A critical evaluation of the strategic choices of telkom and whether they are appropriate or not
A CRITICAL EVALUATION OF THE STRATEGIC CHOICES OF TELKOM ANDWHETHER THEY ARE APPROPRIATE OR NOTAccording to Grant (2010:23) an organisation strategy can be identified or located inthree places: in the heads of the chief executive and senior managers, in theirarticulation of strategy speeches and written documents and decisions through whichstrategy is enacted. From the Telkom view, the strategy statements can be identifiedin its vision, mission and values. These are as follows:VisionTo be Africa’s preferred ICT Solutions provider.MissionTo be a leading South African-based international ICT services group focused onlong term sustainable profitability through growth in existing new markets.Values Continuous performance improvement Honesty Accountability Respect TeamworkStrategic choice is the third logical element of the strategy formulation process. Ittherefore entails identifying options, evaluation of options and selecting a strategy.According to Boojihawon and Segal-Horn (2010) the process of strategic choicerequires managers to identify several potential options, evaluate them and select themost appropriate for his or her organisation and context.Viney and Gleadle (2010:7) argue that in defining organisational objectives andimplementation of selected strategy, comes the identification, evaluating and choiceof strategic options, based on the analysis of external and internal data.
Therefore, in evaluating the strategic choice of Telkom, the discussion will firstly lookat its strategic objectives/intent and secondly, evaluate its recent strategic decisionsit has taken as a result of those objectives.The aim of Telkom is to continue to strengthen their position as a communicationchampion across the African continent. This will be done through the followingstrategic intent: To offer our customers enhanced bundled packages and tailored calling plans that will successfully grow annuity revenue; To use our unique fixed-mobile capability as a platform for future growth. We intend to provide customers with array of ICT services, both voice and data, fixed and mobile. It should also enable us to leverage the strong relationships we have with our current corporate customers by extending the bouquet of services we offer to them; To utilise the strength and reliability of our unique Next Generation Network and infrastructure to bring high quality broadband products to the market. These new and exciting ‘content rich’ offerings are particularly applicable to digital home consumer markets such as gated communities; and To become a Pan-African integrated service provider by making the Telkom brand synonymous with the best products and services on the continentStrategic decisions or options that Telkom has taken as a result of its objectives willbe highlighted below: - Telkom has increased its global connectivity by entering into strategic memorandum of understanding with one of the largest telecommunications companies in the world, AT&T, which will connect Telkom’s regional network with AT&T global network. In this regard Telkom has co-operated with AT&T for each partner to contribute something and moreover Telkom will benefit in terms of being connected to AT&T global network
- Telkom made its acquisition outside South Africa, namely, Africa Online, which is the largest Pan-African Internet Service provider in Sub-Saharan Africa - Telkom has pursuit a revenue growth opportunities outside the borders of South Africa. This was spearheaded by the acquisition in 2007 of Nigeria based Multi-Links. - Telkom also acquired 100% interest in MWEB Africa Limited. MWEB Africa is a group of companies offering internet services and its own VSAT access in Sub-Saharan Africa - Telkom is also investing in the Next Generation Network (NGN) to support converged services and the massive amounts of bandwidth that go with them - Telkom ADSL leads the broadband explosion with Telkom aiming to have achieved an ADSL penetration of 15% to 25% of total access lines. Demand is also being stimulated by the growing use of internet in the country’s education system and increasing expectation for learners to use internet as a research resource. The proven speed of Telkom service also drives growth in the ADSL subscriber base. - Telkom has rolled out 141 W-CDMA (Wideband Code Division Multiple Access) sites in major metropolitan areas throughout South Africa. This W- CDMA allows Telkom to deploy fixed-line look-alike services with regional fixed numbering plans instead of deploying copper. - Telkom also moved into offering a fully fledged mobile service called 8.ta, which is a growth segment and mechanism against mobile cannibalism.In the context of the strategic options outlined above, it could be said that Telkomstrategy was to remain focused on pursuing growth into Afican markets, andreaching all its customers, new and existing with its new and existing communicationservices and products. We have seen a number of acquisitions by Telkom to enterinto new markets and to partner/form alliances with other organisations such asMWEB, Africa Online and AT&T. This signaled a growth strategy by Telkom.Telkom ventured into mobile business for growth and also due to the growingpressure from mobile operators to its international fixed-line communications.
From Porter’s generic strategies, it could be suggested that Telkom in its growthstrategy or plan, favours a differentiations strategyAccording to Porter, there are three generic strategies that a company can undertaketo attain competitive advantage: cost leadership, differentiation, and focus. Porter(1985) cited by Bakhru (2010:63) and Sidahmed (2006:9) argues that althoughorganisations can have a myriad of strengths and weaknesses relative tocompetitors, they essentially compete in one of two ways: on the basis of cost ordifferentiation. Porter’s generic strategies are shown in figure 2.1.Figure 2.1: Porte’s generic strategiesA company pursuing a differentiated strategy seeks to be unique in its industry alongone or more dimensions that are valued by buyers. It selects attributes that buyers inan industry perceived as important and positions itself to meet those needs as fullyas possible (Viney and Gleadle, 2010).Is Telkom selected competitive strategy appropriate or not?In responding to the above question, three sets of generic testing criteria by Johnsonand Scholes (2003) cited by Viney and Gleadle (2010:52) will be used, namely,sustainability, feasibility and acceptability Suitability
Telkom’s proposed strategy is appropriate interms of it suitability since it matches oraddresses its strategic objectived. For Telkon to grow , it needed to enter newmarkets which happened throught their differentiation strategy. Therefore, with itsacquisition strategy of communication operators, it was able to penetrate new andexisting markets. FeasibilityIn terms of whether the strategy is feasible, Telkom strategy might not be feasibledue to their shrinking revenue & profits, but with its high quality and experiencedstaff, technology and physical resources, Telkom strategy might meet its objectivesAcceptabilityThe strategy might not be accepted consideration those acquisitions that ended upbeing sold to other providers due to the decline in revenue and its cost.