DiGi Strategic Management

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STRATEGY MANAGEMENT GSM 5160 |

WRITTEN ASSIGMENT

Lecturer: PROF. DR. NOOR AZMAN ALI

PREPARED BY: GROUP 1

DIGI.COM BERHAD | KUAN YEN CHING GM03709


KUAN YEN NEE GM03698
TUNG WAI CHEE GM03578
1
KAMELIA SHARIFIAN GM03360
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

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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

3
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
Note: 100% indicates wholly-own subsidiaries strong workforces.

1
affectionately called D‟House

4
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 380,975,030 49.00


Telenor Asia Pte Ltd (DiGi)

2 Employees Provident Fund Board 124,865,095 16.06

3 Amanahraya Trustees Berhad 37,090,300 4.77


Skim Amanah Saham Bumiputera

4 CIMB Group Nominees (Tempatan) Sdn Bhd 27,500,000 3.54


Pledged Securities Account For Time dotCom Sdn Bhd

5 Valuecap Sdn Bhd 23,935,200 3.08

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

7 Amanahraya Trustees Berhad 18,303,400 2.35


Amanah Saham Wawasan 2020

8 Amanahraya Trustees Berhad 14,487,300 1.86


Amanah Saham Malaysia

9 HSBC Nominees (Asing) Sdn Bhd 9,700,600 1.25


Exempt An For JPmorgan Chase Bank,
National Association (U.S.A.)

10 Permodalan Nasional Berhad 4,868,800 0.63

11 Amanahraya Trustees Berhad 4,600,000 0.59


As 1Malaysia

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

13 HSBC Nominees (Asing) Sdn Bhd 3,938,373 0.51


BBH And Co Boston For Vanguard Emerging Markets Stock Index
Fund

14 Citigroup Nominees (Tempatan) Sdn Bhd 3,930,400 0.51


Exempt An For American International Assurance Berhad

15 Amanahraya Trustees Berhad 3,510,500 0.45


Amanah Saham Didik

16 Alam Nusantara Sdn Bhd 3,401,523 0.44

17 Amanahraya Trustees Berhad 3,322,300 0.43


Public Islamic Dividend Fund

18 Citigroup Nominees (Tempatan) Sdn Bhd 3,068,300 0.39


Exempt An For Prudential Fund Management Berhad

19 ABB Nominee (Tempatan) Sdn Bhd 3,000,000 0.38


Pledged Securities Account For Ahmad Sebi Bin Bakar

20 HSBC Nominees (Asing) Sdn Bhd 2,918,400 0.38


Exempt An For Jpmorgan Chase Bank,
National Association (U.A.E.)

TOTAL 701,520,834 90.24%

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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


Main Rival 2009 Major Market Share
Fixed Line
Telekom, Maxis, Telekom 97.6%
Voice Telephone
Time dotCom Time dotCom 1.6%
Services2 Maxis 39.9%
Mobile
Maxis, Celcom Celcom 34.4%
Cellular
DiGi 25.7%
Dial-Up
Internet Telekom, Maxis,
(Narrowband/ Celcom,
Wired Time dotcom, Jaring no statistic found
Broadband)
Data Mobile
Maxis, Celcom, P1
Services3 Internet4
Celcom 69.9%
Telekom, Maxis,
Maxis 11.7%
Wireless Celcom, Time
P1 8.4%
Broadband dotcom, P1, Jaring,
Telekom 6.5%
UMobile
DiGi 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

Note: above is market position back in 2004

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
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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.

Telcos
Parameters
Maxis Celcom DiGi
Subscribers
12.97 10.60 8.10
(million)
Revenue
2,191 3,854 1,335
(RM million)
EBITA
1,028 1,812 578
(RM million)

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.

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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

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?)

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.

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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)?
9
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)
10
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 2nd 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.

11
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.

2007

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)
12
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).

Penetration Rate (%)


Social Indicators
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


Based on analogue technology, communication was purely voice, with the
Telekom,
information retransmitted to the receiver/listener without any
1G Celcom,
manipulation. The big drawback, however, was illegal interception with
Mobikom
the use of radio scanners which led to cloning.
Malaysia adopted 2 different technologies:
 European-based
Maxis, GSM 900 (Global System for Mobile Telecommunications)
Celcom, DiGi, PCN 1800 (Personal Communications Networks)
2G Sapura,  American-based
Telekom 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.
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,
2.5G – 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.

13
Major Players Description of Technology
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.
2.75G DiGi, Maxis 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.
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
Celcom, Maxis, on the GSM communication standard that turns mobile phone into a
3G7 UMobile, Time multimedia machine). Simply, it is a packet-based transmission of text,
dotCom, DiGi 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.
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
3.5G Maxis, Celcom 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.
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
WiMax8 P1, REDtone,
data rates to commercial and residential areas
and 4G YTL, Asiaspace
 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

14
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
15
 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

16
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.

17
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:

No of
8 Major Factors Descriptions
Factors
 Prolonged Internal Political Stability 1
 Strong Malaysian Government Support
2
Political (National Broadband Initiative – NBI)
 Malaysian Government discourage the usage of cell phone among
3
school kids
 Globalization 4
 Growing Malaysia‟s GDP 5
Economy
 High Inflation – Increased Price 6
 Influx of Foreign Worker 7
 Higher Standard of Living Among Malaysians 8
Social  High Literacy Rate 9
 Rising Telecommunication Penetration and Demand
10
(Broadband, Cellular)
 continuous technological advancement in wired and wireless
Technological 11
telecommunication
 no legal implications on the telecommunication industry which 12
Legal
hinders it from operating freely
Environmental  More Communication Towers/Base Stations 13
 Malaysians in general are pessimistic towards telecommunication 14
Cultural
services provided (slow internet connections, network congestions)
Demographic  A Young Society 15

18
2.5 5 Identified Opportunities and Threats
From the previous 15 External Environmental Factors, 5 Opportunities and Threats are identified and
rationalize:

Rationalization
1. Strong Malaysian Government Support align to DiGi‟s possible intensive
OPPORTUNITIES

(National Broadband Initiative – NBI) strategies


2. Globalization
increase demand for communication
3. Influx of Foreign Worker
tools to increase quality of life … at
4. Higher Standard of Living
home, work and play – align to
Among Malaysians
DiGi‟s Vision
5. High Literacy Rate

1. High Inflation – Increased Price decrease demand for


2. Malaysian Government discourage the telecommunication
usage of cell phone among school kids products and services
THREATS

3. continuous technological advancement in DiGi‟s product and services might go


wired and wireless telecommunication outdated overnight
4. More Communication Towers / harm the environment and increase
Base Stations citizen uneasiness
5. pessimistic towards telecommunication challenge to change perception
services provided and fulfil needs

19
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.
Major Network Operators in Malaysia
Company License
Telekom/Celcom Fixed; Mobile 450, 800, 900, 1800 MHz
Maxis
Fixed; Mobile 900, 1800 MHz
DiGi
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.

20
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.

21
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

22
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 No of
Descriptions
5 Forces Factors
 difficult and expensive to get an approved license from MCMC 1
Threat of  high capital investment 2
LOW

New
 sole right for certain future granted to existing telcos 3
Entrants
 advance technology – need competent human resource 4
Threat of  traditional and modern substitutes for mobile 5
LOW

Substitute  demanding broadband consumers create opportunity for new entrants


that can offer low price or better performance 6
Products
 tense rivalry 7
Industrial  telcos market lead by Maxis 8
HIGH

Rivalry  2010 dub the broadband year of Malaysia 9


 high exit barrier 10
Bargaining  non availability of substitute for GSM equipment 11
HIGH

Powers of  limited (big boy) suppliers 12


Suppliers  high switching cost (to other suppliers) for DiGi 13
Bargaining  high bargaining power of customers 14
HIGH

Powers of  consumer low switching cost as plenty of other brand with different
offer are available to customers 15
Customers
23
3.7 The External Factor Evaluation (EFE) Matrix
The key external and industrial environmental factors are summarizes and evaluate:
Weighted Opportunity Threat
Key External Factors Weight Rating
Score (largest) (largest)

Opportunities
1 Globalization 0.11 4 0.44 O1
2 Influx of Foreign Worker 0.04 2 0.08
3 Higher Standard of Living Among Malaysians 0.08 4 0.32 O2
4 Rising Telecommunication Penetration & Demand 0.08 4 0.32 O3
5 High Capital Investment 0.07 4 0.28 O4
6 Advance Technology - Need Competent Human Resource 0.04 4 0.16 O5
7 Traditional and Modern Substitutes for Mobile 0.03 4 0.12
Threats
8 High Inflation - Increased Price 0.08 3 0.24 T3
9 Government discourage cell phone usage among school kids 0.03 1 0.03
10 continuous technology advancement in wired & wireless 0.08 3 0.24 T4
11 pessimistic towards telecommunication services provided 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
Total 1.00 3.13

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:

Rationalization
OPPORTUNITIES
EFE Weight EFE Rating
important as it greatly
contributes to frequent
international roaming demand DiGi can response by
1. Globalization
with instant communication capitalizing on it and kept
(mobile) and information offering roaming and broadband
seeking (broadband) product and services broadband
important indication that most internet services to (for mobile
Higher Standards of
Malaysian can afford broadband, DiGi aim to assist
2. Living Among
minimum one mobile (service MCMC in reaching 50% of the
Malaysians
provider) and broadband Malaysian population by end 2010)
Rising – it is high quality
important statistic as
Telecommunication telecommunication services at
higher penetration = higher
3. Penetration and competitive prices
demand for DiGi‟s product and
Demand
services
(Broadband, Cellular)

24
Rationalization
OPPORTUNITIES
EFE Weight EFE Rating
important factor as entry
barrier: DiGi have high capital investment
High Capital
4. high cost for new entrée to largely contributed by its largest
Investment
compete with existing giant in shareholder, Telenor
the industry
mild important factor as DiGi are able to response by focusing
Advance
human talent is one of the key on recruiting new blood while provide
Technology –
5. area for DiGi‟s continual intensive training to existing staffs and
Need Competent
success and survival – succeeded in maintain a competent yet
Human Resource
expertise are expensive loyal workforce at an affordable cost

Rationalization
THREATS
EFE Weight EFE Rating
important because supplier DiGi can response by keeping close
High Switching
relationship management can relationship with their existing
Cost
make or break DiGi as they suppliers: Ericsson and Trilsilco Folec
1. (to other
practically control DiGi‟s while being optimistic that there will be
suppliers)
product and services‟ selling new possible suppliers in the future
for DiGi
price
important because power of
High Bargaining bargain for lowest price and DiGi can response by offering high
2. Power of highest quality switch to quality telecommunication services at
Consumers consumers due to non-existent competitive prices
of information asymmetry
important because high
High Inflation – inflation will decrease demand
3.
Increased Price for
communication tools DiGi can response by continuous R&D
Continuous important because DiGi is still to prevent going outdated overnight and
technology trailing behind Maxis and kept selling price low
4. advancement in Celcom plus once outdated, it
wired and wireless is hard to bounce back in a
telecommunications short duration
important because plenty of DiGi is able to respond since they had
2010 dub the
new devices and packages invest  RM350 million for mobile
5. broadband year of
flooding the market place – broadband expansion as part of its
Malaysia
tense rivalry plans to improve its infrastructure.

25
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%)

26
27
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

28
29
30
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.

31
32
4.3 20 Internal Factors

The following table summarizes the 20 Internal Factors of DiGi:

Functional No of
Descriptions
Area Factors
 strong financial performance 1
 healthy current ratio 2
Financial  strong profits and net cash flow from operation 3
 stable number of subscribers – increasing 4
 reasonable debt ratio 5
 superior customer care 6
 strong company reputation 7
 dependency on strategic sharing between mobile producer,
8
application writer and etc
 good reward system to subscribers 9
Marketing
 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
 lack of base station as compared to others operators 15
Operation
 affiliation with Telenor – wider overseas coverage 16
 innovation 17
R&D
 world class R&D 18
 flexible working environment 19
Management
 experience management personnel from oversea 20

4.4 The Internal Factor Evaluation (IFE) Matrix


Weighted Strengths Weakneses
Key Internal Factors Weight Rating
Score (largest) (largest)
Strengths
1 experience management personnel from oversea 0.13 4 0.52 S2
stable (increasing) number of subscribers leading to
2 0.09 4 0.36 S4
Strong Financial Performance
3 affiliation with Telenor – wider overseas coverage 0.15 4 0.60 S1
4 Innovation 0.11 4 0.44 S3
5 good reward system to subscribers 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
dependency on strategic sharing between mobile
7 0.12 1 0.12 W1
producer, application writer and etc
latest info on new technologies seldom/late to
8 0.11 1 0.11 W2
reach end users
9 lack of base station compared to competitors 0.09 1 0.09 W3
10 DiGi Ambassadors – lack of involvement 0.03 2 0.06 W4
Total 1.00 2.81
33
4.5 Top 7 Strengths and 4 Weaknesses

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

Rationalization
STRENGHTS
IFE Weight IFE Rating

important because affiliation


with Telenor brings
Affiliation with Telenor collective strength19 to DiGi DiGi major strength since they are
1. – wider overseas in terms of technology know keeping good working relationship
coverage how and industries updates with members of Telenor Group
plus knowledge and helps to
widen overseas coverage

important because global DiGi major strength since they had


experience management
experience management been capitalizing on their
2. personnel from
personnel brings new experience management personnel
overseas
innovation to DiGi from overseas

important because creativity


and innovation play a great DiGi major strength because their
role to increase supply of R&D had always exceeded
3. Innovation
voice and data services to customer expectations through
individual and innovation offering to customers
corporate customers
DiGi major strength since they had
been focusing on ensuring
stable (increasing) important because number
excellent customer experience,
number of subscribers of subscribers ensure
4. keeping close tab on number of
leading to Strong survival and sustainability
subscribers, attract new
Financial Performance of DiGi
subscribers and reward current
ones handsomely
important factor to motivate DiGi minor strength as they have a
Good reward system to
5. current and string of past, current and
subscribers
potential subscribers upcoming good reward system
important because R&D is
the key to keep up and DiGi minor strength as their self-
ahead with continuous claim world class R&D had wow
6. World Class R&D
technology advancement in Malaysians with a number of
wired and wireless innovate products and services
telecommunication

important because facilities DiGi minor strength as other


Facilities – auto reloads
7. bring convenience competitors are also offering the
online payment, etc
to customers and cost same service to customers

19
Telenor Group operates in 11 countries with market position from #1 – 3 in each country

34
Rationalization
WEAKNESSES
IFE Weight IFE Rating

important because
DiGi major weakness because
dependency on DiGi product/services cannot
they did and still highly depend
strategic sharing operates without
on product development through
1. between mobile complementary
joint venture with mobile
producer, application product/services from mobile
producer, application writer and
writer and etc producer, application
etc to serve customer better
writer etc

important because low


customers awareness towards
latest info on new
DiGi products/services not DiGi major weakness because
technologies
2. only reduce its consumption they seldom promote on new
seldom/late to reach
but indirectly “giveaway” offerings compare to competitors
end users
potential customers
to competitors

important factor because lack


DiGi major weakness as they have
of base station leads to poor
lack of base station as to either build or share base
line reception (coverage area)
3. compared to others station with competitors to expand
which weaken customer
operators coverage area
satisfaction and loyalty –
reduce in subscribing

DiGi minor weakness as there is


mild important factor because
lack of involvement among these
Digi Ambassadors20 – Digi Ambassadors serve as
4. ambassadors to effectively and
lack of involvement free of charge and influential
aggressively promote DiGi other
marketing tools for DiGi
products/services

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

35
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


Importance
Degree of

Threats ST Strategies WT Strategies

Degree of Urgency

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

36
5.1 DiGi SWOT Matrix
The following matrix summarizes DiGi SWOT and lay out several options/strategies:

Strengths Weaknesses

1. Innovation 1. dependency on strategic sharing


2. Affiliation with Telenor – wider between mobile producer,
overseas coverage application writer and etc
3. experienced management personnel 2. DiGi Ambassadors – lack of
from overseas involvement
4. good reward systems to subscribers 3. latest info on new technologies
5. stable (increasing) number of seldom/late to reach end users
subscribers leading to Strong 4. lack of base station compared to
Financial Performance other operators/competitors
6. World Class R&D
7. Facilities – auto reloads online
payment, etc

Opportunities SO Strategies WO Strategies

1. Market Penetration 1. taking benefits/strength of other


increase customer rewards and categories of provider e.g. joint
provide consistent good services to venture to increase the number of
existing customers (S4,S5,S7,04) base station by sharing through
1. Globalization MOU (O3,W1,W4)
2. Influx of Foreign 2. Market Development
Worker provide myriad International 2. Forward Integration
3. High Capital Services (Foreign Worker) and utilize latest technology by
Investment continuously pursue USP obligation marketing new products through
4. Malaysian Higher by providing access to basic dealers instead of ambassadors
Standards of Living telephony communications to (O3,W3)
5. Advance Technology districts designated to DiGi (Rural
– Need Competent Communities) (S2,S5,O1,O2)
Human Resource
3. effective management, marketing
and R&D with competent human
resource increases sales
(S3,S6,O1,05)

Threats ST Strategies WT Strategies

1. High inflation 1. Product Development 1. reduction of the number of DiGi


– increased price joint venture with handheld mobile Ambassadors to enable the cost
2. 2010 dub the providers to include latest to be switch to sponsoring
broadband year of technologies and internet function educational program to
Malaysia into mobile (S1,S6,T2,T3,T5) strengthen DiGi name – students
3. High Bargaining will subscribe to DiGi in the
Power of Consumers 2. stand ahead of the competitors and future (W2,T4)
4. Malaysian encourage consumers to switch to
Government DiGi with the slogan „IT‟S TIME 2. lower down the calling rate to
discourage cell phone TO CHANGE TO DIGI‟ remain competitive (W3,T1,T3)
usage among school (S1,S2,S4,S7,T3)
kids
5. Continuous 3. produce new and tech savvy product
technology to prevent going outdated overnight
advancement in wired (S1,T5)
& wireless technology

37
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.

38
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)
 Data Services
dial-up, mobile and broadband internet, messaging

Existing Markets Market Penetration


increase customer rewards
and provide consistent good services
to existing customers
increase customer rewards

 Malaysian Digital Native


 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
 Malaysian Digital Native
members
mostly youth below 24 years old
who are technologically driven
and savvy  Foreign Workers and Malaysian general public
 prepaid offered flat voice rate of 12 cents/ minute
 Business Entity
nationwide to ALL networks and SMS rate of 1 sen
 Foreign Workers (DiGi to DiGi only) when daily usage reaches RM1;
 Malaysian general public 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°)

39
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

40
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)
 Data Services
dial-up, mobile and broadband internet, messaging
New Markets Market Development

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
 Potential or New
of 99 cents
Foreign Workers
 RM 1.50 per International MMS
 Rural Communities
 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)

41
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.

42
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
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

 Malaysian Digital Native


 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 –
 Malaysian Digital Native MiFi (Mobile WiFi Device) that can have 5 different
mostly youth below 24 years old WiFi (eg combination: iPad, iPod Touch, iPhone,
who are technologically driven Blackberry and laptop or netbook) enabled devices to
and savvy connect to the Internet simultaneously
 Business Entity
 Foreign Workers  Business Entity
 Malaysian general public 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

43
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.

FP

CP IP

SP

Internal/ Sources
Comparison Numerical
External of Type of Position Axes
(Benchmark) Value Range
Dimension Factors
DiGi‟s Financial Position (FP) Y +1 to +7 (best)
Internal competitors
IFE Competitive Position (CP) X
-1 to -7 (worst)
DiGi‟s Stability Position (SP) Y
External other industries
EFE 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).

44
7.1 SPACE Matrix for DiGi
Ratings
Financial Position (FP)
Strong profits and net cash flow from operation 7.0
Digi paid out total of RM1.4 billion of cash dividend to shareholders 4.0
Revenue revenue growth rate in excess of 11% in the period. 5.0
In, 2009 sought to distribute a minimum 80% of the Digi annual net profit to shareholders
5.0
from financial year 2010.
EBITDA margin reduced to 43.3% from 44.6% 4.0
25.0
Industrial Position (IP)
Malaysia telecommunications industry is expected to reach
6.0
US$6.7 billion (RM22.85 billion) in 2010, a growth of 4.4% over 2009.
 Tense telecommunication industry rivalry does not hinder profit potential. 5.0
 All key telecommunication players are stable financially. 4.0
 Malaysia telecommunications operators optimized resource utilization
4.0
by signing MoU to share infrastructure.
19.0
Stability Position (SP)
 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
Competitve Position (CP)
 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
Conclusion
FP Average is 25.0  5 = 5.00
SP Average is -11.0  4 = -2.75
2.25 Directional Vector Conclusion y-axis

IP Average is 19.0  4 = 4.75


CP Average is -7.0  3 = -2.33
2.42 Directional Vector Conclusion x-axis

\ DiGi should pursue Aggressive Strategies

45
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.

46
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

47
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


48
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.
49
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)
50
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
51
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.

Charges for Micro SIM


Telco
Replacement
DiGi RM 20
Maxis RM 25
Celcom RM 10
Open Market RM 5

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)
52
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:

(CASH FROM REVENUE)


(CASH TO INVEST)

II I

III I
V

53
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

Source: Starbiz, November 30, 2009


 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%

54
 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

Smartphone Telco
Maxis, Celcom31,
Blackberry
DiGi
Iphone Maxis, DiGi32
Samsung33 Maxis, DiGi
Android Maxis, Celcom, DiGi

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
55
 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)
(Source: Ministry of Finance, 2010)
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 2nd Quarter of 2010 (Ministry of Finance)
56
- 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)

Source: Asia Analytica Sdn Bhd

 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

57
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)
(Source: Ministry of Finance, 2010)
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

58
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.

59
60
Strategic Functional Tactical Required Personnel Personnel
Objectives Action Action Plan Resources39 Responsible Accountable
 money/year:  customer and  Albern Murty
 aggressively push sales of Malaysian favourites advertising and channels (Head, Marketing)
smartphones: RIM‟s Blackberry, Apple‟s Iphone promotion budget = marketing
RM 600,000 department  Chan Nam Kiong
and Google‟s open-source Android operating
system phones such as Samsung Galaxy S, HTC  people: trained, aggressive (sales and (Head, Customer
sales and service services and Channels
Legend, HTC Desire, Sony Ericsson Xperia 10 and Marketing)
Motorola Milestones, amongst others personnel/dealers41 at DiGi personnel/
 open Android apps for wider array of phones centres, concept store Dealers,
(DiGi360°) and service advertising
marketing  encourage other service provider users (mobile,
counters; inhouse/outsource and
smartphone) to switch to DiGi many rate plans
advertising and promotion promotion
while retaining the original number at no extra
market team team)
cost (DiGi is absorbing it)
standing40  equipment: hassle free  outsource
 reduce fees to replace standard SIM card with
switch to DiGi technology, advertising
Micro SIM
SIM card cutter, Point of agencies,
 raise memorable marketing campaigns of YCF
Sales (POS) PR/event
 ease customer to be rewarded (BonusLink points) management
house
 liaise with R&D and marketing  money/year: MIS budget  MIS  Ole Martin
 ensure updated, adequate information and user = RM 400,000 department Gunhildsbu
friendly website  people: competent web (web (Chief Technology
 ensure error free new offerings (eg SMS for developer, technicians, developer, Officer)
MIS programmers, engineers technicians,
insurance, collect and redeem BonusLink points
etc)  equipment: reliable, error programmers,
 eliminate paper billing to offer e-billing for all and hassle free technology; engineers)
customers e-billing technology

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

61
Strategic Functional Tactical Required Personnel Personnel
Objectives Action Action Plan Resources Responsible Accountable
 joint R&D for new Data Services goods and services  Money/year:  trained and  Head, R&D
 copy and create Huawei portable wireless router – R&D budget new
MiFi (Mobile WiFi Device) that can have 5 = RM 400,000 researchers
different WiFi (eg combination: iPad, iPod Touch,  people: trained and
R&D
iPhone, Blackberry and laptop or netbook) enabled new researchers
devices to connect to the Internet simultaneously  equipment: lab
 4G testing/trial apparatus, computers
and new technology
 talk with handheld mobile providers for joint ventures  money/year:  strategy and  Noelle Tan
 tie up with Apple Inc for the rights to distribute budget news business (Head, Strategy
iPhone 3G, 3Gs and 4s = RM 300,000 department and New Business)
 offer BlackBerry® solution with help from  people: trained
Research in Motion (RIM) to business entity negotiator
Innovation42
 partnership with bank, cloth retailer and insurance  equipment: reliable,
companies error and hassle free
 partnering HSBC Credit Card and Guess to lure technology
potential iPhone owner with iDiGi Plan through
24-months Easy Payment Plan plus a free GUESS
management
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

42
development of new Data Services goods and services

62
Strategic Functional Tactical Required Personnel Personnel
Objectives Action Action Plan Resources Responsible Accountable
 money/year: HR  HR  Suriahni Abdul
 ensure enough and competent employees for all budget = RM 200,000 Development Hamid
functional efforts to implement the strategic  people: trained recruiters, Team (Head, HR,
human decision competent HR personnel, (recruiters, Development and
HR
resources43  new recruitment (if needed), job rotation or internal/external trainers on competent HR Members, DiGi
transfer new needed skills personnel, Management
 training on new needed skills  equipment: training internal/external Team)
materials trainers)
 money/year:  operation  Head, Operation
operation budget department
= RM 200,000 (purchasers,
 people: trained supply chain storekeepers,
personnel (purchasers, QC/QA, lorry
 warehouse clearing of iPhone 3Gs stock before
storekeepers, QC/QA, lorry drivers)
physical launching of 4s
operation drivers)
resources44  ensure adequate/healthy inventory of all offered
 equipment: QC/QA
smartphones and its accessories
smartphone defect tracing
tools, suitable inventory
software (eg ERP/Oracle)
that enable FIFO for
smartphones
 ensure and raise capital for (if needed) fees of  money/year: accounts and  accounts and  Stefan Carlsson
LTE/4G spectrum finance budget finance (Chief Financial
financial  liaise with marketing to decide on pricing = RM 200,000 department Officer)
finance and
and decision on all new Data Services goods and  people: accountants, (accountants,
accounting
profit services bookkeepers, data entries bookkeepers,
 keep track on overall budget allocation, usage  equipment: suitable data entries)
and profit accounting software

43
selection and development of employees to implement the strategic decision
44
adequate/healthy stock (inventory) of smartphones etc

63
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

64
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)?

65
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:

66

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