Harvard Case - Zong Pakistan: In Search of Profits in a 'Free' World (A)
"Zong Pakistan: In Search of Profits in a 'Free' World (A)" Harvard business case study is written by Muntazir Mehdi, Ehsan ul Haque. It deals with the challenges in the field of Strategy. The case study is 22 page(s) long and it was first published on : Aug 31, 2020
At Fern Fort University, we recommend Zong Pakistan adopt a multi-pronged strategy to navigate the competitive landscape and achieve profitability in the increasingly free and digital Pakistani telecommunications market. This strategy focuses on business model innovation, leveraging technology and analytics, and enhancing customer experience through strategic partnerships and digital transformation.
2. Background
Zong Pakistan, a subsidiary of China Mobile, entered the Pakistani market in 2008. Initially, it enjoyed success by offering low-cost services, attracting price-sensitive customers. However, the market has become increasingly competitive with the emergence of new players and the rise of mobile internet usage. This has led to a decline in Zong's profitability and forced them to seek new strategies for growth and sustainability.
The case study highlights the key protagonists:
- Wang Hua: CEO of Zong Pakistan, tasked with navigating the company through a challenging market.
- Zong Pakistan's Management Team: Facing pressure to deliver profits in a highly competitive environment.
- Pakistani Telecommunications Market: A dynamic and evolving landscape with increasing competition and a growing demand for data services.
3. Analysis of the Case Study
To analyze Zong's situation, we utilize a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High due to low barriers to entry in the Pakistani market, leading to intense competition.
- Bargaining Power of Buyers: High due to numerous choices and price-sensitive customers.
- Bargaining Power of Suppliers: Moderate, with a limited number of equipment and technology providers.
- Threat of Substitute Products: High due to the rise of over-the-top (OTT) services like WhatsApp and Facebook Messenger.
- Competitive Rivalry: Extremely high, with numerous players vying for market share.
b) SWOT Analysis:
Strengths:
- Strong parent company support (China Mobile).
- Extensive network coverage.
- Strong brand recognition.
- Focus on innovation and technology.
Weaknesses:
- Limited market share compared to competitors.
- Dependence on low-cost pricing strategy.
- Lack of differentiation in product offerings.
- Inefficient customer service.
Opportunities:
- Growing mobile internet penetration.
- Demand for data-centric services.
- Potential for partnerships and acquisitions.
- Development of new technologies like 5G.
Threats:
- Intense competition from established players.
- Regulatory changes and uncertainty.
- Economic instability in Pakistan.
- Potential for disruption by new technologies.
c) Value Chain Analysis:
Zong's value chain needs to be optimized to enhance efficiency and customer experience. Key areas of focus include:
- Inbound Logistics: Streamlining supply chain management for equipment and services.
- Operations: Improving network infrastructure and service quality.
- Outbound Logistics: Enhancing distribution channels and customer delivery.
- Marketing and Sales: Developing targeted marketing campaigns and improving sales processes.
- Customer Service: Providing responsive and efficient customer support.
d) Business Model Innovation:
Zong needs to move beyond its current low-cost strategy and explore new business models to create value. This could involve:
- Value Bundling: Offering packages with data, voice, and other services tailored to specific customer segments.
- Digital Services: Expanding into areas like mobile payments, e-commerce, and digital entertainment.
- Strategic Partnerships: Collaborating with other companies to offer bundled services and reach new customer segments.
e) Technology and Analytics:
Zong can leverage technology and analytics to improve operations and customer experience:
- Big Data Analytics: Analyzing customer data to understand their needs and preferences.
- Artificial Intelligence (AI): Automating customer service and improving network efficiency.
- Internet of Things (IoT): Expanding into new markets like connected devices and smart cities.
4. Recommendations
1. Business Model Innovation:
- Shift to a Value-Based Pricing Model: Offer tiered packages with varying data, voice, and other services tailored to different customer segments. This allows for higher ARPU (Average Revenue Per User) and improved profitability.
- Develop Digital Services: Expand into mobile payments, e-commerce, and digital entertainment to capture new revenue streams and enhance customer engagement.
- Strategic Partnerships: Collaborate with other companies like banks, retailers, and entertainment providers to offer bundled services and reach new customer segments. This can help Zong leverage existing customer bases and offer comprehensive solutions.
2. Technology and Analytics:
- Invest in Data Analytics: Use big data analytics to understand customer behavior, predict demand, and personalize service offerings. This can lead to improved customer satisfaction and targeted marketing campaigns.
- Implement AI-powered Solutions: Utilize AI for customer service automation, network optimization, and fraud detection. This can improve efficiency, reduce costs, and enhance customer experience.
- Embrace 5G Technology: Invest in 5G infrastructure to offer high-speed internet services and support new digital services like AR/VR and IoT. This will position Zong as a leader in the future of telecommunications.
3. Digital Transformation:
- Enhance Online Channels: Improve the user experience of Zong's online portal and mobile app, making it easier for customers to manage their accounts, access services, and receive support.
- Social Media Engagement: Actively engage with customers on social media platforms to address concerns, gather feedback, and build brand loyalty.
- Develop a Digital Marketing Strategy: Utilize targeted digital advertising, content marketing, and influencer marketing to reach new customers and promote Zong's services.
4. Customer Experience:
- Improve Customer Service: Invest in training and technology to provide responsive and efficient customer support. This includes offering multiple channels of communication and resolving customer issues promptly.
- Personalized Service: Utilize data analytics to personalize service offerings and communication with customers, creating a more tailored and engaging experience.
- Loyalty Programs: Develop loyalty programs to reward existing customers and encourage repeat business. This can help build brand loyalty and reduce customer churn.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Zong's internal and external environment, considering:
- Core Competencies: Leveraging Zong's existing strengths in technology, network infrastructure, and parent company support.
- External Customers and Internal Clients: Addressing the needs and preferences of diverse customer segments while ensuring internal stakeholders are aligned with the new strategy.
- Competitors: Differentiating Zong from its competitors by offering innovative services and a superior customer experience.
- Attractiveness: The recommendations are expected to drive increased revenue, higher ARPU, and improved profitability, ultimately leading to long-term sustainability.
6. Conclusion
Zong Pakistan faces a challenging but exciting opportunity. By embracing business model innovation, leveraging technology and analytics, and enhancing customer experience, Zong can transform itself from a low-cost provider to a leading player in the Pakistani telecommunications market. This will require a commitment to strategic planning, digital transformation, and customer-centricity.
7. Discussion
Alternatives:
- Mergers and Acquisitions: Zong could consider acquiring smaller players or merging with competitors to gain market share and economies of scale. However, this may involve significant financial investment and regulatory hurdles.
- Cost Leadership: Zong could focus on maintaining its low-cost strategy, but this would likely lead to further erosion of margins and limited growth potential.
Risks:
- Regulatory Uncertainty: Changes in government regulations could impact Zong's operations and profitability.
- Economic Instability: Economic downturns in Pakistan could lead to decreased customer spending and reduced demand for telecommunications services.
- Technological Disruption: New technologies could emerge and disrupt the market, making Zong's current investments obsolete.
Key Assumptions:
- Zong's parent company, China Mobile, will continue to provide financial and technological support.
- The Pakistani telecommunications market will continue to grow and offer opportunities for expansion.
- Zong will successfully implement its digital transformation strategy and enhance customer experience.
8. Next Steps
- Develop a Detailed Strategic Plan: Outline specific goals, timelines, and resource allocation for implementing the recommendations.
- Establish a Digital Transformation Team: Assemble a dedicated team to oversee the implementation of digital initiatives.
- Invest in Technology and Analytics: Allocate resources for acquiring and implementing new technologies and data analytics platforms.
- Enhance Customer Service: Implement training programs and invest in technology to improve customer support processes.
- Monitor Progress and Adapt: Regularly track key performance indicators and make adjustments to the strategy as needed.
By taking these steps, Zong Pakistan can position itself for success in the evolving telecommunications landscape and achieve its goal of profitability in the 'free' world.
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Case Description
Moied Javeed, Chief Commercial Officer (CCO) of China Mobile Pakistan Limited (CMPak), purveyors of the cellular brand Zong, needed to come up with his response to the launch of the free VEON App by their largest cellular competitor and leader in the voice market, Jazz. Moied felt that VEON's promise of free calls and chats over the internet would seriously dent his own brand's efforts to strengthen their leading position in Pakistan's data market. His team had come up with three retaliatory options, i.e., hard bundling Free WhatsApp with existing promotion offers, launching Zong's own free App, and launching a Free WhatsApp offer. Each option had its own costs and benefits. The decision had both tactical and strategic aspects. On the tactical front, it required handling short-term threats to Zong's positioning and profits. On the strategic front, it confronted the challenges that cellular companies face on account of digital disruption. What option could lead to a sustainable competitive positioning leading to profits in a highly fluid and uncertain digital future?
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