EXTERNAL AUDITGroup 4 – MMTUI 2015

What, Why, When ?An external audit is the process of identifying and evaluating the influential forces In the business environment,to develop a list of threats and opportunities that a company should prevent or take advantage of.

An external audit provides information that could impact your strategic decisions on issues such as new product development, market entry or exit, mergers and acquisitions, and resource allocation.

Case Study

2013 2014

Source : Annual Report PT Telkom - 2014

Key External Forces

Economic

Social, cultural, demographic, and environment natural

Political, legal, and governmental

Technological

Competitive

CompetitorsSuppliers

DistributorsCreditors

CustomersEmployees

CommunitiesManagers

StockholdersLabor unionsGovernments

Trade associationsSpecial interest groups

ProductsServicesMarkets

Natural environment

AN ORGANIZATION’S OPPORTUNITIES

AND THREAT

External ???

Key External Forces

Interest rateInflation rate

Availability of creditConsumption patternUnemployment trendsStock market trendsImport/export factors

Monetary policiesFiscal policies

Tax Rates

Case example1. Indonesian economic rate is growing at 5.1%

2. Disposable income among citizens grew 5%

3. Interest rate (BI Rate) is growing at 7,75%

4. Rupiah has depreciated against dollar nearly 2,1%

Source : Annual Report PT Telkom - 2014

Economy

Number of marriagesNumber of deathNumber of birth

Childbearing ratesLifestyles

Immigration ratesTraffic congestion

Racial equalityLevel of education

Sex roles

Key External Forces

Case example1. EID Mubarak / Going back to Hometown “Pulang

Kampung”

2. Digital lifestyle

3. Indonesian population is growing 1.40%

Social, Cultural, Demographic, and Environment Natural

Source : Data Kependudukan 2014 - BPS

Key External Forces

Government regulationSpecial tariffs

Voter participationsNumber of patents

Local/nation electionsAntitrust legislationLobbying activities

Government budgetsChange in patent lawsNational relationship

Case example1. Multi Operator Radio Access Network (MORAN)

2. State / Nation Elections in 2014

3. Spectrum Re-farming

Political, Legal, and Governmental

Ref: SIARAN PERS NO.7/PIH/KOMINFO/2/2015

Key External Forces

New products

Total spending for RnD

Focus of technological – effort

Productivity –improvement through –

automation

Technological advancements can : • Create new markets• Result in a proliferation of new and improved

products• Change the relative competitive cost positions in an

industry• Render existing products and services obsolete

Case exampleLTE

Technological

Key External Forces

Characteristic of the most competitive companies :• Market share matters• Understand precisely what business you are in• Evaluation• Innovate• Acquisition• Make a difference• There is no substitute for quality

Competitive

How : Competitive Intelligence

CI is involved with developing a systematic program for capturing, analyzing, and managing external (and internal) information and

knowledge to improve the organization’s decision-making capabilities.

Focus is more on external views, but some include

internal perspectives.

CI Benefits• CI helps you:

– understand the business environment better;

– understand your industry better; – learn about your competitors’ corporate

and business strategies; – forecast opportunities and threats; – anticipate competitors’ research and

development strategies; – create a company information library; – make effective decisions; and – act rather than react.

CI Life Cycle

Making decisions to

WIN the bussiness

[Primary source] : Individual information, dataset, or document/Interviewing people or meeting individuals who has the information[Secondary source] : a newspaper article, industry report, someone quoting someone else.

Proactive and forward thinking. Using analytic tools :• SWOT• Five Porter Forces• Value Chain• Or Else

taking the collected

information and distilling it into manageable snip - Its and

executive summaries

The Porter's Five Forces Tool

BargainingPower ofSuppliers

Threat of SubstituteProducts orServices

Threat ofNew

Entrance

BargainingPower of

Buyers

Competitive Rivalry

The External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

A. Opportunities

1. Indonesian population is growing 1.40% annually on 2010-2014 0.05 2 0.1

2. Almost throughout 2014, the level of the BI Rate at the level of 7.5% 0.06 2 0.12

3. Internet user penetration in Indonesia is 34.9% in 2014 0.07 3 0.21

4. 85% of the total Internet users in Indonesia access the Internet using a mobile phone 0.10 4 0.4

5. Indonesia is the largest smartphone sales market in Southeast Asia with a market growth of 68% in 2014

0.08 3 0.24

6. Disposable income among citizens grew 5% in prior year 0.06 3 0.18

7. Telkomsel has the largest network coverage in Indonesia 0.15 4 0.6

B. Threats

7. Fluctuations in the exchange rate depreciation 0.1 4 0.4

8. Marketing campaign of competitor 0.07 3 0.21

9. Competitors have set a lower price for its products 0.12 3 0.36

10. The government has not set regulations related to OTT in Indonesia 0.06 2 0.12

11. The phenomenon of infrastructure sharing in Indonesia 0.08 3 0.24

1.00 3.18

Conclusion• The firm’s external environment is challenging and complex.

Because of the external environment’s effect on performance, the firm must develop the skills required to identify opportunities and threats existing in that environment.

• The general environment has seven segments: demographic, economic, political/legal, sociocultural, technological, global,and physical. For each segment, the firm wants to determine the strategic relevance of environmental changes and trends.

• By studying The five forces model and EFE Matriks, the firm finds a position in an industry where it can influence the forces in its favor or where it can buffer itself from the power of the forces in order to achieve strategic competitiveness and earn above-average returns.

Reference[1] Data Kependudukan, www.bps.go.id

[2] Survey APJII Tahun 2014, https://apjii.or.id/

[3] Laporan Tahunan Telkom, http://www.telkom.co.id/

[4] Produk dan Daftar Tarif Telkomsel, www.telkomsel.com

[5] Produk dan Daftar Tarif XL, www.xl.co.id

[6] Produk dan Daftar Tarif Indosat Ooredoo, https://indosatooredoo.com/

[7] Produk dan Daftar Tarif Smartfren, http://www.smartfren.com/

[8] Siaran Pers NO.7/PIH/KOMINFO/2/2015 Tentang Kebijakan Penataan

Frekuensi Radio 1800 MHz, http://

www.postel.go.id/berita-penerbitan-surat-edaran-menteri-perihal-kebijakan-penataan-pita-frekuensi-r-26-2278

[9] 3G and 4G LTE Cell Coverage Map, www.opensignal.com

Reference[10] Liebowitz, Jay. Strategic Intelligence Bussiness.[11] Murphy, Christopher. Competitive Intelligence.[12] David, Fred R. Strategic Management Concept and Cases.