China Mobile Limited - Essay Example

?China Mobile Limited Italy has a large telecom market with one of the highest mobile penetration rates in Europe (BuddeComm, . Consumers in Italy adopt mobile-only solutions and VoIP (Voice over Internet Protocol). The two largest mobile operators in Italy are Telecom Italia Mobile (TIM) and Vodafone Italy (formerly Omnitel). The telecom industry has undergone reforms which have been driven by the regulations of the European Union (EU). Through successive liberalization directives and harmonization directives, the EU has played a vital role in liberalization of the EU telecom market (OECD, 2001). Italy now has a comprehensive regulatory regime which enables it to promote competition in the sector. Italy also has one of the most pro-competitive approaches among all the OECD members in monitoring service quality and coverage of carrier pre-selection. China Mobile Limited (CHL) is one of the world’s largest mobile network operators, headquartered in China and having operations in Mainland China, Hong Kong and Pakistan. Despite its presence only in three countries it has the largest customer base in the world of approximately 650 million with a market share of 65% in Mainland China (China Mobile Limited, 2012). CHL has been evaluating the prospects of entering the European markets as a strategy seeking growth and expansion. Besides, the government in China also encourages Chinese companies to expand overseas. Growing organically is time consuming and hence CHL intends to enter into alliance or acquire majority stakes in an existing mobile network operator (MNO). Telecom Italia (TM), the leading service provider in Italy is heavily indebted and running in losses (Sanderson, 2012). The organization needs funds to grow but is already in heavy debts. CHL has an opportunity to enter into an agreement with TM and fund their growth. CHL is cash-rich and has massive network as well. In entering new markets the risk and control is proportionately related to the investments. CHL can fund their growth but this would require controlling stakes, which implies high investments. Low investments would not give CHL controlling stakes without which CHL would have to function as the other stakeholders insist. However, CHL would need the support of the existing MNO as the two countries are wide apart in cultural dimensions, particularly in uncertainty avoidance and long-term orientation, according to Hofstede’s dimensions. Thus, CHL would have to adapt to short-term orientation in decision-making and accept risks as well. Risks include obtaining controlling stakes in the company by paying more than the market price. Since CHL has experience in technology this would help offset risks from not having country-specific experience (Braunstein, Jussawalla and Morris, n.d.). The Italian economy is in trouble and the political condition in Italy is unstable too (Sanderson, 2012). However, in the telecom sector there are no restrictions on foreign ownership and on shareholding of a single party (OECD, 2001). Therefore, even though CHL would have to change its strategy to adapt to Italian cultural standards, they would make profits because of their experience in the sector and the strength of financial resources. However, they may not be able to make profits in the first few years but eventually they would be able to get return on their investments. First Solar First Solar has been one of the largest and most successful solar panel manufacturers so far but it faces stiff competition from Chinese manufactures which has driven down the prices by 50 percent (Bullis, 2012). Oversupply of panels and sales below production cost by Chinese manufacturers has intensified competition (Wang, 2012). Technologically, First Solar’s thin-film, cadmium-telluride solar panels are less efficient than the silica solar panels made by the Chinese manufacturers. First Solar’s panels can be used for large, ground-mounted installations. However, this has limited market and the company is no longer able to sustain selling its products below competitor prices. It has been forced to shut down many of its manufacturing units. Under the circumstances First Solar has to decide on multinational strategy for future. Since it has the lowest cost of production, arbitrage is not the solution. Its products cannot be standardized because of differences in temperature and humidity in different regions of the world, and hence aggregation too cannot be its strategy. First Solar would have to apply adaptation strategy which would help to boost its market share by customizing the processes to meet local needs. For instance, in climates such as India, their products would be more suitable than the Chinese panels. Over time, to achieve economies of scale, it may aggregate countries into regions. As far as portfolio is concerned, First Solar should also focus on solar power plants where competition is less. In addition, the company should stretch its focus to countries such as India, China and Australia for solar power plants. So far Germany and Italy have been the largest markets for renewable energy but subsidies in these two countries are being cut. First Solar hence has to look further towards India and China that are implementing subsidies to promote solar energy (Wang, 2012b). The US is also expected to be one of the most important solar markets in the world. However, breaking into new markets may be challenging as convincing banks to fund large projects would not be smooth. The company should hence set up regional production hubs while still maintaining its home base, and have local managers with experience and knowledge of the local market and administration. This would not only lower the transportation and installation costs, it would also be easier to convince the banks to fund the projects. Companies selling below the cost price cannot say in business for long as most solar panel manufacturers have been posting losses (Wang, 2012). If First Solar is able to alter its strategy and sustain itself, its current low prices would give it the competitive edge in due course. Besides, First Solar has earned reputation in the field and consumers would prefer to use their products rather than cheaper products from companies that may not be able to sustain and offer service. Thus with the adaptation strategy, extended to aggregation at a later stage and with enhanced portfolio, with newer markets such as India and China, First Solar would be able to sustain itself against competition. Zara – The Spanish apparel giant Zara, the Spanish clothing and accessories retailer, is the most innovative and devastating retailer in the world (IPR Plaza, 2012). Its sense and respond model is the key to its phenomenal success in the sector. It replenishes its stocks twice a week at all of its stores and ensures customers visit the store every two or three weeks instead of buying several items at one time. Zara’s value chain has three intangibles - the information system, the Zara brand and the process. The company has an advanced IT infrastructure while its “rapid fire” supply chain enables the company to capitalize on the internal and external value chain network. However, disaggregation of the value chain has become essential as the current strategy would be complex to manage at the global level. Since Zara has decided to capture the Asian markets and also aggressively market in the US, it has become essential to address the fashion trends and clothing preferences in different regions (Knowledge@Wharton, 2012). Moreover, competitors have been able to emulate Zara’s strategy which exerts pressure on the company to innovate further to maintain competitive advantage. To achieve success in Asian markets is a challenge. Zara may not be able to capture a sizeable market with its current strategy and pricing. Zara believes that reducing the prices will have an adverse impact on the brand. Its core activity is designing, and sourcing of raw material. Zara should maintain these two activities in-house and reconsider the following strategy to remain sustainable: In Asian countries appoint franchisees to manage stores instead of managing its own stores at all locations as the company has been doing so far. This would help reduce the impact on human resource management and on sales and marketing, both of which are critical components in the value chain. To achieve economies of scale at stores that are not close to its base, Zara should change the strategy and replenish stocks less frequently and price them less than what it is now. This could enhance their sales. Zara has not been engaging in e-commerce so far but to keep up with the trends they would need to add this to their value chain and logistics. By now customers know of the brand and hence would not hesitate to order online. Brands that have multi-channel distribution (brick-and-mortar shops and online sales) tend to leverage advantage. As of now most of Zara’s production is in-house or at locations close to its headquarters. However, as it now markets globally, it should find alternate means of sourcing its products. Since it plans to have a sizeable market in Asia, and since labor cost is low in this region, Zara should consider offshoring its production line to these countries. As the company is expanding, it would need to offload some of the activities that it has been conducting itself. For instance, the logistics – transporting the finished garments to the stores – this activity can be outsourced within the country. References Braunstein, YM., Jussawalla, M. and Morris, S. n.d. COMPARATIVE ANALYSIS OF TELECOMMUNICATIONS GLOBALIZATION. Available from http://www.usfca.edu/fac- staff/morriss/PTC.html [Accessed Dec 9, 2012] BuddeComm. 2012. Italy - Key Statistics, Telecom Market and Regulatory Overviews. Available from http://www.budde.com.au/Research/Italy-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html [Accessed Dec 9, 2012] Bullis, K. May 8, 2012. What Happened to First Solar? MIT Technology Review. Available from http://www.technologyreview.com/news/427860/what-happened-to-first-solar/ [Accessed Dec 10, 2012] China Mobile Limited. 2012. About China Mobile. Available from http://www.chinamobileltd.com/en/about/overview.php [Accessed Dec 9, 2012] IPR Plaza. Nov 30, 2012. Zara: A Case of Rapid-Fire Fast Fashion Strategy. Available from http://www.iprplaza.com/files/StreamFile13469/download/Zara---A-Case-of-Rapid-Fire-Fast-Fashion-Strategy [Accessed Dec 10, 2012] Knowledge@Wharton. April 18, 2012. Zara: Changes Are in Store, but What Will They Mean for the Retail Chain? Available from http://www.wharton.universia.net/index.cfm? fa=viewfeature&id=2190&language=english [Accessed Dec 10, 2012] OECD. 2001. Regulatory Reform in Italy. Organization for Econimic Cooperation and Development. Available from http://www.oecd.org/regreform/2717568.pdf [Accessed Dec 9, 2012] Sanderson, R. Dec 5, 2012. Telecom Italia seeks strategic direction. Financial Times. Available from http://www.ft.com/intl/cms/s/0/29b1cd26-3ecd-11e2-87bc- 00144feabdc0.html#axzz2EcntUIFS [Accessed Dec 9, 2012] Wang, U. April 18, 2012. First Solar Struggles Amid Decline Of Thin-Film Solar Market. Forbes.com. Available from http://www.forbes.com/sites/uciliawang/2012/04/18/how-first-solar-struggles-amid-decline-of-thin-film-solar-market/ [Accessed Dec 9, 2012] Wang, U. March 14, 2012b. How A Trade Complaint Against China Will Impact U.S. Solar Market Growth. Forbes.com. Available from http://www.forbes.com/sites/uciliawang/2012/03/14/how-a-trade-complaint-against-china-will-influence-u-s-solar-market-growth/ [Accessed Dec 9, 2012] http://geert-hofstede.com/china.html Read More