TECHNOLOGICAL the company in order to improve its competitive

 

TECHNOLOGICAL
EDUCATIONAL INSTITUTE OF CRETE

SCHOOL OF MANAGEMENT AND ECONOMICS

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STRATEGIC MANAGEMENT

 

 

ERASMUS
2017 – 18 Winter Semester

Case
Study Project

Crnogorski
Telekom

 

 

 

 

 

 

 

 

 

 

Mentor:                                                           
                                            Student:

Dr Irini
Dimou                                                                      Nikola Djurickovic

Heraklion,
2018.

 

 

 

Introduction

 

Telecommunications as an industry and telecommunication research is
highly important for state economy and society. Everyone knows that
telecommunications are a very important tool for businesses in order to connect
with customers and deliver them a high quality product. Also, they are a great
tool for communicating between colleagues and they make teamwork easier.

The societal importance of telecommunications is broadly accepted,
mostly because telecommunications represent an important role in fundamental
operations of a society.

This project will examine Crnogorski Telekom, the biggest
telecommunications company in Montenegro.

At first, this paperwork will focus on a short presentation of the
company, along with its background.

The second part of the project is a detailed SWOT analysis which
provides strengths, weaknesses, opportunities and threats for the company. In
addition to this, internal and external environment will be examined. This
analysis includes the analysis of the macro-environment and competition
analysis, using Porter’s five forces model. On the
other hand, the internal analysis will provide more information about Telekom’s
operations which give the company a competitive advantage as well as the ones
who cause problematic situations.

Furthermore,
the analysis will cover the mission statement and explain the company’s main
strategic and financial objectives.

Also, competitive
strategy implemented by this company is explained, using Porter’s Generic Strategies framework.

Finally, Crnogorski Telekom Case study is finished by presenting
suggestions to the company in order to improve its competitive position and providing
a conclusion which sums up the key information from the whole analysis.

 

 

 

 

 

 

 

 

 

 

A short presentation of the company, along with its
background

 

Crnogorski
Telekom is the leading telecommunications operator founded in December 1998 and
headquartered in Podgorica, Montenegro. It is the largest telecommunications company in Montenegro
and this company offers a full range of fixed-line, mobile, IPTV, and internet
telecommunication services.1

Crnogorski Telekom is a joint-stock company.
Joint-stock company represents a business entity where stockholders can buy or
sell shares of the company. Stockholders have the right to transfer their
shares to others without influencing the existence of the company. Nowadays,
synonyms for a joint-stock companies are corporation or a limited company.
Shareholders have limited liability which means that they are liable for the
company debts only to the amount of money they invested.

In 2005, Magyar Telekom became the majority
owner of company shares, owning 76.53% of shares. 59.21% of Magyar Telekom
shares are owned by Deutsche Telekom AG. Crnogorski Telekom launched T-Com and
T-Mobile brand in 2006 and a 3G Network in 2007.

Internet Crna Gora d.o.o. and T-Mobile Crna Gora
d.o.o. decided to merge and become one legal entity, Crnogorski Telekom a.d. In
January 2017, Magyar Telekom sold all shares to Hrvatski Telekom for a total
amount of 123.5 million euros. Crnogorski Telekom expects to improve its
overall business through this transaction and to benefit from mutual market
approach.

In the “Annual Report 2016”, CT stated that the
company has 800 employees. Chief Executive Officer(CEO) of Crnogorski Telekom
is Nikola Ljusev since September 2017. 
The official website of the company is www.telekom.me.

Image 1. Crnogorski Telekom
logo2

SWOT analysis

SWOT
analysis is an acronym used to describe company’s strengths, weaknesses,
opportunities and threats. SWOT analysis is crucial when a company makes
important decisions or is in the process of building a strategy. The business
environment is constantly changing and businesses need to respond proactively
to those changes. That is when managers use SWOT analysis to improve the
process of planning.

Strengths:

·       
High level of customer satisfaction

 

One
of the main CT’s strengths is based on the satisfaction of customers. CT has
loyal customers who appreciate Telekom’s dedication to deliver the best product
available. Also, the company has a well-known brand name which influences the
potential customers to think the best of the company.

·       
Reliable suppliers

CT
is a company that never has to worry about supplies because they possess a
strong base of reliable suppliers of raw material. Suppliers are always
competent to supply an acceptable product at the required time.

·       
Highly motivated employees

Crnogorski
Telekom employs only the best who are highly motivated to achieve the goal.
Employees work not only hard but proactively. Their staff is highly skilled and
CT is always investing resources in training and development. The result of
this is a workforce that is always motivated to achieve more and become better
at their job.

·       
Good returns on capital expenditure

CT is highly successful at executing new
projects and based on financial reports, the company  generates good returns on capital
expenditure.

Weaknesses:

·       
Little
investment in new technologies

Crnogorski Telekom needs to invest more money
in technology. At the moment, the investments are not in accordance with the
vision of the company.

·       
Small
success outside core business

This company, even though it is a leader in
the telecommunications market hasn’t achieved significant success outside core
business.

 

Opportunities:

·       
Growth
rates

    
The achieved results show growth of company’s revenues, earnings,
dividends and profitability.

·       
New
technologies

New technologies provide an opportunity to
Crnogorski Telekom to practice differentiated
pricing strategy. This way, CT has a great number of loyal customers and can
lure new consumers in a new market.

·       
Increasing use of social media

Social media can be used as
a powerful tool to advertise Telekom’s products. This marketing plan can be
accomplished with a relatively low budget.

Threats:

·       
Increasing
rates of interest

Increasing rates of interest representing a
serious threat for companies in Montenegro. Obviously, this means that it is
becoming more expensive to borrow money from banks.

·       
The
company can face lawsuits in different markets

CT is operating on different markets so the
company needs to be careful about different laws concerning product standards
in those markets.

External
analysis

Porter’s Five Forces
Framework is a tool for
analyzing competition of a business.3  This
model used for competition analysis is named after Michael E. Porter. These
forces are:

·       
Threat
of new entrants

·       
Threat
of substitutes

·       
Industry
rivalry

·       
Bargaining
power of suppliers

·       
Bargaining
power of customer

 

1.      Threat
of new entrants

Fortunately, the telecommunications market is
an industry with strong barriers to entry. 
For a new competitor to enter the market, it is a needed a lot of money
and time. This means that CT’s position is significantly strong.

 

2.      Threat
of substitutes

When talking about substitutes, it could be
said that Crnogorski Telekom has a limited number of substitutes which is a
positive fact. This means that customers cannot easily find other products that
fulfill their needs.

3.      Industry
rivalry

Biggest rivals to Telekom in the industry are
Telenor Montenegro and m:tel. Since this industry         is a large one, this is also a
positive fact for CT because large industries allow a few companies to prosper
without stealing the market share from each other. Being in a large industry
has a long-term positive effect which leads to the increasement of profit.

4.      Bargaining
power of suppliers

There is a big competition between suppliers
which is highly positive for Crnogorski Telekom. When the competition is big,
suppliers have a tendency to reduce prices. Production inputs are similar so
this fact reduces the bargaining power of the supplier. This is also positive
for CT. Reduced suppliers bargaining power means reduced price which leads to
the decreasement in costs and increasement in profits.

5.      Bargaining
power of customers

Customers are willing to pay more for a
product that Telekom offers, rather than paying less for a worse one.  Consumers cherish the products that CT is
delivering to them, so this positively affects Crnogorski Telekom.

 

Internal
analysis

Internal analysis includes the analysis of
company’s main operations and it identifies the ones that give company a
competitive advantage, as well as the ones that could cause problematic
situations.

 

1.      Production

The process of production means transforming
an input to an output. CT uses the most modern machines available in the
country in order to make better products. Best montenegrin mechanical engineers
are working to improve the speed and quality of the machines. Production is one
of the company’s operations which provides it with competitive advantage.

2.      Marketing

Marketing is an area where CT needs to work
the most. Marketing campaigns mostly rely on TV and newspaper advertisement, as
well as the use of billboards and city lights. Nowadays, marketing is
developing fast and people want authenticity. Modern ways of marketing and
possible improvements are presented in the “Suggestions to the company”
section. So, it could be said that marketing can cause problematic situations
for this company.

3.      Financial
operations

Financial
analysis refers to an
assessment of the viability, stability and profitability of a business, sub-business or project.4 Based on the “Annual report 2016”, it could be
concluded that CT is financially weaker than in 2015. Statement of financial
position, statement of profit or loss, statement of cash flows show lack of
progress.

A mission statement

A mission statement explains the
purpose of the company. It is used by employees, stockholders, and by leaders
throughout the organization. It could even be a single sentence in some cases.
A mission statement usually remains unchanged over time because it represents
company’s values and philosophies.

In the “Annual Report 2011”, CT stated
their mission:

,,We are offering top-notch experience
for our customers. We are leading Montenegro to become an information society.
We are constantly innovating and exploring new opportunities which enrich the
life of our customers. We will remain to be the best place for work and
development. We are taking care of operational efficiency in everything we do.”5

Main strategic and financial
objectives

 

In the “Annual Report 2016”,
Crnogorski Telekom published their current strategy.

Main strategic objective for CT is to
remain the leading telecommunications company in Montenegro and to continue
delivering the best possible service in order to fulfill the needs of its
customers. Corporate strategy was defined and implemented in 2015.

Crnogorski Telekom continued using
this strategy which is based on three key elements:

·       
Technology leadership

·       
Best customer experience

·       
New businesses

Innovation is a strategic objective which is
crucial for a business and helps business to be better than the competition.
Innovation is something original and more effective than the previous solution.
Investing in the process of innovation means placing resources into research
and development in order to create a better product or service. Crnogorski
Telekom always supports new ideas and treats innovation as the key to success.

Productivity for every company means fine-tuning a
business process to achieve the best result for a customer while increasing
profit. 6Productivity
is a quality on which every company including CT should work on and try to
increase it. In my opinion, this remains one of the main strategic objectives. A
service business that changes the way customers are served can increase
customer’s satisfaction and loyalty. Increasing employee productivity is a way of
increasing the profit of the company. It is a fact that happy and more
productive workers are more likely to solve a complex problem or come up with a
new idea.

Increasing the market share is always an important strategic
objective for the company, no matter how big the company is. Every organization
or company that wants to be successful must continuously strive to increase its
market share. The process of increasing the market share is strongly associated
with good marketing plans, researching target markets, as well as competition
analysis.

Telekom’s managers set different types of objectives, including
financial objectives  in order to form a
solid plan for achieving long-term success. Main financial objectives could be
increasing profit margins, achieving revenue growth and earning a return on an
investment.

Profit is considered a financial gain. It represents the difference
between amount of money spent and amount of money earned. Profit margins are expressed as a
percentage and the bigger the profit margin is, the company makes more money.
There are different types of profit margins but usually the term “profit
margin” is used to refer to net margin. To obtain a bigger profit margin, it is
very important to keep the costs low by having reliable suppliers, taking
advantage of economies of scale and to try to operate with maximum possible
efficiency.

Achieving revenue growth is the most basic financial objective for any
kind of business, including Crnogorski Telekom. Increase of revenue comes from
accomplishing better results in sales and marketing activities. Companies such
as Telekom set their revenue growth goals in terms of percentage.

Return on investment or ROI, is the most common profitability ratio.
There are several ways to determine ROI, but the most frequently used method is
to divide net profit by total assets. 7 
ROI is used to measure the profitability of the business. Return on
investment calculates the money you invested in comparison to the realized
return on that money. It is a powerful tool and an important financial
objective.

 

 

 

 

 

 

 

 

Image 2. Nikola Ljusev,
CEO of Crnogorski Telekom8

 

Competitive strategy implemented by the
company

A firm can have 2 kinds of competitive advantage: differentiation or low
cost. When combined with the scope of activities, there are three generic
strategies for accomplishing above average performance in a certain industry:

·       
Cost
leadership

·       
Differentiation

·       
Focus(Cost
focus and Differentiation focus)

 

 

 

 

 

 

 

 

Image
3. Porter’s generic competitive strategies9

 

This can be applied on Crnogorski Telekom’s competitive strategy since
this company is always searching for different ways to fulfill the needs of the
customer and it is constantly working on innovations in order to increase the
customer’s happiness with the product. In a differentiation strategy, firm
always feels the need to be different and unique. Even though some competitors
offer a lower price than Telekom, loyal buyers always appreciate the uniqueness
of Telekom’s products. The consumers are ready to pay more in order to get the
best product on the market.

Suggestions to the company

At Case Study Show 2017, a student competition organized in Podgorica,
Crnogorski Telekom presented its problem with promoting tourist prepaid SIM
cards.

I have several suggestions how a company can solve this problem. First
one is in changing the marketing campaign. This marketing campaign consists of
several types of content marketing. Content marketing is a form of marketing focused on
creating, publishing and distributing content for a targeted audience online.10 
In the modern business world, a company needs to be different than the competition
because nowadays, no one pays attention to a marketing campaign unless it leaves
a good impression.

·       
Search
Engine Optimization(SEO) is a process which affects a web page in a web search
to be more visible, depending on the search of the user. For example, most of
the people that plan traveling to Montenegro, they will explore Montenegro as a
destination on the web. Every time, tourists search something on the internet
regarding Montenegro, Tourist Prepaid Package would be on the top of the
search.

·       
YouTube
Ads are a popular and an easy way to promote your product. A lot of people
nowadays are using YouTube on a daily basis. This fact can be used to improve
the competitive position. Designers from the marketing team of Telekom can make
a short presentation of the package in order to leave an impression on future
customers.

·       
Social
Networks are also a powerful tool for promoting a product, especially Facebook
and Instagram. These two networks are becoming more popular every day and
advertising on them is a smart move, because it can be accomplished with a
relatively low budget.

·       
Infographics
are a graphic visual representations of information and a powerful type of Content
marketing. It can be used for making creative flyers that would be posted on
public places were tourist spend most of their time.

·       
Guerrilla marketing is an advertisement strategy concept designed for
businesses to promote their products or services in an unconventional way with
little budget to spend. 11 Crnogorski Telekom can hire mascots to
promote the package on beaches in Montenegro.

·       
Billboards
and city lights would be used in high-traffic areas including
Budva-Cetinje-Podgorica-Barski most, Bar-Sozina-Podgorica, Herceg Novi-Kamenari
and Budva-Bar. The road traffic frequency on these roads is higher almost 20
times in the summer, when most of the tourists come to Montenegro.

 

 

 

 

 

 

 

 

 

Conclusion

 

Crnogorski
Telekom is an established telecommunications operator who is currently the
leader on the telecommunications market in Montenegro and is continuously
trying new ways of satisfying the customer.

This
industry is evolving fast so it is challenging for CT to keep its unique
position on the market. But using a differentiation strategy to improve its
competitive position, Telekom is achieving great results, which are available
in financial and annual reports on CT’s official site.

In
order to maintain its leading position on the market, Telekom needs to keep on
investing in research and development and to make more partnerships.

Despite
the threats presented in the SWOT analysis, CT is a company that has a lot more
opportunities for growth than threats to worry about.

In
my opinion, the company needs to work on its marketing campaigns to attract
more consumers and achieve better results. Better results most certainly mean
company’s  long-term success and
sustainability.

Based
on what has been discussed, my personal opinion is that Crnogorski Telekom has
a bright future full of innovations.

 

 

 

 

 

1 https://en.wikipedia.org/wiki/Crnogorski_Telekom

2 Source:
http://www.privrednakomora.me/sadrzaj/crnogorski-telekom-ad-podgorica

3 https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis

4 https://en.wikipedia.org/wiki/Financial_analysis

5 https://www.telekom.me/content/pdf/Crnogorski%20Telekom%20-%20Godisnji%20izvjestaj%202011.pdf

6 http://smallbusiness.chron.com/six-strategic-business-objectives-14492.html

7 https://www.entrepreneur.com/encyclopedia/return-on-investment-roi

8
Source: http://emagazin.mk/vesti/vest/38007?title=emagazin-doznava-nikola-ljushev-od-1.-septemvri-nje-go-vodi-crnogorskiot-telekom

9
Source:  Porter,
Michael E., “Competitive Advantage”. 1985, Ch. 1, pp 11-15. The Free
Press. New York

10 Wainwright,
Corey. “Content Marketing  Strategy: A Comprehensive  Guide for  Modern Marketers”

11 https://en.wikipedia.org/wiki/Guerrilla_marketing

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