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Tata Communications
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EXECUTIVE SUMMARY
and also with the customer offering them a high quality of service. The use of corporate
communications strategy is also essential in improving its internal functional strategies in
implementing the new strategy.
Improve Shareholder value
Customer
Internal Business
Processes
Growth in voice
revenue and data
revenue
Innovations
Strong Market
Penetration
Customer Intimacy
Product Development
Customer Loyalty
Customer Relation
Management
Improve Marketing
Internal Business
Processes
Learning and
Growth
High Employee
Retention
High Knowledge
Management
Increase market
Share
Technology Innovation
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TABLE OF CONTENTS
I. INTRODUCTION
11
B. Industry Analysis
14
1. Driving Forces
14
2. Macro-Environmental Analysis
14
17
23
C. Market Analysis
24
25
2. Competitor Analysis
26
28
28
29
30
32
C. Financial Analysis
33
35
35
36
38
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38
38
39
47
49
50
50
51
F. Strategy Map
52
53
VI. IMPLEMENTAION
56
56
59
C. Balanced Scorecard
61
64
A. Detailed Assumptions
64
B. Financial Tables
66
C. Financial Analysis
68
70
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12
17
23
25
33
34
34
35
41
42
44
46
48
Table 14:
List of Figures
Figure 1- Proportion of households with computer
13
17
25
31
32
32
43
45
46
52
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53
56
59
61
63
63
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I. Introduction
Tata Communications, part of the $67.4 billion Tata Group, is a leading global
communications provider that has undergone a critical transformation over the past
three years to globalize its innovative service offering.
The Tata Communications brand, launched in February 2008, encompasses VSNL,
VSNL International, Teleglobe, CIPRIS and Tata Indicom Enterprise Business Unit into
one umbrella brand.
As one of the leading Indian conglomerates, the Tata Group has a long and
highly respected history of achievement and contribution to the many markets,
industries and communities it serves.
Tata Communications acts as the flagship global telecommunications and
technology solution leader, leveraging its track record of successes, global investments
and emerging market strengths to continue to forge new global ground and create
additional successful ventures as part of the Tata Group success story. In 2003, Tata
Communications (then VSNL) decided to pursue international expansion and in 2003
formed a wholly-owned subsidiary, VSNL America. The company built its first
international cable between India and Singapore that year. Part of VSNLs global
expansion strategy was to grow through acquisitions:
In 2004, VSNL acquired the narrowband and broadband businesses of Dishnet's ISP
division
In 2005, it acquired Tyco Global Network (US) submarine cable network, and in 2006
acquired Teleglobe (Canada) an international mobile, data and voice network company,
and also acquired the Indian ISP, Direct Internet Ltd
In 2007, the VSNL's name was changed to Tata Communications Limited (Tata
Communications) Subsequent global strategic investments were made in operators in
South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited), and Nepal
(United Telecom).
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In 2008, Tata Communications launched the first truly global CDN service on a
state-of-the-art, single ASN global IP network throughout Europe, Asia, North America
and India. Tata Communications' next-generation CDN service, powered by BitGravity's
technology, delivers the highest performance and reliability in the industry while
providing immediate access to content, including High-Definition Video, without delay or
jitter, and the highest levels of throughput for end users. Following this, Tata
Communications acquired BitGravity in February 2011 as part of its long term media
and entertainment strategy.
Today, Tata Communications is the market-leading provider of Telepresence
services. The service includes public Telepresence rooms located in hotels and
business centres in all major cities, a growing private room customer base and hosted
and managed services. Each public and private Telepresence room is then linked to a
wider Tata Communications Telepresence network via its Global Meeting Exchange
(GMX). The GMX enables meetings to take place between any private or public room
on its network; as well as rooms on the networks of Tata Communications IntercarrierExchange partners, BT and Telefonica, and the National LambdaRail network, which
links leading US universities.
The company is constructing a new TGN Eurasia System linking Mumbai directly
to Paris, London and Madrid via Egypt. When combined with Tata Communications
strategic significant capacity ownership on other cable systems and its privately owned
TGN Atlantic and TGN India Asia systems, the TGN Eurasia System will enable the
company to offer seamless and diverse connectivity between India, South East Asia,
South Africa, Western Europe and the USA.
Tata Communications owns and operates data centres on three continents and
occupies approximately 1 million square feet of space. The companys hosting
capabilities integrate directly into its global IP network to offer maximum traffic capacity
into and out of facilities. Most recently, in 2010, Tata Communications added two new
state-of-the-art data centre facilities located in Singapore and Pune to its global
portfolio. These global data centres are centrally managed to provide consistent service
delivery allowing customers to scale seamlessly as their needs develop.
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This paper would want to identify both the internal and external analysis of Tata
Communications and to identify what strategy could be implemented in order to improve
the current market position they have. At the end of this paper, the researcher is
expecting to have conclusion of the problem or issues the company is encountering and
recommend a solution or strategies the company can use in order to gain a competitive
advantage against rivals.
The researcher recommends market penetration as a result from the QSPM
Matrix. Based on the QSPM, Tata Communications should improve its services that it
offers to customers.
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Today two large and two smaller companies are active in the local
telecommunications market. All four companies provide mobile and landline telephone
service as well as Internet broadband. Each holds a public utility franchise granted by
Congress, as required under the colonial era Public Utilities Act. Their foreign partners
have invested substantial equity in the sector.
In addition to increased competition and consumer choice, another critical factor
in
rapid
technological change. Landlines have been overtaken by mobile phones, and postpaid
telephone accounts by prepaid. Today Filipinos have twenty times as many mobile
subscriptions as landlines. The Philippines, called the text message capital of the world,
is the world leader in Short Messaging Service (SMS) with almost one billion daily
messages.
While the country lags in many competitiveness indicators, mobile phone
penetration is not among them. In 2009 the penetration rate per 100 inhabitants of the
Philippines (81) was higher than China (56), India (44), and Indonesia (69), while lower
than Malaysia (110), Singapore (140), Thailand (123), and Vietnam (101) (see Table 1).
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Digital fiber connects the Philippines inexpensively to the far corners of the globe,
providing what American columnist Tom Friedman once termed the equivalent of an oil
pipeline moving services of skilled Filipino workers to North American markets. The
newest Voice over Internet Protocol (VoIP) telephone service via computers has
brought the cost of communicating on the Internet almost to zero.
As the cost of accessing the Internet falls, the next new technology for the
Philippines is the high-speed wireless broadband revolution. Although less than 5% of
mobile phones in the Philippines have 3G today, within a few years many millions more
could have cheap Internet access on their cellphones. In Asia, 3G penetration already
exceeds 50% in Australia, Hong Kong, Japan, Korea, and Singapore. One presidential
candidate in 2010 suggested providing Filipino students with mobile digital reading
devices, a visionary yet highly practical proposal.
The benefit for national competitiveness of these changes will be enormous.
Most Filipinos will be able to avail of global SMS and email communications on mobile
devices. They will leap over the relatively low household computer penetration in the
Philippines of 13% (see Figure 1.1).
The following provides a brief overview of the four major telecommunication companies in the
country. The public sector role in the sector is limited to regulation through
the National
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Telecommunications Commission (NTC).
B. INDUSTRY ANALYSIS
1. DRIVING FORCES
Telecommunication industry changed in the last 50 years. The driving forces are
government regulation, customers, technology and innovation. The government
regulation is to ensure good pricing, fair competition and good service for the customer.
In the Philippines telecommunications industry was once a monopoly of the Philippines
Long Distance Telephone Company (PLDT) overseen by the Philippines government.
The tariff was high and the service was bad. In 1995, the government decided to
privatize the industry and created the Public Telecommunications Policy Act of 1995
(RA 7925) to overcome these issues. The mission is to set up and implement a fair,
flexible, efficient telecommunications regulatory framework that will develop the industry
through a market-driven environment, ensure accessibility of all kinds of services within
limits to all, and balance the interests of all stakeholders.
The other driving forces behind telecommunication industry change are
customers, technology advances and innovation.
Customers needs and behaviors plays very important role in driving the
changes. For example, young generations want to use their mobile devices as
Walkman. The mobile companies provide service to download songs, play movies and
store photos in mobile.
In addition, customers demand better service. Such
requirements forces telecom companies improve their service or they will lose the
customer.
Technology is another reason for telecommunication industry to change. A good
example is IP phone. It is mirage between two technology data and voice. Companies
forced to adapt this change or they will lose their market shares.
The third reason is innovation. New product creates new business and new
customers. The telecommunication industry has to change to adapt new requirements.
2. MACRO-ENVIRONMENTAL ANALYSIS
Demographic Analysis
An increasing number of subscribers would also stimulate the development of its
related industries. An example would be the growing number of mobile phone users,
which results directly on the demand for both hardware and software products.
According to Porters Five Forces theory, the growth of subscriber numbers can be
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related to the strength required to compete with existing competitors. Another potential
benefit that results from the steady growth of number of subscribers in the telecom
industry is that, it gathers crucial customer related information. Operators maintain
databases with personal information and choice, which is collected during the
registration and cancellation processes. This information is valuable for the company
and the industry to understand better their customers behaviors, preferences, and
segmentations, which provides necessary statistics in order to improve the efficiency in
marketing analysis. The changing demographic profile of Philippines has contributed to
the growth of number of subscribers. A large young population, a burgeoning middle
class, with growing disposable incomes, and also urbanization, which is increasing
literacy levels and higher adaptability to technology, characterizes the changed profile.
Economic Analysis
Intense competition has lowered the prices of hardware and services in the
telecom industry. This helped in lowering the entry barrier into the market and thus
made it affordable to a large percentage of the population. At the same time,
competition among multiple operators also reduced tariffs, particularly in the Philippines
telecom industry, which is characterized by intense competition, has witnessed
continuous price wars. The expansion of wireless networks and growth in subscriber
base, both in urban and rural areas has led to a boost in the sale of mobile handsets
across Philippines.
Natural Forces
Foreign telecommunications company heavily rely on fiber optic cable which is
used for long distance telecommunication are laid cables into the sea bed via remotely
operated vehicles (ROVs). Thus, if any natural calamity occurs and these cables got
damaged, this will greatly affect their operations and which becomes unable to those
who needs to conform to the agreed service levels.
Technological Forces
Technology innovation over the last decade has enabled the expansion of
telecom infrastructure from metropolis to rural areas where the majority of Philippines
population is located. Hence, telecommunication services become easily accessible and
cover large portion of the countrys population that eventually resulted in the increase of
subscribers. Today telecommunications is a highly technical industry, which is
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constantly evolving, and inventing technologies to improve the cost, coverage and
quality of communication. A good example is IP phone. It is mirage between two
technology data and voice. Companies forced to adapt this change or they will lose
their market shares.
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AT&T
TATA, TELSTRA,
HGC, Reliance
RIVALRY
A Cut Throat to the voice
products
Large number of vendors
Low product differentiation
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Capital Requirements
Access to finance is a big threat to a capital-intensive telecom industry.
The entrant must cover high fixed cost by having a large number of current
asset. When capital markets such as stock market and bond market are
generous, the threat of new entrants will rise. When there are less financial
opportunities, the entrants become slow in their gaining their market share.
In owning a telecom license here in the Philippine, it can slow down the
corporation because it must comply with all the legal entities. New entrants
should have a number of experienced and dedicated employees, also to
comply with the requirements for approval.
data from place to place, client to client. But there are actually a number of
large equipment installers and makers around. Due to the large number of
suppliers, not only here in the Philippines but also around the globe, they can
get higher switching costs for larger business customers, especially those that
rely more on customized products and services.
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and cheaper prices which gives the buyer a lot of choices to select operators
and thus have a large bargaining level.
The buyers price sensitivity is high when considering the cost of product
relative to the total cost. The relative bargaining power also is high because of
the size and concentration of buyers relative to the services offered. There is
a low switching cost, high level of buyer information and low ability of the
buyer to backward integrate.
Product Differentiation
Telstra, TATA, HGC and all other telecommunications companies
have similar prices for similar products and services. They are less likely to
maintain product differentiation thus buyers have the option to switch over.
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4. Availability of substitutes
Level: Moderate
Products and services from non-traditional telecommunication industries
pose serious substitution fears. Cable TV and satellite operators now
compete for buyers. The cable guys, with their own direct lines into homes,
offer broadband internet services, and satellite links can substitute for highspeed business networking necessities. Just as worrying for telecom
operators is the internet: it is becoming a viable vehicle for to cut the rates of
voice calls, meaning that the voice is cheaper than the internet. Delivered
by ISPs - not telecom operators - "internet telephony" could take a large
revenue of telecom companies' core voice revenues.
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5. Competitive Rivalry
Competition is "cut throat", meaning that the players are fierce or relentless in
competition. The movement of industry deregulation together with the receptive
capital markets of the late 1990s paved the way for a rush of new entrants. New
technology is prompting a raft of substitute services. Nearly everybody already
pays for phone services, so all competitors now must attract their customers with
lower prices and more exciting services. This tends to drive industry profitability
down. In addition to low profits, the telecom industry suffers from high exit
barriers, mainly due to its specialized equipment and large infrastructures.
Networks and billing systems cannot really be used for much else, and their rapid
uselessness makes liquidation pretty difficult.
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Weight
Rating
Weighted Score
0.08
0.32
0.15
0.60
0.10
0.40
0.06
0.18
0.10
0.30
Threats
0.05
2
Economic Issues
0.09
2
Intense
competition in
the market
0.08
2
Emerging
Markets
0.10
2
Entry of new
rivals
0.06
1
Natural
calamities
0.06
2
Customer needs
0.07
1
Political
instability
TOTAL
1.0
Table 3: External Factors Evaluation Matrix
0.10
0.18
0.16
0.20
0.06
0.12
0.07
2.69
The EFE Matrix of Tata Communications is based on the analysis and evaluation
of the external factors that affects the business in attaining the potential opportunities
and threats for Tata Communications. The result of the EFE Matrix is 2.69 which is
above average and means that the company is doing well with the factors and the
effects were positive. International Market has the highest rate because it is the most
important factor that companies are considering. The highest rating of the threat
external factors is the entry of new rivals because as time passes by, many companies
enter into the telecommunication industry.
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C. MARKET ANALYSIS
1. Market Size/Major Players/Strategic Group Map
Market Size
Philippines has a total of 6.782 million telephone subscribers, 103 million SIMs in
use, 320 internet service providers, and 29.8 million internet users. Also, the clients of
the major players in the telecom industry are the BPO Sector. Below is list of the
country's 36 biggest BPO firms, based on 2012 revenues.
1. Accenture Inc. (P28.104 billion in revenues);
2. Convergys Philippines Services Corp. (P17.281 billion);
3. JPMorgan Chase Bank N.A-Philippine Global Service Center (P10.805 billion);
4. 24/7 Customer Philippines Inc. (P7.711 billion);
5. Telephilippines Inc. (P7.241 billion);
6. TeleTech Offshore Investments B.V. (P6.978 billion);
7. Sutherland Global Services Philippines Inc. (P6.805 billion);
8. Stream International Global Services Philippines Inc. (P6.738 billion);
9. Sitel Philippines Corp. (P6.364 billion);
10. Deutsche Knowledge Services Pte. Ltd. (P5.754 billion);
11. Sykes Asia Inc. (P5.617 billion);
12. IBM Daksh Business Process Services Philippines Inc. (P5.516 billion);
13. Aegis PeopleSupport Inc. (P5.445 billion);
14. TeleTech Customer Care Management Philippines Inc. (P5.402 billion);
15. IBM Business Services Inc. (P5.211 billion);
16. Telus International Philippines Inc. (P4.962 billion);
17. Shell Shared Services (Asia) B.V. (P4.821 billion);
18. HSBC Electronic Data Processing (Philippines) Inc. (P4.700 billion);
19. ePLDT Inc. (P4.147 billion);
20. SPi CRM Inc. (P3.501 billion);
21. ACS of the Philippines Inc. (P3.492 billion);
22. VXI Global Holdings B.V. (P3.266 billion);
23. Emerson Electric (Asia) Ltd. (P3.230 billion);
24. StarTek International Ltd. (P3.094 billion);
25. IBM Solutions Delivery Inc. (P3.019 billion);
26. Sykes Marketing Services Inc. (P2.760 billion);
27. SPi Technologies Inc. (P2.626 billion);
28. Genpact Services LLC (P2.552 billion);
29. Macquarie Offshore Services Pty. Ltd. (P2.522 billion);
30. Thomson Reuters Corp. Pte. Ltd. (P2.265 billion);
31. AIG Shared Services Corp. Philippines (P2.357 billion);
32. Hinduja Global Solutions Ltd. (P2.194 billion);
33. Lexmark Research and Development Corp. (P1.956 billion);
34. ANZ Global Services and Operations (Manila) Inc. (P1.869 billion);
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35. Maersk Global Service Centers (Philippines) Ltd. (P1.859 billion); and
36. Manulife Data Services Inc. (P1.745 billion).
MAJOR PLAYERS
AT&T
26.71%
TELSTRA
21.80%
TATA
Communications
21.69%
Reliance
18.50%
Hutchison Global
Communications
Limited
11.29%
AT&T
TELSTRA
Market Share
TATA
Reliance
HGC
Number of Services
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2. COMPETITOR ANALYSIS
Hutchison Global Communications, Ltd.
Hutchison Global Communications, Ltd. Hutchison Global Communications
Limited (HGC), a full-fledged international telecommunications operator, is a subsidiary
of Hutchison Telecommunications Hong Kong Holdings Limited (HTHKH, Stock Code:
215). HTHKH is a member of the Hutchison Whampoa group (Stock Code: 13). Since
its establishment in 1995, HGC has been fully committed to building its own state-ofthe-art network infrastructure. It owns a robust and resilient international network with a
widespread footprint in Asia and span into the Americas, Africa, the Middle East and
Europe.
The company also provides prepaid phone card, Internet access, local and
international data, telephone and fax line, wholesale and carrier data and voice, and
international direct dial services; and a cloud computing service that comprises
Infrastructure-as-a-Service and Bandwidth-as-a-Service, as well as value-added cloud
services, such as Dedicated Bandwidth-as-a-Service and On-demand Virtual Leased
Lines. It operates optical-fiber networks in Hong Kong, Mainland China, Cambodia,
Indonesia, Malaysia, the Philippines, Singapore, Japan, South Korea, Taiwan, Vietnam,
Thailand, Myanmar, the United Kingdom, and the United States.
Today, HGC runs an extensive coverage of fibre-optic network in Hong Kong, it
also provides network routings that span the globe via submarine and terrestrial cable
facilities offering a high degree of resilience. HGC's advanced voice, data and IP
network today links its home market with the rest of the world and carries traffic
between
internationally-dispersed
geographies.
A top global network service provider, HGC strives to ensure its customers total
network quality and assurance through provision of standard and customized service
pledge. Its 24-hour International Network Operations Centre also provides its customers
with around-the-clock network monitoring and immediate service support.
At HGC, our goal is to maximize global business opportunities of every
customer with the delivery of advanced fixed-line network technologies and
unrivalled total telecom solutions.
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Tata Communications
Tata Communications connects each race location to the world's
largest Tier-1 networkthe Tata Global Network, thereby powering Formula One
Management's diverse global operations
Their superior connectivity solution ensures that Formula 1 gets
ten times faster than before, at every race circuit across the globe. Tata
Communications have the world's largest network footprint linking 240 countries
with city-to-city connectivity that delivers faster time-to-market and lowers costs.
As part of the $100 billion Tata Group, we have invested to become:
With over 7,500 employees in 31 countries we have the scale and reach
to meet the needs of global enterprises and service providers. Tatas global
footprint is spread across the Formula 1 race locations, giving us the scope and
strength to take complex solutions to challenging locations, be it the streets of
Monaco or the deserts of Bahrain.
Tata Communications deliver quality connections repeatedly around the
world, allowing vital real-time content to travel quickly and reliably and
continuously power innovation for the sport and its multiple stakeholders
Telstra
Despite this complexity, Telstra have to keep close to the customers, develop
new products and services, get new customers, ensure that the staff are as efficient and
productive as possible and deliver a good return to the shareholders.
IT helps them do that by fitting the right solutions into the right business strategy,
whilst demonstrating cost efficiencies and improvements in productivity.
Telstra measure success by cost savings, profitability and improved sustainable
growth. And they create this success by providing customers with innovative and
flexible global communications and IT solutions that help fuel growth and enhance the
business agility to, in and from key growth regions such as Asia.
As a network-based services provider, Telstra can foster responsiveness and
agility by providing flexible, solutions that are embedded in our networks, which include
one of the largest and most diverse in Asia Pacific.
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Telstra is committed to providing people with the depth and breadth of resource,
expertise, technology and solutions to help them overcome global business challenges,
now and in the future. And whatever Telstra commit to, they fulfil. This means that the
business needs are always met or exceeded, even during times of disaster recovery.
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4.5
Data Speeds: The growth of internet has created so much impact on the
measurement of the ability of an electronic device or system to send and receive
information an enormous amount or what they call as Bandwidth. The service provider
who has the biggest amount of bandwidth with the last mile connectivity will have
competitive advantage over the rest of competition.
4.6
Convergence: Convergence is the ability for customers to access any data
seamlessly without restrictions and the networks and the devices to get to that data. In
future the success of the telecom companies is dependent on how effectively they can
provide converged services.
4.7
Financial Strength/Resources: With high fixed costs in this industry and
frequent network up gradation and licensing costs, it is essential for the firms in this
industry to have a strong balance sheet. The ability to raise money at cheaper rates
compared to the competition provides a significant competitive advantage
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III. Industry
A. Nature of Business
The Tata Group
The Tata Group comprises over 100 operating companies in seven
business sectors: communications and information technology, engineering, materials,
services, energy, consumer products and chemical. The group has operations in more
than 80 countries across six continents, and its companies export products and services
to 85 countries, employing over 450, 000 people worldwide. The major Tata companies
are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata
Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata Communications and
Indian Hotels.
Tata Communications
The Tata Communications owns and operates the worlds largest fibre
network measuring 240, 000 km. It is the leading global provider of telecommunications
solutions serving voice, data and next-generation service needs of carriers, enterprises
and consumers across the world. It is also the number one global international
wholesale voice operator and Indias largest provider of international long distance,
enterprise data and internet services.
Tata Communications, part of the 64.7 Billion dollars Tata Group is leasing
global communications provider has undergone a critical transformation over the past
three years to globalize its innovative service offering.
Tata Communications businesses are broadly divided into three categories:
1) Wholesale Voice Business consisting of International Long Distance and
National Long Distance services
2) Carrier and Enterprise Data Business Consisting if IPLC, ILL, MDNS, VPN,
Video Conferencing, Inmarsat, ISDN, Corporate Dial-up, TV Uplinking , Data Center
and other services.
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Logistics
Logistics
operations
Inbound
Marketing
and Sales
Outbound
Service
Support Activities:
Procurement
Technological
Development
Human
Resources
Infrastructure
Tata Communications value chain analysis describes the activities of that the
organization performs and links it to competitive position. The primary activities that
need to perform internally were: operations, logistics, Marketing and Sales, and Service.
It also has the support activities which are: Procurement, Technological Development,
Human resources and Infrastructure.
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C. Financial Analysis
Financial Ratio Analysis of Tata Communications
2014
2013
2012
Current Ratio
1.49
1.33
1.39
Quick Ratio
1.45
1.32
1.32
0.51
0.53
0.47
0.50
0.51
0.39
0.11
0.10
0.13
0.07
0.08
0.11
13.5
5.49
1.29
11.20
9.90
4.08
7.25
5.38
6.86
3.25
2.91
1.23
10.08
9.25
5.19
Liquidity Ratios
Asset Management
Ratio
Fixed Asset Turnover
Total Assets Turnover
Ratio
Debt Management
Ratio
Debt-to-equity-ratio
Long-Term Debt-toequity ratio
Times Interest Earned
Ratio
Profitability Ratio
Net Profit Margin on
Sales (%)
Gross Profit Margin on
Sales (%)
Return on Total Assets
(ROA) (%)
Return on Common
Equity (%)
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Tata
Current
FA
TA
Debt
Ratio
Turnover
Turnover
Ratio
1.49
0.51
0.50
0.11
0.56
0.68
1.13
1.05
0.85
0.67
TIE
Net
Gross
ROA
RCE
profit
Profit
13.5
0.1120
0.0725
0.0325
0.10
0.85
7.40
0.09
0.10
0.10
0.10
0.67
1.54
0.15
0.59
0.10
0.31
Communications
Hutchison
Global
Communications
Telstra
Weight
Rating
Weighted Score
0.04
0.16
Internal Strength
Reliability/Robust
Wireless Network
Brand Awareness
0.06
0.24
Advancement of Fibre
0.09
0.27
0.07
0.28
Network
Access to Infrastructure
optical network and
satellite links
Market Positioning
0.04
0.16
High performance
0.05
0.20
Financial Positioning
0.04
0.12
Advanced Telepresence
0.04
0.12
Solution Provider
0.05
0.20
Ethernet
0.10
0.30
Provider
0.05
0.10
Geographic
0.04
0.08
Concentration
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0.08
0.06
telecom industry
0.06
0.06
0.06
0.16
0.13
0.13
of major competitors
Subscribers Loyalty
Strategies
TOTAL
2.64
Wt.
Rating
Score
Wt.
Rating
Score
Wt.
Rating
Score
Service Quality
0.20
0.80
0.20
0.60
0.20
0.80
Price Competitiveness
0.20
0.80
0.20
0.80
0.20
0.80
Customers Loyalty
0.15
0.30
0.15
0.60
0.15
0.45
0.10
0.40
0.10
0.30
0.10
0.30
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market
Market Share
0.05
0.15
0.05
0.10
0.05
0.15
Global Expansion
0.10
0.30
0.10
0.20
0.10
0.30
Network Quality
0.20
0.80
0.20
0.60
0.20
0.60
TOTAL
1.00
3.55
1.00
3.2
1.00
3.4
Note: (1) The ratings values are as follows: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 =
major strength. (2) As indicated by the total weighted score of 3.2, Competitor 2 which is the Hutchison Global
Communications Limited is the weakest. (3) Only seven critical success factors are included for simplicity; this is too few in
actuality.
Every employee of a Tata company, including full-time directors and the chief
executive, shall exhibit culturally appropriate deportment in the countries they operate
in, and deal on behalf of the company with professionalism, honesty and integrity, while
conforming to high moral and ethical standards. Such conduct shall be fair and
transparent and be perceived to be so by third parties.
Every employee of a Tata company shall preserve the human rights of every
individual and the community, and shall strive to honour commitments.
Every employee shall be responsible for the implementation of and compliance
with the Code in his / her environment. Failure to adhere to the Code could attract
severe consequences, including termination of employment.
36 | P a g e
Core values
Tata has always been values-driven. These values continue to direct the growth
and business of Tata companies. The five core Tata values underpinning the way
we do business are:
Integrity: We must conduct our business fairly, with honesty and transparency.
Everything we do must stand the test of public scrutiny.
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Unity: We must work cohesively with our colleagues across the group and with our
customers and partners around the world, building strong relationships based on
tolerance, understanding and mutual cooperation.
Mission:
Tata Communications is a leading global provider of IP, telepresence and
wholesale communications services. With a leadership position in emerging markets,
Tata Communications leverages its advanced solutions capabilities and domain
expertise across its global and pan-India network to deliver managed solutions to multinational enterprises, service providers and Indian consumers.
Vision:
Unified under a single brand, Tata Communications is committed to
spearheading innovation and value in global services.
As an agile, fast-reacting partner, we are dedicated to proactively maintaining
strong client communications and forward-thinking products and solutions.
Supported by the financial stability and vertical intelligence of the 29 Billion
Dollars Tata group, Tata Communications Is focused on driving growth and expansion
of value-added services to consumer, enterprises and providers worldwide.
2. Generic Strategy Being Pursued
Tata Communications generic strategies being pursued are:
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Jan 2011
Jan 2009
Jan 2008
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IV.
Strategy Formulation
A. TOWS Analysis
STRENGTHS
WEAKNESSES
Reliability/Robust
Wireless Network
Geographic
Brand Awareness
Advancement
of
Concentration
Fibre
Network
Access to Infrastructure
Internet Traffic
satellite links
Market Positioning
High performance
Financial Positioning
Advanced Telepresence
Solution Provider
Ethernet Provider
Backbone Bridge (PBB)
Opportunities
SO Strategy: Maxi-Maxi
Technological
WO Strategy: Mini-Maxi
Because Tata
Improve
Advancement
Communications were
assistance
International Markets
Product Innovation
Acquire
as strengths, it has an
opportunity of Joint
than rivals.
the market
and
competitive positioning.
technical
to
overcome
companies
services
to
to
gain
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customers in the
Philippines in Ethernet
WAN.
Market Development in
voice services
Threats
ST Strategy: Maxi-Mini
WT Strategy: Mini-Mini
Economic Issues
Increase brand
Intense Competition in
awareness to attract
the market
customers
Emerging markets
High performance
Product development
Natural calamities
Customer needs
Development and
Political instability
improvement of Ethernet
on competitor deployment
strategies
Promotion
of
company
image
Adopt
latest
online
technologies
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B. Space Matrix
Internal Strategic Position
(X axis): -1 highest, -6 lowest
Competitive Advantage
Tata Communications is competitive
Market Share
Control Over Suppliers and Distributors
Customer Loyalty
Technological Know-How
TOTAL:
AVERAGE:
Internal Strategic Position
(Y axis): 6 highest, 1 lowest
Financial Strengths
Cash Flow
Revenue Growth rate, declining
Net Income Growth rate, declining
Risk in business
TOTAL:
AVERAGE:
External Strategic Position
(X-Axis): Quadrant I: 1 Lowest 6 Highest
Industry Strengths
Profit Potential
Ease of entry into telecom Industry
Growth Potential
Financial Stability
Technological Know-How
Resource Utilization
TOTAL:
AVERAGE:
External Strategic Position
(Y-Axis): Quadrant IV: -1 highest -6 lowest
Environmental Stability
Global Rapid Technological Changes
Price change by competitor
Rate of Inflation and High Interest rates
Expensive Infrastructure
Customer Switching
TOTAL:
AVERAGE:
-1
-1
-2
-4
-1
-9
-1.8
+4
+4
+5
+3
+16
+4
+6
+5
+6
+5
+6
+5
33
5.5
-1
-6
-2
-3
-6
-18
-3.6
In the Space Matrix given, both internal and external strategic position was weighted.
The Internal strategic position (x-axis) and eternal strategic position (Y-axis) both
considers -1 as the highest and -6 as the lowest rating. Meanwhile, the internal strategic
position (y-axis) and internal strategic position (x-axis) considers +6 as the highest and
+1 as the lowest rating. Having the total and average computed, the following values for
the coordinates were obtained:
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FS
Aggressive
CA
IS
Defensive
Competitive
ES
Market Penetration
Market development
Product Development
Backward Integration
Forward Integration
Horizontal Integration
Conglomerate Diversification
Concentric Diversification
Horizontal Diversification
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HIGH
HIGH
Cash Generation
STARS
LOW
QUESTION MARKS
Data Services
Neotel
Service Providers
Cash Usage
CASH COWS
DOGS
Voice Services
LOW
Enterprises
The Data Services which comprises the 39% of the total market share in
the products and services that Tata Communications offer is divided into 2 segments,
the service provider (51%) and Enterprises (49%). It has high relative market share in
high growth markets and offer high profit and high growth opportunities. It is in the
Stars in the BCG Matrix and is considered in the growth stage. However, the cash flow
is neutral and needs further investments. Recently, Tata Communications added
another service that expands thru Asia in 2009, the Ethernet WAN and VLAN. Since it is
new compared to the other services that they offer, they need to invest for growth and
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focus on promotion to maintain the market share and be converted into cash cows.
Market Penetration can be the strategy to be used to gain competitors customers in
different companies in the Philippines.
Voice
50%
Data
Neotel
39%
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D. Internal-External Matrix
Strong (3.00-4.00)
Average (2.00-2.99)
Weak (1.00-1.99)
II
III
EFE = 2.45
High (3.00-4.00)
Medium (2.00-2.99)
IV
Low (1.00-1.99)
VII
VI
VIII
XI
position while the EFE is 2.45 which lies in medium, which means that the company is
not the strong externally.
In this case, Tata Communications should focus on Market Penetration and
Product development.
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Weak Competitive
Position
Rapid Market
Growth
Market Development
Market penetration
Product Development
Forward Integration
Backward Integration
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Horizontal Integration
Concentric Diversification
Market
Market
Product
penetration
Development
Development
AS
Strengths
TAS
AS
Reliability/robust
0.02
0.06
Brand Awareness
0.02
0.06
Advancement of fibre
0.03
4
0.08
0.2
0.2
0.16
High Performance
0.05
Financial Positioning
0.04
Advanced
0.05
Telepresence
0.06
Ethernet Provider
0.05
Backbone Bridge
0.02
lines
0.03
Internet Traffic
0.05
Opportunities
Technological
0.08
0.12
0.12
0.2
0
0.08
2
0.08
0.04
3
0.08
0.12
2
0.12
2
0.08
0.06
3
0
2
0.18
0.15
3
4
0.16
0.1
0.04
0.09
0.04
0.1
0.16
Delivery
0.15
0.06
0.04
0.1
0.06
concentration
0.1
0
0.02
0.16
0.15
0.15
Weaknesses
0.06
4
0.2
2
0.08
0.24
0.12
0.15
Solution Provider
0.08
0.09
2
0.05
0.04
Market Positioning
High competition in
0.12
0.04
Infrastructure
Geographic
0.04
2
TAS
Network
Declining Access
AS
Wireless network
Access to
TAS
0.1
0.12
0
0.2
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Advancement
International Markets
0.08
Product Innovation
0.05
Merger and
0.04
0.02
0.32
0.2
0
2
Acquisitions
0.08
New customers to
0.1
0.12
0.08
0.15
0
3
0.16
2
0.06
0.04
Threats
Economic Issues
0.02
Intense Competition
0.03
Emerging markets
0.05
0.02
Natural calamities
0.03
Customer needs
Political instability
in the market
TOTAL
0.08
3
4
0.09
0.15
0.08
0.02
0.03
0.04
0.12
4
0.06
0.2
0.1
0.06
0.04
0.06
0.12
0.09
0.08
0.06
0.04
0.12
0.09
0.06
3.44
1.0
0.06
2.58
2.58
Attractiveness Score:
1 = not Attractive
2 = Somewhat Attractive
3 = Reasonably Attractive
4 = Highly Attractive
The analysis shown above is the 3 strategy alternatives; The Market Penetration,
Market Development, and Product Development. These strategy alternatives can be
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To become Global. Offer another line in a new Country across the globe. Make
calls available to another Country.
Financial Objectives:
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Financial
Strong Market
Penetration
Learning and
Growth
Internal Perspective
Customer
Perspective
Customer Intimacy
Innovations
Product Development
Customer Relation
Management
-Customer Loyalty
Improve Marketing
Increase market
Share
High Quality
Services
Technology Innovation
xas
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Corporate Level
Business Level
Functional Level
Global and regional telecom operator players face increasing number of critical
challenges, from traffic monetization to capital and labor productivity in mature markets
to intensified competition in developing and emerging markets. Growth strategy in
telecom company with respect to customers, regulation, technology, and competition
and estimated the market potential for different segments in the Philippine telecom
market.
Functional strategies typically align with more narrow functional objectives. It is
used to focus on and manage the businesss constituents parts. By developing
individual goals and objectives for specific functions in the company, business owners
and managers can assign the right people and resources to the right tasks.
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Distribution System
Marketing, sales and customer relationship management are some of the areas
where the returns from analytics are the highest. Ideally, analytics-driven telecom
companies must have predictive analytics embedded in all their business processes,
thereby moving away from decisions based on gut feeling or intuition.
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Performance appraisal
Product innovation
Process improvement
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VI. Implementation
A. Analysis of Companys Capabilities to Implement Strategy
The 7-S Framework
Hard Elements
Strategy
Structure
Systems
Soft Elements
Shared Values
Skills
Staff
Style
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Staff As they say, employees or staffs are the asset of the company, without
them, the implementation of the strategy wouldnt be possible. These staffs
should be well-trained and should be good in interacting an negotiating with
customers. It consist of some of the most dynamic, motivated, and qualified
individuals to be found anywhere in the world. Highly trained individuals and
financial analysts to consistently check the profitability and especially, the
combination of bright minds in the business of Tata Communications.
stakeholder value and a group of people dedicated to uphold the core values of
the group.
Shared Values Tata Communications follows the Tata Code of Conduct which
comprises of the Set of principles that guide and govern the conduct of Tata
Companies and their employees in all matters relating to business. Lays down
the ethical standards that Tata employees have to observe in their professional
lives, and it defines the value system at the heart of the Tata Group and its many
businesses and entities.
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Market penetration
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The figure above, managing internal organization is one of the most important
decisions in order to successfully implement the strategy. First is to improve leadership
to drive implementation forward for the Tata Communications, good leadership and
management among employees would drive them to work efficiently and motivated, and
with this case it would be easier to implement new strategies. Next is by shaping the
work environment and corporate culture to fit the strategy, since Tata Communications
is Global and handles different cultures and practices in each Country, it is important the
they have a single norm to follow. Third is tying rewards and incentives to the
achievement of key strategic targets to drive employees to work or perform better.
Fourth is to install information and systems so that the employees will carry the strategic
goals proficiently. Fifth is instituting best practices and pushing for continuous
improvement in order to prevent the decline stage of their production life cycle, they
should always have a new strategy and development. Sixth is to establish policies and
regulations. Seventh is to secure important resources for critical activities. And lastly,
Tata Communications should build an organization with the competencies, capabilities,
and resource strengths needed for successful strategy execution.
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C. Balanced Scorecard
Financial
To increase Market Share
Customer
Provide high Quality
Services
Customer retention
Increase customer loyalty
Vision
and
Strategy
Internal Business
processes
Meet Customer's needds
improve marketing
Design your message: what do you want to talk about? What are the content,
Identify the channels: reach your audience by placing your message where they
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Strategies to be implemented:
In house training of
personnel from Technical
Group on proper complaint
handling and customer
relations management
Career and personnel
Training
Benefits
It will provide cost effective
solutions for indoor and
outdoor coverage
Know the exact location of
the companies of complaint
for the table tap
assessment
Encourage employees to
avail their services
Assumptions (Costs)
500,000.00
1,000,000
To Boost employees
morale in being committed
to their new key results
area and corporate goals.
500,000
1,000,000
1,500,000
800,000
2014
2015
2016
This will result to the increase in the number of users who will call either
outbound or inbound, and with this, having Tata Communications as the
backbone of major companies, its increase within 3 years would be:
Internet Service
2014
2015
2016
Estimated No. of
subscribers
500, 000
800, 000, 000
1,500,000
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Financial tables
source: http://money.rediff.com/companies/Tata-Communications-Ltd/15140032/balance-sheet
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2014
2013
2012
Current Ratio
1.49
1.33
1.39
Quick Ratio
1.45
1.32
1.32
0.51
0.53
0.47
0.50
0.51
0.39
0.11
0.10
0.13
0.07
0.08
0.11
13.5
5.49
1.29
11.20
9.90
4.08
7.25
5.38
6.86
3.25
2.91
1.23
10.08
9.25
5.19
Liquidity Ratios
Asset Management
Ratio
Fixed Asset Turnover
Total Assets Turnover
Ratio
Debt Management
Ratio
Debt-to-equity-ratio
Long-Term Debt-toequity ratio
Times Interest Earned
Ratio
Profitability Ratio
Net Profit Margin on
Sales (%)
Gross Profit Margin on
Sales (%)
Return on Total Assets
(ROA) (%)
Return on Common
Equity (%)
C. Financial Analysis
On the liquidity ratios, Tata Communications, the current ratio decreased its
value from 2012-2013, however, there has been an increase of 11% in the year 2014.
This is a good sign that its financial stability have improved over a year. It means that
the company covered its current liabilities with assets. For the quick ratio, from being
stable from the year 2012 to 2013, it has increased in 2014 which is a good indicator
because it means that the company met its short term obligations without selling off its
current inventory.
In Asset management ratio, the fixed asset turnover, the measure of the sales
productivity and utilization of plant and equipment, decreased from 2013 to 2014 due to
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under-utilization of fixed assets. Meanwhile, the total assets turnover also decreased in
2014 which means that the company is somewhat not generating a sufficient volume of
business given the size of its asset investment.
In the Debt management ratio, the debt-to-equity ratio had increased but still less
than 1, this means that the company has more assets than debt and still desirable.
However, the long term debt-equity ratio is continuously decreasing since 2012. The
Times Interest Earned Ratio, undergone a tremendous increase because their earnings
before tax was higher and their interest charge was much lower.
In profitability Ratio, Tata Communications the Net Profit Margin on Sales is
continuously increasing which means that the firms sales were high. The Gross profit
margin, an indication of the total margin available to cover operating expenses and yield
a profit, has also increased in 2014 although there has been a decrease on the year
2013. The return on total assets, a measure of the return on total investment in the
enterprise, have also increased as well as its return on equity ratio. However, Tata
Communications still has to improve their ratios to sustain the new strategy that they are
going to implement.
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