1. CASE STUDY:
VODAFONE TURNS EAST
International Management – Professor: Dr. Skarmeas
Tsolis Angelos,Vidali Eirini,Boula Alexandra,Chatziorfanou
Georgia,Danoglidou Ioanna
2. 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
3. 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
4. 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…
5. 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 companies
4. Telecom equipment certificate process is time consuming and costly
5. 49% foreign ownership
6. The world’s highest capitalization fee
7. Resell license
8. Narrow definition of value-added activities license (e.g. PMRTS, VSAT)
6. THE IMPACT ON FOREIGN
TELECOMMUNICATIONS INVESTMENT
• Protected telecommunications market
• JVs between domestic and foreign firms
• Reluctance to loosen control
• Very low foreign investment
7. 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 process
5. 49% foreign ownership
6. World’s highest capitalization requirement
7. Resell license
8. Value-added activities
8. 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
9. 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
10. 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
HarvardBusinessReview(2004)
Deloitte (2010)
11. 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”
12. 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
