Identify the major market and non-market environmental concerns that AT&T should consider as it attempts to capture a piece of the potential industry earnings (PIE) in China's telecommunications industry. Please address the following questions -
· What demand and supply characteristics differentiate the Chinese telecommunications PIE from the U.S. telecommunications PIE?
· Who are the buyers and what power do they have?
· Who are the suppliers and what power do they have?
· Who are AT&T's competitors and what power do they have?
· How do each of these affect AT&T as it attempts to capture a piece of the PIE?
Chinese market is growing very fast.
The Chinese fixed line telecom market grew by 38.9% in 2002 to reach a value of $26.1 billion.
The compound annual growth rate of the market in the period 1998-2002 was 40.8%.
The strongest growth was in 2001 when the market grew by 46.2%.
China Fixed Line Telecom Market Value grows at the average rate of approx. 0.4 per annum
Year Market Value Growth
1999 9,100,000,000 0.372
2000 12,900,000,000 0.411
2001 18,800,000,000 0.462
2002 26,100,000,000 0.389
CAGR 1998 - 2002 0.408
The Chinese fixed line telecom market grew by 18.9% in 2002 to reach a volume of 214.4 million fixed lines.
This growth rate compared with the fact that there are few players in the market throws up several opportunities, such that are not found in the US markets.
The compound annual growth rate of the market volume in the period 1998-2002 was 25.2%.
The strongest growth was in 1999 when the market grew by 31.2%.
China Fixed Line Telecoms Market Volume
Year Fixed lines Growth
1999 114,400,000 0.312
2000 144,800,000 0.266
2001 180,300,000 0.245
2002 214,400,000 0.189
In terms of value, China accounts for 14.4% of the Asia-Pacific fixed line telecoms market.
China Fixed Line Telecoms Market Segmentation - Value, 2002
Rest of Asia Pacific 0.856
The potential buyers of AT&T services
The Chinese fixed line telecom market has experienced massive growth in recent years, gaining, on average, 2.6 million customers per month over the 1998-2002 period. At the present time, the market's primary carriers are China Telecom, China Netcom and China Railcom, although Railcom is somewhat a minor carrier compared to the other two operators.
The potential buyers of AT&T and their power
The China Telecom Group was officially established in May 2002 after the split of the former China Telecom into two groups: China Telecom (south) and China Netcom (north). The corporation is made up of 21 provincial corporations, which, between them, control approximately 70% of the national trunk-line transmission network assets owned by the former (pre-2002) China Telecom.
The China Telecom Corporation, an affiliate of parent China Telecom Group which transferred the assets and operations from four regional divisions into the new company, was listed on both the New York and Hong Kong stock exchanges in mid-November 2002. The move, which was hoped would boost foreign investment and improve management systems, raised $1.4 billion for approximately 10% of the company's stock.
The power the buyers wield.
The China Telecom Corporation has recently announced that it is to acquire six provincial networks from its state-owned parent company which will expand the company's network into poorer areas of the country. When the acquisition has been completed China Telecom Corporation will serve over 520 million people, approximately 41% of the country's population.
China Telecom's primary competitor at the current time is China Railcom, the second largest fixed telecom network operator in China. Although the name is new to the public, Railcom has been a carrier for private communications for nearly 50 years. It used to be a division of the Ministry of Railways (MOR) dealing with the Ministry's voice and data (mostly low-speed) services along rail lines and the majority of its customers are MOR affiliates and employees.
The company became a public service operator in December 2000 and two years later reported revenues of $690 million, 36% higher than in the previous year, and approximately 2.5% of total telecom revenues in China. The company also recruited nearly 2.1 million fixed telephone customers during 2002, expanding its customer base to some 3.3 million customers. The company's operations are widespread and cover some 500 cities and 700 counties with more than 1,100 switching centers.
At the present time, the Chinese market has a fairly well developed telecoms infrastructure. Although the market is dominated by a small number of incumbent players, there are a growing number of regional operators which should, as has been the case across much of Europe, increase competition and customer services
The supplier, the Chinese Government
China Telecom is the country's primary telecommunications company and is government owned. For the fiscal year 2002, revenues totaled $9.12 billion.
The company is responsible for development, construction, operation and maintenance of the public telecommunications network, operating most voice, data and paging networks in China. It provides fixed-line phone services to more than 130 million subscribers on the Chinese mainland. China Telecom is headquartered in Beijing, China.
Potential Supplier and its power
China Unicom is a telecommunications company, operating primarily in China. For the fiscal year 2002, it generated revenues of $4.9 billion (RMB40.58 billion).
The company provides mobile communications, paging, long distance and data services in China, and is the second largest mobile phone operator in that country. China Unicorn is headquartered in Beijing, China
In 2007 the Chinese fixed line telecoms market is forecast to have a value of $75.5 billion, an increase of 189.3% since 2002.
The compound annual growth rate of the market in the period 2002-2007 is predicted to be 23.7%.
Annual growth is forecast to fall steadily from its 2002 rate of 38.9% to a low of 14.7% in 2007.
China Fixed Line Telecomm Market Value Forecast shows fall in growth an ominous sign for AT&T
Year USD Growth
2002 26,100,000,000 0.389
2003 35,300,000,000 0.353
2004 45,700,000,000 0.294
2005 56,300,000,000 0.231
2006 65,900,000,000 0.17
2007 75,500,000,000 0.147
AT&T's competitors and their power
Â? Partly because of the country's size, the Chinese market is one of the world's fastest-growing wireless telecommunications services markets.
* Rapid growth has been achieved despite limited wireless infrastructure and difficulties in achieving coverage in many areas for providers.
* Competition is a relatively new concept in the Chinese telecommunications sector, which has traditionally been run entirely by the Chinese government.
* The liberalization of the market means that the government is set to allow foreign companies to acquire substantial interests in Chinese telecommunications operators.
Partly because of the country's size, the Chinese market is one of the world's fastest-growing wireless telecommunications services markets. Uptake of wireless services has reached saturation point in many countries but this is a long way off for the Chinese market.
Rapid growth has been achieved despite limited wireless infrastructure and difficulties in achieving coverage in many ...
In a 4144 solution, the subject of the expansion into China by ATT is fully explored including historical and statistical analysis.
AT&T Strategy vs. Organizational Approach in China
I am looking for assistance in determining how well AT&T's strategy aligns with the company's organizational approach that is built around 21 business units and China's market and nonmarket environment. The main questions are:
Is AT&T's strategy aligned with China's environment? How or how not?
Is AT&T's organizational approach aligned with China's environment? How or how not?
Is AT&T's strategy aligned with its 21-business-unit organization? How or how not?
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