Strategic Management

Sep 4, 2019
folder_opencategory: Management

Introduction

Strategic management enables managers to describe and identify the suitable strategies for achieving competitive advantage and better performance for their companies (Hitt, Ireland, & Hoskisson, 2012). A company with a competitive advantage has higher revenues than the average productivity of other comparable businesses. Strategic management entails the acts and decisions managers take in order to influence the results of the company’s performance (Hitt, Ireland, & Hoskisson, 2012). A proper understanding of the general and competitive organizational surroundings is crucial for making right decisions (Hitt, Ireland, & Hoskisson, 2012). Managers should take advantage of internal and external factors by exploiting strengths to reduce the company’s weaknesses and utilize the business atmosphere opportunities without ignoring threats. Strategic management is applicable for large and small firms (Hitt, Ireland, & Hoskisson, 2012). Moreover, creating and implementing suitable strategies helps organizations attain proper competitive advantage. Strategic management deals with formulating and implementing decision regarding the future of a firm (Hitt, Ireland, & Hoskisson, 2012). Therefore, it helps in determining the business direction. In addition, strategic management is essential in evaluating competitors and controlling the company. It helps the involved organizations to set strategies and goals to outshine all existing and potential competitors (Hitt, Ireland, & Hoskisson, 2012). Reevaluating plans regularly helps determine the success and nature of the implementation and the possibility of replacement (Hitt, Ireland, & Hoskisson, 2012). Current paper will discuss the SWOT analysis of Etisalat and provide recommendations for the company.

Company Profile

Etisalat is among the world’s leading telecom groups that focus on emerging markets (Etisalat, 2015). In 2014, the company reported a net profit of AED 8.9 billion and net returns of AED 48.8 billion, hence graded among the world most lucrative telecom groups (Etisalat, 2015). Etisalat’s high acknowledgement rating at AA-/A+/Aa3 proves an enduring performance and appealing financial statement (Etisalat, 2015). Etisalat was established in the UAE 40 years ago as the country’s first telecommunications provider. Etisalat provides innovative solutions and services in 19 nations traversing Africa, Asia, and the Middle East, with 169 million subscribers (Etisalat, 2015). In 2014, Etisalat had employed about 40,000 employees. Etisalat’s head office is located in Abu Dhabi. The company’s aim is to offer the best in-class total consumer knowledge globally and locally (Etisalat, 2015). Etisalat is aspiring to be most popular telecom group in rising markets. In every market Etisalat operates, it strives to deliver new technologies and foster innovation consistently (Etisalat, 2015). It is evident in the UAE as they pioneered the 5G services and deployment of upcoming ICT platforms, design and coordinating for fifth generation mobile broadband (Etisalat, 2015). The world’s first city to have highest fibre optic speed and exclusively connected is Abu Dhabi, which is attributed to Etisalat. The diverse technology has enabled Etisalat to operate in significant market share striving to expand through Saudi Arabia and Egypt in the Middle East, Asia and Africa (Etisalat, 2015). The beginning of mobile broadband services, such as mobile television and video call, has altered the market conditions and provided people with cheap mobile Internet access (Etisalat, 2015). Etisalat is widely recognized in the telecom industry for its services and performance.

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SWOT Analysis

SWOT analysis is the most widely utilized tool in the business world for analysis and audit with regard to ascertaining the strategic position of an entity. Also known as (S) Strength and (W) Weakness, (O) Opportunities and (T) Threats (Coman & Ronen, 2009). The internal factors include Strength and Weakness, whereby the firm is in a position to control. The external factors such as Opportunities and Threats denote the factors that the entity is not in a position to control (Goh, Tang, Lam, & Gao, 2006). The function of SWOT analysis is to recognize the strategies that will enable the aligning of a company’s capabilities and resources; thus, helping in matching the environment in which the business operates (Goh, Tang, Lam, & Gao, 2006). SWOT analysis allows an organization to evaluate the likely external environment threats and opportunities as well as internal limitation and potential (Goh, Tang, Lam, & Gao, 2006). In addition, SWOT analysis views all factors both negative and positive, outside and inside the company that hinders success (Goh, Tang, Lam, & Gao, 2006). Continued research on the surroundings where the company operates is vital. It assists in predicting the shifting trends that enable them to make decisions regarding the firm (Goh, Tang, Lam, & Gao, 2006).

Strengths

Telecommunication sector growth in the UAE is usually identical with Etisalat growth, a major telecommunication firm (Coman & Ronen, 2009). The UAE telecom sector is highly monopolized in the market by Etisalat despite the existence of other telecom companies (Coman & Ronen, 2009). Secondly, Etisalat is quick in innovation and the introduction of newer technologies in the market. In 1982, Etisalat was the first to establish mobile phone service (Coman & Ronen, 2009). Third, Etisalat is the hub for Internet, corporate data services, roaming, broadcast, mobile, and voice in the Middle East (Coman & Ronen, 2009). Stable financial performance of Etisalat is yet another strength for the firm. It is positioned sixth largest firm in the Middle East with respect to revenues and capitalization (Coman & Ronen, 2009). In addition, the company has skilled and talented employees which helps improve firm’s performance. In order for Etisalat to acquire new countries and expand its territory by recognizing international techniques, it uses an effective distribution strategy (Coman & Ronen, 2009). It has 525 roaming agreements linking 185 nations with voice roaming and 3G (Coman & Ronen, 2009). Another strength of Etisalat is its high marketing and brand presence. Moreover, Etisalat benefits from reduced labor costs, domestic market, experienced business units, and high growth rate (Coman & Ronen, 2009).

Weaknesses

The challenges associated with global operations are a source of weakness for Etisalat. The need to control operations in many states may lead to Etisalat’s failure to focus on service quality (Coman & Ronen, 2009). In addition, Etisalat lacks proper investment on development and research (Coman & Ronen, 2009). Recently, Etisalat customer service has become poor as they invest a lot in fixing technical problems and supporting their subscribers. Etisalat has bad coverage of Internet in various areas in the region, which is affecting its reputation as a provider of Internet services (Coman & Ronen, 2009). Moreover, Etisalat suffers from poor network coverage in particular areas, mostly in regions with dense population.

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Opportunities

It is worth noting that a number of opportunities exist for Etisalat. The company can opt to expand its business by penetrating new countries and markets (Goh, Tang, Lam, & Gao, 2006). The firm can increase its reach into markets, services, and modern technologies. Etisalat expansion in these areas will enable it to create opportunities for its customers (Goh, Tang, Lam, & Gao, 2006). Another opportunity for Etisalat is increasing consumer interest by using new technologies (Goh, Tang, Lam, & Gao, 2006). The growing mobile penetration is yet another opportunity for Etisalat in the UAE with more than 100% and 60% broadband and Internet penetration. Moreover, the entire ICT segment including telecom and IT is expected to grow in future (Goh, Tang, Lam, & Gao, 2006). In future, development plans of multibillion-dollar infrastructure, an enthusiastic SME sector, besides economy diversification are expected to boost the development of ICT segment in the UAE (Goh, Tang, Lam, & Gao, 2006). Abu Dhabi and Dubai are expected to grow and the strong ICT segment is a requirement for attaining such ambitious strategies.

Threats

Etisalat future success is limited by various external threats such as increased government regulations against the telecommunications industry, increasing competition, and sluggish economy (Goh, Tang, Lam, & Gao, 2006). The firm faces stiff competition from global and local companies in telecommunication industry. An example is Du Telecommunication Company, with its establishment in the UAE causing a decrease in profits and sales of Etisalat firm (Goh, Tang, Lam, & Gao, 2006). The existing Etisalat subscribers can be snatched by rivals that provide consumers with innovative technology and fast service mainly if the Etisalat cannot provide the same new features (Goh, Tang, Lam, & Gao, 2006). In past few years, Etisalat has experienced reduced markets due to competition from DU Telecommunication, and global economic slowdown. In 2008, the mobile industry penetration had achieved maturation at 190%; thus less possibility for future expansion (Goh, Tang, Lam, & Gao, 2006).

Recommendations

The firm’s first recommendation is to gain entry to new markets, such as Sri Lanka and India, since they play a crucial role in controlling Etisalat future strategy (Ghanem & Elfakhani, 2011). Other viable markets for Etisalat include West Africa, Tanzania, Sudan, and Pakistan, which have a vast subscriber base with minimal competition (Ghanem & Elfakhani, 2011). In Sudan, for instance, there is 1-2% fixed line penetration; therefore, it offers a great potential to growth for major telecom such as Etisalat. Whereas India with 115 million population and penetration rate of 43% for mobile phones offers strong opportunities for growth (Ghanem & Elfakhani, 2011). The case is the same with Africa, where the opportunity for strong economic growth, Internet, fixed line penetration, and the mobile services are expected to grow; hence, Etisalat can exploit a potential market (Halawi, McCarthy, & Aronson, 2006). Essentially, Etisalat has to increase its search for unoccupied regions and formulate strategies to enter and exploit these markets.

Secondly, the firm should present innovative products for its local consumers (Ghanem & Elfakhani, 2011). Other than globalized industries, Etisalat should learn the conditions of the local market and develop innovative solutions as a means of capping the intensifying local competition. For instance, in 2010, the launching of the cooperation between PTCL and Etisalat Afghanistan offering affordable rates in two nations led to quadrupling of traffic (Halawi, McCarthy, & Aronson, 2006). In order for Etisalat to lure more subscribers, it needs to offer innovative customized packages in its local markets, especially in the Middle East (Halawi, McCarthy, & Aronson, 2006).

Conclusion

Etisalat operates in over 18 countries worldwide, which makes it a global brand. In future, Etisalat is expected to expand its geography depending on the innovation value it offers for the present products and geographies portfolio. However, the UAE offers a considerable share of profits; it is not simple to maintain the healthy bottom line due to intensifying saturation and competition of the marketplace. Based on the SWOT analysis, two recommendations are made for Etisalat, which include expansion to untapped markets and offering innovative products and services in the local market.

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