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BUSM 3192 Strategic Management
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Strategic Management Project:
PCCW Directories Limited
Table of Contents
Page No
Introduction 1
Discussion of some Strategic Management Project Topics:
I) SWOT Analysis for Making Strategic Choices
A. External Analysis: Industry Opportunities and Threats 2 – 3
B. Internal Analysis: Strength and Weakness 4 – 5
II) Functional-level Strategy 6
III) Organisational Structure 7
IV) Evaluation of Strategy Performance 8 – 9
Conclusion 10
Reference List
Introduction
The process of strategic management involves the systematic examination of a number of interrelated elements, which results in an explicit statement of company objectives and how they are to be achieved. The ultimate purpose of strategic management is to secure competitive advantage of the organization in question (Drejer 2002). Strategies are made by businesses to be able to perform well in its industry and react well to the different problems they have encounter in their day to day operations. Companies use strategic management to maintain their standing in the market and attain some advantage over competitors.
Pacific Century Cyber Works Limited (PCCW Limited), the largest and most comprehensive telecommunications services provider in Hong Kong, makes use of strategic management within the Group and its subsidiaries particularly the only maker of Yellow Pages telephone directory in Hong Kong which is PCCW Directories Limited (PDL).
PCCW Limited has adopted a set of Vision, Mission and Core Values that expresses the PCCW brand and is relevant to today’s business environment. The corporate vision is, simply, “To be the best”. PCCW refers to being and maintain the status of a dominant player in the industry. The mission is “Connect, Inform, Entertain, Serve” with Core Values as “Customer-focused, Agility, Innovative, Reliable, Premium quality, Value creation”.
As one of the business unit under the PCCW Group, PCCW Directories Limited shares the group’s common vision/mission with the following major goals:
- Provide a way for customers (advertisers) and buyers to search and connect to local services instantly.
- Empower customers (advertisers) so that they can connect with buyers in the most effective way.
- Make sure that both the advertisers and buyers will have the updated information they need at once.
- Offer high-effective one-stop advertising solutions via traditional print, online media and innovative multi-media search directory products/services to cater different needs of advertisers and buyers in B2B and B2C business.
PCCW Directories Limited (PDL) has been standing in its industry with monopoly to publish Yellow Pages for a long time without much threat from newer and more innovative companies. Such feat can be attributed to the strategy it has and how the strategy is managed and implemented. PDL’s strategic management is based on the desire to serve the customers with unique products/services with all-in-one solution. This paper will discuss five strategic management project topics (SWOT Analysis: External Analysis and Internal Analysis, Functional-level Strategy, Organisational Structure, Evaluation of Strategy Performance) and the integration with PCCW Directories Limited.
Discussion of some Strategic Management Project Topics
I) SWOT Analysis for Making Strategic Choices
A. External Analysis: Industry Opportunities and Threats
Porter’s Five Forces Model
Threat of new or potential entrants
PCCW Directories Limited (PDL) has been around for a quite some time with significant brand loyalty and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak. PDL is the only company in Hong Kong that is given monopoly to publish the Yellow Pages telephone directory. Thus any new entrants will have considerable difficulty in gaining customers unless they can provide innovative strategies that can thwart PDL from its well-established position in the industry. The Yellow Pages published by PDL is unique in terms of appearance and overall presentation. So if any new entrant wants to compete with PDL’s Yellow Pages they need to have a huge resources and investment to create new products that have the same calibre as the Yellow Pages of PCCW Directories Limited.
Rivalry among established companies within the industry
Competitive rivalry has a low influence on PCCW Directories Limited (PDL). PDL has lower concerns on its competitors since there are limited competitors in the telephone directory industry. One of the competitors is known as Hong Kong Trade Development Council which helps to facilitate opportunities in international trade for Hong Kong companies with publication of supplier directories and trade magazines, etc. The competitors cannot give much problem to PDL since it has already acquired majority of the business establishments in Hong Kong with loyalty of subscribers and customers (advertisers).
But due to the newer trend and development in the directory industry, competitive rivalry is becoming a concern to the company. PDL, knowing the decline of printed directories, has to diversify the Yellow Pages with innovation from a printed product to the Internet (iYP.com), mobility service (Mobile YP) and TV platform (YP on NOW TV Channel 502 – a paid broadband TV channel owned by the PCCW Group), etc. In the Internet sector, the company is facing fierce competition and New World iMedia Solutions Limited (NW iMedia) becomes one of the competitors of PDL with the growth and demand in the online advertising market. NW iMedia is a wholly-owned subsidiary of New World Telecommunications Limited which provides one-stop online media solutions on the Internet. NW iMedia and PDL are both the golden partners (authorized dealers) of Yahoo Search Marketing and are selling similar products/services to business customers in Hong Kong.
Substitute products
PCCW Directories Limited has few substitutes in relation to the Yellow Pages products. The company has made use of both print and Internet media to deliver the Yellow Pages products/services. No other products or services have yet copied this uniqueness and it is the reason for the company’s success. However, for the print media, Yellow Pages has to further define and develop its uniqueness as the printed directory can be easily substituted by online products and other type of directories or magazines in the market. For the Internet media, the company is facing fierce competition due to the rapid growth and demand of the online advertising. The company has to maintain its competitiveness in its online business.
Bargaining power of buyers
The bargaining power of buyers highly influences PCCW Directories Limited. The company has to maintain reasonable and competitive prices for both the print and Internet products as customers are now giving more choices on both the promotion channels and advertising tools in the market. Customers tend to try new, innovative, effective advertising media with lower costs. The bargaining power of buyers is gradually increasing.
Bargaining power of suppliers
The bargaining power of suppliers also highly influences PCCW Directories Limited especially on the online advertising sector. Besides the iYP.com website (a self-owned search platform of PCCW Directories Limited), the company is quite relied on selling Internet advertising solution by acting as a re-seller for Google, Baidu.com and Yahoo Search Marketing products. Hopefully the importance and status of the company can be demonstrated through the partnerships with such key suppliers in the market. But the company has to be aware of its partnership with its online services partners and make sure that every part of the partnership agreement will be followed. Any adverse changes or violations in the partnership agreement will incur a certain amount of risk to the company.
B. Internal Analysis: Strength and Weakness
Generic Building Blocks of Competitive Advantage
Efficiency
Superior efficiency allows a company to lower its costs. PCCW Directories Limited keeps enhancing the product standard and its production technology with automated system to lower the production time and labour cost in finishing the products. Customers can easily upload and update the advertising materials without involving PDL’s supporting employees.
Quality
Yellow Pages is well known for its trust-worthy and quality for years. Superior product quality is one of the strength of the company and it enables PDL to charge the customers higher prices with lower costs. PDL makes good use of other innovative and effective advertising channels owned by the PCCW Group in a lower cost (e.g. mobile Yellow Pages on PCCW mobile service and Yellow Pages on NOW TV Channel 502) and creates product uniqueness in order to sell all-in-one cost-effective advertising bundle package at a higher price.
Innovation
Further to its superior quality, PDL also has the ability to make its products in a pioneer and innovative way. The company tries to advance its products into something innovative like Yellow Pages on NOW TV Channel and Yellow Pages search on EYE fixed line device (a new fixed line device developed by the PCCW Group to cater home telephone users). The company doesn’t rely on age old practices in creating the print Yellow Pages products but also tries to learn and adapt to changes in how Yellow Pages are made and how such products are presented.
Customer responsiveness
Strength of the company is on its superior customer responsiveness. The company makes sure that any complains or questions from the customers will be immediately answered. All the sales representatives and colleagues in customer services department are well trained with regular briefing session to provide any updated product information and role-play training.
Complementary Sources of Distinctive Competency
Resources
PCCW Directories Limited, as one of business units under the Advertising and Interactive Services of PCCW Limited, has sufficient resources to create the company’s value. The company makes sure that the resources are made from good quality materials and can easily be attained to prevent any operational delays. The tangible resources are the materials like directory papers used for the Yellow Pages print products. The intangible resources include the internet, television, partnerships with other groups and some other newer media.
Capabilities
Both PCCW and PDL enlist the best personnel to strengthen its capabilities in the industry. They are the ones that create the products from high standards. PDL makes sure that they hire someone with enough potential to assist the company in achieving its goal. The main weakness of PDL is its culture of putting much power on the top management. The company refuses to share decision making processes with its other divisions. The top management cannot always have the information needed to make decisions on the company’s processes; some decisions may need some inputs from other sectors in the company.
II) Functional-level Strategy
Achieving Superior Efficiency
PCCW Directories Limited has its strategy focused on the contribution of various functions to attain superior efficiency wherein every action should be done with much precision time and less resource used. Top management which is formed with all the division heads provides companywide commitment to achieving superior efficiency via R&D, Information Systems, and Human Resources functions. The company keeps seeking process innovation and enhancing the automation systems to lower the production time, coordination and labour cost. Customers can easily upload and update their advertising materials through the well developed information systems by PDL. A systematic training department is dedicated to upgrade both the sales representatives and colleagues in customer services department with product information and skill, etc.
Achieving Superior Quality
PDL boasts of its superior quality products/services that are made from well thought-out standards. The idea behind this is the company believes that the customers (advertisers) should receive what they are paying for. In implementing total quality management (TQM), the company has already built organisational commitment to focus on providing quality products/services to customers. Through the efforts on Marketing, R&D and Information Systems functions, customer’s feedback on quality will be entertained by evaluation and enhancement on both print and Internet Yellow Pages products. The company also differentiates its products and designs new advertising tools to give advertisers all the multi-exposure opportunities with uniqueness and quality (e.g. mobile Yellow Pages on mobile phone and Yellow Pages on NOW TV Channel 502).
Achieving Superior Innovation
Innovation will always be an important part of a business’ strategy since it will help a staggering company to recover by creating new products. Innovation is used by PDL to make sure that customers will not easily lose interest on the company products. The company applies innovation through making use of Internet, mobile phone service and TV media. The company is proud of its strong R&D, Marketing and Information Systems on developing innovative products/services to meet changes in the environment. “Thinking outside of the box” advertising products/services always delight the customers and enhance brand loyalty.
Achieving Superior Responsiveness to Customers
PDL as a one-stop advertising solution provider focuses on every customer’s need with customised and flexible advertising services. To compete with the emerging competition in the industry, the company exercises market research in regular basis with the help of the global well-known research company Synovate. Through the superior market research, PDL can understand and respond to customer demands quickly. It helps to bring customers into the company, develop and customise products/all-in-one advertising solution to the unique needs of every customer.
III) Organisational Structure
In reference to Mintzberg (1979), who introduced five (5) structural configurations ranging from a ‘simple structure’ to a ‘divisional form’, the growth of the PCCW Limited has led to the formation of various divisions, which handle different businesses. PCCW Directories Limited is one of the divisions under the PCCW Limited. It is assumed that the organisational structure is divisional. In general, the divisional form uses markets for products as a basis for grouping units or divisions that will have full control of operating functions to serve these markets (Riahi-Belakaoui 1995). PCCW developed different divisions that will handle different specialties, products and services. PCCW Directories Limited as a division (business unit) of PCCW Limited specializes in directory business and is concerned with highly effective advertising solutions primarily to small and medium-sized business.
The whole PCCW Group possesses a high level of centralization. Like many Asian contemporaries, PCCW Limited is a family controlled company. Historically, Asian companies are highly centralized. PCCW was tightly controlled and managed in hierarchy dominated by the founders and their immediate family members. The hierarchy of authority is considered as centralized. Centralization according to Hendrick (2002) has something to do with where formal decision-making occurs within the organization. In centralized work systems like PCCW, formal decision-making is concentrated in a relatively few individuals, group, or level, usually high in the organization (the top management). The board of directors of the company is responsible for the management of the company. Key responsibilities include formulation of the overall strategies of the company and its subsidiaries, the setting of management targets and supervision of management performance (PCCW Annual Report 2005).
Similarly, PCCW Limited has high degree of specialization or professionalism. Because of intense competition, globalization and demands for Asian companies to adopt western style of management, firms such as PCCW are starting to adopt a more flexible corporate structure (Yeung 2005) as well as its subsidiaries like PCCW Directories Limited.
Low complexity is seen in the entire managerial framework of PCCW Limited as it uses Porter’s differentiation as competitive strategy. It is also attributed to the fact that PCCW originated to a family business, thus, there is a systematic or single source of control and authority. There is also low degree of formalization. PCCW Limited has defined rules that are to be strictly implemented on the functions of decision-making and taking, communication initiatives, and control mechanisms. The management however is motivated to work on a single mission where their governing rules are illuminated in making corporate policies that are to be adopted in all local and regional network levels.
IV) Evaluation of Strategy Performance
Kaplan and Norton (2001) devised the Balance Scorecard (BSC) to measure performance of organisations with the idea that managers need to broaden their analysis and understanding of the organisation to include four (4) elements: Financial, Customer, Internal Business Process, Innovation and Learning perspectives (Kaplan and Norton, 2001). The application of BSC should be unique to each organization and to levels in the organization.
The Balanced Scorecard is seen as an evaluation part of the strategic management process that helps to measure the internal and external problems faced by PCCW Directories Limited and what can be done to change the threats of the problems and realign with the overall goal of the company.
Financial Perspective
PCCW Directories Limited as one of the business unit under Advertising and Interactive Services (A&IS) of PCCW Limited, has a significant growth in 2007 revenue. The whole PCCW Group’s financial performance for 2007 has signified growth in core revenue turnover amounting to HK,581 millions compared to HK,374 millions in 2006. (PCCW Annual Report 2007)
Customer Perspective
For PCCW Directories Limited, the company’s mission/goals is to provide the most comprehensive, practical and up-to-date information on all walks of business to facilitate the customers’ information sourcing efficiently and quickly. In 2007, the printed Yellow Pages Consumer book was proved to be able to generate some HK.5 billion in sales for advertisers over a 12-month period and it remains hugely popular in Hong Kong. The company’s multi-publishing offer includes substantial online presence featuring reseller relationships with Internet giants such as Yahoo Hong Kong, Google, Baidu and SINA Hong Kong, etc. This is provided alongside the company’s own popular Internet Yellow Pages website, which attracts advertisers and consumers alike and generates around 35 million page-views every month in 2007. (PCCW Annual Report 2007)
Internal Business Process Perspective
Over the years, PCCW Directories Limited invested on strategic alliances and new projects and extends its operations as seen on the growing networks while maintaining progressive growth on the services and business process. The company continues to deliver the PCCW Group’s quadruple-play strategy to create value by leveraging assets, while capitalizing on synergies and pursuing new opportunities for growth. The company is able to connect Yellow Pages advertisers with buyers via multi-exposure channels, which means consumers can conduct searches online and find their needs via Yellow Pages on mobile phones, the PCCW EYE home multimedia fixed-line device and YP Channel 502 on NOW TV. (PCCW Annual Report 2007)
Innovation and Learning Perspective
The company is committed to superior innovation by introducing first-of-its-kind advertising channels for Yellow Pages advertisers. In August 2007, YP Channel 502 was first launched on NOW TV platform which enable customers to find a wide variety of local products and services via TV, the ultimate user-friendly interface. Advertisers can display information, photos in catalogue format and a 360-degree panoramic view. In early 2008, some Yellow Pages selected categories have been multi-published to the innovative home device – PCCW EYE multimedia device. Recently PCCW Directories Limited signed a contract with the publisher of Yellow Pages in Malaysia to provide an Integrated Publishing System developed in-house by PCCW. (PCCW Annual Report 2007)
Having all of these at hand, it could be said that PCCW Directories Limited, as a subsidiary under the PCCW Limited, is an effective organization as supported by its competitive and strategically appropriate organisational structure.
Conclusion
PCCW Directories Limited operates as a subsidiary (business unit) of PCCW Limited and is one of the leading directory market players in Asia. In order to maintain its leading position and to compete with the emerging global competition, the company has to make good use of strategic management to maintain its competitive advantage and distinctive competencies. The company knowing the decline of printed directories has to diversify the products to Internet, Mobile Services and TV platform, etc. With the strength of its sufficient resources and capabilities, the company devotes to commit superior efficiency, quality, innovation and customer responsiveness in order to maintain its competitive advantage in the industry. Though the organisational structure of the company is high centralization with most of the strategic decisions are made by the top management, the company has been measured as an effective organization with its competitive and strategically appropriate organisational structure.
Reference List
— 2008, PCCW Corporate Website (online, accessed April 10, 2008) http://www.pccw.com/eng
— 2007, ‘PCCW Annual Report (2007)’, PCCW Corporate Website (online, accessed April 18, 2008) http://202.66.146.82/listco/hk/pccw/annual/2007/ar2007.pdf
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Credit:ivythesis.typepad.com
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