Balanced Scorecard for Telecom Industry

Moreover, other scholars think that strategy implementation is more important and crucial for businesses to realize compared to strategy creation. A horde of different strategies can be made for a particular company keeping in view its particular situation and life cycle; however, what is more difficult is executing those strategies effectively (Kaplan and Norton, 2001). The problem occurs mainly due to the shift of the economies from an industrial age to an information age. Managing and measuring performance in the information age is difficult but not impossible. In the early days of industrial age companies main target was to bulge up its balance sheet and the focus was more on the finances and building up huge inventories and gaining profits. However, that is clearly not the case in this age of a dynamic competitive environment where a lot of companies sell similar products and provide similar services. Then how would companies excel and become successful? In this information age value creation is the key to success; and companies do this through managing their knowledge based assets and using these intangible assets to create strategies that are not easily imitable (Kaplan and Norton, 1996). Thus, the problem arises in how to measure the performance of this knowledge based intangible assets. For this purpose, balanced scorecard is a helpful tool to measure not just the results of a strategy, but also create the best suitable strategies for a company in the first place.

The balanced scorecard is composed of financial indicators that cover past performance of the company, along with other indicators that would measure drivers of future performance (Kaplan and Norton, 2001) and in turn actually guide the company towards making such strategies that would be perfect for that particular company, where the mission and the vision of the company is also accounted for. Companies need to fully understand and know the four perspectives of the balanced scorecard; and concentrate equally on them. Unfortunately many companies fail to do so and just concentrate on one or two perspectives and eventually find themselves in a position similar to that of a person sitting on a stool with four legs with one leg broken: inevitably they fall (Hannabarger, Buchman and Economy, 2007).

Furthermore, focusing only on the four perspectives in isolation is not a good step; instead the company needs to keep in view the market it operates in, the industry environment and the trends happening there. A company should keep abreast with how the market is functioning in which it’s operating; what the product introduction cycle times are, what the lead times are and the like. Seconding this view and assisting companies to use Balanced Scorecards for their operational purpose is the work of another author who researched upon Balanced Scorecard with a Six Sigma approach (Gupta, 2004). The work studies how this model facilitates companies in optimizing their profitability, cost and revenue measures and enhance firm performance overall. The author believes this model is important for a company to know because it enables the company to set targets for their performance measures and therefore, employees can meet them in a better fashion by rechecking with the target levels on a continual basis. The external environment should be analyzed as well for best results of a strategy implemented. This external environment would include no just the local environment but the international arena as well (Hannabarger, Buchman and Economy, 2007).

One important factor in the successful implementation of a balanced scorecard model is that the company under subject should be confident about its performance measures, since the key performance indicators would indicate how well the company is doing. However, research shows that many businesses are dissatisfied with their performance measures and are often shifting to new measures; on the way losing focus of their true indicators altogether (Meyer, 2002). This research states that knowing the performance measures are more crucial than implementation of balanced scorecard. The author believes that if firms would know their performance measures and if these performance measures are positively correlated then measuring just one performance indicator would do the job, and a company would not have to assess all the indicators and not implement the balanced scorecard. Keyes’ (2005) second this point, and state that balanced scorecard approach helps companies realize how strong there is a relation between the drivers of an organization and formulate the ‘cause-and-effect relationship’ between them; thus, enabling companies to eliminate those indicators that do not show a positive relationship with the main indicators of success of the companies. Therefore, Meyer’s (2002) stand is that companies should work more towards ‘going beyond balanced scorecards’ and search for the performance metrics that best describe their business.

Balanced Scorecard has been linked with information technology as well. For some companies IT serves as the most crucial part of the organization and these companies depend on the success of their IT systems and IT strategies; however for some other businesses the dependence on automated systems is not that large, and IT is used only in their operations. Thus, this dependence on IT systems gives birth to various strategic decisions by the management. Keyes (2005), in her book emphasizes upon this point that for companies that have their profitability measures linked with the success of their systems, balanced scorecard approach provides the IT departments of these firms to link their strategies with the overall business strategies; and eventually this leads to successful operations.

In another study, the Balanced Scorecard tool has been linked with the Enterprise Systems, so to measure its performance (Sedera, Gable, and Rosemann, 2001). The study has been done taking into consideration the public sector only; since the author states that in the private sector the major focal point is on financial indicators of managing the organization; such as market share, share price fluctuations and dividends. However, the public sector works more on the legislative acts and government regulations; and thus, the balanced scorecard used for a public sector would incorporate cost reduction techniques; while private sector focuses on revenue generation measures.

Various works have studied the effects of this phenomenon on companies, businesses, non-profit organizations, as well as education centers. A recent study has researched upon how Balanced Scorecard management tool can be used to compare the strategic positioning of different universities, with the Balanced Scorecard strategic perspectives (Nayeri, Mashhadi and Mohajeri, 2008). The study concludes that the school with the more customer-oriented mind-set scores the highest among the sample size.

Balanced Scorecards do not just help companies in keeping track of their performance, but also keeps companies away from subjecting themselves to corporate scandals, due to intense pressure of increasing shareholder wealth (Niven, 2003). Furthermore, the performance management tool also assists companies to execute strategies effectively, which is more important since many firms fail not because they do not formulate good strategies, but because their execution is faulty. The author, further believes that the reasons for a failed strategy implementation are unclear vision of the company; incentives of managers not linked to the strategy execution; top management hardly meeting up to discuss strategy for the company; and businesses failing to link budgets with strategy which means there is a resource constraint. Thus, these issues are handled and sorted out with balanced scorecard tool, since it allows management from regularly keeping up to date with the performance and strategy execution of the company.

Talking about the use of a Balanced Scorecard in the telecom sector, especially in the cellular sector of this industry; it is important to know what other researchers have worked upon. Initially, the telecom sector was bombarded with a lot of foreign investment into the manufacturing of multiple systems and a range of equipment for the telecom industry. However, the industry felt that these range of systems would lead to inefficiencies; and Pakistan would have to wok upon several different types of systems whereas most developed nations worked on just two or less (Ali, 1994). Moreover, there has been a lot of research done upon the amount of foreign direct investment in this particular sector. According to one research, market size, literacy rate, competition, foreign trade and per capita income have a significant and positive relationship with FDI in this sector; that is with the increase in these independent factors, the FDI has also risen up (Hashim, Munir and Khan, n.d.).  Moreover, on the other hand the impact of the investment carried out by the telecom sector on the amount of foreign and domestic trade, have also been studied. In this case, a positive and significant impact has been seen between the independent variable of telecom investment and the dependent variables, domestic and foreign trade. This reconfirms the idea that an increase in the telecom facilities, there has been a positive shift in the trade activities (Hashim and Zaman, 2010).

Other than the effect the telecom industry has had on the economy of Pakistan, it has also contributed a lot to the drastic change in the culture of the country. Most of the public is now using the services of the cellular operators in Pakistan, and many are privy to the multiple ranges of call and SMS packages available to the customers. Some authors also believe otherwise, that is, in order for a telecom operator to do well in a country it is crucial that they know the culture and societal values of that country before setting up their businesses in that area (Umar and Tahir, 2007).

Most of the works on the concept of Balanced Scorecard agree on the fact that this tool assists companies to get ahead of all the other players in the market, and also many international companies that have implemented this tool throughout their organizations are reaping the benefits of a successful company. Thus, the telecom companies, especially the cellular mobile companies that are often seen in a headlock of intense competition, would benefit financially and strategically if they implement the Balanced Scorecard in its true form.

4.0. Theoretical Framework

Independent Variables: the four variables are separate

                                                                                                       Dependent Variable

The variables that are taken for this research study are shown in the diagram above. The independent variables are the four perspectives shown on the left side: Financial, Customer, Internal Business Process and Learning and Growth. These perspectives basically relate to the strategies used by a company; and are primarily concerned with the strategies used in these four areas by the management. The dependent variable is the Balanced Scorecard for the telecom sector that would be the outcome as a result of the analysis of the four perspectives. Since, the Balanced Scorecard has been explained in detail in the previous sections, only the four perspectives would be explained in detail in this section.

These perspectives basically are determined through a set of objectives and the drivers that measure them. The objectives and the measures of the BSC should be interlinked and should be “consistent” and “mutually reinforcing” (Kaplan and Norton, 1996). It is highly important that a good BSC have a cause-and-effect relationship between the four perspectives: i.e. one objective on one perspective would result in another objective on another perspective. Both the measures and the performance drivers are equally significant to know; and moreover all the measures in a BSC should eventually be linked to its effect on the financial outcome, since at the end of the day it’s the numbers that count.

4.1. Financial

The financial perspective is one of the most important variables of a BSC, since this determines the effect of the strategies on the bottom line. In case of successful implementation of a BSC, the financial objectives of the company would indicate how effective the BSC has been for the company. The financial objectives of different companies would differ, according to the type of industry it is in, or at what stage of the industry life cycle the sector is at, or a million other reasons. However, generically speaking, financial objectives of for-profit organizations are mostly related to growth in profitability, which are in turn measured by drivers such as operating income, return on capital, economic value added, rapid sales growth or generation of cash flows (Kaplan and Norton, 1996). The financial objectives and measures should play a dual role ideally: i.e. they serve the purpose of setting up performance standards for the company, and define targets for the objectives and measure drivers for the other three perspectives of the BSC. There are three stages of the industry life cycle that affect the financial perspective; since for each stage there are a different set of objectives and measures to establish a financial Scorecard. For each of these three strategies, there are three financial themes (See Exhibit 6). These stages for the industry life cycle are:

• Growth- business at the early stage of their life cycle; higher investments in new projects and products are expected here
• Sustain-  reap profits from the already invested capital and earn high return on it
• Harvest- where company reaches maturity and harvests the investments and maximizes cash flow to the corporation

The financial themes are:

• Revenue Growth & Mix- This refers to how the company can manage to increase its revenue through strategies like new products or new customer segments
• Cost reduction/ productivity Improvement- refers to the company employing various cost reducing techniques and trying to improve of their productivity
• Asset Utilization- refers to better utilizing the resources for other business units

4.2. Customer

In this, the business determines the customer and market segments which they will compete in, and set targets for determining the objectives and measures related to customers: such as customer loyalty, customer retention, customer profitability and market share. Moreover, the customer perspective takes into account the value proposition that the company gives to its customers, such as fast delivery or innovative products.  The value proposition is critical for the business success since it translates into customer loyalty, and hence higher revenue from repeat customers.

4.3. Internal Business Process

This perspective deals with the business processes that the company must excel at in order to give the value proposition to its customers at a financially feasible rate. It also assists in implementing the strategies of the other perspectives of the company: like if customers prefer fast delivery, then an improvement to the operating machines would enhance the ability to serve the customers on-time, resulting in satisfied customers, better customer loyalty, and hence higher operating income. Thus, the investment in the internal business processes brings positive results in the customer and the financial perspectives respectively.  This variable also contributes to gaining good financial returns for the shareholders of the company, since bottom line increases. Moreover, innovation is an integral part of this perspective; the reason being that for a long-term financial success its mandatory that the business invest in new products, new technologies and systems so to have a continuity in the vision of the company.

4.4. Learning & Growth

Investments in better technologies and systems bring us to investment over the human resource. It is imperative that businesses give significance to the learning and growth of its employees, since they are the ones running the business. It would do no good if a company has the latest gadgetry and technologies but no one in the company knows how to benefit from them. Thus, employee satisfaction, training and development, improving skill sets, enhancing information systems capacities for quick decision making and developing better organizational procedures like aligning employee’s incentives with performance, are some of the objectives for this perspective.

5.0. Data Collection

The data collected for this research study is both primary and secondary. The secondary data is collected from various reports by Pakistan Telecommunications Authority, newspaper articles, and research studies by different authors. The primary data is collected through interviews with employees of the four major players of the telecom sector in Pakistan: UFone, Telenor, Mobilink and ZONG. The interview sessions were an hour long and the questions asked were based on the Questionnaire attached in the Appendix. The information was primarily related to the strategies that the companies have been implementing till date and the measures that are taken to observe the affect of those strategies. The Questionnaire involved all the four perspectives of the Balanced Scorecard and the relevant sub topics of these four variables. This information was then utilized in building the Balanced Scorecard for each individual company. However, some information has not been disclosed in the report on the request of the interviewees, and their confidentiality has been respected.

6.0. Findings & Analysis

6.1. UFONE

Pak Telecom Mobile Limited (PTML), which is a subsidiary of Pakistan Telecommunication Corporation Limited (PTCL), is operating under the brand name ‘Ufone’. It started its operation in January 2001 and after the privatization of PTCL, it has become a part of Etisalat. In less than a time period of a decade, Ufone has developed a customer base of over 2.57 million, having a second largest market share. In 2007, Mr. Abdul Aziz joined Ufone as the president and CEO of the company.

6.1.1. Company Introduction

Ufone provides network coverage in 10,000 locations and provides international roaming to more than 260 live operators in around 150 countries. Apart from this, it provides coverage over all the major highways like GT road, Motorway etc. Ufone’s mission statement is ‘To be the best cellular option for U’; focusing on ‘U’, the customers. Therefore, for Ufone, the customer aspect is important. In order to keep up with the pace of the changing environment, Ufone has been accordingly changing its strategies to sustain its position in the market. In its strategy to revamp the image among the customers, it changed the colors of its logo to green and orange that is more appealing than before. It is their valued customers that bring success to the company which is why it has focused on the tagline ‘Ufone, it’s all about you!’ Ufone’s marketing strategy involves a humorous advertisement that has become its signature, but some may say it is unethical as it directly hits its competitors. In its efforts to increase its out reach for a larger customer base and provide an efficient customer service to its existing customers, Ufone has 200+ sales and customer service centers across Pakistan. Ufone is also planning to expand its existing coverage to new cities, enabling it to reach untapped markets.

Ufone offers both, prepaid and postpaid services, though its postpaid service is not as popular as Mobilink “Indigo”. It has activated international roaming on all its prepaid services for free for over 30 countries and is strategizing to cater for international roaming to some more countries. Ufone is a leader in Value Added Service, and has been constantly introducing innovative services to maintain its leadership position. Ufone offers its customers virtual private network, which enable the customers to make their own private network within their Ufone network. And like all cellular operators, Ufone also provides GPRS.

6.1.2. Company Interview

The major points that the company official relayed to the group were as follows:

• The telecom industry is almost at the mature stage; since there has been around 60% penetration rate of the total population.
• Average Revenue per User (ARPU) would increase with the introduction of 3G technology from a current of Rs.220 (Average Revenue per subscriber per month) to Rs. 1800 for 3G technology.
• Customer retention is more important than customer acquisition, since the former is less costly to the company; and with an industry churn of 24% it is important to retain the customers.
• Ufone focuses highly on the Value Added Services (VAS); and considers ‘Caller Back Ring Tone (CRBT)’, Internet and Call Block VAS as the highest revenue providers.
• Costs to a telecom company consists of network costs (the basic towers), and further enhancement technologies over the basic tower structure, such as for Utunes and CRBT.
• The telecom companies are offering to make a joint venture for Infrastructure Sharing, so to minimize operating costs.
• The value proposition to a customer is that Ufone is the cheaper operator in the minds of the consumers; this is further stressed by their commercials that are launched every two months on average.
• Mobile Number Portability (MNP) provides one of the highest revenues.
• Surveys are collected regularly and a database is there to give real time data.
• 360 degree appraisal format is followed; and interdepartmental  knowledge sharing is encouraged
• Training is given importance and more training for the executive level than the operational levels.
• Culture has changed from an earlier bureaucratic environment, to a very open culture, where any employee can walk in the CEO’s office anytime.

6.1.3. Balanced Scorecard for Ufone

Based on the above information that the group gathered, a Balanced Scorecard is suggested for the company. It involves the four perspectives, and the Strategy Map shows which parts of the business are crucial to the company at present and how one set of Objective is linked to another. It is important to remember that all the other perspectives should end up and link to the Financial Perspective, since bottom line is the key ingredient to success. The Measures show how the company would measure a certain objective, and what the targets are for the company. The initiatives show what the company must do at the operational level in order to pursue the strategic objectives.

Table 1: Balanced Scorecard for UFONE

6.2. TELENOR

Telenor is one of the leading companies of Norway and Telenor Pakistan is a wholly owned subsidiary of Telenor Norway. It started its business in Pakistan in March 2005 when the telecom industry was at the peak of high competition & took very little time to grow in the market . Today it has a market share of 19.5%, standing at almost the same rank as Ufone next to Mobilink. By providing different services to its customers at high quality; it has progressed rapidly and has become the fastest growing mobile network in the country. Today it has a network of 23 company owned sales and service centers, more than 200 franchisees and 100,000 retail outlets.

6.2.1. Company Introduction

Telenor’s total number of subscribers according to the 1st quarter of 2008 is 15.3 million, which stood at 3rd in ranking, and it has penetrated in market with well organized strategies. Its coverage extends to 1252 cities and villages of Pakistan.

Telenor’s pricing policy is influenced by five main factors indicated below:

• Market survival
• Sales growth
• Market position
• Maximization of profits
• Maintenance of product quality

Telenor follows  a high price strategy for some of  its products but at certain level a penetration price strategy is  also adopted to stimulate sales growth, It also follows adaption policy where it allows local subsidiary or partner to set a price which is considered to be most suitable for local conditions.

Channels of distribution adopted by Telenor follow the cultural traditions of the target market. It’s is using different distribution channels which vary from market to market. As Telenor is involved in the telecommunication business so usually it does not involve in physical distribution but it has the partnership strategy and on the local level shops and customer care centers are used as a place strategy. At the beginning of its operations in Pakistan, Telenor aimed to reach out to people living in small towns and the rural areas of Pakistan. Soon it gained the support of people living in those neglected areas and it became the first Mobile Operator to cover such areas. This strategy has led it to quickly gain customer support over the country. It also has a strategic alliance with  for expansion in Pakistan.

Telenor’s product line at the moment comprise of eight prepaid packages and four postpaid packages.

Prepaid Packages:

• Talkshalk A1
• Talkshalk Har Second
• Talkshalk Har Minute
• Talkshalk 30 Second
• Talkshawk 63
• Djuice Jaagtay Raho
• Djuice Din Raat

Postpaid Packages:

• Persona EASY
• Persona SIMPLE
• Persona FREE
• Persona Karoobar (Aimed at Business owners)

6.2.2. Company Interview

• The main financial objective is to increase the Shareholder Value since this is a Foreign Direct Investment; and with decreasing operating margins everyday, it has become more important to increase shareholder wealth
• Some companies might be opposed to the introduction of 3G technology, since most of them have their own WiMax Technology; however, the payback is very less on a 3G phone, since it si very expensive and there is a very minute segment of customers
• The Pricing Strategy is to provide the best value to the customer but not decrease their prices to a very minimum unless absolutely required to
• The telecom sector faces high fixed costs on towers, electricity and fuel, and these can become sunk costs if the payback is not high
• Customer Retention is more important than Customer acquisition; thus focus on Customer Churn is an important Customer Objective
• Value Proposition is High coverage and good quality
• There is a high degree of focus on the Learning and Growth perspective in Telenor, with empowerment given to operational level employees. Moreover there is high focus on the Training and Development aspect, since every individual has a detailed Individual Development Plan.
• Benchmarking is done for every practice, and the benchmark companies can be local or Global.

6.2.3. Balanced Scorecard for Telenor

Based on the above information that the group gathered, a Balanced Scorecard is suggested for the company. It involves the four perspectives, and the Strategy Map shows which parts of the business are crucial to the company at present and how one set of Objective is linked to another. It is important to remember that all the other perspectives should end up and link to the Financial Perspective, since bottom line is the key ingredient to success. The Measures show how the company would measure a certain objective, and what the targets are for the company. The initiatives show what the company must do at the operational level in order to pursue the strategic objectives.

Table 2: Balanced Scorecard for Telenor

6.3. MOBILINK

Mobilink being the pioneer of introducing cellular networks in Pakistan started its operations in 1994. It is a subsidiary of the Orascom Telecom Holding, which is the leading cellular and Blackberry service provider. Orascom telecom also operates in other emerging countries like Egypt, Tunisia, Bangladesh and Zimbabwe as one of the leading mobile telecommunications company.

6.3.1. Company Introduction

 In April 2001, OTH took over management control of the company & today it covers almost every city of Pakistan. As the market leader, Mobilink serves more than 30.9 million subscribers; representing a market share of 39.2%.It also has the highest penetration level in terms of the cities and villages covered and the cells sites erected by the cellular companies in Pakistan.

Mobilink offers both Pre-paid (Jazz) and Post-paid (Indigo) services .These are products which are catering to different market segments. Indigo is targeted at the upper segment & Jazz at the middle segment. Mobilink aims to have the largest customer base and therefore, provides services in maximum locations.  Different promotion strategies are being used like traditional ways of promotion as well as others to reach out to as many customers as possible. Mobilink has been following a differentiation strategy ever since it started. Their differentiation strategy is usually targeted at people who are not particularly concerned with price, so it can be quite profitable e.g. indigo and blackberry are relatively expensive packages; blackberry is mainly targeted at the business class who can afford it. In this way, the revenue generation remains high.

Mobilink does not follow a low cost strategy. Since it first started its operations, it has been focusing its products on the upper strata of the society. That is why its rates are higher than its competitors, Ufone, Warid, Telenor, etc.

Mobilink has always made successful attempts to distinguish their products or services from others in the industry. They make their product unique through unique advertising, distinctive product features and exceptional services.

6.3.2. Company Interview

• Voice is mature technology, but other products are still changing and have not reached mature
• It is about to become a commodity
• The company pays dividends to shareholders, unless there is s huge CAPEX
• The pricing strategy followed is to stabilize the price, and with mutual understanding between the different operators for stabilization of price, in order to avoid destructive competition
• Value Proposition is High coverage; and there still is a lot of population that have not been reached
• Customer Surveys are not very regular and they rely on Focus Groups.
• Trainings are done on a need basis, and the supervisor take the initiative that the sub ordinate requires training for a particular aspect

6.3.3. Balanced Scorecard for Mobilink

Based on the above information that the group gathered, a Balanced Scorecard is suggested for the company. It involves the four perspectives, and the Strategy Map shows which parts of the business are crucial to the company at present and how one set of Objective is linked to another. It is important to remember that all the other perspectives should end up and link to the Financial Perspective, since bottom line is the key ingredient to success. The Measures show how the company would measure a certain objective, and what the targets are for the company. The initiatives show what the company must do at the operational level in order to pursue the strategic objectives

Table 3: Balanced Scorecard for Mobilink

6.4. WARID

Warid Telecom started its operations in Pakistan in May 2005. Warid is a result of joint venture between SingTel Group and Abu Dhabi Group. SingTel is a Singaporean company, having operating experience of more than 128 year and has played a major role in development of communication system in the region. SingTel has been the largest satellite operator in Asia Pacific. It has major investments in this region, India, Bangladesh, Thailand, Philippines, Australia, Indonesia and Pakistan and has over 172 million mobile customers.

6.4.1. Company Introduction

Warid is backed by another very strong business tycoon, Abu Dhabi Group, offering financial resources and management expertise. It has a diversified business portfolio and hence of the largest business groups in the Middle East and the largest foreign investor in Pakistan. Abu Dhabi formed a strategic alliance with Singapore Telecom. Being part of the Warid’s strategy to grow and increase its market share, SingTel acquired 30% of the equity. The chairman of Warid Telecom is Sheikh Nahayan Mubarak Al Nahayan and Chief Executive Officer is Mr. Muneer Farooqui. Warid gives coverage to around 500 cities, rural areas and road length area of 12500 KM across Pakistan.

Holding a fourth largest market share in the industry, Warid is constantly striving to improve and adopt strategies that will enable it to attract a larger customer base. In its effort to target youth, Warid has sponsored LUMS sports society for the year 2010-11.  In 2009, Warid launched GLOW, a prepaid brand, for the youth of Pakistan. With its remarkable success, it has now brought an advanced version, GLOW 2.0. Warid is the second mobile operator, after Telenor, to offer EDGE apart from GPRS. Warid has also signed MoU (Memorandum of Understanding) with PIA, which will enable PIA to use the voice and data communication service of Warid.

Warid offer prepaid and postpaid services; prepaid is marketed under the brand name Zem and postpaid under the brand Zahi. International roaming is available on both the services, though for prepaid it if offered for selected countries. To keep abreast with its competitors, Warid offers different packages to customers that are related to entertainment, live sports update and news etc.

6.4.2. Company Interview

• Telecom sector is currently at the maturity stage and has become a commodity.
• Warid thinks that its customers are not ready for 3G technology and it is an expensive technology to purchase
• Warid is focusing on retaining its existing customer base; but since it has a 19% market share, it still has a room to further capture new customers. Warid has a strongest hold in Lahore, due to its headquarters being there and they sponsor a large number of public events.
• Fixed cost of infrastructure comprises major part of their cost and can result into sunk cost as well if the customer base in a certain area is not strong. Warid currently does not share its towers with others for cost reduction
• Their value proposition is superior GPRS; unlimited internet download for postpaid users; friends & family package can have upto10 members which is higher than offered by the competitors; offer free call on weekends and free MMS package for the customer.
• They do not follow double taxation strategy
• Customer surveys are conducted throughout the year and feedback from customers are also taken at point of sale and customer support centers.
• The organization structure of Warid is function based, compared to brand based and the employee of the same designation as that of its competitors gets a higher pay.
• Trainings are conducted on monthly basis according to the needs of employees.

Rewards are performance based.6.4.3. Balanced Scorecard for Warid

Table 4: Balanced Scorecard for Warid

6.5. TELECOM INDUSTRY

As already mentioned in the first section that the telecom industry of Pakistan has outperformed many sectors in terms of revenue generation and attraction to Foreign Direct Investment; this section would elaborate on the latest happenings in this industry and would analyze the affect such events would have on the overall economy.

6.5.1. Industry Stage of Life Cycle

Telecom sector is experiencing a stabilized growth, and has almost reached the maturity stage. This stage allows the operators to ‘harvest’ their invested capital, and just maintain their present level of capacity and capabilities, with minor additions to the almost mature technology. The GSM technology is in the mature stage, and VOICE has reached saturation and no new change in this technology is expected soon. However, many operators believe that there still is room for further changes in the other products such as Value Added Services, Caller back Ring Tone, internet facilities and such. However, these services do not require a huge capital investment, but are enhancements over the already erect tower structures of the companies. The main measures of strategic objectives for the telecom operators are Customer Retention which would lead to high operating cash flows and revenue, with as little working capital requirements as possible. This means that companies in this sector are now striving towards lowering their operating costs as much as possible and trying to maintain their Average Revenue Per User(ARPU), if not increase it.

6.5.2. Financial Perspective

Again if Exhibit 6 is seen, and the types of strategies concerning the Mature/Harvest Business Unit Strategy, then it is clear that theory suggests that the strategies for Revenue and Growth Mix should be “to see the customer and product line profitability”. This is confirmed by the research conducted through interviews, in which the company officials agreed that in spite of multiple products being launched often, only a few are profitable and they remain. Moreover, stabilizing the ARPU is now a great concern.

Furthermore, the Cost Reduction strategy involves lowering the “unit cost”, which again the companies are trying to accomplish, i.e. lower the variable cost. An example of this is the Infrastructure Sharing or the Site sharing by the companies. Moreover, Telenor has invested in its solar power network to increase its cost efficiency through the Government’s Universal Service Fund, and to increase its customer base. In addition to this, the company would cut down on its fuel power which is a big fixed cost for telecom operators (brecorder, 2010).  Moreover, it is expected that the introduction of Value Added Tax(VAT) would further lower down the cost of doing business since the current rate of 19% would come down to 15%, and hence boost economy(Amin, 2010).

The overall financial goal is simple: increase Shareholder’s Wealth. This is because investments are from international companies that have selected Pakistan for reaping profits from this region. The total investment in this sector reached $ 970 Million at the end of 2009; with Telenor leading in investing to reduce its operational costs. However, due to the intense competition and price wars raging between the operators, there is high amount of concern especially the affect that this would have on the company’s ARPU levels and the economy of the country. Destructive pricing strategy is detrimental to the overall sector, and many companies are against this (Quarterly Report PTA, 2009). The average revenue generated in the 2009 was Rs. 55,315 million; and Mobilink gave the highest revenue with Rs. 103 Billion in the FY 2009.

As of December 2009, the Market Share of each company is shown in Exhibit 7. Mobilink leads the market with a market share of 32%, followed by Telenor with 23% and Ufone, 19%. Even though Mobilink is clearly the market leader due to its First Mover Advantage, however, Telenor has shown a higher increase in its subscriber base, and is leading in its expansion to Azad Jammu Kashmir.  

6.5.3. Customer Perspective

The focus on the customer is high in this industry, since with intense rivalry between competitors, the customer is the key element to success. The companies in the industry focus more on customer retention because it is less expensive to the company, compared to customer acquisition. Therefore, the operators launch various different strategies for attracting dormant and active customers, e.g. Ufone’s Broadback from Dormancy Programme. Other than this, various strategies are implemented for certain occasions such as Eid Days and Independence Day. Customers in this sector are not brand loyal, especially for pre-paid packages and are frequent switchers. This is one of the major problems faced by telecom companies since switching costs are pretty high for this industry. There are numerous bundle offers and packages from every operator, and there is very little differentiation apparent in the sector. The operators are now concentrating more on providing various VAS to the customers, and offers such as free calls on Friends and Family (FnF) numbers. Moreover, CBRT and MNP are one of the highest revenue generators for these telecom companies. Most of the operators are now working on the low-cost strategy; and some of them in certain segments of the target market have cut throat competition with the price decreasing every day.

Other than this, some operators like Telenor and Mobilink have introduced services like Easy paisa and Genie, which allows customers to pay their utility bills easily; and this new Mobile banking technology has earned them a lot of revenues. For the success of these kind of strategies, the companies need supply chain support as well, and hence Telenor has bought Tameer Bank to assist in the Easy Paisa. The highest subscribers are of Mobilink with 30 Million, followed by Telenor, 22 Million (See Exhibit 8). Therefore, at the moment these two are leading, and the net additions in Telenor for the year 2009 have been the highest, and its market share have been increasing over the years.

6.5.4. Internal Business Process Perspective

The generic structure for any telecom company includes Tower Infrastructure, which are leased by the companies. This infrastructure is normally a $2-3 Billion investment, and the largest number of towers of any operator provides that company the highest coverage, and more revenues. A lot of regions in Pakistan have still not been covered by the telecom operators due to difficult geographical terrains and bad transport facility, therefore there still is potential left in certain rural areas. The Internal Business Processes that are crucial for a telecom company are real time data availability and information systems. These companies are employing Business Intelligence Softwares such as MicroStrategy that have analysis tools and which enable the managers to get real time or current data in the form of graphs, figures, charts etc. Moreover, as already mentioned companies are now using strategies such as Infrastructure Sharing to reduce their costs, and increase efficiency. Along with this, telecom companies also use enhancements over the existing towers for new products and services such as CBRT and EDGE technology. Ufone, for instance, shares revenue with the suppliers of the equipment for the enhancements. Most of the suppliers are common for these companies such as ZTE, Huawie, Alcatel Lucent, Nokia Siemens etc. However, Ufone has a primary supplier of all parts, and has a back up vendor in case of any problem with the main supplier. As contrary to this, other operators like Telenor and Mobilink have multiple suppliers and they strive on having the best products from their supplier based on the amount of competition between the suppliers.

6.5.5. Learning & Growth Perspective

This dimension includes strategies related to improving the skill set and performance of the workforce. For this purpose, objectives such as Trainings, Quality Circles, Employee Motivation and Satisfaction elements, Team work, Leadership qualities, Culture change, Empowerment and Innovation etc make part of this perspective. However, this dimension differs from company to company and hence, cannot be generalized for the whole sector. However, at present the Telecom sector is considered to be one of the most preferred employers, due to multiple reasons such as high compensation packages and good fringe benefits, along with enhanced trainings for employees of all levels which further improve the skills of an employee. Currently, Telenor is leading in its strategy of focusing a lot on the Training and Development of its workforce, and has also been given the Award for ‘Most Preferred Employer’. Their Individual Development Plan for each employee is pretty thorough, using a software, and keeps an employee on track of his performance. Moreover, Telenor also has comprehensive method for encouraging Innovation; like they send their employees with best ideas to a completion to headquarters in Norway; they have formal meetings every 6 months for brainstorming, and also have informal online forum for discussion of new ideas. Relatively, other organizations are not focusing that much on the trainings or innovation; and perhaps that is the reason Telenor has had an edge in bringing Easy Paisa to the platform.

The Reward system also varies from employer to employer, and different variables play such as lobbying and prejudice among employees that lead to different compensation packages. Moreover, hierarchies and Cultures vary as well; like Mobilink has a more bureaucratic hierarchy than Telenor and Ufone. Warid, again does not have brand managers, but mangers for similar work activities, such as Executive Marketing Consultant.

6.5.6. Balanced Scorecard for the Telecom Industry

Despite forming Balanced Scorecards for every company in the telecom sector, we now proceed to creating a basic generic framework for the telecom sector. This would serve as guidance for any new entrant to the telecom sector in Pakistan, or abroad; keeping in view that the industry outlook is more or less the same. However, only the Strategic Map having the Strategic Objectives and Measures are shown in the diagram, since Targets and Initiatives vary with every company.

The table shows how each objective is linked to the preceding objective, and finally it is linked to the financial objectives. For the financial, as mentioned increasing Shareholder Wealth is the bottom line; and to lead that, it is important to increase the revenue and decrease cost or increase asset utilization. To increase revenue, it is important to retain current customers, and for cost reduction to reduce customer acquisition costs. Measures are given along with each objective, and is highlighted with the same color.

The customer value proposition is the key element of the Customer Perspective for any company to succeed here. This is then broken down into other elements which make up the value proposition of a telecom company; such as Price is significant for the telecom company in Pakistani market. The Internal Business Process again consists of Customer Intimacy, Infrastructure Sharing, which is important for the telecom sector to reduce the operating costs, and hence better utilize its assets.

Moreover, the Learning & Growth perspective includes innovation, since there are various other uses of the technology used by telecom sector; and training & development is again important to increase employee satisfaction and performance; and which will further lead to a better Internal Business Process.

7.0. Recommendations

• The foremost recommendation of course is highlighted throughout the research study, and concludes that telecom sector, in order to increase its efficiency and performance should implement the Balanced Scorecard tool throughout their organization.
• It is imperative that the management properly translates the strategies into the objectives: this means that the Balanced Scorecard can work well only if the strategies are correct. In case of improper strategies, the objectives would lead to wrong results.
• Along with a Balanced Scorecard, a corporate dashboard should be implemented, which is complete database of analysis tools that show the performance levels in the form of tables and figures that are easy to comprehend.
• The company should give different weights to different perspectives, depending on their priority levels: i.e. if a company wants to give high weight to Customer Perspective, then some of the Learning & Growth Perspective has to be foregone, due to limited resources.
• This tool might confront resistance from employees; however, the management should train the employees and impart that the tool would increase performance levels.
• Appraisals and bonuses should be aligned with the performance of employees as shown in the dashboard; this would reduce factors such as supervisor’s prejudice, and increase transparency, leading to employee motivation and satisfaction
• Feedback is an important integral part of the Balanced Scorecard, and thus, there should be a top down and bottom up approach of ideas and strategy implementation in the organization.

8.0. Conclusion

The research and analysis concludes that one of the best and way forward for the telecom companies of Pakistan to succeed and raise their performance levels is through the implementation of the Balanced Scorecard. This tool will not only help managers keep track of their goals and objectives but also increase profitability by translating their strategies into measurable and achievable goals that are also known by the operational level managers. The Balanced Scorecard may not be well known at present in Pakistan, but some corporations have already started looking into this tool that has gripped the West with interest. The tool would allow companies, to take the whole organization together, and not one department at a time.  

The strategies at the top cascade down to the operational level and are translated into actionable objectives. Various measures ensure that the workforce knows how far their actual results are from the expected results, and hence proper feedback keeps them on track. The telecom sector reaching the mature stage, would require this tool since they need to decrease their operational costs and improve efficiency and performance, which can be achieved through a Balanced Scorecard.

9.0 Limitations

There were a number of limitations that hindered the progress of the research. Foremost was the limited amount of information available on this topic, especially for the telecom sector. In Pakistan, there has not been any research done on this topic whatsoever, thus, finding primary help was another impediment. Moreover, the primary data consisted of interviews with limited number of employees of a company, maximum two employees, which again made it difficult to get complete access to all the strategies used by these companies. Along with this, the companies also were hesitant in sharing information related to some of their strategies and targets for the year. Most of the employees we interviewed worked at the operational level therefore most of them were not aware of the concept of the balanced score card. Timely access to information was another major issue as the officials of different companies would take time in replying to our queries.

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Appendix

Exhibit 1: The BSC as a Strategic Framework for Action

Exhibit 2: The BSC provides a Framework to translate a Strategy into Operational Terms

Exhibit 3: Teledensity of WLL/ Cellular/ Fixed Sector

Exhibit 4: Cellular Subscribers Growth

Exhibit 5: Foreign Direct Investment in Telecom Sector

        

Exhibit 6: Financial Themes

Exhibit 7: Market Share of Telecom Operators

Exhibit 8: Subscriber Mix (Dec 2009)

Exhibit 9: Questionnaire for Interview

FINANCIAL

• Stages of business cycle probable for telecom: sustain or mature stage? In sustain, attract investment but are required to earn excellent ROCE; maintain their existing market share, remove bottlenecks, expand capacity, and continuous improvement. Financial perspective is Profitability: measures include operating income, increase income generated from invested capital. ROCE, ROI and EVA are some financial measures. Investment projects would be analyzed through discounted cash flow analysis and capital budgeting etc.
• The mature stage asks for  “harvest” minimal investment and just maintain the present capacity and capabilities: measures are high operating cash flows and low working capital requirements
• Would impact of 3G technology shift the telecom sector into the growth stage?         

• REVENUE MIX: New products? New applications for the existing products? New customers and markets? New product and service mix? How do you measure these? In case of new product and service mix, if the strategy is low-cost, then the measure the growth of sales in the targeted segments, and see how much customers have to attracted away from competitors?  Pricing strategy would be price per call/ sms etc to see the trends in the pricing strategy.
• Cost reduction: For the sustain stage, reduce per unit cost of producing the output? Activity-based-process oriented costing system required, since activities make up one unit of output?? Improving the Channel mix: reducing the transaction costs of interacting with the customers, e.g. low cost electronic channels, why not shift from service outlets to internet? Reduction of operating expenses: Is it aligned with the response from customers or the benefit that the employees are giving to the company?
• Targets below which statistics appear horrifying???

CUSTOMER

• Value proposition? ( Customer intimacy; long term relationship)

• Customer satisfaction:  percentage of customers satisfied with timeliness/ quality/ network coverage/ service of call operators/ amount of complaints?? 
• Customer loyalty/ Customer acquisition??
• Customer surveys conducted when?  Are they reliable?
• Targets below which statistics appear horrifying???

INTERNAL BUSINESS PROCESS

• Effective Quality Control Systems: number of complaints/ how many of them solved/ is the rate of complaints reducing? Information systems: databases, are they employee reader friendly? Measures: Number of unit products produced? Minimize variable cost per unit?
• Supplier management? Do you have any alternative procurement suppliers available? How is procurement done?
• Targets below which statistics appear horrifying???

LEARNING & GROWTH

• Quality workforce? Training and development? Employee Satisfaction? Work Environment? Teams? Leadership? Culture? Values? Empowerment? Which is more effective?
• Innovation? How many times a year do you have innovative ideas meetings? Quality circles: how many times a year do the management come together for improvements in the system? What is your current measure for innovation? Revenue from new products? Number of new products?
• Do you benchmark any company?
• Targets below which statistics appear horrifying???

• FEEDBACK systems?  From employees? Is it anonymous? How do the top management give feedback to the employees?
• Reward Systems? Are they performance based? Seniority Based?