Expert answer:How should Telenor move forward in Serbia? Who sho

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Telenor: Case Report Sections
Section
Total Points
I
Decision Needed: Delineate problem to solve
(should be 1-2 sentences)
II
Situation Assessment: 3-4 relevant
background facts (can be bullet points or
sentences)
III
Scenario Presentation: Outline the pros and
cons of each option (you must write these out in
complete sentences)
IV
Recommendation: How should Telenor enter
the market?
I. Decision Needed
How should Telenor move
forward in Serbia? Who
should be the target
segment?
Case study is due on Monday 11/20 prior to class.
III. Scenarios
Cons
Pros
Segment 3
Segment 6
IV: Recommendation
Given the target segment, how should Telenor enter
the market? How extensive of a customer experience
should they offer?
Telenor Case Considerations
Questions to prepare your scenario assessment
▪ What is the banking landscape in Serbia?
▪ Apply Porter’s 5 forces to assess industry potential
▪ Evaluate the different segments using the perceptual maps.
▪ What are their personal values?
▪ What are their attitudes about financial services and banks?
▪ What are their needs and gaps?
▪ What is the expected journey map for the selected segment?
▪ How should Telenor enter the market?
▪ What services should it provide (basic mobile banking,
extensive mobile banking or full retail banking)?
▪ What must be true in order for Telenor to deliver a good
customer experience?
For the exclusive use of S. Obrien, 2017.
IN1328
Telenor: Revolutionizing
Retail Banking in Serbia
Digital Transformation of the
Customer Experience
02/2017-6129
This case was written by Joerg Niessing, Affiliate Professor of Marketing, and Hilke Plassmann, Associate Professor of
Marketing, both at INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation. We thank Hernan Bruno and Robert J. Crawford for
their support in writing this case.
Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at
cases.insead.edu.
Copyright © 2017 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, REPRODUCED OR DISTRIBUTED IN
ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.
This document is authorized for use only by Sean Obrien in E-Marketing taught by Tyler Milfeld, Dickinson College from August 2017 to December 2017.
For the exclusive use of S. Obrien, 2017.
On September 1, 2013, Martin Navratil arrived at Telenor Serbia to begin a new job, with a
market research report on mobile and online banking in Serbia in his hand. It was, he noted,
the same day that Ove Fredheim, the new CEO, was starting. The CEO had already expressed
a keen interest in Navratil’s project for a new financial service offering in Serbia.
After a long period of strong economic growth followed by a severe recession, Serbia’s
economy was starting to pick up. Having liberalized the economy and resolved a number of
key political issues, Serbia was a candidate for admission to the EU. Now, Navratil reasoned,
would be the ideal time to expand the business portfolio of Telenor, one of the world’s largest
mobile telecommunications companies, headquartered in Norway. His immediate mission was
to propose a strategy, for which he had to produce a marketing plan that could convince the
Telenor Group to move ahead with the launch. The question was, how?
Though excited at the opportunity, Navratil felt a shiver of fear: to pursue this opportunity he
had left a stable job as CFO of a Serbian bank. To diffuse the stress, he told himself, “This is
what I wanted to do all along: to build something completely new.”
Company Background: Telenor
The Telenor Group was a Norwegian multi-national corporation (MNC). Founded in 1855 as
a provider of telegraph services, it had expanded into fixed-line telephony and later became a
provider of the cutting-edge telecommunications technologies that emerged in the post-World
War II period; its operations ranged from fixed-line services to mobile networks and internet
access. A semi-public corporation, the Norwegian Government owned over 50% of the
company’s shares.
During the 1990s, the breadth of the Telenor Group’s international coverage expanded from
Scandinavia to include mobile operations in countries in the EU, South Asia, and the former
Yugoslavia as well as Russia. As a global operator, Telenor pursued cross-border economies
of scale via the use of common technologies; it also developed a customer segmentation
model that it applied in its subsidiaries1 (see Exhibit 1, Telenor at a Glance).
By the first decade of the 2010s, the Telenor Group had a number of other interests. Telenor
Broadcast was a leading provider in the Nordic region of television and broadcast services, a
saturated market with diminishing returns. 2 Telenor began investing heavily in emerging
markets in Asia, where competition was intensifying and the cost of setting up a
communications infrastructure remained heavy.3 There was an eclectic mix of other business
units, some of them minority investments in telecom-related companies. Experiments in
mobile banking, Navratil observed, had already been established by Telenor in Pakistan and
Thailand.
Entering Serbia in 1994 as the first mobile operator, Mobtel Srbija, Telenor acquired 100%
ownership in Mobi 63 in Serbia, one of three vendors in that market in 2006. Telenor quickly
became the top provider of a mobile platform, with its own network of shops and a widely
recognized brand name.
1
2
3
See http://en.wikipedia.org/wiki/Telenor; see also, http://www.telenor.com/about-us/telenor-at-a-glance/.
http://www.digitaltveurope.net/320292/telenor-norwegian-tv-sees-modest-growth/
http://www.reuters.com/article/2015/02/11/us-telenor-results-idUSKBN0LF0AX20150211
Copyright © INSEAD
1
This document is authorized for use only by Sean Obrien in E-Marketing taught by Tyler Milfeld, Dickinson College from August 2017 to December 2017.
For the exclusive use of S. Obrien, 2017.
The Telenor Group, Navratil believed, was ready to invest in a new venture. Fresh from
graduating from INSEAD he had risen quickly to the position of CFO in a Serbian bank,
although he hoped his career would take a more entrepreneurial direction. While there, he had
met some Telenor Serbia employees with whom he had engaged in exploratory discussions.
“There was no job on offer,” he recalled, “it was all informal. But I was already tired of my
job. I wanted to do something more challenging. Sitting in an office with a prestigious job
title was not for me.”
Impressed with his experience in retail banking, marketing, and his passion for information
technology, Telenor Serbia offered him a job six months later. Though concerned about
providing for his growing family, Navratil plunged into the task.
He put together a five-member team and their initial research generated much discussion.
While Serbia enjoyed a relatively high rate of internet access, they observed, many Serbian
consumers were only just beginning to tap into its commercial potential. Mobile technologies
were new and gaining a foothold – the market would soon be crowded. In particular, online
and mobile banking sectors remained extremely weak in Serbia. Indeed, few Serbians were
accustomed to purchasing things online. Moreover, in a recession it was a buyer’s market for
banks.
As part of his research, Navratil made a number of trips to Pakistan and Thailand, where
mobile banks had impressed Telenor executives from the Oslo headquarters. Neither
operation, he observed, had used the Telenor brand in support of their mobile banks. “We
didn’t have much of a footprint in Pakistan.” The reason appeared to be the relative weakness
of Telenor’s mobile platform: it was the third largest provider and relied on independent
agents rather than its own shops.
The Serbian Banking Market
Having resolved the major political issues, from 2000 Serbia entered a period of strong
economic growth that the 2011 recession briefly cut short. Many of its service industries,
including banking, continued to offer antiquated services that were substandard compared to
counterparts in the EU.4 Consumer dissatisfaction with the banks in Serbia was due to their
inconvenient opening times and procedures, a lack of retail outlets, and relatively onerous
administrative requirements.
As Navratil learned, the banking sector in Serbia was highly competitive, with approximately
30 banks for a population of 7.2 million. The top five banks together held 48% of the market
(much less than in Slovakia, where the top five banks accounted for 80%). Total bank assets
were approximately €25 billion; according to the governor of the National Bank of Serbia the
capital adequacy ratio was 20.3%, well above international norms. In spite of the recession,
by 2012 the banking sector was on a growth trajectory: profits increased nine-fold that year to
€104 million. Consumer optimism about the future was returning, which Navratil believed
4
See
http://www.wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/08/23/000333038_20
120823010132/Rendered/PDF/658450ESW0v10Y0C0disclosed080210120.pdf, pp. 1-3.
Copyright © INSEAD
2
This document is authorized for use only by Sean Obrien in E-Marketing taught by Tyler Milfeld, Dickinson College from August 2017 to December 2017.
For the exclusive use of S. Obrien, 2017.
would translate into a desire to improve standards of living funded with bank loans.5 These
developments inspired Navratil to explore the opportunities for mobile and online banking
(see Exhibit 2).
There were a number of risk factors. As a result of hyper-inflation in the wake of the civil
war, about 75% of loans in Serbia were currently denominated in euros, most of them owned
by foreign banks. With exchange-rate fluctuations, this aggravated the problems associated
with non-performing loans, which made up 20% of the entire loan portfolio. Many observers
had little faith in corporate governance in the banking sector, particularly banks that belonged
to the state: it remained unclear precisely which loans were under-performing or what
exposure they had, etc.6 Moreover, the banking sector was highly regulated with stringent
consumer protection laws in place.
From personal experience, Navratil knew that banks in Serbia could offer much better service.
In addition to onerous paperwork and other administrative considerations, branches were
often difficult to reach. Customers had to queue for hours and were often turned away due to
inadequate documentation. Not only did he consider bank employees barely competent, he
believed that Telenor could lower the costs of banking, at least for certain functions. While
many Serbians might not be amenable to learning how to use mobile and internet banking, he
acknowledged that “Serbian banks simply weren’t what young, upwardly mobile consumers
wanted –something quick, easy, and even fun.” He immediately set about defining what such
banking services might entail.
Consumer Trends in Mobile Banking
Navratil began by reviewing what mobile banking could offer beyond the ability to conduct
financial transactions through a mobile device such as a phone or tablet. Advantages included
easy access – anytime, everywhere – and many applications that provided unique benefits.
According to a recent report he had read, mobile and online banking represented the area most
likely to “delight” customers and engender lasting customer loyalty. The report also indicated
that “direct banks” had the highest customer satisfaction and loyalty rates among suppliers of
banking services.7 Even when an internet connection was unavailable, a mobile connection
almost always would be.
Though mobile banking had until recently appeared “futuristic”, for some consumers it was a
“must have”: its importance was rising while that of bank branches, internet, and ATMs was
declining. In many countries, Navratil predicted, the compound annual growth rate of mobile
banking would surpass 30% for the next four years. Already, many banks were developing
mobile capabilities to provide account access, payments, one-click transactions, 24/7 videointeraction, location-based services, analysis tools, loan requests, integration of social media
platforms, and product offerings from third parties.
However, mobile banking came with its own challenges. Beyond security concerns, data
privacy and regulations, a service provider had to integrate all services into a seamless
5
6
7
Kester Eddy, “Bad loans cast shadow over sharp rise in Serbian Bank profits,” Financial Times, October
28, 2013. http://www.ft.com/cms/s/866f14a8-3a42-11e3-9243-00144feab7de.html#axzz3TWqcOBeC
Ibid.
Bain & Company, “Customer Loyalty in Retail Banking: Global Edition 2014”,
http://www.bain.com/publications/articles/customer-loyalty-in-retail-banking-2014-global.aspx
Copyright © INSEAD
3
This document is authorized for use only by Sean Obrien in E-Marketing taught by Tyler Milfeld, Dickinson College from August 2017 to December 2017.
For the exclusive use of S. Obrien, 2017.
customer experience. To reap the fullest benefit it would have to anticipate what customers
needed and then provide products and services that added value.
Navratil was convinced that the potential for mobile banking in Serbia was strong: 73% of the
population was “banked”, that is, had access to basic banking services, but only 9% used
online banking, and 6% used mobile devices for banking purposes. Since more than 30% of
Serbian consumers owned smart phone mobile devices, there was, he believed, room for rapid
expansion. Rather than a supplement to traditional banks, he reasoned, mobile banking could
offer a different mix of services.
On aggregate, however, a fairly high level of risk existed, as the following survey results from
a market research firm indicated:
•
•
•
•
34% of Serbians expressed a willingness to use mobile banking so long as there were
strong safeguards for the security of their personal data.
31% would be encouraged to use mobile banking if the fees were lower than those of
traditional banks.
88% of those who didn’t use online banking (i.e. approximately 80% of all banking
customers) felt they had no need for mobile banking.
62% of those who didn’t use online banking knew little if anything about it.
In spite of these results, Navratil concluded, there were exciting possibilities in branding and
consumer outreach, assuming Telenor could access the appropriate demographic groups and
come up with a package of products that would best serve them8 (see Exhibit 3).
Telenor’s Decisions
Customer Segmentation and Targeting
Navratil had to decide which customer segment(s) to target. He had identified at least six
distinct groups, each with its own opportunities and drawbacks. The profiles were mostly
driven by needs and attitudes, but also other dimensions. As Navratil saw it, he had to choose
his targets from these six – perhaps a single segment, perhaps a combination, or even a subsegment of any one of them.
Segment 1 was predominantly urban (82%); the employment rate was high (78%) and a
majority were male. “Among my friends, I am usually one of the first to try new services
offered by mobile providers. I really like trying new functions,” stated one member of this
group. He wanted, he explained, a handset “as smart as possible” and the fewer people that
had it, the better. They enjoyed change, adventure and risk; they regularly kept up with
financial news and promotional opportunities. Nonetheless, though open to changing banks,
they tended to be satisfied with their current banking services. As a whole, they represented
12% of the total population; their monthly household income was relatively high at 49,094
RSD9, enabling them to save.
8
9
“Consumers and Mobile Financial Services,” Federal Reserve, March 2012,
http://www.federalreserve.gov/econresdata/mobile-device-report-201203.pdf.
1 Serbian Dinar equalled 0.008 EUR at the beginning of 2015.
Copyright © INSEAD
4
This document is authorized for use only by Sean Obrien in E-Marketing taught by Tyler Milfeld, Dickinson College from August 2017 to December 2017.
For the exclusive use of S. Obrien, 2017.
Segment 2 offered a stark contrast. Nearly 40% lived in rural areas; 67% were employed. In
terms of age they were fiftyish. They preferred to pay in cash and didn’t use loans to buy
consumer goods, eschewed risky investments, and regarded themselves as extremely careful
with their savings. “Computers are not for me,” one of them remarked, and “mobile phones
are complicated to use, somebody has to show me how to use it.” In their attitudes they were
modest – respecting traditions, revering their ancestors, and preferring to keep their lives
simple and uncluttered. Only 15% owned a smartphone or used the mobile internet. They
represented 20% of the total population and a majority were male; their average monthly
income per household was 25,195 RSD.
Segment 3 was predominantly urban (73%), three quarters were employed, and 51% were
female. Their ages varied widely. Liking change, challenge and risk, they tended to feel
comfortable borrowing money for consumer purchases. While acknowledging that their
financial situation was “tight”, they were open to investments with the prospect of high
returns, though they did not keep up with financial news and opportunities with any particular
attention. Regarding computers, they were comfortable with the internet and mobile apps.
While satisfied with their bank, they were open to the possibility of changing. “When I am
waiting for something or I’m bored,” said one of them. “I like using my handset for playing,
wapping, or SMS. A mobile phone makes life more fun.” This segment comprised 13% of the
total population. Average monthly income per household was 28,753 RSD.
Segment 4 was young, often in their early 20s; 54% male; 39% rural; with a high rate of
unemployment (64%). In a tight financial situation, they rarely used loans or borrowed
money, disliked risky investments, and showed very little interest in financial news. With the
exception of entertainment, they didn’t like computers or the internet. “Computers are not for
me,” one of them said, “and mobile phones are complicated, I only use the most simple
functions [apps]”. In their personal lives they preferred to be self-reliant, avoiding financial
worries or complications in favour of safety and simplicity, and were “modest and selfeffacing”. They were more dissatisfied with their banks. They represented 19% of the total
population. Monthly income per household was 23,022 RSD.
Segment 5 – the biggest segment– was majority female and urban, concentrated in the smaller
cities; in their mid-40s, with an employment rate of 70%. With relatively low penetration of
smartphone ownership and mobile internet usage, they were very focused on their family and
social lives. Highly risk-averse and hesitant in their decision making, one of their principal
goals was to save money, for which they worked very long hours. According to one of them, a
mother of four, “I enjoy computers, but with all of my family and community commitments, I
rarely find time to go on the internet for pleasure.” This segment represented 32% of the total
population. Average monthly income per household was 51,022 RSD.
Segment 6 was half male, with an average age of 30; nearly 80% were employed and
pursuing a career in a major city. There was a high penetration of smartphone ownership and
mobile phone usage. In terms of financial preferences, they tended not to worry too much
about their decisions and showed no aversion to risky investments or borrowing in order to
boost their c …
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