Outline of Answers Question1
Overviewof Matav’s Startegy
Acquisitionof new technology (fiber optics)
Changethe telephone system
Changein the company culture
Benefitsof the changes and improvement
Advantagesin the domestic or local market
Theopportunity to innovate and improve product and services quality
Opportunityto increase customer loyalty
Opportunityto increase switching cost
Capacityto limit the growth of competitors
Justificationof overseas expansion due to:
Avoidancewith government conflict
Relativelylarge make size abroad
Smallsalary of the Hungarian people
Improvebroad band service and products
Strategicacquisition of properties such as smaller telecommunicationscompanies abroad
Avoidconflict with the Hungarian government
Answersto Case Study Questions: MATAV
1.What is Matav`s stratey? Has it been successful?
Matav’sstrategy involves improving its services to customers, particularlyin providing direct lien services by changing old cables to fiberoptics. This alone improved the speeds and quality of the telephoneservice which they provide. This was not possible without the help ofexperts, hence they have also made an initiative to change and managetheir telephone system. This was done through their. Note that at theend of the day, when there is a strong competition in the market, thecustomers will eventually the ones with the highest quality andservice. Matav understood this fact and hence upon its privatizationfrom the Hungarian government, its main task was to improve itsservices and products. They were however short of cash which theywere able to solve by strategic partnership and lending from lendingfirms. Serving the customer better necessitate that the telephonesystem be changed into something more advanced and hence theyunderstood that it is necessary that they acquire the expertise inmanaging such modern facilities incorporated into the telephonesystem. Getting into the US stocks exchange is also a good move inorder to obtain enough capital to establish the modern system and payfor expertise. Matav also understood that it needed to grow, interms, not only in the number of facilities but also in the number ofemployees. Hence one of their major steps to take was to decrease thenumber of waiting list among prospective employees – moreemployees’ means more customers served and at the higher quality ofservice, too. Next thing the Mata did involve the change in itscompany culture. Note that culture is highly important to geteverything in the company in sync. That is the rules if the companyand individual decision making can be governed in accordance tocompany goals using an appropriate company culture. In the case ofMatav, the culture became more customers oriented. In my opinion thisis really necessary as the life blood of the company is its customers– meaning without their customers the company would eventually die.Upon the Hungarian government’s decision to limit the growth of thecompany locally or domestically, Matav had a plan of going overseas,and it did this efficiently by purchasing some existingtelecommunications companies on some countries and improving them andhence increasing their market share. In my opinion going outsidetheir country or going overseas is a very ingenious strategy. In myopinion, it is not wise to force ones way against the government asthe government has every way of diminishing the power of any businessin it. Therefore, if the Hungarian government wishes to limit thepower of Matav in order to protect its country from monopoly, thenthe only reasonable move is really to find a new market and suchmarket can only exist abroad or venture into a new field of business.Nevertheless, the latter may not be as feasible. This is becauseventuring into a new market new expertise and new experience formanaging it which I think Matav is not ready because it has not yetventure into any other type of business since its creation andacquisition.
Inmy opinion the Matav strategy really worked well so far its expansionon the domestic market of Hungary and the expansion abroad areconsidered. One of the main indicators of this is it relative herevenue compared to its expenses as shown in the exhibits. What I,however, disagree upon is the move of Matav to not show the sameaggressiveness still in its domestic branches. In my opinion theincrease in the competition among telecommunication companies inHungary should not be taken as a negative thing but as an opportunityto change for the better. Such as the innovation and creation of moreadvanced product. In my opinion, Martav should, in sync with itsexpansion abroad is its more aggressive move in improving itsservices and increasing the array of its domestic products. This wayit can still keep its customers as they have stronger brand loyalty.When its customers have high degree of brand loyalty it will be veryhard for its competitors to dominate the domestic or local market.
2.Does Matav have competitive advantages in its domestic market?
Theanswer to this question is a very positive yes. The main reason isthat, despite the fact that the competition increased due to theentrance of new competitors and the government has made policieswhich prohibit Matav to further grow, the company still holds themajority or the largest portion of the Hungarian Telecommunicationsmarket. What this means is that whatever changes it does with itsproducts and services they will be readily felt or known by themajority of customers in Hungary. What is the significance of thisadvantage in size is that any innovation or creation of new productwould increase customer loyalty to the Matav Company – providedthat the innovations and new product lines meet customer needs andwants, of course. When customerloyalty is increased the switchingcost would be higher. Note that switching cost may include monetaryand emotional switching cost. This means that its competitors willhave a hard time taking its customers away. All in all I can safelyconclude that Matav have competitive advantages in its domesticmarket. Also, in my opinion it’s categorization of its servicesinto four divisions is highly favorable to innovation and ensuringhigh quality of services and products. Setting performance measuresis also indispensible for monitoring product and service qualityprovided to customers. Also its intercompany evaluation – or theevaluation of its performance to other company’s performance as itallows Matav to fully get a clear picture on its competencies andweaknesses. I think this is what makes Matav highly competitive I itsdomestic market. Moreover, as aforementioned, it already has theskills and the right telephone system to deliver its new services andproducts f ever it decides to make them unlike its competitors whowill have to set up the system first before they could do the samething.
3.Do Matav`s international expansion plans make sense?
Matav’sinternational expansion really makes sense. Because monopoly isviewed as something that is not good in the majority of countries,and Matav is actually approaching that state in the domestic market,it will not be wise to continue to increase its size within domesticboundaries because it may be n direct opposition to the Hungariangovernment’s aims and problems can begin, which is something thatis not very pleasant for the business. The only way to expand or growis to go overseas. Moreover, the salary of the people in Hungary isnot enough for them to prioritize buying computers. Note that Matavalso provides internet services which necessitate either mobiledevices such as smartphones or computers. The salary of the peopletherefore is not favorable for Matav to continue developing in thedomestic market in terms of size, because there will be limited itemsto which it can deliver its services. Hungary’s joining in theEuropean Union will definitely provide Matav a relatively largemarket to venture into hence investing abroad is highly justifiable.Its more to shift its focus to the Eastern European nations fromWestern European nations also makes sense. This is because it willface fears competitions from already established telecommunication inthe west and it is also starting there. So, in my opinion going toEastern Europe were it could be one of the first telecommunicationsservice providers there actually makes a lot of sense because thatmove would limit competition as it starts to grow. Moreover, italready have the necessary knowledge and technology to begin itsexpansion abroad as it did acquirement long time ago in Hungary.
4.If you were a member of the strategy group, what would you recommendto Andras Balogh?
Iwould definitely advice Balogh to reconsider improving and innovatingits products domestically, because this is the only way to keep itsnumber of customers from shrinking as it can no longer grow due togovernment laws. In other words, its strategy in the domestic marketis not expansion but retention of what it already has. Note that inthe case study it was mentioned that its competitors are gaining someof its customers. I would also advice Balogh that such innovationsand products improvement may focus on the broadband technology as itwas mentioned in the case study that there is prediction that thesale or the demand in broadband technology will increase due to somegovernment laws on subsidies on the purchase of broadband productsand services. Note that I would further advice Balogh, in line withinnovation and improvement of products, that the company mustmaintain the four categorizations of products and services and notmerge some of them. This strategy will allow it to really improve thequality of the existing services and products as well as to innovatenew ones. I would also encourage Balogh to really invest on itsoverseas expansion and strategic partnering and ownership of othertelecommunication businesses abroad. Also, I would advise Balogh tocontinue avoiding conflicts with the Hungarian government. Lastly, itwill be better to Balogh to avoid strong competitions againstestablished large sized telecommunications companies in WesternEurope by shifting its focus in the Eastern Europe because here itwill have a greater chance of dominating the telecommunicationsmarket due to limited competitions.
Grigoriou,K. (2005). StrategicCrossroads at Matav: Hungary’s Telecommunications Powerhouse.Strategic Management. Retrieved from:<https://create.mcgraw-hill.com/shop/#/bookshelf/main/>.