Business Analysis AFNAN TALIB (TP023735)
Executive Summary
The aim of this report is to study the external and internal environment variables as well as the strategies that are implemented based of such variables. In order to get a better understanding, a company is chosen as a subject of reference namely; Astro. The company is analysed as a media group that has a large presence in Asia Pacific. The variables are determined using PEST analysis and Porter's Five Forces Model while the strategies are explained using SPACE matrix. Personal recommendations and opinions are provided at the end of the report.
Table Contents
1.0 Company Background 3
2.0 Current Environmental Analysis 4
2.1 General Analysis - PEST 4
2.1.1 Political 4
2.1.2 Economic 5
2.1.3 Socio-Cultural 5
2.1.4 Technological 6
2.2 Industry Analysis - Porter's Five Forces Model 7
2.2.1 Rivalry among existing competitors 7
2.2.2 Potential New Entrants 8
2.2.3 Threat of Substitute 8
2.2.4 Bargaining power of buyers 9
2.2.5 Bargaining power of Supplier 9
3.0 Resources, Capabilities, Distinctive Competencies and Competitive Advantage 10
3.1 Resources and Capabilities 10
3.2 Distinctive Competencies 10
3.3 Competitive Advantage 11
4.0 Strategies Implemented 12
4.1 Integrations 12
4.2 Market Development 12
4.3 Product Development 13
4.4 Other Strategy 13
5.0 Recommendations 14
6.0 Conclusion 15
7.0 References 16
Company Background
Astro Malaysia Holdings Berhad is one of the most enormous media groups based out primarily in Malaysia and Southeast Asia with operations conducted in 4 key areas of business, namely Pay-TV, Radio, Publications and Digital Media.
It has a customer base of around 3.5 million residential customers or about 52% penetration of Malaysian TV households, Astro also offers 170 TV channels, including 37 HD channels, delivered via Direct-To-Home satellite TV, IPTV and OTT platforms.
Astro provides HD, 3D, PVR, VOD and IPTV services through Astro B.yond and Astro On-The-Go. Astro has also set the goals of finishing the gap the digital divide for all of Malaysia, Astro introduced NJOI as an entry-level DTH satellite TV service and is the country's first ever non-subscription based satellite TV, offering 22 TV and 20 radio channels. Astro Radio includes Malaysia's highest rated stations across key spoken languages and is accessible on both terrestrial and digital channels, reaching approximately 13 million weekly listeners and capturing a 52% share of listenership in Malaysia in April 2012. Its digital arm is involved in digital publishing, applications and platforms as well as publication of entertainment and lifestyle magazines locally. (ASTRO Holdings Sdn. Bhd (AHSB), 2012), (About, 2013),
2.0 Current Environmental Analysis
2.1 General Analysis - PEST
PEST analysis assists in business owners to analyse the Political (P), Economic (E), Socio-Cultural (S), and Technological (T) changes in the business environment (Manktelow J. and Carlson A., n.d.). Needless to say, the same applies to Astro. The following will be the discussed in regard to four elements of PEST accompanied with an example in relation to Astro's business operations.
2.1.1 Political
Political factors are closely aligned with policies made by the government that had or will have direct impact on the business operations. Malaysia television broadcasting was introduced by Malaysian government on 28th Dec 1978 with colour transmission being allowed by 1982. Astro has been the forefront of the Media face and has lot of stake with government on how to run its operations. In this case, its fair to assume that politically, Malaysia government with exception to some sensitive areas, cooperates in most of the areas with Astro. A recent example is MEASAT Broadcast Network System which is a subsidiary of Astro that provides broadcasting services through its satellite MEASAT-1.
The Group operates in an industry that is subject to a broad range of rules and regulations put in place by various governing bodies and relevant authorities. New rules and regulations may also be implemented from time to time and we recognise that any noncompliance's thereof may have a material adverse effect on the Group's financial performance and operations. To manage any potential uncertainties, the Board and Management constantly keep abreast with all relevant developments and are in regular contact with the relevant authorities and the Group's legal advisors, and emphasise strict compliance with all relevant rules and regulations.
2.1.2 Economic
Economic factors are generally financial patterns that affect the business such as the economic stability of the network or the tax the government imposes on broadcasting networks such as Astro. In 1996 when Astro was launched with 22 broadcasting channels and 8 music channels, and with assistance of variety of more MEASAT satellites from 1998 onwards allowed Astro to expand its presence. Malaysia's economic growth has been fairly stable since the past few years. As of right now, Astro holding Sdn bhd as of 2010 stands at the revenue of RM 3,258 million MYR and is the one responsible to provide financial management services to its subsidiaries in Astro. It serves dedicatedly by engaging with its subsidiaries to provide different business opportunities and ventures.
2.1.3 Socio-Cultural
Socio-cultural emphasizes on the demand and preferences of the people within a certain period of time. The Astro's success depends to a significant extent upon, among other factors, Astro ability to continue to attract, retain and develop human capital and talent across Astro operations. Thus, its Astro inability to attract, retain and develop our human capital and talent could have a material and adverse effect on Astro business, prospects, results of operations and financial position. The Group's people strategies places importance on making Astro a great work place as well as various talent development programmes such as Graduate programme, an apprenticeship programmes well as high potential and talent pool leadership development programmes as part of the Group's key functions succession planning initiative.
2.1.4 Technological
The technological element includes improvement of equipment and machinery, research conducted to decrease production process and others. Many researches have been conducted or are being conducted to maintain the efficiency of products and services of Astro while meeting corporate social responsibilities (CSR). CSR is important as it affects how customers view the brand and its reputation. For instance, in 1999, Astro launched a large-scale sustainable broadband and internet based services that provide consumers with high-speed satellite-delivered internet access services.
The Group strives to be at the forefront in technology and innovation to achieve the first mover advantage in making content available on all platforms from DTH to IPTV to AOTG. At the same time, Astro facilities and equipment are continuously being upgraded to enhance security, improving delivery of high definition and rolling out quality customer experiences. The Astro has also taken steps to maintain best in class operations with 99.9935% availability while ensuring its systems remain current and relevant through continuous maintenance and system upgrades.
(Astro's game plan, 2012), (PEST Analysis, 2010)
2.2 Industry Analysis - Porter's Five Forces Model
In order to evaluate Astro's position within the beer industry and among its competitors, Michael Porter's five forces model will be used.
Source: Anon
2.2.1 Rivalry among existing competitors
The intensity of the rivalry in the media world has been intensified over last couple of decades. For example in the Western Europe, there are much less rivalries as compared to America and Asia. This is because countries in Asia and continental America are locked over rating and usually go at lengths to beat each other out in race to get higher ratings. Mainly its competitors are Catcha Group and Media Prima who have a broad presence in this theatre and should be regarded as potential rivals. However, the threat of new rivals is not high to sum it all up.
2.2.2 Potential New Entrants
The threat of new entrants into the industry is low as the cost of entry is high. New entrants need to have a large amount of capital for the production, distribution and marketing of their products and services. Not to mention, the implementation of high entertainment relates taxes in many countries increases the cost of entry for new entrants. Moreover, it is more difficult for companies to obtain license for Media services due to rising complication in legalities. Some new entrants may opt for ways which does not require as much capital and marketing. However, new entrants will be competing against a very tough situation as Astro has a very solid foothold in media industry. These new entrants will not be able to stand against Astro as Astro has the high calibre of research, developments, distribution and strategies.
2.2.3 Threat of Substitute
Astro not only face substitution threat from other substitutes but also from other sub media products. Many people from a higher social class will prefer to watch broadcasting services that carries the persona that represents higher social status. All this is due to the influence of movies and TV series. Other than that, minors, residents below the age of 18 years (in general), though would feel like an invisible force but with introduction of social networking has become a force that can be reckoned with. Any of this exploitation can be used as business strategies to poach clients and services of Astro, but with coherence and appropriate business strategies such can be avoided.
2.2.4 Bargaining power of buyers
Astro interacts directly with end users through different means i.e. social networking to take their valued opinions in shaping the products and services. However, the bargaining power of the buyer is affected by the demand of the end user. The bargaining power of buyers differs with their level of financial status. For the companies who may want a different product or service specified to their need, the buyer is said to have a high bargaining power. The end user in the region are of a higher social class and demands only quality products. This affects the demand of the buyer (distributor) as they need to meet the end users need. As for Malaysia in general, the bargaining power is of a moderate state. The buyer (distributor) is more than the products but the level of disposable income in the region is considerably low.
2.2.5 Bargaining power of Supplier
Astro gets most of the raw materials it needs from local subsidiaries and most importantly it has acquired the assets of its supplier over the period of time. Therefore allowing it to control or limit the amount of investment with appropriate measure for better revenue generation. This go on to show that bargaining power of suppliers is low as it has pool of suppliers which it can choose from if a supplier raises cost more than Astro`s demands.
Porter's Five Forces
Evaluation
Rivalry among existing competitors
Neutral
Potential New Entrants
Positive
Threat of Substitute
Negative
Bargaining power of buyers
Negative
Bargaining power of Supplier
Positive
The effect of the five forces to Astro = Neutral
Table 1: Evaluation of Porter's Five Forces Model
(MANKTELOW, James, 2013)
3.0 Resources, Capabilities, Distinctive Competencies and Competitive Advantage
3.1 Resources and Capabilities
One of Astro resources is human resource. Before and during its recruitment process, Astro follows its own defined guidelines and process which include multiple interviewing sessions, test and assessment such as "personality questionnaire and numerical and verbal ability tests" (Astro Group, n.d.), and contacting referees to obtain applicants' previous performances. This is to ensure that the applicants are right for the job and to sort them into the appropriate vacancies. During the employment, employees will be given feedback on their performance which allows them to understand their job better and grow. Astro provides employment benefits to maintain its employees' job satisfaction.
Another resource will be its financial stability. Astro's financial growth can be seen in its annual report which range from 2010 to 2012. They utilises their financial resources in investment such as merging and acquisition with and of other companies. The success draws in more investors which causes continuous growth in its capital and financial stability.
Experience is also one of Astro resources. Ever since it was founded in 1996, Astro has conducted many researches to develop a more efficient and effective way of products and services. Through these experiences, they also knew what needs to be done to attract and retain their customers. Up to today, Astro has successfully achieved the economies of scale which allows them to give product and services at lowest cost. It allows Astro to gain a maximum profit out of their present profit margin.
3.2 Distinctive Competencies
Out of the four resources and capabilities, Astro distinctive competencies will be their experiences. Distinctive competencies consist of 3 elements; rare, non-substitutable and difficult to imitate. Experience comes from constant trial and errors and time. Other companies could not copy Astro experiences unless they too have gone through the same phases. It is rare as every company will have different experiences because they make different decisions and have different group of employees. Experiences cannot be bought or exchange with anything which makes it non-substitutable.
3.3 Competitive Advantage
The distinctive competency of Astro is also their competitive advantage. With their vast experience, Astro has not only achieved economies of scales but also mastered the distribution and sale system of the media industry. Their experiences have helped them to maximise their earning power. Smaller competitors will find it difficult to steal market shares from Astro and larger competitors are losing theirs to Astro as Astro continue to grow as one of the largest media giants in the globe. With this, Astro has a very secure competitive advantage over its competitors.
(ASTRO Holdings Sdn. Bhd (AHSB), 2012)
4.0 Strategies Implemented
As there are no concrete evidence and figures that can be used to evaluate the importance and value of each internal and external environmental variables, a rough estimation and sketch of the SPACE matrix is created based on personal research and observations.
For the financial strength, though the value drop significant over the past three years (2010-2012), it is still relatively high and stable considering Astro's position in the market during the economic downturn.
SPACE Matrix has four categories which are defensive, competitive, conservative and aggressive. Under each category, there are different types of strategies used. As it can be seen in the figure above, Astro falls under the aggressive category. It simply means that Astro has a strong presence in the brewing industry and rapid market growth. The company has been utilising or needs utilise its internal strengths to continue to grow deeper into the industry.
The strategies under this category that can be seen used by Astro are integration and intensive strategies.
4.1 Integrations
Astro has been using horizontal integrations whereby they acquire other services in order to decrease the amount of competitors in the industry. For example, Astro collaborated with different partners to acquire different assets. In terms of vertical integration, as mentioned, Astro has also acquired assets overseas to form a better supply chain process.
4.2 Market Development
As Astro continue to acquire other assets and having joint business ventures with them, Astro was able to reach out to a larger group of customers in other geographic region. For instance, when it was first establish, Astro can only reach out to people living in Malaysia. Now, astro has expanded into many countries such as Australia.
4.3 Product Development
Needless to say, product development and innovation is one of Astro key strategies. In Malaysia, Astro has developed and formed products and services as per the needs of the specified area. All this effort is done as per the wisdom on which it began it started its business in 1996. It believes in reaching out to customers and consumers in way the products and services depict what consumers wanted in first place and not what works best for Astro.
4.4 Other Strategy
Some strategies used are a mixture of the categories and cannot be classified. In the year 2012, ASEAN 2012 was held. Astro took the opportunity and became one of the sponsors. Moreover, Astro launched various campaigns of different sort i.e. Health awareness, Education outreach programs, Employment programs.
Besides that, several outreach programs with governments of Malaysia and other countries it operates in, helps it to elevate it position in business and gain compensation in areas where it needs it.
(ASTRO Holdings Sdn. Bhd (AHSB), 2012), (Go Beyond, 2013)
5.0 Recommendations
There are some areas which astro is lacking in. First and foremost, decline of sales in some rural areas. Mainstream channels tend to reach out to urban audiences but what it needs to understood is that although urban consumers may have more financial potential but they can be equated with rural consumers. If Astro forms an appropriate strategy to reach out to rural consumers and give them range of product and services that are compatible to their need, it will generate a good source of revenue for them.
Astro's acts of being involved in many commercial opportunities have raised customers' expectation of them. As there are legal matters that complicate the whole reaching out process, it is thus necessary for Astro to maintain a vigil to uncomplicated legal matters to have a consistent flow of Astro services and product and receive good feedback.
Lastly, the price increment of products and services due to raising tax and supplies can lead to potential business damage. To avoid that price of the products and services should be increased in a manner that provide relief to consumers and when it's necessary to raise the costs of different products and services, Astro should not only reach out to government and consumers, so as to take them on-board on raising the prices.
6.0 Conclusion
Through evaluation of the industrial and general variables, Astro was able to acquire wider prospect of its standings within the media industry. This allowed them to have more effective business planning for the company such as understanding their resources and capabilities, utilising them in the best manner, and develop and implement suitable strategies at the appropriate time. All of these are the reason why Astro was able to achieve its position as one of the largest in Asia Pacific.
7.0 References
About. 2013. [online]. [Accessed 14 OCTOBER 2013]. Available from World Wide Web:
ASTRO Holdings Sdn. Bhd (AHSB). 2012. [online]. [Accessed 17 OCTOBER 2013]. Available from World Wide Web:
Astro's game plan. 2012. [online]. [Accessed 15 OCTOBER 2103]. Available from World Wide Web:
Go Beyond. 2013. [online]. [Accessed 19 OCTOBER 2013]. Available from World Wide Web:
MANKTELOW, James. 2013. Porter's Five Forces. [online]. [Accessed 16 OCTOBER 2013]. Available from World Wide Web:
PEST Analysis. 2010. [online]. [Accessed 16 OCTOBER 2013]. Available from World Wide Web:
Business Analysis AFNAN TALIB (TP023735)
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