Environmental Analysis of Nepal Telecom


Assessment of Internal Environment

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Forces and condition within the organization that affects the performance and outcomes is internal environment of the organization. It defines the scope and boundary of the business organization. These forces within the organization are controllable by the organization. Analysis of Internal environment depicts the strengths and weakness of the organization.

Strategy:

After all being the government organization, strategy in NTC is to reach and retain its customer more broadly. NTC is trying to install better management softwares to handle its cross functional areas. With focus on its management NTC are about to have an Enterprise Resource Planning to improve its management of man, machine and material to have better satisfied customers.

NTC is also reducing cost for customer and staying competitive in the market. To counter the competitors strategy and techniques of attracting customer, NTC, without lagging behind are working on providing services in lower cost, customer friendly and new schemes and features.

Employees:

Without forgetting that the NTC is government organization, for the people working and about to work in the organization obviously have the presence of prestige and security. Being the largest profit earning government organization, here the employees believe that their job is secure and satisfactory.

With the good sense of security and prestige, NTC is also facing various problems in the organization. The organization is encountering the hitch of overstaffing and human resource management. The employees in the organization are not well updated with the technology and trends in telecommunication. Company cannot train all of them and also it is hard to fire them. Cost of training to employees is very much high and it is difficult to recruit the employees in right place. Though new technologies are emerging in NTC, employees and the management are quite traditional and persist resistant to change. It is complicated to build the confidence and change the attitude of employees in the organization for new technologies and trends.

Shareholders:

Mostly, the company is owned by government. The very large portion of share is of government of 91.49%. There is very less amount of shares of general public. With the good performance of the company, earning per share of NTC is growing comparing to last year. Therefore the NTC is providing healthy dividend amounts to its shareholders.

Shareholders Classification

Outstanding Number of Shares

Percentage

Government of Nepal

137,239,910

91.49%

Citizen Investment trust

50,000

0.03%

Public

5,737,905

3.83%

Employees

6,972,185

4.65%

Total

150,000,000

100%

Unions:

We know that NTC is the government organization, then without any doubt there is the presence of influences of unions. The unions present in NTC are Telecommunication Employees Association of Nepal (TEAN), Nepal Telecom Company Workers Union (NTCWU). There is high involvement of unions in decision making process in the organization.

Corporate Culture:

Holding the long history of presence in the industry, culture and management of the organization is quite traditional. The management culture has the flavor of old taste of operation and service. Employees are also there for the long time and hold the traditional nature of dealing to work and customers. Even we can feel the environment whenever we enter the business house of the organization. Employees have the mentality of escaping from the task and delaying the services. We can also find the negligence of executive pertaining to long process and time span in decision making and implementation.

Assessment of external Environment

Forces and condition outside the organization that affects the performance and outcome of the business organization is the External environment of the business organization. The control of external environmental factors is out of the hand of business organization. Analysis of external environment depicts the opportunities and threats to business organization. External environment consist of different factors such as political, economic, socio-cultural, technological, legal and environmental. In short we can say as PESTILE Analysis

a.      Political Analysis

Nepal is in the state of the transition phase politically. So the political instability seems to be normal during this phase. All the sectors in the economy are more or less affected by it, and the telecommunication sector also can’t remain unaffected. The effect is better seen in NTC because it is a state owned company. The affects can be seen in the sector of delaying in new projects and investment, and irregularities in the case of making tender.

The other crucial aspect in political instability is the change in government. With the change in government, the first thing that falls under the minister priority is to transfer and allocate the staffs according to their will and need. This process consequently affects the plans and procedure of the organization.

b.      Economic Analysis

Although the economy in the world is shrinking, but the disposable income of the people in Nepal is increasing. The inflow of remittance in the country is directly helping in this prospect. The number of people using the cellular mobile phone is increasing day by day. Furthermore, the inflow of Chinese mobile phones at the low cost is also helping people to enjoy the services of mobile technology. Hence in Nepal, the economic environment seems to be favorable.

c.       Social Analysis

Nepal Telecom’s widespread reach will assist in the socio-economic development of the urban as well as rural areas, as telecommunications is one of the most important infrastructures required for development. Accordingly in the era of globalization, it is felt that milestones and achievements of the past are not adequate enough to catch up with the global trend in the development of telecommunication sector and the growth of telecommunication services in the country will be guided by Technology, Declining equipment prices, market growth due to increase in standard of life and finally by healthy competition.

d.      Technological Analysis

Technology in the communication sector is a crucial aspect. New technologies are been developing day by day. Nepal Telecom is also adopting the new technologies to be updated with the trend. The new services like ADSL and 3G services are already been used by Nepal Telecom. Recently NTC completed its optical fiber connection with its sub branches across Nepal.

e.       Legal Analysis

Nepal Telecommunication Authority is the governing body for the telecommunication sector. It enacts laws to bind this sector. With the provision of know your customers, it is bound to distribute the sim cards to its customers only after the full and detailed information. It is also restricted to distribute the unlimited number of sim cards since the frequency is limited to them.

f.       Environmental Analysis

With the obvious information that our country is very much diversified geographically, it has vast difference in its tropical points where Kanchan Kali is situated at lowest point of 70 meters above the sea level and highest point of 8848 meters at Mount Everest.  There is certainly a big problem to build the towers for network and in the installation of machines to run the service. Due to this hitch, mountains act as a barrier for smooth flow of radio frequency. Hence, NTC has to build more number of towers to capture further coverage, which directly induces to rise of operating cost.

Competitive Analysis

Porter’s Five Force Model of competitive analysis

Michael E. Porter of Harvard Business School in 1979 developed the framework through which the company or industry can analyse its competitive environment. Porter’s Five forces model determines the competitive status with the analusis of five competitive forces.

a.      Barriers to entry

Barriers to entry represent the prospect of new organization to enter into the industry. Especially in the telecommunication industry, it needs a high investment to operate the business. In Nepal, there are already 4 companies providing the services. Among them, NTC and Ncell are the giant companies, while UTL is in loss for subsequent years and Smart Cell is just initiating its services. Moreover in Nepal, NTA has restricted to enter the foreign companies to enter this sector. So with this regards, there is a strong barrier to entry in this industry.

b.      Bargaining power of suppliers

The Suppliers in the telecommunication industry for the mobile operation are the firms manufacturing and distributing SIM cards, recharge cards, CDMA handsets and technologies for activating and providing the service. Nepal Telecom selects the suppliers from global bidding process. The main suppliers which facilitate the various accessories like sim cards, CDMA set, wireless, exchange, access, optical transmission and data telecommunications gear etc are Zhongxing Telecommunication Equipment Corporation (ZTE) and Huawei. The power of the companies to select the suppliers shows that the suppliers are not strong enough since the transaction is made on on worldwide bidding.

 

c.       Bargaining power of customers

 

At the current scenario, the bargaining power of customers is very high. Its main competitor Ncell is providing the same service in case of GSM mobile technology and internet service to the customers. Customers can easily switch the product to other as Ncell is also expanding its reach aggressively. Moreover in the western part of the country, smart cell has slightly taken the market. So in sum up, the bargaining power of the customer is very high.

 

d.      Threat of substitutes product

 

Nepal Telecom provides a wide range of services to its customers ranging from PSTN to GSM mobile. Its PSTN has not substitute product but all the other facilities has its substitute product. The other giant company Ncell and the emerging company Smartcell provides the GSM mobile and the internet facility, whereas UTL provides the CDMA mobile and the internet facilities. Thus there is a chance of complete substitute product.

 

e.       Level of rivalry among firms in an industry

 

NTC enjoyed the monopoly power for almost thirty years. But now with gradual entry of few private sectors, the competition has been intense among them to take over the market. Two big giants in telecommunication industry in Nepal namely NTC and Ncell are competing with each other with very severe rivalry in terms of price, product differentiation and promotion. New schemes and features are added to their services in order to attract and retain the customers and as well as to counter the promotion strategy of rival company. This can be observe in the case of the reducing cost of international and national call rates by both of the firms.

 

Conclusive Remark

 

In order to draw the conclusive remark, we have drawn SWOT analysis of Nepal Telecom.

SWOT Analysis

Strengths

  • Economies of scale- It is easier to create economies of scale thereby increasing return on investment. The Nepali telecom market especially Kathmandu is a high-density area, which means more population per tower. This means lower capital expenditure cost.
  • Active management team- Active management is a big strength to the telecom industry because it is due to the effective management team; the telecom industry is able to make consistent profit over a long period of time.
  • Manipulate price- NTC has loyal customer base. Eventhough the comparative prices are higher for its services, customer are ready pay for it.
  • Strong brand name-Due to the strong brand name of the company, people have trust and are loyal towards the company. It will not have any problem in introducing its products and technologies in the new market.
  • Sustainable business modeling-It is able to sustain itself with the profit it has made over a long period of time even though if there is some kind of hindrance.

Weaknesses

  • Low signal strength-Large number of call drops and quality of connection is not good.
  • Late adoptation of new technology- Nepal is probably one of the last countries to adopt new technology. Example 3g technology, some estimate suggests that nearly 133 countries across the world already had 3G technology and mobile services in one form or the other.
  • High overhead cost: NTC is compiled with lagre number of staffs. NTC is facing hard time to recruit and assign the employees in right place and in right time.
  • Low quality customer care services-If there is any problem in the product that you buy, the customer care service in not that efficient to solve the problem immediately. It will probably take days to cater the customer. Companies don’t give priority in the maintenance.

Opportunities:

  • Technological advancement-The technology has been getting more sophisticated and advanced. The telecom firms can use such technology in their operation to improve the overall performance and customer satisfaction. This provides the firm the competitive advantage in the market.
  • Expansion of territory: Still huge amount of people are there who are far from any or some of the telecommunication services. This is one of NTC’s opportunity to reach the customer and expand its business.
  • Creation of new business opportunities- Development of telecom industry can result to creation of new business opportunities in other sectors such as hydro power, man power, import, export etc.

Threats:

  • Competition- Private telecom company entering the industry with new and advance technology to satisfy the consumer need and overtake the one or some market segments.
  • Shrinking economy-Due to the unhealthy and shrinking economic condition, new telecom companies are not able to enter and the ones who are already established are not able to expand.
  • Increasing rules and regulations-Due to the frequent change in the government and change in the rules and regulations, telecom industry is not able to take risk, explore new technology and market.
  • Health related problems-According to studies, there are also many health related diseases like cancer which is caused due to the excessive use of mobile phones.
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