Strategic Analysis of Telstra for HI5019: T2 2018, Holmes

This strategic analysis report examines Telstra, an Australian telecommunications company, through a comprehensive lens. Part 1 delves into the external environment, including a detailed analysis of the political/legal, economic, sociocultural, technological, global, demographic, and physical environments impacting Telstra's operations. It then explores the industry environment, assessing supplier power, buyer power, substitute products, and competitive rivalry. The competitive landscape is scrutinized, identifying key rivals like Optus and Vodafone and evaluating their strategies and potential threats. The report concludes Part 1 with an analysis of Telstra's opportunities and threats. Part 2 shifts focus to Telstra's internal resources, capabilities, and core competencies. It identifies key resources like skilled manpower and research teams and assesses the company's capabilities in delivering quality services. The core competencies, particularly technology and human resources, are highlighted. The report also discusses an information system for Telstra, followed by an evaluation of the proposed system and recommendations. The report concludes with a summary of the company's strengths and weaknesses and their strategic implications.

Strategic Management
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Contents
Part-1................................................................................................................................................3
1. Company Brief.........................................................................................................................3
2 Industrial Background-.............................................................................................................3
3 General Environmental Analysis of Telstra.............................................................................3
4 Industry Environment...............................................................................................................5
5 Competitive environment.........................................................................................................6
6 Opportunities and threats..........................................................................................................6
Part -2...............................................................................................................................................7
1.Resources of Telstra.................................................................................................................7
2 Capabilities identification.........................................................................................................7
3 Core competencies....................................................................................................................8
4 Information system for Telstra.................................................................................................9
5 Evaluation of proposed system and Recommendations...........................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Part-1
1. Company Brief
Strategic management involves setting up goals and objectives to give directions to business
firms. It also assists in formulating plans and strategies to achieve goals (Aaker & McLoughlin,
2010). Strategic management also involves understanding the environment in which a firm
functions, so that plans can be formulated to conduct business in the given environment.
Telstra is an Australian company functioning in the telecommunication sector. The company
specialises in telecommunication products like voice, internet data and pay television (Telstra,
2018). Prior to 1975 telecommunication sector in Australia was controlled by the Government
and was run by Australian telecommunication commission (Telstra, 2018). However, post 1989
the commission was renamed Telstra and was fully privatised by 2006.
2 Industrial Background
Telstra functions in the telecommunication industry which is highly competitive and
technologically intensive (Telstra, 2018). Telecommunication industry has a high growth
potential as most of the population uses telecommunication services (Telstra, 2018). Therefore,
Telstra also has a high growth rate with a 51% market share.
3 General Environmental Analysis of Telstra
An assessment of the general environment in which a firm functions helps in ascertaining the
factors which influence business (Hoffman & Bateson, 2010). This also helps in planning
strategies. (Bamford & West, 2012). Following is the assessment of general environment of
Telstra.
Political/ Legal- telecommunication sector is promoted by the political system in Australia and
was earlier Government controlled (Telstra, 2018). Now the sector is privatised but Government
clearance is required to set up a new business (Government of Australia, 2018).
Telecommunication sector and hence, Telstra’s business is regulated by Australian
Communications and Media Authority (ACMA) (Government of Australia, 2018). The authority
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has regulations in place for restriction on spam and promotional calls along with do not disturb
system (Government of Australia, 2018). Other regulations affecting the business are customer
safety and privacy norms and labour acts like anti-discrimination and work health and safety
regulations (Telstra, 2018). Hence, political and legal system offers good growth opportunity to
the company.
Economic –Telecom services have a huge and growing demand due to large innovation in
information and communication services (Robbins, 2013). Customers and businesses alike
require telecom services. Therefore, there is huge growth potential in the economic sense in this
sector for Telstra. (budde.com.au, 2017).
Sociocultural-digital devices have become a thing of fashion and a status symbol for the youth
and the young professionals. This is increasing the need for better and effective
telecommunication services. (Telstra, 2018). Moreover, there is peer group influence for brand
choice of data services. Therefore, Telstra needs to pitch its product in an appealing way to the
youth.
Technological- telecommunication industry is highly driven by technology (Telstra, 2018).
Sophisticated technology is required by Telstra for setting up new communication towers,
hosting servers and further innovation and research (Robbins, 2013). Therefore, investment in
new technology is essential for the firm.
Global- Telecommunication industry is expanding globally. There is large scale global demand
for telecom services. This industry is growing a at a huge pace which is a good sign for a lot of
companies in this sector (Aaker & McLoughlin, 2010). Telstra also has the ability and
technology to cash in on the global demand for telecommunication network.
Physical environment- physical environment comprises of all tangible elements of a business
(Payne, 2012). Telstra provides services. Therefore, its product is intangible and inseparable
from the service provider (Lovelock, 2012). However, in terms of physical elements it has
servers, communication towers, offices and galleries from which it sells its product (Telstra,
2018). The firm has a powerful and well-connected infrastructure which forms its physical
environment.
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Demographic environment- telecommunication sector has customers from all types of
demographics (Robbins, 2013). All genders, income groups and adult age groups require data
and voice services these days (Kumar & Debnath, 2015). Therefore, Telstra has a huge growth
potential in all kinds of demographic patters in the global market place.
Hence, it can be said that, environmental analysis allows a firm to analyse the external
environment and formulate strategies to work with in this environment.
4 Industry Environment
Industry environment assessment tries to find out how a company manages with in the industry
specific factors (Aaker & McLoughlin, 2010). Following is industry analysis for Telstra-
Supplier power- firms in telecommunication industry have a heavy dependence on suppliers for
maintenance of servers, clouds severity and raw material required for wired and wireless
communication system (Telstra, 2018). Therefore, supplier power is high in this industry.
Buyer power- telecom sector is highly competitive due to its high growth potential (Telstra,
2018) Hence, the customers have a lot of choice in terms of selection of telecom providers
(Armstrong, 2012). However, providers with high speed and service quality are few in number.
Therefore, customers tend to stick to the chosen service provider. Consequently, buyer power is
moderate.
Substitute products- telecommunication with data and wireless network is the latest in fashion
and technology (Robbins, 2013). The major substitutes are fixed lines and postal services which
are fast going out of fashion. Therefore, threats from substitutes are low. It can also be inferred
that there are no close substitutes to telecommunication services.
Rivalry among existing firms- telecommunication is a highly growing industry. Hence, there is
large number of firms in the industry with fierce competition (Telstra, 2018). Homogeneity of
services also lead to less product differentiation (Hoffman & Bateson, 2010). This leads to
customers perceiving different products as similar within the telecom sector. Hence, rivalry
among existing firms is high.
Through an assessment of industry specific factors Telstra can make strategies to survive and
grow with the industry.
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5 Competitive environment
As the telecommunication sector is a highly growing sector and entry barriers are moderate,
there is tough competition among the firms (Czarnecki, 2017). However, the market is
oligopolistic and dominated by few firms due to high technology and research costs
(budde.com.au, 2017). A few firms competing with Telstra in the market are Optus, Vodafone,
and Virgin Mobile. Rivalry is very high in this small oligopolistic group of companies (Telstra,
2018). All of them try to give high speed data and quality voice network. Most important
competitor is Vodafone which has an international presence and massive marketing research
power and technology (budde.com.au, 2017). Optus is another major competitor. This firm also
has good technical skills, staff and network coverage. Their major strategies are to focus on
quality and good Customer service (Kumar & Debnath, 2015). The high-quality product offered
by these companies pose threats of inducing customer switching. They can also outsmart Telstra
by having an edge in marketing and advertising practices.
6 Opportunities and threats
Opportunities and threats analysis help in understanding what potential gains and difficulties are
there for the firm in a given industry (Bamford & West, 2012). To function well in the industry a
firm must consider its opportunities and threats. This can help a firm like Telstra in formulating
better strategies. (Henry, 2011). Following is an opportunity and threat assessment of Telstra.
Opportunities
 Large growth opportunity as mobile
handset and digital devices industry is
booming
 Aspirations of people for high speed
internet is rising which Telstra can
provide
 Emerging markets offer huge growth
opportunity as aspirations of people are
rising in these economies
 Telstra has tied up with Samsung the
global leader in mobile technology.
Threats
 Some competitors like Vodafone are
giving low cost plans which can lead to
customer switching
 Marketing cost is very high which can
hamper service quality
 As service is homogenous there is low
differentiation and uniqueness.
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This has opened a new opportunity of
growth in customer base.
Table -1: Source Made by Author (2018) Adapted from Telstra, (2018)
It can hence be deduced that, through an analysis of its opportunities and treats, Telstra can
formulate and implement strategies for removal of threats and further growth.
Part -2
1.Resources of Telstra
A firms’ internal functions are important for proper management of operations and sales (Aaker
& McLoughlin, 2010). Telstra is well endowed in terms of resources. The firm has an able,
skilled and well qualified manpower. Employees are very important to a service firm because
they are the ones who help the customer in getting the service (Hoffman & Bateson, 2010).
Another major resource of the firm is its well-established research team (Telstra, 2018).
Telecommunication is extremely technology intensive; hence, research and innovation can go a
long way in improving sales and revenue (Aaker & McLoughlin, 2010). The firm has well
designed infrastructure in term of telecommunication towers and servers which help in quality
service delivery (Telstra, 2018). Good technology and well-maintained infrastructure are pivotal
to quality service delivery for Telstra (Alkhafaji, 2013). Additionally, marketing and sales team
of the company is very efficient. This helps in prompt customer support and query resolution
(Telstra, 2018) Another major resource is the customer service which helps in establishing good
customer relationship for the company. Therefore, the firm has well endowed resources and it
using them to its advantage.
2 Capabilities identification
In business terms capability is the ability of a business organisation to deliver what it has
promised to the customer (Alkhafaji, 2013). Telstar has promised quality service delivery to its
customers. Hence, it is important to assess whether Telstra is capable of delivering its promise or
not. not.
The firm has highly capable technical staff to handle telecom service delivery process (Telstra,
2018),The firm also has sophisticated reengineering and innovation process, which increases the
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farm’s capability to deliver quality services (Telstra, 2018). With the help of its research and
innovation capability, the firm can build sophisticated telecommunication towers, wireless
systems and host servers (Czarnecki, 2017). The firm also has capable research and development
wing which assists it to keep abreast with changing communication technology (Telstra, 2018).
The firm has been in the Australian telecommunication business since a long time. This has
improved its financial position (budde.com.au, 2017). Therefore, the firm has financial capability
to invest in further research. This can help Telstra in spending on higher quality infrastructure.
Better infrastructure will in turn improve service quality (Telstra, 2018).
Additionally, Marketing capability of the firm is also high and it has a capable human resource
department which helps in effective recruitment, selection, training and employee development.
This is because it has a long-standing experience in the telecom sector which makes it
recognizable as good and quality-oriented brand (Telstra, 2018). Therefore, with the help of its
capabilities the firm is able to function effectively in the telecommunication sector and deliver
services as promised to the customer.
3 Core competencies
Core competencies of a firm are those resources or capabilities which differentiate a firm in the
market (Hill & Jones, 2012). Management philosophers, C.K. Prahalad and Gary Hamel have
analysed capabilities and resources orientations of firms and have come up with tests to assess
whether a capability is a core competency or not (Hitt, et al., 2014). According to these thinkers
a capability is a Core competency if-
 It provides access to a better market or
 It contributes to perceived benefits by the customer or
 It is difficult to imitator.
 It provides competitive advantage (Hitt, et al., 2014).
Thus, it can be said that a capability which exhibits any of these virtues, then it can be called a
core competency.
Telstra has various capabilities which can be tested on these grounds for being a core
competency. Telstar has excellent technology and well-designed infrastructure of service
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delivery (Telstra, 2018). This give Telstra competitive advantage and provides a way to enter
new and potential markets, Therefore, its technology is its core competency.
The firm has excellent human resource which can provide good service quality; hence, giving
benefit to customers and increasing their perceived value from the product (Telstra, 2018).
Therefore, Telstra’s human resources are its core competency.
The firm also has financial strength which helps in expenditure on marketing and research of its
products (Telstra, 2018). This creates the competency of competitive advantage and enhances
perceived value benefit of the customer (Telstra, 2018). Hence, financial strength of the company
is its core competency. Therefore, Telstra has various core competencies which helps it in
growing in the market.
4 Information system for Telstra
An information system is a software which helps to organise and analyse data (Beynon-Davies,
2016) There are various types of information systems designed by IT developers to enable a
firm in its data analysis. One of them are executive support system which helps the management
in making strategies. Another one is decision support system which allows users to reach a
decision (Beynon-Davies, 2016). However, the most popular is management information system
or MIS which processes internal sources of information and generates timely and structured
information to so that managers and other users can make decisions and policy changes.
Management information system is recommended for Telstar to manage its business functioning,
information and decision-making process. Management information system can be created and
programmed for Telstra in such a way that it generates reports on financial, marketing and
operational aspects of business. This will help managers to take desertions and formulate
adequate strategies (Beynon-Davies, 2016). This would meet the business needs of Telstra and
help the firm in analysing its competitors and customers in a better way (Beynon-Davies, 2016).
MIS can assist strategic planning through control and evaluation of strategy implantation
process. It can help in management control and evaluation process. Therefore, MIS is a suitable
information system for Telstra.
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5 Evaluation of proposed system and Recommendations
Telstra has shown remarkable growth and has survived in an extremely demanding and
competition ridden industry (Telstra, 2018). MIS as a proposed information system will assist the
firm in important strategic decision-making skills. MIS would enable the managers by helping in
a number of ways like query handling, decision support, information generation, creation of
modelling for new changes etc,
Following are the recommendation for setting up and implementation of MIS
 Before implantation of MIS the firms need to assess its information needs (Beynon-
Davies, 2016). For example, Telstra requires information about its financial health,
marketing, customer relations and operational efficiency. Therefore, these needs must be
added to the MIS system.
 The firm should be clear on the objectives of MIS and sources of information (Beynon-
Davies, 2016). Objectives can be regarding financial planning or strategic planning and
control. Sources of information can be managers, customers database, competitor
analysis etc,
 Manner of collection, processing and output of data should be clearly defined so that the
MIS gives accurate results.
 There should be proper evaluation and control of the MIS system. Additionally, a backup
should be kept in case the MIS system fails.
The MIS system will help Telstra in accurate and fast decision making.
Conclusion
Business strategy can be managed through adequate analysis of internal and external
environment. Such analysis can help Telstra in gaining competitive advance. Strategic planning
can be assisted through management information system. This system can help implementation
and control of these strategies.
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References
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