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FOUNDATION OF MANAGEMENT ASSIGNMENT
A Strategic Review
Case: Lannet Communications, Greek Telecommunications Company
Name: Yannis Ghikas Student I.D. No: 2079778 (IACY)
Date: 11/03/2005
Word Count: 4.713
1. INTRODUCTION 3
THE CASE 3
2. VMOST ANALYSIS/STAKEHOLDERS 4
2.1 VMOST ANALYSIS 4
2.2 STAKEHOLDERS ANALYSIS 4
3. EXTERNAL ANALYSIS 5
3.1 PEST ANALYSIS 6
3.2 LIFE CYCLE ANALYSIS 7
3.3 THE MAJOR COMPETITORS 8
3.4 PORTERS 5 FORCES MODEL 9
4. INTERNAL ANALYSIS 11
4.1 VALUE CHAIN 11
4.2 MC KINSEY 7S MODEL 15
4.3 FINANCIAL PERFORMANCE 16
4.4 DISTINCTIVE CAPABILITIES, UNIQUE ASSETS AND RESOURCES 17
5. SWOT ANALYSIS AND CONCLUSIONS 17
5.1 SWOT ANALYSIS DISCUSSION 17
5.2 CONCLUSIONS 20
6. OPTIONS AND RECOMMENDATIONS 20
7. REFERENCES/BIBLIOGRAPHY 22
8. APPENDICES 24
APPENDIX 1: VMOST 24
APPENDIX 2: STAKEHOLDERS ANALYSIS 25
APPENDIX 3: PEST ANALYSIS 28
1. INTRODUCTION
This assignment attempts to examine the competitive standing of Lannet Communications,
a Greek telecommunications services provider. In doing so we are going to examine the
external and internal environment of the organization, by using business models that will
help us conduct a SWOT analysis and evaluate Lannet VMOST in order to reach some
conclusions concerning the organization strategic position. A brief description of the
company is given below.
THE CASE
Lannet Communications, who was established in 1999, is a subsidiary of the KLONATEX
business group and a member of the Athens Stock exchange in the telecommunications
sector. The deregulation of the Telecommunications market in Greece which was initiated
on January 2001, has given the option to both residential and corporate customers to
choose between Telecom Operators. Lannet Communications was the first Greek company
that materialized its interconnection with the public National Telecom Carrier (OTE) in
November 2001 and ever since is aiming at capturing leading market share in pre-selected
segments which are large corporations, small-medium enterprises, international carriers
and residential customers by offering optimal cost and high efficiency.
After the finalization of the merge with Lantec s.a. in December 2003 Lannet service
portfolio includes mainstream fixed and leased line telephony, internet services, bandwidth
trading, data communication and virtual private networks deployment. At the end of the
first semester of 2003, Lannet share in the fixed telephony market, including public
National Telecom Carrier (OTE), modulated to 4,5% (Lannet Communications Annual
Report, 2003) giving Lannet the leading position among the rest of the privately-owned
telecom companies. At the end of 2004, the number of Lannet clients surpassed 161.785,
16.701 of which were corporate clients while the market share modulated to 4, 76% giving
thus Lannet the second position among the competition, despite OTE (Lannet
Communications Annual Report, 2004).
2. VMOST ANALYSIS/STAKEHOLDERS
2.1 VMOST ANALYSIS
In our attempt to get a better understanding of Lannet ideology, what is trying to achieve
and through which strategy, we first looked into the organization VMOST. A detailed
analysis of our findings is placed in the Appendices but as an overall conclusion we could
assume that Lannet VMOST presents certain drawbacks. The vision and mission although
they seem appropriate and realistic, are not communicated properly within the organization
whereas objectives are not specific and measurable and tactics do not help in the
implementation of the strategy which though seems relevant for the company.
2.2 STAKEHOLDERS ANALYSIS
As we can see from the detailed stakeholder analysis in Appendix 2, there is a linkage
between Lannet vision, as presented in the VMOST and most of the key stakeholders
expectations and therefore we can assume that the organization is moving towards
satisfying them. On the other hand, the founder expectations are not aligned with the
organization vision and mission while conversely the rest of the top management team is
focused on these statements. This contradictory confuses the management team and
probably explains what we underlined in our VMOST analysis concerning lack of
monitoring and co-ordinating in day-to-day tactics, non specific and measurable objectives
and lack of vision and mission awareness to the employees, which as a result do not fully
meet their expectations. Finally, it is quite essential that customers expectations are met,
but we should pay attention to the fact that according to Lannet strategy shareholders
might need to be patient enough in order to see the return of their investment.
Following in our analysis, we are going to take a look in the external environment of
Lannet Communications.
3. EXTERNAL ANALYSIS
In this part we aim to give a thorough view of Lannet external environment in order to
understand the particularities and variables of the Greek telecommunications market. In
this attempt we have conducted a PEST analysis that helped us get a clear view on the
different aspects of the Greek market, a life cycle analysis and a competitors and five
forces analysis so as to examine the different factors that affect the Greek
telecommunication market.
3.1 PEST ANALYSIS
From the detailed PEST analysis in Appendix 3 the key issues are identified as following.
Lannet greatest threat comes mainly from the fully privatization of the National
Telecommunication Company (OTE) which will make it more flexible and thus more
competitive. It is of no doubt that OTE has all the necessary infrastructure and knowledge
in order to provide high quality services and develop or absorb new technologies.
Furthermore, OTE has the highest awareness among the consumers who might be willing
to pay a higher price if they knew that after sales support would be appropriate. Another
factor that could be seen as possible threat for Lannet is the integration of new
technologies that will give the opportunity to combine internet services with fixed
telephony. Lannet has not yet found a way to combine these two services while
competitors have already applied such solutions which seem to be rather popular
especially among young people.
On the other hand European Union regulations, which are not yet fully implemented in the
Greek telecommunications market, set a rather promising framework for Lannet since
OTE and mobile telephony companies will be forced to reduce the costs they charge to
fixed telephony providers. This will give Lannet the opportunity to increase its profit
margins. National Telecommunications and Posts Commission (EETT) is responsible for
the implementation of these regulations. Furthermore, the current social and economic
trend encourages the development of companies that offer telecommunication services in
lower prices and consumers have started familiarizing with the idea of not using OTE as
their provider. Finally, the new government has announced measures that will lead to tax
and interest rates decreases for companies.
The interconnection among different drivers in each factor leads to the conclusion that
Lannet can and probably should take advantage of the EU regulation and the expected
stimuli from the government considering investment opportunities in order to develop its
own network and make profitable use of new technologies in the fixed telephony. In
addition trends towards income distribution, increased level of education and
familiarization of young people towards new technologies and social trends concerning
communication among people, set a rather promising environment for Lannet. On the
contrary, the development of internet applications and services might leave Lannet behind
compared to competition.
3.2 LIFE CYCLE ANALYSIS
Taking into consideration the different stages of the life cycle analysis (Johnson & Scholes
2001), we would conclude that Greek telecommunication market is in the maturity stage.
As described in our stakeholders and PEST analysis, customers are well informed about
fixed telephony services whereas competitors have started a price war in their attempt to
maintain their market share or gain market share in expense of competition. On top to that,
3 telecommunication companies have already close down as a result of a first shake-out
that took place in the market. What is now expected is that this price competition will lead
some competitors to the exit and probably the whole market to a declining stage.
Lannet main threat at this stage is that its profit margins are declining as a result of the
price competition .In contrast, the expected shake-out of some competitors and the EU
regulations that will eventually take effect as we described in our PEST analysis, will
probably create opportunities for Lannet to increase its market share and profit margins.
3.3 THE MAJOR COMPETITORS
Lannet greatest threat comes from OTE, Forhtnet and Tellas. All these competitors have
already created a strong brand name and have acquired a remarkable market share. OTE
has been a monopoly for more than 50 years and still has the support of the state and the
greatest awareness among the providers while also offering reliable services. Forthnet has
build its reputation based on internet services and has the ability to offer qualitive
telephony services combined with a wide range of internet applications. One of its main
advantages is the awareness gained through these years. Tellas, has a substantial amount of
cash available as a result of its cooperation with the National Electricity Company which
has given the opportunity to invest in marketing and create a strong brand name, become
the most well known alternative provider and being considered as the only direct
competitor of OTE. Tellas has paid great attention to its sales channels, focusing mainly on
residential customers by offering a wide range of services in the best quality.
None of the other competitors represent a significant threat, though their growth
strategies ,which are mainly based on a low-prices policy, could become a threat as we saw
on the life cycle analysis. Lannet has the chance to compete each one of its main
