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Executive Summary

This paper focuses on DiGi Telecommunication Sdn Bhd, one of the key players in the
telecommunications industry alongside Celcom and Maxis. DiGi holds a large subscriber base
and is constantly growing its market share. DiGi offers a large variety and package options to
consumers. Sources of information used are credible and reliable journal articles, the companys
website and annual report, newspaper articles and relevant published books.
A SWOT analysis is conducted to identify the internal and external influences on the
organization. The strengths of DiGi are that its mobile plans are one of the cheapest in the
market, product innovation is good and DiGi has attractive career development prospects for its
employees. The weaknesses of DiGi are the lack of base stations causing poor network coverage,
poor customer service and slow dissemination of information to publics. As for the opportunities
of DiGi, globalization is a positive advantage for DiGi, living standards in Malaysia are
increasing and the number of foreign workers and international students are growing in the
country. Threats faced by DiGi are the tight governmental regulations, strong competitors and
high bargaining power of suppliers.
Based on the SWOT analysis, two strategies are proposed; Strategy 1: Low Price Plan focus
strategy and Strategy 2: Best Quality Service differentiation strategy. Strategy 1 is a mobile
plan catered for the growing niche market of foreign workers and students which offers cheap
international call rates and more mobile internet capacity. Strategy 2 is mainly to improve the
customer service of DiGi which is not currently at its best state. After careful evaluation of both
strategies, it is proposed that the Low Price Plan strategy is the best option out for the business
as it requires lower monetary risks, while it takes a longer period of time to produce results for
Strategy 2.
Two managerial functions proposed to aid the implementation of the strategy is organising and
leading. The mechanistic organisational structure is used in this case involving high work
specialization, functional departmentalisation and a clear chain of command. As for leading,
transactional leadership is applied in the early stages of the product implementation, while the
motivational styles used are the goal-setting theory and Herzbergs two-factor theory.

The integration of the Low Price Plan strategy and managerial functions of organizing and
leading will ensure the success of the implementation of the strategy which leads to a growth in
DiGis business.

1.0 Introduction
1.1 Purpose
The purpose of this report is to conduct a strategic analysis for DiGi Telecommunication.
Using the SWOT analysis, two strategies are proposed and the preferred strategy is implemented
with supporting justifications to improve DiGi Telecommunications position in the industry.
Two management functions, organizing and leading are also proposed to support the
implementation of the chosen strategy.
1.2 Company information
DiGi Telecommunication Sdn Bhd, a subsidiary of DiGi.com, is one of Malaysias
leading telecommunication providers, mobile broadband and mobile internet company since May
1995 (DiGi Telecommunications Sdn Bhd, 2014). DiGi is the first telecommunication company
in Malaysia to introduce the mobile number selection service in 2008 and has a subscriber base
of 10.5 million as of 2012 (MalaysianWireless, 2013). DiGi offers products and services
including prepaid, postpaid, data plans and services, international roaming, calling cards and
WAP services. The companys mission is to Deliver Internet for All and a vision of Changing
the Game by pushing boundaries, defining new standards, and improving in their business
(DiGi.com Berhad, 2012).
1.3 Assumptions
It is presumed that all information sources regarding DiGi Telecommunication and other
statistics are reliable and credible. The report assumes that DiGi has not implemented the
proposed strategies and is looking for opportunities to grow. Besides, DiGi is assumed to have
sufficient resources to fund the strategy.
1.4 Methodology
The information obtained to support the analysis and proposed strategies in this report are
from DiGis official website and annual reports, credible internet sources, journals articles and
management textbooks.

1.5 Plan of report


The report first presents the SWOT analysis of DiGi, followed by the proposal and
evaluation of two strategies to address the environmental situations. The most suitable plan is
then selected with credible justifications and a discussion regarding the methods of
implementation of the chosen strategy is done. Lastly, the report is concluded and summarised
with emphasis on key points.

2.0 SWOT Analysis


SWOT analysis is an assessment technique to analyse strengths and weaknesses
comprising of positive and negative internal influences; and opportunities and threats which are
positive and negative external influences of an organisation (Robbins, Bergman, Stagg &
Coulter, 2012). An accurate SWOT analysis is important for effective organisational planning
and goal setting.
2.1 Identification of strengths
2.1.1 Great value plans
DiGi has one of the lowest price plans in the market. The table below illustrates DiGis
price plans for the iPhone 5S as compared to its competitors. On top of cheaper rates, DiGi has a
superior loyalty program called DiGi Rewards where they give out rebates, free talk time,
mobile data and SMS (DiGi.com Berhad, 2012).

Source: Celcom Anxista Bhd, 2014; DiGi, 2014; Maxis Bhd, 2014

Table 1: Comparison of Maxis, Celcom and DiGi price plan for iPhone 5S

2.1.2 Innovation
DiGi has a good track record in product innovations. For example, DiGi was the first
Malaysian mobile operator to co-brand Opera Mini featuring a compression technology that
allows non-smartphone phone users easy access to internet. In 2012, DiGi established
Partnership with WhatsApp which offers subscribers unlimited access to WhatsApp at an
affordable rate (DiGi, 2012).
2.1.3 Attractive career development
DiGi provides attractive career development prospects for employees. They have many
initiatives and programs for all levels across the organization. For example, in 2012, targeted
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coaching and development programs were launched to address key skills and leadership
deficiencies of their employees (DiGi, 2012).
2.2 Identification of weaknesses
2.2.1 Poor network coverage
DiGis lack of base stations as compared to its competitors causes poor network and
broadband coverage which leads to dissatisfaction among subscribers and give DiGi a bad
reputation. Based on MalaysianWireless (2013), both Celcom and Maxis have about 80% 3G
coverage with more than 7000 3G base station compared to DiGis 2000-3000 3G sites causing
poor indoor coverage.
2.2.2 Unsatisfactory customer service
Based on several online forums, there evidence show that DiGi has poor customer
service. Customers complain about the long waiting time in service centres and call centres, slow
e-mail responses and unfriendliness of DiGi sales representatives (Complaints Board, 2014). As
stated by a DiGi subscriber in Lowyat.net, cIvIc_noob (2011) mentions that he had to call DiGi
many times to settle a simple phone billing issue.
2.2.3 Slow dissemination of new products information to customers
DiGi lacks marketing activities which delays the dissemination of new products
information to publics (DiGi, 2012). As a result, the lack of information has caused DiGi to lose
out on potential customers and market share.
2.3 Identification of opportunities
2.3.1 Globalization
The world is now borderless due to technological advancements causing an increase in
global movements and interactions of people, goods and services (Najam, Runnalls & Halle,
2007). Globalization has provided DiGi with an opportunity expand their business reached in
order to provide a platform to meet these demands.
2.3.2 Higher standard of living
The rising standard of living in Malaysia is increasing the demand for telecommunication
devices. According to the 2012 Household Income Survey, the average monthly household
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salaries have risen by 7.2% since 2009 (Borneo Post Online, 2013). It has become common for
people to own at least one mobile device providing DiGi an opportunity to increase sales
revenue.
2.3.3 Influx of foreign workers and international students
According to national statistics, the influx of foreign workers and international students is
increasing. Since 2011, there are 1.5 million foreign workers and 90,000 international students
and continuously rising (Chi, 2011; Zakariah, 2013). Ministry of Higher Education aims to
attract at least 200,000 international students to education institutions in Malaysia by 2020 (Chi,
2011). Foreign workers seek low international calling rates while international students demand
cheap mobile internet service to stay connected to with their loved ones back home providing
DiGi an opportunity to enter this new market segment.
2.4 Identification of threats
2.4.1 Government regulations
According to Deputy Prime Minister Muhyiddin Yassin, Malaysia's Education Ministry
will continue to ban mobile phone usage in schools (The Straits Times, 2012). The policy
decreased demand for mobile phones and less usage by students causing a negative impact on
DiGis sales revenue.
2.4.2 Industrial rivalry
Within the industry, Maxis, Celcom and DiGi continue to compete on product and service
differentiation

through

improvement

and

introduction

of

new

innovative

features

(MalaysianWireless, 2011). The need to gain and maintain competitive advantage over its
competitors might place a heavy burden on DiGis bottom-line.
2.4.3 Bargaining powers of suppliers
The telecommunications industry in Malaysia is dependent on imports for its network
components. Most equipment cannot be sourced locally resulting in high bargaining powers of
suppliers (MalaysianWireless, 2011). This has resulted in an increase in DiGis cost, hence
reducing profit margin.

3.0 Evaluation of alternative strategies


3.1 Proposed alternative strategies
Based on the S.W.O.T analysis, the following were identified and a strategy is developed to
address each influence:
1. Opportunity: Influx of foreign workers and international students in Malaysia.
2. Weakness: Unsatisfactory customer service.
3.1.1 Low Price Plan
The first strategy is to take advantage of the opportunity of influx of foreign workers and
international students in Malaysia, Porters generic competitive strategy of focus is proposed.
The focus strategy emphasizes on cost advantage targeting a growing niche segment which is the
low priced mobile plan catered for foreign workers and students (Robbins et al., 2012).
The increase of foreign workers and international students has created a demand for low
International Direct Dial (IDD) calls and mobile internet service. To serve the targeted segment
better, a mobile plan is designed to suit their needs, which includes lower IDD rates and higher
data usage for mobile internet service while reducing other services like SMS and talk time as it
is not prioritized by them. Subscribers can choose to tailor their mobile plans according to their
preferences. For example, a subscriber who does not use the mobile internet service can transfer
the credits into IDD minutes. This allows subscribers greater flexibility to manage their mobile
plans, thus improving customer satisfaction.
According to a research done, the advantage of cost focus strategy is having the highest
performance on sales growth (Dess & Davis, 1984). This strategy allows DiGi to increase
revenue and market share. In addition, the implementation of this strategy will make DiGi the
leader of the new emerging market segment.
The disadvantages are that DiGi sacrifices economies of scale which would be gained by
serving a wider market. The ever changing consumer preference is also a risk as DiGi has to
undertake for serving a niche market (David, 2011). Lastly, with the focus on non-local
consumers, DiGi runs a higher risk of default payment in monthly bills.

3.1.2 Quality Customer Service


The second strategy is to rectify DiGis weakness of unsatisfactory customer service.
Porters generic strategy of differentiation is proposed which focuses on creating a product or
service with distinctive attributes that sets itself apart from the competition (Robbins et al.,
2012). The strategy is to provide superior customer service to DiGis subscribers to differentiate
itself from competitors.
During S.W.O.T analysis, poor customer service was one of the major weaknesses of
DiGi. DiGis customers listed long waiting time at service centres and slow response time for
enquires as their main dissatisfactions. In order to provide quality customer service, front line
staff will be sent for customer service training programs. More service centres and retail outlets
will be established to provide more location options and reduce waiting time. Feedback channels
like online chat and forums will also be developed allowing to interaction with subscribers.
The advantage of this strategy is the improvement of brand image. In the long run, DiGi
may be able charge a premium for its products or services. Another advantage is that DiGi is able
to increase customer loyalty. Having loyal customers stabilizes the company's revenue and
lessens the impacts of market downturns (Lam, Shankar, Erramilli, & Murthy, 2004)
The major disadvantage of executing a differentiation strategy is the high cost required to
implement the necessary measures to differentiate the organization from its competitors
(Hambrick & Fredrickson, 2001). The increase in retail outlets/service centres and shorter
response time to customers enquires more manpower. Together with the increase in feedback
channels, the strategy requires significant capital outlay for implementation. Another
disadvantage is that it takes time to change the mindset of consumers to create a strong brand
image in consumers minds. During the process, the company may not have sufficient customer
demand to offset its higher costs, which may lead to a loss.

3.2 Selection of best strategy


After careful evaluation, it was decided that the focus strategy, Low Price Plan will be
implemented as it requires less monetary loss risks. The strategy allows DiGi to direct resources
to value chain activities in order to build a competitive advantage. With innovation as one of
DiGis strength, DiGi has the ability to identify the needs or preferences of the narrow segment
to create a product to serve the targeted market efficiently and effectively. If implemented
successfully, DiGi will see an increase in revenues in the short term while second strategy
requires a longer time horizon to have an impact on its revenues which may incur great losses to
DiGi. Moreover, first strategy aligns with DiGis mission of delivering affordable
telecommunication packages for all (DiGi, 2012). Despite DiGis reputation of poor customer
service, its subscriber base has increased steadily in recent years (The Star Online, 2013). As
such, customer service has not impeded DiGis sales growth. Thus, the focus strategy is more
appropriate as it allows DiGi to increase its revenue and market share.

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4.0 Implementation of selected strategy


4.1 Organising function
To ensure the success of the Low Price Plan strategy, organising - the arrangements and
structures of work to effectively achieve organizational goals; is needed to support execution
plans. According to Courtright, Fairhurst, and Rogers (1989), the mechanistic design should be
used in large organizations. Thus, it is suitable for the new mobile plan of DiGi. It is effective as
it is a rigid and controlled structure with standardised tasks and minimal room for ambiguity.
Mechanistic organisations have a high degree of work specialization, departmentalization and
formalization with narrow span of control, centralized decision making and a clear chain of
command (Robbins et al., 2012). For the Low Price Plan strategy, the key characteristics taken
into consideration are work specialisation, departmentalisation and chain of command.
4.1.1 High work specialisation
In accordance to the mechanistic design adopted, high work specialization is essential as
work is divided into separate jobs, delegated based on skills and executed in sequence (Robbins
et al., 2012). According to Wood and Wood (2002), Fayol states that besides fully utilising the
abilities of each personnel, the level of productivity increases.
Specialisations needed in this strategy would be market research. This skill is important
for the organisation to further understand the needs of the up and coming niche market of
international students and workforces using proper analysis. The next important component is
product development. This requires personnel who are well informed of the technical and
technological aspects of the phone plans to be able to develop new packages. Then, the finance
and marketing specialisation is important for the resource allocation and successful penetration
of the package into the market using the appropriate techniques. Trade marketing will then use
their expertise to work with business partners such as authorised dealers and service centres. The
sales and customer service personnel who are competent in communication will focus on the
sales of the plan to consumers and post-purchase services.
In each step of developing the mobile plan specialisation is important as not every
individual opposes good skills in all of these areas. However, proper time management is crucial
as over specialization can lead to inefficiencies (Nandakumar, Ghobadian & ORegan, 2010).
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4.1.2 High departmentalisation


Departmentalisation is how jobs are grouped based on similarities (Robbins et al., 2012).
DiGi Telecommunications structure comprises of functional departments such as marketing,
finance, human resource and more (DiGi, 2012).
For easier implementation, functional departmentalisation is used in this plan, whereby
departments are formed based on specific job functions as it aligns with the functional
departments of the organisation.
Besides functional departmentalisation being similar to the departments of DiGi, it is
closely linked to the work specialisations needed for this strategy. For instance, market research
is done by the market research department, product development is by the product planning and
development department, financial analysis is conducted by the finance department, marketing
personnel and trade marketing is also under the marketing and trade marketing department, while
sales and customer service personnel are in the one department. It can be seen that people with
common skills and knowledge are grouped together under one department making the
implementation of the strategy more efficient and coordinated with greater depths of
specialisation as proven by Courtright et al. (1989) in their research.

Figure 1: Departments of DiGi in implementing the focus strategy


4.1.3 Chain of command
To establish effective departments for the strategy chosen, a chain of command which is
the structure of authority from top to lower levels in the organisation needs to be clearly defined
(Robbins et al., 2012). According to Wood and Wood (2002), Fayol states that unity of
command- the principle where each person reports to one manager, is essential to avoid conflicts.
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For the focus strategy, the ideal chain of command is where executives of each
departments report to the department manager while department managers reports to one general
manager as illustrated below. The general manager and department heads will have weekly
discussions to align their strategies to achieve the goal of being the leading Telco provider for the
growing foreign market, and each department will have their separate meetings to coordinate
their tasks. As stated by Parker and Ritson (2005), a clear chain of command ensures the smooth
flow of authority and integration among departments.

Figure 2: Ideal chain of command for the focus strategy


On a side note, centralisation is inevitably implemented with this chain of command
where decisions are made by higher levels of management as the general manager is incharge
overall. With this, high formalisation is also brought into the system as there are many rules and
guidelines to follow (Nandakumar et al., 2010). Subordinates will have to give detailed plans and
reports to be approved by higher management and comply with all the standard operating
procedures of the organisation.
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4.2 Leading function


Leading plays is needed to implement the strategy as it involves guiding and working
with people to achieve organizational goals (Robbins et al., 2012). Leading can be classified into
leadership and motivation. Leadership is the ability to influence, motivate and encourage
innovative behaviour among employees which is significant for implementing change (Pieterse,
Knippenberg, Schipper & Stam, 2010; West, Hirst, Richter & Shipton, 2004). Motivation refers
to a persons efforts and drive towards achieving goals which is important for the success of the
organisation (Schaffer, 2008).
4.2.1 Transactional leadership
Transactional leadership focuses on task-related exchange of actions and rewards
between followers and leaders, while transformational leadership is more people-oriented with
the nature of motivating and inspiring (Pieterse et al., 2010; Tyssen, Wald & Spieth, 2013). For
DiGi, transactional leadership is more practical to facilitate the implementation of the focus
strategy because the clear and straightforward guidelines create less room for misinterpretation
of the new product. This is a less complicated way of managing workers; hence lower cost is
required to implement this style of leadership as managers need not be trained to motivate and
encourage their staff. Faster results will also be obtained with the reward and punishment
system (Groves & Larocca, 2011).
For the reward system, commissions are given to the salesperson for every line registered
under them to encourage aggressiveness in sales. To instill teamwork, yearly bonus and incentive
trips are given when departmental targets are reached. As for the punishment system, when
annual targets are not met, the department will need to submit an analysis report regarding their
inability to achieve the target and develop strategies for improvements.
For immediate effect on the implementation of the new mobile plan, transactional
leadership is vital. However, when the product and market is more established within the next
few years, transformational leadership will be introduced as it is more effective in the long run
and both leadership styles work well together (Wofford & Goodwin, 1994).

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4.2.2 Goal-setting theory


Goal-setting theory is a process theory of motivation which proposes that more specific
and challenging goals lead to higher levels of performance (Robbins et al., 2012). Goals are the
future valued outcomes which setting of goal may imply discontent with ones present condition
and the desire to attain the outcomes (Locke & Latham, 2006). Although challenging goals
motivate employees to work harder, it has to fit with the employees capabilities and
competencies (Lunenburg, 2011). The SMART criteria, which are specific, measurable,
attainable, realistic and time-sensitive is to be used as a guideline to develop good goals (Shahin
& Mahbod, 2007).
According to Lunenburg (2011), when goals and rewards are combined employees are
more motivated, hence goals have to be set for the DiGi employees. For example, employees are
given a target of securing 150,000 subscribers within a year. When the goal is achieved, rewards
like appreciation dinners, and bonuses are given accordingly. Besides, yearly appraisal is done,
so that employees know their standard of performance and improvements they have to make in
the coming year. With effective goal setting, it is certain that the Low Price Plan strategy will
be a success.
4.2.3 Herzbergs two-factor theory
Two-factor theory will also aid the achievement the chosen strategy. This motivationhygiene theory is divided into two aspects, the motivators and hygiene factors (Robbins et al.,
2012). Hygiene factors do not lead to job satisfaction but prevents dissatisfaction (Ewen, Smith,
Hulin & Locke, 1966; Herzberg, 1965). For example, salary is the basic need for every
employee. When the employees are paid on time, they are not happier, but when the payment is
delayed, they will be dissatisfied. Therefore, hygiene factors such as company policies, working
conditions, salary and interpersonal relationships must be maintained.

Motivators drive employees to achieve higher performance. Motivators include task


achievements, recognitions and career advancements. DiGi must give Top Sales awards to
deserving employees and Outlet of the Month recognition to motivate employees to promote
the mobile plan. As mentioned by Ewen et al. (1966), motivators are the intrinsic factors that can
lead to overall job satisfaction. Herzberg (1965) also asserts that motivators serve to provide for
the human need to exercise ones capabilities or the surplus potentiality of the brain as an
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instrumentality for psychological growth (p. 395). When employees are satisfied, it will
increase productivity and work quality. Hence, the prevention of job dissatisfaction by hygiene
factors and the enhancement of job satisfaction by motivators allow DiGi to successfully
implement the strategy.

5.0 Conclusion
DiGi Telecommunication has several internal and external influences that effect the
organization. Hence, strategies need to be imposed to address these influences to improve the
organisations overall position. The appropriate strategy to implement is the Low Price Plan
focus strategy which targets the international students and foreign workers, a growing niche
market in Malaysia. For successful implementation, the organising and leading aspects have to
be set to ensure a smooth flow of execution. This will bring more profits and growth to the
business of DiGi Telecommunications.

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List of Tables
Table 1: Comparison of Maxis, Celcom and DiGi price plan for iPhone 5S..................................3

List of Figures
Figure 1: Departments of DiGi in implementing the focus strategy.............................................10
Figure 2: Ideal chain of command for the focus strategy..............................................................11

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