vodafone presentation - BUEC342

Vodafone enters Japan
Josh Proulx, Mario Panizzon, Patricia Ting, Steffen Janzen, Stuart Young
Explore what we’re talking about:
 Ideas – movie, graphs or other attention
grabbing idea
Vodafone’s History
Founded in 1984
 Became Vodafone in 1991
 Merged with Airtouch in 1999
Vodofone’s Business
Leading Mobile Telecommunications Co.
 Global presence in Europe, Middle East,
Africa, Asia Pacific, and the US
こんにちは! [Konnichi wa]
Population: 127 million
 Pop. Growth Rate: -0.19%
 GDP per capita: 34,000
 Literacy Rate: 99%
 Life Expectancy: 82.12 years
 HDI: 0.96 (10th)
 Religion: Shinto and Buddhism
 GINI Index: 38.1 (63rd)
Japanese Culture
Bow as traditional greeting
 Age equals respect
 Negations are subtle and indirect
 High-context culture
 Direct eye contact is not the norm
Japanese Culture (Josh edit it)
Keitai Culture
◦ Cell phones are integral to life
◦ Well adapted to advanced technologies
Political Environment
PM in 2001 was Junichiro Koizumi
 Emperor (figurehead), Diet (legislative),
Cabinet (ministers of state), and judiciary
 Prior to WWII, military totalitarian state
 Democratic Constitution 1947
 Stable environment for investors
◦ Smooth transitions between gov’ts
◦ Political violence virtually non-existent
Legal Environment
1997 revised Telecommunications
Business Law removing FDI limitations
 Tariffs are low, but have non-tariff barriers
 Legal system is civil law
 Restrictions on Japanese lawyers limit
foreign investors
 Courts are slow
 Corporate Tax Rate 42% in 2001
Economic Environment (2001)
(mario edit)
World’s 2nd largest economy
 Stimulus packages & restructuring
 Manufacturing (electronics, cars)
 Growing FDI (doubled in 1999)
 Low openess to foreign trade
◦ No free trade aggreements
Business Environment
 2nd
largest telecommunications market
 Market players/market share
◦ NTT DoCoMo: 58.4%
◦ KDDI Group: 27%
◦ J-Phone Group: 14.6%
Market Trends
◦ PHS handsets & Digital Phones
◦ Internet access – iMode
◦ 3G networks being developed
SWOT Analysis
J-Phone brand equity
Highly successful parent company
J-Phone has 3G license
Local knowledge from J-Phone
Vodafone has successfully entered other foreign
Vodafone has well-diversified assets
Well developed global supply chain
No experience in East Asian markets
Low quality phones/products
Lagging in technology
New to Japanese culture
Weak Japanese wireless infrastructure
Low import tariffs
2nd largest telecom market
Explosive growth in mobile market
Loyal employees (culture in Japan)
Consumers adapt well to new technologies
Unattractive to switch cell phone providers
Aging, well to do consumer group
NTT dominance!!!
Non-tariff trade barriers
High consumer expectations (well-educated,
technology conscious)
Non-english consumer base
Legal system – businesses settle outside of court
Recessionary market
Inability to lay-off employees
Challenging advertising environment
High corporate tax rate (compared to UK +12%)
Why Enter Japan?
“The industrial logic behind Vodafone’s
expensive foray into Japan was that such a
vibrant market would give it a technological
edge over domestic and European rivals.”
◦ The Business Times
“Vodafone [entered] with two aims: to exploit
Japan's lead in mobile telecoms to boost
Vodafone's fortunes elsewhere, and to use
Vodafone's global scale to win a larger share of
the Japanese market.“
◦ The Economist
Entrance to Market (josh can you
make this into a nice timeline? ^^)
1999: Inherited small operating interests
in 9 companies from merger with
 1999 October: increased interests to 20%
 2000 June: 9 companies restructured as JPhone Communications
 2001: gradually increased direct stake in JPhone to 69.7%
Entrance to Market
Vodafone purchased shares of Japan TeleCom , British
Telecom, and J-Phone Comm in order to gain control
Four topics:
Problems with 3G
Globalized Strategy
Final Straws
Evaluation – Problems with 3G
Late launch of 3G network compared to
 3G service quality poor
 Re-launching of 3G network
 Lost market share and customers
Evaluation – Globalized Strategy
Decided to use economies of scale
◦ European handsets
Failed to factor in local consumers
◦ Phone were technologically behind
◦ Demanding consumers
Evaluation - Management
Tried to revamp management to save
◦ 2004 Shiro Tsuda (former DoCoMo VP)
◦ 68 days later replaced by Bill Morrow
Management failed to turn company
Evaluation – Final Straw
New number portability rules
 Three new competitors
 Threatened regulation of pre-paid market
 Continued poor performance
Market Exit Strategy
2005 applied to delist Vodafone KK from
Tokyo Stock Exchange
 2006 sold to SoftBank for 15.1billion USD
Smooth entrance to Japanese market
 Failure to provide relevant services to the
Japanese consumer
 Takeaways:
◦ Globalized strategy may not always work
◦ Don’t forget about the consumer
◦ Watch your competitors