations of the customers. But they are not following the principle of sun
management because their operations in different countries are running as strategic business
units and the model of standardization is not followed (Jackson et al. 2014). Although Saudi
Telecom Company has these strategic business units in various parts of the world but the
management processes of this organization is also not centralized. This means that the flow of
communication between the main unit and other strategic business units is not at all important
for them.

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