Enhancing Telecommunications Expansion Strategy

1. Title Agenda Introduction Problem Alternatives Rating Conclusion By Team …

2. Title Agenda Introduction Problem Alternatives Rating Conclusion Agenda • Introduction • Problem Statement • Alternatives • Ratings • Conclusion

3. Title Agenda Introduction Problem Alternatives Rating Conclusion Introduction • Atlanta, Georgia • Telecommunications Company • 1991 Annual Sales - $14.4 billion • Income after taxes - $1.5 billion • Ranked among top 25 U.S. Corporations • 1984 AT&T Breakup • Cellular Communications

4. Title Agenda Introduction Problem Alternatives Rating Conclusion 1986 – BellSouth Enterprises BellSouth International • Legal aspects of foreign countries International Systems • Support with the installation of financial systems World Wide Wireless • Technical operations of cellular telecommunications

5. Title Agenda Introduction Problem Alternatives Rating Conclusion • Need for a billing system • Linking capacity of cellular phones • Large number of different billing plans • Different ways of doing business in countries

6. Title Agenda Introduction Problem Alternatives Rating Conclusion • Identification number • Inbound and Outbound calls • Exchange of billing information • Highly competitive industry • Variety of billing plans • Flat rate • Per minute

7. Title Agenda Introduction Problem Alternatives Rating Conclusion • BellSouth in international markets • Uniform billing system • Languages • Currency • Business practices

8. Title Agenda Introduction Problem Alternatives Rating Conclusion • BellSouth wanted to introduce a revolutionary software to cope with the complexities of all the different markets BellSouth had already entered or sought to enter. • Such technology was intended to give BellSouth a competitive advantage, and help the company enter new markets faster than the competition. • The company had several options in obtaining software that could handle cellular billing.

9. Title Agenda Introduction Problem Alternatives Rating Conclusion Options for a Solution • Outsource the billing system to a service bureau. - 1992: service bureaus weren’t operating in the cellular market. 2) Develop a software system using in-house programmers. - Lack of resources. - threat of computer technicians driving the project.

10. Title Agenda Introduction Problem Alternatives Rating Conclusion Options for a Solution 3) Purchase a software package. - Software available did not meet the requirements. • Contracting with a vendor to customize a product. - Traditional vendor-client relationship was not going to solve the companies problems.

11. Search for a strategic partner Vendor Stability 1 Vendor Vision 2 Product Fit 3 Worldwide Support 4 Cost 5

12. Title Agenda Introduction Problem Alternatives Rating Conclusion Strategic Alliance between BellSouth and TeleSciences Motivation for BellSouth to join strategic alliance Influence on product development Contribution of BellSouth to strategic alliance Expertise about the required functionality of billing software package Contribution of TeleSciences to strategic alliance Design billing software package according to the requirements of BellSouth

13. Title Agenda Introduction Problem Alternatives Rating Conclusion Interests are not congruent • BellSouth has committed to a deadline in New Zealand • The deadline is of little importance to TeleSciences since the company would be able to sell the product even if the deadline was not met • Contract does not provide for recourse against TeleSciences Unequal share of cost and benefits • BellSouth contributes its expertise in the early stages of the cooperation • Later, BellSouth is not allowed insight into the documentation of the product development

14. Title Agenda Introduction Problem Alternatives Rating Conclusion Lack of Communication • No direct input into the product development process by BellSouth • TeleSciences owns the product definition Instability of the alliance • Frequent management changes • Both parties can terminate the agreement on a 30 days notice at any time

15. Title Agenda Introduction Problem Alternatives Rating Conclusion Problem Statement It soon became obvious that the contractual details of the agreement between BellSouth and TeleSciences were not appropriate to facilitate a balanced long-term business relationship Driving forces for the formation of Joint Ventures

16. Title Agenda Introduction Problem Alternatives Rating Conclusion Alternatives • Redesigned Contract • Must Support Long-Term • MOU and 30-day termination • Long-Term Contract • Common Objective • Form of Strategic Alliance • Responsibilities of each party

17. Title Agenda Introduction Problem Alternatives Rating Conclusion • Long-Term Contract Specifics • Contractual Penalties and Commitments • Support Common Objectives and Benefits • Risk Allocation • Clear Definition of Risks and Responsibilities • Communication and Party Changes • Quantity, Quality, and Form of Information • Consequences of Party Changes

18. Title Agenda Introduction Problem Alternatives Rating Conclusion • Problems with Contract Redesign • Specifics hard to monitor • Free-Rider-Maximizing Benefits • Divergent Objectives

19. Title Agenda Introduction Problem Alternatives Rating Conclusion Definition: Joint Venture • A contractual agreement • Joining together two or more parties • Purpose of executing a particular business venture • All parties agree to share in the profits and losses of the enterprise Driving forces for the formation of Joint Ventures • Business expansion • Development of new products • Moving into new markets, particularly overseas

20. Title Agenda Introduction Problem Alternatives Rating Conclusion Advantages - generally • Sharing of risk with partner • Access to specialized staff and technology • Access to new markets • More resources • Greater capacity • Increased technical expertise • Established distribution channels Risks - generally • Objective of the Joint Venture is not absolutely clear • Objective of the Joint Venture is not communicated to all the staff involved • Different cultures and management styles can result in poor integration and cooperation between partners

21. BellSouth TeleSciences • Benefits from pooling resources • Benefits from pooling expertise • Sharing of expenses • Sharing of project risk • Access to increased technical expertise • Benefits from pooling resources • Benefits from pooling expertise • Sharing of expenses • Access to established distribution channels • Share of control and profits • Theft of core competency • Share of control and profits • Theft of core competency • … Title Agenda Introduction Problem Alternatives Rating Conclusion

22. Title Agenda Introduction Problem Alternatives Rating Conclusion Benefit of a JV for the Cellular Billing Project An establishment of a JV does not represent a temporary cooperation 1 Parties’ investments evidence their interest in building and maintaining a long-term relationship 2 Management changes are generally restricted 3 Allocation of risks and rewards is explicitly addressed in the JV agreement 4

23. Title Agenda Introduction Problem Alternatives Rating Conclusion Benefit of a JV for the Cellular Billing Project Problem of divergent interests or objectives can be eliminated, or at least reduced to a reasonable level 5 Parties are interested in effective documentation, communication, and knowledge sharing 6 Flow of information is expected to be better within a Joint Venture 7 The formation of a joint venture could have avoided many of the problems faced by the strategic alliance.

24. Title Agenda Introduction Problem Alternatives Rating Conclusion Rating

25. Title Agenda Introduction Problem Alternatives Rating Conclusion Conclusion Incongruity of interests Lack of communication Major problems Instability of the alliance Unequal risk sharing A Joint Venture between BellSouth and TeleSciences could eliminate, or at least reduce, many of the problems faced by the strategic alliance.

26. We thank you for your attention