Summary
There is a rapid change in the telecommunications world brought about by new technologies like broadband and wireless Internet access that make possible video telephone connections and high speed data transmission. The demand for telephone call increases and various countries are taking advantage of the market opportunities. The end result is the globalization of the telecommunication industry as alliances and joint venture partnerships are formed. France Telecom, Deutsche Telekom, and Sprint created Global One to bring international telecommunications services to multinational companies. This was however marked by some limitations in the initial stage including high start-up costs and language barriers. With the goal of improving global telecommunication, WorldPartners began as an alliance of AT&T, Kokusai Denshin Denwa of Japan, and Telecom of Singapore. Today, it includes Telecom New Zealand, Telestra, Hong Kong Telecom, and Unisource.
Unisource and AT&T agreed to form a 60-40 joint venture (AT&T-Unisource Communications) that offers voice, data, and messaging services to business with European operations. The joint venture developed a sense of equality and congeniality. AT&T was greatly boosted by Telefonica de Espana’s strong influence in Latin America. When Telefonica pulled out, the alliance was weakened; however, AT&T and Italy's Stet created a new alliance that expanded communication services to both Latin America and Europe. Concert Communications was the third major alliance with the goal of offering global voice and data network services to global corporations.
Question 1: What strengths did AT&T bring to its joint venture with Unisource?
One of the strengths of AT&T is its strong brand name. The venture, thus, benefited greatly from this strength. The enormous size of AT&T made it possible for the joint venture to achieve its globalization goals. Due to the fact that AT&T included Telefonica de Espana, which had strong influence in Latin America, AT&T-Unisource Communications greatly benefited from this market. Even after losing Telefonica de Espana, AT&T continued its Latin America market capture through creating an alliance with Italy's Stet that further expanded its communication services.
Other strengths that the joint venture derived from AT&T are highlighted hereunder. AT&T-Unisource joint venture gained new capacity and expertise, new technological knowledge, and at the same time entered new geographic markets. The alliance enjoyed an access to greater resources and at the same time shared the risks. As a result of the joint venture, AT&T-Unisource Communications had the opportunity to penetrate protected markets, the production costs were lowered due to economies of scale, and there was the sharing of high research and development costs as well as risks. Unisource also managed to gain access to AT&T know-how and both marketing and distribution channels.
Question 2: Can you think of any potential complications that could arise in the AT&T-Unisource joint venture?
In any joint venture, there are a number of potential complications, and AT&T-Unisource joint venture is not an exception. The general complications include differences in cultures and management styles that eventually result in poor cooperation and integration. Imbalance in the levels expertise and failure of the partners to provide sufficient leadership and support are most likely to be potential complications.
It can be stated without any reasonable doubt that the structure of the AT&T-Unisource joint venture was very difficult to manage based on its enormous size. There were complexities of legal and commercial relationships, lengthy negotiations, high start-up costs, and the need to communicate in different languages. Lack of trust among partners could also arise thus creating complexities. Other problems that might arise include equipment and billing incompatibilities resulting from distribution agreements in the individual countries, financial losses, and the potential for conflicts and disputes. There could be disagreements on how to manage the business affairs, the future or the direction of the business, and how to capitalize the business.
It is also true that joint ventures cannot work if all there is no mutual willingness of both the parties in building a solid relationship. Identification of clear objectives is another most likely complication especially when both partners have different visions and goals of the joint venture. The most likely cause is lack of communication, which, ultimately results in both partners focusing on different goals. Uneven balance is another complication especially when one partner lacks expertise in a number of areas or when the workload is not evenly distributed.
Question 3: Assess the formation of Global One, Unisource, and other partnerships discussed in this case in terms of the strategic factors for selecting entry modes indentified in this chapter.
There are four entry modes, namely: direct investment, licensing, joint venture, and exporting. In this chapter, the entry mode is joint venture as seen hereunder.
The partnerships stated herein majorly formed following the need for capitalization of on the changed market and business environment. Global one was formed with a sole aim of bringing the international telecommunications services to multinational companies. This was however, faced with various challenges including integration of the three partners' communication networks, language barriers, etc. WorldPartners started with the main aim of providing improved telecommunications services to companies conducting business globally. WorldPartners started as an alliance of three companies namely Telecom of Singapore, AT&T, and Kokusai Denshin Denwa of Japan. Because of its strategy, WorldPartners has grown and is currently composed of ten companies.
The strategy of Unisource was to offer voice, data, and messaging services to business with European operations. It started as a joint venture including Sweden's Telia AB, Swiss Telecom PTT, and PTT Telecom Netherlands. Due to the need for offering global solutions, Unisource entered a joint venture with AT&T. Concert Communications, on the other hand, was formed with a goal of offering global voice and data network services to global corporations.
Based on the above information, it can be seen that the strategic factors for selecting this entry mode are the strategic goals of the partner, the partner’s market power, size, and industry, and the partners’ ability to learn from each other.
Reference
The case study
