CASE STUDY

Transilvania University Faculty of Economic Sciences Business Administration Group 8881

Contents
1. About Romtelecom ............................................................................................................................... 3 1.1 History ................................................................................................................................................. 3 1.2 Mission, vision, values......................................................................................................................... 4 2. The PEST framework ................................................................................................................................. 5 3. SWOT analysis ........................................................................................................................................... 6 4. The five forces model................................................................................................................................ 7 5. Management team ................................................................................................................................. 10 6. Finances .................................................................................................................................................. 11 7. Corporate Social Responsibility .............................................................................................................. 14 References .................................................................................................................................................. 15

1. About Romtelecom
1.1 History
Romtelecom has evolved from a former state monopoly to a private company. They have used state-of-the-art technology to transform the business from providing traditional fixed line telephony to also offering high quality Internet (ADSL) and digital TV services. With an established presence in the market of over 75 years, Romtelecom had many hurdles to overcome in the Romanian peoples eyes; namely the perception of being a social services provider. In 1930, Societatea Anonim Romn de Telefoane (SART, "Romanian Telephone Company, Ltd.") was founded, more than 90% of its value being a foreign investment from ITT. In 1949, SART was nationalized and turned into a division of the Ministry of Posts and Telecommunications. In December 1989, ROM-POST-TELECOM was created as a post and telecommunications operator, independent of the Ministry. The current name of Romtelecom was given after reorganization in July 1991, when the state-owned company was also given the monopoly for basic telecommunications services. In 1998, a share of 35% was sold the Greek company OTE. OTE has since acquired an additional 18% of the shares and has thus become the majority share holder of the company. The Ministry of Communications and Information Society (MCSI), Romania detains the other 45.99%. The Ministry of Communications and Information Technology is the specialized, juridical body of the central public administration in the IT&C sector, established with the objective of implementing the Romanian Governments policy in the field of e-communications, postal services, information technology and informational services. Romtelecom owns 30% of the Cosmote Romnia mobile phone operator as well as 100% of the internet provider Click Net, the television digital satellite platform Dolce and Cyber Host data center facilities. In 2008, in OTE's shareholder structure, Deutsche Telekom becomes implied by taking over 25% of the shares belonging to the group in Greece, and in 2009 Deutsche Telekom takes over other 5% of the shares belonging to OTE, thus DT's involvement in the Greek group reaching 30%. Romtelecoms aim is to become the leading technology services providerincluding that of the broadband Internet Marketover the next few years. In order to achieve this goal, the company has to be able to offer innovative dual and triple play service bundles quickly and efficiently. This is critical to success in a market that will increasingly demand a stable, fast service with excellent customer care.

The stockholders of Romtelecom are: the shareholders (OTE and the Ministry of Communications and Information Society), the clients, the competition (RCS&RDS, UPS, Astral, CCC Blue Telecom, and Universal Cable Systems), the suppliers, the State.

1.2 Mission, vision, values

The Corporate mission is to deliver promptly ever-growing reliable telecommunication and entertainment services The Corporate vision is that Romtelecom is the service company setting the standards within Romania, by exceeding the expectations of customers, employees and shareholders in the provision of high quality communication, entertainment and IT solutions. The Corporate values are: Customer focus Our mission is Customer 1st. I treat the client as I would like to be treated and as he would like to be treated. I positively surprise my customer in everything I do. I make things simple. Commitment I say what I do and I do what I say. I take ownership for what I do. I act in the interest of the company. I challenge the status quo. I am Romtelecom count on me. Respect guides our behavior I respect and value the diversity of opinions and other peoples individuality. I respect my customers, respect my colleagues and also respect my work. I show respect to others and it is likely they will respond in the same way. Integrity I act ethically and fair in my daily job and in all my decisions. I do not tolerate unethical and irresponsible behavior. My decisions are guided by principles. Resources and cost consciousness I treasure the time, resources and effort of my colleagues and my company. I spend and use as if I was using the money from my own pocket. I keep costs under control as the easiest way to have a healthy business and a good job. Teamwork I share my opinion openly and make my views known. I address issues not individuals. I fully stand behind the team decision. I put my full energy into executing the decision.

I seek out the opinion of others. I support my colleagues to achieve their objectives.

Win-Win I approach my customers, suppliers, colleagues and business partners with the intent of creating value for all of us.1

2. The PEST framework

Political framework: Political instability is one factor that influences Romtelecom. According to Bloomberg, the risk of political instability could lead euro to a rate of 4.4 lei. This is not a bad thing for Romtelecom because, according to OTE report, one of Romtelecom advantages in the stable maintaining of incomes and profit are the euro tariffs and the fact that 60% of the incomes are generated by the subscriptions. This way the operator "is enjoying an efficient devaluation against the depreciation rate and of lower consumption. 2 Economic framework: Inflation and unemployment influence Romtelecom revenues. According to Yorgos Ioannidis, the general manager of the company posted an operating loss of EUR 13.9 million in the third quarter and revenue fell 6.5% to 181.5 million Euros, due to austerity measures and rising unemployment, the results were significantly worse than in 2009 and the first nine months of 2010. Social framework: The shift in people preferences is another factor that influences the company. Romtelecoms Dolce had to launch new main packages and to redefine its portfolio (which is based on the new recorded consumer preferences). Technological framework: Romtelecom has launched a service whereby the clients of the company can pay their bill via the internet; the company collaborates with Gecad ePayment, the main player on the market for online payment by credit card.

1 2

Source: www.romtelecom.ro Yorgos Ioannidis, general manager of Romtelecom

3. SWOT analysis
Strengths: Romtelecom is the most important Romanian company on the fix telephone market. It detains a strong leader position on the market. It has a good image gained over time. It has well-trained employees who provide a good image to the company. It respects contracts. Effective advertising campaigns: "Customer 1st", "Romanian Romtelecom", "Together we Romtelecom", "Customer focus" Involvement in projects regarding the environment It provides a wide range of products. Romtelecoms main activity is providing fixed line, mobile and television DOLCE. Good production capacity / services. It is under strong competitive pressure. It has a strong organizational culture. Weaknesses: Using outdated machineries/equipment. Closure of certain activity sectors and dismissal of employees. Aged staff. Language barriers. The specifics of activity (danger of lead pollution). Being a big company is hard to control.

Opportunities: More limited range of products. Serving new customer groups. Rapid market growth. Entry into new markets or market segments (DOLCE). Increased customer base by attracting individuals and companies that do not benefit from Romtelecom. Establish strategic alliances in accordance with their business strategies. Advantageous geographic coverage. Threats: Rapid changes of products can affect the market position. 2. Changes of policies and introduction of new regulations in the field. 3. The emergence of strong competitors in the market (UPS, RDS-RCS). 4. Financial instability. 5. Rising inflation. 6. Migration of skilled labor rises in other countries. 7. Regulations, taxes and excise.

4. The five forces model

Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. The threat of entry. Economies of scale e.g. the benefits associated with bulk purchasing. The high or low costs of entry e.g. how much will it cost for the latest technology? Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up? Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects. Will competitors retaliate? Government action e.g. will new laws be introduced that will weaken our competitive position? How important is differentiation? e.g. The Champagne brand cannot be copied. This desensitizes the influence of the environment.

The power of buyers This is high where there a few, large players in a market e.g. the large grocery chains. If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains. The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another. The power of suppliers The power of suppliers tends to be a reversal of the power of buyers. Where the switching costs are high e.g. switching from one software supplier to another. Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft. There is a possibility of the supplier integrating forward e.g. Brewers buying bars. Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places. The threat of substitutes Where there is product-for-product substitution e.g. email for fax Where there is substitution of need e.g. better toothpaste reduces the need for dentists. Where there is generic substitution (competing for the currency in your pocket) e.g. Video suppliers compete with travel companies. We could always do without e.g. cigarettes. Competitive Rivalry This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control.3 Michael Porter proposes three generic types of economic strategies: Least-cost strategy (of domination by costs) The activity is directed toward the attainment of lower production and distribution costs so that prices of products sold to be below those of winning the competition and provide a bigger market share. This strategy builds on the experience curve. The organization applying such a strategy must have a technological potential, production, supply and logistical level. This requires huge investments for business equipment production and aggressive distribution that will produce a large part of the market. It entails the accumulation of experience accumulated by increasing production to reduce production costs, continuous improvement of production structure, a less expensive distribution system and control of indirect costs. This strategy requires the discovery and exploitation of all possible sources of competitive advantage of cost, such as: exclusive use of manufacturing technology, preferential access to sources of raw materials etc., and avoid costly product features that are not necessarily required customers. Such a strategy is advantageous because it protects the company against: Bullying competitors (RDS - RCS, UPS, ASTRAL, CCC BLUE TELECOM, UNIVERSAL CABLE SYSTEMS COM NEW TELECOMMUNICATIONS) - to hold the cost advantage allows it to obtain a uniform high profit margins;
3

Source: http://marketingteacher.com/lesson-store/lesson-five-forces.html

Strong customer (ARPECHIM SA, Dacia Renault, Institute for Nuclear Research) - they can exercise power only if competitors fail to find a company to offer lower selling prices; Powerful suppliers (Ericsson, Alcatel, Siemens, electromagnetic) - can cope with higher prices of raw materials, energy resources and equipment purchased.

Risk-cost strategy of domination: technological progress, which annihilates the effect of past investment and accumulation of experience; strong focus on cost reduction, which affects their ability to assimilate and concern in manufacturing new products and initiating changes in the market; emergence of other firms with lower product costs, which represent a major threat to the company who has directed all concerns to achieve low cost; maneuvers competitors by adopting a policy that fail to differentiate in the operating segment inflation, which erodes the firm's ability to prevail in the market by low prices Differentiation strategy The Company aims to create a special advantage, based on a single factor to be felt across the whole area, and much appreciated by customers, so they are willing to offer a premium price to profit from this advantage. In this respect, the company will focus on delivering a superior performance, giving it leadership in the sector with regard to one of the following attributes: quality of our products, after sales services and facilities offered to customers, the technology used, product originality , timeliness of delivery, ability to adapt to environmental changes and customer requirements, etc.. Using this strategy requires intuition and creativity, increased capacity in the exploitation of the strengths available to the firm compared to its competitors. It is only possible when the product characteristics other than those addressing basic needs, for which it was created, or attributes that it provides firm leadership is critical to customer purchase decision. Such a strategy is advantageous because it protects undertaking which apply: Competitors - due to poor sensitivity of customers to variable price of their loyalty to the brand. Power suppliers - high profit margins per unit attaches protection on growth in commodity prices. Risk of product substitution, which is low. Threat of new entry in the sector, which is low. Risks differentiation strategy: not give a higher market shares; threat of imitation is high - in those circumstances the company applying such a strategy must be able to regularly provide new features to counteract imitation products; rendering the product due to its life cycle, which to suppress the effect of differentiation strategy

Strategy Focus It consists in focusing the company on a narrow segment of the market -niche (CLASS Business customer group, a type of product marketed NET CLICK, INTERNET ADSL, MetroNET geographical area etc.) and occupying an irreplaceable position in this segment. Knowing very well the specific needs of this segment, the company will either opt for a strategy of domination by costs or for a strategy of domination through differentiation. The essential element of the focus strategy is identifying the niche in which the company can operate successfully and knowing the target clients. This kind of strategy can be best used by the firm that wants to enter a market (DOLCE the total digital television from Romtelecom). Any building strategy should be based on one of the three guidelines. On this basis the company will adopt a certain type of behavior toward competitors, adapted to the specific environment and internal potential, developing a particular strategy with elements of originality.4

5. Management team
The management team in Romtelecom is the following: Yorgos Ioannidis Chief Executive Officer Anastasios Tzoulas Chief Financial Officer Efthymios Tsokanis Chief Information Officer Wolfgang Breuer Chief Technology and Operations Officer George Makowski Chief Commercial Officer, Business Segment Efthymios Papapostolou Chief Business Service Officer Anca Georgescu Aladgem Chief Human Resources Officer Catalin Dima Chief Legal, Regulatory & Corporate Affairs Officer Ovidiu Ghiman Chief Strategy and Commercial Residential Officer Andreea Mirea Chief Internal Audit Officer

http://www.scribd.com/doc/24674111/PROIECT-Gradinaru-cap-1-5-8

Maria Maxim Chief Compliance Officer

A few months after joining Romtelecom, Yorgos Ioannidis together with a new executive management team launched Customer 1st, the program that shaped the companys actions since then, bringing one of the fastest evolutions in Europe for an incumbent with regard to customers satisfaction index (TRIM). 5

6. Finances

*Source: www.mfinance.ro/codfiscal/codfiscal.html

Source:http://www.romtelecom.ro/en/company/about-romtelecom/management/yorgos-ioannidis/

*Source: www.mfinance.ro/codfiscal/codfiscal.html

*Source: www.mfinance.ro/codfiscal/codfiscal.html

Romtelecom's revenues were affected by difficult economic conditions and the migration of customers to competition .In 2009, Romtelecom posted an operating loss of 15.3 million Euros, down 57.7% compared to an operating loss of 36.2 million Euros in 2008. Despite increases in broadband and television segments, Romtelecom's revenues fell 7.2% to 807.7 million Euros. Because of this loss, the number of employees has decreased. 6

Source: http://economie.hotnews.ro/stiri-telecom-7496657-romtelecom-disponibilizeaza-alte-cateva-suteangajati-reduce-pana-29-tarifele-internet-banda-larga.htm

7. Corporate Social Responsibility

Romtelecom initiated the Adopt a river project. This project wants to help collect the waste from Romanians rivers, and also to make people aware that we could do better. This project is meant to show everybody that we can do otherwise, that we can have clean waters, correctly stocked wastes, efficient water administration, responsible communities, and healthy nature. The Adopt a river project is an urge addressed by Romtelecom to each Romanian: assuming the responsibility for all our gestures is the first step towards having cleaner waters, stated Cristina Popescu, Romtelecom PR General Manager. Romtelecom also made many campaigns, such as Anti-stress campaign, "Save for Yourself! Save for Tomorrow!. The Anti-stress campaign is meant to relax and to introduce the Romanians in the holiday spirit. We just entered the most stressful month of the year, according to the specialists. This seems to be the best moment for an anti-stress campaign, through which we can draw attention to the ones around us that stress can be managed so as not to become harmful. Sometimes, just a few relaxation or stress-dumping minutes can create wonders., declared Cristina Popescu, Public Relations General Manager in Romtelecom. Another campaign made by Romtelecom is Child, looking for time. To be spent with my parents., is meant to draw attention to the fact that parent spend less and less time with their children. The study was initiated following the Child Helpline reports from 2009, which showed an increase in the number of calls made by children only to communicate with someone. Through this campaign we aim not only to draw attention upon a problem which, even if it doesnt seem obvious, it affects an entire generation of future adults, but to also find together simple solutions to create vivid relationships between parents and children, stated Cristina Popescu, Public Relations General Manager, Romtelecom. Romtelecom also organized the Cool ideas contest. The students of the Faculty of Electronics in Bucharest can use a high tech laboratory equipped by Romtelecom and Huawei Romania.

References
www.romtelecom.ro http://www.convergys.com/smartrevenue/downloads/rom-telecom.pdf?TRID=1 http://economie.hotnews.ro/stiri-finante_banci-7744264-bloomberg-instabilitatea-politica-dinromania-putea-duce-euro-curs-4-4-lei-dealerii-locali-rareori-politicul-misca-cursul-fundamenteleeconomiei-insa.htm http://www.efin.ro/articole_financiare/companii/inflatia_si_somajul_afecteaza_veniturile_romtelecom. html http://www.scribd.com/doc/24674111/PROIECT-Gradinaru-cap-1-5-8 http://www.wall-street.ro/articol/IT-C-Tehnologie/80261/Clientii-Romtelecom-isi-pot-plati-facturileonline.html