Written Report on Foreign Market Servicing Strategy for the Deutsche Telekom for an expansion in China

Contents

  A. Main Part  

1.  Introduction  

  1  

2.  The concern Deutsche Telekom  

  1  

2.1  General overview  1

2.2  The divisions of the concern  2

2.2.1  T-Com  2

2.2.2  T-Systems  2

2.2.3  T-Online  2

2.2.4  T-Mobile  2

3.  The Telecommunication industry  

  3  

3.1  Development within the industry  3

3.2  Technical Standard  4

3.3  Business policy  5

4.  Environmental Analysis  

  5  

4.1  Political environment  6

4.2  Economic environment  7

4.2.1  Market size  7

4.2.2  Economic Growth  8

4.2.3  Competitive situation  9

4.3  Sociocultural environment  9

4.4  Technological environment  9

5.  Mode of Entry  

  10  

5.1  Joint Venture  10

5.1.1  Equity Joint Venture  10

5.1.2  Contractual Joint Venture  11

6.  Recommendation for T-Mobile  

  11  

7.  Summary  

  12  

  B. Bibliography  

  C. Appendix  

II

1. Introduction

In times of globalisation it is so important for our MNE Deutsche Telekom to find early new markets in order to detect or expand the position in the hard global competitiveness. We are good positioned in West Europe and in the growing markets in Eastern Europe and with our division T-Mobile also very successful in the USA, but the potential growth rates are much higher in Asia. The growth motor in Asia is China with the biggest population worldwide. Nearly 80 % of the top 500 companies have invested in China and it is the fast-growing telecommunication market in the entire world ¹ . This shows how important China for our MNE is.

The continuous high growth in this telecommunication industry leads to the question how our mobile division T-Mobile belonging to the concern Deutsche Telekom should invest in the coming most powerful market China after the USA.

First of all, I am going to present the concern Deutsche Telekom and will then focus in detail on the division T-Mobile. Additionally, I am going to give an overview about the mobile industry itself and how the distribution of their products proceeds. Before I am going to recommend a market servicing strategy for our MNE, I would like to analyse the environment in China in which we want to invest and weigh up the advantages and disadvantages for an investment abroad ² . After this analysis has been presented a proposal for the best type of international business strategy in China will follow and finally a summary finishes this assignment.

2. The concern Deutsche Telekom

2.1 General overview

The Deutsche Telekom is Europe’s largest telecommunication company and the third largest in the world with a presence in 65 countries on six continents, basically in all major markets ³ . It provides fixed- line and mobile communication, leased lines, text and data services, corporate networks and on- line services.

For the year ended December 2003 the worldwide turnover of the company amounts for €55.8 billion. More than a third of the total turnover was generated outside of Germany. Deutsche Telekom is headquartered in Bonn, Germany and employed around 250000 people worldwide.

¹ The People’s Bank of China (2004)

² Daniels, J., Radebaugh L., Sullivan, D. (2004)

³ Federal Foreign Office (2004)

1

2.2 The divisions of the concern

The company has got four core strategic divisions. The following illustration shows the four divisions:

2.2.1 T-Com

T-Com is providing fixed line networks, such as T-DSL Broadband connection or ISDN channels and it is with 55.2 million connections in Europe the largest provider. The T-Com also has stakes in companies in the growing Eastern markets and more than 125,700 employees are working for T-Com.

2.2.2 T-Systems

The second division, T -Systems, is one of the biggest providers of Information and Communication Technology (ICT) in Europe. Within the concern the division is responsible for servicing major business accounts. The division employed in over twenty countries around 40,000 people.

2.2.3 T-Online

The third division, T-Online, is one of the major players in Europe in the online industry with subsidiaries in Spain, Austria, France and Switzerland. T -Online provides for business and private customers a wide variety of products and services, such as W-LAN or ISDN access to the internet ⁴ .

2.2.4 T-Mobile

Deutsche Telekom's mobile telephone division, T -Mobile International, is expanding through Europe with a strong position in next generation services , such as UTMS and it is also pushing into the US market through its acquisition of mobile operators VoiceStream Wireless and Powertel in 2000. An important reason for the success in the

⁴ Deutsche Telekom (2004)

2

USA was the implementation of the GSM Standard by T-Mobile. The division was the first company provided such network. This connection standard is the most common used standard worldwide. T-Mobile employed nearly 44,000 people worldwide in order to provide the communication service to over 100 million people ⁵ .

T-Mobile`s focus is on the dynamic growth markets of Europe and the USA, but this sector of the concern should also more presented in Asia, especially China.

3. Telecommunication industry

An important part of the strategic planning process is a scan of the internal and external environment in which the firm operates. The SWOT analysis provides information’s which are helpful in matching the firm’s resources and capabilities to the competitive environment. Environmental factors internal to the firm can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) ⁶ .

Illustration 2 (Source: Quick MBA, 2004)

3.1 Development of the industry

The growth in mobile communication has had a profound economic and social impact in Europe and beyond. The mobile phone is now pervasive and is used in virtually every sphere of human activity, private, business and governmental.

Before the liberalization in the telecommunication industry, in most nations a dominant telecommunication provider such as British Telecom in Britain, France Telecom in France and Deutsche Telekom in Germany were often state owned and its operations were tightly regulated by the state. “Cross-border competition between

⁵ T-Mobile (2004)

⁶ John, R., Ietto-Gillies, G., Cox, H., Grimwade, N. (1997)

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