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Universal Journal of Management 5(6): 278-290, 2017 http://www.hrpub.org
DOI: 10.13189/ujm.2017.050603
Achieving a Sustained Competitive Advantage in the
South African Telecommunications Sector
Mfanasibili Ngwenya
Graduate School of Technology Management, Faculty of Engineering,
the Built Environment and Information Technology, University of Pretoria, South Africa
Copyright©2017 by authors, all rights reserved. Authors agree that this article remains permanently open access under the
terms of the Creative Commons Attribution License 4.0 International License
Abstract The sustainability of South African
telecommunications companies is under threat. Such threats
are as a result new regulations that allowed influx of new
entrant in the form of ISPs (Internet Service Providers) and
the emergent of over-the-top (OTT) applications in recent
years. This research seeks to understand the factors that
influence a sustained competitive advantage despite all the
challenges in the telecommunications industry in South
Africa. The research explained the relationship that exist
between service quality and sustained competitive advantage
as well as the relationship that exist between intellectual
capital and sustained competitive advantage. The study
looked at the influence from both an internal perspective and
external perspective. The internal perspective analysed the
three constructs that make up intellectual capital namely;
human capital, structural capital and relational capital. The
external perspective used the SERVQUAL model to analyse
how customers perceive services they expect to get from the
telco providers and how they perceive the services after an
encounter with the telco provider. The SERVQUAL model
looks at five constructs of service quality namely; tangibility,
reliability, responsiveness, assurance and empathy. The
results of the study show that in the telco industry, relational
capital is the most important dimension of intellectual capital
followed by human capital, with structural capital coming up
last. On the service quality variable, the research shows that
customers see assurance as the most important dimension of
service quality. With this in mind, the telco companies need
to focus on their relational capital and human capital which
includes customers and suppliers. They also need to focus on
the assurance and responsiveness part of service quality.
These variables will then influence future behaviour of
customers (external view) as well allow employees to forge
relationships that are long lasting and develop skills
continuously (internal view). These dimensions are critical
for the telco providers to achieve a sustained competitive
advantage.
Keywords Service Quality, SERVQUAL, Competitive
Advantage, Intellectual Capital, Relational Capital,
Structural Capital, Human Capital, Tangibility, Assurance,
Responsiveness, Reliability, Empathy
1. Introduction
The sustainability of most companies remains under threat
unless conscious steps are taken by management to remain
relevant. This is especially true in the telecommunications
industry where information moves at the speed of light from
one part of the world to any destination, and technological
changes happen at the blink of an eye. The over-the-top
(OTT) applications have increased tremendously in recent
years with the introduction of smart phones and tablets. An
OTT application is any application or service that provides a
product over the Internet and bypasses traditional ways.
Services that come over-the-top are most typically related to
media and communication and are more often than not lower
in cost than the traditional methods of delivery. The South
African telecommunications sector is not immune to these
challenges. Other challenges are caused by changes in
regulations, entry of new players, and more disruptive
innovations. This kind of competition comes with disruptive
innovations in a sense that such innovations threaten
traditional revenue streams of telco companies.
This research attempts to answer the effect of intellectual
capital and service quality to sustained competitive
advantage despite the challenges mentioned above. The
dimensions that make up intellectual capital are examined
and the most influential dimension is determined. On the
other hand, the five dimensions that contribute to service
quality (SQ) are discussed and the most significant
applicable in the telecommunications industry in South
Africa from a customer perspective is tested. The study
assumes that a combination of superior intellectual capital
(IC) of a company and great service should lead to
sustainable competitive advantage. However, the study also
takes cognizance that each of the constructs that contribute to
Universal Journal of Management 5(6): 278-290, 2017 279
either IC or SQ do not have the same influence from industry
to industry within the services sector. The question then arise
as to the most important constructs, be it from IC or SQ side,
in the South African telecommunication industry. This paper
seeks to explain how companies can move from “temporary
competitive advantage” to “sustained competitive advantage”
regardless of changing regulatory environments in the
telecommunications sector.
1.1. Problem Statement
While telecommunications companies had been quick to
react to previous game changing developments such as the
internet explosion and the emergence of cellular mobile
communications in the 1990s, they seem to have been caught
napping in the face of the newest challenge to their revenues
in the hands of over-the-top service providers [1]. The fact
that technological changes happen very fast in this 21st
century mean that companies are in danger of becoming
irrelevant as a result of disruptive innovation. For example
the introduction of WhatsApp in 2009 meant that the use of
traditional SMS (Short Message Service) has been declining
ever since. Recently, WhatsApp followed the likes of Skype,
Facebook and many more providers in making it possible to
make voice calls on the same application using data. This is
disruptive to the traditional voice services. The research
explores the extent at which intellectual capital and service
quality play a role in creating and sustaining a competitive
advantage despite all these disruptive innovations and
regulatory changes. Customers’ behavioural intentions as a
result to service quality are analyzed. In order to address the
research problem effectively we have to develop the
hypothesis in the next section.
1.2. Hypothesis Development
The model below assumes that intellectual capital and
service quality contributes to the sustained competitive
advantage of companies. The diagram below summaries the
different hypotheses that support the proposed model.
Which predictors are significant towards achieving
sustained competitive advantage?
Hypothesis 1 (H1): Superior Intellectual Capital in the
telecommunications company leads to sustained
competitive advantage. Sustained competitive
advantage can be achieved by developing the
company’s intellectual capital.
H1 (a) – relational capital is the most significant
contributor towards superior intellectual capital
H1 (b) – structural capital is important in the
achieving superior intellectual capital
H1 (c) – human capital is critical in achieving a
superior intellectual capital
Hypothesis 2 (H2): Differentiated Service Quality
leads to sustained competitive advantage.
H2 (a) - there is a positive correlation between
tangibility and service quality
H2 (b) - there is a positive correlation between
responsiveness and service quality.
H2 (c) - there is a positive correlation between
empathy and service quality
H2 (d) - there is a positive correlation between
assurance and service quality
H2 (e) - there is positive greater correlation
between reliability and service quality
Figure 1. Hypothesis Development – Contributing Constructs
Sustained
Competitive
Advant age
Intel lectual C apital Service Q uality
H1 H2
Huma n
Capital
Relational
Capital
Structura l
Capital
Tangibili ty Responsiveness
Reliabili ty Assurance
Empathy
H1 (a)
H1 (b)
H1 (c)
H2 (a) H2 (b)
H2 (c)
H2 (d)
H2 (e)
• Measuremen t of
Intellectual Capital of Telco
companies (l isted on JSE)
• Behavioural In tentions of
customers dri ven by
service quality of a telco
company
=
280 Achieving a Sustained Competitive Advantage in the South African Telecommunications Sector
2. Literature Review
2.1. Competitive Advantage Overview
The lifeblood of companies is in gaining a competitive
advantage in the industry in which they operate. Porter [2]
says that to have a sustainable competitive advantage a
company needs to create value for its customers, select
markets in which it can excel and presents a moving target to
its competitors through improving position in a continuous
manner. Chahal and Bakshi [3], describe competitive
advantage as an outcome which is provided by rare, valuable
and unique human resources, customer relationships and
systems which provide a company with sustainable
competitive position. On the other hand Kay [4] explained
competitive advantage as an advantage that a company has in
the market place that result in superior financial
performance.
Ma [5] refers to competitive advantage as the comparative
positional superiority in the marketplace that leads an
organization to outperform its rivals by providing such
strategies that are difficult to be copied. He further stipulated
competitive advantage as the result that is derived in the form
of valuable, rare, difficult to substitute and difficult to imitate
resources. O'Brien and Kok [6], ascertain that companies
will have to do more than just offer the services to enjoy
sustainable profits in the future. That means they need to also
focus deeply on the quality of that service, the delivery
method thereof and the future behaviour of customers.
Bontis [7] relates sustained competitive advantage with
human capital. He remarked that the more the unique
competence an individual possesses in an organization, the
more is the competitive edge of that organization because
valuable and rare employees create more value. While this
may be true, it is just one aspect of the intellectual capital.
While it is true that employees can assist a company by
adding value using their rare and unique characteristics, there
is also structural capital, and relational capital that needs to
be taken into consideration.
2.2. The Concept of Service Quality
Service quality leads to customer satisfaction which in
turn has a positive impact on customer word-of-mouth,
attitudinal loyalty, and purchase intentions [8]. Service
organisations have begun focusing on the customer
perceptions of service quality because it helps in developing
strategies that lead to customer satisfaction [9]. Various
studies that focused on a link between satisfaction and
quality argued for different views in terms of relationship.
While some scholars say that quality leads to satisfaction
[10], [11], other prior scholars argue that satisfaction leads to
quality [12]. Parasuraman, et al. [13], mention that quality
and satisfaction are determined by the same attributes. The
latter scholars see customer satisfaction as transaction
specific, meaning consumers get satisfied with a specific
aspect of service while perceived service quality is a global
judgement or attitude to a service.
Negi [11], points out that service quality is significantly
associated with and contributes to the overall satisfaction.
His view is from a mobile telco consumers point of view and
we assume that view is applicable across the telco industry.
Saravanan and Rao [9], ascertain that customer satisfaction is
based on the level of service quality delivered by the service
providers. Cicerone, et al. [14], agree and further mention
that this is determined by the consumer’s cumulative
experiences at all of the points of contact with company. As
much as there is minimal contact in cinsuming telco services,
it should be noted that the little contacts via service centres
and cellular shops can have significant impact in as far as
service quality perception is concerned and hence customer
satisfaction. Wicks and Roethlein [15], says that the link
between service quality and customer satisfaction cannot be
ignored and that the importance of customer satisfaction
when defining quality is very important.
While all these studies confirm a relationship between
service quality and customer satisfaction, Asubonteng, et al.
[16], say that there is no agreement on the exact kind of
relationship between the two constructs and points of out that
most researchers agree that service quality and customer
satisfaction have attributes that are measurable.
Lai, et al. [17] mention that a company cannot achieve
success in today’s business environment without delivering
superior service quality. If the service is superior, companies
can even charge more than their competitors. Excellent
service can be seen as profit strategy as the company can gain
new customers, keep existing customers while getting new
business from them, and charge premium prices. Saravanan
and Rao [9], found that the above factors all lead to improved
perceived service quality, customer satisfaction and loyalty
from the customer’s perspective. Most scholars agree that
service quality is a very complex topic and is define it using
five dimensions namely; reliability, responsiveness,
assurance, empathy, and tangibles [18], [13], [11].
2.3. Models to Measure Service Quality
It is very important to measure service quality because it
allows for comparisons before and after changes, identifies
quality related problems, and helps in developing clear
standards for service delivery Some of the models used to
measure service quality are discussed below:
Gronroos Model - Ghotbabadi, et al. [19], attributes the
early conceptualization of service quality to Christian
Gronroos from the early 1980s. The model defined service
quality by technical or outcome (what consumer receive) and
functional or process related (how consumer receive the
service) dimensions. Ghotbabadi, et al. [20], say that the
model is based on disconfirmation paradigm by comparing
perceived performance and expected service. More
subsequent scholars followed Grönroos [21]’s definition.
Rust and Oliver [22] defines this model by three components
Universal Journal of Management 5(6): 278-290, 2017 281
namely; service product (i.e., technical quality), service
delivery (i.e., functional quality), and service environment.
The shortfall here was that they did not really test the model.
Haywood-Farmer Service Quality Model - The
Haywood-Farmer service quality model dates back to the
late 1980s. Haywood-Farmer [23], believes that the choice of
elements from each of these three sets of service quality
factors is an important, strategic managerial decision. The
relative degrees of labour intensity, service process
customisation, and contact and interaction between the
customer and the service process, partially determine an
appropriate mix.
The more a service requires contact with customers, the
more labour intensive it becomes. In such a cases, a company
needs to pay more attention in making sure that the personnel
providing the service on behalf of the company behave
appropriately. The voice and data service from the telco
providers is a typical example of a service that is not labour
intensive.
The three service attributes identified by
Haywood-Farmer [23] can also not be directly compared
with the three service dimensions of Grönroos [21] and the
five dimensions of Parasuraman, et al. [13].
The SERVQUAL Model - The SERVQUAL instrument
is based on the gap theory [13]. The model was developed
after carrying out a study on four service settings: retail
banking, credit card services, repair and maintenance of
electrical appliances, and long-distance telephone services.
This is more of an attitude measure. What this model strives
to measure is the consumer perception of the service quality
which depends on the size of the gap between expected
service and perceived service which in turn, depends on the
gaps under the control of the service provider such as
delivery of service and marketing. This model suggests that a
consumer's perception of service quality is a function of the
difference between customer’s expectations about the
performance of a general class of service providers and the
customer’s assessment of the actual performance of a
specific service company within that class [12]. The original
SERVQUAL instrument included two 22-item sections that
intended to measure the following [13]; customer
expectations for various aspects of service quality customer
perceptions of the service they actually received from the
focal service organization.
Researchers have used the SERVQAUL instrument for a
number of years. Lai, et al. [17] confirmed that the
SERVQUAL instrument is a valid and valuable tool to
measure service quality in the service industry, including the
telecommunications sector. To measure service gaps in
organizations there has to be a continuous customer feedback
[18]. This section defines the five gaps on service quality as
articulated by Ladhari [8], Fitzsimmons, et al. [18] and
Subramaniam and Youndt [24].
The SERVPERF Model - The SERVPERF model was
developed by Cronin Jr and Taylor [12]. This model uses the
performance approach method which measures service
quality based on customer’s overall feeling towards service.
This model is good to measure service quality but does not
provide information on how customers will prefer service to
be in order for service providers to make improvements. The
SERVPERF was derived from the SERVQUAL model by
dropping the expectations and measuring service quality 40
perceptions just by evaluating the customer’s the overall
feeling towards the service. Implicitly the SERVPERF
model assesses customers experience based on the same
attributes as the SERVQUAL and conforms more closely on
the implications of satisfaction and attitude literature [12].
SERVPERF became an alternative measurement scale of
SERVQUAL. SERVPERF was constituted with a different
point of view and called perception only model.
Brady and Cronin Service Quality Model - Brady and
Cronin Jr [25], suggested a new model for measuring service
quality. They used a seven-point Likert scale to measure the
consumers’ attitudes towards the items under the dimensions.
Leisen Pollack [26], mentioned that in the SERVQUAL
measurement, service outcomes were not clearly considered,
but on the other hand Brady and Cronin’s model seems to fill
this void. Caro and Garcia [27] used this model in their
empirical research for measuring perceived service quality in
urgent transport service industry and they emphasized this
hierarchical conceptualized and multidimensional model
was a combining of Rust and Oliver [22] and Dabholkar, et al.
[28] hierarchical RSQS model. Brady and Cronin Jr [25],
saw this model as an improvement by to the SERVQUAL
model by specifying what is needed to be reliable, responsive,
empathic, assured and tangible. In addition, the model accept
multilevel service quality perceptions and multidimensional
by Dabholkar, et al. [28].
Evaluated Performance model - Teas [29], developed
the evaluated performance model (EP) in order to overcome
some of the problems associated with the gap in
conceptualization of service quality [13, 21]. This model
measures the gap between perceived performance and the
ideal amount of a feature, but not customers expectation. He
argues that an examination indicates that the P-E (perception
– expectation) framework is of questionable validity because
of conceptual and definitional problems involving the
conceptual definition of expectations, theoretical
justification of the expectations component of the P-E
framework, and measurement validity of the expectation. He
then revised expectation measures specified in the published
service quality literature to ideal amounts of the service
attributes. The idea was to solve some of the criticism of
some previous models. In telecommunications, service
quality has become increasingly important as
telecommunication companies face stiff competition driven
by new entrants and substitute services. If the existing
telecommunications company are serious about gaining or
re-gaining a competitive advantage, it is of paramount
importance that they need to improve service quality to
differentiate their services from those of their competitors.
The assessment of service quality is made during the service
282 Achieving a Sustained Competitive Advantage in the South African Telecommunications Sector
delivery process [18].
2.4. The Concept of Intellectual Capital
Sullivan [30], conceptualised intellectual capital in terms
of competencies and relationships. He described intellectual
capital as an intangible asset composite of human
competencies, knowledge, ability, skills, experience and
customer relationships that provide an organisation with
superior position in the market. Barney [31], says that
intellectual capital is one of the critical sources for an
organisation to gain competitive advantage. And according
to Edvinsson and Malone [32], intellectual capital
encompasses the applied experience, organizational
technology, customer relationships and professional skills
that provide a company with a competitive advantage in the
market. If we analyse the definition from all these scholars
we can say that they agree broadly on the definition of
intellectual capital. The common view is that of
competencies (human capital), organizational structures
(structural capital), and relationships (relational capital) all
contribute towards competitive advantage. If they all
contribute towards a company’s competitive advantage, we
need to understand the most influential of them all. We also
need to understand how they can all contribute towards
taking a company from a temporary competitive advantage
to a sustained competitive advantage. I will be approaching
intellectual capital with these definitions in mind as they
capture the essence what intellectual capital is. Out of the
three components of intellectual components we need to
understand the most influential of the three in the telco
industry. Some scholars believe that intellectual capital leads
to competitive advantage but differ on which component of
intellectual capital is more influential. These differences may
result from the field being studied at the time. Hence, the
paper intends to confirm the role of human, relational and
structural capital in predicting sustainable competitive
advantage in the telco sector in South Africa. The next
section discussed the three components of intellectual
capital.
Human Capital - The human capital component is
defined as the combined knowledge, skill, innovativeness,
and ability of the company’s individual employees to meet
the task at hand. It also includes the company’s values,
culture, and philosophy. Some researchers have argued that
human capital is embedded in employees and not in
organizations, and can be developed through training and
education [33]. Elias and Scarbrough [34] and Ulrich [35]
pointed that human capital has two determinants namely;
employees' capabilities and their commitments. However,
this research will focus on the definition that it is a
summation of employees' knowledge, skills, capabilities,
experience, attitude, wisdom, creativities, and commitments,
etc., and was embedded in employees not in organizations
[32], [36]. While I intend using the above definition of
human capital, this does not in any way answer the question
around its level of influence toward the overall intellectual
capital in telco companies. Auw [37], believes that human
capital is more significant in influencing competitive
advantage and remarked that it is the employees’ proficiency,
skills, experience and capabilities which lead to competitive
advantage in organisations. While I agree with the fact that
the telco needs very highly skilled people but are those
individuals the drivers of business and its sustainability?
While this may be the force behind the human intellect and
innovation of a telco company and a definite contributor
toward competitive advantage, it doesn’t necessarily mean it
drives the sustainability or the long term competitive
advantage of a company.
Johnson [38], also mentioned that that human capital is the
lifeblood of the concept of Intellectual Capital. His argument
is that in human capital, human ideas and innovations
emerge. His view was from technology management point of
view. Dzinkowski [39], agrees by mentioning that human
capital has a positive effect on competitive advantage. Salehi,
et al. [40], say that human capital is the most important asset
in a company and is a source of innovation and strategic
renewal. They say that it is a sum of technical expertise,
leadership ability, risk-taking, and problem solving ability.
While I agree on the importance of human capital especially
in the technology space, the question still arises if it is the
driving force for sustained competitive advantage. While
Dzinkowski [39]’s view was from management accounting
company’s point of view, this may not necessarily be true in
other service industries, including the telecommunications
industry. According to Mojtahedi and Ashrafipour [41],
some of the knowledge that exist within a company can be
unique to individuals while some can be generic. They make
mention of such attributes as innovation capacity, creativity,
knowhow and previous experience, teamwork capacity,
employee flexibility, tolerance for ambiguity, motivation,
satisfaction, learning capacity, loyalty, formal training and
education.
Structural Capital - Subramaniam and Youndt [24],
found that out of all the three components of intellectual
capital, structural capital plays significant role in gaining
competitive advantage which consequently leads to business
performance. This is in clear contrast to other scholars
including Dzinkowski [39] and Johnson [38]. It is true that
structural capital allows for the creation of wealth through
the transformation of the work of human capital. It is defined
by Al-Jaradat, et al. [42] and bin Ahmad and Mushraf [43] as
the structural ability of the firm to utilize human intellect and
innovation to create wealth. They further say that it includes
the hardware, software, databases, organizational structure,
patents, trademarks, and everything else of organizational
capability that supports those employees’ productivity. Put
differently, it is everything that gets left behind at the office
when employees go home.
Relational Capital - In the case of the telco industry I
have hypothesized that the most influential intellectual
capital is relational capital. While I hypothesized that it is the
Universal Journal of Management 5(6): 278-290, 2017 283
most influential, it is important to understand that it is not
sustainable on its own. In other words, a telco company
cannot just depend on relationships. It is a very high-tech
industry and the importance of human capital cannot be
over-emphasized. The point is that relationships should bring
the business, and the technical skills should assist in
delivering superior service and support thereof through
highly skilled individuals. These individuals will be able to
work together through proper structures and processes.
Relational capital is defined as the ability of the firm to
interact with the business community. Al-Jaradat, et al. [42],
believes that the strongest component is relational capital
and thus in direct contrast to Johnson [38], Dzinkowski [39]
and Subramaniam and Youndt [24]. Chen [44], agrees with
the idea of having relational capital as being the most
influential. These scholars ascertain that the reason for
relational capital being the most influential component is
because robust relationships with the customers can help a
company to sustain and survive in the market. They further
agree that relational capital possess high potential to create
competitive advantage by collaborating with other
organisations through knowledge sharing routines and
inter-organisational connectedness.
2.5. Models to Measure Intellectual Capital
A lot of models have been developed in trying to measure
and manage intellectual capital. Some of them are listed
below and will be further discussed below:
The Scandia Navigator - the Skandia Navigator is one of
the models that attempt to measure a company’s
performance and intangible assets value. The model derives
its names from the company Skandia where it was first
developed. It was developed by the then Chief Architect Leif
Edvinson [45]. The company initially developed its
Intellectual Capital report in 1985 inside the company. In
1994, the company’s financial report to the shareholders was
accompanied by an Intellectual Capital report [46]. This
model is said to be having a dynamic and holistic Intellectual
Capital reporting and has five areas of focus namely;
financial, customer, process, renewal and development, and
human capital. Salehi, et al. [40], says that this model
integrates the assumptions about intellectual capital that
reflects the difference between the book and market value of
a company. This tool is closely related to the balance
scorecard in the way it groups the financial and non-financial
indicators.
The Intellectual Capital Index - The Intellectual Capital
Index attempts to consolidate all the different individual
indicators into a single index, and to correlate the changes in
intellectual capital with changes in the market [40, 47].
According to these authors, second generation practices still
seek “to improve the visualization of the value creating
processes of the company so that they can be managed
comprehensively and create a bottom-line for Intellectual
Capital. This synthesis allows managers to assess the
intangible assets or intellectual capital of a company
holistically. Roos, et al. [47], says that the first generation
practices give information only on the single components of
intellectual capital. On the other hand a summary index
further provides an immediate improvement to having long
lists of individual indicators because it requires companies to
understand the priorities and relationships that exist between
their different measures.
The Balance Scorecard - This model seeks to balance the
financial perspective by considering internal business
processes and external outcomes of the business. The
balance scorecard was developed by Kaplan and Norton [48]
and they mentioned that it retains traditional financial
measures. They believed that if companies were to improve
the management of their intangible assets, they had to
integrate the measurement of intangible assets into their
management systems. The aim of the Balanced Scorecard is
to give managers a comprehensive view of the business and
allow them to focus on critical areas. The concept of the
balance scorercard is based on the assumption that the
efficient use of investment capital is no longer the key
determinant of competitive advantage, and that soft factors
such as intellectual capital and knowledge creation are
increasingly becoming more important [49].
However, some scholars have argued that financial
measures tell the story of past events [50, 51, 52]. They
further ascertain that this is only enough for the industrial age
companies for which investments in long-term capabilities
and customer relationships were not critical for success.
Therefore, it means that these financial measures are
inadequate in the information age. They further say that it is
only useful for guiding and evaluating the journey that the
information age companies must make to create future value
through investment in customers, suppliers, employees,
processes, technology, and innovation [53]. The balance
scorecard considers the customer, financial, internal business
processes and the learning and growth perspectives
combined with the company’s vision and strategy. Just like
the Skandia Navigator, the balance scorecard group the
financial and non-financial indicators. Since its inception,
the balance scorecard has become a model for many of the
reporting systems that include non-financial measures.
The Intangible Assets Monitor - The Intangible Asset
Monitor was developed by Karl Erik Sveiby as a presentation
format that displays indicators for internal management
information purposes [54]. Bukowitz, et al. [55], mention
that the Intangible Assets Monitor assumes that people are
the only true agents in business. The authors say that it is the
individuals that create structures as a form of self-expression
and these structures are regarded as part of the knowledge
base. While I’m in agreement with the authors with regard to
creating structures, it is also true that it is the individuals that
can forge lasting relationships with customers, partners
and/or suppliers. This model works best in
knowledge-intensive organisations. The telco industry strive
on information and knowledge. Such information and
284 Achieving a Sustained Competitive Advantage in the South African Telecommunications Sector
knowledge range from core technical skills to market
intelligence.
Erik Sveiby [54], further advises companies to develop
one or two indicators for each intangible asset and under
each of the measurement groups. The Intangible Assets
Monitor is a valuable contribution to the debate on
Intellectual Capital and especially emphasises the internal
perspective. This tool is should provide managers with a
meaningful way to communicate information on intangible
assets. While this is an appealing approach to measure
intellectual capital, its downside is that it is not clear as how
to integrate it into any broader performance measurement
frameworks in order to establish the link between intangible
performance drivers and performance outcomes which
become increasingly important [56].
Economic Value Added (EVA) Model - The EVA
(Economic Value Added) has its roots in corporate finance
and was developed by Stern Stewart, a New York-based
consultancy [57]. It is also known as economic profit [58].
The EVA’s main rational is to maximize shareholders’ value
and the effective use of capital. This should be reflected in all
of the decisions of all levels of company. It is is the most
recent method of organizational performance evaluation. Its
focus is on maximization of shareholder wealth. In other
words, EVA is a measure of whether the intellectual capital
of a company has been effective or not. EVA is a substitute
metric for intellectual capital and provides accurate
information about the effect of Intellectual Capital on
business performance [59].
It is a comprehensive performance measure that uses the
variables of capital budgeting, financial planning, goal
setting, performance measurement, shareholder
communication, and incentive compensation to properly
account for all ways in which corporate value can be added
or lost [60]. Bontis, et al. [60] mention that EVA has gained
widespread acceptance in the financial community and can
increase the legitimacy of a company in the eyes of financial
markets, as a valuable measure of corporate value-creation or
destruction over a given period. According to Lehn and
Makhija [61], the EVA model has attracted a lot of attention
over the years from both scholars and practitioners. They
further say that such attention comes from the idea that the
models attempt to measure the value created or destroyed by
a company by subtracting a capital employed from the after
tax profit. This is clearly a step further from traditional
accounting in measuring performance of a company.
The EVA model is not only used as performance measures
but are also recommended by some as metrics for executive
compensation plans and the development of corporate
strategies [62, 63, 64, 65].
3. Research Design and Methodology
The research objective of this study focuses on telco
companies in South Africa looking at both the internal
perspective and external perspective. In the external
perspective, questionnaires are used to assess consumers’
satisfaction with the assumption that the level of satisfaction
informs future behavioural intentions by customers and thus
leading to long term competitive advantage. Different
models of measuring service quality have been discussed and
the SERQUAL model is chosen as this model is widely used
by scholars and is said to provide data of high reliability and
validity.
In the internal perspective, the primary data is obtained
through structured interviews and is used in assessing
intellectual capital so as to understand its impact on
competitive advantage as well as to understand the level of
significance between the three constructs of intellectual
capital. The primary data input for assessment of intellectual
capital is obtained from the managers of general employees
and managers and executives from sales, customer solutions
design, product management, supply chain management
department, marketing, and human resources departments. In
addition, I seek to ensure that my cases reflects a range of
workforce skill-sets. Given my concern with management
practice, I include the main telco companies that are directly
affected by the ever changing landscape. None of the
companies have a clear system for the collection of data on
intellectual capital and thus I had to structure my questions
such that I get as much information on all spheres of
intellectual capital.
Within each company, I interviewed three or four
respondents who play a key role in the development and
implementation of their approach to intellectual capital
evaluation. The final sample in this part of the study thus
comes from 20 senior managers from the five telecoms
companies (Vodacom, MTN, Cell C, Neotel and Telkom).
Given variations in the scope of initiatives, size of
organisation and the access made available by the company,
the actual number of interviews varies from one company to
another. In each case, however, interviews lasted around
one-and-a-half hours (often longer) and were all conducted
face to face. Each company has a minimum of three
respondents. Interviews are conducted in a structured manner,
revolving around a set of core themes based on the overall
research questions.
The external point of view side of the research is
conducted using structured questionnaires that are designed
using the SERVQUAL model and this makes it objective. In
the case of internal point of view, the research is conducted
using primary data from structured interviews. The study has
a self-completion questionnaire surveys whereby
respondents were given the hard copy of the questionnaire to
answer. This happened over a period of two months. The
idea of using hard copies is to make sure that I get as much
responses as possible. Each respondent was asked to respond
within a period of two weeks and these hard copies were thus
physically collected. The respondents were randomly chosen
from a group of students to working class individuals and
that ranged from the ages of 18 years to 63 years old.
Universal Journal of Management 5(6): 278-290, 2017 285
Basically, a total of 150 questionnaires was given in hard
copy to consumers of telco services from across the five telco
companies namely; Telkom, Neotel, Vodacom, Cell C and
MTN. The data is collected using a seven-point Likert-scale,
from 1 (strongly disagree) to 7 (strongly agree). These
questions are answered using quantifiable data collected
from respondents and this enable us come out with findings
and conclusions on how customers perceive service quality
and what dimensions are more important from a customer’s
point of view. The questionnaires also include questions
regarding respondent demographics. The SERVQUAL
instrument with 22 items is used on the questionnaire. The
effective response rate was 85.3% which is determined by
calculating those who responded within the specified time,
which happened mostly happened when I followed up with
each individual.
Service Quality Variable: - to analyse the service quality
variable the SERVQUAL intrument model enables us to
obtain answers from consumers about their perceptions and
expectations. Data collected from these respondents is then
analysed using SPSS software and thereafter, we are able to
answer our research questions. This research is quantitative
in nature and the use of SPSS software help us to determine
the validity of collected data. The data collected allows us to
find the most common dimensions of service quality
applicable in the telco services sector. That is determined by
consumer expectations.
Intellectual Capital Variable:- None of the companies
have a clear system for the collection of data on intellectual
capital. Each of the elements of Intellectual Capital
constructs are rated between a Scale of 1 to 10 whereby 1
referred to the least important element and 10 referred the
most important element. The average score between all three
constructs of intellectual capital is then obtained.
4. Results (Data Gathered and Analysis)
4.1. Service Quality (External View)
The ability of service quality to be considered as a source
of competitive advantage is one of the objectives of this
study. Parasuraman, et al. [13] suggested that service quality
can be used as a source for competitive advantage. For this
purpose, behavioural intentions of the consumers of all the
companies were tested in order to be able to draw
comparative analysis of the users of different service
providers. The next section lays the foundation of the
variables used in the study of service quality.
Coding
Tab le 1. Coding Table
Tangibles TA TA1 The telco service provider has up-to-date equipment
TA2
Your main telco service provider's physical facilities are visually appealing (e.g. customer walk-in service
centres, shops, etc.)
TA3 Your telco service provider’s employees are well dressed and appear neat
TA4
The appearance of the physical facilities of your telco service provider’s is in keeping with the type of
service provided
Reliability RL RL1 When your telco service provider’s promise to do something by a certain time, it does so.
RL2 When you have problems, your telco service provider is sympathetic and reassuring.
RL3 Your telco service provider is dependable.
RL4 Your telco service provider provides its services at the time it promises to do so.
RL5 Your telco service provider keeps its records accurately.
Responsiveness RN RN1 Your telco service provider dos not tell customers exactly when services will be performed.
RN2 You do not receive prompt service from your telco service provider’s employees.
RN3 Employees of your telco service provider are not always willing to help customers.
RN4 Employees of your telco service provider are too busy to respond to customer requests promptly.
Assurance AS AS1 You can trust the employees of your telco service provider.
AS2 You feel safe in your transaction with your telco service provider’s employees.
AS3 Employees of your telco service provider are polite.
AS4 Employees get adequate support from your telco service provider to do their jobs well.
Empathy EM EM1 Your telco service provider does not give you individual attention.
EM2 Employees of your telco service provider do not give customers personal attention.
EM3 Employees of your telco service provider do not know what your needs are.
EM4 Your telco service provider doesn’t have customers’ best interests at heart.
EM5 Your telco service provider doesn’t have operating hours convenient to all its customers.
286 Achieving a Sustained Competitive Advantage in the South African Telecommunications Sector
Re-coding
TA - Average gap score for tangible items = (TA1+TA2+TA3+TA4)/4
RL - Average gap score for reliability items = (RL1+RL2+RL3+RL4+RL5)/5
RN - Average gap score for responsiveness items = (RN1+RN2+RN3+RN4)/4
AS - Average gap score for assurance items = (AS1+AS2+AS3+AS4)/4
EM - Average gap score for empathy items = (EM1+EM2+EM3+EM4+EM5)/5
OSQ - Overall service quality = (TA+RL+RN+AS+EM)/5
To check the reliability of data items of the questionnaire Cronbach’s alpha reliability test was run by using SPSS software.
Service Quality Assessment in the Telco Industry
There were 150 questionnaires that were distributed in hard copy. The responses that could be collected on time was 128
out of 150, making a response rate of 85.3%. Of the 128 responses, only 119 could be used for data analysis. The table below
is the summary of the data collected across all the telco providers:
Tab le 2. Summary of Questionnaires Distributed and Response Rate
Telco Provider
Vodacom
MTN
Cell
Neotel
Tel kom
Distributed Questionnaires to Customers n = 150 45 33 25 23 24
Percentage (%)
30%
22%
17%
15%
16%
Response Rate
41
28
19
20
20
Percentage (%)
34%
24%
16%
17%
17%
Usable Questionnaires
38
25
19
18
19
The table of results below shows data averages from the 119 usable questionnaires out of the 150 distributed
questionnaires.
The computed data from the questionnaires is shown in the table below:
Tab le 3. Service Quality Assessment - Industry
Dimension Statement Expectation Score
in Percentage (E)
Perception Score
in Percentage (P)
Gap Score in
Percentage
(P-E)
Overall
Gap
Score
Average
Gap
Mean
Mean
Tangibles (TA) Average 6.175 5.675 -2 -0.5
TA1
6.3
5.6
-0.7
TA2
6.2
5.6
-0.6
TA3
5.7
5.5
-0.2
TA4
6.5
6
-0.5
Reliability (RL)
Average
6.14
4.26
-9.4
-1.88
RL1
6
4.1
-1.9
RL2 6.2 4.5 -1.7
RL3
6.1
3.9
-2.2
RL4
6.5
4.2
-2.3
RL5
5.9
4.6
-1.3
Responsiveness (RN)
Average
6.375
4.375
-8
-2
RN1
6.1
4.4
-1.7
RN2
6.3
4.5
-1.8
RN3
6.8
4.3
-2.5
RN4 6.3 4.3 -2
Assurance (AS)
Average
6.425
4.55
-7.5
-1.875
AS1
6.4
4.2
-2.2
AS2
6.5
4.7
-1.8
AS3
6.4
4.7
-1.7
AS4
6.4
4.6
-1.8
Empathy EM)
Average
6.32
4.46
-9.3
-1.86
EM1 6.1 4.5 -1.6
EM2
6.3
5
-1.3
EM3
6
4.2
-1.8
EM4
6.7
4.3
-2.4
EM5
6.5
4.3
-2.2
Universal Journal of Management 5(6): 278-290, 2017 287
The data above addresses the external perspective (service
quality) whereby there were 150 questionnaires that were
distributed in hard copy. The responses that could be
collected on time was 128 out of 150, making a response rate
of 85.3%. Of the 128 responses, only 119 could be used for
data analysis. The reliability of the data for both expectation
and perception was tested using SPSS and had Cronbach’s
alpha of 0.75 and 0.77 respectively. The results to measure
the external perspective of a telco company shows that
consumers expect superior service quality. When we look at
the expectations data, consumers expect a higher level of
assurance in the telecommunications industry with a score of
6.425. That was ahead of reliability, which in fact came last
with an average of 6.14. Assurance was closely following by
responsiveness and empathy.
When it comes to the overall GAP score, the tangibles had
the lowest GAP score which is a sign that what the customers
expect in terms of tangible is not far off when compared to
what they perceived or experienced. All the dimensions of
services quality recorded a negative value which means the
telco companies in South Africa are not meeting customer
expectations in their service offerings. The figures are
alarmingly low in as far as assurance, reliability,
responsiveness and empathy is concerned:
4.2. Intellectual Capital (Internal View)
In the case of the internal perspective (measure of
intellectual capital), the results of factor analysis showed that
the questionnaires used in the interviews were enough to
investigate the importance of intellectual capital with a
Cronbach’s alpha of 0.76. The answers were able to explain
the most dominant component of intellectual capital in the
telco space. The results below show the empirical evidence
from an internal perspective in as far as the influence of
intellectual capital is concerned.
From the results, we see that Relational Capital is the most
important aspect in the telco industry. The senior managers
felt that it was more important for them to have solid
relationship especially in the B2B space. Customer relations
came up as the most important part of relational capital
followed by supplier relations. The data shows that overall,
the human capital followed relational capital in terms of
significance in the telco industry. While the human capital is
not the most important, it is still a very critical part in the
telco industry and the data shows that it’s more important
than the structural capital.
Tab le 4. Results Ranking Intellectual Capital Constructs in the Telco space
Type of Capital Relative Strength in
Your Company (Mean)
Average Score for
Each Type of
Capital
0 = less important
10= very important
Human Capital
Ideas 8.83
8.88 Leadership 8.7
Innovation 9.1
Structural Capital Processes 8.73 8.18
Culture 7.63
Relational Capital
customer relations 9.63
9.08 supplier relations 9.59
community stakeholders relations 8.01
288 Achieving a Sustained Competitive Advantage in the South African Telecommunications Sector
5. Conclusions and Recommendations
The results show that relational capital is more important
than the other two categories of intellectual capital. The
interviewed top managers selected customer relations as the
most important part of the relational capital and in fact, the
most important attribute of all attributes tested. This shows
that managers value customer loyalty and believe that it
influences future behaviour and thus sustained competitive
advantage. Community stakeholder relations was not
considered a key relational capital attribute.
In the case of human capital which followed closely to the
relational capital, the most important attribute was
innovation. Senior manager insisted that in this industry
whereby there’s stiff competition from new entrants as well
as from the existence of substitute products and services, it is
critical for companies to push boundaries in as far as
innovation is concerned. The consensus was that the human
capital part should have personnel that are not afraid to
pursue ideas that lead to innovation. Such innovation may
influence the way the company deal with internal structure
and processes – process innovation. While all the attributes
that drive superior intellectual capital are intrinsically linked,
the senior manager agreed there has to be systematic way of
prioritizing the attributes in the telco and thus achieve overall
sustained competitive advantage. These results show that
managers prefer to focus on learning and development that
will lead to future business successes.
There is a consensus between academia and practitioners
that successful companies are those that continuously
innovate. Information and knowledge is the engine of
corporate development. Telco companies’ needs to
continually innovate, focus on gaining customer loyalty and
forge lasting relationships with suppliers. Other constructs
should not be ignored in the process but it is assumed that on
the most critical constructs, the other ways will be taken care
of by the great relational and human capital anyway.
5.1. Contributions to Practice
The results discussed represent a basis for future research
that will can help telco companies develop the most critical
elements to enable them to have a competitive advantage
over a long period. As we live in societies that are dominated
by services, it is imperative that companies differentiate
themselves from a service quality point of view. It is
important to understand what resonate with customers in as
far as dimensions of service quality is concerned. It is also
important for companies to give intangible assets the
attention they deserve if they are to remain competitive over
a long period of time. In the telecommunications industry,
companies should focus on the most important dimensions
and the study found that assurance is more important in the
telecommunications industry as customers expect a certain
level of assurance from their telco service providers.
When it comes to intellectual capital, the research is not
prescriptive on the model to use. It is important to understand
the strengths and weaknesses of each model and leverage on
the strengths of more than one model to get a comprehensive
view of the company’s intellectual capital. After analysing
the company’s intellectual capital, managers are able to see if
the most important dimensions in the telco are receiving the
attention they deserve.
5.2. Future Studies
Studies in the telco industry’s competitiveness is of
paramount importance for the benefit of the consumers, telco
providers, country and the world as a whole. In the
information age, companies cannot afford to take things for
granted and depend on past glory. More studies that seek to
understand service quality and customer behaviour are
needed. Future studies can seek to focus more on either B2B
space or B2C space. It is envisaged that the results may alter
when focus is given to each of these segments. When it
comes to intellectual capital, models that consolidate all the
strengths of each and every model needs to be developed and
simplified for easier use in both academia and in practice.
Finally, the mere fact that the telco industry is a complex
environment, future studies can focus on incorporating
complexity theory, complexity leadership theory, and
complex adaptive systems. We need to appreciate that the
telco industry has all the characteristics of a complex
adaptive system namely; non-linearity, dynamic behaviour,
emergence as well as self-organizing. Uhl-Bien, et al. [66],
defines a complex system as the one whose component parts
interact with sufficient intricacy that they cannot be predicted
by standard linear equations and the telco industry is
unpredictable as it is influenced by politics, economics,
suppliers, customers, employees, shareholders, and other
stakeholders. Clearly, there are a lot of variables at work in
the telco industry (which can be referred to as a system in its
own right), that its overall behaviour can only be understood
as an emergent consequence of the holistic sum of the myriad
behaviours embedded within. Reductionism does not work
with complex systems and thus a purely reductionist
approach cannot be applied if we are to understand complex
systems [67]. In “systems thinking” we say that the whole is
more than the sum of its parts. This is even more profound in
complex systems which allow certain behaviours and
characteristics to emerge. There is no doubt a lot of
opportunities for future research in this ever changing
industry.
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