BUSINESS STRATEGY IN A GLOBAL ENVIRONMENT
P.T Telekomunikasi Indonesia (Telkom),is a state-owned enterprise that running“T.I.M.E” (Telecommunication, Information, media, and edutainment) business based in Indonesia (Telkom Indonesia, 2012). Telkom Companystill consider as the biggest telecommunication company in Indonesia. Telkom also currently has 9 subsidiaries, which engage in the field of communication, application, cellular, communication data, property, construction, and content. Currently, Telkom is the most dominant player in the communication industry this time in Indonesia. However, in this particular assignment I moreconcentrate about telecommunication or cellular fields, Telkom Broadband Internet (such as Wi-Fi) and a little bit of their content fields.
Major industry environmental influences can be summarised in the PESTEL framework as shown in Figure 1 below.
– Increase In Minimum Wage
– Tax Increase
– State-own Enterprises
|The industry environment
List of suppliers are:
– Datacomm Dangraha Ltd
– Spire Indonesia Ltd
– Metropolitan Corporation
· Competitors: The top 3 competitors are
· Current Customers:
– Young until adult peoples.
Figure 2.1 PESTEL analyses for case organisation
· Government Support
· New learning system in school
· New Wave Technology
· Currency Problems
· Economic Growth
· AEC (ASEAN Economic Community)
· Business Continuity Management Disaster Recovery
· Social Media
· Home Phones
· The Demands of Public Wi-Fi
· State-Own Enterprises
– Increase In Minimum Wage: Every year, the minimum wages that obtained by every worker or labors in Indonesia will always rise every year(DarminNasution, 2015). Darminstated in Indonesian State Palace “Labor costs will rise every year, based on inflation and economic growth. So, the next year wages is the current minimum wage plus the percentage of increase in inflation and plus the economic growth.” The ministry of finance also has updated the new tariff of tax in Indonesia. This rate increase not only impact to the company but also to the workers.
- Indonesian Rupiah (IDR) is getting weaker compare to the US Dollar (USD). Since 2013, rupiah was constantly decreased until reach 13.000 in the mid of 2016. This situation makes the prices of the raw materials gets expensive and also impacts the margin profit of the Telkom Company.
- ASEAN Economic Community (AEC) is Economic Integration in South East Asia. Shortly AEC is an agenda of economic integration of ASEAN countries, which aims to eliminate, if not, to minimize the obstacles in economic activity across the region, for example in trade in goods, services, and investments. This situation canmake Telkom spread the wings and expand their product abroad easily. However, the industry competition also will increase.
– The need for social media in society is very high these days. Starting from awaken from sleep to fall back to sleep. The citizen needs to up to date their information; even from junior high school student due to the way of learning’s in Indonesia, (the students in Indonesia needs to practice the theories after the teacher gives the theories to their students). This situation makes the mobile operators such as telecoms getting lucky because mobile data demand from its customers or pulses continued to increase.
– As I mention above, these day people needs to up to date their information everyday and every time. Like while they are working, studying, eating, even when they are at the toilet This circumstances makes the Broadband operator gets more benefits, because the demand for Wi-Fi connection is increasing every year from the workplace, restaurant, cafe, downtown, campus, school, etc.
– It is true that Indonesia has many island in there, but many island is still lagging behind the others.Outlying regions and border regions in Indonesia desperately needs new development for them. At least they could find out information outside their territorial easily.Therefore, the Ministry of Communications and Information TechnologyRudiantara say they are ready and would provide subsidies to telecommunications companies that build infrastructure in outlying regions or national borders, using the funds of Universal Service Obligation (USO) (CNN Indonesia, 2015).USO aims to accelerate equitable access to telecommunications and information for lagging regions and remote areas, border areas and areas that are not economically feasible (Wikipedia 2016). New technology also needed for the education level. As I say at the Social Cultural Influences part, that every student needs Internet to browse the material that their teachers told.
– Indonesia is prone to natural disasters due its location that can cause serious disturbances on the Telkom business and adversely affect results of operations of Telkom. Some of Telkom’s operating area prone to natural disasters, such as floods, earthquakes, tsunamis, volcanic eruptions, fires or other events that are beyond the control of Telkom. All of the above may disrupt the company’s operations and result in damage to equipment that have an adverse impact on financial performance and results of operations of Telkom.However, Telkom already has Business Continuity Management, Disaster Recovery Plan(Telkom sigma, 2015).It’s like the insurance for the assets of Telkom Company if there are any disaster or others phenomenon.
– A few licenses require Telkom to pay the cost of telecommunications services and radio frequency usage fees to the Ministry of Communications and Information in IndonesiaGadingMahendrata, 2009).
– As State- Own enterprises, Telkom relative burdened with various rules and regulations that make them slow in making strategic decisions. And as I say in the political part, which is because Telkom is a state-owned enterprise, sometimes government intervening against the Telkom Company so as to make Telkomcannot be dynamic if there are any market changes (GadingMahendrata 2009).
3.0Five Forces Analysis
Figure 3.1 Porter’s Five Forces: Analysis of the Automobile Industry
· Traditional Mailing Services
· Free government WI-FI
Currently there are
· Telkom High Technology barrier
· Substantial Capital barrier for this industry
The Low Price cellular Program
Buyers consist of
· Young adult
Suppliers are numerous
· Datacom Dangraha Ltd
· Spire Indonesia Ltd
· Metropolitan Corporation
The rivalry in the industry could be described as Oligopoly, because Telkom and its 2 other competitors excel in the mobile phone market than any others. This means that Telkom included the marketleader
3.1 Potential Entrants
–Substantial Capital Barrier: The telecommunications industry is an industry that is solid with the capital and technology, so that the percentage for new entry in the telecommunication industry could be said weak, due to become the new entry in telecommunication industry, they must have a license issued by the government for which the license price is not cheap. For example, the government issued the 3G licences in the middle of 2006. Worth at least 100 billion rupiah which was then won by Indosatcompany at a price of 160 billion rupiah, Telkom company218 billion rupiah, Virgin and Orange company at a price of 188 billion rupiah (EndiFirtriHarlianto, 2010). The Low Price cellular Program also can bring a threat to the company: Many new entrants try to attract their potential consumer with their low cost pulses and low cost data cellular program. The new competitor in the industry tries to win the market with their cost advantage strategy.
Substitutes products can distract our products, because substitutes product has the same function with our products. For example Traditional Mail services which can send a letter, notification,invitation, or announcement. This mail services has the same function with the cellular phone. Another example; Government has successfully built some free hot-spot WI-FI in the certain places in downtown. This action also can threat the Cellular Company, because consumer now can reach Internet without any charges by their operator.
The power of buyer is strong in this industry, because customers have many choices in terms of both price and quality (EndiFitriHarlianto, 2010). The number of operators that provides similar services at the price and quality is not far away different. This condition can causes customers to easily move from one operator to another operator with the low Switch Cost by the consumer.Young adult however tend to continuously use Telkom because Telkom has a great program that suitable with the life of the young adult. For example, every consumer who bought a data packet or pulse, then they will get a bonus that can be exchanged as a cinema ticket, a sweepstakes ticket, etc.
– Telkom has many suppliers, starts from the consultant like Spire Ltd, Outsourcing like Metropolitan Corporation, or IT services like Datacom Dangraha etc. The relationship between Telkom and their “partner work” are very good. Like In 2010, Telkom gave award to their loyal or superb supplier and also in 2009 when Telkom conducted some surveys to their supplier (Telkom Indonesia, 2015). The content of the survey are quality, cost, delivery, flexibility, and responsiveness in the Telkom Company. So, activities like this can increase some bond and makes the relationship between Telkom and its partner stronger.
– Cell phone industry has grown rapidly over the past 2 decades in Indonesia; many companies try to compete against each other in this industry. However, the character in this industry field is oligopoly because Telkomis the dominant player in this industry, followed by Indosat and XL Company.Oligopoly as we know is the market character or form which a market or industry is dominated by a small number of sellers (Oligopolists) (Wikipedia, 2016). The competition atmosphere in this industry also strong, all of the competitors try to steal another telecommunication company loyal customer with their program, which for example tariff war between the competitors (Sanjayana, Herman, Margaretha Cynthia, 2014).
4.0 Key Success Factors
Table 4.1Key success factors for the selected organisation
|External Forces/Needs||Industry responses||Key Success Factors|
|Prices||· Attractive prices on the service bundle and effective customer services.
|· Reducing of service bundles prices and creation of a strong customer care and operations support system and personnel||· Price tariffs|
|Internet connection||· Provision of information, entertainment and communication service bundles for specific user groups
· Demand for wireless internet options such as Wi-Fi
· Fast and reliable internet
|· Creation of customer user interfaces designed for wireless devices and provision of services according to the targeted market lifestyle and needs
· Provision of fast and reliable internet services
|· Cost effective and advanced technology
|Electronics||· Provision of more advanced applications and devices such as dual mode internet enabled handsets
|· Enhancement of innovative services and technology
|· Integration of applications, networks, and telecommunication devices|
|Market||· Market is segmented due to remote areas and less economically feasible areas||· Expanded services such areas by use of advanced technologies
|· Service expansion|
|Technological advancement||· Increased demand of telecommunication devices and services||· Analysis and observation of market trends both local and international||· Benchmarking|
4.1 KSF 1
The pricing strategies employed by a telecommunication company or provider as essential in the achievement of its objectives. Determination of the telecommunication tariffs and the interconnection charges are key to the achievement of the objective. The market always needs quality products and services at cost effective prices (Telkom Indonesia, 2015). To meet the demand, Telkom has to create price tariffs to enhance operational efficiency and flexibility, financial viability, promote investment, innovations, accelerate demand, and outcompete its competitors (Huag et al, 2014, pp. 1-6). This is achievable only if the price rates for the products and services are reasonable and viable from the market perspective.
4.2 KSF 2
Technology has always been a key factor in success in telecommunication operations. An industry with advanced technology is able to favourably compete in the market and provide quality and attractive prices for its services and products. In conjunction with government policies and the efforts of the Ministry of Communications and Information Technology, Telkom had to advance its technology and services (International Business Publication, 2015, pp. 24; 218). As the digital era and globalisation expand, it is mandatory to use cost effective but advanced technology.
4.3 KSF 3
One consideration put in place whenever a computerized device is being purchased is its multitasking capability. The market often needs an electronic device that is able to provide multiple services, with that in state; smartphones, smart homes, and smart TVs are being used. For Telkom to meet the requirement of having devices with integrated applications, networks, dual SIM card enabled and other telecommunication alternatives in encouraging innovative services and enhanced (Puspasari&Yuwono, 2013).
4.4 KSF 4
One of the characteristics of the Indonesian telecommunication industry is it is segmented into remote and urban areas experiencing different economic feasibility. Services in urban areas and their vicinities are relatively better compared to rural areas. Nevertheless, the remote areas need to be connected to the internet, to meet this requirement, Telkom has to expand its services to the remote areas and standardize its prices as per the segment. Market segmentation based strategy would be viable for Telkom to exploit (Telkom Indonesia, 2015).
4.5 KSF 5
International influence has greatly changed the Indonesian communication and information technology services and operations. The demand for the products and quality services and risen, the market needs to trend with the international style of globalisation and the digital era has made the world a single village. One feasible strategy to be used by Telkom is benchmarking as a total quality management program. Through benchmarking, it is able to conform to the international needs as well as the requirements of its local market. Benchmarking is a gradual process that enables companies to improve continuously its products and services through continuous learning (Binti, 1996, p. 44-50).
List of references
- BBC News2015, ‘The Indonesian government set the formula about the increase in labor wages’, 15 October, viewed 20 April2016, <http://www.bbc.com/indonesia/berita_indonesia/2015/10/151015_indonesia_paket_ekonomi_4>
- TaxOnline2015, viewed 29 April 2016 <http://www.online-pajak.com/en/tools-and-tips/calculation-income-tax-21>
- Opportunities and Challenges in Facing the ASEAN Economic Community 2016, Viewed 29 April 2016, <http://www.gajimu.com/main/tips-karir/peluang-dan-tantangan-dalam-menghadapi-masyarakat-ekonomi-asean>
- Mahendrata, G, 2009, ‘SWOT and PESTLE Analysis Telkom Ltd’, Viewed 28 April 2016,
- CNN News Indonesia 2015, ‘Build Network Operator in Remote Areas, Then The Government wills Ready To Subsidies’, 16 August 2016, Viewed 25 April 2016, <http://www.cnnindonesia.com/teknologi/20150816075503-185-72442/operator-bangun-jaringan-di-pelosok-pemerintah-siap-subsidi/>
- Wikipedia, 2016, ‘Oligopoly’, Viewed 28 April 2016 <https://en.wikipedia.org/wiki/Oligopoly>
- Business Continuity and Disaster Recovery 2015, Viewed 27 April 2016 <http://www.telkomsigma.co.id/datacenter/disaster-recovery/>
- Telkom Indonesia 2009, Relation ship With Suppliers, Viewed 26 April 2016 <http://www.telkom.co.id/UHI/sr-en/02_transfomation/0900_suppliers.html>
- Herlianto,EF, 2010, ‘ANALYSIS OF COMPETITIVE STRATEGY IN TELKOMINTERNET INDUSTRY’, Viewed 20 April 2016 <https://endifitri.files.wordpress.com/2011/07/tesis-strategi-bersaing-ef1.pdf>
- Cynthia, Herman, Sanjaya, 2014, ‘Telkom Indonesia Business Strategy’, Viewed 18 April 2016 <http://www.slideshare.net/SanjayaSanjaya/telkom-business-plan>
- Binti, R. E. 1996. Develop a benchmarking model for PT. Telekomunikasi Indonesia (TELKOM). University of Wollongong.
- Huang, H. S., Su, T. C., Wu, J. C., Tsai, W. D., Tseng, Y. C., Lin, F. J., … & Hu, W. H. (2014, September). A comparison of 4G telecommunications tariff plans in Asia countries. In Network Operations and Management Symposium (APNOMS), 2014 16th Asia-Pacific.IEEE.
- International Business Publication. 2015. Indonesia Business success Guide: Basic Practical Information and Contacts. Washington, DC.
- Puspasari, D., &Yuwono, B. 2013, September. Implementing integrated internal control life cycle at Telecom Company. In Advanced Computer Science and Information Systems (ICACSIS), 2013 International Conference on (pp. 249-254). IEEE.
- Telkom Indonesia. 2015. 2015 Annual report: BUILDING INDONESIAN DIGITAL SOCIETY. Retrieved on 30th April 2016 from <http://www.telkom.co.id/en/investor-relations/laporan-laporan/laporan-tahunan>