In 2008 Sir Richard Branson’s multinational conglomerate Virgin Group decided to enter Indian mobile phone market through a 50-50 joint venture with Indian mobile phone service provider Tata Teleservices (Terazono, 2007). The company Virgin Mobile India was founded as mobile service provider to target the youth market. The deal was a franchise arrangement, where Tata was selling part of its services under the Virgin brand. Tata had to pay a pre-agreed fee to Virgin for every user buying the youth-focused service. The deal was considered as a brand extension plan, where Virgin Mobile was one of the brands offered by the Tata Teleservices. Also, both companies had the option to work with other partners (“Virgin Mobile enters India, but not as MVNO,” 2008).
An important factor for creating a successful alliance is a strategic fit (Zaman & Mavondo, 2008). It refers to whether “partner can provide the complementary skills and resources that the other firm can not acquire or possess in a way that constitute a strategic advantage” (Ungson & Wong, 2014, p. 288). Ungson and Wong (Ungson & Wong, 2014, p. 288) define a number key driver (aspects) for strategic fit between the alliance members. The first driver defines that the reasons for entering the alliance should complement each other. In this case, Virgin group wanted to enter Indian market, while Tata Teleservices needed the recognizable brand for its services. In India Virgin Group was already known to consumers through Virgin Atlantic airlines, which flies into Delhi and Mumbai. The second driver is the access to the complementary skills and competencies. Virgin group got access to the infrastructure and the network in India, while Tata got the expertise in design and marketing of mobile services. Virgin was able to provide extra value for young users through music, downloads and games. Another driver is the need of alliance members to achieve their objectives. For Virgin group, entering the Indian market directly would have involved not only complicated paperwork procedures, but also huge investments in the development of the infrastructure and the network. Thus, the decision to form joint-venture agreement with the local service provider seemed to be an effective way of entering new market.
References
Terazono, E. (2007). Virgin to venture into India mobiles with Tata. Retrieved March 6, 2016, from http://www.ft.com/intl/cms/s/2/f032effa-04ce-11dc-80ed-000b5df10621.html#axzz428eI1SsY
Ungson, G. R., & Wong, Y.-Y. (2014). Global strategic management. Routledge.
Virgin Mobile enters India, but not as MVNO. (2008). Retrieved March 6, 2016, from http://articles.economictimes.indiatimes.com/2008-03-03/news/28493476_1_virgin-mobile-virgin-group-mobile-virtual-network-operator
Zaman, M., & Mavondo, F. (2008). Measuring Alliance Success: The Role of Strategic Fit. In ANZMAC 2008 Conference (Richard Fletcher and David Low 1 December 2008 to 3 December 2008) (pp. 1–10).
