12.

Distribution Strategy

TELECOMMUNICATION SYSTEM & BUSINESS

BM61B3

SYSTEM AND BUSINESS OF TELECOMMUNICATION

 Framework

TELECOMMUNICATION SYSTEM AND

BUSINESS
Contents,
Telecommunications basic concept,
infrastructure in the telecommunications industry based on data communication,
a comprehensive telecommunication business model in Indonesia.
Telecommunications business governance system is referring to the e-TOM

1. Introduction of
9. Telecomm service
telecommunication and
marketing and
business system
business
2. Telecommunications
10. Distribution strategy 12. Case study
industry and competition
11. Trend and business
and business
expansion
3. Basic concept Network practice
4. Data Communication
5. Cellular and wireless 7. E-TOM and model
6. Internet and service business
Integration 8. Telco competencies
SYSTEM AND BUSINESS OF TELECOMMUNICATION
 Contents
Introduction
Differentiate Distribution Chain
Coexisting Whole Sale & Retail Strategy
Case against Vertical Integration
Suppliers & Partners Strategy
Internet Strategy
Supporting Tools
Important Notes

SYSTEM AND BUSINESS OF TELECOMMUNICATION

 Introduction

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 4

 INTRODUCTION (1/5)
Distribution channels comprise the support
structure required to deliver telco services
to customers.
Elements in the distribution chain ;
wholesalers
retailers
brokers, agents, resellers, and a host of other
intermediaries.

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 5

 INTRODUCTION (2/5)
Example of distribution choices ;
Pre-paid vs post-paid
Domestic vs international
Urban vs rural
Segmented vs all market
Wholesale vs retail
Own vs agency (middle man)

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 6

 INTRODUCTION (3/5)
Telco service providers can establish their
market position wherever they want along the
distribution chain and with whatever breadth
of product they believe will make them
successful
The new competitive environment requires a
thorough reassessment of channel strategies.
Selection of the channels should consider their
strengths and focus within the distribution
chain.
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 7
 INTRODUCTION (4/5)

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 8

 INTRODUCTION (5/5)
Some celluler operator dealers:
Telesindo
Akardaya
Arifindo Mandiri
CV Suryalaya
KISEL

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 9

 Differentiate Distribution Chain

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 10

 DIFFERENTIATE DISTRIBUTION CHAIN (1/3)
Telco service has began to differentiate, incl their
distribution channel.
The wholesale channel is emerging as a source of
growth in the industry.
In Indonesia, we saw the growth in telco market
thru the availability of new entrants (providers,
users, services)
Much of the increase is cause by new technology-
based business models (3G, LTE, smartphone,
satellite)
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 11
DIFFERENTIATE DISTRIBUTION CHAIN (2/3)

The differentiation enhanced by the rise in

service providers without a facilities investment
(MVNO / Mobile Virtual Network Operator)
Wholesalers and other differentiation strategies
are important in the competitive market.
More market segmen to service, need focus
strategy
Telco service provider cant do it alone
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 12
DIFFERENTIATE DISTRIBUTION CHAIN (3/3)

New business models in wholesale markets will

boost the wholesale segment.
Benefit of wholesale services ;
Service level guarantee
Minimize staff needed
Reducing equipment investment
Target more customers

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 13

 Coexisting Whole Sale vs Retail
Strategy

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 14

COEXISTING W.SALE & RETAIL STRATEGY (1/3)

In the interexchange market, many of the

largest carriers wholesale their network
services, some more aggressively than others.
Is it providing wholesale services has the
potential to cannibalize their retail base of
customers??
Wholesale recovers business that would have been
lost to competitors anyway.

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 15

COEXISTING W.SALE & RETAIL STRATEGY (2/3)

The wholesale operation is such a small part of the

business that channel conflict is not an issue.
If it were, resellers would still have an abundance of
wholesale-only suppliers with considerable
overcapacity.
Several telecommunications service providers
plan to offer wholesale VoIP service

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 16

COEXISTING W.SALE & RETAIL STRATEGY (3/3)

Several telecommunications service providers

plan to offer wholesale VoIP service
Challenges when serving two market ;
Creates channel conflict. Telco acting as wholesaler
compete against their own retail customers
Channel conflict (perceived)

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 17

 Case Against Vertical Integration

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 18

 CASE AGAINST VERTICAL INTEGRATION (1/3)

The facilities-based provider controls its own

facilities and service quality,
they seek to differentiate its brand based on service
quality by build its own network.
Telephone companies in most of the 20th
century, especially the largest (the Bell System)
were vertically integrated, making their own:
_ telephones, telephone cables, telephone exchange
equipment and other supplies

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 19

 The Corporate Expansion Option
V I Customers
e n
r d
t Forward Integration
i
i r
c e
a c
l t Horizontal The Horizontal
Diversification Company Integration
I c
n o
t m
e p Backward Integration
g e
r t
a I Supplier
t t
i o Horizontal Integration / Diversification
o r
n
SYSTEM AND BUSINESS OF TELECOMMUNICATION
 CASE AGAINST VERTICAL INTEGRATION (2/3)
Is it serving both market and vertical integration
necessary ?
If facilities-based incumbents expect the wholesale
business to be successful, they should eliminate the
channel conflict of a retail operation
Telco service provider in highly competitive markets will
find better uses for capital and expense dollars than in
owning and operating a network in a market
characterized by overcapacity
A service provider in the retail channel will be more
flexible to enter and exit markets than a facilities-based
competitor.
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 21
 CASE AGAINST VERTICAL INTEGRATION (3/3)
Is it serving both market and vertical integration
necessary ?
A telco without facilities investment can purchase
services based upon newer technologies as they are
launched without stranding investment.
Telco provider concentrated in a well-defined channel
has a better opportunity to be excellent than one spread
across the distribution chain
Telco provider intending to grow through mergers will
command more value for its customer base than its
facilities in areas where the merger partner already
owns facilities
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 22
 Suppliers and Partners Strategy

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 23

 SUPPLIERS & PARTNER STRATEGY (1/4)

Suppliers are the other distribution strategies

can be used by telco providers
Using suppliers or other party capability to
enhanced our services

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 24

 SUPPLIERS & PARTNER STRATEGY (2/4)

Vendors and suppliers are often measured on

their contribution to a companys success on
three simple factors:
whether they deliver more quickly,
more cheaply or
more effectively.

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 25

 SUPPLIERS & PARTNER STRATEGY (3/4)

Yet many suppliers know that they have so much

more to offer to companies who are willing to think
outside these traditional supplier definitions.
Indeed, in the rapidly changing technological
environment, coupled with a challenging economic
environment, a shift in perspective toward
suppliers and their offerings may be a welcomed
change for many company executives seeking to
reconcile the balance sheet with the companys
long-term needs
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 26
 SUPPLIERS & PARTNER STRATEGY (4/4)

Supplier partnerships will become more

important as companies expand their
outsourcing of mission-critical functions.
Advances in information systems and the rise in
suppliers to meet market requirements will
foster the growth in outsourced services and
strategic partnerships along the distribution
channel.
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 27
 Internet Strategy

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 28

 INTERNET STRATEGY (1/4)

Internet become new distribution strategy

Telco, which using more information technology
than other industry, surprisingly have not been
utilizing the internet
Think of what internet can support the telco
providers in delivering the product

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 29

 INTERNET STRATEGY (2/4)

The internet has become an extension of global

distribution systems (GDSs). It offers three
particular strategic possibilities:
(1) to drive revenues by extending the company's
reach to broader, more global markets,
(2) to reduce costs by bypassing traditional
distribution channels (e.g., airline GDSs), avoiding
commissions, and lowering transaction fees, and
(3) to enhance customer service by providing more
and better information with multimedia

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 30

 INTERNET STRATEGY (3/4)
A new medium--the Internet and World Wide
Web (WWW)--is changing distribution channels
like no other force since the Industrial Revolution.
It is modifying many of the assumptions on which
channel structure is based, and in some cases it is
transforming and even obliterating channels
themselves.
As a result, many intermediaries will die out,
while new channels and intermediaries will take
their place

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 31

 INTERNET STRATEGY (4/4)

There are three (3) essential purposes of

distribution channels:
to support economies of scope,
to routinize transactions, and
to search for information essential to both producer
and consumer.
However, the Internet and Web have brought
about the death of distance, the homogenization
of time, and the irrelevance of location.

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 32

 Supporting Tools

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 33

 SUPPORTING TOOLS

Distribution channel decisions require choices

between channels,
it need the supporting tools.
Supporting tool available:
Data mining
Vertical integration

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 34

 SUPPORTING TOOLS
Data of Customer gathered by providers
A significant difference between the typical

Internet Service Provider and the typical

Telecommunication Service Provider lies in the

relationship with the customer

the data gathered from the customer by those

providers are different
SYSTEM AND BUSINESS OF TELECOMMUNICATION
 SUPPORTING TOOLS
Data characteristics of customer
1. Where data about where the main services
are consumed
2. Who personal data about the subscriber (such
as name and address)
3. When data about the time of consumption
4. With what (means) data about the terminals as
well as the access technology used

SYSTEM AND BUSINESS OF TELECOMMUNICATION

 SUPPORTING TOOLS
Data characteristics of customer
5. What data about the exact contents the
costumer access
6. How data about the methodology the
user apply to data retrieval and consumption
7. Why data about the reasons or the
requirements that drive service usage

SYSTEM AND BUSINESS OF TELECOMMUNICATION

 SUPPORTING TOOLS
Why
Characteristics

Market Analyst
How
Data

Internet
What Players

With What Broadcasters Telecoms Service

Providers
When

Who
Broadband Providers
Where

Everyone Group Individual

Customer
SYSTEM AND BUSINESS OF TELECOMMUNICATION Intimacy
 Cross Industry Collaboration
Value System

Infra Network Service Content Content Marketing

structure operation Delivery Brokering Creation & Sales
Care
constr.

Costumer
Intelligence
Where Who When With What How Why
what

Cross Industry Collaboration Source : Christian Saxtoft,Convergence

SYSTEM AND BUSINESS OF TELECOMMUNICATION
Characteristic of Communication Services

TV over the air Targeted Adv

Push Mobile
Marketing

Cable TV
Search
Social Engines
Websites
Pull
Voice
Telephony

Everyone Group Individual

SYSTEM AND BUSINESS OF TELECOMMUNICATION

 Important Notes

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 41

 IMPORTANT NOTES
CLEC (competitive local exchange carrier), in the
United States, is a telecommunications provider
company (sometimes called a "carrier") competing
with other, already established carriers (generally
the incumbent local exchange carrier (ILEC)).
MNF, RBOC
ISP
ASP
DSL
IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 42
 Handy Resources & Refference

Strouse, Karen G.(2001). Strategies for

Success in the New Telecemmunications
Marketplace. Artech House
Telecommunication Library. London;
Chapter 12

IM TELKOM 2013 SYSTEM AND BUSINESS OF TELECOMMUNICATION 43

 Assignment 12
1. Please explain internet strategy used in distribution system
of your Celco
2. Discuss & Find the example of your celcos cross industry
colaboration.
3. Please explain how celco give margin to its distributors

Should be delivered on D-1 of next session

to imtromadhan@gmail.com

4/3/2017 SYSTEM AND BUSINESS OF TELECOMMUNICATION 44