Testra Case Summary

Telstra Case Scenario 2 (12 Marks, 4 marks and 8 marks each)
PORTER 8 FORCE, PAGE 38 Case study 1
Monopoly until 1997, wholesale and retail Telecommunications Company
Fixed line copper wire network fast become obsolete
Strategy:
Former CEO say adding value for our customer base is our driving force and idea of service and the drive for improvement must be at the core of the culture of the organsiation CEO David Thodey said the company need to transform from an engineering and technology led company to a truly sales and marketing led company, and he the first one have really did sth
13 years later, still try to make customer service part of its corporate structure
Need to implement strategy for increasingly competitive and technologically evolving
environment and marketplace
Continue to redefine itself as distributor and retailer offer competitive products and pricing Government: either adopt super fast fibre to every home and structurally separated Telstra (sh will not buy its shares until govt bb policy is finalized) or pull it back to market driven environment with tougher competition rules but No structural change
Misalignment of CEO and senior executives:
Telstra senior executives seems not align with the CEO by admit the company is not managing customer service and announce a 1 billion transform project to fight for customers in mobile, fixed bb and wireless bb markets
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New measures:
Educate customer importance in employee training
Removing and simplifying bundle and package product and services to make customer less confusing
Fewer customer complaint reduce number of staff in complaint dept and fee imposed by telecommunications industry ombudsman
From CEO Thodey (the first CEO to):
 first to open customer services lines 24 hours a day
 cut mobile and broadband price to competitive levels
 send technicians out on weekend
 other initiatives: new IT troubleshooting service, higher subsidies for mobile handset and possibility of “welcome” credit for new customers
Financial performance:
Last yr, net revenue fell 2.3%
Expect to fell up to 9 % due to transformation cost
(400 mil go to improve customer service and upgrade system)
(600 mil go towards subsidizing mobile phones, t-boxes and t-hubs to attract new customers) steady decline in market shares and traditional sources of revenue
1.5 fewer residential home phones (fixed line) today than 97, number of calls made from home phone drop my half – as no need to have a second line used for dialed up now CEO and CFO met investor to explain how a yr of pain will lead to better returns over the long run
CFO gone to US to meet foreign investor
Bottom line is must invest to grow, win customers and lower cost base to make room for a lower-margin product mix world to grow gross earnings
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Share price not bounce back from 9.5 % drop on the poor annual result day sh will not buy its shares until govt bb policy is finalized or sh unconvinced they can get the customer service right
Former CEO: expand Telstra overseas and build a new 3G national network, but
cannot stop the steady decline in market share and traditional sources of revenue
Labor government policy is to build a fibre network to 93 % of houses, with the rest serviced by wireless and satellite (this will structurally separate Telstra)
Or pull back in market driven environment with tougher competition rules with no structural change
This will see Telstra transfer copper network customer to govt-owned national broadband network company’s wholesale fibre network and receive 9 billion in cash as compensation and for leasing pipe network
Statistical figures:
1.5 mil fewer residential home phones (fixed line) then 1997, home phone calls drop by half decline as previous need a second line to use dial up internet but now no need
They will be in much worse position if former CEO Sol Trujillo had not invested in the new billing system and the 3G network
Opportunities, Advantages:
Goldman Sachs analyst, the whole world is going wireless and they can leverage it when going forward with this phenomenal network, because smartphone users need
3G everywhere
Competitors:
2G network of Optus and Vodafone incomparable to Telstra network now
Going forward: start cut price in early 2010 to match
competitions must win ex customer back with better service this aggressive market share push to catch up but not an ongoing thing
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Standard and poor rating:
The short term cost of winning back market share will not affect the company long term credit rating, providing it is successful in regaining mkt share and turn Telstra into a more competitive company
Tyndall investment analyst Michael Maughan: this is a delay reaction and the large profit margin of recent yrs will prove unsustainable
Fixed line services not dead yet:
Optus add 25000 customer
Telstra add 11000 for fixed bb subscribers after lower price and reveal new devices like T hub and T box in the first half of the financial years
Add 11000 customer after new price and increase data allowance, but
But still end the financial yr of 09-10 with 19000 fewer retail fixed bb customers
New Vision to enable further change:
Setup a new division focused on customer experience, simplicity and productivity
Reduce mgmt jobs to streamline decision making, get rid of overlaps and duplicated reporting ULTIMATE goal:
Transform into a new streamline company that operate as a retail telco provider (one can retain customers, provide better service, pricing and content, and deliver a good profit margin without the advantage of being the only really integrated provider)
Key functional areas Key activities
Finance - Credit rating will not affected provided they can regain market share - Meet investors in US explain yr of pain will be better in the long run
- Must invest to growth, lower cost base to make room for the lowermargin product mix world
Operations - Remove and simplifying products
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and services
- cut mobile and broadband prices to competitive level and send technicians out on weekend,
- new IT trouble shooting service, higher subsidises for headset and the possibility of welcome credit for new customers - Setup new division focus on customer experience, simplicity and productivity - Fewer customers complaint will reduce staff in complaint department and less fees imposed by the telecommunications industry ombudsman - Remove and simplifying products and services
- Remove mgmt jobs to streamline decision making
Marketing - they got to move from engineering and technology led company to being a truly sales and markeing led company. (13 years still doing this)
- need to redefine itself as a distributor and retailer offering competitive products and pricing
- Remove and simplifying products and services
- Must win ex-customer back with better service
Human resources - Setup new division focus on customer experience, simplicity and productivity - Customer service: employee training, remind staff about the importance of customer -
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Communication (e.g. to stakeholder) - Misalignment, senior executives admit company is not managing customer service
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IT - Competitors 2G network incomparable to the 3G network
- Fixed line copper wire network fast becoming obsolete
- The previous 26 billion investment in billing system and 3G network is great - Can leverage the 3 g network by the smart phone and mobile device
7S:
The McKinsey 7-S model is used as the framework for analysing the integration issues. This model specifically shows that change is complex and requires the many interconnecting variables involved to be simultaneously and actively managed.
You can use the 7S model to help analyze the current situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint.
Hard Elements Soft Elements
Strategy
Structure
Systems
Shared Values
Skills
Style
Staff
Strategy:  Strategy—a set of actions aimed at gaining a sustainable advantage over the competition.
What is our strategy?
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How do we intend to achieve our objectives?
How do we deal with competitive pressure?
How are changes in customer demands dealt with?
How is strategy adjusted for environmental issues?
- Ultimate aim for leader is to transform Telstra into a new streamlined company that will operate as a retail telco provider, one can retain customers, provide a better service, pricing ad content, and deliver a good profit margin without the advantage being the only really integrated provider
- Misalignment, senior executives admit company is not managing customer service
- Recently announce a 1 billion plan to fight for customer in mobile, fixed bb and wireless bb
- move from engineering and technology led company to being a truly sales and markeing led company
- Recently announce a 1 billion plan to fight for customer in mobile, fixed bb and wireless bb
- Setup new division focus on customer experience, simplicity and productivity
- Reduce mgmt job, streamline decision making, get rid of overlaps and duplicated reporting - Remove and simplifying products and services
- Setup new division focus on customer experience, simplicity and productivity
- improve customer service by 24 hours hotline, cut mobile and broadband prices to competitive level and send technicians out on weekend, new IT trouble shooting service, higher subsidises for headset and the possibility of welcome credit for new customers
- Customer service: employee training, remind staff about the importance of customer Issue :
1) uncertainty of the Government broad band policy have a huge baring of how
Telstra should go (a detail review and what if analysis may help)
2) no commonly understood strategy (?)
3) misalignment between CEO and senior executives (talk about diff things)
4) why no specific strategy to leverage the advantage in having the 3 G network but target to get fixed line and BB customer
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Structure: Structure—the organisation chart and associated information that shows who reports to whom and how tasks are both divided up and integrated.
How is the company/team divided?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized?
Is this as it should be, given what we're doing?
Where are the lines of communication? Explicit and implicit?
- Previously is a bureaucratic organization bloat by the high margin, now reduce mgmt job, streamline decision making, get rid of overlaps and duplicated reporting - Setup new division focus on customer experience, simplicity and productivity
Issue: 1) Communication more effective due to less mgmt job, get rid or overlaps and