Northwestel Inc.: Performance Review and Strategic Analysis

Topics: Management, Performance, Strategic Analysis Words: 1552 Pages: 6

Performance Analysis

SWOT Analysis

Strengths

The only company in the northwest territories.
First company in the northern region.
Positive reputation.
Strong domestic marketing.
Can fix costs in the market.

Weaknesses

Poor management.
Less focus on customer satisfaction.
Unorganized.
Harsh weather conditions.
Remote areas (Hard to reach most areas).

Opportunities

Very big market to expand in.
Huge customer base.
No competition.
Implement new technology (customer has not many options to choose from)

Threats

CRTC passing a bill (Allowing more companies in North West Territories)
Customer not satisfied ( would want to leave if another company to choose)
High maintenance costs ( Geographic location)
Aging infrastructure.
Lacking new technology.

PEST for Northwestel Inc.

Political

NorthWestel Inc. performance will be affected by CRTC’s decision of allowing other companies on North West Territories.

Economical

With CRTC’s decision of allowing other companies will start the competition and the funding NORTWESTEL used to get from CRTC (Government) will also go to other companies now and competition means bad market and economic conditions.

Social

Current performance of NORTHWESTEL is not socially acceptable as they don’t care about customers and charging high rates for their services which will affect them in a not so good way.

Technology

NORTHWESTEL is currently not advanced in technology. They will need to spend money on innovative technology.

Performance Summary

Northwestel Inc. performance is very good in the last few years. It is making good profit margins but due to less focus on customer satisfaction and innovative technology, they will soon be losing buyers. With the CRTC announcement of allowing other companies in North West territories, the competition will start and buyers will have more service providers to choose from which will affect Northwestel Inc.’s profit margins. Due to poor management, they are losing customer’s interest in the company.

Northwestel Inc. focus from now should be on innovative technology. Also, due to the aging infrastructure, they need to focus more and more on bringing new technology and replacing the old infrastructure. Northwestel Inc. has a lot of potentials to grow in the Northern Areas if they make customers happy and spend money on innovative technologies. When new companies start establishing in North Western Territories, they will face more challenges as of now because now they are a monopoly. Before they face competition, this is the time to focus on the market, new technology and value the customers.

	Past Year	Current Year	Next Expected	Next Year Actual
Revenues	138.6 M	138.9 M	140.0 M	139.1 M
Variable Costs¹	102.4 M	102.3 M	102.1 M	102.2 M
Fixed Costs²	0	0	0	0
Net Operating Revenue	36.1 M	36.6 M	37.9 M	36.9 M

Solution Analysis

Northwestel has long since had a monopoly over telecommunications services in Northern Canada. However, beginning on May 1^st, 2012, the CRTC (Canadian Radio-television and Telecommunications Commission) has ordered that other companies be allowed to enter the territories to offer phone services.

With competitors already entering the market, it is important to evaluate the company’s strategy to help ensure Northwestel’s growth and success. The following is an external and internal analysis of Northwestel Inc.

Options Based on External Analysis

Northern Canada has a unique telecommunications service area in that it covers one-third of Canada’s landmass, but only 1/300^th of Canada’s population. The CRTC recognizes this area as being a high-cost serving area. Most of these places have extremely low population density along with a severe weather climate. This drives the cost of maintenance to these sites.

Companies such as Iristel have already announced that they will be extending their services into the Yukon, Northwest Territories, as well as Nunavut. They claim that they will “put an end to Northwestel’s long-standing monopoly”. With the emergence of new competition, Northwestel will need to reinforce its core competencies to ensure its success in this rapidly evolving market.

Northwestel will continue to focus on bringing new and innovative technologies to Northern Canada as well as providing outstanding customer service. Together, these priorities will help safeguard the company’s future and keep Northwestel as Northern Canada’s largest Telecomm provider.

Porters 5 Forces

Rivalry – Medium – Companies such as Iristel and Ice Wireless have started their aggressive expansion of telecommunications service across the North. Iristel’s president, Samer Bishay, says “Northwestel’s monopoly is officially at an end.”
Buyer Power – Medium – Buyers will now have options when choosing which service provider they want. However, the number of providers is still small.
Supplier Power – Low – Materials needed to enter the market are not rare. Supplier power will below.
Potential Entrants – Low – Businesses do not need a large financial backing to enter this market because they can start small, only servicing a small community, and grow over time.
The threat of Substitutes – Medium – There are many different types of technology that could be used to enter this market. The telecommunications services offered by Northwestel could be replicated by a rival.

Product Consumer Matrix

	Value Focused	Mixed Interest	Business Class
Home Phone	x	xx	xxx
Cable Internet	x	xxx	xxx
DSL Internet	xx	xx	x
T.V.	xx	xxx	x
Mobile Phone	x	xx	xxx

PEST

Political CRTC regulations Provincial and Federal taxes	Economic High pay jobs Slow growth Low population density The high cost of living
Sociocultural Low population density Very cold and dark winters	Technological New emerging telecom technology High maintenance and repair costs

Options based on Internal Analysis

Spend on innovative technology.
Train staff on customer’s relations.
Spend on expanding.

Northwestel Inc. Alternatives:

Use Resources on Bringing new technology

One of the technological challenges facing Northwestel Inc. is the lack of advanced technology. In this era, organizations are automating most of their operations in order to enhance efficiency and effectiveness. Therefore, by introducing advanced technology within the operations of Northwestel Inc., the organization will achieve effectiveness and efficiency in providing the required services (Williamson et. al, 2008).

Currently, Northwestel Inc. is experiencing high maintenance and repair costs with respect to technological requirements. By incorporating advanced technology, the firm will achieve the objective of reducing the associated maintenance and repair costs.

One of the most opportunities that Northwestel Inc. may take is the new emerging telecommunication technology. Being the only company in the northwest territories, the organization is likely to derive a lot from the increased new telecommunication technology (Williamson et. al., 2008). Consumers have very little to choose from hence making it appropriate for the adoption of such technologies. Customers are dissatisfied with the services provided by the company and would leave it for another company hence the need to introduce new emerging technologies for purposes of enhancing efficiency and effectiveness.

Training Staff on Customers’ Relations

The dissatisfaction of customers is partly due to the fact that there are no adequate and effective customer services within the organization (Williamson et. al., 2008). One of the reasons explaining this scenario is due to its monopoly status. However, with the passage of the CRTC bill that allows for more companies in North West Territories. Introducing more companies within the North West territories is likely to divert the attention of customers. Currently, the customers have no choice but to continue using the services of Northwestel Inc.

Another reason that makes Northwestel Inc. engage in training the staff on customers’ relations is the fact that the firm’s current performance is not socially acceptable as they do not care about the clients. What’s more, the firm charges high rates for their services. Customers or consumers are usually the central aspects of business (Williamson et. al, 2008). Consumers are usually the driving factor behind the operations of an organization. As a result, there is a need for the firm to have good customer relations that will not only maintain the existing ones but also attract new customers.

Spending on Expansion

Growth and expansion are usually some of the objectives of business organizations. Through growth and expansion, business firms are in a position of obtaining additional operating income as well as meeting some of the business objectives such as increased shareholders’ value (Williamson et. al., 2008). What’s more, business entities need to grow and expand in order to overcome the potential of entrants, increase their supplier power and buyer power, as well as reduce the level or ability of rivalry.

In this scenario, Northwestel Inc. needs to expand in order to reduce the rivalry from companies such as Iristel and Ice Wireless. The expansion makes an organization to attain both absolute and competitive advantage over other firms. Through absolute and competitive advantage, Northwestel will be able to reduce the power of threats from other rivalries. Therefore, Northwestel Inc. should spend resources on expansion.

Another reason for expansion is to reduce and scare away the new entrants. New entrants do not enter markets where the existing players are large enough to the extent that they experience high costs and revenue. Bigger and expanding firms are able to scare away new entrants. Therefore, Northwestel Inc. should expand in order to scare away possible new entrants into the region.

In addition, the expansion is likely to make the power of buyers low. Currently, the power of buyers is medium given the possibility of some of the migrating to other organizations. Options will be based on the new entrants. In the event that Northwestel Inc. expands then there will be able to prevent their customers from migrating to other rivalries.

Reference

Williamson, D., Cooke, P., Jenkins, W., Michael, K. & Moreton. M. (2008). Strategic Management and Business Analysis. Burlington, MA: Butterworth−Heinemann.