Competitive strategy in transition to deregulation : a case study of Hong Kong Telecom

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Competitive strategy in transition to deregulation : a case study of Hong Kong Telecom

 

Author: Tsoi, Andrew P. W
Title: Competitive strategy in transition to deregulation : a case study of Hong Kong Telecom
Degree: M.B.A.
Year: 1994
Subject: Hong Kong Telecommunications Limited
Telecommunication -- China -- Hong Kong -- Deregulation
Strategic planning
Hong Kong Polytechnic -- Dissertations
Department: Dept. of Management
Pages: 128 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1152504
URI: http://theses.lib.polyu.edu.hk/handle/200/4593
Abstract: The telecommunications industry has undergone structural changes around the world. Global trend of liberalisation arrived Hong Kong several years ago. On 12 July 1988, Hong Kong Government announced that Hong Kong Telephone's network could not be used for the provision of public cable television services and she further restricted Hong Kong Telecom's interest, if any, in cable TV network to 15% shareholdings. Recently, Hong Kong Government decided not to grant the exclusive franchise of local network to Hong Kong Telecom after its local telephone's license expires in 1995. In addition, the international call charges have to be reduced by 12% in the three years to 1995. The management of Hong Kong Telecom facing such important issues has been implementing significant changes in strategies that lead to changes in organisation structure and culture. This report provides a comprehensive structural analysis of the telecommunications industry in Hong Kong, the sources of regulatory change and the forces driving competition in the industry. It then gives an account of strengths, weaknesses, opportunities and threats (SWOT) of Hong Kong Telecom. Based on strategic management theories and with reference to successful strategies of overseas telecommunications firms (American Telephone & Telegraph (AT&T) and British Telecom (BT) etc.), a competitive strategic plan is illustrated in Chapter 10. The plan covers regulatory relations, public relations, corporate image and four business functional areas. Hong Kong Telecom has to strengthen these areas before competitions come truth. Competitive strategies are derived from the perceived view of future market structure, government policy and potential competitors. The mission is to ensure that Hong Kong Telecom can grow and maintain its market leader position in the long run. Some key competitive strategies are worth mentioning in this abstract. They are intended to solve the critical problems that are facing Hong Kong Telecom in view of Government has changed her policy in regulating the telecommunications market. (1) Pricing International Calls In the agreement with Government, Hong Kong Telecom has to lower the overall international call charges by 8% in 1993. The company is allowed to apply different reduction percentages to different countries. It is recommended that the major price changes should be as follows: (i) Canada, the U.S. and the U.K. The charges to Canada, the U.S. and the U.K. should be reduced by 20-25%. This preemptive strategy (Kotler, 1991) is used to deter/suppress the growth of City Telecom1 before it poses a major threat to Hong Kong Telecom. (ii) Australia The existing charges for international calls from Hong Kong to other countries are lower than calls made in overseas to Hong Kong except calls from Australia. To gain good public image, the charges to Australia should be lowered to get the "champion" of the lowest charge in the world. (iii) China China is the highest growing area for international calls. The traffic between China and Hong Kong accounts for nearly half the total traffic handled by Hong Kong Telecom. Lowering price for China destinations is not recommended because it will have significant adverse impact on Hong Kong Telecom's profit. The above recommendations will improve public image too. According to the survey described in Chapter 11, customers feel that the international call charges to the U.S., Canada, Europe and Australia are too high. For calls to China, they think the charges are fair. Telephone Installation Fee Based on the same survey, local telephone charges are acceptable to customers but they feel that installation fee is too high. Installation fee should be kept to a low level to attract new customers. When competitions emerge, it becomes strategic to Hong Kong Telecom in gaining new customers and preventing existing customers from switching to competitors. (2) Regulatory Relations Hong Kong Telecom should employ managers to lobby with legislators and government officials. This helps the company in negotiating for the future regulation policy. (3) Public Image My survey results indicate that the public image of Hong Kong Telecom is good and is among the best of the utility companies in Hong Kong. Nevertheless, customers have dissatisfaction in some areas of the services. Good public image on products/services and the company itself is important in the competitive environment. More public relations work such as charity activities and sponsorship to institutes can improve the company image. Improvement in products/services quality improves the company image as well but good quality can only be achieved if the company strengthens each of its functional areas. (4) Cost Reduction And Productivity Enhancement As compared with overseas telecommunications firms and other utility companies in Hong Kong, Hong Kong Telecom has been lagging behind in productivity enhancement. The staff number is 25-30% in excess even after the large retrenchment in March 1991. High cost of production is one of the most important factor that hurts competitiveness of products/services. If the status quo remains unchanged, competitors will inroad Hong Kong Telecom's market share significantly. To enhance productivity, Hong Kong Telecom needs a revolution in its culture, operations, marketing and human resources functions. The recommendations are contained in Chapter 10.

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