Co-opetition and Strategic Business Alliances in

247 Pages·2014·8.24 MB·English

Co-opetition and Strategic Business Alliances
in telecommunications: the cases of
BT, Deutsche Telekom and Telefonica de Espana
Raymond Cairo
London School of Economics
Interdisciplinary Institute of Management (IIM)
Doctor in Philosophy (PhD)
UMI Number: U21B645
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Abstract
As a relatively new phenomenon compared to other ways of executing an
international strategy, Strategic Business Alliances (SBAs) lack the theoretical
support that most of their longer-established counterparts enjoy. Yet, it is our
belief that the widespread use of SBAs in a large number of manufacturing and
service sectors necessitates the development of a theoretical foundation. One of
the contributions of this thesis is the assessment of the suitability of an established
theoretical framework: Nalebuff and Brandenburger ’s game theoretical “Co-
opetition”. Whilst the authors had a much wider domain than SBAs in mind when
they developed their theory, we will argue that Co-opetition can be an extremely
suitable theory to assess deciding developments with regard to SBAs. Our
empirical analysis of the major telecommunication SBAs does, thereto, not only
provide a comprehensive overview of the most prominent alliance activities in this
sector but it also serves as input to assess Co-opetition’s suitability as a theoretical
framework on developments related to SBAs. Besides the overall suitability of
Co-opetition we will further assess which of the two extremes of the theory’s
central notion of the new Mindset, peace and war, best represents developments
we witness in the telecommunication industry. In order to achieve that we have
selected two theories that provide a clear representation of the two extremes. The
comparison of the applicability of these two representing theories leads us to
conclude that regarding SBAs in telecommunications the “peace element” of Co-
opetition’s Mindset is more applicable than the “war element”.
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Chapter 1 ______________________________________________________________6
Research interest and research objective___________________________________ 6
Introduction_________ 6
Research interest 6
Thesis set-up__________________________________________________________7
Research objectives and methodology____________________________________ 16
Changes in the global economy___________________________________________18
Introduction_________ ___________________ 18
Reasons for the running of industrial sectors by the state_______________________ 18
The liberalisation wave 19
The privatisation wave__________________________________________________21
Consequences for regulation_____________________________________________22
Technology’s role in the globalization process________________________________23
Operational distance_____________________________________________________________24
Operational complexity___________________________________________________________24
Geographical complexity__________________________________________________________24
Operational capacity_____________________________________________________________25
Summary on globalisation_________________________________________________________25
Ways of executing an international strategy_____________________ 26
Serving foreign markets from the company’s home country__________________ 26
Building and buying overseas operations_____________________________________________27
Cooperative contractual agreements________________________________________________ 28
Strategic Business Alliances________________________________________________________29
Introduction__________________________________________________________________ 29
Prominent reasons for firms to enter into SBAs______________________________________31
Ownership__________________________ . 43
Control_____________ 45
From contract to status 47
Chapter 2 _____________________________________________________________49
The theories_________ 49
Co-opetition_________________________ 49
Introduction____________________________ 49
The potential contribution ofNalebujf and Brandenburger’s Co-opetition to our thesis_______50
The new mindset: war and peace____________ ‘_____________________________________51
Understanding the Value Net_______________________________________________________52
Special role of the government___________________________________________________ 55 .
The new mindset and the Value Net_______________________________________________ 55
The Value Net, the new mindset and cartels________________________________________57
Introducing game theory___________________________________________________________57
Introducing PARTS_______________________________________________________________ 58
Players_______________________________________________________________________58
Added Value 62
% ■ " ■
Rules_________________________________.______________________________________ 66
Perceptions___________________________________________________________________ 67
Boundaries or Scope of the game ________________________________________________ 71
Hypotheses______________________________________________________________________74
Classification of alliances_______________________________________________75
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The Mindset___________________________________________________ 79
Mindset I: “War” ________________________________________________________________79
Hamel’s model on inter-partner learning _________________________________________79
Hamel’s model________________________________________________________________82
Hypotheses______________________________________________________________________89
Mindset II: “Peace”_______________________________________________________________93
Introduction__________________________________________________________________ 93
Madhok’s theory: introduction___________________________________________________ 95
Hypotheses____________________________________________________________________ 102
Instability and high failure rate of SBAs_______ 105
Different agendas on the development of the alliance________ 106
The variables__________________________ 107
The issue of different agendas___________________________________________________110
Chapter 3 ___________________________________________________________ 115
Telecommunication cases .____________________________________115
BT’s international strategy: three stages of Concert ___________________115
BT’s European operations_______________________________________________________ 115
The role of Concert in BT’s international operations________________________________ 118
Concert’s first stage__________________________________________________________ 118
A wave of liberalisation in telecommunication markets__________________________ 119
Concert’s second stage_______________________________________________________ 121
Concert’s third stage_________________________________________________________ 127
BT’s current international strategy: strategic change in BT’s conception of the European market
after the demise of Concert_________ 135
Deutsche Telekom and its SBAs___________________________________________________ 138
Beyond a European partnership: Global One_______________________________________ 140
Deutsche Telekom, France Telecom and the Italian job____________________________ 143
Consequences of the Telecom Italia merger failure_____________________________, 146
Deutsche Telekom’s international strategy after Global One________________________ 150
Deutsche Telekom’s current international strategy_________________________________ 152
Telefonica de Espana and its SBAs______________________________________ 154
Telefonica’s international strategy________________________________________________ 154
Telefonica’s first stage: Building a Latin American presence__________________________ 156
Telefonica’s second stage: Adopting an SBA-strategy_________________________________ 157
Telefonica’s current international strategy_________________________________________ 169
Chapter 4 ___________________________________________________________ 172
Cases and theory_____________________________________________________ 172
PARTS’ contribution: an interpretation of PARTS applied to the telecommunication
industry____________________________________________________________173
Two types of contribution________________________________________________________ 174
Co-opetition and BT____________________________________________________________177
Co-opetition and Deutsche Telekom______________________________________________ 194
Co-opetition and Telefonica_______________________________________________________199
Conclusion of PARTS’ contribution________________________________________________ 205
War versus Peace: assessing our expansions of Nalebuff and Brandenburger’s
mindset against our cases______________________________________________208
Assessing Hamel’s theory against our cases_________________________________________208
Assessing Madhok’s theory against our cases________________________________________213
Conclusions 221
The issue of Different Agendas on the development of the alliance______________ 221
Conclusions on the war and peace mindset_________________________________223
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Conclusion on Co-opetition
Bibliography____________
Chapter 1
Research interest and research objective
Introduction
In today’s world businesses co-operating is so common that it largely escapes our
attention. So is the computer that I am currently using to write this thesis
undoubtedly the product of at least a few partnerships and, very likely, depending
on several Strategic Business Alliances (SBAs). Such forms of co-operation may
refer to the hardware part (i.e. the computer and its component) or to the software.
But not only computers and their software are to a large extent the result of
corporate partnerships. It seems that daily attributes as cars, medicine and even
simple foodstuffs nowadays cannot emerge without high level co-operation
between companies that some decades ago were able to produce these products on
their own. Moreover, it is not only in the case of products that this silent
revolution is taking place all around us yet managing to escape our perception.
The service sector is also laden with examples of strategies that lean heavily on
cross-cofporate partnerships. This is most obvious when the airline company
where we book our plane ticket with is not the same as the one that we are offered
a seat on. The connecting flight may be with yet another company and, with a little
luck, the return flight can be handled by company number four. Whilst such
alignment can be detected by the consumer similar partnerships between banks
and insurance companies or in the telecommunication industry are completely off
our individual radar screens.
Research interest
It is particularly that last industry that has caught our interest in relation to the
subject of SBAs. Not very long ago, telecommunications meant little more than
making expensive calls from home, office or a booth in the street and sending a
fax was the high end of the industry. Nowadays it is hard to find any relatively
sophisticated product or service that does not have some sort of link to
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