Expert answer:International Business: Two Parts: Case Study Anal
Expert answer:INB-200 International BusinessW6 – “Telecom Ventures Unite the World” Case
HistoryPart
1:DQ
– Answer in 50 words or more:Many countries in the Middle East and Africa are considered high risk for
global investments due to political considerations, in the same way as China
once was. What criteria should companies use to determine where to invest? How
could seemingly high risk countries be managed as opportunities?Part
II:Read the Case History
(attached), “Telecom Ventures Unite the World.”Review the tutorial, “How
to Analyze a Case History.” Write a 750 word paper, typed
and double-spaced using the Writing Assignment Template, in
which you respond to the following questions.Support your response with at
least three scholarly sources, two of which must be scholarly sources from the Online
Library
What strengths did AT&T bring
to its joint venture with Unisource?
What were some potential
complications that could have arisen in the AT&T–Unisource joint
venture?
Assess the formation of Global
One, Unisource, and other partnerships in this case. What strategic
factors might have influenced the entry mode choices that these firms
made?
Based on the case and your
research and readings, what other entry mode choices might have made sense
for these firms?
wk6_case_history___telecom_ventures_unite_the_world.docx
Unformatted Attachment Preview
Practicing International Management Case: Telecom Ventures Unite the World
The world of telecommunications is changing. The era of global e-commerce is here, driven by new
technologies such as broadband and wireless Internet access that make possible video telephone
connections and high-speed data transmission. Annual worldwide revenues for telecommunications
services total $600 billion, with international companies accounting for 20 percent of the business.
Market opportunities are opening around the world as post, telephone, and telegraph (PTT) monopolies
are undergoing privatization. Since 1998, telecom deregulation has been taking place in earnest in
Europe. Meanwhile, governments in developing countries are boosting investments in infrastructure
improvements to increase the number of available telephone lines. The demand for telephone service is
growing at a sharp pace; international telephone-call volume more than doubled over a recent six-year
period. The net result of these changes is the globalization of the telecommunications industry. As
William Donovan, a vice president at Sea-Land Service, said recently, “I don’t want to have to talk to a
bunch of different PTTs around the world. I don’t want to have to go to one carrier in one country and a
second in another just because it doesn’t have a presence there.”
Several alliances and joint venture partnerships formed between companies hoping to capitalize on the
changed market and business environment. France Telecom, Deutsche Telekom, and Sprint created
Global One to bring international telecommunications services to multinational companies. As part of
the deal, Sprint sold 10 percent of its stock to each of its French and German partners. One hurdle for
the company was how to integrate the three partners’ communication networks into a unified whole.
Also, start-up costs were high, and the need to communicate in three different languages created some
friction among personnel. Early on, lengthy negotiations were required to reach agreement about the
value each partner brought to the venture. A former Global One executive noted, “There is no trust
among the partners.” Other problems included equipment and billing incompatibilities resulting from
distribution agreements with telephone monopolies in individual countries. And then there were the
financial losses that prompted Sprint chairman William T. Esrey to install Sprint executive Gary Forsee as
CEO and president of Global One.
AT&T also depends on various partnership strategies as entry modes. WorldPartners began as an
alliance of AT&T, Kokusai Denshin Denwa (KDD) of Japan, and Telecom of Singapore. The goal was to
provide improved telecommunications services for companies conducting business globally. Today,
WorldPartners is composed of 10 companies, including Telecom New Zealand, Telestra (Australia), Hong
Kong Telecom, and Unisource.
Unisource is itself a joint venture that originally included Sweden’s Telia AB, Swiss Telecom PTT, and PTT
Telecom Netherlands. Later, Telefonica de España became an equal equity partner in Unisource.
Unisource and AT&T then agreed to form a 60–40 joint venture known as AT&T–Unisource
Communications to offer voice, data, and messaging services to businesses with European operations.
AT&T would have preferred to form a joint venture with the French or German telephone companies.
Yet European regulators, concerned about AT&T’s strong brand name and enormous size, refused to
approve such a deal.
There was strong logic for the deal. AT&T–Unisource CEO James Cosgrove explained from headquarters
near Amsterdam in Hoofddorp that to be competitive in Europe a telecom company needs to have a
base there and offer global solutions. Despite the fact that there are five corporate parents, a sense of
equality and congeniality has developed. CEO Cosgrove explained that after working together for two
years, the parent companies realized that their own success is tied to the success of the shared venture.
The presence of Telefonica de España in the alliance was especially significant for AT&T because of the
Spanish company’s strong influence in Latin America. Unfortunately, the alliance was weakened when
Telefonica decided to ally itself with Concert Communications. To fill the void, AT&T and Italy’s Stet
announced a new alliance that would expand communication services to Latin America as well as
Europe.
The third major telecommunications alliance, Concert Communications, was formed when British
Telecommunications PLC bought a 20-percent stake in MCI Communications. Again, the goal of the
alliance was to offer global voice and data network services to global corporations.
Thinking Globally
•
•
•
13-10. What strengths did AT&T bring to its joint venture with Unisource?
13-11. Can you think of any potential complications that could have arisen in the AT&T–Unisource
joint venture?
13-12. Assess the formation of Global One, Unisource, and other partnerships in this case. What
strategic factors might have influenced the entry mode choices that these firms made?
Sources: Barbara Martinez, “Sprint Names Its Long-distance Chief to Run Loss-Beset Global One
Venture,” Wall Street Journal,February 17, 1998, p. B20; Jennifer L. Schenker and James Pressley,
“European Telecom Venture with Sprint Hasn’t Become the Bully Some Feared,” Wall Street Journal,
December 23, 1997, p. A11; Alan Cane, “Unisource Partners to Strengthen Ties,” Financial Times, June 4,
1997, p. 13; Gautam Naik, “Unisource Expected to Merge Operations,” Wall Street Journal, June 4, 1997,
p. B6.
…
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