Microeconomics Digi Weblog

Introduction

Background of company

     Digi, used to be known as Mutiara Swisscom Bhd., is a telecommunications company founded in 1995. Digi is owned 49% majority, by Telenor ASA of Norway. Digi has achieved many things over the years and one of it is being the first telco company in Malaysia to introduce and run a fully digital cellular network. Not only that, Digi is also first to offer GPRS (2.5G) and later onwards in 2004, EDGE (2.75G). Also, Digi was the first to offer customers the power to pick their own cellphone numbers when buying a sim-card rather than the older times where people were given a fix mobile number that was pre-assign when customers had purchased a sim. It’s competitors are mainly Celcom and Maxis.

  The reason why for choosing Digi is that, it is a very interesting company that sets prices at a very low point and it is a leading telecommunication. They actually manage to set lower prices but at the same time satisfy their workers and investors. They also have won so many awards such as, in 2007; the company has won two merit award for best innovation and best overall winner in Corporate Social Responsibilities categories. Not only that, Digi has been rewarded by Wall Street Journal Asia as Malaysia’s most admired company for innovation for three years straight. Our group member also admired to Digi Company, so we chose to understand more about Digi services. Other than that, Digi is ranked third in the top 10 companies of Malaysia by the Asia’s 200 most admired company. It is truly a success for a company to achieve so much.

Market Competition

There are four types of market competition which is perfect competition where , monopoly, oligopoly and monopolistic. Digi is an oligopoly as there is only a few competitors such as Celcom, Maxis, Tune talk and U Mobile.

Digi is a strong competitor as they actually have one of the cheapest prices among the competitors and therefore one of the leading telecommunication companies in Malaysia making super profit. But super profit requires an extremely high capital, therefore Digi actually uses a lot of capital for their network cable, base station and especially advertising in order to create awareness of their offers. Also these kinds of business have quite a high barrier and therefore it is harder for people to start up these kinds of business. Other than that, Digi is a cartel company as they compromise to set up the price, being price maker in the business industry. Furthermore, oligopoly is usually homogenous but differentiated. This means that the services provided by these companies are usually the same like going online and paying their bills or providing a hotline but then again, they are different in terms of the style they serve people or their speed and efficiency in their service. Digi is elastic in a way that, if their prices increases, people would not want to continue with Digi and move to another company.

Objective

This survey of the main role is to find out the elasticity of demand for Digi as well as the factors of why the consumer chooses to consume Digi.

Issues

The issues of this research is to identify the demand factors of Digi products and to figure out what is elastic in the company. Also, this research is to figure out what could possibly happen if the price of substitute decreases. How sensitive are customers towards the price point? Would their customers spend more money if their income increases?

Limitation in conducting survey

This survey is only conducted done by the Taylor’s student. So far, our research is only based on 10 people therefore the data that is used may not be accurate. Also, the people that has been interviewed are only students so the facts are not based on the majority users of Digi. Sometimes, users may be bias towards one company or may not answer the survey given in an honest fashion and therefore the results may not be accurate and the research may be turning from factual to fictional.

Methodology

    Decisions were made between doing a web blog on either Microeconomics or Macroeconomics and Microeconomics was chosen. The company chosen to do research on, is Digi , basically because of its popularity among people residing in Malaysia and it being widely used by majority. The questionnaire was designed on the website which is especially for surveys called , ‘Survey Monkey’ .  The survey was distributed to the correspondents through the internet. The objective of this web blog   is to know the demand factor(s) of Digi. The factors which were included in the survey are price , income level , age, consumers’ expectations of services offered  in future and loyalty to the company. This method is very reliable to achieve the objective as ‘Survey Monkey’ produces a well-organized layout with results shown in graph/chart, which is helpful in understanding the demand factor of Digi very well.

Finding Analysis

Bar chart 1.1 : Why do you choose Digi?

            Based on bar chart 1.1, the four factors that affect the demand of Digi user are price, coverage, services and offers. From our survey, the main concern of respondents in using digi is the price. Therefore, this shows that price is the main determinant that attracts customers to purchase digi service. The price is important to customers is because there are so many competitors. Competitors could give a reasonable price, coverage, services and offers as well. That is why the customers are very concern about the price that is given by Digi. The lower the price, the higher the quantity demanded. The percentage that affects the demand of buyers is 50%, the largest portion compared to other factors, price.

In addition, the coverage and services are the least percentage compared to all of the factors, which is only consists of 10%. The quantity demand will increase when digi improve the coverage and the customer services because people will tend to use more services such as text messages, calls, data plans and more.
However, the offers only contain 30% of all the other factors of demand. It shows that the promotion that is given by Digi will also influences the demand of the customers whereas some of the customers will purchase the services based on the offers.

Bar chart 1.2 : Would you use more services provided by Digi if your income had increased? Why?

 The reason that respondent who choose “YES” is :
- As my income increase and I can spend more time chatting with friends
- to have a better data plan
- because it’s cheap
- because they provide the best services among the others
- upgrade data
The reason that respondent who choose “NO” is :
- because I don’t like the services
- prefer other telecommunication company

Based on the graph 1.2, when the respondents’ income increases, many of them will purchase more Digi services because now the price of the Digi products only occupy a small percentage on their income spent. This clearly shows that the price elasticity of demand on Digi service are very high. Customers with high income will tend to have an inelastic demand. On the other hand, the income is very elastic towards the demand. As shown in the chart 1, there are 60% of respondents which are a large percentage will buy more services when the income increases while there are only 40% of the respondents who will refuse to use Digi services.
Besides, when the income level of respondents increases, directly, the demand on Digi services will increases as they can afford more.

Bar chart 1.3 : If the services provided by Digi increased in price, will you continue to using it? Why?

The reason that respondent who choose “YES” is :

- because it’s good service

- because it is cheap

- many friends using same service with me

The reason that respondent who choose “NO” is :

- because I would change to substitute services.

- because I enjoy using low rates

- it’s not worth it to pay the services

- because too expensive

-will have to decide on another lower price service offered

Based on bar chart 1.3, there are 80% of the respondents that refuse to use the services provided by Digi when the price that Digi offered increases. This shows that the elasticity of demand on Digi’s services are very elastic because most of the customers are very concern about the price. The consumers are very sensitive to the price changes. The higher the price, the lower the quantity demanded from digi customer. When the services and coverage are not that efficient even when the price increase, people will reject even more on Digi services.

Bar chart 1.4 : If there is another telecommunication company offers services at a much lower price, will this change your choice to use Digi? Why?

The reason that respondent who choose “YES” is :

-  depend on their plan offered

- because is cheaper and can save money than digi

- because it is cheap

The reason that respondent who choose “NO” is :

- because I’m a loyal user

          Based on bar chart 1.4, there are 70% of the respondents will change their choice to use digi if there’s another telecommunication company that offers services at a much lower price. This shows that the elasticity of demand on Digi are very high. When the other company gives promotion, there will be a big percentage of customers who will change their choice to use digi. The lower the price in another company offers, the more the quantity demanded. Besides, it also depends on customers’ decision as to whether they want to stay loyal to Digi or not , as now it is possible to switch to other telecommunication company and keep the same phone number at the same time.

Conclusion

In conclusion, there are 10 respondents in this survey form. The survey is conducted in Taylor’s University Lakeside. In this survey, the highest demand is the price whereas the lowest demand is the coverage and services. The higher the price, the lower the quantity demanded. The consumers attracts more on the price compared to the others factors. Coverage and services has the lowest demand because the consumer is not satisfied with these services as their competitors provide a better coverage and services. The elasticity of demand on Digi are very high. Customer will tend to purchase more in Digi when the income increases. However, the availability of substitute are the more substitutes the services is, the more elastic the demand. As shown in the bar chart, the consumers are very sensitive to the price changes.

      However, this survey only consists of 10 respondents. For our future study, survey form can extend more questions and more respondents to understand the customer’s satisfaction and also their demand on Digi.
There are few ways of suggestion, one of them is to improve on their coverage and services because many customers complain about their services. Customers will tend to refuse to use Digi even though the price is very low. Other than that, from this survey will tend to improve and promote more promotion and offers of Digi to the customers to attract them and increase customer’s purchasing power on Digi.

In addition, in this blog, the majority readers are the students. This finding will benefits students on the demand and supply and also firms to identify the factor of demand on telecommunication.

References

Tan, J. (1995) DiGi Background. [online] Available at:http://www.scribd.com/doc/58786058/DiGi-Background  [Accessed: 6 May 2013].

tungwc (1964) DiGi Strategic Management. [online] Available at :http://www.scribd.com/doc/40379775/DiGi-Strategic-Management[Accessed: 6 May 2013].

Scribd.com (1995) digi edit 2. [online] Available at:http://www.scribd.com/doc/76564720/digi-edit-2  [Accessed: 6 May 2013].

McConnell, C. and Brue, S., et al. (2012) Economics. 19th ed. United States of America: McGraw-Hill Irwin