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Strategy report Strategy report Document Transcript

  • Rennes International School of Business ESC RENNESExecutive Master of Business Administration EMBA COHORT 1 (2003 - 2004) STRATEGY Conducted by: Serge OREAL Menatel Business Strategy By Magdy A. Sattar July, 2004 Cairo, Egypt
  • EXECUTIVE SUMMARY ................................................................................................................... II1- INTRODUCTION......................................................................................................................... 12- REPORT OBJECTIVE ................................................................................................................ 13- MENATEL PROFILE.................................................................................................................. 14- ENVIRONMENTAL SCANNING .............................................................................................. 85- STRATEGY FORMULATION ................................................................................................. 226- STRATEGY IMPLEMENTATION.......................................................................................... 257- EVALUATION AND CONTROLLING ................................................................................... 318- REFERENCES ............................................................................................................................ 359- ANNEXES ................................................................................................................................... 36EMBA Cairo IRennes International School of Business
  • EXECUTIVE SUMMARYThis report is about Menatel strategy, and how Menatel manages its strategies. I will start bydescribing Menatel profile and illustrating it in brief; Menatel business, Menatel objectives,vision, and values. I will show some of Menatel quantities indicators; such as commercial,operational, and financial indicators, plus Menatel critical success factors and technology.I will start by analyzing Menatel current environment, first, scanning the external macroenvironments (factors & actors), then the external micro environments (supply & demands),summing up the findings using EFAS techniques. Second, scanning the internal environments(firm analysis), summing up the findings using IFAS techniques. By the end of this step I willuse SWOT analysis to identify Menatel strategic alternatives. The second step is to evaluatethe alternatives using SFAS to be able to formulate Menatel recommended strategies. I willformulate Menatel strategy by illustrating Menatel rephrased mission, vision, and objectives.Then I will define Menatel corporate strategy, business strategy and Menatel functionalstrategies, (marketing, financial, operational, R&D, IT, logistics, HRM, and purchasing).The third step is to recommend the implementation plan; I will illustrate Menatel programs,budgets, procedures and action plan, and finally staffing and recommended training.The last stage is recommendations for evaluating and controlling the implementation of thestrategies, by proposing input controlling, process controlling, and output controlling.Finally a list of references I used to help me in doing this report followed by some annexes toillustrate some points to the reader and verify some of my findings.EMBA Cairo IIRennes International School of Business
  • 1- INTRODUCTIONIn this report by the here below items, I will start by briefly describing what is Menatel? Andwhat is Menatel doing in payphone business, by illustrating Menatel owners and equitydistribution, coverage, functional activities and departments, and some of the key figures andindicators of Menatel operation, commercial, and financial achievements. I will start scanningthe external environment by macro analysis of the factors and actors of the externalenvironment, and micro analysis of the telecom industry and competitors. I will continue toscan Menatel internal environment through firm analysis, later by SWOT matrix I will sum-upthe findings and conclusions of the analysis to start formulating the recommended strategies.I will evaluate the strategic alternatives to recommend the profitable and most suitablestrategy to the current situation. I will describe the programs and their corresponding budgetswith the suitable procedure to them in order to implement the recommended strategies. At theend a controlling system will be described to follow the implementation procedure andmeasure the performance outputs. 2- REPORT OBJECTIVEThe purpose of this report for me is to review Menatel strategies and strategic managementprocess, analyzing it using what have been taught during the module, and then providing well-founded suggestions or recommendations for improving or formulating new ones. It will alsobe a tool for the instructor to measure to what extend I have digested the course objectives,and fulfilled what was expected from me by being more familiar with the terminology,concepts, and the underlying issues. I will try to carry out this assignment in order toconsolidate my learning and try to reach useful conclusions about how strategic managementcan be better exploited in Menatel. 3- MENATEL PROFILE 3-1 Menatel in briefLate in 1998 Mena Communication Company (Menatel) was born as a domestic joint stockcompany, under investment law number 8/1997 registered in 1998 under number 314030.Menatel is granted a ten years; renewable license, to install, operate, and manage aEMBA Cairo 1Rennes International School of Business
  • telecommunication network of at least 30,000 public payphone. Egyptian shares were 53 %and foreign shares were 47 %. By the end of 2003 Menatel has been operating a payphonenetwork of 30,000 payphones in operation, work force of more than 400 employees, and theEgyptian shares are 100 %. Menatel is in the prepaid smart cards payphone business,Menatel products are calls (minutes), local calls, national calls, mobile calls, and internationalcalls. Menatel is selling its products through a payphone network that covers all Egypt and ismanaged by a payphone management system. These calls category are Menatel profitcontribution. With a centralized management style Menatel is structured of five main divisionsheaded by corresponding Directors and four Branches allocated all over Egypt, to form simpleflat functional organizational structure. 3-2 Menatel ownership and equity distributionBy the end of 2003 the main four Egyptian shareholders bought the foreign shares and theseven million shares are distributed as follows:  National Bank of Egypt Egyptian 35 %  EGYTEL Egyptian 37 %  ADCOM Egyptian 17 %  Telecom Egypt TE Egyptian 3.5 %  ADI Egyptian 3.5 %  CIIC Egyptian 3.5 % 3-3 Menatel Coverage  Menatel Head Quarters, 54, Road 261, New Maadi, Cairo www.menatel.com.eg Tel: +2-02-591-400-1 Fax: +2-02-591-400-2 Cairo Governorate Giza Governorate Beni Suef GovernorateEMBA Cairo 2Rennes International School of Business
  • Kalyobia Governorate (first part)  Menatel Alex. Branch, 4, El-Saidla Towers, Somouha, Alex Tel: +2-03-424-910-2 Fax: +2-03-424-910-1 Alex. Governorate Behera Governorate Matrouh Governorate  Menatel Canal & Sinai Branch, 81, El-Gomhoreya St, Port Said Tel: +2-066-324-336-6 Fax: +2-066-324-337-7 Damiatta Governorate Ismailia Governorate Port Said Governorate Suez Governorate North Sinai Governorate South Sinai Governorate  Menatel Delta Branch, 1 Abu Baker St. Tanta, Gharbia, Tel: +2-040-333-031-3 Fax: +2-040-333-354-4 Kalyobia Governorate (second part) Gharbia Governorate Dakhlia Governorate Sharkia Governorate Monofia Governorate Kafer El-Sheikh Governorate  Menatel Upper Egypt Branch, 1, El-Gomhoreya St, Assyout Tel: +2-088-307-600 Fax: +2-088-307-700EMBA Cairo 3Rennes International School of Business
  • Assiut Governorate Minia Governorate Sohag Governorate New Valley Governorate Qena Governorate Red Sea Governorate Luxer City 3-4 Menatel functional activities & departments 3.4.1 Technical Department & ActivitiesThe objectives of this division are:  Payphone-management system.  Payphone installations.  Laboratory & technical help desk.  Maintenance supervision.  Payphones maintenances.  Value added services development.  Subcontractors’ coordination.  Branches management. 3.4.2 Commercial Department & ActivitiesThe objectives of this division are:  External communication.  Advertising.  Payphone location determination & authorization.  Sites owner management.  Cards direct distribution management.  Cards indirect distribution management.  Telecom Egypt relationship (JWC).  Customer hot line.  Commercial reporting.EMBA Cairo 4Rennes International School of Business
  • 3.4.3 Financial Department & ActivitiesThe objectives of this division are:  General reporting & payments.  Accounting & balance sheet.  Business plan & budgets.  Billing invoices & suppliers.  Cash & contract management.  Internal network management.  Recruitment & training.  Payroll & salary policy.  Social, litigation, and legal matters. 3.4.4 Logistics Department & ActivitiesThe objectives of this division are:  Security management.  Premises management.  Purchases.  Custom clearance.  General procurement.  Warehouse  Card distribution  Transportation.  Vehicles management. 3.4.5 Business Development Department & ActivitiesThe objectives of this division are:  Handel assignments and projects to improve organization performance.  Improvement of the interface with major suppliers.  Tuning of HR tools.  Defining and building major business indicators.  Managing auditor.EMBA Cairo 5Rennes International School of Business
  • 1 3-5 Menatel Quantities indicators  Operational IndicatorsIndicators Dec.2000 Dec.2001 Dec.2002 Dec.2003Civil work (Thousand) 18.2 28.7 31.8 32Booth Installed (Thousand) 16.2 24.9 29.3 30Payphones IO (Thousand) 16 24 28 30Numbers of Calls (Million) 291.5 437.3 520.5 476.4Numbers of Minutes (Million) 580.5 870.7 1036.5 948Quality of Service 96 % 95 % 97 % 98 %  Commercial IndicatorsIndicators Dec.2000 Dec.2001 Dec.2002 Dec.2003Number of locations (Thousand) 22.1 37.8 43.3 62.4Sales Point (Thousand) 20 35 45 42Line Retain (Thousand) 17.3 25.6 30.6 30.5Cards Sales (Million, LE) 220.3 340.4 400.1 360.1Total revenue (Million, LE) 196.8 295.2 351.4 321.9Average Revenue/day/PP (LE) 33.6 33.6 34.3 29.3  Financial & Administrative indicatorsHuman ResourcesIndicators Dec.2000 Dec.2001 Dec.2002 Dec.2003Expatriates 5 5 3 3Managers 27 28 28 26Employees 203 307 363 370Total 235 340 394 3991 Menatel Internal monthly Reports.EMBA Cairo 6Rennes International School of Business
  • 2Key Financial RatiosIndicators Dec.1999 Dec.2000 Dec.2001 Dec.2002 Dec.2003LIQUIDITY RATIOSCurrent Ratio 137 % 94 % 94.9 % 84.6 % 92 %Quick Ratio 114 % 83 % 84.9 % 70.8 % 83.68 %Cash Ratio 75.3 % 55.4 % 60.5 % 57.3 % 69.37 %ACTIVITY RATIOSReturn on Equity -6.2 % 14.4% 39.2 % 40.9 % 18.33 %Return on Investments -3 % 4.7 % 13.8 % 10.63 % 5.96 %Total assets turnover 0.39 0.79 0.82 0.79 0.74Inventory turnover 7.8 10.5 10.5 8.8 10.9Days sales in inventory 46.33 34.5 34.74 41.45 33.36Receivable turnover 8.9 6.2 6.8 9.3 12.5Days sales in receivable 55.97 86.54 85.61 57.61 42.2Payables turnover 3.2 1.2 1.07 0.89 0.91Days sales in payable 114.2 229.7 338.1 405.63 400.65LEVERAGE RATIOSDebt to Assets 51.4 % 66.9 % 64.5 % 74 % 67.46 %Debt to Equity 105.9 % 202.7 % 182.4 % 284.9 % 207.29 %PROFITABILITY RATIOSOperation Profit Margin 26.6 % 32.5 % 37.6 % 31.8% 29.45 %Sales Profit Margin 3.2 % 9.1 % 17.7 % 13.3 % 9.89 %Net Profit Margin -7.7% 6% 16.9 % 13.3 % 7.97 % 3-6 Menatel Critical Success Factors (CSFs)The key of success at Menatel is that Menatel manages all its resources; tangible andintangible, in a way that optimizes maximum use of all the resources to gain the maximumefficient use of them. Tangible Resources, financial and physical assets Intangible Resources, human resources, reputation, and technology2 Aneexes 9-1,2, and 3EMBA Cairo 7Rennes International School of Business
  • 4- ENVIRONMENTAL SCANNING 4-1 External environment analysis 3 4.1.1 Global or Macro environment analysis (factors & actors)  Factors indication CURRENT FUTURE MACRO ECONOMICS FACTORS Low Medium High Low Medium High Attractiveness Attractiveness Attractiveness Attractiveness Attractiveness AttractivenessDemographic factors X XEconomic factors X XNatural factors X XTechnological factors X XPolitical & Legal factors X XSocial Cultural factors X XOverall assessment X X Analysing the figures and their expectation trends for the future illustrated in annex (9-4), we can sum-up the main factors indications, as shown in the above table, in which I believe that the trend is for better future conditions especially for the political and legal factors. The restructuring of the government organisation and the new Prime Minister who was the previous ITC Minister is a strong indicator of these believes.  Actors’ indication CURRENT FUTURE MACRO ECONOMICS ACTORS Low Medium High Low Medium High Attractiveness Attractiveness Attractiveness Attractiveness Attractiveness AttractivenessConsumers X XSuppliers X XCompetitors X XGovernments X XOverall assessment X X Again the Government role in Egyptian telecom market is extremely important; despite dominating the market, the new ITC policy towards liberalization is a highly attractive indicator of the future. 4.1.2 Direct or Micro environment (telecommunication industry and competitions) analysis  Market Environment (demands) 3 Annex (9-4) EMBA Cairo 8 Rennes International School of Business
  • Egyptian telecommunication market is a promising market, despite of Telecom Egypt (TE)dominance over the market, the escalating developments of the market towards liberalization,the issuing of telecommunication law in February 2003, and the role of NationalTelecommunications Regularity Authority (NTRA) will make TE a Dinosaur no more.The fixed lines telecom market is getting more competitive, as TE is pushing towardsincreasing the penetration rate, by offering lines at 50 % discount, the ambitious universalplan for TE is to operate 40,000 payphone all over Egypt, the recent entrance of the prepaidcalling scratch card (two new licenses) in addition to TE Marhaba card, and Egypt Telecard.The second payphone license, our direct competitor (with two brands, Nile Telecom, andRingo), is in a very tough situation, with lots of debts to TE that might drive them to gobankrupt, or to turn their debt into equity for TE. In both cases we are anticipating to seize theopportunity of the gap of their absence, and the new competition directly with TE (unfaircompetition) or to compete with a new comer (not likely to happen due to the current politicaland economical situation).We strongly believe that the NTRA will not allow us to be the sole player in the market. Thus ifour direct competitor went out of market or bankrupted, they would issue a call for newpayphone license or they will allow TE to go into this market to fill the gap, and avoid Menatelmonopoly.The indirect competition by the two GSM companies (Vodafone and Mobinil), through theirprepaid and post-paid lines, we are monitoring the two big elephants movements towardsincreasing the capacity of their network and subscribers. 4  Market Players or competitive structure (supply) Telecom Egypt (TE)Telecom Egypt (TE) operates more than 7 million lines in Egypt, some 80% lines installed areresidential, 17% business and the remaining 3% government.The Egyptian fixed lines market is under-penetrated; at the end of 2002 wire line penetrationtotalled 12%, representing 7.75 million access lines in service. Expected wire line penetrationin the end of 2007 is 19.6%, representing 14-million access line in service.4 Annex (9-5)EMBA Cairo 9Rennes International School of Business
  • Wire linepenetration 1998A 1999A 2000A 2001A 2002A 2003A 2004F 2005F 2006F 2007FYear to JunePopulation (m) 62.7 64.0 65.0 66.0 67.00 67.8 68.7 69.5 70.2 71.5Access line 3,972 4,686 5,530 6,530 7.75 8,830 10,130 11,430 12,730 14,00installed (000)Growth (%) - 18 18 18 19 16 15 13 11 11Additions (000) - 714 844 1,000 1,220 1,200 1,300 1,300 1,300 1,300Penetration (%) 6.3 7.3 8.5 9.9 12 13 14.7 16.5 18.1 19.6 A= actual, F = forecasted Prepaid Calling Scratch Card (PCC) Two active players in the market, one is a private owned company called Egypt Telecard, and the other one is Marhaba service owned and managed by TE. In addition to the 2 million cards capacity of the two TE (IN) Intelligent Network platforms in operation today, TE has ambitious plans to upgrade their system capacity (2million card “IN” platform contracted) expected to be in operation by June 2004. Egypt Telecard also made use of the long time span of the Scratch Card License bidding to upgrade their system capacity which resulted in enhancing their quality of service, and expanding their distribution channels. The marketing intelligence information we managed to gather was as follows: Egypt Telecard and Marhaba achieved sales of 22 million cards during the period from Jan. 2002 till Dec. 2002, which is equal to approx. 250 millions LE. Taking that the minimum face value of “Marhaba” is LE. 15 and it has gone out of stock several times. Two more renewable licenses were introduced to the market, one of them “Moftah el Zero” launched his product first of June 2004 and managed to sell approx. 5 millions LE for all the face values of the card (5, 10, 25, 50,100). The owner of the second license is still facing difficulties launching his product. EMBA Cairo 10 Rennes International School of Business
  • Public Payphones (PP)Menatel is maintaining the leader position by far; we are in a dominant company position, farahead of our direct competitors Nile & TE. According to ministry of communication andinformation technology (MCIT) report of February 2004 the situation is as follow: 5Market coverage in Feb. 2004 Company Number of Payphones Menatel 29878 Nile & Ringo 14000 TE 4532The above table shows that we are still improving our position, while Nile is blocked. As forTE, their plan is to upgrade and replace their old payphones, with new ones using SmartCards, and to go public; as we know from our sources they started to request digging permitsin Cairo. We anticipate an aggressive competition from TE. Also the two competitors inpayphone area are using the OFF-LINE technology to manage their system while Menatel isusing the ON-LINE & OFF- LINE technology. GSM Operators (GSMO)The two big elephants enter the telecommunication market before the two private prepaidpublic payphone companies; they have been growing slowly but in a continuous way and arestill growing. They are the future threat to the payphone business. 6Mobile phone subscribers in Dec.2003Subscribers Mobinil VodafonePrepaid 2.325 million 2.160 millionPost-Paid 667,000 479,000  Market share (volume bases)Based on the retail auditing reports for all the prepaid cards the bellow table shows that theprepaid payphone cards share is shrinking,5 Ministry of Communication & Information Technology (MCIT) report Feb. 2004.6 Mobinil marketing intelligence information Dec.2003EMBA Cairo 11Rennes International School of Business
  • Prepaid cards Market shares on Brand Name Brand Share Volume bases March-April 2001 Prepaid Calling Scratch Card (PCC) 20.4 % Public Payphones (PP) 72.9 % GSM Operators (prepaid cards) 6.8 % March-April 2002 Prepaid Calling Scratch Card (PCC) 28 .8 % Public Payphones (PP) 56.3 % GSM Operators (prepaid cards) 13.7 % March-April 2004 Prepaid Calling Scratch Card (PCC) 33.8 % Public Payphones (PP) 55.2 % GSM Operators (prepaid cards) 11.8 % Based on what was previously illustrated and using Porter forces techniques we can sum-up the findings in the hereunder table, which shows that we are in a high attractive situation but we need to hedge our future situation. CURRENT FUTURE PORTER FORCES Low Medium High Low Medium High Attractiveness Attractiveness Attractiveness Attractiveness Attractiveness AttractivenessBarriers to entry X XBarriers to exit X XRivalry among competitor X XPower of buyers X XPower of suppliers X XAvailability of substitutes X XGovernment actions X XOverall assessment X X 4.1.3 External Environment Analysis findings Using the external factor analysis summary (EFAS) to sum-up the analysis finding in the hereunder table. Opportunities Weight Score Weighted Score Comment Telecom Market Need to be part of O1 0.150 4 0.60 Growth this growth Prepare for now End of TE monopoly O2 0.050 3 0.15 opportunities (2nd. 2005 Operator) More customers O3 Increased tariff of TE 0.065 3 0.20 prefer prepaid EMBA Cairo 12 Rennes International School of Business
  • Low interest rate & O4 New monetary policy 0.030 3 0.09 investment cost Lobby to fight illegal New Telecom law & O5 0.130 3 0.39 competition & empowering TRA balance TE power Nile Telecom might Prepare to take their O6 0.060 4 0.24 be out of market market share Neighbour O7 0.024 3 0.072 Exporting Experience Developed countryThreats Scratch market T1 0.090 3 0.27 Due to new licenses growth Likely to continue T2 Economy slowdown 0.075 3 0.225 during 2003 Floating of Egyptian Increased cards & T3 0.075 3 0.225 pound spare parts cost. Lobby to solve T4 TE power still high 0.100 3 0.30 disputes to our favour. New payphone Nile Telecom might T5 0.050 3 0.15 license (Unknown go bankruptcy competitor) Increased number of Illegal competition of T6 0.075 3 0.225 substitutes street mobile Middle East political Iraqi war and T7 0.026 2 0.052 instability Palestine conflict. Total 1.00 3.189I believe that Menatel performance is average we need to move faster to seize currentopportunities. 4-2 Internal Environment Analysis 4.2.1 Firm analysis  Menatel Vision.To be the leaders in Egypt in the field of public pay-phone service as well as the leader assmart card issuer.  Menatel Goals, Exceptional customer satisfaction. Inspired, Innovative and Empowered Employees. Superior Financial Results.  Menatel Values, Customer First:In order to achieve total customer satisfaction, we anticipate, perceive, fulfil and exceed ourcustomer’s needs and expectations. Integrity In All We Do:Our actions and decisions seek the highest professional standards.EMBA Cairo 13Rennes International School of Business
  • Excellence Through Quality:We individually and collectively use Menatel quality in our daily activities to achieveexcellence as a company. Respect For Others:We care for our company, our work, and our customers as well as we care for each other.This caring is the unique source of our company’s energy, strength and excellence. Respect For Our Environment:We do not pollute. We maintain perfect cleanliness for our equipment and use energy savingtechnology. Growth through change:We will grow as a company, as individuals and as professionals by aspiring towards change,and responding to it creatively. 4.2.2 Internal Resource & Competences  ResourcesThe key success of Menatel is that Menatel manages all its resources tangible and intangiblein a way that optimizes maximum use of all the resources to gain maximum efficient use ofthem.  Tangible Resources Financial AssetsMenatel managed to maximize the use of its negative working capital situation by conductinga very aggressive approach that lead to breaking even 8 months ahead of plans. This in turnyielded in a remarkable high ROE of 40 %, as the source of investment was the recycle ofexcess cash flow. Physical AssetsAs Menatel successfully managed to optimize the use of its physical assets (LAN, PayphonesNetwork, Branches) to achieve effective communication between all employees whichfacilitated running the project in a productive and efficient way. Also, Menatel managed tooptimize the use of its database (Menaprod) achieving full management of the business,which means conducting and analyzing its results.  Intangible ResourcesEMBA Cairo 14Rennes International School of Business
  • Human ResourcesMenatel recruitment policy is to recruit self-motivated and business oriented stuff to ensurequality and productivity in the workflow. Also, Menatel conducts a semi - annual employee’sobjective - appraisal by which Menatel aims at: 1. Measuring employee’s skills and performance in coherence with Menatel objective. 2. Determining whether new or different tasks need to be added or adjusted. 3. Nominating the needed courses, training or workshops in coherence with the new tasks added or modified. Technology 1. Menatel System TechnologyMenatel uses on-line payphone management system (Centralize Management Network)unlike the off-line system; it provides a remote monitoring of equipment, which allows on sitemaintenance in real time by Menatel employees. 2. Smart Card TechnologyMenatel uses smart cards, which are the highest existing technology for cards not only forPayphones but also, for Banks and Mobiles. ReputationThrough its lifetime in the Egyptian market Menatel obtained a good reputation through verydistinctive services to its customer: 1. Using the most advanced technology in the market. 2. Dedicating six customer service-centres to achieve total customer satisfaction. 3. Guarantying high quality service to its payphones in field by Menatel highly- trained team of technicians. 4. Safeguard environment by a high quality of cleaning and maintenance to Menatel booths in field on daily basis by a sub-contractor. 5. Adhering to its financial commitments towards Governmental Institutions, subcontractors and suppliers.  Competences Sales & Distribution PolicyMenatel Policy for sales & distribution based on three main trends:-EMBA Cairo 15Rennes International School of Business
  • 1. Cards distributed through Main Distributors (7 Main Dis.) 2. Cards distributed through Sub Distributors (12 Sub Dis.) 3. Cards distributed through Menatel Sales Force (130 Sales Rep.)This allows Menatel to cover 26 Governorates and 45,000 sales point to insure availability ofMenatel Card everywhere. Customer ServiceMenatel ensures a customer service hot line, only dedicated to receiving customer’s calls inorder to help the users and receive their comments on commercial or technical aspectsthrough 6 Customers Centers covering all of Egypt. MaintenanceMaintenance is ensured by highly trained groups of Egyptians Engineers supported by FrenchExperts, highly trained and skilled technicians, and equipped by the highest on-linetechnology to monitor and maintain Menatel payphones network all over Egypt. Booth & PedestalMenatel Booth and pedestals are in stainless steel, specially designed to prevent shocks andrust. Menatel’s Booth & Pedestals are locally manufactured.Menatel is not required to further dig in order to connect to the light post in streets, fortelephone use. The power needed by the payphones line itself is at low energy thanks to thechip memory used by Menatel. This provides 100 % safety to our customers since they faceno risk of electric shock. 4.2.3 Supply and Value chain analysis  Supply chainMenatel suppliers are categorized by three types, the first one is the only fixed line supplier(Telecom Egypt), the second is all the domestic suppliers, and the third is all the foreignsuppliers (mainly Menatel cards, payphones, and spare parts) Menatel manages this processthrough two systems, the first system process can be described as follows; it started by thepayphone distribution department to request directly the lines from TE through a committeeby a paper request, then to forward the retain lines to the PMS division for creating new linesIDs and then to be send to maintenance division to be received on the out-door distributionboxes, all these steps are by sharing Menatel data base (Menaprod). For the second and theEMBA Cairo 16Rennes International School of Business
  • third supplier providing Menatel with all the equipments needed to have a payphone In-Operation, Menatel second system process is based on sending a purchase order (PO) to thesupplier after the approval of the purchase requisition (PR) of the concerned division. Thelogistic (WH) is to receive the orders and dispatch them each to its concerned division, mainlyto the distribution cards division (Menatel cards), and production division (payphones, booths& pedestals, and spar parts). This is done by a normal logistic paper work cycle, and all thedata transaction is saved on Menatel data base (Menaprod).The diagram of annex (9-6)shows Menatel supply chain.  Value chainThe diagram of annex (9-7) shows Menatel value chain. The system start with the commercialagents survey to allocate best locations according to Menatel code, the commercial agentsupdate Menaprod (ORACLE designed data base) with these locations technical data (adders,type) in the commercial field, request fixed lines for these locations by manual system (paperrequest) using Fax technology, and update line request table (date, invoice number). As thelines retained by TE (the sole provider of fixed lines) the commercial agents update Menaprod(line retain date). The PMS (payphone management system) creates these lines andcharacterizes them by IDs in the PMS Field of Menaprod, and at the same time, publicrelation team requests digging permits from districts authorities using manual system(papers). At this stage also the maintenance team starts receiving lines. When diggingpermits are obtained the PR team updates Menaprod with digging date, this will generate civilwork needed report, and the production team generates this report by using production teamfield on Menaprod. In the same time logistics receive orders to deliver equipments to Menatelsubcontractors (manual system). The production team follows all installation steps till allequipments are installed, updating all the concerned dates waiting for maintenance team toreceive line date to finally installing the payphones. As the payphone is In Operation (PMSteam provides daily reports of the new payphones IO), the maintenance team updatesMenaprod with IO date, and thus closing the Menaprod cycle.Menatel recognizes that the operation cost is an important element to have a competitiveadvantage. Menatel strategy is to get the job done, to achieve Menatel target as fast as wecan and in the same time controlling the operation cost, and accelerating the productionEMBA Cairo 17Rennes International School of Business
  • outputs. Menatel succeeded in achieving more than what was expected, and by starting theoperation four month behind the direct competitor we managed to put the first 20,000payphones in operation all over Egypt two years ahead our schedule, this puts Menatel in astrong financial and commercial position. 4.2.4 IT analysis  Menatel LAN and communication organizationMenatel operates four different branches to ensure closer look at the consumers natures andbehaviors, all linked with the HQ by domestic WAN using frame relay technology in a starconnection, this ensures direct and on-line communication among all levels of theorganization. In addition to this desk communication, all menatel staff is provided with mobilelines using GSM technology to ensure effective communication for out-door sites. Menatelalso has a reporting system (weekly & monthly) to share internal information betweendifferent levels, and meetings system to share information between different departments.This is to ensure effective communication at all directions of the organization. This kind oforganization saves Menatel time and money, and provides Menatel with the flexibility to anytechnological change requirements.  Data base (Menaprod)Menatel designs, operates and installs a data base (Menaprod) shared to all Menateloperation activities commercial, production, public relation, PMS, maintenance, branches, andfinancial. The Menaprod (designed and built by ORACLE) enhances production process andaccelerates having payphones in-operation. One of Menatel managers is dedicated tomaintaining the effectiveness and efficiency of Menaprod, also operating daily updating toMenaprod and weekly backup to the data for hedging risks.  PMS (payphones management system)Payphone management system, regarding the fact that Menatel strategy is to ensure superiorservice, it decided, from the start, to operate and manage its network by using Ascom V7technology, that enabled Menatel to monitor payphones, on-line, effectively, and efficiently.This increases the total in-operation time for payphones, and provides Menatel with a widevariety of options and promotions to the customers, that means a marketing advantage, i.e.more customers, and more revenue.EMBA Cairo 18Rennes International School of Business
  •  Service Quality Maintenance operation is one of Menatel core competences, the maintenance team main activities are; receiving lines, solving payphones incidents, following booth maintenance and cleaning, and managing Menatel spare parts. 4.2.5 Leadership & Management Menatel leadership and top management describe the MD and the five directors who control the steering wheel of Menatel, recently and due to the lack of the MD role in maintaining Menatel soul and culture, as well as the straggle of power and authority among the five directors, which resulted in five isolated islands managed by different styles with no synergy among them. Knowing that, Menatel family spirit was a key element of Menatel success story and that to have payphones in-operation depends on full commitment and effective communication among all departments, thus, explain the importance of the leadership role in maintaining Menatel performance level. I strongly believe that Menatel leadership and top management weakness affect the continuity of Menatel operational process synergy and is a major reason of Menatel performance drop. By the above discussions of all the points related to Menatel performance in all its internal activities and departments we can sum-up all Menatel performance in the following table: PERFORMANCE IMPORTANCE Strength Weakness High Med Low FINANCE Cost or availability of capital   Cash flow   Financial stability   HR & administration 4 H IT management 4 H COMMERCIAL Company reputation   Market share   Customer satisfaction   Customer retention   Product quality   Pricing effectiveness   Distribution effectiveness 4  Promotion effectiveness   Sales force effectiveness   Innovation effectiveness   Geographical coverage   TECHNICAL Service quality   Booth shape maintenance 4  Payphone technology   EMBA Cairo 19 Rennes International School of Business
  •  Card technology   ORGANIZATION Visionary, capable leadership 4  Dedicated employees 4  Entrepreneur orientation   Flexible or responsive   LOGISTIGS Security & premises   Purchases system 4  Warehouse system   Transportation & vehicles 4  BUSINESS DEVELOPMENT (R&D) New projects 4  Auditing process 4  New business indicators 4  4-3 Internal Environment Analysis findings Using the internal factor analysis summary (EFAS) to sum-up the analysis finding in the hereunder table rating Menatel strengths and weakness in away that prioritize them to have better view and analysis. Strengths Weight Score Weighted Score Comment Learn from related Strong management S1 0.075 4 0.30 experiences & with FCR know-how. benchmarking Established Considered one of the best S2 0.050 4 0.20 distribution network. in Egypt Market leader & Dominant company S3 0.075 3 0.225 strong brand name position. Strong financial Cash method, no credit S4 0.080 5 0.40 position. policy. High quality of service Need to be maintained, S5 0.045 4 0.18 & coverage competitive advantage. Utilized functional & matrix S6 Slim organization 0.035 3 0.105 organization. Deep knowledge of Ability to meet new S7 Indirect competitors 0.060 4 0.24 challenges in the market. business economics Highly trained & Ability to be export S8 0.080 5 0.40 skilled employees expertise Weaknesses Stagnant organization, New Depts needed, start W1 0.090 2 0.18 no clear career path. with HR. Customer service W2 0.060 2 0.12 Call center is needed function not utilized Marketing less Market watch, market W3 structured & unclear 0.100 3 0.30 analysis, & PR strategy Expenditures are W4 affected by exchange 0.060 3 0.18 Seek hedging tools. rate. W5 Spare parts shortage 0.060 3 0.18 Strategic stock needed EMBA Cairo 20 Rennes International School of Business
  • Distributors’ Avoid out of stock W6 0.055 3 0.165 coordination. situations Maintenance vehicles Revisit cars policy & W7 0.025 3 0.075 operating cost control procedures Premises needs Limited org. growth W8 0.050 3 0.15 expansion potentials Total 1.00 3.40The analysis shows that menatel is doing slightly over average, but I strongly believe thatmenatel can do better if we work or try to eliminate our weakness and I strongly recommendthat the key to this is HR and people management developments along with internal synergy. 4-4 SWOT matrix of MenatelGetting Menatel through SWOT analysis will help better view the Opportunity or Threat arisingfrom current market conditions. STRENGTHS WEAKNESSES  Strong management with  Stagnant Organization, FCR know-how. Unclear Career path.  Market Leader & Strong  Marketing less structured & Brand Name. Unclear Strategy.  Strong financial position. OPPORTUNITIES SO Strategies WO Strategies  New Strategic Plan aiming at exploring the expected opportunities in Telecom  Revisit Org. Chart  Telecom Market Growth market.  Revisit marketing functions.  New Telecom Law & Empowering  Benefit from our cash position  Revisit Customer Service & TRA to finance our development Card Distribution. plans  Second Operator as strategic Target after 2005 THREATS ST Strategies WT Strategies  Side effects of economic New strategy to be adapted under recession & decreased consideration: buying power.  Slow growth with close  Economy slow down.  Staff frustration and monitoring to the market.  Floating of Egyptian Pound. decrease of productivity  Advanced hedging &  Increasing number of substitutes and efficiency financing techniques.  Consumers attracted by  Advanced marketing & Sales lower priced substitutes, we Techniques. might face price wars.By the SWOT analysis Menatel strategic alternatives are:  New strategies aiming at exploring the expected opportunities in telecom market  Benefit from our cash position to finance our developments plans  Second operator as strategic target after 2005  Slow growth with close monitoring to the market  Advanced hedging & financial techniquesEMBA Cairo 21Rennes International School of Business
  •  Advanced marketing & sales techniques  Revisit Org. Chart  Revisit marketing functions  Revisit Customer Service & Card Distribution  Side effects of economic recession & decreased purchasing power  Staff frustration and decrease of productivity and efficiency  Consumers attracted by lower priced substitutes, we might face price wars 5- STRATEGY FORMULATION The SWOT analysis has some weakness by itself, that it shows no prioritization of the findings or weight. To solve this weakness a new matrix has been developed, which is the SFAS matrix. 5-1 Strategic factor analysis summary (SFAS) Working on both EFAS & IFAS findings and ratings we can sum-up both in the following table: Weighted Duration Strategic factors Weight Score Comment Score Short Intermediate Long Follow a corporateO1 Telecom Market Growth 0.150 4 0.60 X X X growth strategy. New potential New Telecom. Law &O5 0.130 3 0.39 X opportunities in Empowering TRA Telecom Market. Slow growth withT2 Economy slowdown 0.075 3 0.23 X X close monitoring. Cost EfficiencyT3 Floating of Egyptian pound 0.100 3 0.30 X policy & Hedging Techniques. Increased Number of Advanced MarketingT6 0.075 3 0.23 X Substitutes & Sales Techniques. Strong management with FCR Maintain parentingS1 0.090 4 0.36 X know-how. relationship Market Leader& Strong Brand Maintain positionS3 0.100 3 0.30 X X Name and capitalize on it. Avoid high financialS4 Strong financial position. 0.100 5 0.50 X X exposure in hard currency. Stagnant organization, no Complete org.W1 0.080 2 0.16 X clear career path. structure. Marketing less structured & Refine marketingW3 0.100 3 0.30 X X Unclear Strategy. strategy &Tools. Total 1.00 3.36 Revising Menatel mission and objectives to see if the findings of the analysis and the strategic alternatives implementation will match, we can rephrase Menatel mission and objectives as follows: 5-2 Menatel rephrased mission EMBA Cairo 22 Rennes International School of Business
  • To invest in the telecom market by providing high quality voice communication to the out-doorconsumers all over Egypt. 5-3 Menatel visionTo be the leader in smart card prepaid payphone business. 5-4 Menatel rephrased objectives  Extend menatel network to become 33,000 payphones by the end of 2008.  Maintain average revenue of 32 LE/PP/day over the year.  Maintain 60 % of payphones distribution market share.  Maintain quality of service of 97 %.  Low revenue payphones should not exceed 10 % of total number of payphones in- operation with revenues per month.  Reallocate payphones with revenue of less than 30 % of the average revenue per area without losing locations.  Extend distribution channels by increasing sales points by 20 % annually.  Maintain ROI of 12 %.  Maintain ROE of 30 %.  Maintain NPM of 16 %. 5-5 Menatel strategiesMenatel is considered a small to medium size company that is why menatel corporate andbusiness strategies are not separated and actually we can consider both strategies are thesame. Menatel global strategy is to ensure payphones wherever needed and reachable pointsof sales distributed around Menatel payphones to ensure an effective availability to Menatelcustomers. 5.4.1 Corporate and Business strategy  Corporate growth strategy by expanding Menatel network with new off-line payphones.  Business competitive strategy by being unique towards competitors through: Payphones distribution. Cards availability everywhere. Skilled management.EMBA Cairo 23Rennes International School of Business
  • Total quality payphones services. 5.4.2 Functional strategy  Marketing strategy; Possession; to use market development strategy by developing new market (small and medium villages). Product; to use product development strategy by introducing new payphone type (off-line payphones). Promotions; to use a pull strategy by increasing our advertisings to increase customers’ demands. Price; to use no change strategy by applying the same service tariff.  Financial strategy; To use an autarky strategy by not relying on borrowing and Long-term debts as a source of capital. To use a hedging strategy by minimising the exchange rate volatility risk.  R&D Strategy; To use technological leader strategy by being pioneer in interring new services (obtaining new licenses).  Operations strategy; To use continuous improvement strategy by increasing Menatel employees experience and knowledge and process standardization.  Purchasing strategy; To use a multiple sourcing strategy by having more than one source for Menatel purchasing needs and depending on high quality local suppliers .  Logistic strategy; To use centralized strategy by delivering all Menatel equipments and cards to contractors and distributors through Menatel warehouse located in the head- quarter.  (HRM) strategy; To use quality strategy by recruiting highly skilled and trained employees.  Information system strategy;EMBA Cairo 24Rennes International School of Business
  • To use superior quality strategy by using high quality reliable equipments. To use internal and external customer satisfaction strategy by operating On- Line payphone system to have high quality after sales services. To use effective communication strategy by enhancing internal connections building strong data base and efficient networks. 5-6 Policies & Values  Policies. Market share growth. Resources optimization. Cost control. Preventive maintenance. Process standardization.  Values. Enjoy communication with passion. Feel, Think, and Act as number one. Be ready Create value $. Perform Together. 6- STRATEGY IMPLEMENTATION 6-1 Programs  Reallocation program.  Levelling and restructuring organisation program.  Off-line payphone program. 6-2 Budgets  1,000,000 LE will be allocated to the reallocation program about 20 % out of the maintenance budget to reallocate 1000 payphone annually.  1,200,000 LE will be allocated to the levelling and restructuring organisation program about 4 % of the G&A budget to revise all Menatel salaries and positions andEMBA Cairo 25Rennes International School of Business
  • reengineer Menatel current organisation structure to cope with Menatel strategy and future expectations.  6,000,000 LE will be allocated to the Off-line payphone program about 12 % out of the retained earnings to put 1000 payphones In-Operation annually. Cost effective analysis for three years of the programs, by the end of 2008. With programs executed Items Without programs optimistic Most likely pessimisticRevenue (increase) 0 65,700,000 LE 49,275,000 LE 32,850,000 LERelevant cost 0 22,200,000 LE 22,200,000 LE 22,200,000 LE(increase)Training & HR cost 0 3,000,000 LE 3,000,000 LE 3,000,000 LEprofit 0 40,500,000 24,075,000 LE -1,935,000 LE 6-3 Procedures & Action plans  Reallocation program. Program objectiveIs to reallocate 1000 Menatel PD2 locations (locations with 2 payphones) with averagerevenue for both payphones les than 30 LE/day/location to new locations PD1 (locations with1 payphone) with expected revenue more than 25 LE/day/payphone within a budget of1,000,000 LE per year. Program activities 1. Revenue analysis to determine the PD2 locations to be transfer to new location 2. New locations survey and updating the data base 3. Checking the network and digging permits availability 4. Request lines transfer 5. Request digging permits 6. Receiving retain lines 7. Start civil work 8. Install booths and put payphone in-operationEMBA Cairo 26Rennes International School of Business
  • 9. Monitor new location in terms of revenue.Action steps Responsibility Start End Duration1-  Collecting data  PMS team 1/1/2005 7/1/2005 Quarterly  Analysing data  Commercial team 8/1/2005 15/1/2005 Quarterly  List of low revenue PD2  Commercial team 15/1/2005 15/1/2005 Quarterly  Distribute to Branches  Commercial team 16/1/2005 16/1/2005 Quarterly2-  Survey new location  Commercial agents 1/1/2005 14/1/2005 Monthly  Revise with managers  Payphone distribution Mg. 15/1/2005 16/1/2005 Monthly  Update Menaprod  Commercial agents 16/1/2005 16/1/2005 Monthly3-  Checking network availability  Maintenance team 17/1/2005 21/1/2005 Monthly  Checking digging availability  Public relation team 17/1/2005 21/1/2005 Monthly  Report to commercial  Maintenance supervisor 22/1/2005 22/1/2005 Monthly4-  Request line transfer  Commercial agent 22/1/2005 26/1/2005 Monthly  Follow line transfer with TE  Commercial agent 27/1/2005 27/1/2005 Monthly  Update line retain on Menaprod  Commercial agent 27/1/2005 27/1/2005 Monthly  Report to maintenance supervisor  Commercial agent 27/1/2005 27/1/2005 Monthly5-  Request digging permits  PR team with subcontractors 22/1/2005 26/1/2005 Monthly  Follow digging request  PR team 27/1/2005 27/12005 Monthly  Report digging obtained  Production supervisor 27/1/2005 27/12005 Monthly  Update digging permits on Menaprod  Production supervisor 27/1/2005 27/1/2005 Monthly6-  Create new lines ID  PMS team 27/1/2005 27/1/2005 Monthly  Receiving lines retain  Maintenance team 28/1/2005 29/1/2005 Monthly  Update lines received  Maintenance team 29/1/2005 29/1/2005 Monthly7-  Civil work order  Production supervisor 27/1/2008 28/1/2005 Monthly  Update on Menaprod  Production supervisor 28/1/2005 28/1/2005 Monthly8-  Old ID closed & initialize new ID  PMS team 28/1/2005 28/1/2005 Monthly  Install booths order  Production supervisor 28/1/2005 29/1/2005 Monthly  Install payphone order  Production supervisor 29/1/2005 30/1/2005 Monthly  Update Menaprod  Production & maintenance supervisor 30/1/2005 30/1/2005 Monthly9-  Collecting data  PMS team 1/2/2005 1/2/2005 Weekly  Analysis of data  Commercial agent 1/2/2005 1/2/2005 Weekly  Report to managers  Commercial agent 2/2/2005 3/2/2005 Weekly  Report to top managers  Payphone distribution Mg. 3/2/3005 3/2/2005 Monthly EMBA Cairo 27 Rennes International School of Business
  •  Levelling and restructuring organisation program. Program objective Is to revise Menatel salary policy and organisation structure and reengineer Menatel organisation structure to cope with new strategy and to enhance staffing policy within a budget of 1,200,000 LE. Program activities 1. Identify 3 best HRM consultants for reengineering organisation structure. 2. Ask 3 HRM consultants to submit a proposal for the new structure and salary policy plan. 3. Consultants present proposals to administration director. 4. Select best proposal and inform consultant. 5. Consultant present winning proposal to MD. 6. Implement new policy. 7. Measure and evaluate new policy.Action steps Responsibility Start End Duration1-  Review previous policy & structure  HR manager 1/1/2005 1/2/2005 One month  Discuss with administration director  HR manager & Adm. Director 1/2/2005 5/2/2005 One week  Decide on 3 HRM consultants  HR manager & Adm. Director 5/2/2005 12/5/2005 One week2-  Write Menatel code and specifications  Adm. Director 12/2/2005 14/2/2005 Two days  Write consultant request  HR manager 14/2/2005 14/2/2005 One day  Contact consultants  HR manager 15/2/2005 15/2/2005 One day  Send request to consultants  HR manager 16/2/2005 16/2/2005 One day  Meet with consultants  HR manager 17-19/2/2005 19/2/2005 One day3-  Consultants work on proposals  Consultant agency 20/2/2005 31/3/2005 Five weeks  Consultants present proposals  Consultant agency 1/4/2005 7/4/2005 One week4-  Select best proposal  HR manager & Adm. Director 7/4/2005 14/4/2005 One week  Meet with winning proposal  HR manager & Adm. Director 15/4/2005 15/4/2005 One day  Inform non winning consultants  HR manager 16/4/2005 16/4/2005 One day5-  Fine-tune proposal  HR manager & Adm. Director 16/4/2005 18/4/2005 Two days  Presentation to top management  Adm. Director & MD 20/4/2005 20/4/2005 One day6-  Meeting with managers  Adm. Director & MD 21/4/2005 21/4/2005 One day  Meeting with supervisors  Managers 22/4/2005 22/4/2005 One day EMBA Cairo 28 Rennes International School of Business
  •  Meeting with staff  Supervisors 23/4/2005 23/4/2005 One day  Formal announcement  HR manager & executive secretary 24/4/2005 24/4/2005 One day7-  Internal customer satisfaction survey  HR manager 30/7/2005 30/8/2005 Twice a year  Evaluate performance  HR manager & managers 1/1-30/6 30/1-30/7 Twice a year  Compare monthly production  managers Month ending Month ending monthly improvements  Off-line payphone program. Program objective The objective is to increase Menatel payphone coverage, by introducing the new off-line payphones to small villages, and remote areas within a budget of 6,000,000 annual investments. Program activities 1. New locations survey and updating the data base 2. Checking the network and digging permits availability 3. Request new lines 4. Request digging permits 5. Receiving retain lines 6. Start civil work 7. Install booths and put payphone in-operation 8. Monitor new location in terms of revenue. Action steps Responsibility Start End Duration 1-  Survey new location  Commercial agents 1/1/2005 14/1/2005 Monthly  Revise with managers  Payphone distribution Mg. 15/1/2005 16/1/2005 Monthly  Update Menaprod  Commercial agents 16/1/2005 16/1/2005 Monthly 2-  Checking network availability  Maintenance team 17/1/2005 21/1/2005 Monthly  Checking digging availability  Public relation team 17/1/2005 21/1/2005 Monthly  Report to commercial  Maintenance supervisor 22/1/2005 22/1/2005 Monthly 3-  Request line transfer  Commercial agent 22/1/2005 26/1/2005 Monthly  Follow line transfer with TE  Commercial agent 27/1/2005 27/1/2005 Monthly  Update line retain on Menaprod  Commercial agent 27/1/2005 27/1/2005 Monthly  Report to maintenance supervisor  Commercial agent 27/1/2005 27/1/2005 Monthly EMBA Cairo 29 Rennes International School of Business
  • 4-  Request digging permits  PR team with subcontractors 22/1/2005 26/1/2005 Monthly  Follow digging request  PR team 27/1/2005 27/12005 Monthly  Report digging obtained  Production supervisor 27/1/2005 27/12005 Monthly  Update digging permits on Menaprod  Production supervisor 27/1/2005 27/1/2005 Monthly 5-  Create new lines ID  PMS team 27/1/2005 27/1/2005 Monthly  Receiving lines retain  Maintenance team 28/1/2005 29/1/2005 Monthly  Update lines received  Maintenance team 29/1/2005 29/1/2005 Monthly 6-  Civil work order  Production supervisor 27/1/2008 28/1/2005 Monthly  Update on Menaprod  Production supervisor 28/1/2005 28/1/2005 Monthly 7-  Old ID closed & initialize new ID  PMS team 28/1/2005 28/1/2005 Monthly  Install booths order  Production supervisor 28/1/2005 29/1/2005 Monthly  Install payphone order  Production supervisor 29/1/2005 30/1/2005 Monthly  Update Menaprod  Production & maintenance supervisor 30/1/2005 30/1/2005 Monthly 8-  Collecting data  PMS team 1/2/2005 1/2/2005 Weekly  Analysis of data  Commercial agent 1/2/2005 1/2/2005 Weekly  Report to managers  Commercial agent 2/2/2005 3/2/2005 Weekly  Report to top managers  Payphone distribution Mg. 3/2/3005 3/2/2005 Monthly  Staffing and training The HR department will provide the necessary training to all the involved persons to in reach there skills. The table below shows the recommended programs for the involved persons.Program Name Duration Target Audience Objective Cost Understand the important of communicationsBasic Communication 2 Days All Levels 225 LE/day/person in the organization. Getting around obstacles that prevent teamTeamwork 1 Day All Levels 225 LE/day/person success and build an effective team. Improving analysis skills for identifyingProblem Solving 2 Days All Levels problems and recommending creative 225 LE/day/person solutions that help the organization.Customer Orientation 3 Days All Levels Understand customer satisfaction. 225 LE/day/person Understand the important of effectiveNegotiation Skills 2 Days Commercial persons 225 LE/day/person negotiation to the organization Understand the role of supervisor, understandSupervisory Skills 4 Days Supervisors 225 LE/day/person people, how to manage people. Understand quality and quality process;Service Quality 2 Days Technicians understand the important of customer 225 LE/day/person satisfaction. EMBA Cairo 30 Rennes International School of Business
  • 7- EVALUATION AND CONTROLLING 7-1 Preliminary controlling (input controlling). Nominated quality control committee of technical, financial, and logistics departments is to approve all Menatel purchases according to Menatel codes of quality. 7-2 Steering controlling (process controlling). Menatel monthly performance report is to monitor and control Menatel performance and strategy implementation during Menatel Senior Managers bimonthly meetings. The tables below show the recommended measurements indicators of commercial, technical and financial performance for monthly controlling and follow up.  Operational monthly report. Operational Monthly performance year 2003 objectives indicators 1 2 3 4 5 6 7 8 9 10 11 12Technical Civil work Target done(per pp) Achieved Accumulated CW Target done (per PP) Achieved Target Booths installed Achieved Target Accumulated BI Achieved Availability Target Network (% QS) Achieved Payphones Target installed Achieved TargetAccumulated PPI Achieved Target Payphones IO Achieved Accumulated PP Target IO AchievedCommercial Target Lines retain Achieved Target Accumulated LR Achieved Lines transfer Target reallocation Achieved TargetAccumulated LTR Achieved Private locations Target (Per line) AchievedAccumulated PrL Target (Per line) Achieved Public locations Target (Per line) AchievedAccumulated PbL Target (Per line) Achieved Menatel 10 LE Target soled (volume) Achieved Accumulated 10 TargetLE soled (volume) Achieved EMBA Cairo 31 Rennes International School of Business
  • Menatel 15 LE Target soled (volume) Achieved Accumulated 15 Target LE soled (volume) Achieved Average Target revenue/PP/day Achieved Number of PP low Target revenue Achieved Target Lines paid Achieved Target Accumulated LP Achieved  Financial Financial Monthly performance year 2003 objectives accumulated indicators 1 2 3 4 5 6 7 8 9 10 11 12 TargetSales (revenues) Achieved Menatel 10 LE Target soled (value) Achieved Menatel 15 LE Target soled (value) AchievedNet cash received Target (millions LE) Achieved Target Expenditure Achieved Target EBIT Achieved Target Gross profit % Achieved TargetNet profit/loss % Achieved Target OPM % Achieved Target NPM % Achieved Target ROI Achieved Target ROE Achieved  Total Quality Feedback & control In addition, we recommend to design a process for quality operation, the block diagram bellow shows the recommended process guided by TQM philosophy that involves every one of Menatel value chain including the contractors assigned for production, booth maintenance, and cleaning, on continuous effort to improve quality and achieve customer satisfaction. The process is based on that each block represents a step in the operation each step is controlled and supervised by a person in charge, who knows his objective and collect the results. Before and after each block or step a check quality test is done by random sampling to insure quality at the source. EMBA Cairo 32 Rennes International School of Business
  • Civil, Booth, Payphone & Payphone Cleaning & Line PMS Line Maintenance Booth Request Installing Received Cabling Installing & Spare Parts MaintenanceQuality Check Quality Check Quality Check Quality Check Quality Check Quality Check Quality Check Test Test Test Test Test Test Test Reporting System Reporting System Reporting System Reporting System Deviation Control Reporting System 7-3 Feedback controlling (output controlling) Menatel quarterly trend performance report is to monitor and control mental performance and strategy implementation during a Board of Directors and Menatel MD quarterly meetings. The tables below show the recommended measurements indicators of commercial, technical and financial performance for quarterly controlling and follow up. Operational (Technical/Commercial) Quarterly trend performance year 2003 Operational Semester 1 Semester 2 Semester 3 Semester 4 Semester 1 Semester 2 objectives indicators (31/3) (30/6) (30/9) (31/12) (31/3) (30/6) 2003 2004 2003 2004 2003 2004 2003 2004 2004 2005 2004 2005 Technical Civil work Target done(per pp) Achieved Accumulated CW Target done (per PP) Achieved Target Booths installed Achieved Target Accumulated BI Achieved Availability Target Network (% QS) Achieved Payphones Target installed Achieved Target Accumulated PPI Achieved Target Payphones IO Achieved Accumulated PP Target IO Achieved Commercial Target Lines retain Achieved EMBA Cairo 33 Rennes International School of Business
  • Target Accumulated LR Achieved Lines transfer Target reallocation Achieved Target Accumulated LTR Achieved Private locations Target (Per line) Achieved Accumulated PrL Target (Per line) Achieved Public locations Target (Per line) Achieved Accumulated PbL Target (Per line) Achieved Menatel 10 LE Target soled (volume) Achieved Accumulated 10 Target LE soled (volume) Achieved Menatel 15 LE Target soled (volume) Achieved Accumulated 15 Target LE soled (volume) Achieved Average Target revenue/PP/day Achieved Number of PP low Target revenue Achieved Target Lines paid Achieved Target Accumulated LP Achieved Financial Quarterly trend performance year 2003 Financial Semester 1 Semester 2 Semester 3 Semester 4 Semester 1 Semester 2 Objectives Accumulated indicators (31/3) (30/6) (30/9) (31/12) (31/3) (30/6) 2003 2004 2003 2004 2003 2004 2003 2004 2004 2005 2004 2005 Sales Target (revenues) AchievedMenatel 10 LE Targetsoled (value) AchievedMenatel 15 LE Targetsoled (value) Achieved Net cash Target received Achieved (millions LE) Target Expenditure Achieved Target EBIT Achieved TargetGross profit % AchievedNet profit/loss Target % Achieved Target OPM % Achieved Target NPM % Achieved Target ROI Achieved Target ROE Achieved EMBA Cairo 34 Rennes International School of Business
  • 8- REFERENCES  Menatel internal data, Annual report 1999-2003  Thomas L. Wheelen & J. David Hunger, Strategic Management & Business policy, Eighth Edition.2004.  Philip Kotler, Marketing Management, Eleven Editions. 2003  Fundamentals of Corporate Finance, Ross Westerfield Jordan, sixth edition, 2003  Pre-reading materials & slides, Serge Oreal, July 2004  Menatel retail audit reports 2001-2004 (MEMRB).  www.idsc.gov.eg  www.tra.gov.eg  http://www.cia.gov/cia/publications/factbook/  http://www.amcham.org.eg/EMBA Cairo 35Rennes International School of Business
  • 9- ANNEXES 9-1 Menatel Balance sheets As of December, 31, 2003, 2002, 2001, 2000, 1999 2003 2002 2001 2000 1999Assets Current assets cash 178.2 160.21 107.01 63.14 12 Accounts receivable 25.68 37.79 43.18 31.48 4.47 Inventory 20.30 27.19 17.52 12.55 3.7 Total 224.3 225.2 167.7 107.18 21.9 Fixed assets Net plant and equipment 205.85 215.04 191.9 141.72 79.93 Total assets 430.15 440.02 359.6 248.9 101.8Liabilities & owners equity Current liabilities Accounts payable 243.79 266.08 170.53 109.1 9.12 Notes payable 13.25 13.25 6.18 4.7 6.8 Total 257.04 279.33 176.7 113.8 15.92 Long-term debt 33.13 46.37 55.65 52.9 36.44 Owners equity Common stock 70 70 70 70 49.44 Retained earnings 69.98 44.32 57.34 12.12 0 Total 139.98 114.32 127.34 82.2 49.44 Total liabilities and owners equity 430.15 440.02 359.6 248.9 101.8 EMBA Cairo 36 Rennes International School of Business
  • 9-2 Menatel Statements of cash flowAs December, 31, 2003, 2002, 2001, 2000, 1999 2003 2002 2001 2000 1999Cash, beginning of the year 160.21 107.01 63.14 12 0Sources of cashOperationNet income 25.66 46.77 49.93 11.85 -3.07Depreciation 33.04 29.14 21.73 13.58 7.53Total 58.70 75.91 71.66 25.49 4.46Working capitalIncrease in accounts payable -22.29 95.55 61.43 79.42 9.12Long-term financingIncrease in common stock 0 0 0 20.56 56.88Total sources of cash 36.41 171.46 133.09 149.32 70.46Uses of cashWorking capitalIncrease in accounts receivable -12.11 -5.40 11.70 27.01 4.47Increase in inventory -6.89 9.67 4.97 8.85 3.7Decrease in notes payable 0 7.07 1.48 -2.10 6.8Long-term financingDecrease in long-term debt 13.24 9.28 -2.75 -16.46 -36.44Fixed assets acquisitions 9.19 23.14 50.18 61.79 79.93Dividends paid 14.87 74.50 23.64 7.09 0Total uses of cash 18.30 118.26 89.22 86.18 58.46Cash end of the year 178.32 160.21 107.01 63.14 12EMBA Cairo 37Rennes International School of Business
  • 9-3 Menatel Statements of income For the fiscal year ended December, 31, 2003, 2002, 2001, 2000, 1999 2003 2002 2001 2000 1999 Sales (revenues) 321.9 351.44 295.22 196.88 39.75 Direct cost 222.1 239.43 184.1 132.77 29.15 Gross operating profit 94.8 112.01 111.12 64.11 10.6 Marketing & sales cost 33 37.94 34.8 27.02 2.7 G & A cost 29.97 27.2 23.92 19.04 6.6 EBIT 31.83 46.87 52.4 18.05 1.3 Net financial activities results 6.17 0.1 2.47 6.2 0.4 Other gains (loss) 0 0 0 0 2.17 Net profit 25.66 46.77 49.93 11.85 -3.07 Additional to retained earnings 9-4 Environment indicatorsEnvironmentindicators Year to 1998A 1999A 2000A 2001A 2002A 2003A 2004F 2005F 2006F 2007FDecemberGDP Growth (%) 3.3 4.9 5.1 3 3.2 3.2 4.1 5.5 - -Inflation (%) 3.8 3.8 2.8 2.5 2.7 3.2 12 9 - -FDI (million $) - 639 223.4 134.9 150.4 55.5 - - - -Exchange rate - 3.68 3.4 3.28 3.87 5.37 7.33 7.6 - -(euro)Exchange rate 3.39 3.4 3.45 3.85 4.5 6.03 6.2 6.51 - -(dollar $)Interest rate for 3 9 9.14 9.29 9.43 9.42 8.46 7.92 - - -month (%)Interest rate for 13.2 12.84 13.11 13.57 14.1 13.45 13.42 - - -one year (%)Per capita realincome growth 2.9 3.7 3.8 1.4 1.1 1.2 1.2 - - -(%)Population (m) 62.7 64.0 65.0 66.0 67.00 67.8 68.7 69.5 70.2 71.5 EMBA Cairo 38 Rennes International School of Business
  • 9-5 Egyptian telecom sector structureIncumbent Operator (Telecom Egypt)Available capacity for telephone lines 11,500,000 linesTotal number of subscribers in service 9,000,000 linesTotal number of ISDN subscribers 14,771Total number of DSL subscribers 6,131Internet providersClass A (carrier level internet provider) 4Class B (data service provider) 8Class C (internet service provider) 170Free internet numbers 261Total BW (international bandwidth) 1,214 MbpsDSL ports 11,619Total minutes 603,033,850Mobile Providers Mobinil2 Mobile Networks VodafoneTotal number of subscribers 5,950,285Total stations 261 108 countriesRoaming (agreements with all operating countries) 262 operatorsSatellite service providersVSAT service 2 operatorsGMPCS service 2 operatorsPayphone companiesNumber of companies 3Number of payphones 47,377International circuits% of number of maritime cables international circuits to total 75.3 %% of number of terrestrial cables international circuits to the total 1.81 %% of number of satellite international circuits to the total 22.29 %% of number microwave international circuits to the total 0.6 %Total 100 %Penetration rateGSM 8.66 %Fixed 13 %Payphones 0.0695 %EMBA Cairo 39Rennes International School of Business
  • 9-6 Menatel supply chain Suppliers Payphone PMS C Maintenance T/E distribution U S Domestic T W/H, Logistics Production O Foreign M E R Menatel Distributors S Menatel Supply Chain Management 9-7 Menatel value chain Logistics, manual and automated systems Administration & management, Reporting and meeting system Support HR, computerized payroll system, manual procurement system MenatelActivities Value chain Accounting, computerized accounting system IT, computerized-WAN, LANs system Commercial Operation Cards sales Service ProductionPrimary surveyActivities Payphone Payphones Manual management Manual maintenance Automated system system (PMS) system system system EMBA Cairo 40 Rennes International School of Business