STC Industry Analysis

This paper will focus on analyzing the Saudi Telecommunication Company (STC) and its industry. STC work in the telecommunication industry, and the main competitor in Saudi Arabia are Zain, Mobily, and Integrated Telecommunication (ITC). We will analyze and then predict STC’s industry profitability -is it high, low, or intermediate - by using Porter’s five forces framework. Then, we will see what kind of strategy the competing companies are going to use to decrease competitive pressure, which may improve the industry profitability. Also, we will give STC some recommendations of strategies that will improve its competitive position and incomes. The Key Success Factor (KSFs) of SCT will be identified, along with how they may change over time. Lastly, STC customer and their need will be identified and how SCT survives the computation.

Analyze and then predict STC’s industry profitability:

Applying Porter’s five forces framework:

Porter's definition of the "five forces" that deals with the structure of industries and, to a large degree, determines the competitive conditions, rules, and the real reasons for profitability in the industry and how it affects companies (Dobbs, 2014). The five forces are the followings: the bargaining power of the supplier, bargaining power of the buyer, threats of substitutes, Threats of new entries and rivalries among exciting firms (GRANT, 2019, p. 65).

The bargaining power of the supplier:

We want to be up to date in this paper. That is why we will analyze this part with the latest telecommunication technology that STC use, which is 5G. There are many suppliers of this technology globally, like Nokia, Huawei, Cisco, and Ericsson. STC is using them all and has the power to choose any one of them (SHARMA, 2019). STC uses all the companies available in the market and does not relay one supplier because it did not want them to have the upper hand. The same thing applies to 4G and other coverages and technologies that they use. So, the bargaining power of suppliers is low for SCT.

The bargaining power of the buyer:

SCT target the same customers that other companies in the market are targeting with the same services. Saudi Arabia's population is around 34.54 million; 32.23 million use a cell phone and other carriers' service(Saudi Arabia Social Media Statistics 2020, 2020). All the major players in the market want a share of this cack, but the customers can choose anyone they want, feel comfortable with, and give better value for the money they spend. Other carriers offer almost the same type of packages like pre-paid and post-paid with the almost same price and services. So, the bargaining power of the buyer is high.

Threats of substitutes:

           Due to the nature and the way the government services are being obtained by the citizens and non-citizens and how the government pushes more toward the e-government. People almost must use the internet and have a cell number to renew the passport, driver, license, or car registration paper. All these services can be obtained via Abshir (one of the e-government website). The cell phone number must be under the same actual person, and if they want to log in, an SMS message and OPT (one-time pin) code will come from the cell phone user. Without this code, none of the services could be obtained (User Registration, n.d.). Even if a person goes to a government office to get the service he/she needs, the government office will refer him/her to Abshir and other e-government services. As a result that everyone in Saudi must use STC service in order to get the government service. So, the threats of substitutes are low or even not existed.

Threats of new entries:

           The three major competitors to SCT are Zain, Mobily, and ITC. However, there is a smaller player in the market like Virgin Mobile and labara. They are working as wireless communications providers; however, they do not own or invest in infrastructure. They rent another telecom companies infrastructure (Telecoms in the Kingdom of Saudi Arabia — An Overview, 2016). The government makes it easier for companies to enter the Saudi market because of the vision 2030 and the need for more advanced telecom infrastructure. However, since the market is almost full, there is no more customer in the market, and the telecom industry is expected to be driven by intense rivalry over the coming years, which may discourage investors from investing until the industry has consolidated. We think that the threats of new entries in a medium because of the easy government policies and the heated competition.

Rivalries among exciting firms:

           The industry is expected to grow by 10% from 2021 to 2026. However, almost all the players give the same services with the same quality and almost theme price (Saudi Arabia telecom market, n.d.). The competition is very high in the market. The switching cost is free for the customer, but they need to wait for a maximum of 72 hours, and the number is transferred. Exit from the market is very costly as each company spent a lot on the infrastructure. So, the rivalries among exciting firms are high.

The result from Porter’s five forces:

           The competition is very tough in the market. However, form the analysis with two high, two low, and one medium. We can say that the industry is good, and STC can still make money and make more money with a good strategy. The government is also going to invest $13.3 billion in this industry to reach the goal of the Saudi 2030 vision (Saudi Arabia telecom market, n.d.). That will make making a profit from this industry a little easier for STC.  

Implications for strategy:

Strategies adopted by competitor companies that may help to decrease competitive pressure and enhance industry profitability

           STC is almost dominated more than 50% of the market share, and the other companies (Zain and Mobily and ITC) control the other 50% (The Saudi Telecom Sector, 2018). Both Zain and Mobily agree to sell and lease their towers. They did this because they believe that will help both companies financially -from the rent-, enhance the industry, better competition, and cut the operation cost. (Sequeira, 2016), (Zain KSA signs agreement to sell and lease back tower infrastructure, 2019).

Strategies recommended to STC to enhance its competitiveness, position, and earnings

·      Smart Cities investment:

Two new cities are being built in Saudi Arabia as part of the 2030 vision, NEOM and The Line (Carlson, 2021). STC must grab the opportunity and be part of the companies that make the infrastructure there. NEOM and The Line are not going to an ordinary city in Saudi because they are being bullied to be the model that all of the cities around the world to be like (Carlson, 2021). Being there will increase sales and company recognition (globally).

·      Newmarket strategy:

STC is not operating in Saudi Arabia only. It operates in Bahrain and Kuwait (Alsaeed, 2019). STC is strong financially, and it has all the experience needed to enter a new market like the African countries. Countries like Nigeria, Kenya, and South Africa among the fastest-growing counties, along with Ethiopia, which it just opened up its telecommunications sector and seeking new investors (African telecoms, tech and infrastructure – where are the opportunities for investment?, 2019).

·      Relationship marketing strategy:

It was mention above that the telecommunication industry in Saudi Arabia is very comparative. That is why STC must use the relationship marketing strategy, which means looking to the customer as a partner. With this strategy, STC will save time and effort by relying on consumers who are not as expensive to sustain relationships with them; STC will make more intelligent choices on which customers have inadequate value (Gruen, 1997).

STC’s Key Success Factors (KSFs)

Who are the customers, and what do they want?

There are two types of customers that SCT has personal and business. It offers a different service depending on the customer and their needs. For personal it offers, many packages for home internet, broadband, and selling phones like Apple, Samsung, and Huawei. For business, STC offer IoT, Fleet Control, Point of Sales (PoS) Solutions, M2M SIM RAQIB Enterprise Medical Imaging (EMI), Virtual Clinic, Cloud services, Cyber Security (business, n.d.). STC know what is the customer -business or personal -want. That is why it offers robust Infrastructure, Quality of service, loyalty program,24/7 Customer service, technical development, Competitive prices (why stc?, 2021).

How does the company survive the competition?

STC is the first telecommunication company in Saudi Arabia established in 1998 (2019 annual report). Because of that and its domination of the market for a long time, it built a powerful infrastructure. It controls half of the telecommunication market. In 2019, its revenue was more than 40 billion Saudi Riyals and net profit of more than 10 billion Saudi Riyals (2019 annual report). STC survives the computation because of its strong financial position and infrastructure.

Has STC KSFs changed over time?

 STC KSF’s change over time to be better. It is still a solid company. In 2019, STC was the second most valuable brand in the GCC region, estimated to worth $9.7 billion more than SABIC and Emirates Airline (Nair, 2020). That is shows use that STC’s KSFs are changing every time but in a better position every year.

Conclusion.

In this paper, we analyze STC. the strongest competitor of STC in Saudi Arabia are Zain, Mobily, and ITC. As we show above predicted the profitability of STC’s industry by using Porter’s five forces framework, the result was two lows, two high and one intermediate. Then, we show Mobily and Zain's strategy to decrease competitive pressure and improve the industry profitability by selling and renting their towers. Then we give STC three strategies that we recommended to use to improve its competitive position and incomes, which Smart Cities investment, Newmarket strategy, and Relationship marketing strategy. We show the Key Success Factor of SCT and identified them, and we prove that STC KSF’s changed over time to be in a better position. Lastly, we show that STC knows its customer's needs -personal or business- and how SCT survives the computation by having a strong infrastructure and financial position.

References

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