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Task - A PEST analysis

Company - Omantel

Present the result of your assessment in a PEST Analysis Grid and a textual explanation that follows the essay technical format with an inclusion of Introduction, Body of the Essay, Conclusion and Reference. Include in-text citations of theories or concepts that can support your discussion.

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Answer - Strategic Management

Introduction

The paper will discuss about the strategic management such as resource-based theory and resource dependence theory that must be followed by the organizations. The theory states that the organizations are the bundle of capabilities and resources that are made up of intangible and human assets, financial and physical factors. It also states that the possession of strategic resources facilitates an organization with great opportunities to build competitive advantages over its competitors. On the other hand, resource dependence theory states that organizations cannot gain capabilities and resources without communicating with individuals and organizations. It determines that the behavior of an organization is affected by the external resources of the organizations.

Objective

The primary objective of the study is to provide an understanding of the external forces that affect Omantel.

Industry Analysis

Oman is determined to be the most progressive countries within the telecom industry in terms of promotion and liberalization of competition. The telecom service providers or operators in Oman offers huge range of telecommunication services to its customers related to the state of art of technology. In line with the government's vision and strategy 2020, the telecommunication has made progress within the liberalization process (Al Jabri, Al-Badi and Ali, 2017). It aims to turn telecommunications industry into a competitive and attractive sector with the help of private sector investment for social and economic development. The telecom industry in Oman rises 2% of revenue growth in 2018. The revenue ratio of telecom industry in Oman is highest (30%) as compared to other telecom sectors across the world. The telecommunication industry provides attractive products to its customers at low price other than the telecom sectors in other countries.

Oman Telecommunications Company (Omantel) is determined to be the leading and first integrated telecommunications company located in Oman. It was founded in 1980 whose headquarters is located at Muscat, Oman where it serves internet services within the country. The Oman government owns a 50% share into the company. In 2017, Omantel acquired 21.9% of Zain Group stake which is the biggest transaction in the North African Region and the Middle East. Currently, Omantel possesses ten submarine cables landing in Oman such as BBG, GBI, OMRAN, POI, MENA, SMW-3, EPEG, Falcon, PLAG, EIG and TWA (Omantel.om., 2019). The number of employee's works in the company is around 2,690. In 2015, Omantel won an award for its high-quality Human Resources.

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The mission of the company is to meet the communications need of the consumers and develop and attract talents into a team-oriented environment. Omantel focuses upon the sustainability vision based on three key aspects such as innovation, responsibility and digital inclusion. Omantel brand has experienced a remarkable growth which helped the organization to maintain a unique position within the industry (Masson et al., 2016). The Omantel brand stood $479 million in 2016 which reflects the improvement of the Omantel brand. As a result, it is considered to be the best brand within the telecom sector.

PESTLE Analysis

Political factors 

Economic factors

 

  • Omani market follows the rules and regulations of Oman
  • International, regional and governmental factors affect Omantel
  • Strong support from the Oman government (Chang and Taylor, 2016)
  • Cordial international diplomatic relations with Oman
  • Political situations in the Middle East affects the company
  • Majority of stakeholder with 51% stake
  • Import restrictions puts an impact on the company
  • High-income economies
  • Low oil price affects earnings
  • Recession or economic growth in Oman affect the company
  • The Omani market faces low sales from the consumers
  • Stage of the business cycle and stock marketing trends
  • Labor costs affects Omantel (García et al., 2017)
  • High currency exchange rates

Social factors

Technology factors

  • Increased expatriate population
  • Cultural and social aspects of Oman greatly impacts Omantel
  • The constant change in the demographics of Oman
  • Social behaviors and family size impacts the decision-making power of the company
  • Increased level of e-user and education
  • Accessibility of technology, religion and lifestyles affects Omantel (Dehmolaee and Rashnavadi, 2019)
  • Leasing of network and telecom infrastructure
  • Investments in the Internet of Things
  • Rate of technological change, infrastructure legislation and fostering innovation in Oman
  • Internal development enables competitive advantages
  • Spends more on internal services and software products
  • Appropriate management of technical services and products

Environmental factors

Legal factors

  • Influence of fundamental regulatory changes
  • Issues based on new licenses
  • Pollution from e-waste and transportation in Oman urban areas
  • Irregular management of environment puts an impact on Omantel
  • Difficulty in measuring the products at international and local level
  • Initiatives based on environment awareness
  • E-commerce legal in Oman greatly affects Omantel
  • Oman possess less experience for e-commerce drafting
  • Unavailability of consumer rights, digital signatures
  • Unavailability of validation for electronic contracts

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The PESTEL analysis is further discussed below:

Political factors

Several political factors like global, regional and governmental factors of Oman puts a direct impact on Omantel. Firstly, the political situation in the Middle East negatively affects the telecommunication industry in Oman. Another factor is the import restriction where in order to import the products Omantel needs to follow the rules and regulations of Oman that increases regulatory pressures. As a result, the importing of product to Oman leads to regulatory pressures for the company (Garrone and Zaccagnino, 2015). Another factor such as anti-trust law, political interventions, and tax policy also put a great impact on the company. Absolute dominance enhances benefits and business decision-making of the company. Another factors such as change in consumer behavior, regulations, stiff competition as well as higher royalties and taxes.

Economic factors

The GDP rate of Oman in the year 2017 is estimated by 7,264.27 crores USD that indirectly or directly affects the revenue of Omantel. Oman deals with change in the interest rate and economic recession or growth within the Omani market. This factor affects the company as the interest rate of Omantel differs from the interest rate of Oman. Moreover, the low labor costs of Oman put an impact on the company as it leads to lower sales from the consumers (Wasono and Furinto, 2018). Stage of the business cycle, stock marketing trends, and currency exchange rates are some of the other factors that influence the company to a great extent. Lower sales from the Oman customers negatively affects the income rate of the company. Insufficient financial resources by Oman government fails to boost economic growth of the company. Increased dependence on the oil revenues affects company's growth in Oman.

Social factors

Omantel is greatly impacted due to the wide range of cultural and social aspects of Oman. There is a constant change in the demographical features of the company that puts a significant impact on its target market. These can alter the cultural values and social trends of the company (Zhao, Sun and Xu, 2016). Emigration in Oman puts a positive impact on Omantel as most of the people immigrate to Oman are categorized as educated people and appointed with increased wages. This leads to maximized selling ration as the level of education and e-user is high in Oman. Increasing crime rate within the country increases the corruption level.

Technological factors

The technological factors such as, rate of technological change, legislation regarding technology and fostering innovation put a significant impact on the revenue of Omantel. As Omantel spends a quarter of its income to develop technologies internally, thus internal development enables them to gain competitive advantages that serve technical control over the services or products (García, Nebot and Vellido, 2017). This strategy helps the company to deal with various technological factors such as competition rate, new production technology and rate of technology development. Due to the technological factors, Omantel faces problem in order to renew licenses. Oman government invests lesser amounts in the research and development that affects the level of technological usage.

Environmental factors

The Ministry of the Environment strives hard to maintain various other environmental factors and air quality. In the Oman urban areas, pollution from e-waste and transportation is the major problem. This directly puts an impact on the e-commerce business operated by Omantel. Thus, the ministry of environment of Oman implements a new legal policy to minimize the environmental issues. Irregular management of environment affects the recovery and recycling of products and services of Omantel.

Legal factors

The e-commerce legal factors put a direct impact on the business operations of Omantel because Oman has little information about drafting e-commerce legislation such as tax and intellectual property rights. Oman does not possess any regulations that support the privacy, validation of internet services, consumer rights and identification of digital signatures (Collier, 2017). However, this puts a direct impact on the laws of business regulation and employment enrichment in Omantel. Therefore, the company must focus upon laws on business regulation, employment enrichment as well as employee working hours.

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Opportunities and Threats

Opportunities

Threats

 

  • Government support
  • Information and Communication technology offerings
  • Partnerships with promising technology areas
  • Acquisitions
  • Support from internal development (Storey et al., 2016)
  • New markets, technology, and services
  • International expansion
  • Great financial performance
  • Planned investment all over telecom sector
  • Leading telecommunication company in Oman
  • Investment in new fiber optics
  • Increased interest rates
  • Liberalized domestic market
  • Reduced costs of oil
  • Low labor costs
  • Regulatory Pressures
  • Economic instability
  • Intense competition
  • Government policies
  • Mature markets
  • Alternative products
  • Minimal growth of subscriber
  • Limited market in Oman (Chang et al., 2016)
  • Cutting-edge technology and fast service

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Action plan for overcoming threats

In order to overcome the threats, Omantel needs to implement an action plan are as follows:

Reducing interest rates

The company must ensure quick repayment of the actual amount. The lower principal amount will lead to a lower interest rate to be repaid.

Increasing costs of oil

The reduced costs of oil put an impact on the earnings of Omantel, as a result, the company must improve energy efficiency and become cost-effective. Maximized energy efficiency proves to be beneficial for the telecom sector. Thus, Omantel must implement the system of cost-effective modular compressor that will help in increasing the earnings of the company (Lema et al., 2017). In other words, efficiency could be achieved by utilizing standardized and modular compressor systems.

Economic development

In order to gain economic stability, Omantel must maintain strong and positive relations with stakeholders and consumers that provide economic sustainability. It must understand the fundamental needs of the market and its consumers and work hard to provide innovative solutions.

Understanding government policies

While operating its business operations in Oman, it becomes significant for the company to understand different government policies (Wollschlaeger, Sauter and Jasperneite, 2017). Based on the government policies it company is highly required to comply with the rules and regulations of the government policies.

The innovation of new products

To overcome the threat of alternative products produced by competitors it is important for Omantel to understand the needs of the consumers and create the best alternatives for them. The company must meet the satisfaction level of the market and its customers (Vrontis et al., 2017). In order to do this Omantel must make strategies to create innovative and creative products that will fulfill the needs of the customers.

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Conclusion

The paper helped in demonstrating the external factors that put an impact on Omantel which is the telecommunication industry in Oman. It has been observed that the external factors indirectly or directly affect the revenues of the company. Due to this external factors the income rate of the company is negatively affected. Hence, the company needs to implement various efficient strategies to overcome the challenges that arises from such external factors. Moreover, it can be seen that the company also experiences opportunities and threats based on external factors. The opportunities helps the company to expand their business in Oman with strong support from the Omani government. It is significant for Omantel to implement an efficient and effective action plan that will help in overcoming from the threats such as, increased interest rate, intense competition, low labor costs and many more. Based on the action plan it has been observed that the company must reduce their interest rate, focus upon the increasing costs of oil as well as enhance economic development. The company must also understand government policies and innovate new products or services. As a result, the paper presented an action plan that will help deal with the threats effectively.

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