CASE STUDY: VODAFONE TURNS EAST

International Management – Professor: Dr. Skarmeas

Tsolis Angelos,Vidali Eirini,Boula Alexandra,Chatziorfanou Georgia,Danoglidou Ioanna

CONTENTS • Case Study Abstract • China’s entry into the WTO and the impact on Vodafone • The impact on foreign telecommunications investment • The factors that have inhibited Vodafone’s investment• China Unicom joint venture with SK Telecom• The advantages, challenges and effectiveness of the strategy • Recommendations for China Telecom

CASE STUDY ABSTRACT • Reconstruction of China’s telecommunications sector

• Before entering the WTO (2001), the market was protected from foreign competition.

• Vodafone’s entry into the Chinese market

• Response of the Chinese telecommunication sector

• Benefits and challenges brought to the domestic firms

CHINA’S ENTRY INTO THE WTO AND THE IMPACT ON VODAFONE

• Equity alliance with CMHK

• Partnership with SmarTone

• Advancements in product and research development

• Access to millions of subscribers

BUT…

THE FACTORS THAT HAVE INHIBITED VODAFONE’S INVESTMENT

• Open policies further to increase investment

• Barriers that limit market access: 1. Enactment of a comprehensive telecommunications law 2. Establishment of a fair telecom regulator 3. Foreign investors are obligated to form partnerships with Chinese companies4. Telecom equipment certificate process is time consuming and costly 5. 49% foreign ownership 6. The world’s highest capitalization fee7. Resell license8. Narrow definition of value-added activities license (e.g. PMRTS, VSAT)

THE IMPACT ON FOREIGN TELECOMMUNICATIONS INVESTMENT

• Protected telecommunications market

• JVs between domestic and foreign firms

• Reluctance to loosen control

• Very low foreign investment

THE FACTORS THAT HAVE INHIBITED VODAFONE’S INVESTMENT

• Open policies further to increase investment

• Barriers that limit market access:

1. Comprehensive telecommunications law 2. Independent telecom regulator 3. Joint Venture Requirements 4. Telecom equipment certificate process5. 49% foreign ownership 6. World’s highest capitalization requirement 7. Resell license8. Value-added activities

CHINA UNICOM JOINT VENTURE WITH SK TELECOM

• Alliance with South Korean SK Telecom

• Korean SK Telecom which acquired “a 6.6 percent stake in China Unicom” (CIO, 2006).

• The goal of this strategy was to make China Unicom more competent against CMHK-Vodafone

THE ADVANTAGES, CHALLENGES AND EFFECTIVENESS OF THE STRATEGY

• Share resources and risk

• Cooperation, R&D

• Capital worth of U.S. $1 billion

• Lower commitment

• Past collaboration

THE ADVANTAGES, CHALLENGES AND EFFECTIVENESS OF THE STRATEGY

• Different business objectives

• Different business cultures, management styles and working relationships (Fortune,2011)

• Imbalance in the levels of expertise, assets and investment

• Trust, transparency, and mutual understanding between the participants PwC (2016)

• Loss of control

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Deloitte (2010)

THE ADVANTAGES, CHALLENGES AND EFFECTIVENESS OF THE STRATEGY

• Trust, faith and clear flow of information and communication

• Continuous R&D regarding technology development and customer service

• Continuous reporting, tracking and testing of the products.

• Deloitte (2010) claims “Most JVs will end sooner than most managers expect”

• Harvard Business (2004): “more than 2,000 joint ventures and found that 53% of them “had achieved returns greater than the cost of capital”

RECOMMENDED ACTIONS FOR CHINA TELECOM.

• Study the market and the available suppliers

• Market segmentation

• R&D

• Build long lasting relationships with customers

• Increase product portfolio

• Untapped markets

REFERENCES•  • http://www.vodafone.com/content/index/media/vodafone-group-releases/2000/press_release13_06.html•  • https://books.google.gr/books?id=IsJGohvrKPQC&pg=PA92&lpg=PA92&dq=china+wto+vodafone&source=bl&ots=jOh8H78zl4&sig=MgwaosEXQBP5CFEtgmp1cNUQzXo&hl=el&sa=X&ved=0ah

UKEwiJ9K6d5e7PAhVE2hoKHXIMAhUQ6AEIPjAE#v=onepage&q=china%20wto%20vodafone&f=false•  • https://books.google.gr/books?id=ONvUCgAAQBAJ&pg=PA357&lpg=PA357&dq=china+wto+vodafone&source=bl&ots=ATY5mmZJeK&sig=F2S0Blh6OPrmEtZGAAveDgx02-0&hl=el&sa=X&ved

=0ahUKEwiJ9K6d5e7PAhVE2hoKHXIMAhUQ6AEIUjAI#v=onepage&q=china%20wto%20vodafone&f=false•  • http://www.intracen.org/itc/trade-support/wto-accession-implication-for-business/•  • http://www.independent.co.uk/news/business/news/vodafone-in-pound17bn-move-into-chinas-mobile-phone-market-635797.html•  • U.S. Department of Commerce International Trade Administration: (2010) :http

://web.ita.doc.gov/ITI/itiHome.nsf/9b2cb14bda00318585256cc40068ca69/7a19947d610987658525788c0041ea3d/$FILE/telecom%20market%20snapshot-china.pdf•  • http://www.nortonrosefulbright.com/knowledge/publications/137503/chinas-new-telecom-catalogue-comes-into-force-on-march-1-2016•  • http://warrington.ufl.edu/centers/purc/purcdocs/papers/0201_Yu_Market_Perfomance_of.pdf•  • CIO (2006:) http://www.cio.com/article/2445936/it-organization/korea-s-sk-telecom-to-invest--1b-in-china-unicom.html•  •  • Fortune (2011) http://fortune.com/2011/01/28/how-to-crack-asian-business-culture/•  •  Harvard Business Review (2004) https://hbr.org/2004/02/launching-a-world-class-joint-venture•  •  •  

THANK YOU FOR LISTENING!

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