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DEAKIN UNIVERSITY

FACULTY OF BUSINESS & LAW


MPM703 BUSINESS STRATEGY and ANALYSIS
UNIT CHAIR STEVE JAYNES

TELSTRA CORPORATION: A Business Strategy Report

TRIMESTER 2 2014

SUBMITTED BY:
GROUP 14 (ON CAMPUS)
MANSI SINGLA - 213541144
BIBHAV BISARIA - 212556246
KUNAL PATIL - 212407833
NISHANT SAINI - 213
SHYAM PRASAD 213048811

DATE: 05-SEPTEMBER-2014

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Table of Contents
1. Executive Summary ......................................................................................................................... 3

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1. Executive Summary

This report

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2. Introduction

For any business to thrive, having a good business strategy in place is quintessential. In todays
rapidly evolving global business world, adapting to change is necessary to ensure that the business
is in line with the needs of the customers it is catering to. Fierce competition from other players
is another cause of concern for businesses, and is also one of the motivating factors to develop a
sound strategy that would separate the business from the rest of the pack. This would also help
the business in achieving its goals and growing stronger in the industry that it operates.

Analysing the strategy of a well-established and successful business provides an insight into the
approaches taken by the business to sustain itself and stand apart from the rest. The way the
business positions itself in the industry sheds light on some of the measures undertaken by the
firm in defining its business goals, its vision, mission and values that are in line with its strategy.
Taking the telecommunications sector in Australia, mobile telephony to be specific, into
consideration, there are some huge players such as Optus, Vodafone, Telstra and Virgin to name
a few. The annual revenue of this industry stands at about $21.6 billion with Telstra leading the
market with a share of 45.8%, followed by Optus with 24.5% and Vodafone with 15.4%. (IBIS World
2014). This industry is quite competitive with these service providers having their respective
customer base and offering similar services. Among these, as the numbers suggest, one of the
names that stands out is that of Telstras.

With over 16 million mobile service users, Telstra Corporation has undoubtedly become
Australias leading telecommunications and information services company. The firm not only
caters to its customers by providing mobile services, but also by providing various other services
ranging from fixed line, broadband, and information to transaction, search and pay TV. By many,
Telstra is not just perceived as a brand with a concrete history, but also as a brand with a promising
future. Consistency has been one of the key factors for the organisations success, and this has
instilled confidence in the brand. Telstra continues to lead its competitors in the industry, with
some other big names such as Optus and Vodafone. What makes Telstra an influential Australian
business, or rather, a huge brand is its competitive edge and a wide presence (Marketing Magazine
2014). Telstra has extended its presence to 15 countries, with a vision to build a brilliant connected
future for everyone.

<http://www.marketingmag.com.au/tags/telstra/#.VAcK5PmSwuc>

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3. Strategic Analysis

3.1 Methods

This Business Strategy report includes an extensive research conducted primarily with the aid
of scholarly databases and Telstras website. IBIS World Industry database was used to gather
data about the wireless telecommunications industry in Australia.
The latest annual report available on Telstras website was used to understand the
organizations vison, mission, values and goals. The website also provided a brief history of the
organization, and also its vision for the future.
A fair bit of research was also done using various news forums to obtain the latest news
pertaining to the mobile business sector, particularly with a focus on news related to Telstra
and its business strategy.
The macro-environment analysis was done with the aid of data gathered from reliable
industry reports and well as a variety of news websites which provided news about the
industry and changes.

A research was also carried out on the competitors with the help of the industry reports and
also their respective websites.

Strategy canvas website was used to draw the strategy canvas.

Draft ICT Strategic Vision Submission Telstra May 16, 2011 Australian Government,
Department of Finance.

mobiles now account for 38 per cent of sales revenue (Telstra Annual Report 2014).

Much of Telstras reputation and core strength is built on the foundation of

providing customers with outstanding mobile service in cities and in regional

and remote Australia. We are committed to maintaining our network leadership

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and this year we invested $1.1 billion in our mobile network, including significant expansion
of our 4G mobile coverage, to now reach 87 per cent of the Australian population with four
times the geographical coverage area of any other 4G network. Our 3G service provides
coverage to 99.3 per cent of the population.

transform our internal business processes to streamline how we work and remove

internal barriers that impede productivity, collaboration, innovation and better

customer service.

3.2 External Analysis

3.2.1 PESTEL Analysis

Political:

The Australian government can intervene in the telecom market through regulations
and policies. The privatization of Telstra brought more opportunities but the
deregulation of the market allowed new entrants into the market causing stiff
competition for Telstra. National Broadband Systems proposal for operational and
functional split of Telstra could affect its monopoly and the mobile business splitting
from fixed telephony could reduce the companys ability to leverage the fixed line
market power onto the mobile market. Some lobby groups of the competitors are also
seen pressurising the government to intervene and reduce Telstras market
dominance.

Economic factors:

Economic growth affects business of service providers like Telstra. Australian


economy has grown steadily over the last couple of decades. Continuous structural
and policy reforms have resulted in a stable regulatory structure and a changed tax
system has reduced the business cost significantly. This has given more opportunities
for Telstra to design and develop communication solutions. However, with a fall in
AUD-USD exchange rate, the technology imports would incur higher costs for the
company.

Social Factors:

Demographic factors like religions, nationality and income of the Australian people
have acquired a significant importance these days with these changing rapidly owing
to diverse nature of the migrating population and workforce. Attracting diverse range
of people could help Telstra achieve its strategic objective and the performance could
be improved if Telstra keeps on encouraging diversity in its workforce as well. Telstra
to have a highly motivated workforce must ensure that the diverse staff is also free of
unlawful discrimination.

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(Corporate social responsibility part not covered above)

Technological factors:

Advancement in technology plays a key role in Telstras mobile business. New


technologies give Telstra opportunities to bundle new products and services with the
existing ones. To thrive in the Australian telecommunication market Telstra needs to
stay staying abreast with the current technologies or embrace quickly the new
disruptive technology. Telstra should focus on delivering its products and services
through online shopping, offer information about its services for better comparability
with the competitors services and also let its existing and prospective customers to
know what Telstra is going to offer them in the near future like securing the
nationwide spectrum license to offer 4G services from 2015 based on Long Term
evolution technology.

Environment

The telecom industry has minimal chances of adversely affecting the environment.
Telstra offers its services complying with the relevant laws and regulations and should
ensure that its impact on environment is much less than the minimal required as per
norms. It can better project its image of a socially responsible firm in this era where
people eye that as another factor in comparing the brands. Telstra should support
more programmes on waste management and recycling initiatives to bring down the
carbon footprint.

Legal Factors

Telecom firms need to be careful of the legal issues which could adversely affect their
business. The competitors often promote their own network as having coverage
equivalent to that of Telstra. Telstra has to be prompt in complaining about such
misleading advertisements else it may lose some of its client base. Moreover, $272
million Telstra indicated as its earnings in 2014 from late fees and other
miscellaneous fees has invited a possible legal suit against the company by ACA
lawyers.

http://www.news.com.au/finance/business/telstra-optus-vodafone-facing-aca-
lawyers-class-action-over-unlawful-late-payment-fees/story-fn5lic6c-
1227030590301

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3.3 Strategic Capability

STRENGTHS:

Telstra is Australias pioneer in 3G and 4G network services. Its 3G service provides coverage
to around 99% of Australias population and the competitors by and large depend on Telstra
as they borrow Telstras network for their own coverage. The advantages of largest coverage,
high capacity and speed allow Telstra to charge a bit over the competitors. It enjoys such a
lead in the market also due to strong retail operations and stores throughout Australia.

WEAKNESSES:

Telstra 4G network reaches only a small number of Australian population and the services are
costlier than its competitors like Optus and Vodafone. Telstra has been focussing much on
the Australian market and has not made considerable efforts to establish it globally. Its weak
relationships with the regulatory bodies are damaging the brand worth as well. Telstras 2G
network traffic is increasing but the 2G core network technology itself is nearing its end
globally.

OPPORTUNITIES:

Telstra can take advantage of its partnership with Australias largest building and construction
company, Hutchinson to expand 4G network. 3G Direct Tunnel technology software allows
the data capacity for network services to be enhanced without acquiring new hardware.

THREATS:

Ever changing and advancing technologies ask for constant upgradation and investments and
the expensive tariff plans put existing or new customers off. The competitors like Vodafone
and Optus having better access to finances and new technologies due to global presence of
these or their parent brands offer stiff competition to Telstra in this scenario. The Australian
mobile market is nearing saturation and the regulatory requirements could impact the
operation performance in the near future.

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3.4 Strategy and Culture

Rick, T, (2013) says that culture is a vital factor in companys long-term success. He says, a
strategy that is at odds with a companys culture is doomed. Culture trumps strategy every
time- culture eats strategy for breakfast it is the way people respond in day-to-day
operations. Telstras ingrained values have been noticed as the central influence in supporting
and constraining its strategy. Potter, D, (2014) says that history of an organisation over a

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period of time becomes a part of the culture and it underpins the competitive advantage of a
firm. Telstras history of trusting each others to deliver has helped them turning it into a value
which in turn has been a vital part of the way Telstra has built its strategies. However, it has
been noticed as a speed-breaker in shifting the culture.

Culture acts as a glue in holding the organisation together. Culture is a taken-for-granted


assumption that unconsciously define the basis of the way organisations see themselves
(Ahmadi, A. et al, Vol. 4, No. 3- 4, 2014)

(Reference from my notes) Culture is a mixture of Values, Beliefs, Behaviour and the taken-
for-granted assumptions. Telstra has been seen as the Employer of choice and they have been
specifically training their new employees about the white ribbon work place it is which is
acting as a cultural glue. Cultural glue acts as a control measure which often is seen as the last
frontier of control which has worked fairly over the years for Telstra. Telstra has been
captured by culture and now need to manage or change the culture to being creative which
has been lacking.

(Book)Competitive advantage via strategy is gained through culture. These unique abilities
become part of an organisation. Culture may often cause strategic inertia and impede
strategic change. Telstras Ethics have been able to stop the strategic drift which develops
incrementally however it is about time to keep pace with the changing environment. Quinn
(2014) says that organisations must keep the pace with the experimentation around a
particular theme which is called as logical incrementalism.

(book)Strategies fail because of not keeping up the pace with the change because of various
reasons, one of which is core rigidness, from which Telstra has suffered for a period of time.
Core rigidness are ingrained capabilities that are difficult to change. It is possible for a large
and complex organisation of Telstras size to suffer from lagged performance effects. Lagged
performance effect is the effect is the financial performance which holds up initially, that
masks the need for change (Pearson, 2011).

Hence, (book) says that a part of appreciating the strategic position of an organisation is to
understand and manage culture.

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3.5 Competitive Strategy

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3.6 Business Strategy Statement

Telstras Mission

Telstras mission is to focus on building technology and content solutions that are built on the
terms of simplicity and ease of use. The organization understands the constant evolution that
is happening in the industry and is striving to stay ahead in the competition. They believe that
putting the customer at the centre of everything that they do.

Telstras Vision

At a recent event, Telstras CEO stated that his vision for Telstra was to become a great, global
technology company (Business Insider Australia 2014). Their mobile network business is
always customer focussed. Telstras vision is to provide their customers the services they
want, where and when they want them in a simple and convenient way. The organisation is
determined to sustain and grow their mobile network, which forms the core of their business.

http://www.businessinsider.com.au/david-thodey-telstras-future-is-in-global-tech-2014-3

Telstras Objectives

One of the main objectives of Telstra includes retaining and growing customer numbers,
which can be achieved by their other objectives such as improving customer satisfaction,
simplifying their business, and at the same time, managing risks effectively.

Scope

Just like any other organisation, Telstras scope also refers to three dimensions: customers,
geographic location and the extent of internal activities (Johnson, Whittington & Scholes
2011, p. 8). In terms of the geographic location, Telstra has also focussed on expanding its
mobile business in the Asian region.

Advantage

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http://www.businessspectator.com.au/article/2014/6/4/technology/can-optus-topple-
telstra-mobile

Improving customer advocacy by improving services, driving value from the core by focussing
on customer and revenue growth by maintaining network leadership.

3.7 Conclusion

The telecommunications industry is experiencing enormous growth; network traffic is growing


faster than any other period of time and digital technology is changing our world.

Telstra is at the heart of this changeand were helping make it happen by connecting
everything to everyone.

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