Price Discipline Increase A Company’s Market Value: A Telecom Case

The US market for data and wholesale voice services is famous for its price
wars. Once a company puts its network cables in the ground, it has hardly any
variable costs. This makes it very tempting to use aggressive prices to
attract customers. One leading US company finally had enough of this
strategy, after its share price fell by 67 % over 2 years. Simon-Kucher &
Partners developed a comprehensive program to help the company stabilize its
prices. The new program imposed strict price discipline on the sales force.
At some earnings press conference, Telecom announced that it had seen its
first success with the new strategy. Its share price rose significantly that
same day and eventually doubled within six months. Some of its competitors
witnessed the success and followed suit with their own form of price
discipline, making this case an example of strategic price leadership.
The company’s management commented on the upward trend in the share price by
saying: “We are pleased with the results of our continued disciplined
approach to pricing. Third quarter performance reflects positive industry
dynamics including continuing moderation of price compression.” Analysts also
praised the newfound price discipline: “The company’s increase in wholesale
prices is part of a general trend that price pressure is easing, a healthy
pricing trend. More stable pricing should help all the players.” The company
achieved the significant improvement in their business standing through price
stabilization and constant coordination among several functions, including
sales, marketing, product management, and finance divisions of their company.
In addition, the company ensures that their people possess hard and soft
skills to effectively identify and evaluate opportunities in pricing their
products and services.
This case shows that price measures can have a dramatic impact on share
prices. It would seem prescient for senior management and investor relations
departments to take the role of price more seriously, and communicate its
importance more vigorously. Avoiding serious pricing mistakes would seem to
be even more important than finding the right price strategy. Taking the
correct price decisions does not impact share prices immediately, but rather
with some delay. That is because such decisions are normally not spectacular;
they simply bring a company closer and closer to its desired price position.
The effects are asymmetric. A poor price decision can have an immediate and
devastating impact on a share price. A sound price decision often takes time
to show its full effects, translating into a modest but steady improvement in
share prices as the equity markets take notice.
Answer the following questions: (2 items x 10 points)
1. What is the effect of the price discipline initiative of telecom on
their shareholder value?  
The telecommunications industry is at the forefront of their transformation,
both industries witnessing large scale change in their market environment and
as a key driver of worldwide telecom. For example, slow or lopsided reception
of advanced interchanges or the web. For client’s fulfillment is vital to
satisfy their fulfillment. In any case, the value discipline doesn't quantify
shareholder value dependably. The conduct of fulfilled clients impacts the
level, timing and hazard of future and fulfillment of shareholders value.
2. What is the effect of the price discipline initiative of telecom on
their shareholder value?  
The structure squares of an essential valuing association present for the
situation are Decision Right and impact, to make a viable evaluating
association, top administration should guarantee that choice privileges are
clear. The other one is Skills and abilities an estimating association
requires individuals who have hard and delicate expertise. Colleagues should
likewise have any familiarity with the organization's items, markets and
client. The capacity to foster estimating that mirrors the business
methodology and the abilities to recognize and assess amazing chances to
change valuing.