The Effectiveness of the Newly Executed Distribution Network Of Pacific Bangladesh Telecom Limited PORTRAIT OF THE ORGANIZATION 2.1 The Company Pacific Bangladesh Telecom Limited (PBTL) is the first mobile phone service provider in the Indian Subcontinent, with its inception in 1993. The address of the Head office: “Pacific Centre”, 14, Mohakhali C/A Dhaka 1212. PBTL was founded by Pacific Group Limited and Hutchison Whampoa Limited. “CityCell” is the brand name under which PBTL provides wireless telecom or mobile phone service and products to its customers. PBTL is one of the companies of the Pacific Group. The Pacific Group is involved in various businesses including: •
Pacific Group of Companies (since 1967)
•
Fisheries
•
Banking
•
Automobiles
•
Tea
•
Pharmaceuticals etc
PBTL is also the only operator in Bangladesh supporting two mobile technologies – AMPS and CDMA, while providing, in addition, Cellular and Fixed wireless services. Pacific Group Limited The Pacific Group is a group of companies under common ownership. The group has interests in automobile service (Pacific Motors Ltd.), consumer electronics (Pacific Industries Ltd.), fisheries (Bengal Fisheries Ltd.), tea (Noyapara Tea Company Ltd.) and telecommunications (Pacific Bangladesh Telecom Ltd.). This group of industries was founded by the renowned industrialist and current honorable foreign minister – Mr. M. Morshed Khan. Hutchison Whampoa Limited Hutchison Whampoa Limited (HWL) is a Hong Kong based diversified, multinational company with origins dating back to the 1800s. As part of the Li Ka-Shing group of companies, HWL's ultimate shareholder is Cheung Kong (Holdings) Limited, which has a 49.9 % interest in the Company. In terms of market capitalization, HWL is one of the largest companies listed on the Hong Kong stock exchange. With over 150,000 employees worldwide, the Group operates five core businesses in 41 countries. The Company History In October 1990, Hutchison Bangladesh Telecom Limited (HBTL) was formed as a joint venture between Bangladesh Telecom Limited (BTL) and Hutchison Whampoa Limited of Hong Kong. In March of that year BTL had been issued a license by Bangladesh
Telegraph and Telephone Board (BTTB) for operating cellular, paging and other wireless communication networks. The joint venture agreement with Hutchison gave HBTL the right to use BTL’s cellular license while Hutchison would provide financial support to BTL. However, soon there was legal dispute between BTTB and BTL regarding the BTTB’s refusal to provide Public Switch Telecommunication Network (PSTN) channels, which ensured connectivity to the BTTB network. The Supreme Court then ruled in April 1993 that BTTB would have to provide PSTN connections to HBTL, and that BTL would have to transfer the cellular portion to the license of HBTL. Bangladesh Telegraph and Telephone Board gave HBTL the PSTN connections in August 1993 and HBTL began commercial operation of the first cellular telephone service in Bangladesh in the same month. The owners of HBTL, however, decided to sell their stakes in the company due to the legal war. HBTL’s shares were divided into two parts: Type A, which was held by BTL and Type B, held by Hutchison. Each type of share represented 50% title of HBTL. Pacific Motors Limited bought the type A shares while Hong Kong based financial investors Far East Telecom Limited bought the Type B shares. On 12th February 1996, HBTL was renamed Pacific Bangladesh Telecom Limited (PBTL). PBTL uses the brand name CityCell to market its cellular products. In order to boost the financial and also the managerial strength of PBTL, the shareholders of the company have completed the transaction under the agreements in which Fujitsu Limited, Japan and Asian Infrastructure Development Company (AIDEC), established in Cayman Islands, would acquire 10% and 20% equity shares in PBTL, respectively on June 2000. With this acquisition of 10% shares by Fujitsu Limited, a Global Fortune 500 company, they have further strengthened their presence in Bangladesh and have also demonstrated confidence as well as their commitment to the Bangladeshi market. Fujitsu has long been supplying Microwave links and telecommunications equipment to Bangladesh Telegraph and Telephone Board and is clearly a leading market player in providing telecommunication solutions in Bangladesh. Being 10% equity shareholder of the company Fujitsu is in a position to nominate 1 (one) Director to the Board of PBTL. Mission, Vision, Objectives, Goals and Strategies 2.3.1 Mission PBTL’s mission statement is “To be the most successful cellular, paging and other wireless service provider in Bangladesh by virtue of having greater operating expertise.” This mission statement puts into perspective a few points regarding CityCell. Their inherent emphasis is on quality, not cheapness of service. The first priority is to provide a high-end service that can be used for both commercial and personal use. Vision The vision of the company is “To continue to be the leader in the telecom industry in the region and provide a complete communication solution to our customers with a smile.” It
may be noted that there is an emphasis on strong customer relations. This is important to CityCell especially as, until recently, they positioned their packages as high-end packages. This means that they need to promote their packages especially to corporate and business users. Such customers will require strong support for brand loyalty to develop. Objectives The business strategy of CityCell is focused around two objectives: •
Qualitative Objectives
Increasing service offerings.
Expanding the network.
Creating
innovative, unique,
and cost-effective various products
to
customers.
•
Increasing loyalty by focused customer retention program.
Develop operational procedure for the fast deployment of service.
Quantifiable objectives Increase subscriber base over 1 million on the network by December 31, 2006 with 99.8% overall network availability.
Goals: The current strategic goal of the company is to occupy a unique position in Bangladesh in the telecom sector. One way to achieve this is to develop a strong subscriber base to be able to penetrate in the markets with other attractive products. The ways to ensure a strong subscriber base is to: •
Meet customer requirements
•
Establish technological leadership trough choice of appropriate technology
•
Establish service leadership through quality manpower
•
Expand the footprint of cellular coverage
•
Expand the customer base
Workforce CityCell has currently 540 permanent employees under direct payroll. There are 146 part timers working currently. The Customer Care Division is the biggest department in CityCell at the moment with 112 employees. Organizational Structure CityCell has just recently introduced the post of the CEO and established the Human Resource Department (HRD). The name of the new CEO is Mr. Chai Hoon Pin, a Chinese executive with vast international experience in the telecom business. The CEO has taken over the activities that the former MD, the son of the owner of Pacific Group of Industries, Mr. Faisal Morshed Khan, used to perform. The Vice President (VP) of the
Human Resource Department (HRD) joined in March of this year. The activities of the HRD have been defined. No Assistant Vice President (AVP) has yet been hired for this department. The marketing and sales department makes up the office of the Chief Marketing Officer (CMO), who is also the VP of the department. The office of the CMO decides down into four sub departments with an AVP in charge of each. A senior VP is in charge of the whole engineering department while three other VPs are assigned for Switch, Base Transceiver Station and Planning & Development. There are AVPs for each section of the engineering department except Power, which is directly under the charge of Senior VP. It has to be mentioned that there are two other posts after the AVP: senior executives and executives who have managerial authority. There are also advisors assigned for various departments who are not direct employees but have directorial level status above the VPs and below the CEO. There are currently two advisors working in the Engineering and Marketing & Sales department. Further levels of employees exist under the executives, officers and senior officers. To facilitate the overall process the ranks of drivers and peons also exist. The Charts below represents the organogram of the company:
Figure2.1: CityCell Organogram Sales & Marketing As the name implies, this division’s job is to conduct marketing promotion for CityCell. The job of its employees is to maintain a good distribution channel relationship, media, and corporate clients. This division also deals with value added services, brand and product design. In the Sales Division there are Channel Sales, Corporate Sales and Direct Sales. In the Marketing Division, there are Market Communications, Brand, VAS,
Product Development and FWT & Backbone Departments. The Senior Vice President is the Chief Marketing Officer of this Sales & Marketing Division. Customer Service Operation, Billing and IT: This department deals with customer after the sale occurs. Main activities of this department includes maintaining a database of the customers, preparing, distributing, and collecting the bills, activating new connections, deactivating connections, helpline service, interchanging of the CDMA sets, collecting the faulty and repairable sets, returning repaired sets, changing CDMA sets and so on. This department is divided into two divisions: 1. Billing & IT and 2. Service Delivery
Figure 2.3
Service delivery
Finance and Commercial This department is divided into two divisions, a) LC preparation and Purchase, and b) Fund Management. Here LC is opened for purchasing of sets and equipment, and all the funds collected are used and controlled for the maximum benefit of the company. This department is also responsible for the budgeting which takes place once a year for the next three years.
Figure 2.4: Finance and Commercial Engineering This department is responsible for the setting up and maintenance of the heavy equipment and the major telecom channels required for providing services to customers. This department is divided into 7 divisions. They are Switch, Central Base station,
Microwave,
Radio
Frequency,
Base
Transceiver
Station,
Power,
Planning
and
Development. Accounts This department is responsible for collecting direct cash or check or charging credit cards from the customers who are paying for the service and equipment. This department is also responsible for maintaining the balance of store where sets and equipments are gathered for future purpose and present operation. Administration and Human Resource As the name implies, this department has three major divisions. The Administration division is responsible for Contract, Legal and Protocol & Government affairs. The Purchase & General Maintenances is responsible for Purchase & Support and Estate & Properties, Maintenance & general security. The Human Resource department is responsible
for
procuring future
employees according.
This department is also
responsible for maintaining the database of all employees, leaves, attendance, health care and related fields of employees.
Figure2.5: Administration and HR Business Strategies of Citycell: CityCell is a service-oriented company as it provides wireless telecom service. Their primary business according to CityCell is to sell wireless telecommunication packages to the customers and provide customers with comprehensive wireless telecommunication solutions. CityCell, since its inception in 1993, has targeted a niche market of the rich businessmen who would need information on the move or use it as a luxury item. It had a “Blue-Blood” image at that time by following a premium pricing policy. It was the right decision at that time and CityCell made a good bit of revenue by doing so. But with the emergence of GrameenPhone and AkTel, CityCell has had to change its business policy. It could not survive in the long run with the “Blue- Blood” appeal. It brought down the prices of its mobile packages from what was Tk.150,000 in 1993 to 15,000 at around the year 2000-01. And today, the lowest price of their package on offer costs around Tk 1399 only. CityCell has had to establish a mass-market strategy as it now targets every segment of the mobile telephony market. Some of these strategies are depicted below: Functional Level Strategy PBTL’s focus is on efficiency, quality, innovation, and customer responsiveness. CityCell’s functional level strategy deeply concentrates on being customer responsive. It wants to grow its business by providing superior customer service to the customers. And for that, as already stated, CityCell has a 99 member customer service team working for them 24
hours a day, on the Helpline or the front desk 7 days a week. Not only that, but CityCell has just recently introduced a slogan saying, “Because We Care”. The strategy suits the company since care is what they strive to provide, especially in the face of competition such as GrameenPhone , AkTel, Banglalink and Warid. Business Level Strategy The business level strategy of CityCell is that of differentiation. As CityCell targets everybody from small businessmen of a small town to the big corporate of the urban area, it has packages for everyone. There are the prepaid mobiles for the cost conscious people and those with monthly rents of Tk.500. It has prepaid mobile-to mobile packages and 24 hours BTTB connectable prepaid packages. The packages offered will be classified in depth in the marketing mix part of this section. PBTL applies both cost leadership and differentiation strategies as their business level strategies. CityCell wants to increase market share by expanding the network by ensuring the lowest call rate within the industry. Corporate Level Strategy PBTL follows related diversification as their corporate level strategies. The management of PBTL is already involved in diversified businesses of automobiles, banking, tea gardens etc. But PBTL itself has no plans of any sort of backward integration, which would be creating technologies like CDMA or forward integration to make mobile sets themselves. Global strategy CityCell does not have any Global strategies as it is still in a growth stage within Bangladesh. But just to keep within reach, some of the mobiles do have ISD connections. Marketing Mix of CityCell CityCell now follows the mass-market strategy. It has long passed the days when it used to be the monopolistic cellular phone company selling its connections with sets at Taka150, 000. Now it wants to serve all segments of mobile users from low end users to corporate all over Bangladesh. The Marketing Mix or the 4Ps that CityCell follows are discussed below. Product CityCell’s products are the packages it offers. They offer both postpaid and prepaid packages for consumers since they wish to serve everyone. Post Paid Packages1 The postpaid packages of CityCell are: •
Jono Phone
•
CityCell 500
•
Shabar Phone
•
Aamar Phone
•
Citycell Premium
Prepaid Packages2 The prepaid packages are made for the cost conscious buyers who may be a student or even a businessperson. The user has total control on his mobile usage, because he knows how much money he is spending on making a call. The hassle of going to the bank to pay the bill is also easily avoided. But of course the rate is a bit higher than postpaid mobile call charges. It is currently the most effective tool for CityCell and other companies for growth in respect of gaining customers throughout the whole of Bangladesh. CityCell released its prepaid first in 2002, with the uniqueness of having TNT incoming facility. The pre-paid package of CityCell is called “Aalap”. The prepaid packages are: •
Hello 0123
•
Mega Phone
•
Aalap Super Plus
•
Aalap Classic
•
Aalap Super
•
Aalap A
•
Aalap B
•
Aalap Call Me (with call2cash feature)
•
Hello Tomake
Set Classification CityCell classifies its subscribers’ sets in two ways depending on where they buy it. The sets, which are brought by CityCell are called the “White Sets” and those which are not, are called “Grey Sets”. Price CityCell’s policy when it comes to pricing is to keep the lowest call rate possible per minute for the zonal calls. This is visible in their call rate policy compared to that of others. When a customer brings his own set which is called “Grey Set”, he has to present a bank clearance to make sure that he/she has paid tax on the purchased set. The customer must also pay an additional charge of Tk.575 (including 15% VAT) to get the set programmed. This is for an existing number in a “Grey Set”. A new connection for a “Grey Set” requires the tax papers and an additional charge Tk.1675 either for a new prepaid or postpaid line. The customer has to pay a refundable fixed deposit for the postpaid packages. For any sort of connection the lowest price that CityCell has on offer at the moment for a set and connection is Tk.1,399 and the highest is Tk.8,999. The
customer always has to pay 15% VAT for his/her bills (both pre-paid and postpaid) according to government regulations. The set price of CityCell includes the 15% VAT. Place The main emphasis of CityCell when deciding on place is convenience and proximity to customers. Dealers are not treated as the subordinate branches of the company. Instead, they are taken as partners in the endeavor to provide better services to customers. The primary marketing channel used is that of distributors who are at various locations. It is only natural, from a business point of view, that the density of dealers be highest in Dhaka. In other regions of the country, there are dealers in each main town of the various provinces where CityCell network exists. Network coverage has been increasing and so are the numbers of dealers. Logistics and transportation is handled primarily by the dealers. A certain amount of logistic support is provided to dealers for better supporting their activities for CityCell. Promotion The company that had once relied on its name to gain new market share now has to aggressively market their brand and packages among the Bangladeshi customers. The main advertising is done in newspapers. The advertisements have a general look targeted towards everybody. CityCell ads in the past used to emphasize on building a solid aristocratic image of the postpaid packages and a ‘light and happy’ image of the prepaid packages. But at the moment there is no differentiation in the ads because CityCell does not have any use of ‘aristocracy’ any more. It targets the general population. The ‘light and happy’ image is visible, however, on the advertisements in television and sometimes on newspapers. Overhead plastic billboard ads of CityCell are visible on every major and important roads of Dhaka. The slogan of these ads is the current theme of CityCell “More Than You Thought possible”. Personal selling is done not just for phones but also for new data transfer services to corporate customers. This is done by the services marketing department under CSO and also by Corporate Sales department under Marketing and Sales. The marketing department carries out public relations. It emphasizes on PBTL’s contribution to the development of the telecom industry in Bangladesh and the introduction of advanced CDMA technology. As part of their promotional activity the marketing department gives out banners, poster and calendars to its dealers. They dealers are also given a monthly allowance of around Tk. 2,500 for supporting CityCell activities. Notebooks and calendars are given out to corporate clients every year. For supporting sales activities CityCell had offered a free camera with every prepaid package brought. Then recently they offered “lucky” winner for all its packages. Prepaid customers could get free airtime ranging from Tk. 50 to Tk. 3000. Postpaid customers could get free rental ranging from a month to a year. Now CityCell is offering 15%
discount on purchase of a single CityCell package and 50% on two. CityCell has probably carried out the most aggressive sales campaign recently than any of the other companies. 2.8 SWOT Analysis of CityCell SWOT stands for Strength, Weakness, Opportunity, and Threat. This is a very important tool for a company to analyze its internal and external environment. Strengths •
Capital: CityCell has a huge amount of capital. As mentioned before, the Pacific
Group, which is a well-established local organization of $1000 million, owned 90% shares of PBTL, and it was never required to borrow from banks or investors. •
Competitive tariff structure: Price is a huge competitive advantage for CityCell.
CityCell is the only organization selling CDMA mobile phones with both way T&T facilities at the lowest rate. For example, the lowest package rate of CityCell is Tk 1,399/= with T&T incoming and outgoing facilities (‘Hello Tomake’, pre-paid). With T&T facilities the other competitors are nowhere near CityCell. This package has a fantastic and a very innovative feature, Call2Cash, in which any subscriber of this package can ‘earn’ or collect Tk 0.25 per minute in his/her pre-paid account upon receiving a call from any CityCell mobile. •
No ‘Busy Network’: Because of an enormous number of channels, access to
CityCell mobile phones is very easy. The rate of call drops is very low. It possesses high quality voice and data transmissions. •
Advanced
technology:
CDMA
technology
is
the
best
technology
for
telecommunication. World class mobile operators and world class mobile phone manufacturers are advancing to this new technology. CityCell is one of the few mobile service providers which are using CDMA technology. The current CDMA 1X platform paves the way for easier migration to 3G technology. •
Low Cost: CityCell follows low cost strategies that enable a greater profit margin
for shareholders. It tries to cut cost in every possible way to maximize the strengths for future battle. •
Centralization: PBTL is a centralized organization that helps in easier coordination of business activities.
•
Dedicated & professional management team: Dedicated core staff, willing to provide significant labor hours to accomplish targets.
Weaknesses: •
Fewer staff: The number of staffs working for CityCell is not enough. Far fewer staff than actually required in terms of tasks to be completed.
•
New technology: CDMA is the latest technology but it is not widely used. A still more popular option is GSM. It is more difficult for CityCell to provide
international roaming because of few number of CDMA operators around the globe. •
Low
network
coverage:
Though
CityCell
started
to
provide
mobile
telecommunication ten years back, it is still behind the other operators from the point of nationwide coverage. GrameenPhone was able to use the optical fiber network of Bangladesh Railway through strong lobbying with the past government for the next twenty five years. Therefore GrameenPhone’s expansion has been huge, whereas CityCell has covered roughly 58 districts all over the country with a poor infrastructure. •
Lack of education: The subscribers are not educated enough to handle sophisticated CDMA mobile handsets effectively. Proper knowledge is essential to handle these mobile sets.
Opportunities •
Advanced technology: Since CDMA technology is the latest in the wireless telecommunication industry and most effective one, it is likely to find even newer potential in the near future.
•
Secured data transfer: Secured data transfer means CityCell has the potential to be the leading player once more.
•
Leadership in telecommunication services: Bangladesh government has already started to provide license to private sectors to set up land phones. PBTL is the only mobile phone operator with nationwide mobile & fixed license. With full nationwide coverage and a huge capital investment from Singtel, it is possible to become the market leader.
•
Overseas expansion plan: The growing need for across border telecom services at lesser cost (e.g. with neighboring India, Burma, then onto Thailand, etc) can be an opportunity for CityCell.
•
Acquisition of Singtel: The acquisition of 45% equity stake of CityCell brings more opportunity. The company now has greater capital and more budget to invest on its network facilities. In fact, of the $118 million investment of Singtel in Pacific Bangladesh Telecom Limited, $90 million would be spent on network expansion plans 3.
Threats: •
Technology factor: There is a high degree of acceptance of GSM technology over CDMA in local market.
•
Legal problems: Tough legislation against easy expansion into regional and international markets bypassing the state owned BTTB.
•
Newly imposed tax: In the fiscal budget proposed last year, the government imposed a Tk.1,200 tax on each and every SIM/RUIM card which would hurt the
regional expansion plans, increase customer base in the lower segment and the profit motive for every operator including CityCell. •
New competitors: If new, international competitors like ‘Airtel’ of India enter the local market with full coverage and low price, and then not only CityCell, but also other mobile operators would be in great trouble. Orascom (Banglalink) is already giving CityCell a run for its money and market share.
•
Global companies: In India, global companies like ‘AT&T’ of the United States and in Eastern Asia ‘Vodaphone’ of the United Kingdom is working well. They might wish to enter Bangladesh with higher capital. If so, it will be a huge threat for CityCell.
Company and Industry life cycle Stage Although revenues appear to be steady, PBTL is losing customers steadily (declining market share) and, thus is predicted that within the next few months, revenues will also start to decline. This has happened in an industry which may be relatively low- growth currently but in which many believe that should prices of usage be decreased slightly and the telecom sector further liberized, it would grow significantly further. Thus we may state the company to be having ‘question mark’ or ‘problem child’ status within the BCG matrix.
High Market Growth
Low
Star
Problem Child
Cash Cow
Dog
Market Share If we consider the situation in terms of the life cycle scenario, we are forced to say that under current conditions, Citycell of PBTL is under the decline stage. On the other hand, the industry life cycle stage may be declined as a shake out stage. The rate of growth has slowed as demand has approached saturation level under current conditions. Much of the demand for sets and packages are limited to replacement demand – both in terms of packages and also in terms of sets. This explains why PBTL is losing such a major portion of its customers many of them are leaving for more versatile and cheaper packages from other companies. 2.9 Unique Selling Proposition (USP) of CityCell: The sources of these USPs are CDMA Technology, CDMA Operator, CityCell Company & CityCell Products. Please note that the basis for considering USPs is direct comparison with contrasting technology/companies (e.g. CDMA technology USP is derived by
comparing it with GSM technology). Some USPs may be interpreted as beneficial, detrimental or neither, depending on the situation, customer & market approach. This is a consolidated list of major USPs. It is up to the sales individual’s judgment which USPs to emphasize in a particular situation. 2.9.1 CDMA Technology USP: •
Each frequency/channel is individually encoded for transmission: voice transmission is more secure, uninterrupted
•
Data transmission is much faster (2 MBPS) compared to GSM (384 kbps) and more secure
•
Due to high level encryption (1033 possible decryption combinations), BTS level snooping/cloning is virtually impossible
•
Background noise in voice calls can be more effectively suppressed compared to any other technology; voice quality is better
•
Soft handoff from one BTS to another BTS is possible – low risk of call drop while a person is moving from one place to another
•
CDMA
became
commercialized
for
mobile
communication
much
later
than
GSM technology: later technology – better technology •
More efficient network deployment & management, in terms of Cost
•
Technical maintenance
•
Scalability
•
Per customer resource usage (32 customers per BTS channel)
•
Least handset radiation level among all existing technologies
•
Ability to lock individual handsets
•
Average handsets are smaller
•
Handsets require a lot less power (depending on the state of network)
•
Programmable handset
•
RUIM based handset
•
Signal strength is more reliable across greater distances
•
Can accommodate progressively higher traffic (if necessary at a poorer voice quality) - risk of network overload is minimal
•
Network capacity & reach is better in wide open spaces (e.g. rural areas)
•
Instant connection upon dialing
•
Ability for faster incorporation of newer technologies into the existing network (e.g. upgrade to 3G)
•
Handset timer starts as soon as a number is dialed – PCOs use this to charge customers for longer duration than the actual call duration.
CDMA Operator USP •
More cost efficient – have the ability to offer products at lower price
•
Only CDMA operator in Bangladesh - handset churn to other operator is virtually impossible
•
Network expansion to (especially) rural areas is easier/faster
•
A single source for both handset & connections - a complete communication solution
•
Little effect of handset tax imposed in National Budget’05-06
CityCell Company USP: •
Pioneer mobile phone company in South Asia - most experienced
•
Established/longstanding backward & forward linkage & distribution channels
•
$118 million investment by SingTel - Possibility of high growth in near future (SingTel and its concerns are now the leading Telecom providers in Singapore, India, and Australia)
•
Wide spectrum band license – ability to introduce more services
•
Only company with Nationwide license for operating WLL based fixed phones
•
Loyal customers & channel partners
•
Own transmission network (E1)
•
Faster decision making – most market responsive
•
In-house service center
CityCell Product USP4: •
Wide range of products/packages
•
Both Cellular and WLL operator
•
Longstanding high volume & high revenue postpaid portfolio
•
Low entry barrier products
•
Established product presence in the business segment
•
Market best/most competitive tariff
•
Very short lead time for product development/deployment
•
Pioneer/Innovator in many cases:
•
First 1 second pulse
•
First free handset package
•
First Group SMS
•
First Bangla SMS
Current State of CityCell’s operations: CityCell packages are focused to follow the company’s differentiation strategy. There are a number of market segments into which CityCell’s potential and current 4 Product development is dynamic process. The above USPs may change over a relatively shorter period. Customer base can be divided. PBTL always strives to make each CityCell package released be unique and noticed above that of the competition. They also try to
attain distinctness in their sales and marketing strategy to make them seem like a unique, ‘blue-blooded’ mobile phone company. In order to do this, they have made a number of strategic choices, which, while setting them as being different from other companies; acts also as a handicap in certain areas. The primary strategic choice that has affected PBTL is their choice of technology. Although CDMA technology is far in advance from other technologies, it has yet to gain a significant acceptability in Bangladesh. Therefore, there is a serious shortage of CDMA sets. Worse, many sets are simply lying around due to lack of spare-parts. Customers have to pay line rent for faulty or dead sets. Many customers are disconnecting their CityCell lines and buying cheaper packages from other companies. The detrimental effect this has had on operations is that PBTL is finding increasingly less room to maneuver and introduce new features in their service, which will help them combat competition. This also means that they have to fight for survival rather than for dominance. Inherently, PBTL’s strategies appear to be more reactive than proactive. A very important aspect of current operations is the severe effect that centralization of organization has on operations. The regional offices are responsible for handling phones only in that zone. There is a severe lack of coordination between the various regional offices, which has a detrimental effect on customer satisfaction. Worse, the entries for each zone are done all on one floor at the head office. Since the majority of customers are buying their sets directly from PBTL, they are also dependent on PBTL for repairs and spare part requirements. Thus the current staffs who work at repairs and servicing are severely overworked. This affects morale and employee satisfaction, reducing the efficiency of set-servicing process and thus resulting dissatisfied customers. PBTL is a company with immense potential, but it remains to be seen whether management can fully harness this potential. The potential is present in all the factors of operations: 1. The technology is very advanced and has immense potential 2. The labor factor is strong with some very capable staff 3. PBTL has sufficient capital to undertake infrastructure investments 4. There is still a significant portion of goodwill towards the company from its stakeholders What PBTL needs to do now is to harness all these positive factors, negate the detrimental ones and move forward. 2.11 Network Coverage of CityCell
Figure 2.6: Network coverage of citycell 2.12 Future Direction of CityCell The Company appears to be moving towards a more customer oriented approach in its overall customer policy. Gone are the days when PBTL could dictate terms to its clients. These days PBTL has to spend an increasing amount of time covering its shortfalls and persuading customers to stay with them. This is especially worrying after what is perceived to be by many industry insiders, a concerted effort by GrameenPhone to make headway into the corporate market – a domain that was once almost exclusively under PBTL. What the company is really looking for is a way by which it can seriously bounce back into dominant position. The primary reason for choosing CDMA is that they hope to be able to introduce next generation (2G) mobile phone features such as voice conferencing, Internet, sending visual data, etc into their services. It remains to be seen how successful they will be in harnessing the full power of CDMA technology. There is also a proposal to decentralize their organization in order to be able to better serve their customers in the far-reaching regions of the country. This means that many major functions will be spread out throughout the country, divided according to customer regions. It is yet to be seen how much decentralization may occur, but it is a major issue under consideration. If the network expansion into North Bengal and then into Khulna
region occurs soon, there is a real potential, by virtue of superior technology, to gain a significant competitive edge over GSM rivals. There is also the sale of data link to corporate clients. This will gather significant revenue for the company as well as solidify its position with its corporate clients as their primary information transfer and telecom provider. The incongruities between the various tariff plans of the various packages are to be removed to make it much easier for customers to budget usage and also to increase the value for money of each package. There are no mergers or acquisitions in the future, but it is believed that Fujitsu may increase its holdings in PBTL and gain greater management control. If this happens, then the entire picture may change. This is especially important if we consider the fact that slowly boundaries are opening and technologies are improving. GSM will give way to more advanced technologies like CDMA and there will soon be no national boundaries as defined in the current telecom industry. If that happens and the telecom sector is further liberalized, then PBTL can look forward to increased growth and revenue. 2.13 Acquisition of SingTel Singapore Telecommunications Limited (SingTel) recently announced that it has invested US$118 million for a 45% equity stake in PBTL. In addition, SingTel has a call option to increase its equity interest in PBTL to 60% for an additional US$65 million. The option can be exercised between 1 April and 30 June 2007 and it is still negotiable. The recent investment made by SingTel has created a lot of options for the company. Everyone is expecting that network expansion and technology upgrade will occur at a faster pace. This is especially important if we consider boundaries are opening gradually and technologies are improving.
Figure 2.7: SingTel’s Group Structure 2.13.1Strengths & Opportunities from SingTel •
Equity injection of $90M (in phase 1) will give necessary thrust in aggressive expansion strategy of PBTL.
•
A multinational corporate like SingTel as a major stakeholder will give enhanced access to funding.
•
SingTel, as an international player, will provide incremental leverage over vendors (handsets, equipment).
•
SingTel brings in 120 years of expertise – innovation, quality, efficiency, and corporate governance.
•
PBTL with SingTel is better poised to capture the market potential & become the market leader.
•
Benefit from seamless coverage across SingTel network in Asia and international access across the world for international roaming through its submarine & satellite network.
3.0 TECHNOLOGY IN CITYCELL 3.1 How Cell Phone Works: Cellular telephones have revolutionized the communications arena, redefining how we perceive voice communications. Traditionally, cellular phones remained out of the hands of most consumers due to their high cost. As a result, cell phone carriers have invested
time and resources into finding ways to give the systems higher capacity and thus lower cost. Cell systems are benefiting from this research and starting to develop into largescale consumer products. Today, cellular phones are truly consumer electronics devices with over 580 million subscribers. The Nokia Bowl and Qualcomm Stadium are further evidence of the idea that cell phones are consumer electronics devices. Since cell phones have ceased to be an exclusive status symbol of high-powered lawyers and are now in the hands of millions of consumers, they are now incredibly cost sensitive. Specifically, it is not the cost of the device that counts, but the cost of using the device. As a result, the cellular phone infrastructure is being optimized to allow calls to be placed as inexpensively and reliably as possible. Today, more than ever, cellular companies are looking for ways to bring down the call cost to attain even higher market penetration, especially in metropolitan areas. It is common knowledge that Cellular Phones are wireless phones; however, many are confused about how a cell phone actually works. Essentially, cell phones use high-frequency radio signals to communicate with "cell towers" located throughout the calling area. Cell phones communicate in the frequency range of 806-890 MHz and 1850-1990 MHz. When the user wants to make a call, the cell phone sends a message to the tower, asking to be connected to a given telephone number. If the tower has sufficient resources to grant the request, a device called a "switch" patches the cell phone’s signal throughout to a channel on the "public switched telephone network" (otherwise known as the PSTN). This call now takes up a wireless channel as well as a PSTN channel that will be held open until the call is completed. The figure on the right side illustrates this process. This channel cannot be used for anyone else’s call until the cell phone call is discontinued. Given this simple description of how cell phones work, we will add technical details about various facets of cell phone systems throughout the remainder of this section. As the name implies, cell phone systems are made up of many small "cells." Each cell in a cell phone system represents the area served by one cell phone tower. The concept of cells is the key behind the success of cell phones because by spacing many cells fairly close to each other, the cell phones may broadcast at very low power levels (typically 200mw–1W, depending on system). Since the cell phones may broadcast at low power levels, they use small transmitters and small batteries, and thus are able to fit in a shirt pocket, unlike amateur radios, which can occupy a tabletop. Cells are typically spaced around 1-2 miles apart but can be spaced up to 20 miles apart in rural areas. In loaded areas or areas with many obstacles (such as tall buildings), the cell sites may be spaced closer together. Some technologies, like PCS (Personal communication System), require closer cell spacing due to their higher frequency and lower power operation. Additionally, buildings interfere with cell signals coming from outside, so many buildings have their own "Microcell." The Kingdome and New York subway are two examples of where Microcells are used. Microcells may also be
used to increase overall capacity within a heavily populated area such as a city’s core downtown area. In fact, homes may have "picocells" connected to the home’s PSTN connection to allow the cell phone to be used as a cordless phone. An example of typical microcell and Picocell environments is pictured in the following figure. With thousands of cellular phone calls going on at any given time within a city, it certainly would not work for everyone to talk on the same channel at once (as in CB and short-wave radios). Therefore, several different techniques were developed by cell phone manufacturers to split up the available bandwidth into many channels each capable of supporting one conversation. The following sections will discuss each technology and how it works. 3.2 Different Types of Cellular System 3.2.1 AMPS The most commonly used cellular system in North America, the Advanced Mobile Phone System (AMPS) had also gained widespread acceptance in Asia (specifically in Korea, Hong Kong, Japan, Singapore, etc). An analogue system, this was introduced in the mid 80s and used a technique known as Frequency Division Multiple Access (FDMA) to allocate Channels. Thus it divides its entire allocation in sections of 30 KHz and uses each of these sections as channel. Thus AMPS is able to provide 30 channels per 1MHz of frequency allocated. The principal behind AMPS is analogous to dividing up a large hall room (the entire frequency allocated to the operator) into a number of smaller rooms (channel) once the first pair has completed their conversation and left the room (disconnected). 3.2.2 FDMA FDMA stands for "Frequency Division Multiple Access". Though it could be used for digital systems, is exclusively used on all analog cellular systems. Essentially, FDMA splits the allocated spectrum into many channels. In current analog cell systems, each channel is 30 kHz. When a FDMA cell phone establishes a call, it reserves the frequency channel for the entire duration of the call. The voice data is modulated into this channel’s frequency band (using frequency modulation) and sent over the airwaves. At the receiver, the information is recovered using a band-pass filter. The phone uses a common digital control channel to acquire channels. FDMA systems are the least efficient cellular system since each analog channel can only be used by one user at a time. Not only are these channels larger than necessary given modern digital voice compression, but they are also wasted whenever there is silence during the cell phone conversation. Analog signals are also especially susceptible to noise – and there is no way to filter it out. Given the nature of the signal, analog cell phones must use higher power (between 1 and 3 watts) to get acceptable call quality. Given these shortcomings, it is easy to see why FDMA is being replaced by newer digital techniques. 3.2.3 TDMA
TDMA stands for "Time Division Multiple Access." TDMA builds on FDMA by dividing conversations by frequency and time. Since digital compression allows voice to be sent at well under 10 kilobits per second (equivalent to 10 kHz), TDMA fits three digital conversations into a FDMA channel (which is 30 kHz) By sampling a person’s voice for, say 30 milliseconds, then transmitting it in 10 milliseconds; the system is able to offer 3 timeslots per channel in a round-robin fashion. This technique allows compatibility with FDMA while enabling digital services and easily boosting system capacity by three times. While TDMA is a good digital system, it is still somewhat inefficient since it has no flexibility for varying digital data rates (high quality voice, low quality voice, pager traffic) and has no accommodations for silence in a telephone conversation. In other words, once a call is initiated, the channel/timeslot pair belongs to the phone for the duration of the call. TDMA also requires strict signaling and timeslot synchronization. A digital control channel provides synchronization functionality as well as adding voice mail and message notification. Due to the digital signal, TDMA phones need only broadcast at 600 miliwatts. 3.2.4 CDMA Code Division Multiple Access is a system in which a subscriber uses the entire frequency for the entire period that his phone is active. Installing of segregating users by frequency (FDMA) or time (TDMA) this technology segregates customers by coding the signals in such a manner that each customer decrypts only one signal at any one signal at any given time. Again using the previous example, this would be similar to allowing a large number of people into the hall room, but requiring each pair to converse in a different language. Thus while everyone would hear everyone else, this would just be more of background noise rather than interference. On the other hand, each person would be able to understand this partner, because they would be speaking the same language. One of major differences between CDMA and the other existing technologies is in terms of frequency reuse. Using CDMA an operator would use the entire allocated frequency in every cell. The reuse pattern, therefore, is in effect a ‘one cell reuse pattern’. Therefore, the operator can serve may more customers per unit of allocated bandwidth compared to either AMPS of GSM. In general, CDMA capacity is rated to be 10 to20 times higher then analogue techniques such as AMPS, and 3 to 5 times higher than other digital cellular technologies such as GSM. CDMA has been likened to a party: When everyone talks at once, no one can be understood, however, if everyone speaks a different language, then they can be understood. CDMA systems have no channels, but instead encode each call as a coded sequence across the entire frequency spectrum. Each conversation is modulated, in the digital domain, with a unique code (called a pseudo-noise code) that makes it
distinguishable from the other calls in the frequency spectrum. Using a correlation calculation and the code the call was encoded with, the digital audio signal can be extracted from the other signals being broadcast by other phones on the network. From the perspective of one call, upon extracting the signal, everything else appears to be low-level noise. As long as there is sufficient separation between the codes (said to be mutually orthogonal), the noise level will be low enough to recover the digital signal. Each signal is not, in fact, spread across the whole spectrum (12.5 MHz for traditional cellular or 60 MHz in PCS cellular), but is spread across 1.25 MHz "pass-bands." CDMA systems are the latest technology on the market and are already eclipsing TDMA in terms of cost and call quality. Since CDMA offers far greater capacity and variable data rates depending on the audio activity, many more users can be fit into a given frequency spectrum and higher audio quality can be provide. The current CDMA systems boast at least three times the capacity of TDMA and GSM systems. The fact that CDMA shares frequencies with neighboring cell towers allows for easier installation of extra capacity, since extra capacity can be achieved by simply adding extra cell sites and shrinking power levels of nearby sites. CDMA technology also allows lower cell phone power levels (200 miliwatts) since the modulation techniques expect to deal with noise and are well suited to weaker signals. The downside to CDMA is the complexity of deciphering and extracting the received signals, especially if there are multiple signal paths (reflections) between the phone and the cell tower (called multi path interference). As a result, CDMA phones are twice as expensive as TDMA phones and CDMA cell site equipment is 3-4 times the price of TDMA equivalents. 3.2.5 GSM GSM stands for "Global System for Mobile Communications." GSM is mostly a European system and is largely unused in the US. GSM is interesting in that it uses a modified and far more efficient version of TDMA. GSM keeps the idea of timeslots and frequency channels, but corrects several major shortcomings. Since the GSM timeslots are smaller than TDMA, they hold less data but allow for data rates starting at 300 bits per second. Thus, a call can use as many timeslots as necessary up to a limit of 13 kilobits per second. When a call is inactive (silence) or may be compressed more, fewer timeslots are used. To facilitate filling in gaps left by unused timeslots, calls do "frequency hopping" in GSM. This means that calls will jump between channels and timeslots to maximize the system’s usage. A control channel is used to communicate the frequency hopping and other information between the cell tower and the phone. To compare with the other systems, it should be noted that GSM requires 1 Watt of output power from the phone. 3.3 Advantages of CDMA
In the global mobile arena, CDMA (Code Division Multiple Access) is widely recognized as the most advanced digital wireless technology, offering many more features and benefits than GSM technology. As the only CDMA operator in Bangladesh who will be offering next generation CDMA1x technology from the end of 2004, CityCell consequently has the edge to provide customers with state of- the-art services which are currently not available here, such as multimedia messaging, streaming video and push to talk – all over your mobile phone. However, even at the ‘grass root’ voice service level, CDMA is superior to GSM technology. Providing much better voice quality in the form of less call drops, reduced background noise, minimal interference with other electronic devices, a larger spectrum, greater coverage and capacity are all on clear benefits over GSM technology today. And the steady increase in customers choosing CDMA technology seems to be the best proof for its superiority. Nearly 13.5 million subscribers signed up with CDMA providers in the first quarter of 2004 alone, taking the total number to 202 million users worldwide. CDMA will reshape the communications landscape in Bangladesh by helping to raise teledensity and thus growing the country. CDMA’s advanced voice services as well as data services that are completely new to Bangladesh – and in fact still are to a lot of other developed countries worldwide – will enable CityCell to deliver affordable prices and efficient services to customers now and into the future. There are numerous advantages of using CDMA technology, the most important of which are: a. Higher Capacity: Since CDMA makes more efficient use of the available spectrum; it can provide greatly increased capacity. CDMA capacity is rated to be 10 to 20 times higher than other analogue techniques such AMOPS, and 3 to 5 time higher that other digital cellular techniques such as GSM. With higher capacity, CDMA accommodates higher demands and supports new digital services such as data transmission and mobile fixing. b. Simplified Planning: CDMA allows system planning to become much easier through the use of the same frequency in every sector of every cell. Because the entire frequency is used in each cell, operators do not have to retune base stations, thus capacity expansion is quicker and simpler. c. Better Voice and Call Quality: The unique encoding scheme used foe each different CDMA conversation virtually eliminates cross-talk and dramatically reduces the impact of interference from other sources. Also, The larger bandwidth of CDMA signals (the signals use the entire frequency versus only a portion for competing technologies) means that they are less prone to fading compared to the narrower bandwidths of AMPS and GSM. d. Enhanced Security and Privacy: Since the signals are coded, it is very difficult to intercept and decode a CDMA signal. This prevents eavesdropping and prohibits cloning
and other types of fraud. Also, due to the wider bandwidth, such phones are difficult to jam. 3.4 CDMA vs. GSM: A Technical Comparison 3.4.1 Advantages of CDMA include: •
Increased cellular communications security.
•
Simultaneous conversations, less call drops, strong network.
•
Increased efficiency, meaning that the carrier can serve more subscribers.
•
Smaller phone sets.
•
Low power requirements and little cell-to-cell coordination needed by operators.
•
Extended reach - beneficial to rural users situated far from cells.
3.4.2 Disadvantages of CDMA include: •
Due to its proprietary nature, the engineering community for solving does
not know all of CDMA’s flaws. •
CDMA is relatively new, and the network is not as mature as GSM.
•
CDMA cannot offer international roaming, a large GSM advantage.
3.4.3 Advantages of GSM include: •
GSM is already used worldwide with over 450 million subscribers.
•
International
roaming
permits
subscribers
to
use
one
phone
throughout
Western Europe. CDMA will work in Asia, but not popular European destinations. •
GSM is mature, having started in the mid-80s. This maturity means a more stable network with robust features. CDMA is still building its network.
•
GSM's maturity means engineers cut their teeth on the technology, creating an unconscious preference.
•
The availability of Subscriber Identity Modules, which are smart cards that provide secure data encryption give GSM m-commerce advantages.
3.4.4 Disadvantages of GSM include: •
Lack of access to burgeoning American market.
4.0 FUNCTIONS OF DIFFERENT DEPARTMENTS 4.1 Sales & Marketing Division The major marketing goal of the Sales & Marketing Division is to capture a significant market segment that will yield maximum revenue by means of passing on directly or indirectly, a high end cellular phone service. Many clients provide telecom services to their locality by Tellular or Fixed Wireless Telephone (FWT). The rates of this package may be low but this is offset by the high frequency of usage and the strong support claimed to be provided by CityCell.
Figure4.1: Sales & Marketing Division Organogram The office of the Senior Vice President (SVP) of Sales and Marketing Division is responsible for coordination of marketing activities across the company and to provide top level management with an overall picture of the market situation. The Vice President (VP) of the division oversees the product and business development scenario of the company. He is responsible to the SVP of the division. 4.2 Departments of S&M Division Sales and Marketing Division has seven main departments headed by seven managers. 4.2.1 Product Development This department is responsible for find out the innovative features that can attract the existing and potential customers. Product development is one of the key departments in the company. While developing new packages and talk plans, this department has to keep in mind the profit and cost issue. Under all these constraints the department has been producing exciting and new features to attract customers. 4.2.2 Product (& Tariff design) This sub-department is under the Product Development department and is responsible for package design and fixing tariff rates, which are the rates of usage for each package. This department is also responsible for the coordination of market research for the whole company. They will integrate knowledge gleaned from extensive market research into the design of new packages that fulfills customer needs. This is done very frequently as the needs of even the most stable of customer segments change and the company has to change the tariff structure of its offered packages accordingly. 4.2.3 Value Added Service (VAS) This is another department which also deals with product development, but is concerned only with the Value Added Services that the company offers. Value Added Services are those other than basic voice calls. CityCell’s VAS department is one of the leading VAS providers in the country in terms of the number of wide range services that it is providing.
•
Short Messages Service (SMS)
•
Voice Mail Service
•
Call Conferencing
•
SMS Based Information Services
•
Fun (Jokes, quotations, etc.)
•
Financial Services
•
Emergency Services
•
Sports
•
SMS Banking & others
4.2.4 Brand The brand department of the company deals with image of the brand in the minds of the customers. It basically helps the brand portray its intended image to the potential target group. This department, along with the Marketing Communication department, deals with the promotional activities. 4.2.5 Corporate Sales There is a separate office of assistant vice-president for corporate sales who is also responsible for corporate customer relations. Corporate customers are given high priority in terms of sales and also in terms of after sales services. Of course, this is due to the high usage and need for good long term goodwill with such corporate clients. This department deals mainly with sales to corporate customers and maintenance of relations with both current clients as well as scouting out potential new corporate clients, whereas the after sales service and other issues are dealt with by the customer services operations section of the company. 4.2.6 Channel Sales The assistant vice president responsible for channel management has the very important job of setting up marketing channels by which packages are distributed among clients and by which feedback is obtained from customers. This department is responsible for the selection of new dealers and motivating them and current dealers to promote CityCell packages to customers in their respective areas. This department is also responsible for overseeing that there is an excellent support network for each dealer and that they are satisfied with their monetary or otherwise remuneration. This department is also responsible for checking that each dealer does not cut into the sales of another dealer in a very proximal region. 4.2.7 Marketing Communications The chief responsibility of this department is logically, promotion and communication of new products and product ideas to customers, both directly through selection of advertising media, then dissemination of information by means of advertisements; and
indirectly through dealers by providing them with promotional material. This department is also responsible for public relations which do not include corporate relations. This is handled, as we have seen, by other departments. The responsibility of this department is immensely important especially in the introduction stage of a package for customers. They also provide help for other departments such as the front office and services marketing in order to promote CityCell packages to both current and new customers. This helps very much in handling cases of dissatisfied customers and also in case of adjusting customers with old packages who have to be persuaded to upgrade their packages to the new ones on offer. The company sub-contracts its promotional materials production to local companies. A regular number of events are held to integrate promotional activities with public relation exercises to enhance the image of CityCell and promote the packages on offer. 4.2.8 FWT and Backbone This particular department looks after the Fixed Wireless Terminal (FWT) clients and the packages. FWT has been one of the most profitable sectors for the company. As a result this department has a great significance to the company. PBTL has undertaken a commercial program to expand its business activities to selling backbone for data transfer to corporate clients. This network stretches from Chittagong to Sylhet through Dhaka. It has immense potential and may generate significant revenues for the company. The overall structure of the Sales & Marketing Department and its sections of CityCell has both advantages and disadvantages in terms of organizational structural and respective functionality. 4.2.9 Trade Marketing The vision of this department is “To ensure the Brand presence and the loyalty in all Point of Sales throughout Bangladesh where mobile phone subscriptions are sold.” The activities of TM include•
Need assessment of POS Materials:
The need for merchandising will be assessed by mainly Trade Marketing. During many occasions like Eid, Bengali New Year and English New Year, different merchandising items like posters, danglers, festoons will be printed •
After having proper direction from Trade Marketing, the Creative unit of Market Communication will select the appropriate design for the merchandising items
•
Developing POS Material Portfolio:
The portfolio of POS materials will be developed by Trade Marketing as to what items and what quantity should be distributed to different POS. The categorization will be done as per the monthly standing of any particular POS according to the POS pyramid. Trade Marketing will have to interact with the Business Support unit and line Managers of Distribution periodically
•
Allocation of different types of POS Materials for different category of POS
•
POS Material distribution
•
POS Material replacement
•
Implementing and ensuring the brand presence in and outside of the POS i.e. shelf share, background walls, shop signs
5.0 The Effectiveness of the Distribution Network 5.1 Prologue The topic of my internship project is “The Effectiveness of the Newly Executed Distribution Network of Pacific Bangladesh Telecom Limited. I have worked under the Channel Sales Department of the Sales & Marketing Division for the past three months. During this period I have been assigned to create reports on the distribution network of CityCell. 5.2 Significance of the Study One of the most contentious battles being waged in the wireless infrastructure industry is the debate over the efficient use and allocation of finite airwaves. For several years, the world's two main methods – Code Division Multiple Access (CDMA) and Global System for Mobile communications (GSM) - have divided the Wireless world into opposing camps. Among the six operators in Bangladesh, Pacific Bangladesh Telecom Limited (PBTL) is providing the cellular services to the subscribers by using CDMA technology. PBTL not only provides the basic services but also the handsets compatible with CDMA. As a telecom service provider in a third world country like Bangladesh, PBTL is facing difficulties in establishing CDMA as the prime choice for customers. The main difference seen and felt by the customers regarding the technologies are the handsets. The outside market, other than PBTL, of CDMA handset is very narrowly defined. Since 90% of the Bangladeshi cellular phone market is captured by GSM technology, the cellular handset market has been flourishing for GSM technology. So, it is quite an obstacle for the customers as well as the CDMA service providers to create a proper market for CDMA handsets in Bangladesh. Despite all these obstacles CityCell is walking toward a better future. A lot of changes must be executed before CityCell is ready to fight back again. Network condition improvement is one of the major priorities. One cannot deny the need of a well structured systematic distribution network. To achieve more through Channel Sales, CityCell recently decided to review its existing distribution network and finally concluded that the distribution network needs restructuring. A lot of analysis has occurred before coming up with a better distribution network, such that a new distribution network was implemented in 2006.
Given the current situation, this study strives to measure the effectiveness of the newly executed distribution network of CityCell. 5.3 Industry Analysis through Porter’s 5-forces model Each of the five forces and its association with the current distribution network is depicted as follows. 5.3.1 Bargaining Power of Suppliers Bargaining power of suppliers is high because: 1. Suppliers provide CDMA sets that cannot be found easily from many suppliers 2. Suppliers do not depend solely on CityCell for significant portion of sales 3. Products are not differentiated. However this has little effect on over-all supplier power 4. PBTL cannot vertically integrate backwards as it does not have the capability to produce hardware whereas the primary suppliers may buy a majority stake in PBTL 5.3.2 Bargaining Power of Buyers Bargaining power of buyers is comparatively low under certain conditions: 1. Tellular customers have significantly low bargaining power because of the high cost of procurement of a Tellular set. They have to rely on PBTL for spare parts and other help. 2. Users of low cost packages may switch from CityCell to other packages but only at a certain cost of purchase. In many cases it is seen that such customers run up bills equivalent to or above their credit limit then abandon their CityCell number. In such cases the buyer’s bargaining power is higher. 3. In cases of packages like CityCell 500/1000 buyers have significantly less purchasing power because of the high deposits paid to PBTL (Tk.2,500 for local T&T connections, additional Tk.2,500 for NWD and Tk.10,000 for ISD connections). This significant amount of investment means that customers cannot shift easily from one company to another. 5.3.3 Potential Competitors Let us look at the potential competitor’s scenario from the barriers to entry perspective: 1. Brand loyalty: Due to decreasing performance and slow progress in network expansion, CityCell packages inspire less brand loyalty than before. However, potential new entrants to the industry will be deterred by the high brand loyalty to GrameenPhone packages. Essentially it is believed that the total potential market has been fulfilled by as much as three fourths, thus leaving a very small segment of customers for new entrants to gain. High brand loyalty to GrameenPhone and the die-hard users of the other three companies: Orascom, CityCell & AkTel ensures that potential entrants will be strongly discouraged by the high brand loyalty in current markets. 2. Absolute cost advantages & economies of scale: Current players have a more or less
absolute
cost
advantage
because
they
have
already
invested
in
telecom
infrastructure and have recouped their investments. New companies will have to invest
in equipment and will take considerably greater time to cover initial equipment-purchase expenses. Considering the size of the four companies already operating and the size of their investments, they will not take kindly to an upstart in the industry and may use as many competitive options as possible – price strategy, quality etc. – to retain an upper hand. 3. Distribution channel: Another major barrier to entry is the access to distribution channels. With four companies competing in the current market environment, the distributors of mobile phones are becoming very limited. Moreover, many retailers will not want to carry more lines of mobile phone packages as they have to sell the ones they already have. Thus any increase in the number of companies will cannibalize into current sales. 4. Governmental regulations: In Bangladesh, the telecommunications market is still in the hands of the state-owned BTTB who have already entered the mobile phone market. Thus they will not take kindly to new companies entering the industry. This may make them influence the government to introduce new legislation designed to restrain the business activities of new companies. 5.3.4 Threat of Substitute Products For CityCell the threat of substitute products is very real. Many customers prefer to use GrameenPhone above that of CityCell primarily for the network reach. There are also a number of other factors that make CityCell vulnerable to this aspect of the five forces method of analysis. However, we should note that in case of packages used for commercial use, CityCell has a significant hold over customers. In case of Tellular packages, the rates being so low, many clients prefer to stick with their CityCell Tellular sets even after experiencing technical and network problems. Moreover, as the initial purchase of a CityCell Tellular set constitutes a significant investment – around Tk.50, 000 all inclusive – an owner of a Tellular set cannot easily substitute his or her product. 5.3.5 Threat of New Entrants The entry barriers to this industry are very high since the government controls the licensing arrangements. The existing operators have made sufficient inroads into the market which will strongly discourage new entrants into the market despite the government deciding to give a few new licenses. 5.4 Competitive Analysis The mobile telecommunications industry in Bangladesh is now in its rapid growth stage. Since the technology is expensive, there are only four companies operating actively the mobile service. The other three companies are, GrameenPhone, AkTel, and Orascom Telecom. BTTB with its brand, “TeleTalk” has also very recently entered this competitive scenario.
Figure 5.1: Market Share of the Mobile Phone Operators in Bangladesh As operators of mobile cellular services, AkTel, GrameenPhone,Banglalinkand Warid are direct competitors of CityCell. But here the market share of Warid telecom is not mentinoed because the company is recently established, their market share is very negligible. The PBTL license was issued in 1989. The three other licenses were awarded during November 1996, and are identical to each other. However, the licenses awarded to AkTel, GrameenPhone, Warid and Sheba (now Banglalink) for their mobile cellular networks differ in some aspects from the license that PBTL holds.
5.4.1 GrameenPhone Limited GrameenPhone Limited (GP) is the current market leader in terms of market share, which is owned by a consortium of investors comprising of Grameen Telecom and Telenor (Norwegian state owned telecommunication company, owning nearly 65% of total shares). GP is using GSM technology to provide mobile cellular services to about 10
million subscribers in Bangladesh. The company started its service in March 26, 1997.
Picture5.2: GrameenPhone Network Coverage in Bangladesh GrameenPhone’s basic strategy is coverage of both urban and rural areas. In contrast to the “island” strategy followed by some companies, which involves connecting isolated islands of urban coverage through transmission links, the company has been building continuous coverage, cell after cell. So far, GP has installed more than 2000 BTS’s around the country for cell to cell coverage. GrameenPhone has the widest coverage in Bangladesh. The company is planning to increase the network coverage to 80% of the population from the current 57% within this year.
5.4.2 TM International (Bangladesh) Limited (AkTel) Telecom Malaysia International (Bangladesh) is a joint venture between Telecom Malaysia and A. K. Khan & Co. TMIB also began operations in 1997 using the GSM technology. TMIB offers its mobile services under the brand name AKTEL. It operates as a Limited Liability Company, where the majority shareholder, Telecom Malaysia, owns 70% shares, while minority shares of 30% are owned by A. K. Khan & Co. Bangladesh Limited.
Picture 5.3: AkTel Logo
AkTel has been distinctly ahead in offering the “30 Seconds Pulse” from the first minute of talk time. Today, The company boasts the widest International Roaming service in the market connecting 315 operators across 170 countries. In addition, AkTel is the first mobile operator to connect Tetulia and Teknaf, the northern and southern most points of Bangladesh. AkTel was also the first to provide seamless coverage along the DhakaChittagong highway. With a network covering all 61 (allowable) districts of Bangladesh, coupled with the first Intelligent Network (IN) Prepaid Platform in the country, AkTel is geared to provide a wide range of products and services to customers all over Bangladesh.
5.4.3 Orascom Telecom Bangladesh (banglalink) Orascom Telecom Bangladesh, an Egyptian multinational company with market presence in 11 countries (and market leader in 9 of them) launched their GSM network on the February 10, 2005. This company is one of the additions to the GSM family of the local market when on October 20, 2004; Orascom Telecom announced the purchase of Sheba Telecom at a cost of US$ 60 million. The company’s re-branding has been under the name of ‘banglalink’ with the leveraging promise to provide the market with quality service at the most affordable prices fitting to their communications needs.
Picture 5.4: Netwrk coverage of Banglalink It is also worth mentioning that an unprecedented success of sales results followed the commercial launch of Banglalink in early this year. Orascom is currently serving around 2,000,000 subscribers. 5.4.4 Bangladesh Telegraph and Telephone Board (TeleTalk) State-run Bangladesh Telegraph and Telephone Board (BTTB) operates basic telecom services, national transmission network and overseas communication. It has a monopoly over
interconnections
and
the
international
gateway,
in
which
all
telecommunications operators depend on connection to the fixed telephone lines
other
and international calls. All phone operators are also subjected to a monopolistic control by BTTB that limits revenue sharing arrangements. Just several months ago, BTTB launched their much-awaited mobile phone, Tele-talk which has generated hype among the potential subscribers. As of now, Tele-talk has a small customer base of 40,000 with T&T connectivity & also mobile connectivity. But the major feature of this package is absolutely free incoming from BTTB which has strongly swayed the market in favor of the new package.
5.4.5 Warid Telecom Limited
The newest player in the industry is Warid Telecom Ltd., owned and run by Dhabi Group of UAE is launched their Gsm network at May 10 2007. Warid has invested a huge sum of money in Bangladesh, which they see as a large untapped market in terms of telecommunication. Having started operations only a couple of months ago,Warid is yet to launch a mobile phone package.
5.5 Sales & Distribution of CityCell The Sales & Distribution of CityCell is responsible for all the sales through channel partners. This department is subdivided into four sections. They are Channel Sales, Logistics, Trade Marketing & Business Automation. 5.5.1 Distribution Channel of CityCell Distribution channel is the bridge between the company and the customers. Distribution channel is very important for any company. If there is any gap in distribution channel the marketer is unable to reach its product and services to the customers in time. In the beginning, PBTL decided to distribute through its own distribution channel. As the market is growing fast, it is giving dealerships to sell mobile sets directly to the customers. There are many people interested in becoming distributors of CityCell. But CityCell has some strict policies that are maintained when the dealership is given. Currently, the restructuring process of the distribution network has taken place, making some dealerships redundant, while at the same time, paving the way for others to come into the scenario.
5.5.2 Analysis of GrameenPhone Distribution Department When GrameenPhone signs with any existing or new distribution partner (D&O) he/she is called an alliance partner. The alliance sign up will only be valid or can be done after having or doing an existing dealer/outlet agreement with that specific party. Cellular handset and other accessories are supplied by the alliance partner‘s own account and GrameenPhone has no responsibility for the quality or fitness of such telephones and accessories. GrameenPhone only connects type-approved and taxpaid telephone to its service. GrameenPhone reviews the Commission, Super Bonus and Quality Bonus rates and their qualifying criteria periodically, and at least once a year on the Annual Date. Following each review it either confirms the existing rates and criteria, or gives the Agent written notice of new rates and criteria, which applies with effect from the Annual Date, or (in any other case) with effect from the end of the month in which notice is given. Head of Distribution •
Represent the department in the strategic planning of the Sales & Marketing Division.
•
Plan for the Department according to the company’s Business Plan, Sales & Marketing Plan.
•
Allocate targets among the sections.
•
Monitor & coordinate departmental activities.
•
Take the final decision along with Director, Sales & Marketing about the selection and location of new POS.
Figure5.2: GP Distribution Dealer Management Section Head of Dealer Management Section •
Represent the section in the strategic planning of the Sales & Marketing
•
Prepare short-term & long-term plan for the section as per company’s Sales & Marketing plan and Business Plan.
•
To allocate and delegate responsibilities among the personnel of the section.
•
To allocate sectional sales target among the regions
•
To monitor and coordinate sectional activities
•
To act as bridge in the upward and downward communication Key Account Manager
•
Plan, implement, and supervise Key Account activities
•
Communicate with the Dealer Heads
•
Supervise the generation of various structured reports in the form of Daily Sales Report, Stock Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report
•
Visit Dhaka Region Markets in order to keep special focus on this zone, since this zone generates 80% of the total sales.
Key Account Officer •
Make customized operational procedures according to the strength of key accounts
•
Plan, implement and monitor effective channel sales.
•
Examine the feasibility of new POS (Point of Sales) proposals of Dealer considering potentiality of the area for which the Dealer applied.
•
Provide structured training about handset and sales process to POS sales personnel (especially newly appointed POS).
•
Monitor daily, weekly and monthly sales of the POS, motivate them to increase their sales volume and after sales service.
•
Issue stocks to the POS and constantly monitor their stock drawing limit.
•
Collect and process subscription papers and payments from the POS.
•
Assess Market Potential for each POS, communicate it to that POS, give them briefing about its target and guide them to achieve it.
•
Collect and disseminate information and act as an effective interface of GP to its partner.
•
Make customized operational instruction according to the strength of regional unit of each dealer.
•
Plan, implement and monitor effective channel sales.
•
Select location for POS for that region and approve new POS (Point of Sales) of Dealer considering potentiality of the area for which the Dealer applied.
•
Provide and arrange structured training about handset and sales process to POS sales personnel (especially newly appointed POS) in the respective region.
•
Monitor daily, weekly and monthly sales of the POS and motivate them to increase their sales volume and after sales service.
•
To issue stocks to the POS and constantly monitor their stock drawing limit.
•
To collect and process subscription papers and payments from the POS.
•
Visit POS on a regular basis to get direct market feedback, profiling status any other issues.
•
To assess Market Potential for each POS, communicate it to that POS, give them briefing about its target and guide them to achieve it.
•
Disseminate and collect information and act as an effective interface of GP to its partner.
•
Generate various structured reports in the form of Daily Sales Report, Stock Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report
Outlet Management Section Head of Outlet Management Section •
Plan for the section as per company’s Sales & Market plan.
•
Allocate sectional sales target among the POS
•
Allocate and delegate responsibilities among the personnel of the section.
•
Monitor and coordinate sectional activities
•
Act as bridge in the upward and downward communication
•
Represent the section in the strategic planning of the Sales & Marketing Division.
OMS Officer •
Plan, implement and monitor effective channel sales.
•
Make customized operational instruction according to the strength of Individual Outlets.
•
Examine the feasibility of new POS (Point of Sales) considering potentiality of the area for which the Outlet applied.
•
Arrange and provide structured training about handset and sales process to POS sales personnel (especially newly appointed POS).
•
Assess Market Potential for each POS, communicate it to that POS, give them briefing about its target and guide them to achieve it.
•
Monitor daily, weekly and monthly sales of the outlets and motivate them to increase their sales volume and after sales service.
•
Issue stocks to the POS and constantly monitor their stock withdrawals limit.
•
Collect and process subscription papers and payments from the Outlets.
•
Disseminate and collect information and act as an effective interface of GP to its partner.
•
Generate POS wise structured reports in the form of Daily Sales Report, Stock Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report Visit Outlets in a regular basis to get direct feedback regarding sales, market conditions and any other issue.
•
Make customized operational instruction according to the strength of Outlets
•
Plan, implement and monitor effective channel sales.
•
Select location for POS for that region and approve new POS (Point of Sales) of Dealer considering potentiality of the area for which the Dealer applied.
•
Provide structured training about handset and sales process to POS sales personnel (especially newly appointed POS)
•
Monitor daily, weekly and monthly sales of the POS and motivate them to increase their sales volume and after sales service.
•
Issue stocks to the POS and constantly monitor their stock withdrawals limit.
•
Collect and process subscription papers and payments from the POS.
•
Assess Market Potential for each POS, communicate it to that POS, give them briefing about its target and guide them to achieve it.
•
Disseminate and collect information and act as an effective interface of GP
to its partner. •
Generate various structured reports in the form of Daily Sales Report, Stock
Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report •
Visit Outlets in a regular basis to get direct feedback regarding sales, market
conditions and any other issue. Account Manager •
Plan, implement, and supervise Account activities
•
Generate various reports in the form of Daily Sales Report, Stock Report,
provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report •
Assign and communicate product / hardware wise target among OMS
Officers •
Allocate product / hardware wise Stock among the POS
Agent Management Section Head of Agent Management Section •
Plan for the section as per company’s Sales & Market plan.
•
Allocate sectional sales target among the Agents
•
Allocate and delegate responsibilities among the personnel of the section.
•
Monitor and coordinate sectional activities
•
Act as bridge in the upward and downward communication
•
Represent the section in the strategic planning of the Sales & Marketing Division. AMS Officer
•
Plan, implement and monitor an effective channel sales agent.
•
Appoint new Individual Sales Agent considering potentiality of the area for which the interested person applied.
•
Coordinate the appointment of the agents in other region.
•
Provide structured training about handset and sales process to POS sales personnel (especially newly appointed POS).
•
Monitor daily, weekly and monthly sales of the agents and motivate them to increase their sales volume and after sales service.
•
Issue stocks to the agents and constantly monitor their stock withdrawals limit.
•
Collect and process subscription papers and payments from the agents.
•
Assess Market Potential for each Agent, communicate it to that Agent, give them briefing about its target and guide them to achieve it.
•
Disseminate and collect information and act as an effective interface of GP to its partner.
•
Generate various structured reports in the form of Daily Sales Report, Stock Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report
•
Plan, implement and monitor an effective channel sales agent.
•
Appoint new Individual Sales Agent considering potentiality of the area for which the interested person applied.
•
Provide structured training about handset and sales process. (Especially newly appointed Agents).
•
Monitor daily, weekly and monthly sales of the agents and motivate them to increase their sales volume and after sales service.
•
Issue stocks to the agents and constantly monitor their stock withdrawals limit.
•
Collect and process subscription papers and payments from the agents.
•
Assess Market Potential for each POS, communicate it to that Agent, give them briefing about its target and guide them to achieve it.
•
Disseminate and collect information and act as an effective interface of GP to its partner.
•
Generate various structured reports in the form of Daily Sales Report, Stock
Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report Account Manager •
Plan, implement, and supervise OMS officers’ activities
•
Generate various reports in the form of Daily Sales Report, Stock Report, provisional & Final Hardware-wise sales Report, Weekly Report on total activities, Total Paper & Payment Collection Report
•
Assign and communicate product / hardware wise target among OMS Officers
•
Allocate product / hardware wise Stock among the Agents
Trade Support & Reconciliation Management Trade Support & Reconciliation Section Manager 1. Provide support to the other sections of Distribution Department who deals with the channel partners.
2. Coordinate various events and activities taken by Distribution Department. 3. Coordinate various development & incentive programs undertaken for the channel Partners. 4. Allocate and delegate responsibilities among the personnel of the section. 5. Monitor and coordinate sectional activities 6. Act as bridge in the upward and downward communication 7. Represent the section in the strategic planning of the Sales & Marketing Division. 8. Plan for the section as per company’s Sales & Market plan. 9. Coordinate training and workshop for channel partners •
Distribution Conference is arranged and coordinated for all the Channel Partners.
•
Training is arranged and coordinated for the channel partners
•
To coordinate the Handset Workshop all over Bangladesh
•
Unique profiling for the POS
•
Coordinate in developing unique profiling for POS all over Bangladesh.
•
Coordinate to provide uniform dresses for the Individual Sales Agent
•
Coordinate installation of the signboards in the POS with Hardware Management
•
Make official visit to various regions to maintain the profiling of GP’s POS.
•
Gifts, Souvenir and POP materials Distribution
•
Distribute posters, stickers and danglers regularly among the POS during Campaign and Off-campaign periods.
•
Distribute calendars, diaries, GP clock, greeting cards, mug, etc regularly to the POS as well as to official guests.
Others: •
Send Package prices and official letters to all the POS officially through a letter.
•
Maintain database on the number of POS and their addresses, which are regularly updated
•
Coordinate various Incentive Activities taken for channel partners.
•
Send Legal notices to the unauthorized points of sale through Legal Department to refrain from selling GP products. RU Officer
•
Subscription paper reconciliation
•
RU reconciles subscription paper (from DMS, OMS and AMS) of Dhaka & Barisal zone for Outlets, Agents and centralized Dealers.
•
Paper Status is maintained for paper receiving, reconciliation and submission on a daily, weekly and monthly basis.
•
Paper status is crosschecked with total Sale of the respective month (POS wise) and is being regularly checked with Logistics Department.
•
Documentation (POS wise and month wise) of receiving of subscription papers is done
•
Payment Receiving & Submission
•
Payment is received from Centralized Dealers, Dhaka & Barisal Outlets and Individual Agents of Dhaka
•
Payments is received and submitted to Finance division daily basis.
•
Monthly payment reconciliation is done with Finance Division
•
Proper supporting documents is filed for all POS
•
Report Generation
•
Provisional Handset Report is generated monthly
•
Final Handset Report is generated monthly
•
Zonal sale report is prepared every month.
•
Key figures (weekly & monthly basis) are sent to Financial Control Unit of Finance Division.
•
Commission
•
Commission of Dealers, Outlets & Agents is processed regularly
•
Income Tax Challan is distributed among all the POS (Dealer, Outlet, Agent)
5.6 SWOT Analysis of GrameenPhone’s Distribution Channel 5.6.1 Strength •
Experience in telecom market: Most of the POS has experience on selling telecom product.
•
Well located POS: All the POSs are situated in good location.
•
Attractive profiling of POS which attracts the customers
•
Co-branding with GP
•
Exclusive shop for GP products
•
Affiliation of the largest distribution channel
•
Social recognition
•
Decentralized Operation
5.6.2 Weakness •
Lack of working capital for Outlet and Individual agents:
•
Lack of well trained personnel
•
Alarming turnover of personnel
•
Diminishing Profitability
•
Organizational Structure
•
High Overhead cost for stock carrying
5.6.3 Opportunity •
Increasing demand for Cellular Phone
•
Growing competition in telecom market
•
Marketing support provided by GP
•
Brand Value of GP
•
Helpful attitude from GP personnel
•
Availability of concern contact point of GP
•
Stock return facility
•
Stock receiving facility on credit
•
Hand set and Kit lifting from the same point
5.6.4Threats •
Public demand for discount on price
•
Split sale
•
Poor after sale service by the handset supplier
•
Inadequate information flow regarding future planning of GP
•
Tremendous sales pressure from GP
•
Imposing sudden decision
•
Decision making without prior consultation
•
Higher commission provided by the competitor cellular phone providers
•
No interest calculated against security deposit
•
Conflict among different channels
•
Inadequate commission
•
Poor commission structure
•
Inadequate supply of lower end handset
•
Unhealthy competition among the cellular phone providers
•
Deterioration of law & order situation
•
Delay in commission process
•
Self marketing is restricted by GP
•
The influence of the hand set provider
Documents required in Citycell when applying for Outlet Agent 1. Application in plain paper for the dealership addressing Head of Distribution, Sales & Distribution. 2. In case of Dealer franchisee the forwarding letter have to be submitted. 3. Bio-Data of the owner/proprietor/applicant. 4. Two copies of passport size photograph of the applicant; 5. Business Profile
(in detail) – mentioning the kind of business the applicant is
involved in or the businesses s/he has experienced so far with the yearly turnover; 6. Picture of the outlet (the shop)
Exterior pictures taken from 3 different angles;
a) One picture taken from left side angle of the proposed outlet/space, b) One picture taken from the right side angle of the proposed outlet/space, c) And one picture taken from the center/front side of the proposed outlet/space.
One interior pictures taken of the proposed outlet/space
One picture of the front view of the market (if the outlet is located in side the market)
(Please make sure that all the pictures have clear visibility of the shop) 7. Copy of rental agreement (in case of rented shop/outlet) Or Copy of ownership proof (in case of own shop/outlet) 8. Market floor plan/map locating the proposed outlet (in case of situated at the market) 9. Location plan/map locating the proposed outlet. 10. Bank Solvency Certificate – (Mandatory); 11. Copy of Trade License– in case of existing business; Optional documents, 12. Copy of Vat Registration Certificate (Attested) - if required Considerable factors, while doing any assessment,
Visibility
Location
Business potentiality
Owner’s reputation
Please concentrate on the considerable factors while stating remarks on assessment form.
5.7 Previous Distribution Network of CityCell When the previous distribution network was active, retailers had to come to the operators to lift products making the whole process of lifting products was timeconsuming and lengthy. This resulted in a large amount of channel conflict such that cross territorial distribution and price under-cut was a daily issue.
Figure5.3: Simplified Previous Distribution Network Freelance-retailers were the most upset. Because of the price under-cut they could not make their expected profit. Moreover, as CityCell products do not have a pull in the market, most of the retailers did not bother coming to CityCell to lift products.
5.8 New Distribution Network of CityCell ‘Distributorship’ under the new distribution structure follows these attributes: •
Appointed for a defined area or territory.
•
Distribute
stocks
to
‘Exclusive
POS’
and
‘Retailers’
within
the
allocated
area/territory. •
Monitor & control the activities of POS.
•
Develop the market.
After the activation of the new and improved distribution network of CityCell, retailers do not have to come to CityCell to lift products. CityCell has appointed a specific Distributor in a specific territory who is responsible for the product availability in all the POS in that area. So, retailers can thus have the products readily available at their own shop, saving both time and money. The new distribution network also creates a push of products in the market, giving a forecast of possibly higher sales volume.
Figure5.4: Distribution of Citycell
Distribution Flow
Handset + RIM
CityCell
Handset
Handset + RIM
Handset Vendor
Channel
R E T A I L E R
Handset + RIM
End User s
Handset
RIM
Figure5.5 Distribution flow of Citycell
Channel work flow – Logisti cs Product RIM + Number
Deliver y Handsets RIM Number issue
Logistics
Channel Sales Requisition
Channel work flow – Trade support TSR
MARCOM
Credit/Reconciliation
Finance
POSM distribution Channel Sales Outlet assessment
CCD
Secondar y dat a
Product
Distribution Channel DEALER Franchisees
CITYCELL
DEALERS
Own outlets
Resellers Definition: A dealer is a business firm that has nation wide distribution network consisting of its own outlets, franchisees, and resellers. Own Outlets : Individual retail points owned by the dealers. Franchisees : Dealer’s authorized outlets owned by individuals. Resellers
: Informal retailers that sell products of all operators.
Other Operator s Distr ibution Str ucture
Distributor (AKTD)
Sales Center
Main Dealer (Integra)
Dealer
POS
Auth ori zed Dealer
Dealer
Banglalink Point
Dealer
POS
Dealer POS
NERO
POS POS
POS
Regist er ed NERO
GPDC (A rea 1)
GPDC (A rea 2)
Regist ered NERO
Regist er ed NERO
Dealer Fra nchise
Dealer Fra nchise
Outlet
Outlet
GP Cent er
Walk in Center
ROSA
Planned
Comparison of the Citycell and Grameen Phone Distribution Network Grameen Phone has 33 GPDC( Grameen Phone DIstribution Center) in different points in Bangladesh
where
Grameen
Phone
maintain
their
distributorship
in
their
own
management and own control. From GPDC the products are delivered to registered NERO (Non exclusive retailer outlet) who have various operators product and registered ERO (Exclusive retailer outlet) whose have only the product of GP. From registered ERO dealer franchisee (wholesaler of GP product) and GPCF (Grameen Phone center franchisee); who are reailer of all types of operator’s product collect the product. As GPDC is maintained by Grameen Phone and the management of the products are bear by GP the cost and investment is huge but in Citycell management of the product is transferred to the distributor. And in GPDC the employee whose are appointed is the employee of GP and GP have to pay handsome salary to that employee but in Citycell the management of the product is all managed by the distributor. So recently GP establish severel Grameen Phone Centre (GPC) which are managed by GP approved distributors and all type of works are done by the distributors. Where by establishing 33 GPDC GP has better control on distributor because the control of the distributors can be properly maintained by GP where as Citycell give some control of any territory to that specific distributor, and the cross territory transaction of the
product by the distributor can be happened.
So in comparison to GP distribution
network, the new distribution network of Citycell is very effective and significant also because better control can be captured on every teritorry than previous situation 5.9 Benefits of the new Distributorship •
CityCell will gain the profits of “First Mover” to this kind of distribution concept.
•
The new distribution network saves both time and money for the retailers and distributors. From now on CityCell’s Channel Partners will be able to generate more profit by selling more products.
•
Ensures timely product delivery to the POS.
•
Market penetration is easier in this distribution network.
•
Previous distribution network did not ensure a wide network. The new network ensures the widest distribution.
•
Markets will be more controllable if this is executed properly. Retailer market will be easily penetrated by the Channel Sales Team Members of CityCell.
•
Identification of the actual seller and rewarding them is much easier and scientific because of this distribution network. We can easily measure the outstanding performance by the channel partners.
•
More products can be sent to POS with less amount of time.
•
This reduces channel conflict.
•
According to the new BTRC regulation subscription forms must be with the phone operators with 10 working days. The new distribution network ensures quick submission of subscription paper.
•
Price under-cutting can be completely reduced by proper activation.
•
CityCell can have complete control over the unsold stocks in POS.
•
POS material distribution is much easier. Distributors can carry the POSM while they come to pick up product. Sometimes, activation of POSM can be done by the distributors. This saves CityCell’s money and time.
•
As CityCell will always have a better control over the market because of this new distribution network, Brand Presence of CityCell is ensured in the markets.
Market Growth After the New Distribution Network
5.10 Penalty Mechanism in the New Distribution Network
The mobile operators of Bangladesh are struggling to attain both targeted market share & ARPU. So, to meet the sales target and ensure product availability, CityCell has restructured its sales & distribution structure and thus implemented the ‘Distributorship Model’. As per the new structure, the whole country is divided in to a number of territories (Thana/District level), where territory or area wise distributors are appointed to serve Outlet agents, Franchisee and retailers of the specific market. The distributors were selected through an extensive selection process, which involved evaluation of existing channel partners (i.e. Dealers, Outlet Agents, Scratch Card Distributors, Franchisee
&
others),
interview
of
short-listed
candidates,
identifying
potential
distributors, and finally, territory allocation for distributors. All of the distributors are appointed for a period (probation) of 3 months. The entire selection process was done in consultation with the concerned executives and channel partners. For back up support, a substitute for each of the distributors has been selected. The new distribution structure has a code of conduct for the distributors. Every ‘Area Manager’ will administer & closely monitor their respective distributors’ activities as per the codes of conduct. 5.11 Codes of Conduct Grade – A: 1) Sales Target: Distributors will have to achieve the given sales target for any given territory. 2) Stocks Lifting & Distribution: Distributors will be obliged to lift stock from PBTL (as per sales campaign) and distribute them among all registered retailers (except Continental agent) within a given time. 3) Territory: Distributors shall have exclusive right to distribute the products within their defined territory only. They cannot distribute products in territories, other than that which they are appointed for. 4) Price: Distributors will sell all the products at official price only. Grade – B: 1) Commission Disbursement: Distributors will be obliged to disburse the sales commission (as advised by PBTL) among all registered POS. 2) Subscription Paper Submission: Distributors will collect the subscription papers from the POS and submit them to PBTL within the time frame. The quality of subscription papers should be maintained by the distributors. 3) POS Profiling: Distributors in co-operation with retailers will make necessary arrangements for POS profiling. 4) Reporting: Distributors will be entitled to submit the report (Daily/Weekly/Monthly) as per the prescribed (by PBTL) format. Grade – C: 1) Resource allocation: Distributors will arrange for all the needed resources
(manpower & others) in order to ensure smooth & timely product distribution. 2) Market Control: Ensure market control by regular visit. 3) Cooperation: Distributors should cooperate both with PBTL and its registered POS.
CityCell is focusing on establishing the widest & most efficient distribution structure for mobile products in Bangladesh. This structure will facilitate ensuring the timely availability of products in the widest way. As per the new concept, all appointed distributors are obligated to go by the above mentioned codes of conduct. If any of the distributors breach these codes, they may be penalized so that the market discipline can be established. On the other hand, distributors will be rewarded for their performance (sales & others).
5.12 Contingency Plan for New Channel Sales Strategy It will be hard for CityCell to suspend the distributor temporarily as a penalty measure (for example, if it distributes product to other Distributor’s area) as it will hamper the Distribution of its product in that particular area. Probable solution may include: “Instead of suspend the Distributor, CityCell can penalize by delaying its commission payment to the particular Distributor”. If the Distributor is not exclusive with CityCell, it sometimes may focus on another company. Probable solutions may include: •
CityCell should have “Shadow Distributor” for every Territory. It can be CityCell’s Distributor in an adjacent territory.
•
CityCell should have its own personnel in every Distribution house who will monitor the activities of the Distributors.
•
The retailers will have the registration directly from the CityCell’s personnel. On a separate card, CityCell personnel will inform the retailers of the Distributor it is attached with. If the company wants to suspend it temporarily (if it is inevitable) or permanently, the Distributor in the adjacent area will be appointed for Distribution in the particular territory, given that, the Distributor will stop Distribution when it is informed by the company. However, there is a problem with this solution. If the “Shadow Distributor” gets the chance to distribute products in the territory, it will have access to that area’s retailers. As a result, the Distributor may keep on distributing the products even if it is told not to.
Again, if the Commission Structure is same for the exclusive outlets and nonexclusive retailers, the outlets will not be interested to have CityCell’s signboard. In this kind of situation, the probable solution is – “Only exclusive outlets will have the privilege to sell Post-paid and PCO products.” But the key challenge will be whether they will be interested to deal with PCO and post-paid connection in expense of doing business exclusively with CityCell.
5.13 Findings & Analysis: Mentioned in this section are the findings and analysis pertaining to the survey questionnaire that I designed as partial requirement of my report. 5.13.1 Link with other operators Except a few, almost all the distributors have business with other operators. Among them 36% have business with Grammeen Phone, and 22% with Banglalink. The rest have business with other operators.
Aktel BanglaLink
Frequency 3 8
Percent 8.3 22.2
Valid Percent 8.3 22.2
Cumulative Percent 8.3 30.6
Grameen
13
36.1
36.1
66.7
Teletalk
2
5.6
5.6
72.2
None
10
27.8
27.8
100.0
Total
36
100.0
100.0
Link with other operators
Aktel BanglaLink Grameen Teletalk None
5.13.2 How frequently Citycell personnel visit the area: 50% of the respondents said that only once in a month Citycell personnel visit their place while they prefer at least once in every two weeks of visit. It has been found that more than 70% prefer once in two weeks visit of citycell personnel. Frequency of CCP visit
Valid
once in a week once in two weeks once in a monrh Total
Frequency
Percent
Valid Percent
Cumulative Percent
6
16.7
16.7
16.7
12
33.3
33.3
50.0
18
50.0
50.0
100.0
36
100.0
100.0
Frequency of CCP visit
once in a week once in two weeks once in a a monrh
Preferance of visits
Valid
once in a week once in two weeks Total
Frequency
Percent
Valid Percent
Cumulative Percent
10
27.8
27.8
27.8
26
72.2
72.2
100.0
36
100.0
100.0
Preferance of visits
once in a week once in two weeks
5.13.3 Motivating factor of the Distributors More than 90% respondents’ motivating factor is commission. While citycell is offering the highest commission, yet the distributors are not satisfied just because of the lead time of commission disbursement.
Valid
prize commission
Frequency 2 34
Percent 5.6 94.4
Valid Percent 5.6 94.4
Total
36
100.0
100.0
Cumulative Percent 5.6 100.0
What motivates you
prize commisions
5.13.4 Commission disbursement More than 83% respondents stated that the lead time of Citycell’s commission disbursement is average, whereas they are very much satisfied with GP’s commission disbursement.
Valid
average irregular
Frequency 30 6
Percent 83.3 16.7
Valid Percent 83.3 16.7
Total
36
100.0
100.0
Cumulative Percent 83.3 100.0
Commision disbursement
100
80
t n rc e P
60
40
20
0 average
irregular
Commision disbursement
5.13.5 Contribution of cc to total business Despite having business with other operators, a significant portion of distributors’ revenue comes from Citycell business.
Valid
less than 25% 25 -50% 50 - 75 more 75% Total
than
Frequency
Percent
Valid Percent
Cumulative Percent
1
2.8
2.8
2.8
12
33.3
33.3
36.1
18
50.0
50.0
86.1
5
13.9
13.9
100.0
36
100.0
100.0
cotribution of cc to total business
50
40
t n rc e P
30
20
10
0 less than 25%
25 -50%
50 - 75
more than 75%
cotribution of cc to total business
5.13.6 New distribution can maintain close relationship No respondents disagreed that after adopting the new distribution structure, Citycell can maintain closer relationship with the channel partners. They also agreed that Citycell is highly concerned about their channel partners.
Valid
Strongly agree agree
Frequency
Percent
Valid Percent
Cumulative Percent
6
16.7
16.7
16.7
20
55.6
55.6
72.2
neutral
10
27.8
27.8
100.0
Total
36
100.0
100.0
New distribution can maintain close relationship
Strongly agree agree neutral
5.13.7 Citycell is always concerned about partners
Valid
Strongly agree Agree
Frequency
Percent
Valid Percent
Cumulative Percent
13
36.1
36.1
36.1
21
58.3
58.3
94.4
Neutral
2
5.6
5.6
100.0
Total
36
100.0
100.0
5.13.8 CC ensures loyalty programs to motivate partners 33.3% respondents disagreed that citycell ensures different loyalty programs for channel partners. Except Previous year’s first ever distribution conference, there were no significant loyalty programs for channel partners. They also believe that regular loyalty program can increase loyalty toward ciycell.
Valid
Strongly agree Agree
Frequency
Percent
Valid Percent
Cumulative Percent
1
2.8
2.8
2.8
10
27.8
27.8
30.6
Neutral
13
36.1
36.1
66.7
Disagree
12
33.3
33.3
100.0
Total
36
100.0
100.0
CC ensures loyalty programs to motivate partners
40
30
t n rc e P
20
10
0 Strongly agree
Agree
Neutral
Disagree
CC ensures loyalty programs to motivate partners 5.13.9 Loyalty programs would increase loyalty
Valid
Strongly agree Agree
Frequency
Percent
Valid Percent
Cumulative Percent
7
19.4
19.4
19.4
24
66.7
66.7
86.1
Neutral
5
13.9
13.9
100.0
Total
36
100.0
100.0
Loyalty programs would increase loyalty
70
60
50
t n rc e P
40
30
20
10
0 Strongly agree
Agree
Neutral
Loyalty programs would increase loyalty
5.14 Feedback of retailers: Ciycell organized a training program to educate the channel partners about the new and improved distribution network. In that training session, retailer feedback was taken. Retailers were well convinced about the new distribution process but they are confused about the succession since CityCell has had a bad reputation in the market for a long time. Network situation in some areas is worse than it was before. They spoke loudly about increased call drop, prolonged call processing time, vague voice on balance enquiry, network shrinkage and stability problems. Some retailers complained that they do not even have any network in their areas. Places like Balagonj, Tajpur, Fenchugonj bazaar etc. are just a few examples. All retailers insisted on improving and expanding network to increase sales. Since the territory includes some small thanas, town retailers are confused about their sales volume as well. Summary of the feedback is discussed below. 1. New Distribution Structure: Channel partners have highly appreciated the new distribution structure. But they expect strict control from PBTL regarding price undercut and cross territorial issues. Retailers also demand quick action by PBTL for any misdeeds by other retailers/distributors.
2. Poor Network Coverage: The network coverage in the sub-urban (Thana level) and rural areas are extremely poor. Coverage is relatively good in the metropolitan areas. Poor network coverage in the sub-urban and rural areas is affecting the retailers generate new sales. 3. Poor In-door coverage: The in-door coverage in the urban, sub-urban and rural areas is very poor. In the sub-urban areas & rural areas, most of the customers have to use an external antenna to get coverage. Customers demand increasing indoor coverage quality. 4. Poor Network quality: Customers are facing problem in network quality. Such as, call drop, echo, high call processing time, interconnection problem etc. 5. Poor Customer Service: The customer service of CityCell is extremely poor. Retailers and customers complain regarding the ill manners of the customer service personnel. Customers are having a very negative impression about CityCell customer service. 6. Limited Customer Service Center: In comparison with other operators, CityCell has very limited customer service centers (only in the metropolitan city) across the country. Channel partners & customers demand customer service centers at district levels (at least 1 customer service center in each district). 7. Call Center Hotline: Most of the time, customers are unable to reach the call center hotline (*121 & 01199-121121). 8. Poor Brand Visibility: Compared to other operators, CityCell brand presence is extremely poor (both in urban and sub-urban areas). 9. Postpaid Billing: Most of the retailers are complaining about the excess bill charged by CityCell in their postpaid connection with which they do business. They fail to find any match with their own record with the bill charged. 10. Cash Card Fraud: Retailers complain about the fraudulence of cash card. They demand compensations. 11. Handset Service Centers & Accessories: Channel partners have requested establishment of handset service centers across the country & also ensure availability of handset accessories at district level.
6.0 Conclusion and Recommendation: The new distribution network of PBTL is indeed a concept within the telecom industry such that all other operators are likely to realize quite soon how effective it is and thus incorporate the system to their own channels. Even now, the other operators such as GrameenPhone, AkTel etc. have continued forth with their existing distribution network. However, given the success that PBTL has attributed partially due to its new network, it is likely this distribution network system will gain popularity quite soon. It is evident from surveys conducted both internally and externally, that PBTL has been able to
increase its subscriber base on its distribution system alone. The retailers are happier, as are the distributors. The customer base is being tended to so that there is a little or no call drop, better network, and instant connectivity and availability. CityCell is nurturing its existing client base and at the same time has also tried to increase it. To an extent, this has been made possible by the investment poured into the company and the complete restructuring that has followed the investment. Increasingly, however, more and more people are becoming fascinated with what the company has to offer. The new distribution network is only a portion of the restructure that has been shown here, but is very significant in that this network actually provides a large foothold for all the rest to come.