the analysis of viettel telecom corporation penetrate into singapore market

BANKING ACADEMY FACULTY OF INTERNATIONAL BUSINESS ESSAY SUBJECT THE ANALYSIS OF VIETTEL TELECOM CORPORATION PENETRATE INTO SINGAPORE MARKET Credit: Introduction to international trade and finance Lecturers: MSc Hoang Phuong Dung, MSc Nguyen Thu Huong Group 4: Nguyen Thi Hoai Anh Chu Kim Oanh Đoan Thi Thom Luu Thi Anh Linh Hoang Thi Minh Trang Nguyen My Linh Nguyen Thi Nhung Ha Noi – 2017 Table of Contents Introduction Internationalization brings a number of challenges and opportunities to all economies around the world All of the enterprises in a country must have their own plan for maintenance and growth in international context In cases, a number of enterprises choose to go international There are many reasons for this choice of enterprises Several cases invested to other countries because they have their own evaluation and comparison between domestic and foreign market; thus going abroad is one of the best way for growing faster instead of a stagnant domestic market The other go abroad in order to compete with their domestic competitors Whatever reasons for going international, the final purpose of every enterprise is the prospected profit to be made (Root, 1994, 1564) In order to achieve this aim, each enterprise must have suitable entry mode choice to expand Among variety of internationalization process implements, telecommunication shows as an effective mean According to Afullo (1999, 287-296), telecommunication is the engine for economic growth It has participated to internationalization process of all areas of the global economy It helps other service business to deliver service and help international communication to become easier and faster (Lovelock and Yip, 1996, 64-68; Knight, 1999, 347-360) In Vietnam, the internationalization process of mobile network operators have grown rapidly and play a vital role to the economy of the country Before 2000, the Vietnamese telecommunication market had only one supplier named Vietnam Posts and Telecommunications Corporation (VNPT) With the entry of Viettel in 2004, the Vietnamese telecommunication market become more competitive; eliminate the monopoly status in the market Viettel’s background Viettel is one of the largest telecommunications companies in the world in terms of number of customers Viettel has a significant presence in 12 countries and a customer base that includes more than 85 million accesses around the world in Asia, Africa and America Other than Telecommunications, Viettel also participates in Research and Production of Hi-End Technology and some other categories such as Posts, Construction, Commerce, Importing and Exporting, IDC 2.1 General Introduction Full name in Tập đoàn Viễn thông Quân đội Việt Nam Vietnamese Name in English Viettel Group Slogan Hãy nói theo cách bạn (Say it your way) Founded 01/06/1989 Headquarter Hanoi, Vietnam The main field of Telecommunication activity Brands website http://viettel.com.vn/ 2.2 History Timeline Establishment of SIGELCO, original name of Viettel Group Setting up the first broadband microwave backbone (140 Mbps) and the 1989 – 1999 highest antenna tower (85 meters) in Vietnam The first new company to be licensed to provide all kinds of telecom services in Vietnam - Completion of 2.5Mbps capacity North-South Fibre-Optic Backbone using the latest technology in Vietnam to successfully achieve bi-directional transmission over one cable 2000 – 2005 Provide telecommunications services sufficiently in Vietnam - Become the telecommunications operator with the largest network infrastructure 2006 – 2009 Launching service in Cambodia (Metfone), Laos (Unitel) Among Top 100 global telecommunications brands Owner of the biggest 3G network in Vietnam and the only 3G operator in the world to cover 86% of the population upon launching the service - Joining the GSMA (Global System for Mobile Communications Association), and the International Telecommunication Union (ITU) 2010 – 2013 2014 - 2015 Launching service in Haiti (Natcom), Mozambique (Movitel) and TemorLeste (Telemor) Inaugurate Vietnam’s biggest IDC - Successfully produce 3G USB, 2G & 3G mobile phones Launching service in Peru (Bitel), Cameroon (Nexttel), Burundi (Lumitel), Tanzania (Halotel) - M&A Beeline in Cambodia 2.3 • Viettel’s Solution Comsumerservice: andmanufacturing • Interprise service: IT, IT, telecommunication, Telecommunication, retail, post, post, research research and manufacturing, import and export, other service • Government service: Electronic one access, Electronic one access, Staff management system V-GOMs, Vportal.One, Digital Office Management System V-Office 2.4 Network Viettel has deployed telecom infrastructure in 10 countries to serve a customer base that includes more than 90 million people around the world across Asia, Africa and America Viettel Group is one of the fastest growing operator in the world The Group's network is featured with 99,500 GSM Stations (2G, 3G and 4G) and over 365,000km of fiber optical cable Apart from Vietnam, Viettel has invested in telecommunications sector in 10 countries across 03 continents, including; Cambodia, Laos, Timor Leste, Myanma for Asia Mozambique, Cameroon, Burundi, Tanzania for Africa and Haiti, Peru for America Reasons for finding a new foreign market Deputy General Director of Viettel similes and analyze, whether the country including political instability, civil war and natural disasters, but telecommunications services is still essential It is the rice as rice, so that the country would need anywhere anytime Moreover, the telecommunications infrastructure is also related to many other fields such as education and training, construction, economic so that Viettel does not hesitate to invest in the foreign market There are a variety of reasons why companies decide to go abroad and expand their business operations Organizations mainly engage in international businesses in order to establish competitive advantages and efficiently adapt to the ever-changing business environment However, it is rarely the case that firms are just driven by one single factor In the context of international marketing, proactive and reactive reasons or motivations can be differentiated While proactive factors are stimulated by internal strategic change, reactive reasons result from environmental shifts Proactive reasons include growth in terms of revenue, sales and customer base, cost savings due to economies of scale or low-cost manufacturing, and reduction of dependency on a single national market as well as alternative sources of labor Reasons which rather force the firms to expand to foreign countries and markets are described as reactive ones For instance, domestic markets could be already saturated or emerging competitors prevent firms from further increase its market shares and therefore, stay competitive Even though most companies highly profit from operating internationally, they are often faced with incalculable risks and challenges Possible risks are primarily based on a lack of information regarding consumer preferences, unfamiliar business procedures and regulations, as well as human resources management Internationalization process is increasing day by day The enterprises have competed with not only domestic enterprises but also foreign enterprises When the domestic market has become increasingly crowded, searching a new foreign market is demand of each enterprise to expand their scale However, not all of the Vietnamese enterprises in which investing in foreign market has achieved in the foreign market The case study of Viettel is the phenomenon when achieving the success not only in the domestic market but also in the foreign market From 2009, Viettel has invested in a number of foreign markets such as Cambodia, Laos, Haiti, Mozambique, and Peru They are the difficult market but have a number of potentials to develop in the next few years In these markets, Viettel has had some initial success such as becoming the biggest mobile network operators in Cambodia, achieving the award from international telecommunication organizations This research focuses on analyzing the international market entry strategy of Viettel when operating business in foreign market Moreover, this research has investigated the opportunities and challenges for Viettel in the process of penetrating foreign market Singapore’s PESTLE analysis Over the last decade, Singapore has shown extraordinary economic growth Today it is considered a high-income economy The growth is driven by several factors Some of them are private consumption expenditure, local and external demand, and investments Singapore’s leading sectors as pharmaceutical and petroleum refining industry have the potential to attract other countries to invest PESTLE is a business tool used to study the macro-environmental factors It is an acronym for political, economic, social, technological, legal and environmental factors 4.1 Political factors The political risk in Singapore is quite low In fact, the Political and Economic Risk Consultancy (PERC) states that the country enjoys the lowest political risk in the continent It is a democratic country The people elect representatives to lead the nation Since its independence, they cherished relative political stability Today, the stability has translated to peace and a better standard of living Moreover, it has transformed into improved business opportunities for Singapore However, there have been reports about restriction of free speech for opposition parties in Singapore It is said that the value of free speech for the parties is limited The defamation laws require opposition parties to be careful that political comments not lead to costly defamation suits or imprisonment The fear of legal suits limits the potential of free speech for opposition parties in Singapore Another factor is limited dissemination of content These discourage the opposition parties As a result, the contribution to free speech activities and inter-party debates is low 4.2 Economic factors The economy of Singapore is a vibrant free-market economy It is developing at a very fast pace The country’s per-capita income is the highest in ASEAN A corruption-free environment supports the business sector It is among the most competitive countries The educated and motivated workers strengthen it The legal and financial business framework helps as well Recently, the government has invested in diversifying the economy As a result, the tourism, pharmaceutical, and many other industries have flourished One of the main reasons behind the success is its strategic geographic location The government is an imperative and active player It owns substantial productive assets Cheaper labor cost from neighboring countries helps Singapore save a lot of costs Some constraints on Singapore’s economic performance are the following:  Labor shortages  Rising labor costs  Declines in productivity 4.3 Social factors Socially, Singapore is like any other Eastern country It still follows traditional family values It is true that the younger generation has the tendency to follow western culture and values The residents work hard and fulfill the materialism desire This urge to well has increased nation productivity The business sectors can, therefore, expect higher purchasing power from customers Reports suggest that most Singaporeans dislike blue collar jobs like construction Literacy rate in the country is very high Primary schooling is compulsory in Singapore Parents must ensure children’s regular attendance Good command of English and Chinese languages gives Singaporeans an advantage It helps to attract international trade and foreign investment 4.4 Technological factors One of the main reasons behind the change in lifestyle and quality of life is the technological advancement The IT infrastructure in Singapore is praise-worthy The penetration rate for household broadband internet is over 70% E-commerce and eB2Cmodels have flourished in turn More than 10Mbps of broadband internet service is available The widespread IT infrastructure has encouraged multinational companies to set up regional operations in Singapore The government is also moving towards an electronic government era 3G technology has gained a lot of market share in 2009 with 6.58 million mobile users and a penetration rate of 136%, compared with 6.22 million mobile users and a penetration rate of 129% in 2008 Youth markets in Singapore are most likely to be highly receptive to new 3G technology telecom companies conduct internet sales on hand phones, telephony and accessories such as batteries, chargers, headsets, memory cards etc 4.5 Legal factors Singapore has various Free Trade Agreements (FTAs) with its trading partners, bringing about some changes to the country's legal environment Various restrictions which were on indirect and direct foreign ownership within the telecom sector have been lifted, which has created a progressive commercial environment, over 97% of homes have fixed-line telephone connections Singapore-based companies enjoy benefits in services, such as enhanced access to important service sectors like telecommunications in the FTA markets (Broadband, n.d.) 4.6 Environmental factors The Ministry of the Environment and Anti-Pollution Unit works relentlessly to maintain air quality and other environmental factors Pollution 10 from the transportation is the key problem in Singapore’s urban areas There was a time when Singapore was among countries with the highest level of industrial carbon dioxide emissions Singapore lost almost 30% of its mangrove area Many species are in danger of extinction The Water Pollution Control and Drainage Act helps control water quality One of the major concerns for Singaporeans is that the country does not have enough water to support their needs Pollution from the industrial byproducts like oil increases the problem As a solution, water is recycled after desalination As there is a lack of water resources, Singapore is dependent on Malaysian supplied water A local brand called NEWater supplies sewage water after purifying it using dual-membrane More solutions to this problem are needed Methods of entering an overseas market Joint venture is the method chosen to enter the telecommunication market in Singapore by some reasons • First of all, Viettel can share costs with partners A joint venture is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task This task can be a new project or any other business activity In a joint venture, each of the participants is responsible for profits, losses and costs associated with it and in return, profits and losses are also shared in agreed ratio In the absence of any other agreement between the co-venturers, the profits and losses are shared equally - Cost of establishing a distribution channel A common use of JVs is to partner up with a local business to enter a foreign market Due to a JV agreement with a local unit, Viettel can effectively expand their business to a new country by supplying products to a local market, thus benefiting from an already existing distribution network - Cost of market survey and approach 11 When a newcomer goes to a new market, it is unavoidable to face barriers of culture and social values Therefore, local partner supports Viettel to eliminate such costs through providing valuable database and marketing consultancy - Cost of infrastructure As been known, telecommunication requires a large and sophisticated infrastructure which need a long time and huge budget to set up Thus, working in consortium helps two parties invest what they own so far for a win-win target Certainly, they can take use of existing infrastructure from local partner • Secondly, joint venture help share risks with partner - Risk of legal constrain and local regulations One of the most common risk that a company may cope with when penetrating an overseas market is unfamiliarity with local laws and related regulations It’s not mentioned that sometimes the local policies are incompatible with international practices In this case, thanks to a Singapore’s telecom operator, Viettel can avoid all of such barriers - Risk of geographical constraints Why Singapore? It’s a potential market and a gateway for Viettel to approach the whole Asia in the long run Singapore has one of the highest per capita GDPs in the world According to Singapore Economic Development Board, Singapore attracts an influx of foreign investment and key business partnership With pro-business incentives and world class infrastructure, Singapore has successfully established itself as an important financial and technology hub in Southeast Asia Besides, Singapore is like “a second USA” which is a melting pot of multi-culture, ethnic and religious background A country with too many potential factors to take over 12 • Thirdly, Viettel takes use of greater resources, including specialised staff, high information technology and strong finance As stated above, Singapore is a best choice to look for an agreement of joint venture Not only own complex infrastructure but a telecommunication company in Singapore also employs a strong team of professional and rich experienced staffs Working with such expertised human resources like that, Viettel will definitely have rapid growth in comparison with other domestic competitors, which raises prestigious and competitiveness of Viettel to a higher level Conclusion Analyzing the international market entry strategy of Viettel could help researchers to understand the operations of Viettel and the decisions helps Viettel deal with difficulties in order to become the leading telecom brand of Vietnam in international market International business strategy in addition to the flexibility of international market penetration has contributed to the success of Viettel in international market The new position of Viettel has increasingly strengthened With the aim to analyze the international market entry strategy of Viettel in the process of penetrating in Singapore telecommunication market, the research has firstly focus on studying the basic reasons for the international market penetration and for the investing and improving the business operations in the target foreign markets The international market penetration of Viettel has also analyzed the factors affected to the decisions, the choice of the target market and the entry mode choice This analysis leads to the only result that the researcher could investigate the advantage and disadvantage in the process of international market penetration of Viettel At the end of this dissertation is some recommendation in order to help Viettel to improve their international market penetration 13 The international market has a number of potential for Vietnamese enterprises in all sectors especially for telecommunication enterprises In the context of globalization, the competition between mobile service providers has increased continuously and the domestic market has become saturation It requires the 68 enterprises to have an appropriate strategy to develop the business operations Investing in foreign market is one of the best choices for all enterprises in this time especially for telecommunication enterprises However, it is not easy to penetrate a foreign because each country has a number of barriers in order to protect their domestic enterprises For the case study of Viettel, the international market penetration is a great opportunities but it also provides a number of difficulties and risk in the process of doing business in international market In order to exist and develop in the international market, Viettel has always tried their best to understand the foreign market, their customers’ demand, interest, habit This dissertation is necessary for improving the effective investment of Viettel Moreover, it also provided a number of recommendations in order to help Viettel as well as other Vietnam telecommunication enterprises to have more success when operating business in foreign market in the future 14 ... foreign market has achieved in the foreign market The case study of Viettel is the phenomenon when achieving the success not only in the domestic market but also in the foreign market From 2009, Viettel. .. and Telecommunications Corporation (VNPT) With the entry of Viettel in 2004, the Vietnamese telecommunication market become more competitive; eliminate the monopoly status in the market Viettel s... addition to the flexibility of international market penetration has contributed to the success of Viettel in international market The new position of Viettel has increasingly strengthened With the aim