DiGi Strategic Management

1

DIGI.COM BERHAD |

Lecturer: PROF. DR. NOOR AZMAN ALI

STRATEGY MANAGEMENT GSM 5160 | WRITTEN ASSIGMENT

PREPARED BY: GROUP 1

KUAN YEN CHING GM03709

KUAN YEN NEE GM03698

TUNG WAI CHEE GM03578

KAMELIA SHARIFIAN GM03360

2

Table of Contents

1.0 Introduction to DiGi Telecommunication Sdn Bhd .................................... 4 1.2 Market Composition ............................................................................................................... 6 1.3 Commenting on DiGi‟s Vision ............................................................................................... 7 1.4 Commenting on DiGi‟s Mission ............................................................................................. 8 1.5 DiGi‟s Long Term Objectives ................................................................................................. 8 1.6 DiGi‟s Potential Issues ............................................................................................................ 9

2.0 3 Key Strategic Environments ......................................................... 9 2.1 Introduction to External (Macro) Environment .................................................................... 10 2.2 PESTLE Analysis ................................................................................................................ 10 2.3 Cultural and Demographic Factors ....................................................................................... 17 2.4 15 External Environmental Factors ....................................................................................... 18 2.5 5 Identified Opportunities and Threats ................................................................................. 19

3.0 Introduction to Industrial Analysis (Competitive Information) ...................... 20 3.1 Threat of New Entrants ......................................................................................................... 20 3.2 Threat of Substitute Products ................................................................................................ 21 3.3 Industrial Rivalry .................................................................................................................. 21 3.4 Bargaining Powers of Suppliers ............................................................................................ 22 3.5 Bargaining Powers of Customers .......................................................................................... 23 3.6 15 Industrial Environment Factors ........................................................................................ 23 3.7 The External Factor Evaluation (EFE) Matrix ...................................................................... 24 3.8 Top 5 Opportunities and Threats .......................................................................................... 24

4.0 Introduction to Internal Analysis .................................................... 26 4.1 DiGi‟s Common-Size Financial Statement Analysis (2005 – 2009) .................................... 26 4.2 DiGi‟s Financial Ratio Analysis (2005 – 2009) .................................................................... 31

4.3 20 Internal Factors………………………………………………………………………… 32

4.4 The Internal Factor Evaluation (IFE) Matrix………………………………………………32

4.5 Top 7 Strengths and 4 Weaknesses………………………………………………………...33

5.0 Introduction to SWOT Matrix Framework .......................................... 33 5.1 DiGi SWOT Matrix .............................................................................................................. 37

6.0 Introduction to Types of Strategies ................................................... 37 6.1 DiGi‟s Possible 4 Types of Strategies ................................................................................... 38 6.2 DiGi‟s Intensive Strategies – Market Penetration ................................................................. 38 6.3 DiGi‟s Intensive Strategies – Market Development ............................................................. 40 6.4 DiGi‟s Intensive Strategies – Product Development ............................................................ 42

7.0 Introduction to SPACE Matrix ...................................................... 43 7.1 SPACE Matrix for DiGi ........................................................................................................ 45 7.2 DiGi‟s SPACE Matrix Profile............................................................................................... 46

3

8.0 Introduction to Blue Ocean Strategy (BOS) .......................................... 47 8.1 DiGi Strategy Canvas ........................................................................................................... 49 8.2 DiGi ERRC Grid ................................................................................................................... 49

9.0 Introduction to BCG Matrix ......................................................... 53 9.1 DiGi BCG Matrix ................................................................................................................. 54 9.2 DiGi BCG Matrix Justifications and Strategies .................................................................... 54

10.0 Introduction to Strategic Implementation Action Plan ............................... 59 10.1 DiGi Strategic Implementation Action Plan ......................................................................... 59

11.0 Introduction to Strategic Evaluation – Balanced Scorecard .......................... 64 11.1 DiGi Balanced Scorecard/Strategy Map ............................................................................... 64 11.2 DiGi Balanced Scorecard/Strategy Map Cause and Effect Relationships ............................ 66

4

Note: 100% indicates wholly-own subsidiaries

1.0 Introduction to DiGi Telecommunication Sdn Bhd

Company Overview (History, Location, Structure, Size and Key Employees)

DiGi Telecommunications Sdn Bhd (herein

after known as DiGi), a subsidiary of DiGi.com

Berhad (former name: Mutiara Swisscom), is a

mobile communications company that engaged

in establishment, maintenance and provision of

telecommunication and related services. DiGi,

was established in May 1995, primarily

operates in Malaysia with its headquartered1 in

Shah Alam, Selangor.

DiGi sister company, Pay By Mobile Sdn Bhd

deals with electronic financial services, while

its subsidiaries are DiGi Services Sdn Bhd

(property holding, renting of premises) and

Djuice.Com Sdn Bhd (others related services).

The table below tabulates DiGi.com Berhad

Key Employees who are leading DiGi 2,800

strong workforces.

1 affectionately called D‟House

5

Ownership

As a group, DiGi.Com Berhad is listed on Bursa Malaysia Securities Berhad under the Infrastructure

category with a paid-up capital of RM77.75 million and a market capitalization of approximately

RM16.8 billion as at 6 April 2009. As of March 2010, DiGi market capitalisation was approximately

RM17.5billion.

Top 20 Shareholders as at 18 March 2010 No. of Shares %

1 Citigroup Nominees (Asing) Sdn Bhd

Telenor Asia Pte Ltd (DiGi)

380,975,030 49.00

2 Employees Provident Fund Board 124,865,095 16.06

3 Amanahraya Trustees Berhad

Skim Amanah Saham Bumiputera

37,090,300 4.77

4 CIMB Group Nominees (Tempatan) Sdn Bhd

Pledged Securities Account For Time dotCom Sdn Bhd

27,500,000 3.54

5 Valuecap Sdn Bhd 23,935,200 3.08

6 Kumpulan Wang Persaraan (Diperbadankan) 23,553,500 3.03


Amanah Saham Wawasan 2020

18,303,400 2.35


Amanah Saham Malaysia

14,487,300 1.86

9 HSBC Nominees (Asing) Sdn Bhd

Exempt An For JPmorgan Chase Bank,

National Association (U.S.A.)

9,700,600 1.25

10 Permodalan Nasional Berhad 4,868,800 0.63


As 1Malaysia

4,600,000 0.59

12 Dato Ahmad Sebi Bin Bakar 4,551,813 0.59


BBH And Co Boston For Vanguard Emerging Markets Stock Index

Fund

3,938,373 0.51

14 Citigroup Nominees (Tempatan) Sdn Bhd

Exempt An For American International Assurance Berhad

3,930,400 0.51


Amanah Saham Didik

3,510,500 0.45

16 Alam Nusantara Sdn Bhd 3,401,523 0.44


Public Islamic Dividend Fund

3,322,300 0.43

18 Citigroup Nominees (Tempatan) Sdn Bhd

Exempt An For Prudential Fund Management Berhad

3,068,300 0.39

19 ABB Nominee (Tempatan) Sdn Bhd

Pledged Securities Account For Ahmad Sebi Bin Bakar

3,000,000 0.38


Exempt An For Jpmorgan Chase Bank,

National Association (U.A.E.)

2,918,400 0.38

TOTAL 701,520,834 90.24%

6

Note: above is market position back in 2004

1.1 Business Description

DiGi operates through 2 business lines:

Voice Services fixed and mobile telephony (prepaid, postpaid, international services)

Data Services dial-up, mobile and broadband internet, messaging

1.2 Market Composition

The subsequent table give the overview of the Malaysia telecommunication market composition by

business line:

Business Line Market Composition

Voice

Services2

Fixed Line

Telephone

Main Rival 2009 Major Market Share

Telekom, Maxis,

Time dotCom

Telekom

Time dotCom

97.6%

1.6%

Mobile

Cellular Maxis, Celcom

Maxis

Celcom

DiGi

39.9%

34.4%

25.7%

Data

Services3

Dial-Up

Internet

(Narrowband/

Wired

Broadband)

Telekom, Maxis,

Celcom,

Time dotcom, Jaring no statistic found

Mobile

Internet4

Maxis, Celcom, P1

Wireless

Broadband

Telekom, Maxis,

Celcom, Time

dotcom, P1, Jaring,

UMobile

Celcom

Maxis

P1

Telekom

DiGi

69.9%

11.7%

8.4%

6.5%

3.5%

With reference the below figure (Source: DiGi), on an overall basis, DiGi benchmark only against

Maxis and Celcom since 2004. Even in 2009, when broadband was accounted for 31.7% of total

2 Source: Malaysian Communications and Multimedia Commission – MCMC, 2009

3 Source: Starbiz, November 30, 2009

4 Mobile internet only took off in 2009 and DiGi had entered the arena with 3G for small screen in

3rd

Quarter of 2009

7

market growth, DiGi managed to defend its revenue market share (compare to 2008) when Maxis lost

substantial share to Celcom and some to DiGi (refer below figure from DiGi‟s 13th Annual General

Meeting on 13 May 2010) despite having less 3G coverage. However, notice that numbers exclude

broadband.

2nd

Quarter of 2010 Updates

The subsequent tables compare and contrast the same parameters (subscribers, revenue and EBITA)

of Maxis, Celcom and DiGi in 2nd

Quarter of 2010. It echoes DiGi sentiment on Celcom overtaking

Maxis on quarter revenue and EBITA while DiGi is still #3.

Parameters Telcos

Maxis Celcom DiGi

Subscribers

(million) 12.97 10.60 8.10

Revenue

(RM million) 2,191 3,854 1,335

EBITA

(RM million) 1,028 1,812 578

1.3 Commenting on DiGi’s Vision

DiGi‟s Vision is to be seen as stars in excellent customer experience by enhancing communications to

improve customers' quality of life, at home, work and play.

Comments: This is a good statement – reveals DiGi‟s core communications business. It is short – one

(not so long) sentence length; thus acceptable. Plus, it does serves as the starting point in everything

DiGi do and express where DiGi want to be in the long term. It does not tell how DiGi are going to

get there but sets the direction. DiGi‟s strategists believe that the Vision attracts commitment and

energises employees to strive for an established standard of expected excellence.

8

1.4 Commenting on DiGi’s Mission

DiGi‟s Mission is to:

1. Provide customers specific solutions to meet individual needs for communications, connectivity,

and access to information and security; (1,2,4,6,7)

2. Provide an environment where our employees can grow and be fulfilled; (5,8,9)

3. Provide superior returns to shareholders; and, (5,9)

4. Contribute to improving life in Malaysia. (3,8)

Note: the numbers in parentheses correspond

to the 9 essential components of the mission statement below

In DiGi‟s 2009 annual report, DiGi declared this in addition to their mission: Every day we go the

extra mile, in small and big ways, to exceed our customers‟ expectations, by delivering mobile and

internet services that are; “Made for me”, “Make it easier”, and offer the “Best deal”. DiGi make

things simple and easy to understand for their customers. Their products and services are practical and

intuitive. They make things happen to uphold “Make it Easier”.

Comments: The statement is clear as it declares DiGi‟s “reason for being”. Apart from that,

it also fulfills these characteristics of a mission statement:

broad in scope; do not include monetary amounts, numbers, percentages, ratios or objectives

250 words in length

inspiring

identify the utility of DiGi‟s products – as long as it is for communication

reveal that the DiGi is socially and environmentally responsible

includes all 9 essential components of mission statement – making it effective

reconciliatory enduring

1.5 DiGi’s Long Term Objectives

DiGi‟s long term objectives is to create long-term shareholder value through providing innovative,

easy-to-use and best value telecommunications services in the Malaysian market.

1. Customers (Who are the firm‟s customers?)

2. Products or services (What are the firm‟s major products or service?)

3. Markets (Where does the firm complete?)

4. Technology (Is the firm using the latest technology?)

5. Concern for survival, growth, and profitability (Is the firm committed to growth?)

6. Philosophy (What are the basic beliefs, values, aspirations and ethical priorities of the firm?)

7. Self-concept (What is the firm‟s distinctive competence?)

8. Concern for public image (Is the firm responsive to social, community and environmental concerns?)

9. Concern for employees (Are employees a valuable asset of the firm?)

9

1.6 DiGi’s Potential Issues

These symptoms are recognized from DiGi‟s annual and quarter Financial Statement:

slower subscribers‟ growth despite increase in total numbers of subscribers

declining revenue growth rate despite yearly increase

Voice Services will still be DiGi cash cow (especially for prepaid Mobile Cellular), but growth

will definitely come from Data Services (mobile internet and mobile/wireless broadband). Yet, the

mobile/wireless broadband market is crowded with DiGi having the smallest market share in

2009 and there are many new entries in 2010 (refer 3.3 Industrial Rivalry).

Hence, DiGi‟s key potential issue is how the firm should fight (strategic planning) to compete for

growth and at least defend or preferably increase its market share in both Voice and Data Services?

Specifically:

What action (intensive strategies) should DiGi take to increase its subscribers‟ growth and

encourage more spending among its current subscribers base?

To what extend should DiGi venture into enhance communications of Data Services (especially

mobile/wireless broadband) so that they can be seen as stars in excellent customer experience

that improve customers' quality of life, at home, work and play, which is DiGi‟s Vision?

How should DiGi react to continued price pressure (pricing decision) while upholding their

mission statement #2 (Provide an environment where our employees can grow and be fulfilled)

and #3 (Provide superior returns to shareholders)?

10

2.0 3 Key Strategic Environments

As shown by the left figure, strategic planning

commences with an analysis phase to understand DiGi‟s 3

key strategic environments, namely:

(a) External (Macro) Environment,

(b) Industry Environment, and

(c) Internal Environment

(a) will be cover in subsequent sections while (b) begins

in 3.0 Introduction to Industrial Analysis (Competitive Information) and (c) in 4.0 Introduction

to Internal Analysis.

2.1 Introduction to External (Macro) Environment

External environment are conditions, entities, events, and factors surrounding DiGi which influence

its activities and choices, and determine its opportunities and threats. As DiGi operates in Malaysia

telecommunication industry, Macro Analysis will be done on 8 major external factors (Political,

Economic, Social, Technological, Legal, Environmental, Cultural and Demographic – the first 6 are

collectively known as PESTLE Analysis) that affects the industry as a whole. Each factor will be

deliberate in isolation for the final listing of DiGi‟s 15 External Environmental Factors.

2.2 PESTLE Analysis

This section analyzes the political, economic, social, technological, legal and environmental structures

of Malaysia that affects the telecommunication industry as a whole.

POLITICAL

Prolonged Internal Political Stability (despite the failure of democratic institutions to take firm

root): Malaysia has enjoyed a relatively stable political climate since achieving independence under

the leadership of the United Malays National Organization (UMNO). The current ruling alliance,

Barisan Nasional (BN), won the 2008 elections, although it could not garner an absolute desirable 2/3

majority. Despite this, the BN-led alliance has been successful in establishing a sound governance

system and has continued to follow the policies established by the previous regimes, as no significant

changes have taken place in the political order since 1957. With the dominance of this alliance in the

political landscape, Malaysia will enjoy continuity of policies with little opposition. (Datamonitor,

2009)

Strong Malaysian Government Support (National Broadband Initiative – NBI): In 2007, Malaysian

government has set to achieve 50% Malaysian household (both wired and wireless mobile) broadband

penetration by the end of 20105. To aid service providers further, the government roll out supplies of

broadband infrastructure and services throughout Malaysia. Plus, they also aggressively generate

continuous demand – in 3 aspects: awareness, attractiveness and affordability – for broadband (refer

also The Implementation Plan on Page 16).

Malaysian Government discourage the usage of cell phone among school kids: In 2006,

Malaysian government banned the usage of cell phone among kids in nationwide school (included

fully residential schools). The decision was taken after many groups especially parents and teachers

expressed their concern that allowing the handheld tool to be used by students while in schools could

5 Achieving 50% household broadband penetration in 2010 can result in tangible contribution of 1%

to Malaysia‟s GDP and creates 135,000 new jobs by 2010

as of 2nd

Quarter of 2010, penetration reach 37.5% (Source: Ministry of Finance, 2010)

11

lead to a lot of problems although guidelines on its use had been issued by the Education Minister

earlier on.

ECONOMY

Globalization: The world is now borderless. Economic openness and growing interdependence

between countries had spur on increase in movements of people, goods and services. As global citizen

intermarriage, work in multinational companies (MNC), study abroad or travels for business and

leisure, effective telecommunication tools for communication plus knowledge seeking, sharing and

disseminates becomes essential. Growing Malaysia‟s GDP: Malaysia‟s GDP for 2

nd Quarter of 2010 was at RM 186,047 million

(8.9% growth rate from past quarter) while global economic recovery continued at an uneven pace.

Previously, in 2008, the communications and multimedia industry contributed 6.1% in term of

revenue to Malaysia‟s GDP. In 2009, the industry generated RM40 billion.

For 2nd

Quarter of 2010, the communication sub-sector registered 8.4% growth, mainly attributed to

greater usage of cellular, broadband and 3G services (Ministry of Finance, 2010).

High Inflation – Increased Price: Malaysia Consumer Price Index (CPI) rose to 1.9% in July 2010 –

which is still not a concern as inflation in many regional countries also shown similar uptrend.

Furthermore, the Malaysian government had announced subsidy cuts in sugar and fuel products

effective 16th July 2010.

On a micro level, the communication subgroup recorded growth in a slower pace compare to total CPI

(refer above graph). Nevertheless, domestic inflation is expected to continue its upward trend in the

coming months, but to remain at manageable levels. Higher prices are largely attributed to increased

cost following subsidy cuts and other supply side related factors such as bad weather conditions. To

some extent, the sudden jump in spending for the festive seasons may also exert some upward

pressure on prices (Amanah Mutual Berhad, 2010). Hence, there might either be a widespread drop in

consumers‟ spending on telecommunications products and services or aggressive demands for cheaper

ones since telecommunication are nowadays a necessity, not a luxury.

12

SOCIAL

Influx of Foreign Worker: Up to 31st December 2009, 1.91 million legal foreign workers were

recorded to be in Malaysia6. The same figure are estimated for illegals, on the basis that for every

legal foreign worker, there is one illegal. Malaysian government could not have accurate data on the

number of foreign workers without permits as they had entered Malaysia illegally and their number

was not recorded by any agency (Immigration Department, 2010).

In Malaysia, majority foreign workers and migrants are working at the bottom of the economic

pyramid. As such, they face the hardships of adapting to this „new‟ country and language, working

long hours with low pay, and spending a long time away from their families back home. These people

are the foundation for Malaysia's economic development, and therefore they should not be

discriminated against or discredited in any way.

Traditionally, Maxis and Celcom have neglected to provide mobile services for this segment on the

assumption that they are unable to afford them. DiGi entered this full of opportunity yet neglected

segment after discovering that these migrants were willing to pay for communications to connect with

their loved ones back home if they were offered affordable packages without any extras and make it

their stronghold.

Higher Standard of Living among Malaysians: The right table below tabulates monthly household

income of Malaysians in 2007 in RM1,000 interval (Source: The Star base on Household Income

Survey – HIS). Average monthly household income then was RM3,686.

Compared to 2004 (refer left table below), it denotes an increase in Malaysian earning and spending

capacity – thus, a higher standard of living. In fact, the standard of living in Malaysia has increased

dramatically in the past 20 years. What was a luxury 20 years ago, has become a norm – a color TV,

washing machines, car, air-conditioning or even telecommunications like handheld mobiles.

Source: The Edge, 2008

High Literacy Rate: Malaysia‟s Literacy Rate for 2nd

Quarter of 2009 was at 95.3% – defining that

majority young Malaysia 15 years old can read and write. This is good news to the

telecommunication industry as literacy leads to knowledge hunger. Combine with rapidly improving

telecommunication and internet connectivity, Malaysian spend more time and money to online 24/7

(surf for information, read online news, blog, chat, socializing, entertainment etc) and keep in touch

more often through conveniently cheap telephone calls and texting.

6 exact number = 1,918,146 – Top 5 nationals are Indonesians (991,940), Bangladeshis (319,020),

Nepalese (182,668), Myanmars (139,731) and Indian (122,382)

2007

13

Rising Telecommunication Penetration and Demand (Broadband, Cellular): The table below

summarizes the stagnant fixed line but impressive penetration rate of cellular and broadband in

Malaysia for 2010 (Source: Ministry of Finance, 2010).

Social Indicators Penetration Rate (%)

1Q 2010 2Q 2010

Fixed line telephone subscribers (per 100 households) 44.0 44.0

Cellular phone subscribers (per 100 population) 107.1 108.8

Broadband subscribers (per 100 households) 34.5 37.5

Cellular performance was led by increased usage of voice, data and multimedia services. In addition,

the introduction of social network contents for mobile phones, coupled with advanced data plans

fuelled demand in the cellular segment. Growth was also supported by brisk SMS traffic, which

expanded 9.0% to 24.0 billion (Q1 2010: 14.7%; 23.4 billion), driven by higher usage, particularly

during the 2010 FIFA World Cup season. Similarly, 3G subscriptions surged 30.1% to reach 7.9

million (end-March 2010: 37.1%; 7.5 million), largely on account of rising demand for internet access

and affordability.

Broadband segment sturdy growth was spurred by improved service quality and extensions of

network infrastructure by industry players. Furthermore, the roll-out of HSBB and WiMAX services

created demand for broadband subscriptions.

TECHNOLOGICAL

Continuous technological advancement in wired and wireless telecommunication: The table

below delineates continuous technological advancement in wired and wireless telecommunication in

Malaysia. Each generation (G) of mobile technologies are also match with pioneering major players.

Major Players Description of Technology

1G

Telekom,

Celcom,

Mobikom

Based on analogue technology, communication was purely voice, with the

information retransmitted to the receiver/listener without any

manipulation. The big drawback, however, was illegal interception with

the use of radio scanners which led to cloning.

2G

Maxis,

Celcom, DiGi,

Sapura,

Telekom

Malaysia adopted 2 different technologies:

European-based GSM 900 (Global System for Mobile Telecommunications)

PCN 1800 (Personal Communications Networks)

American-based TDMA (Time Division Multiple Access) operating on 800 MHz;

offered as dual mode analogue AMPS 800 + D-AMPS 800

Although the 2 different 2G technologies did not “interoperate,”

Malaysian welcomed a better world of digital wonders – voice quality,

high capacity, global roaming and low power consumption.

2.5G –

General Packet Radio Services (GPRS) is a packet-based wireless

communication service specifically designed for data and allows for

continuous connection to the Internet for mobile phone and computer

users. The entry of GPRS enabled consumers to instantly access WAP,

HTML or even I-mode sites using appropriate mobile phones, PDAs or

Notebooks. Suddenly, information became accessible from anywhere,

anytime, anyplace, as it allows info to be sent and received across a

mobile network. GPRS works together with GSM to provide better data

transmission speed.

14

Major Players Description of Technology

2.75G DiGi, Maxis

Enhanced Data rates for GSM Evolution (EDGE), an add-on to GPRS

to increase data rates on the GPRS link, is a radio-based high-speed

mobile data standard that allows data transmission speeds of 384kbps.

EDGE was initially developed for mobile network operators who were

either unable to obtain the 3G spectrum or did not wish to bid for one.

This gave incumbent GSM operators the opportunity to offer data

services at speeds that are close to those available on 3G networks.

3G7

Celcom, Maxis,

UMobile, Time

dotCom, DiGi

After 1G (analogue - designed for voice transfer) and 2G systems

(digital – created for voice, data, fax and other value-added services)

comes the most exciting 3G (global technological breakthrough based

on the GSM communication standard that turns mobile phone into a

multimedia machine). Simply, it is a packet-based transmission of text,

digitized video and multimedia at data rates 2 Mbps, offering a

consistent set of services to mobile computer and phone users wherever

they may be in the world. Fully implemented 3G are constantly

connected to the Internet, enabling roaming capabilities.

3.5G Maxis, Celcom

High Speed Downlink Packet Access (HSDPA) technology is an

upgraded network path that allows higher data transfer speed. The

minimum speed HSDPA can achieve is 5 x faster than the current 3G

technology (384kbps). HSDPA provides a smooth evolutionary path

for 3G networks allowing for higher data capacity. Therefore, setting

up HSDPA networks usually involves upgrading existing 3G

infrastructure while competitors Worldwide Interoperability for

Microwave Access (WiMax) require a totally new system. HSDPA is

evolving rapidly with speeds up to 1.8, 3.6, 7.2 or 14.4 Mbps

(downlink) available. Similar to fixed-line broadband services

(Streamyx ADSL), the speed is optimised for downloads and can

provide upload speeds of 384 Kbps. HSDPA continues to evolve to

provide faster download and upload speeds.

WiMax8

and 4G

P1, REDtone,

YTL, Asiaspace

WiMAX is the next step in wireless communications technology aimed

at providing high-speed wireless data over long distances in a variety

of ways, from point-to-point links to full mobile cellular type access –

enable the delivery of last mile wireless broadband access as an

alternative to cable and DSL (Streamyx).

The bandwidth and reach of WiMAX make it suitable for the following

potential applications:

Broadband Internet – providing the last mile connectivity at high

data rates to commercial and residential areas

Mobile applications – increase bandwidth for a variety of data-

intensive applications such as mobile multimedia streaming, mobile

internet access

The major cellular standards are being evolved to so-called 4G, high

bandwidth, low latency, all-IP networks with voice services built on

top. 4G allow rich applications currently enjoyed by wired broadband

(desktop computer) to be enjoyed on hand-held devices (mobile

phone).

7 when it comes to transmission speed, 3G is 6 x faster than GPRS and 3 x faster than EDGE

8 alternative to 4G

15

Spinoff offerings from the advancement in mobile technologies are:

Short Messaging Service (SMS)

enabled text messages as another means of communication apart from voice

Multimedia Messaging Service (MMS)

with GPRS, the level of communication was further enhanced as messages could now contain text,

still images, voice or audio clips, video clips

LEGAL

No legal implications on the telecommunication industry which hinders it from operating freely: The mobile market has undergone its trials and tribulations over the decade or so of its introduction

and continued growth till today. It is govern by an independent regulatory body, the Malaysian

Communications and Multimedia Commission (MCMC) since 1999. Following financial crisis and

the stiff competition among a large field of players, the Malaysian government encouraged

rationalisation of the sector in 2002. In 2003, 3 service providers emerged to a structure that remains

in place today (refer below figure – Source: Malaysia Telecom Brief by Network Dynamics

Associates, MCMC).

Other regulations that benefit the telecommunication industry are:

Mobile Number Portability (MNP)

MNP lets mobile users move from one service provider to another without losing their number.

However, operators are allowed to charge consumers that do RM25.

Universal Service Provision (USP)9

USP main objective is to provide collective and

individual access to basic telephony and Internet

services throughout Malaysia. This is because

network facility providers had, tend to focus on

commercially lucrative areas – thus creating a

Digital Divide gap between the “haves” in urban

areas and the “have-nots” in rural areas.

MCMC use USP to challenge private sector

investment into unprofitable rural areas and allow

reimburses for expenses incurred, at cost. The pie

chart on the left shows overall contribution from

telcos to USP Fund as at 31st December 2008.

9 the existing broadband and cellular coverage will be expanded under USP

16

High Speed Broadband (HSBB)

The Implementation Plan of NBI (refer below figure from MCMC) also involve supplying

broadband to High Impact Economic Area and Businesses – in conjunction with Malaysian

government effort to bring broadband to the whole nation. For that, the government has signed a

Public Private Partnership (PPP) agreement with Telekom to roll out high speed broadband

infrastructure at selected areas. The project is called HSBB.

Lower Mobile Termination Rates (MTR) and Fixed Termination Rates (FTR)10

Termination/interconnection rates are the charges which one telecommunications operator charges

to another for terminating calls on its network. Termination may take place on a fixed or mobile

network. Effective from 15th July 2010, these new rates (reduced 5 cents/minute) applies:

MTR = 8.36 cents/minutes

FTR = 6.07 cents/minutes

Spectrum Re-farming11

Spectrum/frequencies have become a rare commodity in the telecommunication industry. Re-

farming is a way to free up spectrum of an age-old technology that is not used; free up a frequency

that may not have been fully developed; and help a frequency where demand is huge. Moreover,

modern day technologies use spectrum more efficiently.

Spectrum re-farming is currently underway in Malaysia. Since June 2010, operators are said to

have been bidding through tender to MCMC for several spectrums.

However, in September 2010, there is flying industry rumours that the Malaysian government, this

time around, will award 9 blocks of 4G12

spectrum to 9 wireless players (4 cellular – Celcom,

DiGi, Maxis, U-Mobile, 4 WiMax – Asiaspace, P1, REDtone, YTL and a new player linked to

billionaire Tan Sri Syed Mokhtar Al-Bukary13

). The new way of awarding spectrum instead of

through bidding overcomes problem of denying spectrum to deserving party14

. However, the

process of award is unclear and whether there will be a fee for spectrum is also not known.

10

lower interconnection rate translates to lower direct costs for the operators 11

Re-farming is like having a plot of land where durian trees are growing but they are not giving

desired returns. So, all are burn and replant with maize which give 3 x more value than durians

(The Star, 2010). 12

also known as long-term evolution (LTE) 13

richest Bumiputra corporate figure in Malaysia, 7th richest Malaysian

14 in 2008, DiGi had to pay huge sums to buy 3G spectrum from Time dotCom

17

ENVIRONMENTAL

More Communication Towers/Base Stations: USP Fund

finance building of more base stations to enable cellular

operators to expand their coverage to 97% national population

by 2011. This kind of construction usually requires land

clearance or sometimes built near the residential area causing

uneasiness among citizens (refer left picture).

Besides that, there is an ongoing debate on whether exposure to

electromagnetic radiation poses risk to health or not. In 2010,

Information Communication and Culture Minister Datuk Seri Dr

Rais Yatim reveal that studies conducted in France and Spain

showed that the amount of radiation emitted by base stations is

so small that it will not have any effect even on rats. So far, there are also no reported radiation cases

in Malaysian hospitals.

His statement was reaffirmed by World Health Organisation which declares that radiation emitted

from towers is a lot lower than those by handsets.

2.3 Cultural and Demographic Factors

This section analyzes the cultural and demographic factors in Malaysia that affects the

telecommunication industry as a whole.

CULTURAL

Malaysians in general are pessimistic towards telecommunication services provided (slow

internet connections, network congestions): In 2007, a total of 2,147 complaints were received by

MCMC (increase of 223% from 664 complaints in 2006). The large increase in the number of

complaints is possibly due to the publicity and advertisements made by MCMC in the mass media on

channels for registering complaints. Back then (2007), the most frequent categories of complaints

received were:

poor services provided by a service provider

(service downtime/line interruption, slow Internet speed)

SMS mobile content services (receiving unsolicited SMS, unable to stop the service)

billing dispute

cellular coverage and blind spot

A quick check on MCMC‟s http://aduan.skmm.gov.my/ reveals these percentages (as of 10 September

2010):

poor services (40.8%)

SMS (10.9%)

telecommunication equipment ( 1.5%)

bill and charging ( 9.7%)

poor service coverage ( 3.4%)

content (13.4%)

no service coverage ( 3.3%)

spectrum interference ( 0.8%)

In a nutshell, Malaysians are pessimistic towards telecommunications services as they become more

tech-savvy and demanding.

http://aduan.skmm.gov.my/

18

DEMOGRAPHIC

A Young Society: Of the population, 63.6% of Malaysia population belongs to the 15 – 64 age group,

31.4% of the population in the 0–14 age group and 59% of the population is in the 65+ group. The

median age is 24.9 years, indicating that the society is young. While many developed nations are

faced with the problem of an ageing population and rising social expenditure, Malaysia‟s

demographic structure works in its favor as there is a regular addition to its labor force (Datamonitor,

2009). This is also good news to the telecommunication industry where youngest forms the largest

consumer market.

2.4 15 External Environmental Factors

The following table summarizes the 15 External Environmental Factors that are influencing DiGi‟s

operation:

8 Major Factors Descriptions No of

Factors

Political

Prolonged Internal Political Stability 1

Strong Malaysian Government Support

(National Broadband Initiative – NBI) 2

Malaysian Government discourage the usage of cell phone among

school kids 3

Economy

Globalization 4

Growing Malaysia‟s GDP 5

High Inflation – Increased Price 6

Social

Influx of Foreign Worker 7

Higher Standard of Living Among Malaysians 8

High Literacy Rate 9

Rising Telecommunication Penetration and Demand

(Broadband, Cellular) 10

Technological continuous technological advancement in wired and wireless

telecommunication 11

Legal no legal implications on the telecommunication industry which

hinders it from operating freely

12

Environmental More Communication Towers/Base Stations 13

Cultural Malaysians in general are pessimistic towards telecommunication

services provided (slow internet connections, network congestions)

14

Demographic A Young Society 15

19

2.5 5 Identified Opportunities and Threats

From the previous 15 External Environmental Factors, 5 Opportunities and Threats are identified and

rationalize:

Rationalization

OP

PO

RT

UN

ITIE

S 1. Strong Malaysian Government Support

(National Broadband Initiative – NBI)

align to DiGi‟s possible intensive

strategies

2. Globalization increase demand for communication

tools to increase quality of life … at

home, work and play – align to

DiGi‟s Vision

3. Influx of Foreign Worker

4. Higher Standard of Living

Among Malaysians

5. High Literacy Rate

TH

RE

AT

S

1. High Inflation – Increased Price decrease demand for

telecommunication

products and services 2. Malaysian Government discourage the

usage of cell phone among school kids

3. continuous technological advancement in

wired and wireless telecommunication

DiGi‟s product and services might go

outdated overnight

4. More Communication Towers /

Base Stations

harm the environment and increase

citizen uneasiness

5. pessimistic towards telecommunication

services provided

challenge to change perception

and fulfil needs

20

3.0 Introduction to Industrial Analysis (Competitive Information)

Generally, Porter‟s 5 Forces provide a good, simple yet powerful, framework for developing an

understanding of the competitive forces or pressure (either increase or reduce) within DiGi‟s industry

that influence its pricing decision. Great competitive forces put more pressure on it while weaker

competitive forces subdue the pressure.

Hence, as indicated by the combo figure above, Porter‟s 5 Forces (all forces listed in the right figure)

will be use for Industry Analysis or the final listing of DiGi‟s 15 Industrial Environment Factors

after deliberation of each force in isolation.

3.1 Threat of New Entrants

In general, telecommunications is not an easy entry industry despite the rumours of easy award of 4G

spectrum to new entrants. Several barriers are recognized:

License: Every potential entrant will need to obtain a license through MCMC. However, it is

somewhat difficult and expensive to get an approve license due to MCMC‟s strict requirements and

procedures. Yet, once obtain, a licensee may apply for the renewal of its individual license prior to

expiry.

High Capital Investment: Other than an expensive licence, telcos also required high fixed costs and

spend relatively large on network equipment and to maintain development. It might reach a few

billion Ringgit Malaysia.

Sole Right for Certain Projects: The government of Malaysia had granted sole right for certain

projects to existing telcos (e.g. Telekom has sole right to both partnership of submarine cable for the

broadband service and also HSBB). However, apart from TM, other Network Facilities Provider

(NFP) licensees: Maxis, Celcom, DiGi and Time dotCom can build their own network and cable

landing stations should they choose to invest in the facility. Similarly, broadband license are also

granted to some private telecommunications operators.

Advance Technology: The advanced technology required in telecommunication industry not only

incurred high capital investment but also need professional knowledge and skills (human resources) to

ensure success in the industry. It is not easy to copy or imitate.

Major Network Operators in Malaysia

Company License

Telekom/Celcom Fixed; Mobile 450, 800, 900, 1800 MHz

Maxis Fixed; Mobile 900, 1800 MHz

DiGi

21

3.2 Threat of Substitute Products

As highlighted before, DiGi operates through 2 business lines: Voice and Data Services. Mild threats

of substitute products for both of the business lines are recognized:

Voice Services (mainly mobile): Many traditional and modern substitutes – letter, fixed home line

telephone, fax and email. From 2000 onwards, broadband Internet services, which enable faster and

always-on connection to the worldwide web, offer more promising growth potential. In addition, the

pressure on the very low cost to use the phone calling through internet or communicate through online

messenger had threatened the mobile service industry. The attractiveness of internet services making

it more affordable to the masses.

Data Services (focusing on broadband): Consumers have become more demanding in quality

broadband service and this create an opportunity for new entrants to provide a substitute product for

consumers in lower price or better performance than the existing ones.

3.3 Industrial Rivalry

Malaysia mobile market is oligopoly nowadays after the consolidation in 2003. The

telecommunications industry has also been undergoing gradual liberalization since 1985, when

Telekom, the Malaysian government-dominated enterprise, granted a number of licenses to private

sector telecommunication operators. Gradually, the industry witnessed more competition in various

segments of mobile, fixed line and telephony services, and the functioning of the sector became more

transparent.

Early 2010 seems to favour Celcom when at the 2010 Frost & Sullivan Malaysia Telecoms Awards,

Celcom triumphantly clinched 3 awards at the 2010 – the much coveted 'Service Provider of the Year'

(2nd

consecutive year), 'Broadband Service Provider of the Year' Award and 'Mobile Service Provider

of the Year' Award thus further reaffirming its strength as one of the market leader.

Yet, within the industry, together with Telekom, Maxis, Celcom and DiGi continue to compete on

differentiation of products and services through improvement and introduction of new innovative

features – aspects such as call rates, package price and so on. They try to gain competitive advantage

through low call rate and price. Each of them also invests a lot on advertising to promote their product

– successful maintaining their place in Malaysia Top 10 Advertising high spenders list from Jan –

June 2010 as shown:

All key players are also aggressively pushing mobile/wireless broadband as it is expected to surpass

fixed line by 2013 (refer forecast broadband subscribers and revenue next page). At the same time,

WiMAX are also gaining ground and acceptance among customers.

22

The telcos aggressive market promotions and keen competition had successfully reduce prices in

telecommunication products and services (drop 0.4% in 2nd

Quarter of 2010) but telcos kept reiterates

that they are keen to avoid price war.

Other expected development in 2010 (dub the broadband year for Malaysia) will be plenty of new

devices and packages flooding the market place, and the possibility of fixed broadband players

stealing some market share from wireless players. For example, Telekom is expected to deliver its

HSBB in some areas even if it is for trials (launch “UniFi” on 24th

March with free trial until 30th

June

2010).

Then, Maxis re-enter the fixed broadband market in a way that surprise many. Time dotCom – a

company many say is history – will re-emerge while YTL, which has been grossly overselling its

WiMAX 4G idea, “sizzle” the market with a grand entry in July. And there is Tune Talk which is

eager to eat into every operator‟s customer base with its smashingly cool pricing. Just to be in the

game, U Mobile managed to launch its broadband service known as XFone at the 11th

hour of 2009.

Also, in September 2010, there is flying industry rumours that the Malaysian government will award

4G/LTE spectrum to telcos instead of the through bidding process. The award will puts Malaysia

ahead of many countries that are still grappling with their 3G spectrum awards. LTE is said to be the

natural migration path from 3G and do complement WiMax technologies in many ways. Both Maxis

(with Huawei) and Celcom (with Huawei and Ericsson) are already move ahead by undertaking trials

to test this 4G/LTE technologies to see how they can deploy richer offerings for their users.

Further, in October 2010, rumours had it that Celcom will bring in iPhone 4s to Malaysia. It is

unknown whether a contract has been signed. However, it would not be easy for Celcom to get iPhone

4s stocks from Apple. Even right now, Maxis and DiGi does not seem to be satisfied with the current

iPhone 4 stocks that they have. Yet, in conclusion, high exits barriers of this industry due to the high investment budget and

responsibility towards customer making will make companies strive to survive. Technology advanced

also leads to fast industry growth and opportunities, thus, ignite further competition.

3.4 Bargaining Powers of Suppliers

Generally, the telecommunications industry in Malaysia is dependent on imports for majority of its

network components as most of the equipment cannot be sourced locally resulting in high bargaining

powers of suppliers. The factors contributing to these are recognized:

Limited (Big Boy) Suppliers: DiGi networks utilize standard GSM equipment which is available

from a limited number of suppliers. Previously, most of the GSM equipment for DiGi' mobile

23

network operations are purchased from large international companies – size increases supplier power

– namely Motorola, Siemens，Ericsson and Trisilco Folec, and DiGi maintains close working

relationships with its key network equipment suppliers. As there are relatively very few suppliers in

this market, DiGi have limited choices.

Since Siemens is now a sub-contractor of Motorola for network switching systems, DiGi left with

only 2 main suppliers: Ericsson and Trilsilco Folec. Thus, the bargaining power of those suppliers

becomes stronger.

High Switching Cost: As DiGi cannot manufacture in-house, the other viable option – 3rd

party

manufacturing contracts may post complexity with terms covering cost, quality, and use of intellectual

property; and switching between contract manufacturers may therefore be a more costly process. In

addition, such a supply structure usually means lower control on the delivery schedules and may

cause component shortages due to manufacturing process issues. Any persistent shortages in supplies

due to capacity issues or manufacturing process issues would increase the price of manufactured

products. If a company is not able to source required components in adequate quantities, this would

affect its business operations and margins. In the future, DiGi believes that comparable equipment and

support will be available from other established suppliers.

3.5 Bargaining Powers of Customers

Information technology increase the bargaining power of buyer and high availability of information

makes it easier for customers to evaluate sources of materials about telecommunication. There are

many alternatives product such as fax, email, and internet which enhance the bargaining power of

buyer to the mobile service provider. Customer also becomes more demanding of high speed

broadband (which is less costly but yields wider coverage) and after sale service, creating a relatively

high competitive industry. As a consequences, the intense rivalry among mobile and broadband

service providers only benefit the consumers who can enjoy lower price broadband and mobile

services, and eventually making them more powerful – hence, low switching cost.

3.6 15 Industrial Environment Factors

The following table summarizes the 15 Industrial Environment Factors of DiGi:

Porter‟s

5 Forces Descriptions

No of

Factors

LO

W Threat of

New

Entrants

difficult and expensive to get an approved license from MCMC 1

high capital investment 2

sole right for certain future granted to existing telcos 3

advance technology – need competent human resource 4

LO

W Threat of

Substitute

Products

traditional and modern substitutes for mobile 5

demanding broadband consumers create opportunity for new entrants

that can offer low price or better performance 6

HIG

H

Industrial

Rivalry

tense rivalry 7

telcos market lead by Maxis 8

2010 dub the broadband year of Malaysia 9

high exit barrier 10

HIG

H

Bargaining

Powers of

Suppliers

non availability of substitute for GSM equipment 11

limited (big boy) suppliers 12

high switching cost (to other suppliers) for DiGi 13

HIG

H

Bargaining

Powers of

Customers

high bargaining power of customers 14

consumer low switching cost as plenty of other brand with different

offer are available to customers 15

24

3.7 The External Factor Evaluation (EFE) Matrix

The key external and industrial environmental factors are summarizes and evaluate:

Weight RatingWeighted

Score

Opportunity

(largest)

Threat

(largest)

1 0.11 4 0.44 O1

2 0.04 2 0.08

3 0.08 4 0.32 O2

4 0.08 4 0.32 O3

5 0.07 4 0.28 O4

6 0.04 4 0.16 O5

7 Traditional and Modern Substitutes for Mobile 0.03 4 0.12

Threats

8 0.08 3 0.24 T3

9 0.03 1 0.03

10 0.08 3 0.24 T4

11 0.06 1 0.06

12 2010 dub the broadband year of Malaysia 0.07 2 0.14 T5

13 new entrants can offer low price or better performance 0.06 2 0.12

14 High Switching Cost (to other suppliers) for DiGi 0.10 3 0.30 T1

15 High Bargaining Power of Consumers 0.07 4 0.28 T2

1.00 3.13

Influx of Foreign Worker

continuous technology advancement in wired & wireless

Government discourage cell phone usage among school kids

pessimistic towards telecommunication services provided

High Inflation - Increased Price

Rising Telecommunication Penetration & Demand

Key External Factors

Opportunities

Total

Globalization

High Capital Investment

Advance Technology - Need Competent Human Resource

Higher Standard of Living Among Malaysians

Note that the total weighted score of 3.13 indicated in the calculation is above the average (midpoint)

of 2.5, so DiGi is doing pretty well, taking advantage of the external opportunities and avoiding the

threats facing the firm. Yet, there are always room for improvement.

3.8 Top 5 Opportunities and Threats

From EFE, Top 5 Opportunities and Threats are recognized and rationalize:

OPPORTUNITIES Rationalization

EFE Weight EFE Rating

1. Globalization

important as it greatly

contributes to frequent

international roaming demand

with instant communication

(mobile) and information

seeking (broadband)

DiGi can response by

capitalizing on it and kept

offering roaming and broadband

product and services broadband

internet services to (for mobile

broadband, DiGi aim to assist

MCMC in reaching 50% of the

Malaysian population by end 2010)

– it is high quality

telecommunication services at

competitive prices

2.

Higher Standards of

Living Among

Malaysians

important indication that most

Malaysian can afford

minimum one mobile (service

provider) and broadband

3.

Rising

Telecommunication

Penetration and

Demand

(Broadband, Cellular)

important statistic as

higher penetration = higher

demand for DiGi‟s product and

services

25

OPPORTUNITIES Rationalization


4. High Capital

Investment

important factor as entry

barrier:

high cost for new entrée to

compete with existing giant in

the industry

DiGi have high capital investment

largely contributed by its largest

shareholder, Telenor

5.

Advance

Technology –

Need Competent

Human Resource

mild important factor as

human talent is one of the key

area for DiGi‟s continual

success and survival –

expertise are expensive

DiGi are able to response by focusing

on recruiting new blood while provide

intensive training to existing staffs and

succeeded in maintain a competent yet

loyal workforce at an affordable cost

THREATS Rationalization


1.

High Switching

Cost

(to other

suppliers)

for DiGi

important because supplier

relationship management can

make or break DiGi as they

practically control DiGi‟s

product and services‟ selling

price

DiGi can response by keeping close

relationship with their existing

suppliers: Ericsson and Trilsilco Folec

while being optimistic that there will be

new possible suppliers in the future

2.

High Bargaining

Power of

Consumers

important because power of

bargain for lowest price and

highest quality switch to

consumers due to non-existent

of information asymmetry

DiGi can response by offering high

quality telecommunication services at

competitive prices

3. High Inflation –

Increased Price

important because high

inflation will decrease demand

for

communication tools DiGi can response by continuous R&D

to prevent going outdated overnight and

kept selling price low

4.

Continuous

technology

advancement in

wired and wireless

telecommunications

important because DiGi is still

trailing behind Maxis and

Celcom plus once outdated, it

is hard to bounce back in a

short duration

5.

2010 dub the

broadband year of

Malaysia

important because plenty of

new devices and packages

flooding the market place –

tense rivalry

DiGi is able to respond since they had

invest RM350 million for mobile

broadband expansion as part of its

plans to improve its infrastructure.

26

4.0 Introduction to Internal Analysis

Internal Analysis is the final section in analysis phase to

understand DiGi‟s 3 key strategic environments. It is all

about identifying DiGi‟s businesses value

proposition/core competencies. It can be use to explore

what DiGi does:

better than its competitors

that are hard to replicate

that are valued by DiGi‟s customer(s)

In other words, what is DiGi‟s strengths and weaknesses? To answer that, Internal Analysis will be

done by gathering and assimilating information about DiGi‟s functional areas: management,

marketing, finance and accounting, production and operations, research and development (R&D) and

management information system (MIS).

Financial Statement Analysis is done first because it could provide numerous insights about DiGi as it

exemplifies complexity of relationships among the functional areas. Common techniques for

analyzing financial statements are common-size financial statements and financial ratio analysis.

4.1 DiGi’s Common-Size Financial Statement Analysis (2005 – 2009)

In common-size financial statements, all items in the Balance Sheet are computed as percent of Total

Assets (base). For Income Statement, all items are computed as percent of Revenue (base). From the

indirect method of Cash Flows, myriads of typical questions such as how much cash was used to

purchase property, plant and equipment or how good DiGi is in paying out dividend can be answered

by going through its three main categories of activities: (a) operating, (b) investing and (c) financing.

Then, the changes (trends) in asset and capital structures over time are evaluated.

Balance Sheet (refer calculation on Page 27)

Total non-current assets had been rising from 2005 – 2008 before a slight drop in 2009. This is

similar to the trend of their intangible assets15

. The highest portion of non-current assets comes from

property, plant and equipment (60 – 70%).

Total current assets conversely, had been declining from 2005 – 2008 before a slight increase in

2009. A similar trend can be seen from their cash and cash equivalents16

and an inverse one for

inventories. Trade and others receivable slumps from 2005 – 2007 before picking up 2008 – 2009. On

a closer look, DiGi started to have short-term investment in 2008.

Current liabilities trend is the same as total non-current assets (rising from 2005 – 2008 before a

slight drop in 2009). Current (secured) borrowing commence in 2007. Taxation jumped up in 2006 –

2007 but had reduced in 2008 – 2009.

Non-current liabilities rose in 2006, went down in 2007 – 2008 and shoot up high in 2009.This is

largely contributed by non-current (unsecured) borrowing17

.

15

technological support and technical know-how from Telenor, 3G spectrum (since 2008), computer

software and license fee (previously Deferred Expenditure in 2005 and 2006) 16

cash in hand and at bank, money on call and deposits with licensed banks

for the purpose of the cash flow statements, cash and cash equivalents are net of outstanding bank

overdrafts, if any

2009 improvement due to DiGi‟s strategic focus on enhancing cash-generation 17

very high jump in 2009 (2.15% to 16.31%)

28

Income Statement18

(refer calculation on Page 29)

Revenue increases yearly but a falling cost of sales (materials and traffic expenses) from 2005 – 2007

that rise back in 2008 – 2009 directly impacts the gross profit. This is analogous to the trend of trade

and others receivables in the Balance Sheet. However, no correlation can be seen between:

cost of sales – cash and cash equivalent

trade and others receivables – cash and cash equivalent

Internally, DiGi sequence of priorities in spending was:

depreciation and impartment losses

(mirror trend of intangible assets in the Balance Sheet)

sales and marketing

other operating expenses

staff

rental

operations and maintenance

amortisation

Cash Flows (refer calculation on Page 30)

(a) operating: Cash generated from operations steadily increase from 2005 – 2008 but tumbles in

2009 due to higher inventory and increase in deferred revenue. DiGi shows that they value their

customers and employees by having increasing amount of annual provision. They have customer

loyalty programme, employee leave entitlements and related benefits.

(b) investing: DiGi utilizes large amount of cash (RM650,000,000 – RM900,000,000) annually to

purchase property, plant and equipment and intangible assets.

(c) financing

No dividend has been paid or declared by DiGi in 2005. The Directors then do not recommend any

dividend to be paid for the year under review. However, after that, paid dividend increases from 2006

– 2008. It only drop 8% in 2009. Huge amount of RM1,012,500,000 was being used to repay

borrowing in 2006 causing lower cash and cash equivalents throughout 2006 – 2008.

18

Finance Cost in Income Statement Interest paid in Cash Flows

31

4.2 DiGi’s Financial Ratio Analysis (2005 – 2009)

4 categories are used in Financial Ratio Analysis, namely: (a) financial liquidity and solvency, (b)

efficiency, (c) profitability and (d) market performance. Each ratio formula and calculation is clearly

showed in Page 32.

(a) financial liquidity and solvency

For 4 years (2005 – 2008), DiGi‟s liquidity ratios (current and quick ratio), cash and cash equivalent

and times interest covered went downhill – making DiGi in a state of low monetary liquidity. This is a

threat as there is a high chance that DiGi cannot meet its current obligations especially the interest

expense on borrowings. Not being able to meet payment will further lead to problems with others

creditors.

In 2009, condition improve as sales and income increases substantially plus there is additional

interest receive from short-term investment. For the time being, DiGi might still be able to meet its

current liabilities commitment – current (secured) borrowing, accrual payables that included exposure

to foreign currency denominated in USD, Special Drawing Rights and also deferred revenue. But,

they be must caution as debt ratio had been bumpy since 2005 and consider taking some measures

to further curb upward trend, especially after a huge borrowing in 2009.

(b) efficiency

The working capital ratios (inventory turnover and accounts receivable collection period) shows a mix

working capital management. DiGi manage to keep its inventory holding period between 4 – 6 days

indicating they are do have slow moving and obsolete stocks. However, credit control is poor (11.44 –

14.56 years) which subsequently contribute to increase in bad debts. This reflects inefficiency of its

credit management team or a less stringent collection policy adopted by DiGi. To get payments from

debtors is not an easy task and its take time. DiGi must place priority in it to safeguard their cash and

cash equivalent upward trend. Total asset turnover shows low utilization of assets. It shows that growth of sales has fallen relative

to total assets. This may lead to perception that DiGi has reduced its efficiency in generating income

with respect to its investments. In other words, DiGi has not fully optimized its resources (new

property, plant, equipment and intangible assets purchased annually) for generating of sales. DiGi

may want to further investigate this inefficiency issue where one of it might be the 3G spectrum. The

under utilization of investments may also reflect poor operation management.

(c) profitability

Two profitability ratios (gross profit margin and net profit margin before tax) move in parallel trend –

inverse „U‟, which mirror cost of sales. While cost of sales kept increasing in numbers, the peak gross

profit margin and net profit margin before tax might be attributed by DiGi flurry launch of new

exciting product and services in 2007. However, in terms of ROE, 2009 success exceeded 2007.

(d) market performance

DiGi‟s PE ratio climbs up from 2005 – 2007. The market price in 2007 was RM24.80 market price

which reflects investor confidence in gaining future returns (dividends and increase share price). This

may again due to DiGi flurry launch of new exciting product and services in then which provides an

indication or „sign‟ that they are expanding operating activities (future growth), hence enabling

increase in its market share. Although it slips in 2008 (having more share capital), it rise back in 2009

despite a lower profit after tax. This may suggest that in 2009, the share price of DiGi, which stood at

RM21.96 is overvalued or the market may perceive the company as having good future earnings

potentials. Dividend yield increases from 2006 – 2008 yet reduces in 2009. On the hindsight, 2009

dividend is higher than 2007.

33

4.3 20 Internal Factors

The following table summarizes the 20 Internal Factors of DiGi:

Functional

Area Descriptions

No of

Factors

Financial

strong financial performance 1

healthy current ratio 2

strong profits and net cash flow from operation 3

stable number of subscribers – increasing 4

reasonable debt ratio 5

Marketing

superior customer care 6

strong company reputation 7

dependency on strategic sharing between mobile producer,

application writer and etc 8

good reward system to subscribers 9

DiGi Ambassadors – lack of involvement 10

latest info on new technologies seldom/late to reach end users 11

facilities – auto reload, online payment, etc 12

intense and attractive advertising 13

caring for climate – corporate image building 14

Operation lack of base station as compared to others operators 15

affiliation with Telenor – wider overseas coverage 16

R&D innovation 17

world class R&D 18

Management flexible working environment 19

experience management personnel from oversea 20

4.4 The Internal Factor Evaluation (IFE) Matrix

Weight RatingWeighted

Score

Strengths

(largest)

Weakneses

(largest)

1 experience management personnel from oversea 0.13 4 0.52 S2

2 0.09 4 0.36 S4

3 0.15 4 0.60 S1

4 Innovation 0.11 4 0.44 S3

5 0.09 3 0.27 S5

6 World Class R&D 0.07 3 0.21 S6

7 Facilities – auto reloads online payment, etc 0.01 3 0.03 S7

Weakneses

7 0.12 1 0.12 W1

8 0.11 1 0.11 W2

9 0.09 1 0.09 W3

10 DiGi Ambassadors – lack of involvement 0.03 2 0.06 W4

1.00 2.81

lack of base station compared to competitors

dependency on strategic sharing between mobile

producer, application writer and etc

Key Internal Factors

Strengths

Total

good reward system to subscribers

affiliation with Telenor – wider overseas coverage

stable (increasing) number of subscribers leading to

Strong Financial Performance

latest info on new technologies seldom/late to

reach end users

34

4.5 Top 7 Strengths and 4 Weaknesses

The Top 7 Strengths and 4 Weaknesses from IFE are recognized and rationalize:

STRENGHTS Rationalization

IFE Weight IFE Rating

1.

Affiliation with Telenor

– wider overseas

coverage

important because affiliation

with Telenor brings

collective strength19

to DiGi

in terms of technology know

how and industries updates

plus knowledge and helps to

widen overseas coverage

DiGi major strength since they are

keeping good working relationship

with members of Telenor Group

2.

experience management

personnel from

overseas

important because global

experience management

personnel brings new

innovation to DiGi

DiGi major strength since they had

been capitalizing on their

experience management personnel

from overseas

3. Innovation

important because creativity

and innovation play a great

role to increase supply of

voice and data services to

individual and

corporate customers

DiGi major strength because their

R&D had always exceeded

customer expectations through

innovation offering to customers

4.

stable (increasing)

number of subscribers

leading to Strong

Financial Performance

important because number

of subscribers ensure

survival and sustainability

of DiGi

DiGi major strength since they had

been focusing on ensuring

excellent customer experience,

keeping close tab on number of

subscribers, attract new

subscribers and reward current

ones handsomely

5. Good reward system to

subscribers

important factor to motivate

current and

potential subscribers

DiGi minor strength as they have a

string of past, current and

upcoming good reward system

6. World Class R&D

important because R&D is

the key to keep up and

ahead with continuous

technology advancement in

wired and wireless

telecommunication

DiGi minor strength as their self-

claim world class R&D had wow

Malaysians with a number of

innovate products and services

7. Facilities – auto reloads

online payment, etc

important because facilities

bring convenience

to customers and cost

DiGi minor strength as other

competitors are also offering the

same service to customers

19

Telenor Group operates in 11 countries with market position from #1 – 3 in each country

35

20

a postpaid, without monthly fee or minimum usage package plan for staff/close friend with free

unlimited calls, SMS and MMS to 016 numbers

WEAKNESSES Rationalization

IFE Weight IFE Rating

1.

dependency on

strategic sharing

between mobile

producer, application

writer and etc

important because

DiGi product/services cannot

operates without

complementary

product/services from mobile

producer, application

writer etc

DiGi major weakness because

they did and still highly depend

on product development through

joint venture with mobile

producer, application writer and

etc to serve customer better

2.

latest info on new

technologies

seldom/late to reach

end users

important because low

customers awareness towards

DiGi products/services not

only reduce its consumption

but indirectly “giveaway”

potential customers

to competitors

DiGi major weakness because

they seldom promote on new

offerings compare to competitors

3.

lack of base station as

compared to others

operators

important factor because lack

of base station leads to poor

line reception (coverage area)

which weaken customer

satisfaction and loyalty –

reduce in subscribing

DiGi major weakness as they have

to either build or share base

station with competitors to expand

coverage area

4. Digi Ambassadors

20 –

lack of involvement

mild important factor because

Digi Ambassadors serve as

free of charge and influential

marketing tools for DiGi

DiGi minor weakness as there is

lack of involvement among these

ambassadors to effectively and

aggressively promote DiGi other

products/services

36

5.0 Introduction to SWOT Matrix Framework

Environmental Scan

/ \

Internal Analysis External Analysis

/ \ / \

Strengths Weaknesses Opportunities Threats

|

SWOT Matrix

As indicated by the above figure, previous section of environmental scan (Internal and External

Analysis) had successfully produced input in the form of DiGi‟s Strengths, Weakness, Opportunities

and Threats factors (collectively known as SWOT). SWOT Matrix is a commonly used strategic

planning matching tool that provides structure or clarifies strategic analysis. This technique guide

complex decision making by effectively removes subjectivity and emotion from the decision process,

and help in generation of several options/strategies21

for DiGi.

A typical SWOT (Strategic Alternatives) Matrix look like this:

Strengths Weaknesses

Opportunities SO Strategies WO Strategies

Threats ST Strategies WT Strategies

SO Strategies

using internal strengths to capture external opportunities by pursuing opportunities that are a good

fit to DiGi's strengths

WO Strategies

using external opportunities to improve internal weaknesses

ST Strategies

using internal strengths to reduce/prevent external threats

identify ways DiGi can use its strengths to reduce its vulnerability to external threats

WT Strategies

using defending method to reduce internal weaknesses and at the same time avoiding external

threats

establish a defensive plan to prevent the DiGi's weaknesses from making it highly susceptible to

external threats

21

ideally, strategies capitalize on DiGi‟s strengths, minimize the effects of any weaknesses, exploit

available opportunities and defend against threats

Deg

ree

of

Imp

ort

an

ce

Degree of Urgency

37

5.1 DiGi SWOT Matrix

The following matrix summarizes DiGi SWOT and lay out several options/strategies:

Strengths Weaknesses

1. Innovation

2. Affiliation with Telenor – wider

overseas coverage

3. experienced management personnel

from overseas

4. good reward systems to subscribers

5. stable (increasing) number of

subscribers leading to Strong

Financial Performance

6. World Class R&D

7. Facilities – auto reloads online

payment, etc

1. dependency on strategic sharing

between mobile producer,

application writer and etc

2. DiGi Ambassadors – lack of

involvement

3. latest info on new technologies

seldom/late to reach end users

4. lack of base station compared to

other operators/competitors

Opportunities SO Strategies WO Strategies

1. Globalization

2. Influx of Foreign

Worker

3. High Capital

Investment

4. Malaysian Higher

Standards of Living

5. Advance Technology

– Need Competent

Human Resource

1. Market Penetration

increase customer rewards and

provide consistent good services to

existing customers (S4,S5,S7,04)

2. Market Development

provide myriad International

Services (Foreign Worker) and

continuously pursue USP obligation

by providing access to basic

telephony communications to

districts designated to DiGi (Rural

Communities) (S2,S5,O1,O2)

3. effective management, marketing

and R&D with competent human

resource increases sales

(S3,S6,O1,05)

1. taking benefits/strength of other

categories of provider e.g. joint

venture to increase the number of

base station by sharing through

MOU (O3,W1,W4)

2. Forward Integration

utilize latest technology by

marketing new products through

dealers instead of ambassadors

(O3,W3)

Threats ST Strategies WT Strategies

1. High inflation

– increased price

2. 2010 dub the

broadband year of

Malaysia

3. High Bargaining

Power of Consumers

4. Malaysian

Government

discourage cell phone

usage among school

kids

5. Continuous

technology

advancement in wired

& wireless technology

1. Product Development

joint venture with handheld mobile

providers to include latest

technologies and internet function

into mobile (S1,S6,T2,T3,T5)

2. stand ahead of the competitors and

encourage consumers to switch to

DiGi with the slogan „IT‟S TIME

TO CHANGE TO DIGI‟

(S1,S2,S4,S7,T3)

3. produce new and tech savvy product

to prevent going outdated overnight

(S1,T5)

1. reduction of the number of DiGi

Ambassadors to enable the cost

to be switch to sponsoring

educational program to

strengthen DiGi name – students

will subscribe to DiGi in the

future (W2,T4)

2. lower down the calling rate to

remain competitive (W3,T1,T3)

38

6.0 Introduction to Types of Strategies

In building business strategies, there is no one method. The most common approach of building a

vision, then trying to work out how to reach the vision, is just one of a number of alternative views of

strategy.

6.1 DiGi’s Possible 4 Types of Strategies

From SWOT, DiGi‟s possible 4 Types of Strategies are as such:

Market Penetration

Market Development Intensive Strategies

Product Development

Forward Integration Vertical Strategies

The first 3 are collectively known as Intensive Strategies while the last one is a form of Vertical

Strategies – however, the subsequent section only focuses on deliberation of Intensive Strategies.

6.2 DiGi’s Intensive Strategies – Market Penetration

As simplified by the figure on the right, market

penetrations seek to increase market share for existing

products in existing markets through greater marketing

efforts that encourages more usage/spending among

consumers.

In the first half of 2010, DiGi had invested heavily on

advertising to promote their product and successfully

maintaining their place in Malaysia Top 10 Advertising

high spenders list from Jan – June 2010 (refer bar chart

below) making it viable for them to do so budget wise.

39

The subsequent table matches DiGi‟s Existing Markets and Products with their potential Market

Penetration Strategies.

Existing Products

Voice Services fixed and mobile telephony

(prepaid, postpaid, international services)


Existing Markets Market Penetration

Malaysian Digital Native

mostly youth below 24 years old

who are technologically driven

and savvy

Business Entity

Foreign Workers

Malaysian general public

increase customer rewards

and provide consistent good services

to existing customers

increase customer rewards


plenty of mobile apps, offerings and outdoor gathering

in “hot buttons” of youth lifestyle areas (gaming,

sports, music, movie, TV show, internet, weather

forecast, games, picture messages etc)

Business Entity various monthly business call plans depending on size of

business, budget and average call volume; some package

even combine unlimited internet (data plan), broadband

(business solutions), enterprise and immediate family

members

Foreign Workers and Malaysian general public

prepaid offered flat voice rate of 12 cents/ minute

nationwide to ALL networks and SMS rate of 1 sen

(DiGi to DiGi only) when daily usage reaches RM1;

talktime transfer, GPRS, EDGE (Enhanced Data rates

for Global Evolution), flexi e-load (top-up)

BonusLink Points based on monthly usage bill for

postpaid mobile and broadband

family plan myriads international services (refer details in Page

41)

provide consistent good services

customer support corporate website (information on mobile and others

Frequently Asked Questions, technical chat function –

online and by phone)

nationwide centres, specialized store, service counters

and dealers (prepaid and postpaid)

concept store equip with Simbioz system (DiGi360°)

40

6.3 DiGi’s Intensive Strategies – Market Development

As simplified by the figure on the right, market

development is the term used in introducing existing

products to new markets – which can be new geographic

areas or currently underserved communities (DiGi

recognized 2 sources of new markets: potential or new

foreign workers and rural communities)

Supporting Factors Market Development

according to Malaysian Communications and

Multimedia Commission (MCMC), back in August

2007, cellular coverage area was 95% (Peninsula) and 77% (East Malaysia) – refer supporting

diagram below – making the rest of Malaysia blind spots and experiencing dropped calls

May 2010 national population coverage for cellular improved to 94% (MCMC, 2010)

MCMC under USP target to reach 97% national population coverage for cellular by 2011

rural, remote, suburban, low cost housing areas and tourist spots (high Foreign Worker patron

during public holidays) are a few areas that need broader access to communication infrastructure

although affordability is low

as a USP, DiGi is entitled to claim certain qualified expenses from the MCMC in relation to USP

projects

in June 2010, DiGi and Celcom signed a Memorandum of Understanding (MoU) on infrastructure

sharing at both company (DiGi and Celcom) and group level (Telenor and Axiata) benefiting DiGi

on access to Celcom‟s well publicized whole Malaysia coverage –

refer below for current DiGi coverage

41

The subsequent table matches DiGi‟s New Markets to Existing Products with their potential

Market Development Strategies.

Existing Products

Voice Services fixed and mobile telephony

(prepaid, postpaid, international services)


New Markets Market Development

Potential or New

Foreign Workers

Rural Communities

provide myriad International Services

and continuously pursue USP obligation by providing access to basic

telephony communications to districts designated to DiGi

provide myriad International Services

Potential or New Foreign Workers

International Direct Dial (IDD) prepaid and postpaid with rates as

low as 13 cents/minute for call to both mobile and fixed line

recipients around the world

offer a few special rates package:

prepaid long distance savers plan for foreigners from Saudi

Arabia and UAE

cakap-cakap (from 9 pm – 9 am) for foreigners from Pakistan,

Vietnam, Nepal and Indonesia

cakap-cakap lagi (from 12 pm – 2 pm) for foreigners from India

and Indonesia

International Calling Card (Chatz and Desher Kotha)

when roaming abroad (e.g. back in home country or anywhere on

Earth), no charges when receiving SMS but sending it at low flat rate

of 99 cents

RM 1.50 per International MMS

in-flight Mobile Services

continuously pursue USP obligation

by providing access to basic telephony communications

to districts designated to DiGi

Rural Communities

up to 2009, DiGi had provided 5,000 household fixed lines and 200

payphones to 7 under-served districts in Malaysia

DiGi was provisioned 13 Community Broadband Centre (CBC) sites

in various areas in Malaysia (Sarawak, Johor, Melaka, Kelantan,

Terengganu and Pahang) under USP

up to April 2010, DiGi had officially launched CBC in Lundu

(Sarawak) and Kampung Teriang Besar (Johor)

Lundu CBC is equipped with facilities that include 20 desktop

computers connected to DiGi's Turbo 3G™ network with a

minimum speed of 2Mbps and others gadgets such as printer,

scanner, copier machine as well as an LCD projector

CBC members pay lifetime membership fee of RM5.00 to enjoy

Internet access for as low as RM1/hour (non members pay

RM1.50/hour)

42

6.4 DiGi’s Intensive Strategies – Product Development

As simplified by the figure on the right, product

development seeks to increase sales and profit by

improving/modifying present products/services or

developing new ones for its existing markets.

This is especially important in the era whereby global

consumer multitask with their mobile devices – refer

below figure on the Evolution of Mobile Devices Use

from 1995 to (predicted) 2015 (Source: Nokia).

Some might use less Voice Services but more on Data Services (to surf the net, chat using MSN

Messengers, Facebook, Twitter, Mobile TV, GPS for navigation). They also to install tons of other

apps such as mobile wallet without caring much on what operating system it runs on – as long as they

can do their stuff on it. iPad or Mobile Internet Devide (MIDs) is not a choice because it hardly fits

into their trousers pocket or handbag. In other words, consumers are gradually switching to basic

phones/mobiles to smartphones with computer functions that fulfill their needs and wants – and DiGi

had jumped into the bandwagon as well by strategically having joint venture with handheld mobile

providers to include latest technologies and internet function into their product.

43

The subsequent table matches DiGi‟s Existing Markets to New Products with their potential

Product Development Strategies.

New Products

Voice Services

combine postpaid and prepaid for family package

Data Services smartphones (Blackberry, HTC, iPhone), Android apps,

MiFi, DiGiREMIT™

Personal Accident Insurance

Existing Markets Product Development


mostly youth below 24 years old

who are technologically driven

and savvy

Business Entity

Foreign Workers

Malaysian general public

joint venture with handheld mobile providers

to include latest technologies

and internet function into mobile

stand ahead of the competitors and encourage consumers

to switch to DIGI with the slogan „IT‟S TIME TO

CHANGE TO DIGI‟

produce new and tech savvy product to prevent going

outdated overnight


tie up with Apple Inc for the rights to distribute

iPhone 3G, 3Gs and 4s

partnering HSBC Credit Card and Guess to lure

potential iPhone owner with iDiGi Plan through 24-

months Easy Payment Plan plus a free GUESS iPhone

casing

open Android apps for wider array of phones

bring to Malaysians Huawei portable wireless router –

MiFi (Mobile WiFi Device) that can have 5 different

WiFi (eg combination: iPad, iPod Touch, iPhone,

Blackberry and laptop or netbook) enabled devices to

connect to the Internet simultaneously

Business Entity offer BlackBerry® solution with help from Research in

Motion (RIM)

Foreign Workers and Malaysian general public

partnering Citibank to allows subscribers to transfer

funds via SMS up to RM5,000 from Malaysia to

Indonesia, Bangladesh and the Philippines in a secure

manner – direct debit to their local banks in the

beneficiary's country or cash pick-up at designated

agents

partnering AIG to entitled subscribers with 3 months‟

tenure Personal Accident Insurance coverage via SMS

activation

encourage other service provider users (mobile,

smartphone) to switch to DiGi many rate plans while

retaining the original number at no extra cost (DiGi is

absorbing it)

offer DG Family™ that allows combination of prepaid

and postpaid as supplementary line

44

7.0 Introduction to SPACE Matrix

Strategic Position and Action Evolution (SPACE) Matrix is another management matching tool use to

analyze DiGi. SPACE focuses on strategy formulation which relates to DiGi overall strategic position.

SPACE Matrix is broken down into 4 strategies quadrants (aggressive, conservative, defensive or

competitive) which indicate which one is most appropriate for DiGi.

Internal/

External

Dimension

Sources

of

Factors

Comparison

(Benchmark) Type of Position Axes

Numerical

Value Range

Internal DiGi‟s

IFE competitors

Financial Position (FP) Y +1 to +7 (best)

Competitive Position (CP) X -1 to -7 (worst)

External DiGi‟s

EFE other industries

Stability Position (SP) Y

Industry Position (IP) X +1 to +7 (best)

As shown by the above figure and table, a number of variables could make up each of the dimensions

represented by the axes of a typical SPACE Matrix. The importance of each dimension are then value

numerically, calculate and plot on the Cartesian graph considering factors from DiGi‟s External

Factor Evaluation (EFE) and Internal Factor Evaluation (IFE).

FP

CP

SP

IP

45

7.1 SPACE Matrix for DiGi

Ratings

7.0

4.0

5.0

5.0

4.0

25.0

6.0

Tense telecommunication industry rivalry does not hinder profit potential. 5.0

All key telecommunication players are stable financially. 4.0

4.0

19.0

Continuous technology advancement in wired and wireless -3.0

High inflation rates – increased price. -3.0

Price range of competing products -2.0

Increasing competitive pressure facing global telco. -3.0

-11.0

DiGi is still trailing behind Maxis (leader) and Celcom in market share. -2.0

Reasonable good product and service quality. -3.0

Somewhat high customer loyalty and reputation . -2.0

-7.0

FP Average is 25.0 5 = 5.00

SP Average is -11.0 4 = -2.75

2.25

IP Average is 19.0 4 = 4.75

CP Average is -7.0 3 = -2.33

2.42

\ DiGi should pursue Aggressive Strategies

Financial Position (FP)

Competitve Position (CP)

Industrial Position (IP)

Strong profits and net cash flow from operation

Directional Vector Conclusion y-axis

Directional Vector Conclusion x-axis

Stability Position (SP)

Conclusion

Digi paid out total of RM1.4 billion of cash dividend to shareholders

Revenue revenue growth rate in excess of 11% in the period.

In, 2009 sought to distribute a minimum 80% of the Digi annual net profit to shareholders

from financial year 2010.

EBITDA margin reduced to 43.3% from 44.6%

Malaysia telecommunications operators optimized resource utilization

by signing MoU to share infrastructure.

Malaysia telecommunications industry is expected to reach

US$6.7 billion (RM22.85 billion) in 2010, a growth of 4.4% over 2009.

46

7.2 DiGi’s SPACE Matrix Profile

Conservative Aggressive

+6

+4

+2

-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

-2

-4

-6

Defensive Competitive

Proven by the graph above, DiGi‟s falls into the aggressive quadrant of the SPACE Matrix. It is

located at the coordinates of 2.42 for x-axis and a y–axis of 2.25, indicating that DiGi should adopt an

aggressive strategy – forward integration, market penetration, market development, product

development and also possible concentric diversification (related or unrelated). Those strategies

mentioned are aligned to those concluded from SWOT Analysis earlier on.

47

8.0 Introduction to Blue Ocean Strategy (BOS)

BOS is yet another management matching tool use to analyze DiGi. There are many strategy tools,

frameworks and methodologies to develop and explain BOS as shown below. However, only 4 of it

(highlighted in yellow boxes) are further deliberate.

Red vs Blue

48

Strategy Canvas

As shown by the above figure, Strategy Canvas is the central diagnostic and action framework to

build a compelling BOS. The y-axis captures the range of factors that the industry competes on and

invests in while x-axis captures the offering level that consumer receive

across key competing factors.

Strategy Canvas serves 2 purposes: (1) captures the current state of play in the known market space,

allowing DiGi to understand where the competition is currently investing and the factors that the

industry competes on. (2) propels DiGi to action by reorienting focus from competitors to alternatives

and from customers to noncustomers of the industry.

4 Actions Framework and ERRC (Eliminate-Raise-Reduce-Create) Grid

As shown by both figures below, 4 Actions Framework and ERRC Grid complements each other. It

pushes DiGi not only to ask all 4 questions in 4 Actions Framework but also to act on it in order to

create a new value curve, which is essential for unlocking a new blue ocean.

4 Actions Framework ERRC Grid

49

8.1 DiGi Strategy Canvas

8.2 DiGi ERRC Grid

From Strategy Canvas, DiGi ERRC Grid is tabulated below followed by detailed justifications by

quadrant:

ELIMINATE

fixed line telephony Voice Services: As highlighted in PESTLE analysis (under social), the

penetration rate of fixed line is almost stagnant. Also, fixed line is monopoly by Telekom up to 2009

leaving DiGi with a miserable tiny market share. Therefore, elimination of fixed line telephony Voice

Services is a more feasible choice.

paper billing for all customers: The figure next page shows the chronology of e-billing practice by

DiGi from 2007 to 2009 and its respective success switch rate for those years. Since e-billing is

gaining momentum and approval from customers, it is possible to eliminate paper biling for all

customers in their dealings with DiGi instead of only postpaid subscribers.

50

DiGi Prepaid™ Campus22

: This special package was introduced back in 2008 to nationwide tertiary

students 25 years old. However, since then, users had been complaining heavily

on various social media that DiGi is cheating them. On the other hand, DiGi realized that some

students had been abusing the plan. Hence, elimination of DiGi Prepaid™ Campus is a better solution

for both DiGi and fellow students.

RAISE

photovoltaic (PV) solar powered mobile base station site: DiGi began to install solar panels to their

base station in 2009 under DiGi Deep Green (Corporate Social Responsibility - CSR) effort. It was an

initiative to improve energy efficiency across all aspects of DiGi network operations. PV might

induce high capital investment but it provides great savings in long run. According to European

Photovoltaic Industry Association (EPIA), the cost to generate electric from PV is expected to fall 8%

annually. Besides, DiGi Deep Green had gain them acknowledgement and praises from various

parties. Hence, for good image and future lower operation cost, DiGi should raise the numbers of their

photovoltaic (PV) solar powered mobile base station site.

concept store equip with Simbioz system23

: DiGi was the 1st

company in SEA to deploy Simbioz

FT-57 system. Then, by investing RM3 million, DiGi launch a concept store equip with Simbioz

system (DiGi360°) in November 2008 to provide customers24

with personalised services (phone

accessories, data services – content downloads, games and internet browsing etc) which promise to

bring the DiGi experience to a new level. The store in SohoKL, Solaris, Mon‟t Kiara served as an

experimental platform to try out which service concept works best before implementation in customer

service centres nationwide (eg no queuing).

Within DiGi360°, there are small and huge multisensory interactive screen everywhere for customers

to browse DiGi offers and features (showcase their CSR, Music Mixer where customers can have fun

creating their own music and Picture Capture Moment where customers can take a picture using

integrated cameras and print out a copy to take home as a token) or play interactive game as if there

are in the movie Minority Report (refer the combo photos next page).

22

since July 2010, DiGi Prepaid™ Campus plan is no longer available for new subscription 23

next-generation technologies such as artificial vision, gestural tracking and Windows Presentation

Framework to encourage fun interaction and enable two way dialogues with users which can be

seen in the movie Minority Report 24

target market: expatriates, young professionals and enterprise business (especially postpaid)

51

With the success and sophisticated technology of DiGi360° since 2008 (and also enough testing), it is

recommended that DiGi raise/open more concept store nationwide.

memorable marketing campaigns of Yellow Coverage Fellow (YCF)25

: The YCF campaign was

first introduced in end 2006. It success was beyond DiGi wildest expectations and had achieved a near

cult following26

. Besides that, YCF campaigns had garnered recognition at Asian Marketing

Effectiveness (AME) awards, which is the only international marketing awards in Asia which judged

primarily on the measuring impact of advertising campaigns on the clients‟ business. DiGi won

Gold27

for “Most Effective Use of Advertising in Asia” and Silver for “Best Idea” category. As

competitors had not reach where DiGi is at with YCF, it is wise for DiGi to raise memorable

marketing campaigns of YCF.

25 chronology of campaigns: YCF (DiGi had expanded its network coverage), Getting Stronger

(Military Style Bootcamp) and Almost (there are areas where DiGi is not quite there yet) 26

85% approval rating from public with young kids to granny love and can relate to YCF and the

jingle “I will follow you”. There are also lots of request for YCF to make guest appearance at

events. 27

Malaysia 1st

ever gold

52

REDUCE

DiGi Ambassadors: DiGi had realized on the lack of involvement of their DiGi Ambassadors as

effective marketing tools. Hence, it is wiser to reduce the number of DiGi Ambassadors and channel

the cost28

to be switch to sponsoring educational program instead. Through sponsoring, DiGi can be

strengthen and embedded in the mind of students, indirectly influencing them to subscribe to DiGi in

the future.

fees to replace standard SIM card with Micro SIM29

: The „replacement‟ of standard SIM card with

Micro SIM is actually done by cutting the edge of the original card. While consumers can easily DIY

with scissors, special tools in the market or help from mobile accessories shops (open market); many

opt for telcos‟ service. Instead of doing it free of charge (FOC) , telcos charge consumers (refer table

below). This practice irks consumers. Therefore, it is better for DiGi to further reduce the fees to

replace standard SIM card with Micro SIM or offer it FOC.

concert sponsor for “B-grade30

” SEA artistes: Over the years, DiGi had been sponsoring concert

for a mixture of “A and B-grade” global artistes. While it is applausive to support local acts or less

popular entertainers, Malaysian youth are demanding for “A-grade” or world class music. So, DiGi

should reduce concert sponsor for “B-grade” SEA artistes.

CREATE

new Data Services product (Huawei portable wireless router): DiGi had bring to Malaysians Huawei

portable wireless router – MiFi (Mobile WiFi Device) that can have 5 different WiFi (eg combination:

iPad, iPod Touch, iPhone, Blackberry and laptop or netbook) enabled devices to connect to the

Internet simultaneously. Non customers might be attracted to MiFi or on the lookout for other new

creation of Data Services product by DiGi in the future.

ease of customer to be rewarded (BonusLink points): Since July 2010, DiGi partnered BonusKad

Loyalty Sdn Bhd to enable DiGi subscribers can collect BonusLink Points based on monthly usage

bill for postpaid mobile and broadband. This expands the scope of the point accumulation system for

customers beyond using DiGi's services. Non customers might be lure switch the DiGi to collect more

BonusLink points or wait until DiGi create some other appealing ways that ease customer to be

rewarded.

28

DiGi did not reveal exact figures but lump sum of payments for provisions (customer loyalty

program and employees benefits) in their cash flow shows an upward trend from 2005 – 2009 29

use in Iphone 4s and iPad 30

deem to be “B-grade” by youths (eg Tata Young and Denise Ho)

Telco Charges for Micro SIM

Replacement

DiGi RM 20

Maxis RM 25

Celcom RM 10

Open Market RM 5

53

9.0 Introduction to BCG Matrix

Since DiGi operates through 2 business lines (voice and data services), the BCG Matrix will be use to

analyze 4 (prepaid and postpaid, fixed telephony, smartphones and mobile/wireless broadband)

among its numerous strategic business units (SBU) or product lines.

BCG Matrix is a portfolio planning model developed by Bruce Henderson of Boston Consulting

Group in 1968, based on the product life cycle theory (refer figure below).

A typical BCG Matrix look like this:

III I

V

I II

(CASH FROM REVENUE)

(CA

SH

TO

IN

VE

ST)

54

Source: Starbiz, November 30, 2009

9.1 DiGi BCG Matrix

The following BCG matrix classified 4 DiGi‟s SBU (prepaid and postpaid, fixed telephony,

smartphones and mobile/wireless broadband) into 4 quadrants (Question Marks, Stars, Cash Cows

and Dogs):

9.2 DiGi BCG Matrix Justifications and Strategies

This section justifies on DiGi BCG Matrix by quadrant and also looks at possible strategies to handle

the respective SBU.

QUESTION MARKS: MOBILE/WIRELESS BROADBAND (DATA SERVICES)

relative market share: LOW as highlighted before, DiGi was having the smallest market share

in 2009 (refer pie chart on the right)

the market is also getting crowded with many new entries in 2010

such as Time dotCom, YTL, U Mobile and Tune Talk

market growth rate:

HIGH

rising penetration rate of broadband subscribers (per 100 householders)

(Source: Ministry of Finance, 2010)

4th

Quarter of 2009 = 31.7%

1st Quarter of 2010 = 34.5%

2nd

Quarter of 2010 = 37.5%

55

strong Malaysian government support through National Broadband Initiative (NBI) which aims

to achieve 50% Malaysian household (both wired and wireless mobile) broadband penetration

by the end of 2010

challenge for DiGi increase mobile/wireless market share quickly so that it might become Stars and eventual Cash

Cows or it will become Dogs

strategies

invest RM350 million for mobile broadband expansion as part of its plans to improve its

infrastructure

market penetration: increase customer rewards and provide consistent good services to

existing customers

- plenty of offerings and outdoor gathering in “hot buttons” of youth lifestyle areas (gaming,

sports, music, movie, TV show, internet, weather forecast, games etc)

- various monthly broadband (business solutions) depending on size and budget of business

entity

- BonusLink points based on monthly usage bill for postpaid broadband subscribers

market development: build CBC for rural communities in various areas in Malaysia (Sarawak,

Johor, Melaka, Kelantan, Terengganu and Pahang)

product development: bring to Malaysians Huawei portable wireless router – MiFi (Mobile

WiFi Device) that can have 5 different WiFi (eg combination: iPad, iPod Touch, iPhone,

Blackberry and laptop or netbook) enabled devices to connect to the Internet simultaneously

STARS: SMARTPHONES (DATA SERVICES)

relative market share: HIGH no exact figures disclose but relatively, DiGi is having a high market share for smartphones as

they are selling Malaysian favourites (refer pie chart and table below): RIM‟s Blackberry,

Apple‟s Iphone and Google‟s open-source Android operating system phones such as Samsung

Galaxy S, HTC Legend, HTC Desire, Sony Ericsson Xperia 10 and Motorola Milestones,

amongst others

31

largest BlackBerry seller in SEA (2008) 32

3 years contract with Apple to sell iPhones in Malaysia 33

in 2008, Samsung (8GB variant) was #1 smartphone in Malaysia with 14.6% market share

Smartphone Telco

Blackberry Maxis, Celcom

31,

DiGi

Iphone Maxis, DiGi32

Samsung33

Maxis, DiGi

Android Maxis, Celcom, DiGi

56

smartphones had contributed to the DiGi fast-growing mobile Internet market34

market growth rate: HIGH

percentage ownership of smartphones is still low but popularity is rising rapidly35

the potential market for mobile Internet (through smartphones) is large as there are 31

million36

mobile phones in use in Malaysia (more than 10x the estimated number of laptops and

netbooks owners) as of 2nd

Quarter of 2010

in 2009, mobile internet accounted for 25% of industry revenue growth

rising penetration rate of cellular phone subscribers (per 100 householders)


4th

Quarter of 2009 = 106.2%

1st Quarter of 2010 = 107.1%

2nd

Quarter of 2010 = 108.8%

challenge for DiGi maintain or strengthen dominant positions of smartphones as Stars because it is DiGi best long

run opportunities for growth and profitability plus growing it into Cash Cows

strategies

market penetration: increase customer rewards and provide consistent good services to

existing customers

- various data-centric packages to cater to the growing number of mobile Internet (smartphone)

users

- reduce fees to replace standard SIM card with Micro SIM

market development: aggressively push sales of smartphones

- encourage other service provider smartphone to switch to DiGi many rate plans while

retaining the original number at no extra cost (DiGi is absorbing it)

34 include casual surfers (unlimited access via handsets for RM5/day) and prepaid Internet SIM

card users (inserted into modem for access via PC and laptops)

composition of data revenue in 2nd

Quarter of 2010

= 65% SMS, 22% mobile internet and 13% others (Source: Asia Analytica Sdn Bhd) 35

Asia Analytica Sdn Bhd, 2010 36 31,456 million subscribers in 2

nd Quarter of 2010 (Ministry of Finance)

57

Source: Asia Analytica Sdn Bhd

- invest RM100 million over the next 3 years in Perak and Sarawak to expand its mobile

internet services footprint beyond 5 key market centres (Klang Valley, Penang, Kota

Kinabalu, Ipoh and Kuching)

product development: joint venture with handheld mobile providers to include latest

technologies and internet function into mobile

CASH COWS: PREPAID AND POSTPAID (VOICE SERVICES)

relative market share: HIGH DiGi market share for prepaid and postpaid is relatively high up to 2

nd Quarter of 2010 (refer

pie chart below)

however, DiGi do not disclose exact figures for its prepaid and postpaid subscribers (voice

services) but lump it together with broadband customers (refer bar chart below)

market growth rate: LOW

the phenomenon on declining voice revenue is an occurrence worldwide but it is expected to

remain as the main revenue earner (MCMC, 2007)

mobile voice revenue is expected to grow by 6% annually until 2013 (IDC, 2009)

challenge for DiGi maintain prepaid and postpaid strong position for as long as possible as Cash Cows since it was

yesterday‟s Stars to finance mobile/wireless broadband (Question Marks) and smartphones

(Stars)

strategies

product development - maintaining prepaid and improving postpaid momentum by offering handset bundles

- DG Family™ package allows combining prepaid and postpaid as supplementary line

- Happy prepaid37

east coast edition (Kelantan and Terengganu) targeting value seekers that

mainly use their mobiles to just make calls and SMS

retrenchment - eliminate DiGi Prepaid™ Campus package

- eliminate paper billing for postpaid subscribers

37

a mobile virtual network operator (MVNO) under DiGi rivaling Tune Talk

58

DOG: FIXED TELEPHONY (VOICE SERVICES)

relative market share: LOW DiGi was having tiny market share in 2009 (refer pie

chart on the right)

market growth rate: LOW

almost stagnant penetration rate of fixed line

telephone subscribers (per 100 householders)


4th

Quarter of 2009 = 43.9%

1st Quarter of 2010 = 44.0%

2nd

Quarter of 2010 = 44.0%

fixed-line voice revenue is expected to decline 4%

annually until 2013 (IDC, 2009)

challenge for DiGi avoid or maintain fixed line telephony which is weak internal and externally as Dogs Cash if

there is some profit since expensive turn-around plans usually do not help

strategies

retrenchment - eliminate fixed line telephony

- continuously provide payphones and household fixed lines as part of obligation to provide

access to basic telephony communications in rural community districts designated to DiGi

under Universal Service Provision (USP) 38

38

up to 2009, DiGi provided 200 payphones and 5000 household fixed lines to 7 USP districts

59

10.0 Introduction to Strategic Implementation Action Plan

The greatest strategic plans are useless carried out properly. An action plan will define how DiGi get

to where they want to go (the steps required to reach their strategic goals). The framework of DiGi‟s

Strategic Implementation Action Plan is as such: strategic decision strategic objectives

functional action tactical action plan resources required timeline personnel

responsible personnel accountable.

10.1 DiGi Strategic Implementation Action Plan

Vision

to be seen as stars in excellent customer experience by enhancing communications to improve

customers' quality of life, at home, work and play

Mission

1. Provide customers specific solutions to meet individual needs for communications, connectivity,

and access to information and security;

2. Provide an environment where our employees can grow and be fulfilled;

3. Provide superior returns to shareholders; and

4. Contribute to improving life in Malaysia.

STRATEGIC DECISION

Strategic decision derived from SWOT, SPACE and BCG methods is product development – joint

venture with handheld mobile providers to include latest technologies and internet function into

mobile. Through product development, at the end of its strategic action, DiGi will be able to increase

its subscribers‟ growth and revenue by banking on Data Services (mobile internet).

STRATEGIC OBJECTIVES

More specifically, strategic objectives are:

1. market positioning: at least defend DiGi current market share and remain as #3

2. innovation: development of new Data Services goods and services

3. human resources: selection and development of employees to implement the strategic decision

4. physical resources: adequate/healthy stock (inventory) of smartphones etc

5. financial and profit: adequate capital and healthy profit plus growth

TIMELINE

This particular strategic decision will be implemented in a long term basis – 3 years (1st Quarter of

2010 to 1st Quarter of 2013). For detail timeline (using workings days), refer Gantt Chart next page.

FUNCTIONAL ACTION, TACTICAL ACTION PLAN, REQUIRED RESOURCES AND PERSONNEL ACCOUNTABLE/RESPONSIBLE

The subsequent tables in Page 60 – 63 matches each strategic objective with related functional

departments/committee involved, detail activities and efforts that should be done to achieve the

objectives and required resources (money/year, people, equipment) and personnel

accountable/responsible.

61

Strategic

Objectives

Functional

Action

Tactical

Action Plan

Required

Resources39

Personnel

Responsible

Personnel

Accountable

market

standing40

marketing

aggressively push sales of Malaysian favourites

smartphones: RIM‟s Blackberry, Apple‟s Iphone

and Google‟s open-source Android operating

system phones such as Samsung Galaxy S, HTC

Legend, HTC Desire, Sony Ericsson Xperia 10 and

Motorola Milestones, amongst others

open Android apps for wider array of phones

encourage other service provider users (mobile,

smartphone) to switch to DiGi many rate plans

while retaining the original number at no extra

cost (DiGi is absorbing it)

reduce fees to replace standard SIM card with

Micro SIM

raise memorable marketing campaigns of YCF

ease customer to be rewarded (BonusLink points)

money/year: advertising and

promotion budget =

RM 600,000

people: trained, aggressive

sales and service

personnel/dealers41

at DiGi

centres, concept store

(DiGi360°) and service

counters; inhouse/outsource

advertising and promotion

team

equipment: hassle free

switch to DiGi technology,

SIM card cutter, Point of

Sales (POS)

customer and

channels

marketing

department

(sales and

services

personnel/

Dealers,

advertising

and

promotion

team)

outsource

advertising

agencies,

PR/event

management

house

Albern Murty

(Head, Marketing)

Chan Nam Kiong

(Head, Customer

and Channels

Marketing)

MIS

liaise with R&D and marketing

ensure updated, adequate information and user

friendly website

ensure error free new offerings (eg SMS for

insurance, collect and redeem BonusLink points

etc)

eliminate paper billing to offer e-billing for all

customers

money/year: MIS budget

= RM 400,000

people: competent web

developer, technicians,

programmers, engineers

equipment: reliable, error

and hassle free technology;

e-billing technology

MIS

department

(web

developer,

technicians,

programmers,

engineers)

Ole Martin

Gunhildsbu

(Chief Technology

Officer)

39

overall budget = RM 2.3 million per year 40

at least defend DiGi current market share and remain as #3 41

prepaid and postpaid

62

Strategic

Objectives

Functional

Action

Tactical

Action Plan

Required

Resources

Personnel

Responsible

Personnel

Accountable

Innovation42

R&D

joint R&D for new Data Services goods and services

copy and create Huawei portable wireless router –

MiFi (Mobile WiFi Device) that can have 5

different WiFi (eg combination: iPad, iPod Touch,

iPhone, Blackberry and laptop or netbook) enabled

devices to connect to the Internet simultaneously

4G testing/trial

Money/year: R&D budget

= RM 400,000

people: trained and

new researchers

equipment: lab

apparatus, computers

and new technology

trained and

new

researchers

Head, R&D

management

talk with handheld mobile providers for joint ventures

tie up with Apple Inc for the rights to distribute

iPhone 3G, 3Gs and 4s

offer BlackBerry® solution with help from

Research in Motion (RIM) to business entity

partnership with bank, cloth retailer and insurance

companies

partnering HSBC Credit Card and Guess to lure

potential iPhone owner with iDiGi Plan through

24-months Easy Payment Plan plus a free GUESS

iPhone casing

partnering Citibank to allows subscribers to

transfer funds via SMS up to RM5,000 from

Malaysia to Indonesia, Bangladesh and the

Philippines in a secure manner – direct debit to

their local banks in the beneficiary's country or

cash pick-up at designated agents

partnering AIG to entitled subscribers with 3

months‟ tenure Personal Accident Insurance

coverage via SMS activation

money/year: budget

= RM 300,000

people: trained

negotiator

equipment: reliable,

error and hassle free

technology

strategy and

news business

department

Noelle Tan

(Head, Strategy

and New Business)

42

development of new Data Services goods and services

63

Strategic

Objectives

Functional

Action

Tactical

Action Plan

Required

Resources

Personnel

Responsible

Personnel

Accountable

human

resources43

HR

ensure enough and competent employees for all

functional efforts to implement the strategic

decision

new recruitment (if needed), job rotation or

transfer

training on new needed skills

money/year: HR

budget = RM 200,000

people: trained recruiters,

competent HR personnel,

internal/external trainers on

new needed skills

equipment: training

materials

HR

Development

Team

(recruiters,

competent HR

personnel,

internal/external

trainers)

Suriahni Abdul

Hamid

(Head, HR,

Development and

Members, DiGi

Management

Team)

physical

resources44

operation

warehouse clearing of iPhone 3Gs stock before

launching of 4s

ensure adequate/healthy inventory of all offered

smartphones and its accessories

money/year: operation budget

= RM 200,000

people: trained supply chain

personnel (purchasers,

storekeepers, QC/QA, lorry

drivers)

equipment: QC/QA

smartphone defect tracing

tools, suitable inventory

software (eg ERP/Oracle)

that enable FIFO for

smartphones

operation

department

(purchasers,

storekeepers,

QC/QA, lorry

drivers)

Head, Operation

financial

and

profit

finance and

accounting

ensure and raise capital for (if needed) fees of

LTE/4G spectrum

liaise with marketing to decide on pricing

decision on all new Data Services goods and

services

keep track on overall budget allocation, usage

and profit

money/year: accounts and

finance budget

= RM 200,000

people: accountants,

bookkeepers, data entries

equipment: suitable

accounting software

accounts and

finance

department

(accountants,

bookkeepers,

data entries)

Stefan Carlsson

(Chief Financial

Officer)

43

selection and development of employees to implement the strategic decision 44

adequate/healthy stock (inventory) of smartphones etc

64

11.0 Introduction to Strategic Evaluation – Balanced Scorecard

The last part of this paper use Balanced Scorecard, which is an important strategy-evaluation tool to

evaluate DiGi vision, mission and strategy from 4 perspectives: financial performance, customer

knowledge, internal business processes and learning and growth.

11.1 DiGi Balanced Scorecard/Strategy Map

The figure below shows the Strategy Map (Kaplan and Norton, 2004) that will be use to illustrate

DiGi Balanced Scorecard:

FINANCIAL PERSPECTIVE

long-term shareholder value:

align to DiGi‟s mission #3 – provide superior returns to shareholders

indicators: % of dividend,

productivity strategy (attained targeted production):

indicator: improve cost structure45

indicator: increase asset utilization (especially on new property, plant, equipment and intangible

assets purchased annually to generate sales)

45

expenses that DiGi must take into account for its product/services (eg transaction costs, sunk costs,

marginal costs and fixed costs)

formula of cost structure = ratio of fixed costs to variable costs

65

growth strategy:

expand revenue opportunities – is 4G testing/trial successful?

enhance customer value (eg reduce fees to replace standard SIM card with Micro SIM, ease

customer to be rewarded – BonusLink points)

indicator: % of attained target sales

CUSTOMER PERSPECTIVE

indicators to measure outcomes of DiGi strategy plus customer value proposition:

price – affordable at market price?

quality – on par with competitors (no of customer complain, frequency of repair etc)?

availability – short lead time for pre-order of smartphones?

selection – are there myriad of prepaid and postpaid plans with option to switch to DiGi?

functionality – on par with competitors‟ product?

service – friendly and knowledgeable sales and service personnel/dealers at DiGi centres,

concept store (DiGi360°) and service counters (index of impoliteness)?

– new features and services increase value add to customer (% of market share)?

partnerships – successful joint ventures with mobile handheld mobile providers to include latest

technologies and internet function into mobile?

branding – is YCF campaign effective (generating sales)?

– is YCF still acceptable and love by Malaysians (there are still lots of request for

YCF to make guest appearance at events)?

INTERNAL PERSPECTIVE

operations management process:

supply, distribution and risk management – ensure adequate/healthy inventory of all offered

smartphones and its accessories

produce (through R&D and MIS) on supporting features of smartphones

indicators: on time delivery, short lead time for pre-order of smartphones, reliable, error and

hassle free technology, effectiveness of job, efficiency of business processes

customers management process:

select, acquire, retain and grow the right target customers

indicator: % of market share

innovation process:

R&D to locate opportunity identification (ID) before design/develop new innovation and

successful launch it into the market

indicators: time from new product/services conceptualization to commercialization, break-even

time, % of sales from new product/services, no of new products/services launch, % of customer

complain (quality)

regulatory and social process:

environment – no of photovoltaic (PV) solar powered mobile base station site?

– success switch rate to e-billing?

safety and health – how successful in lowering carbon footprint (no of staff carpooling to work)?

employment – staff turnover rate?

– staff job‟s satisfaction?

community – high and visibility of CSR effort (DiGi Deep Green) effort (% of praise from

customer/non-customers, industry players and staffs)?

66

LEARNING AND GROWTH PERSPECTIVE

human capital: improve moral and motivation of staffs through adequate manpower (new recruits if

needed), job rotation or transfer plus suitable training on new needed skills

information capital: acquire, storing and distribute latest information on telecommunication

(especially smartphones) to staffs

organization capital:

company culture – open communication (no of suggestion from all level)?

leadership – leading at all level (average no of times each employee leads ad-hoc projects

annually)?

alignment – are each department KPI align to DiGi vision, mission, long term

objectives and strategy (annual review)?

teamwork – are teamwork highly encourage and develop (no of team building events,

cross-functional teams etc)?

11.2 DiGi Balanced Scorecard/Strategy Map Cause and Effect Relationships

Finally, the figure below summarizes DiGi Balanced Scorecard/Stategy Map cause and effect

relationships by connecting arrows:

DiGi Strategic Management

Documents

Transcript of DiGi Strategic Management