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The Demerger of Orange Plc Assignment

There are a number of factors that need to be considered when formulating a strategic plan to maintain shareholder value; furthermore it is imperative that these factors do not compromise the interests of existing stakeholders e.g. employees. Issues that need to be addressed include sales growth, profit margins innovation, service, investment and the way in which the company is prepared to react to changes in the industry and to changes in the strategies of competitors.

Service and Satisfaction Levels

* The services that the company is able to provide are possibly the key factors in determining its success. However sound the marketing plans, product placements and the like are, unless the customer feels that he is truly getting a product worth having, they all count for nothing. In addition to this, it is widely believed that customer satisfaction can be closely linked to employee satisfaction. Therefore it is beneficial to consider both internal and external factors together.

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* In order for high levels of internal service quality to be maintained workplace design, employee selection and development along with rewards and recognition coupled with basic job design need to be taken into account. Once these are all factored in, employee retention and productivity should become stable and external service value will be achieved. Once this service is tailored to meet the needs of the company’s customers, loyalty from these customers will follow. This loyalty will not only entail customer retention and repeat business but also referrals and new customers. This is highly desirable as it is both the cheapest method of advertising and also the most credible. Clearly this will all lead to a profitable venture and cash flow generation, a key value driver. However, this is only possible if the product itself delivers what the consumer requires.

The Maintenance of a Competitive Advantage Through the Product

* Many of the features on a mobile phone that were innovative only a short time ago are now standard, highlighting the rapid pace of change in the industry. Such things as answer phone services, phone book facilities and built-in clocks and calculators are no longer services that make a phone package stand out and features such as text messaging and multiple lines (for business and personal calls for example) are becoming ever more commonplace as well. More important factors in the current climate include the vogue for smaller, lighter handsets as mobile phones become fashion accessories as much as practical items.

It is because of this that there is an increasing number of younger users of mobiles (which are now the top ‘playground fashion toy’) and this is an area of the industry which could be cornered by a specialist model for younger users. For such customers the features such as multiple lines are far less valuable than a large selection of ringing tones. At the other end of the spectrum charges are of more significance with the advent of ‘Just Talk’ phones and per-second charges. The next generation of mobile phones include facilities for conferencing, information services (sports results, news etc), Internet and e-commerce usage. Orange aims to offer the customer fixed lime equivalent data speeds and to pioneer integrated wirefree data, Internet and e-commerce capacity. The overriding issue for Orange is which of these the competition provide and at what cost.

Responsiveness to competitors – Differentiation

* A differentiation strategy has major implications on cost management and subsequently on shareholder value. The concept of differentiation as a strategy is to offer the customer more value (be it real or merely perceived) than your competitors. As this will undoubtedly require higher production costs, these must be at least equalled, preferably exceeded by the increased revenue provided be it through premium price or high sales volume.

These would satisfy the value drive of cash flow generation, having a positive effect on shareholder value. It should be noted that this technique requires strong cost management that does not undermine the overall competitive strategy of the company. In effect, these considerations apply to all ‘special features’ above and beyond those standard to all competitors, thus acting as ‘motivators’ to potential customers. The nature of differentiation means that some features will become salient whereas others will be simplified or even cut dependent on which have the greatest effect as motivators.

The Nature of the Industry

* The telecommunication industry is fairly complex and ever changing. The rapid pace of innovation means that there are constant developments in economic, technical and regulatory terms making it a necessity for companies to constantly review and update their strategies in light of these changes. This is costly but without such changes companies will be left behind and lose huge numbers of customers very quickly. The fast pace of change is leading to an increased number of service providers, which may saturate the market and confuse or disillusion consumers. Another danger against which Orange has to guard is the high levels of investment by foreign companies and the danger that this will be taken away with little or no warning.

These investments were often only attracted by tax benefits and other government bonuses and a better offer from elsewhere will be enough to lure away these companies. The Internet provides a further threat to the industry. This occurs in terms of both data transmission and also the fast developing voice telephone systems being implemented. This threat is similar to the problems faced by land-line/cable telephone companies when faced by the mobile phone industry. An area into which the industry will surely soon expand is the foreign market, especially in light of the World Trade Organisation’s decision to allow foreign competitors to enter domestic markets. This will follow on naturally from Orange’s current facility to link its customers up to local networks when abroad. This is an area in which a well-planned strategy is vital.

Maintaining Shareholder Value – An Evaluation

* The key factor in maintaining shareholder value is flexibility. The nature of the industry is such that missing one opportunity can be fatal. It is therefore essential that any long-term strategic plan has this degree of flexibility to enable the company to cope with any possible scenario whilst attempting to remain innovative (e.g. Internet, foreign markets). Hence its margins will be kept as high as possible as well as many of the key value drivers being satisfied to enable shareholder value to be maintained.

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The Demerger of Orange Plc. (2017, Dec 29). Retrieved from https://primetimeessay.com/demerger-orange-plc/

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