The Market Exposure of Three UK Mobile Company - Essay Example

 The Market Exposure of Three UK Mobile Company Background to Three UK Three UK is a subsidiary brand which operates under the brand 3. The brand 3 is a renowned brand name under which a number of UMT based Broadband Internet providers and mobile phone networks operate in countries like the United Kingdom, Denmark, Indonesia, Macau, Hong Kong, Austria, Australia, Italy, Ireland, and Sweden. The Three UK brand was found in the year 2002. The company which operates the telecommunication networks under the brand name 3 in the United Kingdom is a common investment unit for the giant company Hutchison Whampoa. All the networks branded as 3 provide 2G, 3G and 4G technologies in the countries in which they operate. As computed in 2013, the number of registered customers of 3 telecommunication brand across the world is over 23.5 millions. The Vulnerability and Costs of Three UK There are a number of factors in the internal and external business environment of the telecommunication industry of the United Kingdom which leads to the vulnerability and added costs for the company, Three UK. The changes in the way people use mobile and internet technologies and the development of electronic commerce businesses are seen as opportunities for the telecommunication businesses, including Three UK. Licensing of spectrums is an important business cost incurred by Three UK. The processes of the licensing of frequency bands for the telecommunication operators have high associated costs. The cost of spectrum licensing is the biggest cost incurred by Three UK. The company has to incur the costs of widening the network coverage through more spectrum allocation. For this the company has set up numerous mobile network towers in various locations in the United Kingdom. For this purpose, either the company has to incur the fixed cost of setting up a new tower or it has to lease these operations to a third party company (Anselin, 2008). In both these cases, Three UK has to invest sufficient amount of money for the ultimate aim of a wider spectrum and network coverage. Also, the company has to continuously ensure that the licensing of frequency bands is acquired in an efficient manner so that the benefits of this kind of limited resource for the telecommunication business can be extracted in the best possible manner. One of the main vulnerabilities of Three UK lies in the fact that if not managed properly, the process of spectrum frequency band licensing may become inefficient and lead to spectrum remaining unsold or being sold at a very high price which ultimately decreases the opportunities related to network investment. Maintaining sustainability and competitiveness in a highly concentrated industry is a major vulnerability for Three UK. Apart from that, the company is also vulnerable to the changing regulatory requirements and policies related to spectrum allocation, telecommunication resource accession and use of mobile communication technologies (Bankoff, 2004). However, in overall the level of vulnerability of Three UK is low because the company is efficient in terms of resource use and management puff risks in the external business environment. The type 1 vulnerability is the vulnerability related to the risks in the external business environment like natural disasters, terrorism, catastrophic events and natural disasters. The Type 1 vulnerability for Three UK is medium because the company uses carefully formulated business contingency plans to meet any kind of risks in a hostile situation (Banzhaf, 2012). The Market Exposure of Three UK The market exposure of a company is determined by the subscriber base it has in that particular market, the attrition rate of the existing subscribers, and the new additions of subscribers who are imported from other competitor networks. The market exposure of Three UK as evaluated from 2006 to 2014 is found to be much high as compared to the industry requirements. The company has an established base of loyal customers. Also, in the last 5-6 years of its operation, the company has been able to negate its competitions through the acquisition of many potential customers who were the users of another network like Orange, Mobile and O2. Until the year 2009, Three UK had been penetrating the market by leveraging on its pricing strategies. However, after 2009, with the boost in the service economy, the mobile company started to extend its efficiency in the arena of service provision by re launching the service of using the three networks across the world at the domestic charges. This service was named as “Feel at Home” and was aimed at making the UK customers remain dependant and loyal to the use of the Three UK services when they visit other countries. The market exposure of Three UK has been considerably high after the introduction of the service allowing flat rate charges for text messages, voice calls and internet packs in the UK as well as in the abroad countries when the customers of Three UK go there. Other than these, the joint ventures and partnerships of Three UK with other leading companies in the telecommunications sector of the United Kingdom has been another factor which has led to added exposure of the company in this market. For example, the launch of a joint venture of Three UK and T-Mobile in 2007 known as Mobile Broadband Network Limited (MBNL) which aimed to couple the 3G and 2G networks of both the telecommunication companies was a hugely successful strategy of Three UK to increase the subscription base of the company in the country. Te MBNL was launched as a 50% joint venture by these two leading telecommunication giant operating in the UK market. This joint venture was a significant integration on the part of Three UK which helped the company to acquire almost full scale coverage of 3G population in the year 2008 within the different regions of the United Kingdom. By the end of the year 2012, this Mobile Broadband Network Limited (MBNL) had acquired more than 12000 combined and individual sites operating in the telecommunications sector of the country. Other strategies of Three UK including the vertical and horizontal integrations through it business chain and supply chain within the telecommunication sector also helped to increase the market exposure of the company. The continued high scale services provided by the company to its customers helped it to reduce the attrition rate and simultaneously acquire new subscribers which made it possible for Three UK to establish a loyal base of customers in the country. In the year 2012, Three UK went on the become the fourth telecommunication network to launch the iPhone in partnership with one of the largest cell phone manufacturing companies in the world, Apple Inc. Earlier the partnership with Apple Inc. was held by three main telecommunication companies which are Orange, Vodafone and O2. The macroeconomic exposure of Three UK The macroeconomic exposure of a company is the degree of financial risk that can be faced by the same due to the political or macro environmental factors that may affect the business directly or indirectly. These can include the political risks associated with the particular sector in the country. The macroeconomic exposure of Three UK has always been high. The volatility of the telecommunication sector and the intense competition level have led to the creation of a business environment that is hostile, fluctuating and that continuously poses new risks and threats to the companies operating in this segment (Adler, 2012). However, the entry barrier is high in this segment because of the huge fixed costs like infrastructural costs associated with these kinds of businesses. This is the only factor that helps to control the macroeconomic exposure of the companies like Three UK which operate in this market. However, the market share is taken up by a handful of companies like Vodafone, Three UK, O2 and Orange which makes the level of competition among these players very tough while the small players are unable to either enter or sustain into this market. The telecommunication market being an increasingly concentrated market, it is difficult for even the leaders like Three UK to completely mitigate the macroeconomic exposure levels. Apart from these, the extensive focus of the regulatory authorities and policy makers on the control of spectrum permissions and bandwidth licensing makes it more difficult for the telecommunication businesses like Three UK to control the macroeconomic exposures adequately (Girma and Gorg, 2002). The non-economic macro exposures of Three UK The non economic macro exposures indicate the degree of non financial risk that may be faced by a company due to the external conditions existing in the business environment. The non financial risks for Three UK are low. This is because, the company is supported by the external environment of the United Kingdom telecommunication market, the popularity of mobile phones, especially smart phones as well as the increasing usage of internet in cellular and other computing devices has created new opportunities for the companies like Three UK. Also, the socio cultural factors and the technological factors affect the business of Three UK positively. Strategies of Three UK The strategies used by Three UK like product and price discrimination, business expansion and diversification, vertical and horizontal integration, etc. have been hugely effective in increasing the market exposure of the telecommunication giant. The pricing strategies of the company have been especially value adding for the market exposure of Three UK. Three UK uses an aggressive and competitive pricing strategy which has helped it to acquire more than 80% of the potential customers in the United Kingdom in the last 2 years. The profit levels of Three UK in the last 8 years from 2006-2014 has been much impressive. The company has been giving a tough competition to the biggest competitors in the telecommunication market of the United Kingdom. These include international companies like O2, Orange and Vodafone. The key to the success of Three UK lies in its ability to control its costs and leverage on its resources and capabilities. Also, the company is financially well managed which makes it a preferred investment option for the individual as well as the institutional investors (Gil and Haskel, 2008). Giant companies like Hutchison Telecommunication International have major investments in the stocks of Three UK. The financial and non financial strategies of the company including the competitive pricing strategies, product differentiation strategies and partnership strategies have also been significant corporate and business strategies that have helped to reduce the external exposure and risk associated with Three UK. The Price Elasticity Demand factor of economics has been correctly tapped in by Three UK. The competitive pricing of the company has helped to increase the demand level to an extent. Simultaneously, the increase in the demand levels has made it possible for the company to sell its services profitably and increase its subscription base. Reference Adler, M. D., 2012. Well-Being and Fair Distribution: Beyond Cost-Benefit Analysis. Oxford: OUP. Anselin, L., 2008. Spatial Econometrics: Methods and Models. Boston: Kluwer. Bankoff, G., 2004. Mapping Vulnerability: Disasters, Development and People. London: Earth scan. Banzhaf, H. S., 2012. The Political Economy of Environmental Justice: An Introduction. California: Stanford University Press. Gil, V. & Haskel, J., 2008. Intangible investment in the UK market sector by industry. Stamford: Cengage. Girma, S. & Gorg, H., 2002. Outsourcing, foreign ownership and productivity: Evidence from UK establishment level data. GEP Research Paper: University of Nottingham. Read More