INTEROFFICE MEMORANDUM TO:
FROM:
SUBJECT:
DATE:
CC: [RECIPIENT NAME]
[YOUR NAME]
TELSTRA MAJOR NEW INFRASTRUCTURE INVESTMENT
ALL MANAGERS AND EMPLOYEES Over the past few years, Telstra has experienced challenges to its
customer satisfaction due to increasing cases of network outages that the
company has suffered as cited in the article by The Economist titled Telstra
announces major new infrastructure investment published on 11th August, 2016.
The article highlights the issues faced by the company in relation to the provision
of uninterrupted internet network to its consumers. This memorandum covers
challenges faced by the organization, purpose of the investment project, how the
new investment will transform customers experience and satisfaction level in
providing competitive services. In addition, the memorandum will explore the
significance of the project in driving firm’s competitiveness and quality of services
intended will retain or increase its customer base.
Telstra announced its new plan that intends to improve its infrastructural
investment to improve the quality of services provided and customer experience in the market. The intended plan will involve A$3bn investment that is in addition
to the A$250m worth of investment that the company has rolled out to reduce the
instances of network outages. With increasing population and demand the
company is serving, there is a need for additional improvement in its network
performance in the market. The company reported a net profit after tax
amounting toA$5.8bn, which represented a 36.6% increase in year on year
financial performance reported at the end of the 2015-2016 financial year. The
new plan aims at expanding its network coverage to lower instances of a network
outage that affects business as experienced in the region where the company
reported seven different internet outages.
Financial Review (2014) cites that Australia is demanding higher internet
speed to support its ever growing demand for the internet. With Telstra being
among the firms in Australia with reputable internet service brands, increasing its
investment will offer competitive services that may help in developing its
competitiveness. However, high internet charges for its consumers is emerging
as another challenging factor that could influence its competitiveness. The
company new investment aims at creating a differentiation strategic move where
it offers more reliable and faster internet services to its consumers better than its
main competitors in the market. Qiang (2017), a senior economist at the World
Bank claims that new information and communication technology advancement
with the development of the high-speed internet has changed how business and
firms are doing their activities that transform services delivery. For instance,
Qiang (2017) cites that a 10% increase in internet speed would result in
economic growth by 1.3%. This demonstrates the potential that increasing the
internet speed by Telstra would not only increase the number of subscribers but
would also increase the profitability of the firms.
Previous studies have reported on the significance of fixed assets tend to
have a positive impact on a firm’s profitability. For instance, Eriotis et al. (2000) 2 conducted a study investigating the link between debt to equity ratio and the
profitability of the firm taking into account level of the organization’s investment
and market power extent. After considering the impact that fixed assets had on
profitability and performance, fixed assets normally increase firm’s capability that
influence efficiency and economies of scale, which do not only affect the
customer satisfaction and competitiveness but also reduce the overall expenses
which may create economies of scale to lower the cost of products or services. In
this case, Telstra plans to address two main challenges it is experiencing
comprising of internet outrage and high charges to consumers. Creating efficient
and high-quality services will address the issue concerning the quality of internet
provided as well as lower the price of internet services that will boost its
competitiveness. By increasing investment in terms of fixed assets, which acts as
a strategic variable that influences its competitiveness and profitability.
Peterson (2002) in his book titled Accounting for Fixed Assets claims that
equipment requires effective managerial control due to the profitability and other
usefulness that they accompany in an organization. In this case, Telstra plan will
create more value to quality and competitiveness of its internet services, which is
a factor of production for many small, medium and large-scale corporations in
Australia. Therefore, the commitment that the management and board of
directors of Telstra are aimed at improving the quality of services, but also the
price of internet services for consumers aimed at increasing demand (Thatcher &
Oliver, 2015). As Belete (2013) claims, investing into fixed assets is critical to its
survival and its dependent on the nature of the business. Belete (2013) took a
different dimension by examining fixed asset turnover ratio by evaluating asset
over time and comparing it to the ratio of the competitors. This facilitates
assessing how effective the asset is being used in the company. Using the
consideration, the firm is able to determine the productivity of the fixed assets in
the generation of sales. The higher the number of the turned over, the more
effective the outcome. 3 Ganiyu and Abiodun (2012) also studied the significance of assets and
liabilities management on the firm’s productivity where they established that
increasing investments for the purposeful of promoting consistency, reliability,
effectiveness and efficiency helps in raising the performance and productivity. In
our current case, Telstra management intends to build competitiveness by
increasing efficiency and reliability of its internet services for the consumers. This
is a measure that supports its commitment to offer competitive services in the
market that will not only improve demand for its services but will also increase its
productivity and overall profitability. This is an intervention that will increase
performance. As Qiang (2017) states, the commitment of a firm to increase its
effectiveness in driving competitive advantage facilitates in driving productivity of
its assets raising the firm’s profitability in the market. Therefore, the profitability of
internet service provider would be enhanced by consideration of its assets and
translating them to contributors of the income of the internet service provider
(Bodie, 2013).
In conclusion, a number of factors can be identified in this memorandum.
First, the organization is facing high competition due to the unreliability of its
consumers. Secondly, the company is receiving an increasing number complaint
due to poor services from its consumers. Thirdly, the firm is being questioned of
its high cost of services. Basing on these challenges, the solution relies on the
improvement in quality and efficiency that will increase profitability, economies of
scale and reliability of the service that will attract huge customer base in need of
its services. Telstra brand will improve the performance of local firms such as
National Australia Bank, Melbourne's public transport system and various
Australian hospitals that will improve its performance in the market as well as the
reliability test, which is essential in promoting high competitiveness that
translates into increased demand and profitability. The decision by highlighted
byTelstra's chief operating officer, Kate McKenzie will increase data loads for the
operator’s network, which is the root cause of most of its challenges. 4 REFERENCES:
Belete, T., 2013. Asset liability management and commercial banks profitability in
Ethiopia. Research Journal of Finance and Accounting, 4(10), p. http://www.iiste.org/Journals/index.php/RJFA/article/view/7152.
Bodie, Z., 2013. Investments. 2 ed. New York, NY: McGraw-Hill.
Financial Review, 2014. Australians demand faster internet speeds: ABS.
[Online]
Available at:

http://www.afr.com/business/telecommunications/australians- demand-faster-internet-speedsabs-20141007-11bkrz
[Accessed 9 May 2017].
Ganiyu, Y. O. & Abiodun, B. Y., 2012. The impact of corporate governance on
capital structure decision of Nigerian firms. Research Journal in Organizational
Psychology & Educational Studies, 1(2), pp. 121-128.
Peterson, R. H., 2002. Accounting for Fixed Assets. 2 ed. New York, NY: John
Wiley & Sons, Inc..
Qiang, C. Z.-W., 2017. Information Development.
Available at: Communications Technology for [Online]
http://live.worldbank.org/information-communications-technology- development
[Accessed 9 May 2017].
Thatcher, M. E. & Oliver, J. R., 2015. The Impact of Technology Investments on a
Firm’s Production Efficiency, Product Quality, and Productivity. Journal of
Management Information Systems, 18(2), pp. 17-45. 5 6

 

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