Internal Analysis of Singapore Telecom
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Internal Analysis of Singapore Telecom

An internal analysis of Singapore Telecom and its possible core competencies it might posess. Also identifies the company's strengths and weaknesses

The core competencies of Singapore Telecom are its capability in advanced (and continuing improving) innovative information technology (IT) infrastructure and systems, and value-added services. Singapore Telecom’s telecommunications infrastructure was ranked 1st in a survey out of 10 Southeast Asian countries in 1997.

Having out-of-date (older) technology would place Singapore Telecom at a disadvantage with competitors (domestically and globally) that have more effective telecommunications technology: investment in IT and value-added services has given Singapore Telecom a sustainable competitive advantage. These core competences are valuable (i.e. Singapore Telecom is able to leverage on their expertise and IT based solutions and services), and difficult to imitate (i.e. domestically in Singapore, not many telecommunications companies are able to afford their own satellite).

Additionally, due to its advanced (and continually improving) innovative IT infrastructure and systems, and value-added services, Singapore Telecom is able to renew, augment, and adapt these core competencies to give it a sustainable competitive advantage (e.g. compelling marketing position and brand differentiation). Singapore Telecom had high teledensity, high-quality fixed-lined services, higher demand for specialized features, lower vulnerability to credit risks and falling tariffs.

Strengths

1. Cash-rich

Singapore Telecom had large cash reserves. Its high operating returns enabled it to replace net fixed assets in less then 2 years, making it possible to replay shareholders’ funds with about 3 years profit.

Having large cash reserves enables Singapore Telecom to sustain growth and profitability levels by investing in IT and value-added services (competitive advantage); keeping up with the pace of technology advancements. It also lowers Singapore Telecom’s vulnerability to credit risks. For example, it enabled the company to weather the advent of competition (e.g. M1) in the midst of the Asian financial crisis. Furthermore it is a resource that the company can use to increase its profitability and growth through means of investments. (This is a strong resource of Singtel.)

2. Strong Market Position

Before the introduction of competition, Singapore Telecom enjoyed a strong market position (having come from a monopolistic, and protectionist environment). Even with the introduction of competition, Singapore Telecom managed to maintain its position by investing in (diverse) IT (infrastructure and solutions), and (introduce) value-added services. A strong market position enables Singapore Telecom to generate incremental revenues and further enhance its brand equity. Thus, despite the onslaught of competition, the Asian financial crisis and advancements in technology, Singapore Telecom still managed to be the most profitable Singapore firm, with a profit of S$1.88 billion for the financial year 1998-1999.

3. Diversified Business Portfolio

Singapore Telecom has a diversified portfolio, with a focus on growth areas, and e-commerce, multi-media, systems integration and Internet-based services (domestically and overseas). Its business segments include wireless, wire-line, IT and engineering: the case study mentions that Singapore Telecom provides fixed-line, mobile, Internet, and satellite services, with systems integrations being provided through its wholly-owned subsidiary, National Computer Systems. This diversified business portfolio (and relevant subsidiaries) reduces business risks and provides cross-selling opportunities.

4. Innovative Technology and Services

Singapore Telecom undertook diversification into IT (e.g. the handling cable chips maintenance, and owning its own satellite). The company also provided value-added services (e.g. information technology consultancy, systems integration and engineering services).

In addition, the company augmented their products and services through acquisitions, mergers and/or alliances. For example, Singtel Mobile, SingNet, and Singapore Post were major partners in the Asia Mobile Electronic alliance, which aimed to provide various cross-border mobile electronic services through mobile phones, which included mobile banking, electronic bill payment, electronic ticketing, secure postal services, e-mail and information access.

Having such comprehensive services and innovative (IT) technology, increases its chances to reach out to a wider target market, thus creating greater revenue generating opportunities.

Weaknesses

1. Over reliance on IDD revenue

In the advent of competition by substitutes (e.g. competition - M1) and alternatives (e.g. advancement in technology – internet telephony), over reliance on IDD revenue caused Singapore Telecom’s profitability and growth (e.g. domestic market share) to be affected. Its largest revenue contributor, IDD (International Direct Dialing), fell by 10.4%, due to lower call rates.

2. Weak Operating Performance and Unstable Growth Rate

Singapore Telecom’s operating performance was weak from 1998 to 1999. The company’s operating expenses increased by 6% (i.e. from $2,738.1 million in 1998 to $2,910.4 in 1998) and operation profits fell by 10.5% (i.e. $2,204.1 million in 1998 to $1,973.1 million in 1999). Group revenue also fell by 1.2%. Singapore Telecom’s growth rate in the recent past up to that point in time (1998-1999) had also been relatively unstable, proving to be a significant disadvantage for the company.

3. Customer relationship

Having been a monopoly (in a protectionist environment) and with the introduction of competition, the case study mentions that Singapore Telecom did not have public sympathy: customers perceived that prices were maintained at an artificially high level (before the introduction of competition). Moreover, the way in which Singapore Telecom handled itself in the 1990s may have led customers to perceive the company as being high-handed when handling their customer relationships.

For example , in 1999, SingNet (a Singapore Telecom subsidiary) secretly scanned subscriber’s computers on the pretext of tracing a virus that allowed hackers to steal computer passwords and credit card numbers, causing controversy in Singapore when it was revealed. This event was widely perceived as indicating that major improvements in the company’s customer relationship were needed.

Despite an issued public apology by SingNet, (potential and existing) customers filled online discussion groups with protests charging of invasion of privacy, expressing suspicion of hidden motives for the intrusion. In the same year (1999), Singapore Telecom was said to have been searching for an individual who claimed that customers were not benefitting from the company’s recent prices cuts, threatening to sue him. Singapore Telecom’s harsh reaction indicated that the company was having difficulty in dealing with its customers and the intense rivalry, placed it in a disadvantaged situation.

References:

• Ireland, R D, Hoskission, R E & Hitt, MA 2009, The management of strategy concepts, 8th edn, South-Western Cengage Learning, USA

• Singh, K, Pangarkar, N & Heracleous, L 2010, Business strategy in Asia a case book, 3rd edn, Cengage Learning Asia, Singapore

 

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