1.

BACKGROUND OF THE COMPANYMISSION STATEMENT

ANALYSIS
1.1.

BACKGROUND OF THE COMPANY

1.1.1.

Digi

Digi Telecommunications Sdn. Bhd., DBA digi, is a mobile service provider

in Malaysia. It is owned in majority by TelenorASA of Norway with 49%. On
24 May 1995 Digi became the first telco in Malaysia to launch and operate
a fully digital cellular network.

They were also the first to offer GPRS

(2.5G) and later EDGE (2.75G) in Malaysia on 14 May 2004. Digi primarily
uses the 1800 MHz band for GSM with the network code of 502-16.
Digi is listed on the Bursa Malaysia under the Infrastructure category act.
It uses the native dialling prefix identifier of "010", "016", "0143", "0146"
and "0149", although with the implementation of Mobile number
portability mandated by the Malaysian government this does not apply to
subscribers who switched from their old mobile service provider over to
Digi. At the moment, switching to Digi is free.
1.1.2.
Celcom

Axiata

Celcom
Berhad,

DBA

Celcom,

is

the

oldest

mobile

telecommunications provider in Malaysia. Celcom is a member of the

Axiata group of companies. Being one of the very few companies in
Malaysia to originally obtain a cellular phone license, it successfully
introduced mobile telephony in Malaysia through its ART-900 (Automatic
Radio Telephone) service, using first generation (analogue) ETACS
(Extended Total Access Communication System) specifications of the
United Kingdom, a derivative of the US-AMPS (Advanced Mobile Phone
System) technology. The ETACS ART-900 was started using the prefix
"010". Celcom now uses the dialling prefix identifier of "013" and "019"
and offer digital GSM (Groupe Speciale Mobile), an originally European
standard, now largely a world standard for mobile communications.
Through

the

Mobile

Numbering

Portability

by

the

Malaysian

Communications and Multimedia Commission, CELCOM provides Virtual

Page | 1

Mobile Operator services. CELCOM also provides rural communications

services using CDMA Technology and Satellite Phone.

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1.1.3.
Maxis

Berhad

Maxis
is

communications

service

provider

in

Malaysia.

Headquarter in Kuala Lumpur, providing a variety of communication

products, applications and value added services for consumers, large
enterprises and small & medium business owners.
Maxis launched Malaysias first 4G LTE network on 1 January 2013. Maxis'
high speed internet footprints are one of the largest in Malaysia, and were
the first Telco to roll out LTE-Advanced technology. Through their
partnership with Astro, Maxis now offers fibre internet packages bundled
with

entertainment.

They

provide

multi-channel

customer

service;

customers are able to reach Maxis service representatives via telephone,

web and social media platforms. Maxis Call Centre was awarded the Best
of the Best honor at the 2012 Customer Relationship Management and
Contact Centre (CCAM) Annual Awards, being the only service provider
that awards scholarships to children of their own postpaid customers.
Maxis use the dialing prefixes of "012", "017", "014-2" and "011-2". The
majority of the company's stake is owned by billionaire Ananda Krishnan,
and the company has about 11.6 million subscribers as of the fourth
quarter of 2015.
1.1.4.
Telekom

Telekom Malaysia

Malaysia

Berhad

DBA

(TM)

is

Malaysias

leading

telecommunications company, with a history dating back to 1946.

Beginning as the national Telco for fixed line, radio and television
broadcasting services; it has evolved to become the largest broadband
services provider, in addition to offerings in data, fixed line, pay television
and network services. The company sees itself as transforming the way
Malaysians connect, communicate and collaborate, with a strong emphasis
on innovation. Most recently this has seen TM venture into the Long Term
Evolution (LTE) space with the launch of TMgo, its first 4G offering.

Page | 3

With a total of 2.23 million broadband subscribers, TMs UniFi is Malaysias

first high-speed broadband service and is one of TMs recent success
stories. Unifi's rollout, in 24months, has been acknowledged as one of the
fastest and lowest cost in the world.

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1.1.5.

Redtone

REDtone International Bhd is an integrated telecommunications service

provider catering to niche market segments. A subsidiary of Berjaya
Corporation Bhd, REDtone was listed on Bursa Malaysia in 2004. A well
respected home-grown brand founded in 1996, REDtone has evolved from
a voice provider to one that offers an extensive range of services under
four main categories; (1) Telecommunication services; Offers data and
voice services to government, enterprises and SMEs. REDtone is the only
service provider in the industry to provide infrastructure integration
expertise. Its access to a unique suite of last mile technologies also
enables it to offer broadband-on-demand, (2) Managed telecommunication
network services; Build, maintain and operating large scale WiFi hotspots,
base stations and fiber optic infrastructure,(3) industry digital services;
Data Centre services, cloud services and applications, Internet of Things
(IOT), healthcare solutions and managed security services and (4) mobile
services; LTE (4G) provider.
1.1.6.

Time

TIME dotCom (TIME), listed on the Stock Exchange of Malaysia since 2001,
is a fixed line telecommunications provider that connects businesses and
homes by harnessing the talents of the most capable people and the latest
available technologies.
Based in Kuala Lumpur, TIME offers a full suite of domestic and
international connectivity, and data Centre solutions to the Wholesale,
Enterprise and SME & Consumer markets.
We also deliver pure fibre home broadband services at speeds of up to
500Mbps to consumers in Malaysia the countrys fastest.
It specialties is fixed-line telecommunication provider primarily focused on
the Wholesale and Enterprise segments, providing customers with nononsense Data and Internet connectivity.

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1.2.

VISION AND MISSION OF THE COMPANY

Company

Vision

Mission

Digi

To be a company
that is always
'Changing the
Game'.

We deliver Internet for all (2) as part of our commitment (8)

to building a connected Malaysia (3) - enabling access to
Mobile Internet services and applications by offering
customers (1) the right combination of devices (4) and value
pricing (7), as well as the best usage experience (5).

Celcom

To become the
finest enterprise in
the country

Maxis

To be Admired for
excellence
To make life and
business easier,
for a better
Malaysia

To delight our customers (1), To build a profitable enterprise

that maximizes investor returns (9), To empower, develop
and reward our people, to become Malaysia's preferred
employer (7), To build win-win relationships with all our
business partners, based on mutual trust, respect and support
(6), To work to bridge the digital divide (4), to build our
nation and to enhance its standing abroad (3), To maintain
the highest levels of transparency, integrity and
professionalism and Together with all our stakeholders (5),
we will make Celcom a premium brand (2): a brand that
symbolizes the spirit of freedom, aspiration, confidence,
dynamism, timelessness, universality and globalism (8).
To remain the nation's premier (3) integrated
communications service provider (2).
We deliver life made easier to customers (1), through
converged lifestyle communication experiences (2), to
businesses, by collaborating with and supporting them with
integrated solutions (4) and to the nation (3), by supporting
socio-economic development through education (5),
innovation & social initiatives(7).
Delivery of full range of leading edge telecom products (2)
and solutions, commitment of providing assistance to
achieve business excellence (5).

Telekom
Malaysia

Redtone

Time

To provide
effective, efficient
and reliable
solutions for all
communication
needs
To be a global one

To contribute towards nation development through achieving

the national policy (3) objectives for the communications
and multimedia industry (2), to deliver supreme customer
experience (1), to optimise shareholders value, to grow and
nurture talent (5) ; and be the employer of choice (9), to be
the partner of choice (8) and to be an opinion leader (7).

Page | 6

1.3.
COMPANY
DIGI

CELCOM

COMPARATIVE ANALYSIS
MISSION STATEMENT
VISION
1
2 3 4 5 6 7 8 9
ANALYSIS
Statement is too

vague; it should
reveal how the

telecommunicati
on industry
benefits

Good statement

MAXIS

Statement too
vague, it should
reveal the type
of business

TELEKOM
MALAYSIA

REDTONE

Statement too
vague, it should

reveal the type
of business

Good statement

MISSION ANALYSIS
The mission statement lacks two statements characteristics: Philosophy (6) and
Employees (9); (42words)
7/9 or 77.78% mission statement characteristics of Digi fulfilled the mission
statement components.

The mission statement dont lack any statement characteristics; (96words)

All 9/9 or 100% mission statement characteristics of Celcom fulfilled the mission
statement components.
The mission statement lacks seven statements characteristics: Customers (1),
Technology (4), Survival, growth, and profitability (5), Philosophy (6),
Self-concept (distinctive competence) (7), Public image (8) and
Employees (9); (9words)
Only 2/9 or 22.22% mission statement characteristics of Maxis fulfilled the mission
statement components. This company doesnt have a good mission statement.
The mission statement lacks three statements characteristics: Philosophy (6),
Public image (8) and Employees (9); (39words)
6/9 or 66.67% mission statement characteristics of Telekom Malaysia fulfilled the
mission statement components.
The mission statement lacks seven statements characteristics: Customers (1),
Markets (3) Technology (4), Philosophy (6), Self-concept (distinctive
competence) (7), Public image (8) and Employees (9); (19words)
Only 2/9 or 22.22% mission statement characteristics of Redtone fulfilled the
Page | 7

mission statement components.

statement.
TIME

Statement too
vague, it should

reveal the type
of business

This company doesnt have a good mission

The mission statement lacks two statements characteristics:

Technology (4) and Philosophy (6) ; (49words)
7/9 or 77.78% mission statement characteristics of Time fulfilled the mission
statement components.

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2. PORTERS FIVE FORCES ANALYSIS

FIVE
FORCES
COMPETITIV
E RIVALRY

DIGI

CELCOM

HIGH
Because there are good
competitor like Celcom and Digi

HIGH
This caused by the current
competitors of the same product.
The rivalry among firms in an
industry is high when there is
fierce competition.

THREAT OF
NEW
ENTRANTS

LOW
Huge License Fees to be paid
upfront & High gestation period
and Entry of MVNOs & WiMAX
operators.

THREAT OF
SUBSTITUTI
ON

HIGH
Because of d iminishing market
and Mobile Operator. Many
Broadband Services and Video
Conferencing has been offer by
other company.

LOW
Entry of new competitor is will
intense the competition in the
industry and it has low of threat of
new entrants because they only
have several barriers.
HIGH
Celcom has used customerorientation strategies to deal with
the threat of substitutes in order
to make the customers happy.

SUPPLIER
POWER

LOW
Network Outsourcing maintenance

HIGH
Increasing standardization and

MAXIS
LOW
Therefore, rivalry among
competitors telecommunication
industry is oligopoly structure and
the level of competition is low
one. Maxis have two main
competitors, they are Digi and
Celcom.
HIGH
Due to high expectations and
standards that come with the
Maxis brand it is not without
reason that customers are more
demanding of Maxis.
HIGH
Maxis have many substitutes for
mobile industry. Hence, threat of
substitutes exists when a
product's demand is affected by
the price change of a substitute
product.
LIMITED
Maxis' networks utilize standard
Page | 9

is very slow and Passive Infrastructure

BUYER
POWER

HIGH
Lack of differentiation among
Service Providers also cut throat
competition.
Also low switching costs and
number portability will have
positive impact on businesses and
consumers

commoditization of network
components leads to competition
among component suppliers, thus
lowering supplier position.
HIGH
Due to pressures on their
profitability, service providers
lowering their operating costs and
capital expenditure.

equipment which is available from

a limited number of suppliers.

HIGH
Advance of technology could
increase the bargaining power of
buyer, high available of
information make it easier for
buyer to evaluate sources of
materials about
telecommunication.

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2.1 DIGI
2.1.1

Competitive Rivalry

In the wireless market in Malaysia, Digi only own 21.7% market share
between Celcom and Digi. This is because Celcom gain highest margin.
However, Digi still maintain the stable sales and profit margin. From the
analysis, Digi got a high competitive rivalry.
2.1.2

Threat of New Entrants

The threat of new entrants is low because of the rapidly changing

technology which Digi cannot achieve.

This is because the infrastructure

setup cost is very high and Digi cannot support.

Other than that, it is

because of the spectrum availability and regulatory issues that must be

faced by Digi.
2.1.3

Threat of Substitution

The threat of substitution is high for Digi. It is because of the diminishing

market of the landline.

Mobile Operator such as Tune Talk, XOX and

Redtone has appeared. Digi also offer many Broadband services such as
P1, Yes, Video Conferencing and many more.
2.1.4

Supplier Power

The supplier or Digi is low because lack of supplier.

The supplier for

Network outsourcing maintenance is Nokia Siemens, Ericsson and Huawei.

Besides that, Digi has a lack of passive Infra-structure which is only Base
station and Telco Towers.

Also the call center is outsourcing and in-house.

The information system of Digi is IBM, Huawei, and Nokia Siemens only.
2.1.5

Buyer Power

The high customer bargaining power because of the lack of differentiation

among Service providers and it is a cut throat competition.

Other than

that, it become high because low switching costs but still the number
portability will give a positive impact
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2.2 CELCOM
2.2.1

Competitive Rivalry

This caused by the current competitors of the same product. The rivalry
among firms in an industry is high when there is fierce competition and
low when there is not. The current competitor is Digi and Maxis.
To increase the rivalry of competitors, Celcom will be using the innovation
strategies by co-operating with Axiata Group Berhad, Asia Mobility
Initiative (AMI), and Vodafone Group whore the business alliances of
Celcom. Axiata Group Berhad is a vehicle overseeing and managing its
overseas subsidiaries an emerging leader in Asian communication. AMI is a
regional mobile operator alliance. Celcom will be strengthening its regional
presence across Asia by joining AMI in 2005. Besides that, market share of
it will be protected and increased in the respective home markets and at
the same time improve profitability. Other than that, Vodafone is the world
foremost mobile telecommunications company and having a significant
presence in Europe, the Middle East, Africa, Asia Pacific, and the United
States.

Celcoms customers will be provided with incomparable global

coverage, the lowest International Direct Dial and roaming rates, and the
latest mobile technologies by Vodafone Group. It also gives Celcom
admission to Vodafones global purchasing and economies of scale.
Compared to normal broadband which delivers bandwidth through wired
and wireless technologies at network speeds ranging between 256Kbps
and 4Mbps, High Speed Broadband (HSBB) is a broadband service that
offers bandwidth delivered at network speeds at 10Mbps and above.

It

allows Celcom to provide its own fibre-based fixed broadband service to

millions of homes and offices, while enabling future internet protocol
television, video on demand and other rich multimedia services. Celcom
will be able to utilize TMs Digital Subscriber Line access service to offer
Celcoms own DSL service to achieve Celcoms widest 3G mobile
broadband coverage for those areas which currently have not been
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covered by HSBB. By doing so, Celcom will be a tough competitor to Maxis,

Digi and any other telecommunication service provider.

Page | 13

2.2.2

Threat of New Entrants

New entrants to an industry can raise the level of competition; thereby

reducing its attractiveness. The threat of new entrants largely depends on
the barriers to entry. It means that, threat of entry to enter a market is low
because significant barrier to entry exist. Entry of new competitor is will
intense the competition in the industry.
The larger the pool of new entrants will result in more changes of intense
competition, Barriers to entry; however can restrict the firms from entering
the market, more number of entry barriers will make it difficult for new
entrants to exploit the opportunity of the new market.
Firstly, an expensive license, telecommunication industry also require high
fixed costs and have to spend relatively large amount of money on
network equipment and to maintain development and it might reach a few
billion Ringgit Malaysia.
Besides that, the government of Malaysia had granted sole right for
certain projects to existing telecommunication providers (e.g. Telekom has
sole right for 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 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.
Finally the advanced technology required in telecommunication industry
does not only incur high capital investment but also need professional
knowledge and skills (human resources) to ensure success in this industry
as it is not easy to copy or imitate.
To overcome this threat of new entrants, Celcom can create barriers to
entry by introducing innovative products or using IT to provide exceptional
Page | 14

service .For example Celcom is working together with Net Cracker

Technology which is a subsidiary of NEC Corporation and is the leading
provider

of

Telecom

Operations

and

Management

Systems

to

Communications Service Providers worldwide. By joining force with Net

Cracker Technology, Celcom will be able to reduce operating costs,
enhance quality of service, and generate superior customer experience.
Celcom Axiata Berhad has selected Net Crackers Telecom Operations and
Management (TOMS) to support an aggressive next-generation network
rollout program and to improve assurance processes. Net Crackers TOMS
will

provide

Celcom

with

comprehensive

Mobil

infrastructure

management solution mainly on asset centralization including Celcoms

satellite network, next-generation network rollout processes, and key
capabilities for the fulfillment of value-added services. Net Crackers TOMS
capabilities will create centralized management for Celcoms transmission,
core, and radio networks and will provide the latest, throughout view of all
network data through Network Management System covering all network
technologies.

Besides that, Net Crackers TOMS customer management

and quality assurance capabilities will help Celcom by enabling them to

provide outstanding quality of service, diversify offerings, and exceptional
customer experience in order to compete with other competitors and thus
making it hard for new entrants to compete with Celcom.

Page | 15

2.2.3

Threat of Substitution

The threat of substitute products or services refers to substitutes,

customers can purchase if your prices too high. The threat of substitute
products or services is high when there are many substitutes for an
organizations products or services and low where there are few
substitutes.
In case of dissatisfaction with any of the features, customers can easily
switch to the competitors product because they have the almost exact or
same kind of substitutes. Many of the substitute product and services have
emerged in voice, data and entertainment in telecommunication sector.
Celcom has used customer-orientation strategies to deal with the threat of
substitutes in order to make the customers happy. For example, call
packages consist of Power38 and Business Executive Plan, Business 1+3,
Business Prepaid, and Business Satellite have been introduced. Besides
that, all the phonebook details and business cards will automatically be
stored in a Phonebook system by using SIM card rescue. Its storage is
unlimited and is a free service. Customers do not need to worry about
losing their phonebook details and business cards anymore if they use this
system.
The Celcom has also created Simera 32 Java SIM cards for the initial phase
of the project.

Simera 32 SIM cards allow Celcom to provide its

subscribers with a suite of menu-driven data communications services

including e-mail and share trading, as well as the means to turn phone
handsets

into

highly-individualized

lifestyle

tools.

These

cards

are

compatible with SIM Toolkit commands, allowing subscribers with a Phase

2+ compatible phone to access the services using menus instead of
keying-in sequences of numbers. The new services are split into three
areas: mobile e-mail and stocks & shares data, and information-ondemand. The latter service provides information on a wide range of
subjects, including news, travel data, and Muslim prayer times throughout
Malaysia. Initially, subscribers will be provided with a SIM card containing
Page | 16

all three value-added services. However, the new SIMs also has the
potential to perform downloading of applets Over-The-Air, allowing users to
re-program cards in the field.

Page | 17

2.2.4

Supplier Power

The bargaining power of suppliers refers to more suppliers a firm has, the
greater control it can exercise over its suppliers. The bargaining power of
suppliers is high when buyers have few choices and low when buyers have
many choices. Bargaining power of supplier will affect the intensity of
competition, especially if there are huge of supplier, less availability of raw
material and the cost of switching supplier or raw material is high. These
attributes in the industry gives power to the supplier to enforce term and
conditions on manufacturer and charge high cost of raw material. In
telecommunication Services Company, increasing standardization and
commoditization of network components leads to more competition
among component suppliers, thus lowering supplier bargaining position.
Besides that, overcapacities have led to lower bargaining power of
Semiconductor suppliers.
Celcom uses lock in suppliers strategy to encourage the suppliers to stay
with Celcom rather than going to their competitors. Many suppliers in
Malaysia are more capital oriented than service oriented. "More-for-more"
marketing strategy is the strategy which the suppliers can provide you
with the best for the highest cost. This makes the purchasing power to be
vested more on the hand of the market leaders, and this is another
competitive advantage Celcom has over its competitors in the Malaysian
market
2.2.5

Buyer Power

Generally, the bargaining power of buyers is high when buyers have many
choices and low when buyers have few choices. Consolidation among
communication service providers due to convergence leads to greater
dependence on a few large clients, which means higher bargaining buyer
power. Due to pressures on their profitability, service providers are
increasingly looking at lowering their operating costs and capital
expenditure. Besides that, with increased choice of telecom products and
services, the bargaining power of buyers is rising. Telephone and data
Page | 18

services do not vary much, regardless of which companies are selling

them. For the most part, basic services are treated as a commodity. This
translates into customers seeking low prices from companies that offer
reliable service. At the same time, buyer power can vary somewhat
between market segments. Bargaining power of buyers is greater in
Telecommunication Company which means there are few dominant buyers
and many sellers in the industry and products are standardized. Buyers
threaten to integrate backward into the industry but suppliers do not
threaten to integrate forward into the buyer's industry.
Celcom has used cost leadership strategies to reduce the bargaining
power of buyer. It has launched few plans such as Celcom Exec 20, Celcom
Exec 50, Celcom Exec 250, and Celcom1+5 plan. For Celcom Exec 20, all
you need to pay is just RM20 for access fee per month. You can find out
that it is the most affordable amount. It also costs only 20 cent per minute
on calls and 10 cent per SMS. It has the fastest, widest, clearest mobile
network in the country. Besides that, by choosing Celcom Exec 50, the
plans will automatically discount up to 30% every month. It has the free
mobile internet and call within network on weekends. After 30% discount,
the call rate is just 10.5 cent per minute. It consists of only RM50 per
month. As for Celcom Exec 250, this is the only all-in-one plan with free
unlimited broadband. It consists of 2000 minutes in either voice or video
calls, or SMS. Enjoy free Celcom broadband of high-speed internet
connectivity with speeds of up to 3.6Mbps. it is a comprehensive plan that
covers all your mobility needs. Celcom 1+5 is to keep your family happy
together for free and to stay in touch with everyone else to enjoy even
more savings. You can enjoy the free voice calls, SMS, MMS, and video
calls within your family.
Celcom has also used innovation strategies by coming up with a new
system known as Virtual Business Phone System. It is called the Celcom
Biz Virtual PABX or also known as Private Automatic Branch Exchange. The
aim of this Virtual Business Phone System is to eliminating the need of
investing or setting up costly PABX system in the office premise. Celcom
Page | 19

Biz will take over the role to offering its service on hosting the PABX
system and facilities to its corporate customers. The Virtual PABX system
integrates quickly, easily with existing phone lines plus hardware, and can
also be used in conjunction with other mobile and smart phones. It does
not require any additional hardware installation as all the Virtual PABX
hardware is supported and maintained at Celcom.
Therefore by reducing the bargaining power of buyer, Celcom is ensuring
that their customers remain loyal to them and attracting new customers to
use their products.

Page | 20

2.3 MAXIS
2.3.1

Competitive Rivalry

Telecommunication industry consists of only several mobile operators such

as TM, Maxis, Digi, Celcom, Umobile and so on due to the entry restriction
that imposed by the government. Profitability of the industry also affected
greatly by the intensity of competition among existing competitors in the
industry.
Therefore, rivalry among competitors telecommunication industry in
Malaysia is oligopoly structure nowadays and the level of competition in
this particular industry is believed that to be low one. Maxis have two main
competitors, they are Digi and Celcom.
Maxis lead in the telecommunication industry. They are largely compete on
differentiate their product and services on how to improve their features
and implementing innovation to the customers.
In addition, Maxis will definitely compete on the call rates, package price
and so on with other two main competitors. Hence, Maxis try to gain
competitive advantage through low call rate and price such as Youth Club.
As we all know that Maxis, Digi and Celcom are invests a lump sum of the
money on advertising to promote their products and to attract more
customers choose them.
There is high exit barriers in this industry due to the high investment
budget and responsible to customer will make companies strive to survive
in the industry. Technology advanced leads fast industry growth and
opportunities, increase the competition among companies. Therefore,
Maxis can sustain be a leader to lead the mobile service industry.

Page | 21

2.3.2

Threat of New Entrants

Companies in this industry required high fixed costs and spend relatively
large

on

network

equipment

and

maintain

development.

Besides,

technologies required also have considered as barriers for companies

entering the telecommunication.
Maxis's reputation has been built around their superior customer service
and quality network. Due to high expectations and standards that come
with the Maxis brand it is not without reason that customers are more
demanding of Maxis. As a result, Maxis always think that their business on
being the customer's first choice.
The key challenge of Maxis is to nurture customers and continue to add
value to the relationship. Maxis proven capability to innovate and the
service experience are core competencies which are their most stable
competitive edge.
Maxis perform well in 2009, their revenue reached a record RM8,611
million which showed that they are the first mobile operator to cross the
12 million subscription mark in Malaysia and hard to have competitors to
complete with Maxis.
Capital requirement usually build up a firm which is high capability to
compete

in

the

industry.

However,

telecommunication

is

high

competitive industry in order to gain large market share. Thus, potential

entrants have to ensure the sufficient financial resource since having huge
capital will be a competitive advantage to compete.

Page | 22

2.3.3

Threat of Substitution

Maxis have many substitutes for mobile industry for instance from
traditional way which are using the letter, fixed home line telephone, fax
and email to communication with other people till currently mostly
everyone using broadband Internet services, which enable faster and
always-on connection to the worldwide web, offer more promising growth
potential.
Furthermore, the pressure on the very low cost to use the phone calling via
internet or communicate via online messenger had threatened the mobile
industry. The attractiveness of internet services making it more affordable
to the masses. For example, nowadays many people using MSN, Facebook,
Skype to communicate or wishing for festival via online rather than use
hand phone to send it.
Threat of substitute product also will directly affect the profitability of
Maxis. Substitute product is the product or services in other industries that
is different from the existing product or services but serves the similar
needs. Hence, threat of substitutes exists when a product's demand is
affected by the price change of a substitute product. This threat is
supposed to be a strong point for Maxis because these substitute products
such as letter or e-mail are unable to fulfill or completely replace the
mobile services.

Page | 23

2.3.4

Supplier Power

Telecommunications industry in Malaysia is dependent on imports for the

majority of its network components as most of the network equipment
cannot be sourced locally.
Maxis' networks utilize standard equipment which is available from a
limited number of suppliers. Most of the GSM equipment for Maxis' mobile
network operations is purchased from Motorola, Siemens and Trisilco Folec,
and Maxis maintains close working relationships with its key network
equipment suppliers.
Siemens is now a sub-contractor to Motorola for network switching
systems. Maxis left only two main supplier- Ericsson and Trilsilco Folec. The
bargaining power of their supplier becomes strong. Moreover, their
supplier is from overseas.
In future, Maxis believes that comparable equipment and support is
available from other established suppliers. Maxis has been purchasing
from these suppliers for approximately six years.

Maxis also purchase

certain network components from various other key suppliers, such as

Nortel.
As we all know that, powerful supplier of Maxis may exert bargaining
power by increase selling price or reduce the quality of the products.
However, powerful of Maxis's supplier must also depend on the position of
market situation.
Since the suppliers of Maxis are limited, hence the Maxis's suppliers are
powerful when the product they provide are differentiated or it has built up
by switching cost. These may arise when there is occasional requirement
by the buyers in this industry such as high invested in submarine fiber
optic cable, and replace the copper cable and old satellite dishes that may
provide reliable broadband connectivity.

Page | 24

Maxis have high competitive environment causes exist entrants need to

invest in high modernization technologies to enable the company to
support and compete in this industry. Therefore, it is crucial for the service
providers to make sure the quality of the technology equipment, yet it
makes the supplier group become more powerful.

Page | 25

2.3.5

Buyer Power

In the era of globalization, advance of technology could increase the

bargaining power of buyer, high available of information make it easier for
buyer 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.
For

the

moment,

high

level

of

competition

between

the

major

telecommunication companies that exists in current market leads to low

switching cost for the buyer to change their mobile service provider.
Customers are high price sensitivity, easy to switch brand. It also mean
customer will not faithful to Maxis if they find out other brand give better
services than Maxis, they will going to change brand.
It

can

be

make

Maxis

became

profitability

or

fruitlessness

in

telecommunication industry within a certain period. The buyers in this

industry are all services customer and said to have low bargaining power
to the services provider. This is because TM is the sole provider of fixed
line telephone services in Malaysia, other mobile operator such as Digi ,
Maxis, Celcom account for approximately 85% of mobile services in
Malaysia.
As a result, this contributes to concentration of the buyers industry.
Besides this, the buyers have high switching cost in this industry. As a
result, the industry is more profitable when the buyers have low
bargaining power which means the buyers are unable to affect the setting
of prices in the industry.
Maxis have come out many Business Value Plus Plans for business people.
It has so many ways to help save money when talking on the phone. Maxis
want make sure that, the customers can enjoy using Maxis services with a
much lower price than other competitor

Page | 26

3. VALUE, RARENESS, IMITABILITY AND ORGANIZATION (VRIO) ANALYSIS

3.1 TELEKOM VRIO FRAMEWORK
RESOURCES / CAPABILITY

Technology

Asset Leverage

Strong market position

Strong R&D department

Strong Management

Good customer relations with quality

offering

Good Brand Name

Customer Loyalty

Innovation

Emerging Markets

Financial Leverage

COMPETITIVE
IMPLICATION

ECONOMIC
IMPLICATIONS

COMPETITIVE
EQUALITY /
PARITY

ABOVE NORMAL

TEMPORARY
COMPETITIVE
ADVANTAGE

ABOVE NORMAL

UNUSED
COMPETITIVE
ADVANTAGE

NORMAL

LONG-TERM
COMPETITIVE
ADVANTAGE

NORMAL

Page | 27

Growing Broadband Market

HSSB initiative

RESOURCES / CAPABILITY

High profitability and revenue

Domestic market

Expertise in extensive resources

3.2 REDTONE VRIO FRAMEWORK

Reduced labor costs

Monetary assistance provided

Many corporate customers

Corporate social responsibility image

Outstanding reputation
Protection solution product

COMPETITIVE
IMPLICATION

ECONOMIC
IMPLICATIONS

COMPETITIVE
EQUALITY /
PARITY

BELOW NORMAL

TEMPORARY
COMPETITIVE
ADVANTAGE

UNUSED
COMPETITIVE
ADVANTAGE

ABOVE NORMAL
(at least for
some amount of
time)

NORMAL

Page | 28

Provider with infrastructure integration

expertise

Venture Capital

Maintain highest level of information

security

RESOURCES / CAPABILITY

Experienced business units

Global markets

Total freedom with no usage limits.

New products and services

New acquisition

Excellent for serious gamers and households

Download an HD movie in 32s

LONG-TERM
COMPETITIVE
ADVANTAGE

ABOVE NORMAL

COMPETITIVE
IMPLICATION

ECONOMIC
IMPLICATIONS

COMPETITIVE
EQUALITY /
PARITY

NORMAL

TEMPORARY
COMPETITIVE
ADVANTAGE

NORMAL

After sales support team

3.3 TIME VRIO FRAMEWORK

Page | 29

Good Brand Name

Customer Loyalty

Best internet operator

Venture capital

Emerging Markets

UNUSED
COMPETITIVE
ADVANTAGE

ABOVE NORMAL
(at least for
some amount of
time)

LONG-TERM
COMPETITIVE
ADVANTAGE

NORMAL

Page | 30

3.4 CONCLUSION
The VRIO Analysis is an analytical technique, which for each type of
resource considers several evaluation dimensions for the organization as
well as for its competitors. VRIO is an acronym from the initials of the
names of the dimensions: Value, Rareness, Imitability, and Organization.
From the analysis, The VRIO framework, in a wider scope, is part of a much
larger strategic scheme of a firm. The basic strategic process that any firm goes
through begins with a vision statement, and continues on through objectives,
internal & external analysis, strategic choices (both business-level and corporatelevel), and strategic implementation. The firm will hope that this process results
in a competitive advantage in the marketplace they operate in.

In practice, the VRIO analysis is also used in combination with

other analytical techniques to help organizational management evaluate
business resources in a more detailed view. For financial resources, there
are many detailed financial indicators that evaluate the financial condition
or performance of the business from different perspectives. Likewise,
human resources, property or information are other detailed indicators of
their performance, efficiency or quality. The advantage of a VRIO analysis
for the Telekom Malaysia, Redtone and Time is simplicity and clarity in the
analysis.
From the VRIO analysis, Telekom Malaysia was been organized properly
because it has a high competitive potential. Redtone still has to improve
the valuable resources or capability and Time was a good company but
still need to be improves because it still lack in the brand name.
As a recommendation, they can be sources of sustained competitive
advantages if they improve the resources that have been mention above.
As for Telekom Malaysia can improve any resources because they was s
stable company. As for Redtone they need to improve the competitive
equality / parity.

Lastly, for the Time they need to improve all the

competitive advantage but need to focus in the improvement of the name

brand.
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