CTC TELECOMMUNICATION

Key answer tips

This is a standard question on objectives and strategic planning. The key is to apply as much as possible
to the specific circumstances of CTC.
(a) The objectives of CTC will have to change for the reasons discussed below.
Shareholder wealth
Before privatisation CTC’s main stakeholder was the government of C with the main objective of
providing the best service the nation could afford. Income was set by the government to cover
resources, so CTC was not expected to do more than breakeven financially.
Now the key stakeholders are shareholders and CTC’s primary focus should be to maximise shareholder
wealth and be profitable. Objectives will need to be set to support this over-riding objective.
Competition
Before privatisation CTC had the luxury of being a monopolist with the government setting service and
price levels. Now the market in C has been opened up to allow foreign competition.
This will force CTC into ensuring that it adopts a marketing orientation and offers a quality service with
value for money, or customers will switch to the competition. Objectives will need to be set by
reference to market conditions and the actions of competitors.
Customer preferences
Before privatisation CTC had to deliver the best service the country could afford. Now, service levels are
determined by what customers are willing to pay for. Some may be prepared to pay higher amounts for
additional services, so CTC will need to develop a range of new services and tariffs to meet demand and
set corresponding objectives.
CTC’s whole approach needs to become more market driven rather than doing the best it could with
the allocated resources. PAPER P3 : BUSINESS ANALYSIS 164 KAPLAN PUBLISHING
Efficiency
Many state monopolies are inefficient. Given imminent competition and more demanding customers
CTC will need to become much more efficient. Firms which have already made such a transition have
usually found that radical changes are needed to improve cost control and change the culture of the
organisation. Objectives will need to be set regarding cost and efficiency levels.
Resources
Prior to privatisation the level of resources was determined by the government. After privatisation the
directors need to attract investors and other financiers and will set resources levels. As a consequence
the directors need to consider the key issues for such investors – e.g. risk, growth prospects and so on –
and set corporate objectives accordingly.
(b) Suitable strategic objectives for CTC could include the following:
Tutorial note
These objectives should be SMART (Specific, Relevant, Measurable, Achievable, Timescale).
Market share
e.g. ‘CTC aims to retain 60% of its domestic market over the next 5 years’.
This is a suitable objective, as market share must be defended from new entrants to ensure that CTC
can benefit from economies of scale to be competitive.
Market development
e.g. ‘CTC aims to develop other markets so 25% of its revenue is derived from outside C within five
years’.
This is a suitable objective, as CTC must look to other markets to ensure future growth and to reduce its
risk exposure. These are necessary to increase shareholder value in the long run.
(c) The directors should adopt the rational planning model as a basic framework for future strategic
planning. This involves the following steps:
Tutorial note
You should frame your answer around Johnson, Scholes and Whittington’s rational model. ANSWERS TO
PRACTICE QUESTIONS : SECTION 3 KAPLAN PUBLISHING 165
1 Strategic analysis
Strategic analysis essentially involves three aspects:
• CTC should perform external analysis to identify opportunities and threats. In particular, it should
assess the risk of new entrants into the industry and perform detailed competitor analysis on potential
rivals.
• CTC should also perform internal analysis to determine its own strengths and weaknesses.
Weaknesses will need to be rectified in order to be competitive and CTC will need to develop core
competences upon which to build strategy.
• and assessing their expectations and power. This should allow CTC to formulate a mission statement
and to set strategic objectives for potential strategies.

2 Strategic choice
Strategic choice also involves three aspects:
• How to compete – CTC will need to decide whether to compete against new rivals as a cost leader,
relying on economies of scale, or as a differentiator offering a higher quality product. The latter seems
less likely so a detailed strategy focusing on costs needs to be formulated.
• Where to compete – as well as its domestic market, CTC needs to consider expansion into new
markets. This stage will involve identifying the most attractive markets and deciding whether they are
worth investing in.
• Choosing the method of expansion – once suitable foreign markets have been identified CTC will need
to decide whether to expand via organic growth, acquisition or via a joint arrangement.

3 Strategy implementation
Strategy implementation involves the following:
• Translating long-term strategic objectives into detailed tactical and operational targets.
• Setting of detailed budgets and performance appraisal to control the business.
• Ongoing assessment as to whether the plans are on track and, if not, what action needs to be taken
to rectify the situation.
• With all of this, CTC should ensure that planning is not a formal once-a-year exercise but an ongoing
process where there is the flexibility to allow strategies to emerge in response to a changing market.
This effectively blurs the distinction between steps 2 and 3 above, as they happen simultaneously.