Strategic Management Process: Airtel

Strategic forethought Process AirtelIndustry TelecomThe Indian telecommunicationmunicationmunications exertion is one of the fast growing in the world, with some 19 million assentings a month. The sedulousness has witnessed consistent development during the last year on the back of rollout of untesteder circles by operators, successful auction of third-generation (3G) and broadband wireless access (BWA) spectrum, ne twainrk rollout in semi-rural beas and emergenced focus on the economic observe added swear outs (VAS) market. in that location suck in been several new entrants in the markets lately. This has led to ever baseering tariffs and a decrease in the tax income of living players. Fresh acquisition of customers is no longer a guarantee to join on in revenue. Consequently, in addition to the lower c eithering rates, the operators have been forced to furnish a waiter of value added and auxiliary work. To retain its leading position, Airtel is already leading the musical mode in aras of peregrine commerce, banking etc.As the Indian telecom application put ons its third phase, growth in the markets is bound to mirror the growth in the economy. This provides valuable poseers to the next driver of growth the rural India where mobile acumen levels still remain an abysmal 15%. Airtel has been looking to expand and develop in the rural/low income market segment. Airtel has already ventured into providing mobile monetary goods, mobile money transfers to customers in rural atomic number 18as, progress leveraging its existing base of cellular subscribers.Vision and MissionVisionBy 2015, Airtel depart be the most loved brand, enriching the lives of millions.MissionWe will meet themobilecommunicationneeds of ourcustomer through error-free helping deli actually for ward-looking Product and ServiceCost efficiencyUnified messaging effectObjectives/GoalsTo downstairstake transformational projects that have a positive impact on decr ee and contri plainlye to the nation building workTo turn into new taskes in agriculture, financial run and retail patronage with world class partnersTo lay the foundation for building a conglomerate for future.Environment AnalysisPorters v Forces (Cellular work)1. Threat of new entrants MEDIUMTRAI has been following a liberal restrictive regime to encourage dandyer competition with better graphic symbol and low-cost pricesThe government throwly allows FDI of 76% in the theatre, encouraging foreign players to enter the Indian market.Heavy capex requirements and strict licensing policy hinders entry2. Bargaining billet of buyers VERY HIGHLack of product specialty- There ar minuscule experimental condition gains that one player may have from innovation/ prototypal mover advantage into a new value added service extremely low switching costs in moving from 1 service provider to a nonherMultiple service providers- very massive strain of choice for the customers.C ompetitive landscape implies consistently better offers and deals for customers.3. Bargaining superpower of suppliers VERY LOWAirtel outsources most of its operations. Since contracts are allocated to the steep schoolest bidder, Airtel only looks at getting the stovepipe deal. This mechanism provides Airtel with a high degree of flexibility. For eg. Network outsourcing/ support partners Ericsson(15 circles), Siemens(7 circles), Huawei., IT system partner IBM, Tower maintenance and other infra coordinate Bharti Infratel and Indus towers.4. contract from substitutes HIGHThe communications space is very dynamic with new engine room (3G and 4G) and products flooding the market. Mobile work are competing with products more than(prenominal) as, Wired- course of studys ,CDMA, Video telephony, Tata/ Reliance- Walky shout outs, pro conciliate telephony- Skype, google, fring etc, VSAT phones.Additionally, information services on cellular phones have become an prerequisite produ ct feature. On this front, mobile services face a solid threat from local ISPs, broadband service, leased lines, Blackberry and iPad.5. Current ambition MEDIUM-HIGHAirtel is the current market leader in the mobile service (GSM) sector with 31% market package. Vodafone, BSNL, Idea are its study competitors.Competitive gainAirtel has the following agonistic advantagesStrategic alliances Acquisitions and JVsAirtel has been entering into various JVs and acquisitions to increase its whole step as well as international presence. The fast has stake in JT mobiles, Sky Cell etc. With the acquisition of Zain and other players, Airtel has utilize this system effectively to become a global playerOutsourcingAirtel has a go along outsourcing strategy. It outsources all its functions except marketing, sales and finance this has helped the firm focus on its marrow competencies. Further due to its market leaders position and flashiness of its operations, there are multiple bidders whi ch has ensured high quality service/products for Airtelprovider RelationshipsAirtel has strong relationships with its suppliers. It relies on Bharti Infratel for towers, IBM for IT systems etc. It is able to sustain its innovative occupation model ,by foc utilize on relationship counseling with vendorsInternational postureAirtels global presence and deep pockets are a source of agonistical advantage for the firm. comfort Chain AnalysisThe traditional mobile industry value chain basically involved the mobile operator, service provider, twisting manu accompanimenturer and the customer. up to now the mobile services industry is rapidly evolving with value added services, data services etc. gaining betokenifi kittyce. These are a very utile revenue stream for the service provider.For fashion model in the value added services segment, the network operator clutchess close to 60% of revenue, the technology/software developer retains virtually 25%, maculation the content provid er gets about 20% of the revenue from value added services ( reference point IMRB Research).With M-Commerce contents becoming increasingly meaning(a) in the value chain, it is seen that the operator share in the value chain has been declining. Airtel has been tie up with entertainment providers, FMCGs, insurance companies to maintain a share in the value chain. From a strategy perspective, this should be one of the focus areas for Airtel. billet direct systemAirtel cellular service follows a cost leadership strategy. The market focus is broad- with the firm catering to 137 million customers as of FY10. Further, since differentiation is very short lived and immediately imitated by competitors firms attempt to maintain a cost advantage over their competitors. Airtel has maintained its cost leadership by reducing its operational costs and its unique descent model- which outsources all major functions except, sales, marketing and finance. Differentiation is also attempted with the help of value added services. go there are several player in the market, including the new entrants, Bharti-Airtel, Rcom and BSNL are the only players to gain a differential advantage on the reputation of existing infrastructural capability.Differentiation center differentiationCost leadership- AIRTEL CELLULAR center CostIntegratedCompetitive ScopeNarrowBroad semen of competitive advantageDifferentiationCostembodied Level StrategyBharti Airtel has been divided into distinct business units, as followsThe Mobile Services surgical incision is probably the most valuable division of Bharti Airtel. Airtel offers GSM mobile services in all the 23-telecom circles of India and is the largest mobile service provider in the country, based on the number of customers. It provides numerous value added services such as mobile apps, hello tunes, m-commerce, wireless internet etc.The Airtel Telemedia Services division provides high speed broadband internet and related services. It also provides l andline service in 93 cities across India. It also launched its DTH services in 2008 and is present in more than 150 cities now.The effort Services division provides a diverse portfolio of services to large Enterprise and mail carrier customers. This division is further divided into two unite Carrier business unit and Corporate business unit.The Corporate Business Unit provides end to end telecom solutions to Indias large collective. It specializes in providing customized solutions to address the unique requirements of different industry verticals.The Carrier Business Unit provides long distance wholesale voice and data services to carrier customers as well as to other business units of Airtel. It is present in signifi assholet capacity in the International arena as well.DifferentiationFoc utilise differentiationCost leadership- AIRTEL CELLULARFocused CostIntegratedCompetitive ScopeNarrowBroadSource of competitive advantageDifferentiationCostThe Digital TV Services provides custo mers with a unique TV viewing experience with a wide variety of channels and programmes and with the on-demand content on Airtel Live.The world-wide business assort deals with all of Airtels operations outside India and South Asia.Bharti Airtel has comparatively low levels of diversification, and it follows a Dominant Business strategy. The second quarter financials of Airtel show that its mobile services division had a gross revenue of Rs. 8099 crore, which is roughly 82% of its broad(a) revenue of Rs. 9846 crore.Thus its mobile services division is its dominant business.The reasons for Airtel to diversify are purely based on value creation. As all its divisions focus mainly on telecommunication and related technologies, the transfer of core competencies becomes much easier and much more useful. Moreover sharing activities and resources, especially technical knowledge, is very helpful and creates a positive synergy for Airtel. It also harbours Airtel to increase its market pow er by engaging in multipoint competition with competitors such as Tata. Further it provides efficient intimate capital allocation opportunities to airtel, as the retained earnings from its hugely profitable Mobile services heap be put to good use in other divisions. repute creation through diversificationAirtel seeks to create value through diversification by moving across businesses that share both operational and collective relatedness. With this approach, it expects to achieve high resource sharing and consequently, significant cost reduction.It looks at operational relatedness since a number of its businesses operate across similar technologies and and soly the platform for a given product can be used directly for extending the service from a completely new product. As an example, the cables for a telephone connection provided by Airtel can be used to provide broadband service to the customer without any significant change in infra coordinate. The skills requisite from the technicians are also non very different and thus economies of scale are quite possible. The same logic can be extended to exploring the corporate relatedness. All the diversified businesses require similar managerial and technical expertise as can be seen in the example provided supra.In pursuing this strategy, Airtel will have to be conscious of the situation that it can lead to diseconomies of scope. This can arise primarily from the very promoter which Airtel is banking on similarity across its businesses. A wrong move in any one of the businesses can spill over to its other business and cause repercussions even in the short term. This is the very reason that the composition cannot afford to go easy on any of its domains and needs to keep up to speed in all its businesses.International Strategy now Bharti Airtel operates in 19 countries throughout the world. Apart from being the largest cellular service provider in India, it is the fifth largest telecom operator in the wor ld. It has about 207.8 million subscribers worldwide 152.5 million in India, 50.3 million are in Africa. This has helped Airtel to increase its global market share and revenues significantly.International Business Level StrategyWe will view this in further detail using Porters Determinants of National Advantage modelIt is worth noticing here that after the Indian subcontinent, Airtels main region of operation is Africa. It is possible that the company found it showy to enter Africa because due to its economic conditions, countries there would be lacking in necessary factors of production. Domestic companies in Africa would be lacking in technological resources, human resources, and capital necessary in the telecommunications sector. On the other hand, there is no lack of such resources in India. This is one of the major reasons why Airtel chose to expand there.Although the demand for services provided by Airtel is increasing at a rapid pace in India, there is still a percentage of competition and the demand is smoothing out slowly. To further increase its revenues and market share Airtel has to expand to other nations as well. cod to the lack of existence of vent minimum infra building in Africa and the slow but steady increase in its economic well being, the demand conditions over there should be very high.The related and supporting industries are also very competitive and there are a lot of players in the telecommunication sector, equal Vodafone, BSNL and Reliance.International Corporate Level StrategyThe business of Airtel has been divided into two units based on geography.Need for cost responsivenessThere are three basic international corporate level strategies availaible to any firmNeed for local responsivenessAirtel has always made it a point to focus on the needs of customers and provide solutions to customers according to their requirements. For example, the mobile services that they offer vary even among the different states of India according to customers preferences. Similarly, the kind of services, offers, plans and value addition that they offer in India is very different than what they offer in other nations. For Airtel, need to address local responsiveness has always been of the concluding vastness.On the other hand, the need for global integration is not very high. The two business root words, as shown above, are distinct from each(prenominal)(prenominal) other. Due to the lack of proximity of the locations where Airtel operates, and other strategic factors, it is ruff for Airtel to have low levels of global integration.Keeping the above points in mind, it is clear that Airtel follows a multidomestic strategy.organisational StructureBharti Airtel follows an corporate structure responsible for all aspects of its telecom business in India. Significant reorganization took place in October 2006 in line with the vision of making Airtel, the most admired brand in India by 2010.As quoted by their president, it is t heir endeavor to build an integrated business, leading to higher(prenominal) synergies efficiencies and creating an organization that has a truly national character in either aspect of business operations. The present structure marks the transition of Airtel towards a customer focused organization while building sustainability scalability to seamlessly manage snow million customers and beyond. The new organization has been designed to enable strong corporate brass section whilst ensuring operational freedom, through functional hyaloplasm reporting relationships. veritable StructureBharti Airtel is structured into cardinal strategic business units Mobile services, wideband Telephone (BT) services, Enterprise services and DTH services. The mobile business provides mobile stubborn wireless services using GSM technology across 23 telecom circles. The BT business provides broadband telephone services in 94 cities. The Enterprise services provide end-to-end telecom solutions t o corporate customers and national and international long distance services to carriers. All these services are provided under the Airtel brand. The top level management of Airtel across its quatern divisions is as shown in the following figure.In the case of Airtel, a ground substance organization structure introduces, or at least recognizes, the real life complexity of a business environment. Geography, function, technology, business unit and technology (among others) are the grievous factors that are recognized in the hyaloplasm organizations structure.However, the above mentioned structure also introduces a higher level of internal complexity and some additional flock management challenges, so there must be significant advantages that are seen by the organization that outweigh the matrix people management challenges. ground substance organization structures were initially introduced in complex projects such as the airspace industry to cope with complex projects. Since then a number of organizations, a good deal prompted by large strategy consultancies, have adopted or adapted the matrix organization structure to help deal with internal and external complexity.In the following figure, a sample matrix organizational structure is shown. In the case of Airtel, the project manager refers to the managers of the different services provided by Airtel across its divisions. It is clear that this allows for sharing of resources across the various projects.At its simplest the matrix organization structure just reflects this external complexity in the internal structure. Airtel is a brand that is aiming for a global presence and realizes that geography is important but so are function, customer grouping, product and technology.Basically, a matrix organization structure is an acknowledgment of the notion that since it is improbable to specify the weightage of richness that can be attributed to these factors, there is a need to allow a structure that is flexibl e and permits balancing and prioritizing on a daily foot between the various divisions. Thus there is a conscious trade-off for clarity in return for more flexibility.An important issue to deem here is that while the organization structure itself is a good fit for Airtel, a lot of emphasis needs to be laid on the successful coordination of the people and their skill stages within the organization.AdvantagesAs a synopsis, the advantages reaped by Airtel as a result of its organizational structure include improve resource accessibility across the old functional and geographic silos.sound coordination on shared technologies across the organization (extended to a global level)decentralization of management endsImproved access to a diverse range of skills and perspectives.increase communication and coordination across the businessFlexible as per the needs of global or regional customersStructural IssuesDual reporting structures run a risk of initiating power struggles. Dual lines of authority in the matrix practically create power struggles between the vertical and lateral forces as each tries to secure member loyalty and budget rupees.Teams may develop groupitis, the matrix depends on team functioning, there may be an overdependence on group decision-making even where it is unnecessary. This can slow down projects and further be a point of frustration for people managers.It is a widely acknowledged fact that the matrix structure increases administrative overhead, it also ideally suits the progressive schooling of new ideas into projects. However, when a slump hits, one common tendency is to tuck in the matrix in favor of more traditional approaches. The matrix can become a scapegoat for inefficiencies.Decision strangulation matrix organizational structures legitimize multiple information flows throughout the organization, creating the danger that too much information will be processed before a decision will be made. Some project managers may feel compelle d to witness with everyone on every project decision.Corporate boldnessCorporate Governance is a set of mechanisms used to manage their relationship among stakeholders and to determine and retard the strategic direction and performance of organisations. An organisation is owned by its shareholders but is managed by the ownership (Principal Agent Issues). Many a times the decisions taken by the management may not be in the best interests of the shareholders and thus Agency costs arise. To ensure that such a scenario does not arise it is essential for the firm to have strong corporate governance tools.BhartiAirtel limited firmly believes in the principles of Corporate Governance and is committed to conduct its business in a manner, which will ensure sustainable, capital-efficient and long-term growth thereby maximising value for its shareholders, customers, employees and society at large. conjunctions policies are in line with Corporate Governance guidelines prescribed under List ing intellect/s with Stock Exchanges and the Company ensures that various disclosures requirements are complied in garner and spirit for effective Corporate Governance.As proof of the excellence of Bharti Airtel in the Corporate Governance it has been Rated Level 1 by CRISIL which is the highest Governance and Value Creation rank (GVC).One way to ensure strong corporate governance is by having independent directors on the wit of Directors. Their sole suggest is to ensure that the decisions taken by the management are in the best interests of the shareholders.In order to ensure that this corporate governance tool is a sound check, Airtel has ensured the followingThe come on has 2 administrator members and 14 non executive members. 50% of the members of the board are independent directors which is a good sign of corporate governance. The board meets regularly outside the presence of management.The chairman of the board is not the CEO or a former CEO of the firm. Else it may imp air the ability and willingness of independent board members to express opinions contrary to those of management. free board members have a primary or leading board member in cases where the chairman is not independent.Board members are not closely aligned with a firm supplier, customer, share-option plan or premium advisor. This may lead to a conflict of interest scenario.Another qualified authority of aligning the interests of the shareholders with that of the management is by means of changing the structure of executive compensation. Having parameters such as stock options as part of the compensate will ensure that management will take decisions that benefit both the stockholders as well as themselves indirectly. This a strategy that is used extensively at Airtel particularly as far as the top management compensation goes.Other Corporate Governance Initiatives taken by Airtel areShareholdersBoard of DirectorsAudit commissioningManaging DirectorHR/ Remuneration caution Opera tionsemployee stock ownership plan CompensationInvestor GrievanceCorporate Governance Mechanisms at AirtelAudit CommitteeSix members, two-third of which is independent directors.At least four times a year. (Max time gap 4 months)The Committee hot seat shall attend the Annual General Meeting.To ensure that the financial statements are professedly and accurate and provide sufficient information.Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of their audit fees.Human Resource (HR)/ Remuneration CommitteeSix non-executive directors, out of which four members including the chairman are independent directors. draw play and Retention strategies for employees.Employees Development Strategies.CompensationAll Human Resources related issue.ESOP Compensation CommitteeConstituted in accordance with SEBI Guidelines, 1999.Six members of whom four are independent and all are non-executiveFormulate ESOP plans and adjudicate on future grants.Formulate terms and conditions Employee Stock Option Schemes of the CompanyInvestor Grievance CommitteeConstituted in accordance with Clause 49 of the Listing Agreement.Four members of whom three members including the Chairman, are non-executive directorsEnsure speedy establishment of various requests received from shareholdersfrom time to time (within 7-10 days from the date of recognize ofcomplaint).Redressal of shareholders and investor complaints/ grievances.Monthly meetingThe above detailed initiatives clearly point towards the importance that Airtel gives to Corporate Governance and this is further reaffirmed by Level 1 rating for GVC by CRISIL again in 2006.Organizational ControlsThey guide the use of strategy, argue how to compare actual results with expected results and suggest corrective measures when the difference is unacceptable. It is an important part of the organisational structure and its key to a firms plans to exploit its core competencies.The organisational throws can be broadly classified asStrategic control It is used to determine the fit between what a firm might possibly do on the basis of opportunities in the environment and what it can do on the basis of its core competencies and competitive advantages. In other words, the process of evaluating strategy, is practiced both after the strategy is formulated and after it is enforcedFinancial controls They are used to measure the performance of the firm against set thresholds and analyse the reasons for being unable to meet them if the case by. Such controls principally include measures like Return on Investment (RoI), Return on Assets (RoA).Management control It focuses on the accomplishment of the objectives of the various sub strategies comprising the noble strategy and the accomplishment of the objectives of the intermediate plans.Operational control It is concerned soulfulness and group performance as compared with the individual an d group role prescriptions required by organizational plans.Each of these types of control is not a break dance and distinct entity and, in fact, may be indistinguishable from others. Moreover, similar cadence techniques may be used for each type of control.While both Financial and strategic controls are important the extent of importance accorded to each is determined by the firm strategy. Airtel which is following a cost leadership strategy focuses more on financial controls more than strategic ones.However a firm should not get too carried away along just one set of controls as that would hurt the long term sustainability. So if a firm focuses just on strategic controls while giving a cold shoulder to financial ones, it may shortly face a scenario wherein it will run out of cash.The organizational control to a very large extent is determined by the establishment Structure.RecommendationsConsidering the heavy fragmentation of the Indian mobile market, we propose the following recommendations so as to ensure that Airtel continues to be the market leader in this domain.As the above figure suggests, there has been a heavy influx of new players in this arena of late which has seen the market share of Airtel fall from above 50 % to about 30 % in half a decade. This means that Airtel should look at hereto untapped markets specially in underdeveloped countries with low penetration. Thus following the Multi Domestic strategy more sharp is crucial to continued successMoreover the ARPU (Average Revenue per User) in India is slightly low. Thus more acquisitions like that of Zain telecom (ARPU of $55 vs Bharti ARPU $7) makes sense. There is no point in proliferating the number of subscribers if Airtel cannot charge them at competitive pricesSince the competition in India has intensified, most players are engaging a price war which can be deleterious to the companys short term prospects. Herein Airtel should supplement its strong network and brand equity and not e ngage in a price war and try in move towards an integrated cost leadership/differentiation strategy.The urban market penetration is about 95 % and hence the only way of expanding revenues from this stream is by introducing quality VAS (Value Added Services). These give high margin services and are passing play to be in much greater demand as the quick phone market swells. Entry and quality innovations into this niche domain (presently) would give it a big first movers advantage.Forging strategic alliances with mobile phone manufacturers specially those of high end handsets will be a great way to tap the premium segment. This segment often has very high usage and contributes significantly to the revenue stream. By locking them in with Airtel at the point of purchase itself, Airtel guarantees itself a long customer lifetime value. overly given the economic spurt, many such players have expressed their not bad(p) interest to enter the Indian markets.