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CP Orange: Success or Failure
CP Orange Overview
CP Orange was established as a joint-venture alliance between CP Telecommunication and
Orange SA, an English telecommunication operator and later on was taken over by the
French, in 2001. The initial investment of CP Orange to provide a GPRS (General Packet
Radio Service) network in Thailand and to build GSM 1800 MHz wireless network that
would offer a range of 2.5G services under the Orange brand name was 22,500 million Baht.
The CP Orange network was expected to be the biggest-capacity GPRS network in Asia
Pacific and the first in Thailand.
The Analysis
Porter 5 Forces Analysis
Threat of Substitute Products: In 2001, the telecommunication market was growing. There
were only two substitutes, which are Personal Communication Telephone, PCT, and the fixed
line telephone. PCT is operated by CP telecommunication. Fixed line is provided by TOT, a
state owned company, which used to have a right over the concession distribution of the
telecommunication service. Thus, this made the threat of substitute product moderate.
Threat of New Entrance: During the time of CP Orange establishment, the
telecommunication services were booming, millions of Thais owned cell phone and the
government promoted foreign investments throughout the country but the telecommunication
business was an extremely expensive business to invest. Therefore, the threat of new entrance
was moderate.
Intensity of Industry Rivalry: There are two major competitors for CP Orange, which are
DTAC and AIS. AIS was the first telecommunication provider in Thailand and gained the
first mover advantage. DTAC was also a joint-venture company. Both of the companies have
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their own market bases and target slightly different group of customers. They also have good
signal, service and experience. Thus, the intensity of competitive rivalry was high.
Bargaining Power of Customers: Due to the fact that there were only two choices available
for customers at the time, the telecommunication business was still growing and customers
were still learning about the product. This results in low bargaining power of customers.
Bargaining Power of Suppliers: Suppliers in telecommunication industry were fragmented.
With small number of suppliers, the market for suppliers was quite competitive as there were
only two big companies, AIS and DTAC, which they could supply. Hence, the bargaining
power of suppliers was low.
Thus, we may conclude that the level of industry profitability was moderate to high.
Competitive Analysis
Competitive Grid
CP Orange
DTAC
AIS
Signal
3
4
5
Promotion
4
5
3
Customer Service
3
5
4
Price
4
4
3
*The score are ranged from 1-5 in which “5” is the highest and “1” is the lowest
According to the grid, CP Orange was still uncompetitive comparing to its competitors
because it was new to the market and the brand awareness was not there.
Competitor Analysis
AIS
AIS was established in April 24th, 1986. In 2006, the company had approximately
17.7 million customers. The company was the first telecommunication operator in Thailand.
The target market was primarily middle to high end customers.
Strengths

No.1 Thailand mobile operators, both as subscribers and revenue
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
The largest network coverage with over 14,000 cell sites nationwide

Successfully developing three distinctive brands targeting different customer profile

Maintain market share leader both in city and rural areas at approximately 48%

Strong dividend payment with low debt profile

Good reputation of both products and services

Brand awareness and market knowledge from being the first mover advantages
Weakness

Small market share over the prepaid customers as they are not the main target

Relatively high price comparing to competitors
DTAC
DTAC was established in 1989. In 2006, the number of customers was around 12
million people. DTAC entered Thai communication market as the second provider with the
target market of middle to low end customers.
Strength

No.2 Thailand mobile operators in terms of market share and customers

Engineered network to prevent disconnection

Excellent promotions

Well defined target consumers with loyalty and awareness
Weakness

Focused too much on the prepaid segment

No competitive advantage over the signal based as the government granted the
operation to AIS
SWOT Analysis
Strengths

Reputation of CP helps CP Orange to capture the local market share

Market knowledge and base from CP telecommunication service such as PCT

Qualified and skilled employees and good training and development program
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
Strong Financial support

Excellent service reputation
Weaknesses

Loss of first mover advantage

Conflict of decision making process from cultural differences
Opportunities

Increase the market share as Thai market was in the growth stage

Diversify to related businesses such as internet
Threats

Economical instability

Political instability: uncertainty of the government policy

New comers as the market was expanding very quickly
Motive
Partner Overview
Orange SA
An English based company that was the first to provide global wire free and now its service
is available in 20 countries worldwide and 13 countries in Europe. The brand is well known
as excellent customer service provider.
Later, Orange SA was one of the telecommunication providers that were acquired by France
Télécom, the biggest telecommunication operator in France and the third-largest in Europe.
The purpose of acquiring was to grow its market throughout Europe. Their strategies for
growth activities are strongly focus on innovation, convergence and effective cost
management. Thus, the growth strategy for Orange SA was changed from expanding to new
markets to cost saving. Resulting in cost management and cost-benefit ratio analysis as the
main criteria they considered the most in choosing partners.
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Since the beginning of year 2001, Orange brand continuously received high rating and ranked
number one in the market for customer satisfaction survey. Orange’s core competency of
superb service provision has contributed significantly to its success. Good service reputation
was a good chance for Orange to expand; however, customers’ requirements were different.
Therefore, partnering with local operator is required to gain knowledge and access in local
market.
Telecom Asia, as the telecommunication operator for CP Group
In 2001, the telecommunication market had a big growth potential but it was obstructed due
to power of the 2 market leaders. AIS and DTAC battled against each other in terms of price
and technology. Fortunately, Telecom Asia, a telecommunication operator under CP group,
recognized that there was still market share to capture. However, TA needed sufficient funds
to enter the market. TA also realized that providing service was critical in this industry. In
order to compete with the two powerful players, TA needed a partner who has expertise in
providing customer service and intensive capital investment to work with.
Why does the alliance make sense?
These two firms are suitable for forming an alliance, since the goals of the two companies are
similar, to expand the market. Orange had capital investment and customer service
excellence, which CP needed. At the same time, CP had customer base and knowledge about
the local market. Their capabilities fulfilled what each other lacked of. With their existing
capabilities as well as good marketing, the alliance could be successful easily.
Purpose of CP Orange
CP Orange’s mission was to become Thailand’s premier communication company: first for
service, first for quality, first for innovation, and first choice for customers.
CP Orange’s vision is to create a pioneering, wire free future where people can communicate
wherever, whenever, and however they wish. They would provide superior coverage, quality,
value and lever of customer service under Orange brand.
The major purpose of the alliance was to expand both partners’ market base through breaking
the old ways of marketing strategies like cutting price. They delivered personalized service to
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its customers where staffs were trained to provide one-on-one relationship management.
Moreover, the company also came up with various strategies to attract and influence
customers such as providing SMS in Thai language, providing both pre-paid and post-paid
service, providing service to customers from other networks, letting customers choose their
own telephone numbers, and etc.
Additionally, they also worked with other companies for efficiency in implementing their
marketing strategies. For example, Orange worked with Alcatel to bring new service called
GPRS into Thai market. They also work with Rockwell customer contact center to have
Rockwell collect customer information and feedback for planning and continuous service
improvement.
Alliance Structure
Types of Alliance
CP Orange was formed as a geographical based alliance that aimed to expand the market in
Thailand. It was a joint-venture between Telecom Asia (TA) and Orange SA. The joint
venture was registered as Bangkok Inter Teletech Co., which had an initial investment of ฿ 21
billion in capital. TA owned 41% of shares followed by Orange with 49% and CP with the
remaining 10%. The joint venture started in October 2000 when both parties signed the
agreement. In March 2002, the joint venture of CP Orange was launched and the operation
and service begun. In 2003, CP Orange had 1.6 customers or about 8% of the total market.
Alliance Management
The joint-venture was located in Thailand. The company had a board of director in which
Hans Snook, the founder of Orange was the chairman. The CEO of CP Orange was Mr.
Supachai Chearavanont who was also the president of TA. He was assigned to oversee and
make decision in the operation management of CP Orange. CP Orange aimed to provide
superb customer service at a cheaper price and innovation, which would result in high
customer satisfaction.
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Alliance Performance
By March 2004, the company had 1.9 million users. It planned to expand its customer base
up to 2.5 millions in 2004 but with the cease of Orange investment and the sale of its 39%
shares out of 49% in March 2004, the company had to restructure and refinance as it was
already in debt of ฿33 billion and had to find other source of capital to cover the loss.
Significance of the Alliance
CP Orange alliance was significant as it was a big move for CP to diversify its business and
attempted to capture market in mobile phone business. For Orange, it was a big step in
expanding its market to Thailand and also to make a big capital investment to earn more
revenue and profit. The nature of this alliance itself showed that it involved massive
investment and there were difficulties in the management in order to compete with the two
main players and also to generate good revenue. In addition, this alliance changed the mobile
industry in Thailand in terms of prices and extra services that CP Orange brought in which
the other players had not thought of providing.
Key Success Factors
There are many factors that contribute to the success of the alliance. The common ones are
commitment, collaboration, trust and respect. However, there are some factors that
significantly contribute to the alliance of CP Orange as followed.
Exchange of Information, Knowledge, Resource and Benefit
Both parties must be willing to share the information so that they can best utilize the data to
create the most value out of the relationship as the alliance should generate more value than
each partner works alone. CP and Orange SA did just that. They first started to create a
relationship in 2000. Later on, they work closely together to share the knowledge and
information about the market and technology, which resulted in alliance formation in 2001.
Strategic Fit
In order to be able to work together, both companies must first find out whether they are
having the mutual goal or not. Having similar interest and objectives is important. It means
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that the alliance must point towards the same direction through the strategy. Strategic fit
plays an important role in showing whether or not the alliance will work out. In this case, CP
and orange initially shared the same goal, which was the market expansion. Both companies
believed that Thailand was the potential market for them. Their strategy was to enter into
Thai market and increase market share by investing intensively on technology and services.
Governing Mechanism
Sharing the same goal and strategy may not be enough if there is still a conflict about how the
decision making process will be, who make the decision and how many from each party
would be nominated into the alliance governance. CP Orange worked together by having a
chairman of the alliance from Orange SA and the CEO from CP. The decisions were usually
made by the CEO as he has more knowledge about Thai market, however, in some cases that
the decision would make a significant impact to the company, both parties decided together.
Opportunity for Improvement for Both Companies
There must also be an opportunity for the alliance to create more value and increase the pie in
order to gain more from the alliance formation. For CP Orange, the opportunity was there as
Thai market was still growing at a fast rate and seemed to continue growing in the nearly
future. In addition, there was more opportunity lying down in 2003 when there was a need to
invest more on the technology aspect to be able to support the growing customer base.
However, with a good relationship that allowed information and knowledge flow, strategic
fit, good governing mechanism and couples of opportunities available, CP and Orange SA
still failed to work their alliance out together to reach the goal that they had initially set when
CP announced to buy 39% of the shares from Orange SA in 2004. The most important reason
that drove this decision was that the company was losing its customer base as it was unable to
develop the technology to support the growing market. All in all, Orange SA, which was
taken over by the French, cut down all the investment in Asia and refocused in Europe. At
this point, it was clear to CP that the goal of both companies was not the same anymore as CP
still wanted to expand its base in Thailand but Orange SA wanted to slowdown the
expansion. Thus, the key towards alliance failure of CP Orange was that they did not share
the same goal, interest and strategy anymore.
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Problem Identification
After the joint venture between Telecom Asia and Orange SA in 2001, CP Orange quickly
became more competitive to the point even a telecommunication giant, AIS, felt threatened
by CP Orange’s aggressiveness. Things were good since Thai market is still in the growing
stage, yet in 2003, Orange began to sell their stakes back to Telecom Asia. The original
intention of this joint venture by Orange SA was to expand their market base to a country
with good infrastructure.
Thailand was such a market. Telecommunication business is
booming, Telecom Asia had the infrastructure and welcomed an expert in telecommunication
to improve their competitiveness.
At this time, French’s Orange SA stopped all investment to Asia, and refocused its fund in
Europe. In 2002 to 2003, European telecommunication market faced a number of serious
challenges. Many telecommunication firms were facing with financial problems associating
with decision makings done in the 1990s. Apparently, experts and speculators were a bit too
optimistic about this booming market. Under this false pretense, many telecom companies
who already invested in the third generation mobile phone services (3G) are now facing
financial deficits. Orange SA was losing its competitiveness and market share in Europe that
no additional funds can be spared. Orange SA then was left with no choice but to cut back on
foreign market spending and refocus its fund in ameliorating problems in their primary
market. Orange SA began selling its share, and Telecom Asia bought most of it raising its
share to 83% from previous 44%.
As funds from Orange SA were drying up, Telecom Asia who at this time had plans
for technological expansion wanted higher holdings for more decision making and
independence to follow its strategic plans. Telecom Asia wish coincided with Orange SA’s
situation. Telecom Asia bought shares from Orange SA who was more than happy to sell out
the shares. The joint venture between Orange and Telecom Asia still existed today, although
it is now known as “Truemove”. The CP Orange was renamed to True Corporation in year
2004.
The mobile network name “Orange” remained in use until 2006 when True
Corporation changed it to “Truemove”.
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By
Sirinan Saeueng 4880366
Sirot Sawangsawai 4880394
Bhuk Kranantawat 4880487
Waraporn Chianwatanasuk 4880605
Tanai Techasmit 4980625