3 G Industry In Malaysia example essay topic

Executive summary The writer of this report is working as the Vice President of Competitive Intelligence (vPCI) on a multi-national and multi-business company. The CEO has asked the vPCI to investigate whether the company should enter the Malaysian market. The company's product is telecommunication infrastructures. The purpose of the report is to analyze and evaluate a major telecommunication infrastructure development in Kuala Lumpur, Malaysia, from January 2003 and for the following five years. Furthermore, the vPCI is supposed to prepare a briefing for the Board of Directors to indicate how a relevant competitive intelligence system might be established. The 3 G industry in Malaysia is on its move, the licenses to offer products and services in the 3 G infrastructure will be awarded in July, 2002.

The government's will is that, no matter how many licenses, only one infrastructure system should be put up. In the SEPT-analysis, I found that Malaysia is an attractive country to enter since its economy will continue to grow. Furthermore, the government is eager to achieve industrialized nation status, which increases the driving forces for new technology in Malaysia. In Porter's five-forces-model I found that the telecommunication industry is not that attractive in Malaysia, due to few customers and high competition. I think the only cost for trying to get the infrastructure contract is to set up a CI system and monitor customers, competitors and country issues as government statements and economical changes.

Since the costs for setting up the CI system and the annual monitor costs are low compared to the potential, I think we should try to get the contract. Concerning the CI system, I think we have to set up one immediately in order to monitor our customers, competitors, and country issues. The team should consist of managers from every function of the company. The team's tasks is to identify sources, collect data and information, analyze data and synthesize information, and make strategic proposals to the CEO and Directors of the Board.

Table of contents 1 Introduction 1 2 Introduction to the industry 2 2.1 Industry outline 2 2.2 Telecommunication's relevance 3 3 Analysis 3 3.1 Analysis of country issues 3 3.1. 1 Social factors 3 3.1. 2 Economic factors 4 3.1. 3 Political factors 4 3.1. 4 Technological factors 5 3.2 Analysis of city issues 5 3.3 Analysis of industry issues 6 4 Competitive intelligence system 7 4.1 Evaluation of the CI system 8 5 Strategic advises 9 6 References 10 6.1 Authors 10 6.2 Articles on World Wide Web 10 6.3 Articles on World Wide Web (no author) 10 6.4 World Wide Web, organizations 11 6.5 World Wide Web, competitors 11 Appendix A 12 Country outline 12 Appendix B 14 City outline 14 Appendix C 15 Evaluation of the sources 15 Appendix D 16 Setup and annual cost of the CI system 16 1 Introduction The background of this report is that the writer is working as the vice President of Competitive Intelligence (vPCI) on a multi-national and multi-business company.

Among other businesses, the company sells telecommunication infrastructures to operators in the 3 G-industry. The CEO has asked the vPCI to investigate whether the company should enter the Malaysian market, and especially Kuala Lumpur. Since the company's product is telecommunication infrastructures, a complex and expensive investment, it is possible that the company has to enter the whole of Malaysia and not just the capital, Kuala Lumpur. This is, of course, depending on the customers, which are the operators in Malaysia. If the reader of the report is not familiar with Malaysia and Kuala Lumpur, the writer suggests that the reader starts by reading Appendix A, country outline, and Appendix B, city outline. The information used in the report has been collected from secondary sources as articles and publications on the Internet foremost, but also textbooks.

When it comes to evaluate the sources reliability and validity, I think that it is a crucial part of the investigation. Concerning the electronic sources that are used in this report; I have only used sources that have a well-known webpage owner, and only non-anonymous quotes from articles. Despite this I have found articles that claim two opposite opinions, in those cases I have tried to investigate further to get a more reliable source. When that has not worked out as it should, I have referenced both sources in the report and made my own conclusions. For a full list of my judgment, see Appendix C. 2 Introduction to the industry In order to introduce the reader to the industry, this section gives a brief outline of the Malaysian telecommunication industry. 2.1 Industry outline The telecommunication industry in Malaysia is on its move.

Soon the government will release the 3 G-licenses. The decision of how many licenses the government is going to give out and which companies that will get them, will be made in July, according to Malaysia's TRI and DiGi to make joint 3 G bid (2002). The license gives the owner the right to offer products and services over the telecommunication infrastructure that has not yet been built. The licenses will be given to the companies that, according to the government, have the best offer.

The government will hold a so called "beauty parade" (ibid) before awarding the three 3 G mobile licenses, based on a firm's technical expertise, track record as a company, and their infrastructure spending plans. At first, the government meant to give out three licenses, if there were three satisfying offers (ibid). According to Malaysia sets rules for 3 G beauty contest (2002), the Energy, Communications, and Multimedia Minister Leo Maggie said that the government might award the licenses to fewer than three operators. In contradiction, the Prime Minister said, according to Malaysia unlikely to issue licenses by auction (2001), last year that the Malaysian government is not likely to auction the license for a third-generation (3 G) multimedia mobile telecommunications network, but will instead award it to a chosen company. web claims that there probably will be a consolidation of the existing five carriers into three. According to Malaysia's TRI and DiGi to make joint 3 G bid (2002), the government has told the five current operators to share network and infrastructure to avoid duplication.

According to Newlands (2001), the Malaysia's Communications and Multimedia Commission chairman has said that the 3 G services are expected to be introduced locally by late 2003 or early 2004 after the issuance of spectrum assignments in July next year at the latest. In contradiction, web claims that the 3 G mobile service is expected to be rolled out in 2005.2. 2 Telecommunication's relevance Malaysia and Kuala Lumpur do not have any infrastructure for the third generation mobile phones. This will be needful, for Malaysia as a country and Kuala Lumpur as a city, to become a powerful competitor on the international and globalizing market, in order to attract companies and skillful employees. In addition, there are trends that indicate future prerequisites of the telecommunication industry. According to Plunkett Research, Ltd (2002), examples of present telecommunications industry trends are; continued rapid growth in wireless communications, convergence of wireless phones and the Internet, and expansion of broadband access options and fiber-optic networks.

Furthermore, the Malaysian government has taken an active role in integrating IT and telecommunications into the community. Therefore, I think that Kuala Lumpur and Malaysia will need third generation telecommunication infrastructures, i.e. our company's product is relevant for Kuala Lumpur and Malaysia. 3 Analysis In this section I am going to determine the external environment and how it affects the telecommunication industry in Malaysia, this is also called a country analysis. A short analysis of city issues follows and thereafter comes an analysis of the present attractiveness of the industry. 3.1 Analysis of country issues De Wit & Meyer (1998) describes the industry's surroundings based on the four forces of the SEPT-model. They think that the external forces that affect the industry are social factors, economic factors, political factors, and technological factors. 3.1.

1 Social factors Our potential customers, the five operators, are more or less multinational companies rather than end-user customers. They have foreign owners and have made strategic alliances with international companies and they got business activities in several countries except for Malaysia. Therefore, I think that the social factors are looking good for a possible entrance into the Malaysian market. 3.1. 2 Economic factors In the recent years Malaysia's economy has been correlating to the world economy and to the Asian economy. When mentioning the world economy, it is, of course, the US economy that is the most important. In particular for Malaysia due to its exporting to the US.

According to the World Bank Group, the US economy appears to be in the early stage of recovery that will be sustained if global economic conditions continue to improve, web I think that the Malaysian economy will continue to perform better and better, as it has done except for setbacks in the global economy. Furthermore, I think that this is one of the most critical issues when determining whether we should enter the Malaysian market or not, because a growing economy encourages more investments, and more companies to enter the market. Therefore, the better economical conditions the more likely the need for third generation telecommunication infrastructures in the whole of Malaysia, and not just around Kuala Lumpur. And in a longer perspective, this will also speed up the process to modernize the technology even further, i.e. 4 G. 3.1. 3 Political factors The political development has been characterized by the relationship between the three main ethical groups. There have been some problems between the groups but in the big picture, Malaysia has succeeded in avoiding bigger conflicts.

Even though the freedom of speech and the political freedom have limitations, for which the government is criticized both internationally and domestically, the country is still one of the most open-minded in the region, both politically and economically, web Though there are not any western conditions in Malaysia, I do not think the political situation in Malaysia will affect our businesses in a negative way since there have not been any major conflicts in the country. In addition, the government's concern for Malaysia to become a highly developed IT-nation puts up a high demand for good and modern telecommunication infrastructures. The Malaysian government has a very active privatization program. Despite this, a number of major businesses are either government controlled or have government equity, web An example of this is the 3 G-industry which is controlled by the government, however I do not think that our company will be affected by this in a negative way since the political influence on the industry will fade out when the licenses have been awarded. 3.1. 4 Technological factors Malaysia is not a high-technological country, but the main point is that it is striving to get there. Communications and information technology infrastructure is a key element in Malaysia's plans to achieve industrialized nation status by 2020 (Vision 2020), web This creates a huge demand of Information and Communication Technologies and it will make the Malaysian market and other South-east Asian markets even more attractive in the future.

The company that succeeds to get the first infrastructure contract has a good opportunity to get more contracts later on when an expansion, or new technologies, will be needed. Therefore, I think that the technological factors are looking good for entering the Malaysian market. 3.2 Analysis of city issues The most important part of Malaysia to enter is of course its capital, Kuala Lumpur. This, since it has most inhabitants per square meter but more importantly, this is the place for the Multimedia Super Corridor.

The companies in this area have high demands on working and satisfying telecommunication infrastructures and it will probably be these companies that set the level of technology demands for the whole of Malaysia. However, I do not think that our company will have that much to add to this issue; instead I think our customers, the operators, will tell us the quantities they want to buy from us and the locations for the equipment to be put up. 3.3 Analysis of industry issues Depending on the verdict of the upcoming awards, there may be one to five customers for our company to serve. The government may decide to give licenses to every company that fulfills the demands or give it to the company that has the best offer. Furthermore, if the licenses go to several operators, there can be one or more infrastructures built up. Considering the information I found in my research, there will most probably be one to three licenses given to the operators.

Additionally, it is reasonable to believe that these operators will build up the telecommunication infrastructure together because of two reasons; (1) it is the government's will, and (2) it will be cheaper for the operators to agree upon an alliance and share the costs. Sounds pretty bad, the worst-case scenario is one customer on the market, and in addition, the customer is an alliance of several companies. This will affect the industry and the competitors in the industry. When deciding an industry's attractiveness, a useful tool is Porter's five-forces-model. Porter (1985) claims that "competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry's attractiveness". The model consists of five forces; buyers' bargaining power, suppliers' bargaining power, substitute products, potential new entrants, and rivalry among competing sellers. o Buyers.

Probably the buyers will put up demands concerning prices and qualities, and then ask the companies in the industry to submit tenders. This together with the fact that the industry has few buyers makes the industry less attractive. o Suppliers. Suppliers may have some bargaining power in the industry concerning price, service etc, but the main point is that the suppliers are as eager as our company to get the contract because of the size of the order. Suppliers to the telecommunication industry are rather helping the companies than the other way around, which makes the industry more attractive. o Substitute products. I can not see any clear threats from substitute products at the moment, except from the existing 2.5 G infrastructure. But for this technology to maintain competitive, end-users must reject 3 G and that is not very likely to happen.

In the near future though, the technology will be changed to 4 G and the industry's prerequisites will change and become similar to today's conditions. o Potential new entrants. Since the industry's characteristics are heavy investments and long-term relationships there is no real threat from new entrants. o Rivalry among competing sellers. The most important competitors are (ranked by sales): Lucent, Nortel, Alcatel, Motorola, and Ericsson. Since the telecommunications equipment segment is one of the most troubled areas in technology industry, web the competition within the industry is getting harder and harder. Additionally, total spending on telecom equipment fell by about 15% in 2001; it is estimated to fall even further in 2002. This stands in stark contrast to the growth that occurred in both 1999 and 2000 (ibid).

One could say that rivalry among competing sellers is very high and is getting higher, and therefore makes the industry less attractive. To sum up Porter's five-forces-model, I think that the telecommunication equipment industry in Malaysia is not that attractive at the moment. This depends foremost on the fact that there are few customers and there is a declining growth in the industry worldwide, which tightens the competition. On the other hand, the industry has high entry barriers and there is not any real potential threat from substitutes. 4 Competitive intelligence system For our company to have a good control on what is happening in Malaysia, foremost concerning the political development and decisions from the government about 3 G contracts, but also to keep an eye on the economical development, we need a competitive intelligence system. When it comes to industry related issues I think it would be necessary to monitor both our competitors and customers, in order to have the best possible information when submitting the tender.

In order to monitor country issues and customer / competitor issues I think we have to set up a competitive intelligence team, to act proactive rather than reactive. The team should consist of managers representing all functions of the organization. According to Cook and Cook (2000), there are two purposes for the team approach; (1) "it increases the likelihood that the organization as a whole will embrace the concept of CI", and (2) "the actual CI function will be more valuable and usable as a result of the input from the team members representing diverse strategic needs within the organization". When monitoring country issues; newspapers, reports, magazines, and government documents will be the main fields and sources of data. Monitoring the customers is best done through a good relationship where information is shared rather then kept on one's own. Monitoring our competitors is the hardest one.

Here I think we have to be open-minded and use every thinkable source; e.g. face-to-face contact in any form gives us information, visit trade fairs, and get help from industry associations. Of course, the sources for country issues should be used for customers and competitors as well. The fields and sources of data should be treated as the references in this report, i.e. articles without authors from doubtful homepages should be rejected, anonymous quotes should not be used, and all sources' reliability should always be evaluated. In the analyzing phase the analyst most important task is to consider the reliability of the information before synthesizing it.

This, since many sources are doubtful, especially on the web. The intelligence is the outcome of this process and it should be stored in a database. The CEO and the Directors of the Board should get fortnightly reports from the CI-team. If breaking news turns up, the immediate action should be to analyze the information and contact the CEO. If the CI system will be managed in this way I think it will be a big asset for our company despite the fact that it will cost us some money, see Appendix D for estimated costs of setting up the CI system. 4.1 Evaluation of the CI system In our analysis phase we will use more tools than I have managed to do in this report, due to time and space constraints.

Examples of these tools are; Porter's five-forces-model, SWOT-analysis, value chain-analysis, merger analysis, SEPT-analysis, key success factors and more. This will make our CI system at least as good as any system designed for market analysis. The big difference is the way, and the channels, for getting data and information. While regular analysis of markets, competitors, and customers are using common sources, our system is based on more unconventional methods. 5 Strategic advises Concerning the country issues, Malaysia seems to be a good market to enter. The potential is huge, if our company gets a contract on putting up the third generation telecommunication infrastructure; we have the possibility to enhance our position in South-east Asia.

From the SEPT-analysis in chapter 3.1, I found out that Malaysia have good conditions for an entry; thanks to the government's vision of Malaysia becoming an industry country before 2020, there will be a lot of effort put into this issue. Furthermore, it seems as the Malaysian economy is on its way up, and that will enhance the conditions for entering the Malaysian market and increase the pressure for upgrading the technological standard. The downside to Malaysia's potential is the industry's structure and attractiveness. Due to few potential customers, and the government's will to build only one network, it will be hard to capture a contract on 3 G infrastructure. Additionally, the worldwide telecommunication industry has been in recession for two years and the outcome is, naturally, higher competition and lower bids on tenders. I think that entering the Malaysian market would only be of interest if we get the 3 G contract.

A positive thing is that we do not really need to do any investments to get the contract, except monitoring the development in Malaysia and our competitors. See Appendix D for estimation of setup costs and annual costs of the CI system. To monitor the development in Malaysia we should use the competitive intelligence system described in chapter 4. Since the investments are small, $40 000 plus $335 000 annually, compared to the potential, I do not think there are any crucial risks or threats. A worst-case scenario though, would probably be extended time for the award process (big monitoring costs), followed by getting the contract when the world economic recession gets worse, and consumers and businesses looses interest for 3 G and delays the expansion. 6