BUILDING 3g BUSINESS STRATEGY FOR MILITARY TELECOMMUNICATIONS CORPORATION

THESIS MBA BUILDING 3G BUSINESS STRATEGY FOR MILITARY TELECOMMUNICATIONS CORPORATION PHASE 2010 - 2015 HA NOI, 2009 CONTENT 2.2 SWOT Matrix for Viettel CHAPTER I: THEORETICAL BASIS .9 Business strategy: .9 1.1 Concepts of strategy, business strategy: 1.1.1 Concept of strategy: .9 1.1.2 Business strategy concept: 10 1.2 Features of business strategy: 11 1.3 Role of business strategy: 12 Process of business strategy management: .13 2.1 Current situation analysis: 13 2.2 Strategy building: 13 2.3 Strategy implementation: 14 2.4 Strategy evaluation: .14 Main issues of business strategy building: .15 3.1 Requirements for business strategy building: .15 3.2 Principles of business strategy building: .15 Determining tasks and system of strategic targets: 17 4.1 Strategic tasks: .17 4.2 System of strategic targets: 17 4.3 Principles of target determination: 18 Model of competition forces : 27 6.4.The junction between business strategy and other strategies : .41 6.4.1 Corporate-level strategies: 42 6.4.2 Business strategy ( competitive strategy) 42 6.4.3 Functional strategies (operation strategy) 42 Methods analysing strategy selection: 43 7.1 The BCG growth share matrix 43 7.2 McKinsey matrix - GE (General Electric): 45 III Business strategies for 3G services from 2010 - 2015 98 ABBREVIATIONS Production and Business - PnB Company - Comp TABLE CONTENT 1.1 Macro environment analysis 1.2 Typical factors that affect competitive strength 1.3 Typical factors that affect market attractiveness 1.4 SWOT matrix 2.1 Business and production outcomes phase 2004 – 2009 2.2 SWOT Matrix for Viettel 3.1 The number of subscriptio for recent years 3.2 Expansion of subscription using GSM technology for recent years 3.3 Prediction of the number of subscribers in Vietnam 3.4 Proposes the number of 3G subscription of Viettel in the 1st, 3rd, and 6th year CHART CONTENT 1.1 Simulation of the company’s business environment 1.2 External environment 1.3 Force model of M.PORTER 1.4 Model of value chain 1.5 BCG growth-share matrix 2.1 Basis for selecting business strategy 2.2 The growth rate figure in years 3.1 The estimation figure for The development of mobilephone subscribes in the world 3.2 The estimation figure for The development of GSM mobile subscribes in the world 3.3 The growth rate figure the WCDMA subscribers 3.4 The growth rate figure of subscribers 3.5 The figure for the revenues density of speech services and non-speech services 3.6 Revenue graph due to subscriber types 3.7 The estimation figure for the growth rate figure of subscribers in Viet Nam 3.8 Distribution channel model of Viettel INTRODUCTION Subject selection reasons In recent years, mobile phone market has been blooming There are service providers in operation, some others are taking application procedures for entrance However, the market is getting to saturated point Competition is becoming fierce Growth of revenue, profit is weak These urge companies to have new strategies for development In this scene, 3G (a set of international telecommunication standards and technologies promoting mobile phone quality and efficiency) turns out to be a solution for companies Viettel is the one to have a big market share in Vietnam telecommunication market and a pioneer in 3G service building and providing To implement business well, it is needed to have a correct, proper business strategy for company’s capability and appropriate to current features of Vietnam market In recent years, Viettel has got business strategies which are definitely right and obtained outstanding results as so called magically in mobile phone business (2G) not only in Vietnam but also abroad However, 3G is a new service, full of challenges for all telecom companies in Vietnam, because it is a right business strategy and an urgent need With the wish of applying learned knowledge into practice at the place whereas there is a group member working for, the group has selected the subject “Building 3G business strategy for Military telecommunications Corporation phase 2010-2015” to be research subject for the group Research purposes - Researching and systematicalizing theories about building and implementing business strategy, selecting analysis models efficient to business strategy building and implementation - Applying system of above theoretical basics and models for analysing and evaluating internal, external environments in order to build 3G business strategy for Military telecommunication corporation - Recommending solutions, suggestions in business strategy implementation in order to complete the corporation’s selected business strategy Subject research criteria Due to time and resource limitations, our group only had deep research in analysing and building strategy of 3G business (one of Viettel’s businesses) for the corporation phase 2010-2015, the key period for development and success of the coporation’s 3G service Research methods To solve the above issue, the report mostly uses method of qualitive analysis (analysing facts of Military telecommunication corporation) The specific methods of data collecting such as investigation sheet, expert interview have been used to collect data Using national statistic records, professional information, data; using secondary data on strategy and researches, reports previously done by Military telecommunications corporation The report includes: Introduction Chapter I: Theoretical basic: Concerning theoretical basics of business strategy such as: concepts, nature and basic features of strategy and business strategy Some of business external environment analysis models in building business strategy: factors of external environment, competition forces Some models are used to analyse the company internally in building business strategy: model of value string, sustainable competition advantage, general model of internal and external environment analysis (SWOT) Chapter II: Analysing Viettel’s strategic factors and activities phase 20042009 General introduction of Military Telecommunications Models are applied to analyse the company’s internal and external environment SWOT model is applied to generally evaluation finding the company’s strengths, weaknesses, opportunities and threats Chapter III: Recommending 3G service business strategy for Viettel phase 2010 – 2015 and implementation solutions General introduction of 3G Recommending 3G business strategy for Viettel phase 2010-2015 and some solutions in order to implement successfully selected business strategy Conclusion Reference List; Appendix CHAPTER I: THEORETICAL BASIS Business strategy: 1.1 Concepts of strategy, business strategy: 1.1.1 Concept of strategy: There are many definitions of strategy Each has differences upon author’s own point of view Strategy is related to definitions of competition advantage and organization’s control of resources such as human, properties, finance, in order to develop and ensure its vital benefits Kenneth Andrews is the first one giving out this outstanding idea in the classical book The Concept of Corporate Strategy According to him, strategy is what an organization should based on its strengths and weaknesses in the scene of having both opportunities and threats According to Chandler, strategy is “determination of the company’s long term basic targets, purposes and series of activities as well as assignments of resources to process these targets” (Chandler, A (1962) Strategy and Structure Cambridge, Massachusetts MIT Press) Bruce Henderson’s concept, strategist as well as founder of Boston consulting Corporation: “Strategy is a careful search of action plan to develop and join the organization’s competition advantages The difference between you and your competitors is the foundation for your advantage” (Source: Efficient business plan, Harvard Business Essentials, Hochiminh City’s general publishing house, page 10) Michael E Porter’s opinion, the leading strategy professor of Harvard: - “Strategy is the creation of position that is unique and valuable, including different groups”; - “Strategy is to carry out the balance of different factors to get the best combination in competition The nature of strategy is to decide what does not need to be done”; - “Strategy is the creation of harmony within company’s activities” (Source: Michael E Porter, “What is Strategy?” Harvard Business Review, November, December 1996, page 68, 70, 75) So, what is strategy? Strategy is a plan to bring to the company a competition advantage against competitors Strategy is to understand the targets of what the company are doing, focusing on planning how to achieve those “Strategy is a series of complex actions to mobilize resources that an organization can have to achieve certain purposes” Strategy has strongest impact when its core is the company’s values which have been understood clearly: what are priority criteria on aspects of product, customer, supplier, investment, shareholders and business environment Strategy is not a singly management process, but one included with commitments to company’s decisions and activities in order to get competition advantage 1.1.2 Business strategy concept: According to Boston consulting corporation: “Business strategy is the determinations of available resources allocation with purpose to change competition balance and turn advantage to our side ” According to Michael E Porter: “Business strategy to cope with competition is combination between targets which need to be achieved and tools that company needs to find to achieve the targets ” The concept of business strategy as Strategic management textbook of Griggs is: a series of commitiments and actions that used by a company to get competition advantage by exploiting core capabilities in a certain market 10 Firstly, because too short time of commitment, Mobifone and Vinaphone had only and months respectivelly to prepare to bring 3G to customers It is the very shortage of time that, when officially providing sevices, the quality and variety of services did not have time for testing It resulted in the fact there were many bad complains from customers for 3G although they were born first This is disadvatage for these companies With time commitment of months, Viettel had enough time for testing its services before official business launching => service quality upon opening would creat trust and good impression for users Secondly, other telecommunication companies did not have many experiences in equipments construction because they were providing 2G for a long period of time via partners Viettel determined to by itself from the moment of 2G deployment => experience of facilities setting-up, break-downs handling would better that other companies => service quality would surely have superiorities because of being master of technology and facilities Thirdly, Viettel’s point of view for service development is that network will go forward, business will follow It means network must be very good before deploying business, bringing services to users 3G will have real meaning when it brings along oustanding and different values against 2G Meanwhile, 3G is the service that needs really large network infrastructure and capacity so that it can make difference to 2G (because 3G services always take more bandwidth that 2G) With available infrastructure (over 20.000 stations BTS 2G – equivalent to the total of other mobile networks), when officially launching business, Viettel will surely have the biggest network coverage Viettel engages that, upon official launch of 3G service business, the coverage will reach to the number of 90% population 3G will not only appears in big cities, towns (as what are deployed by other companies) but also ensure that custmers can use 3G everywhere This is the difference which no one in Vietnam can have at the moment Strategy that network goes forward – business follows has brought success to Viettel for nd generation of cell phone (2G) and surely it will be premise allowing Viettel to keep making its own difference, confirming its philosophy of anys: anytime, anywhere, anybody and anyprice 3.2 Plan to actualize 3G strategy 101 3.2.1 Plan of subscription expansion  Viettel anticipates that 3G subscription development capacity in Vietnam basing on the data seen in the world, regions and in the country On that basis, the targets of subscription market share are set up for each year;  On the basis of calculating, Viettel proposes the number of 3G subscription of Viettel in the 1st, 3rd, and 6th year as follows: Table 3.4: Proposes the number of 3G subscription of Viettel in the 1st, 3rd, and 6th year No I II III IV Content Mobile subscription (2G + 3G) of Viettel 2G mobile subscription 3G mobile subscription 3G PC Broadband mobile subscription Subscription total (2G, 3G mobile and PC Broadband) Subscription gearing 2G subscription gearing 3G subscription gearing (3G mobile 1st year - 3rd year - 6th year - 2010 2012 2015 50,000,000 65,000,000 70,000,000 49,000,000 1,000,000 62,000,000 3,000,000 55,000,000 15,000,000 500,000 2,000,000 5,000,000 50,050,000 67,000,000 75,000,000 100% 96.82% 100% 86.56% 100% 61.11% 3.18% 13.44% 38.89% and PC Broadband subscription ) 3.2.2 Plan of service development  Viettel proposes to supply all services on 3G There will be all kinds of basic 3G services such as Video Call, Mobile TV, Internet Broadband as well as a series of other added entertainment services basing on 3G technology  In cooperation with high technology terminal equipments suppliers to distribute 3G built-in equipments such as: Iphone, BlackBerry… 3.2.3 Plan of distribution channel development 102  At present, Viettel is proud of being a telecommunication corporation which contains the greatest and various distribution channels in Vietnam with more than 100 supermarkets, about 900 shops, 1500 agents and above 60,000 selling points and collaborators nationwide  In the performance of 3G business, Viettel will make use of available channels and continue to expand distributions channels as follows: - Continue to expand current channels, among which we focus on expanding supermarket system and direct shops of Viettel - Expand types of Agents and selling point: Beside current agents, telecommunication post offices, Viettel will co-operate with enterprises, business and distribution points of computers, laptops, netbooks, start-end equipments of mobile to sign agent contract, point of sale for 3G services  Distribution channel mode VIETTEL 63 CNKD Province Direct channel Supermarket Shop Indirect Channel Direct sale Telecommunic ation Agent Point of sale Collabol arator Equipment agent Equipment point 103 CUSTOMER Chart 3.8 Distribution channel model of Viettel  Distribution channel quantity: Direct channel system of Viettel: at the time of executing 3G (earlier 2010) Viettel will expand Supermarket Channel and Direct Shops up to more than 1.000 points, after that Viettel will maintain this system till 2015 (although since 2013, the market was saturated, Viettel would continue to maintain and diversify business types in this network) - Indirect channel network:  For current telecommunication channels: - Increase the number of agent up to 1,500 and point of sale/collaborator up to 90,000 points and maintain that quantity following years till 2015  For channel selling new equipments: At present, it is estimated that there are about 8,000 enterprises that deal in and distribute computer equipments It is proposed that at the time of operating 3G service, Viettel will co-operate with 20% of big enterprises acting as agents supplying the service and 30% of smaller companies acting as points of sale During first years, proposed quantity of agents and points of sale increases up to 20%/year Since 4th year (2013), agents are supposed to increase up to 2%/year, points of sale raise to 5%/year 3.2.4 Estimation of revenue percentage for dialogue and non-dialogue services 104  Communication service and percent of communication revenue: Viettel bases on the average calling minutes/subscriber (details in pre-paid and post-paid) and bases on communication rate to conclude the revenue of communication service  Viettel selects some models of regional countries such as Philippines and Malaysia to anticipate the percent of non-communication service According to the experiences of such countries, once the density of subscribers who use data only, then the revenue of non-communication service can go up to 30% in the 6th year  After calculating, Viettel proposes the percent portion of communication and non-communication revenue of 3G subscribers in the 1st, 3rd, 6th year as follows: No Content Percent portion of communication and noncommunication revenue of 3G subscribers % communication % non-communication % Other 2010 2012 2015 100% 100% 100% 65 % 60 % 55 % 5% 20 % 30 % 30 % 20 % 15 % 105 3.2.5 Average Revenue per Unit (ARPU) for a 3G mobile subscriber In fact, when a new 3G service is born, there will be no much change in revenue from this service for the first year compared to 2G monthly average revenue (about 6USD) The cause is said to be that income source of 3G depends hardly on data content industry However, at the moment, this industry does not have real development in Vietnam Thereto, when 3G really becomes information high way with outstanding advantages of wireless wide-bandwidth technology, 3G will be the basement for the flight of data content industry in Vietnam That is also premise for increase in ARPU of 3G subscription Specificas are as follows: Y ea r 20 10 A R P U U S D 20 12 20 15 10 U S D 15 US D 106 3.2.6 Finance secured for Viettel’s 3G technology As mentioned in 3.1.1, the most important factor and taking biggest part of price formation for telecommunication services is income cost and value of infrastructure investment (transfering system, stations, BTS) Among of those, cost for transfering, stations, BTS covers 75% investment price Thereto, investment in 3G, as to Viettel’s opinion, is just the investment in equipments of machine board and 3G antena This investment covers 25% investment cost, in addition with available system of branches, personnels, initial investment will reduce ¾ - that is the key to define financial capacity to invest in 3G technology for Viettel Besides, Viettel is considered to be the one with growth rate ranking on top among government firms and corporations In 2008, profit reached 8,600 billion VND, and 10,000 billion VND in 2010 Total investment in first years for 3G (from 2009 – 2012), Viettel estimates about 12,000 billion VND With current profit rate and growth pace of almost 100%/year as well as advantage in equipment investment, definitely finance for 3G – a savior for implementation of wireless internent wide bandwidth, supporting network and dialogue quality for temporary 2G – is not an obstacle for Viettel Plan of widespreading 3G service 4.1 Viettel’s view  Supply 3G service at all coverage areas, without separating cities, rural areas, hinterland and remote areas  Use all the available distribution channels to develop 3G  Train and improve professional capacity for 100% of officers ensuring to meet all the demands of 3G standards 107  Focus on developing Mobile Broadband service using 3G technology, replacing current ADSL service Paying special attention to hinterland, remote areas through specific supporting programs such as price supporting for start-end equipments or sale off for 3G service, ensuring that everyone all over the nation has the right to get benefits from 3G service  3G services must engage these principles: diversified, various, meeting all the demands of customers nationwide 4.2 Plan of content technology development and development cooperation  Viettel’s view: 108 - One of the prerequisites making the success of 3G service is that enterprise must create various content sources, meeting the demands of customers - Viettel operates the content industry development in directions: (1) selfdevelopment; (2) domestic co-operation; (3) international co-operation; (4) at open interface, allow customers to develop the content; (5) co-operate with representatives of domestic and international copyright  Content self-development plan: - Viettel set up VAS center and Content center belonging to Viettel Telecom corporation with following tasks:  Self-make contents (tones, waiting tones, games, other information) for 2G and 3G;  Produce game shows;  Supply news to electronic newspapers and content services; - At present, the total revenue from these centers accounts for about 15% of total revenue from content service in the network of Viettel Telecom Viettel proposes that in the coming time, it will continue to invest in human resources, equipments and technology with the targets in 2010 that content revenue accounts for about 30% of total revenue from content service in the network of Viettel Telecom, till 2015, content revenue accounts for about 50% of total revenue from content service in the network of Viettel Telecom;  Co-operation plan with domestic content suppliers: - At present, Viettel is co-operating with nearly 200 domestic partners supplying content such as Vietnamnet, VASC, Blusea, VTC,… To have various content sources for 3G, Viettel Telecom will continue to set up the framework, improve the process of socializing content supplying sources for 3G 109 - At the same time, to ensure the content sources for Mobile TV: Viettel will sign co-operation contracts with big TV stations in 2009: VTC, VTV, HTV,… and it is possible to set up a specific station channel - It is proposed that in 2010, the number of partners supplying content in the network of Viettel Telecom is 500 and till 2015 is 2000  Co-operation plan with international content suppliers: - Apart from the co-operation with domestic content suppliers, ensuring various and professional content sources, Viettel will expand the co-operation with international content suppliers - From now to 2012: Viettel will sign co-operation contract with big content suppliers in the world:  Music; image: Sony BMG, Universal, EMI,  Game: Game loft, Kraze, EASport  Video Clip, content for Mobile TV: Disney, HBO, CNN,… - From 2012 - 2015: Viettel continues to co-operate with content suppliers in the world, the target is that till 2015, the number of foreign content suppliers will account for 30% of the numbers of content suppliers in the network of Viettel (1000 partners)  Plan allowing the customers to create the content: - Apart from self develop the content as well as co-operate with domestic and international content suppliers, Viettel Telecom still has the plan which allows the customers to create the content and get income from their created content to make use of limitless resources - In 2009: Supply the service which allows the customers to create tones, waiting tones, images for mobile phone, video clips The customers will get the percent of revenue if other customers download their created content 110 - Since 2010: Continue to supply other applications to encourage customers to create contents for 3G;  Tightly co-operate with domestic and international representative organizations of copyright: - In order to ensure that the content supplied in the network of Viettel meets the demands of copyright, Viettel has been co-operating with domestic and international representatives of copyright like Copyright reserve center, recording industry association, SICAP and big copyright suppliers in the world: ensuring that all the contents supplied on 3G have the copyright as the regulated law 4.3 Plan allowing service re-sale via mobile virtual network operators (MVNO):  Common information about mobile virtual network organization (MVNO): - MVNO are enterprises who are allowed to supply mobile service to final users as the business registered - MVNO are enterprises who aren’t allowed to use frequency spectrum, set up mobile infrastructure In order to business, MVNO must hire frequency and infrastructure, telecom number store of MNO so as to set up its own infrastructure of virtual network - At present, in the world there are above 200 MVNO active enterprises, mainly located in EU (about 150 MVNO) and North America (approximately 50 MVNO) Successful MVNO enterprises are ones who determine their own market segments and dominate the market by their trademarks and be completely independent with other internet suppliers who share infrastructure 111 - Through MVNOs , mobile network organizations (MNO) obtain a lot of benefits, for example, MNO can increase its competition ability in market segments including low-paid customers without reducing ARPU of high-paid customers and can improve the efficiency of infrastructure utility - Understand and realize correctly the indispensable development trend of telecom market, i.e it turns from infrastructure competition into competition in terms of service products and service quality, Viettel has made a plan of telecom service re-sale with following viewpoints:  Improve the capacity of usage and business of telecom infrastructure  Increase the revenue by re-sell telecom service  Raise trademark quality in domestic and international market  Make full use of sources to focus on business areas where Viettel has available advantages - Proposed operation time:  Base on the time when Ministry of Information and Media gives permission and issues full regulations and policies to the operation of telecom service re-sale business, Viettel will negotiate and select to business with MVNOs who offer the most capacity and most feasible business plan It is proposed to business of re-sale in 2015 - The number of supplied MVNOs:  During the first stage, Viettel proposes to business of re-sale with 03 MVNO enterprises The quantity of such MVNOs can be changed depending on real conditions and regulations of Information and Media Ministry Personnel organization: 5.1 View of structural organization 112 - Organizing man power according to the idea: concentrated technics, decentralized business - Professionalize technological framework, grouping into main fields namely Optimize internet quality; Exploit information application; and Internet infrastructure development Build matrix model in horizontal and vertical directions, each of which is headed by a person who mainly takes charge of it - The strategies and policies are focused in the place of enterprises and are unified through the system; daily routines are performed by provinces and districts - Intermediary layers (corporations, enterprises) take charge of 20% of the workload, 80% of the workload is done by lower layers - Localization: Technology/business framework is organized to the level of district/commune - Automatism daily work transference (information technology) 5.2 Organization of sale force - organs building business strategies and policies for 3G will be shared with 2G and are built from corporation-enterprise according to specific service - Sale channel network, sale force for 3G share current system for 2G Make sure 100% districts containing direct shops (already done); 100% communes having sale points and collaborators selling directly; 100% wards including collaborators selling, direct customer care - Customer care staff: 6.000 customers/1 officer 113 CONCLUSION Due to the limitation of time and other resources, this report couldn’t avoid certain shortcomings The report only focuses on researching and building business strategies for 3G of Viettel stage 2010-2015 Thus, conclusions drawn out are only applied for the procedure of building and selecting business strategies for 3G service of Viettel In order to apply these conclusions for other strategy types as well as other enterprises, it is necessary to conduct additional researches as follows: - The inter-relationship between selected business strategies and function strategies and international competitive strategies, etc - The adapting and appropriate capacity of selected strategies in international integrated environment Graduation thesis: “Building 3G service business strategies for Viettel Telecom stage 2010-2015” has been done with the aim of persuading the enterprise to apply into reality The knowledge obtained from documents and during the course as well as the real exchanges between colleagues, especially the helpful guidance of supervisor group has helped us to finish this report Hopefully, the results of this research would help Corporation leader board to have a proper vision to make full use of opportunities, minimizing the risks in the environment of competitive integration in the next stage, contributing to fulfill the missions and targets of developing the Corporation till 2015 114 REFERENCES Abraham, 1999: “Strategic Alternatives and Choice – The Heart of Strategic Planning” Blocher and colleagues, 2002: “Strategic Analysis and Strategic Cost Management” Brown and colleagues, 2002: “Customer Value Measurement” Raymond- Alain Thietart.1999 Corporate strategy (translation) Griffin, 2005: “Competitive Strategy” Hill and Jones, 1998: “Strategic Management: An Integrated Approach” FredR.David, 2000: “Concept in strategic management (translation)Statistical publishing House Garry D.Smit, Danny R Arnold.2003 Strategies and business (translation) Statistical publishing House Lectures for GaMBA 01 program Strategic management –Statistical Publishing House 2007 Business plan report of Viettel Corporation phase 2004-2009 115