Company Overview 2
SWOT analysis of du 3
Forces Affecting du 5
Buyer Power 6
Competitive Rivalry 6
Threat of New Entrants 6
Strategic Position Overview 6
Analysis of strategic position 7
Strategy Clock Framework Perspective 8
Ansoff Matrix Viewpoint 9
Evaluation of Alternatives 11
Identification of Strategy Formation Process 11
Intended Strategy 12
Emergent Strategy 12
Realized Strategy 13
STRATEGIC ANALYSIS OF DU
Du is a relatively new telecom company which emerged in the year 2006 in UAE. The advent of du in UAE broke the monopoly of Etisalat as the lone telecom provider in UAE and created a duopoly in the UAE telecom market sector. In 6 years after its conception, du gained 50% of the total market share of UAE achieving success beyond bounds. The reason behind the success of du is at times considered to be its strategy regarding market entry and competitive services but the current scenario of the UAE telecom industry is different and sustaining in the market and growing continually requires different strategies. (du, 2015)
In order to formulate a new strategy for future growth of du, it is essential to analyze the various internal and external aspects of du like its environment, features, goals and the culture of its business sector in order to form an educated opinion about the new strategy of du. The analysis of the company will provide required data to form a clear picture about the condition of du in its market sector. Du provides services like fixed telephony, mobile services, TV+ services, and broadband internet connectivity to residences as well as offices.
The telecom market is a sector which has been growing rapidly over the world due to globalization and increasing necessity and dependence on internet as well as the growing sales of smartphones in the world. There is worldwide shift occurring from fixed telephony to mobile telecom services as well as an increasing amount of broadband and mobile data services. A strong penetration in mobile internet and broadband penetration has helped telecom companies grow progressively in current times.
When the UAE telecom sector was governed by Etisalat, the customers did not have a choice over prices and quality of services. Due to no competition, the service of Etisalat was not at par with the other parts of the world. Arrival of Du into the telecom market provided the customers of UAE with choice and due to that factor, many of the customers switched to du because of their competitive prices and services. In 6 years, du has formed a loyal customer base, and due to a duopoly in the telecom sector, both the companies are striving to provide better services at competitive prices. (Emirates 24/7, 2013)
SWOT ANALYSIS OF DU
Fair Price Range
Considering the array of services that it provides which are varied compared to its competitor, du provides better (competitive) prices which the customers think are fair. Due to this factor, they have developed a loyal customer base in UAE. With a penetration ratio of 13.77 million which is among the highest in the world, 2 million new users joined in the GSM market out of which, 1,2 million chose du over Etisalat and the reason behind it is perceived as the factor of pricing. Du charges international call in a “per second” basis. (du, 2015)
Home Services featuring versatile Features
Du provides a home services package with various premium features. A user gets 16 times more data in the broadband service and an international call rate of 0.6 fils per second which includes 6 countries in the plan. With this plan, users are also provided with 5 emails accounts with 1 GB of free cloud space in each account. An additional feature that the users get in this plans is a licensed antivirus and anti-spyware utility. This unique package in not provided by its competitors and remains one of its strengths.
The augmented TV service
The DU TV+ service comes with features like rewinding, recording and pausing live TV. Users of this service get benefits like watching HD as well as 3D channels including watching certain movies and TV shows on demand. This service is an additional service provided which is normally a feature provided by a telecom company.
Multi-language Customer Service
Du has a very strong customer support system in which they provide service in multiple languages like Arabic, English, Hindi and Bengali which also reflects the diverse culture present in UAE. This is a unique quality not present in the competitor making it one of du’s primary strengths. (Rizvi, 2012)
Poor Communication Issues
The customers of du report problems like calls getting dropped, unclear voice quality and another factor is that du’s signal is not available in certain regions in UAE.
Image of a New Company
As du has just emerged recently after years of service by Etisalat, people still don’t put complete trust on the brand. Along with this factor, as the company is new, people are still not completely familiar with the services they provide.
As the company is developing constantly and the demand for telecom and internet services is constantly increasing, there is further scope regarding the fact that du can develop its technological resources to widen the signal and enhance its internet speed to be at par with international standards.
With their increasing profits due to increasing no. of connections in UAE and increased global demand of telecom services, du can expand into its neighboring countries for further growth. This is also a lucrative opportunity considering the strong financial condition of du and its capacity for growth and expansion.
Expansion of Products and Services
As du currently provides a variety of services which are not provided by its core competitor, it has been garnering a good reputation. It suggests that they should constantly innovate and provide consistent quality. There is an opportunity here for providing new services to strengthen its position in the market.
Possibility of New Competition
If there are new Entrants in the market providing better services or better prices, there is a chance that its customer base may find their services appealing and switch to a newer brand. As it is a constantly growing market, it remains highly competitive in approach. If new entrants arrive in UAE, then its growth rate might not be at its expected level and du will have to introduce new tactics to deal with a new competitor.
Pressure on Pricing Strategies
Currently, du has applied pay per second approach due to increased demand on low prices. If there are further changes in the market then du might have to make changes accordingly to survive in the market wherein competition can cause du to decrease their prices.
Customer shifting back to Competitor
If the problems related poor signal reception and bad call quality persist then customers might prefer switching back to Etisalat for a better signal quality.
FORCES AFFECTING DU
Due to increasing amount of customer using their service every day and also due to the presence of a tough competitor, buyers have the power to prefer the other brand for factors like quality of service or prices. This suggests that buyer might shift to other brand making du reduce their prices. This is an indication of buyer power of UAE customers.
Etisalat is a tough competitor which has already spread to other countries indicating that if du expands to those countries, Etisalat would persist as a tough competitor in those countries too. Etisalat has also been growing despite the entry of du in the market as loyal customers of Etisalat still persist in the market who do not want to change their preference. Du does not provide prices which are marginally low than the competitor and are quite similar to Etisalat which gives Etisalat the opportunity to grow its power and succeed in the market by winning back its customers. After the entry of du, Etisalat has been consistently enhancing its service and pricing strategies. (GERGAWI, 2009)
THREAT OF NEW ENTRANTS
The threat of new Entrants into the market is persistent due to the increasing penetration of telecom sector in the UAE market and increasing scope of opportunities in the telecom sector in UAE.
STRATEGIC POSITION OVERVIEW
Looking at the factors that affect du as a company, the current strategic position of du seems strong but it has its share of threats that can come its way. There is capability to grow further and develop internally which is still untapped for most extent.
The vision of du is,
“To enhance your life, anytime, anywhere.”
Du’s mission statement says,
“We want to delight our customers, be the employer of choice for the best talent, create optimal value for our shareholders through business excellence and innovation, and proudly contribute to the transformation of our community.” (du, 2015)
Du’s values include friendliness, confidence, honesty and being surprising.
ANALYSIS OF STRATEGIC POSITION
There are certain strategic tools which can be utilized to analyze a company’s past strategies, their current strategic position and for deciding an appropriate strategy for the future. One such tool is the strategic clock model introduced by Cliff Bowman in 1996 which were an extension of Michael Porters generic strategies for businesses about effectively competing against other companies. The strategy clock features 8 direction which the company can go or has gone in the past and steps can be taken accordingly by the company. (Ahmed, 2014)
STRATEGY CLOCK FRAMEWORK PERSPECTIVE
Figure 1 Bowman’s Strategic Clock
Looking at the year 2006 when du entered the telecom market of UAE, it applied the “Hybrid” strategy providing a competitive price and provided varied services compared to its competitors which led to a huge success and it reflected on its rapid growth over the years. This strategy suggests that the company offers its products and services at a low price but has a perceived value which is found to be higher than the competitor. This strategy was adapted so that the customers feel that the company is providing products at a fair price. And that is what actually happened that is what can be said after analyzing the sequence of events. Currently, bot du and Etisalat are competing on level ground and there is need for du to adapt a strategy for future growth and sustainability.
For the future, du can adapt the strategy of differentiation in which they can sell services which are unique and have a higher amount of perceived value in the eyes of the customers. Companies can only do this if they have a competitive edge and du has the advantage of having TV oriented services which the competitor is not providing. There is also the emergent factor of du developing technological resources related to high speed internet which will be a unique factor of service which du will be providing in the future which is when du can adapt the new strategy.
Du will be able to compete with Etisalat on a long-term basis by adapting this strategy for the future. But it cannot be applied right away as du doesn’t have a significant competitive advantage as of now but after it gains the feature of a high speed internet which provides speed faster than its competitor, it can apply the differentiation strategy for desired effect.
ANSOFF MATRIX VIEWPOINT
The Ansoff matrix is also recognized as a strategic management tool as well as a marketing oriented planning tool which was introduced by H. Igor Ansoff in the year 1957. (Ansoff, 1957) The utility of this matrix is to help a business decide how to expand the business through its product and how to expand the market in which it is currently doing business in.
Figure 2 The Ansoff Matrix
Looking at the Ansoff matrix, du followed a perfect market penetration strategy according to the matrix which worked how it was supposed to, but as du is successfully doing business in UAE, there is need to observe the matrix and analyze which of the steps depicted in the matrix are viable for du to choose and proceed its business. Looking at the current prospects of du and the current scenario of the local and global telecom market which is penetrating almost every country with a high percentage, du has two options at its hands which can be chosen for future growth. Initially at a local level (UAE), du can adapt the step of product development through which du can start providing high speed interned and other features or services through innovation and strengthen its position in the telecom market of UAE.
There is also another step which can be either taken as a separate alternative or a second step to be followed after the stage of product development. Market development is a very lucrative opportunity in the current telecom sector scenario over the globe and du has the potential to follow this step. Its competitor Etisalat has also attempted this strategy and succeeded. This does not indicate that du will also be successful but du can definitely consider expanding into a market where there are less number of competitors and a scope of future growth (i.e. low penetration but high growth rate of penetration).This step can also be done after product development in UAE but there is a possibility that the other markets have the provision of the same services by another service provider.
EVALUATION OF ALTERNATIVES
Observing the alternatives of both the frameworks, it can be safely said that adapting the Ansoff Matrix is suitable option for du in which du has a matter of choice and even if a single definite option of either product development or market expansion is picked, it is likely to have success. The only drawback behind product development is that if du spends time in product development, then it might miss the opportunity of penetrating a market before its competitor does the same in the target country for penetration. Considering this, it is viable for du to bend more towards market expansion and start looking for countries in which it can be successful. Following this alternative will partially eliminate the possibility of Etisalat not entering the market before them and less number of competitors will allow du to have a favorable position in the target market and penetration into the new market will be easier if this strategy is applied as soon as possible. It is not that product development strategy will give way to an unfavorable outcome. Product development will strengthen its place in the home market and provide du with a competitive advantage. But losing the opportunity of market expansion might cause unfavorable consequences for du in future.
IDENTIFICATION OF STRATEGY FORMATION PROCESS
In order to identify or analyze the strategy formation process, it is essential to recognize the true meaning behind what a strategy is to know how it is formed. Strategy can be termed as an aligned arrangement of objectives and plans for the attainment of these objectives which is described in a way that it becomes the mere definition of the series of actions that the company is performing in a specific period of time or till the attainment of certain objectives. (Andrews, 1980)
Strategy is formed in any given phase of an organization. In the creation of the organization, a market penetration strategy is formed to determine how the organization will establish its business in the market and its series of actions and objectives for the first few years. Strategy is also formed when an organization is failing to meet certain objectives or when calamity of any sort comes in the way of the organization. Strategies are also formed when a set of objectives are achieved or circumstances lead the company to go a certain way. These specific points define how organizations have to form strategies at various checkpoints.
The process of strategy formation can be different at times and the manner or circumstance in which the strategy is formed defines the manner of strategy formation process. This leads to a classification of strategy formation types and they are divided into three types:
1. Intended Strategy
2. Emergent Strategy
3. Realized Strategy
An intended strategy is one that gets formed due to a predefined plan. This type of strategy is formed on the event of creation of an organization or when certain objectives of the earlier strategy are achieved which leads to the formation of a new strategy. This kind of strategy is often recognized as a business plan. In certain occasions, if an intended strategy is well defined, then it leads an organization to immense success. (Mintzberg & Waters, 1985)
When a strategy is formed due to specific event or circumstance but not planned beforehand, it is recognized as an emergent strategy. It is not definite that a negative event can only lead the organization to form an emergent strategy as in certain occasions, a new opportunity can also lead the organization to make an emergent strategy. There are chances that emergent strategies may lead the organization to fail as they are not properly planned like an intended strategy. (Mintzberg & Waters, 1985)
Realized strategies are the set of objectives that an organization has formed for a very long term basis and they remain constant despite the formation of an emergent strategy. (Mintzberg & Waters, 1985)
Analyzing the strategy formation has led to the observation that the new strategy which is devised can neither be termed definitely as an emergent strategy nor as an intended one but is an amalgamation of both types of strategies. It can be termed as an emergent strategy due to the factor that du is taking advantage of the opportunity that the global telecom sector is developing and making a new strategy in accordance with that opportunity. It can also be termed as an intended strategy as the organization is not rushing into a new strategy due to the opportunity but has the time to devise a detailed strategy for future expansion. It can be termed later as a realized strategy as the ultimate goal of the organization or the vision and mission of the organization of the organization are being achieved despite the formation of this strategy.
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