Economic and Political Environment of Orange Mobile - Case Study Example

ECONOMIC AND POLITICAL ENVIRONMENT OF ORANGE MOBILE 2005 Economic and Political Environment of Orange Mobile I. Introduction The proceedings of a business are greatly influenced by changes within its environments. Differences can easily be defined between companies living in a highly concentrated industry and companies living in a highly competitive industry. In order to assess the strings of influence attached to their business, managers generally call for the assistance of market analysis tools. According to Porter Five Forces Analysis (2004), factors that influence the proceedings of a business do not come solely from economic conditions, but social and political changes as well. For instant, changes of regulatory policies from local government or a phenomenon that involves 'social shift' could drive a corporation to its success or bankruptcy. The state of social stability within the environment also often becomes the cause of vast development in a certain industry and insufficient funding in another. The extent of influence produces by various conditions within the environment differs for one industry and for another. There are companies, which businesses are so vital to the community, which government strives to maintain stability within their environment. On the other hand, there are companies that must adjust themselves to changes in their environment without significant bargaining powers to question the situation. It is important to recognize the differences of corporations regarding to this issue. Within this elaboration, I am discussing the effect of political and economic changes in the environment to the telecommunication industry. The objects of study are Orange Mobile, one of the market leader of the telecommunication industry in Europe, and several of its competitors. The purpose of the elaboration is to define the extent to which environmental changes contributes to the changes of corporate strategy or corporate operation within the telecommunication industry. The discussion will start with brief elaboration on corporate background and then continues with discussion of how environmental changes influences operation of the business. II. Orange Mobile - Corporate Background Orange SA is one of the world's leading communications companies. To date, Orange Group companies have a strong business in United Kingdom, France, the Netherlands, and various other nations in Europe. Furthermore, the Orange brand has also operated in several Asian countries. The company launched its business to the public of United Kingdom in 1994. However, it is not until 2 April 1996 has the company underwent its first initial public offering with the shares being listed in the London and Nasdaq markets. The company obtained its first million customers in 1997 and named as the best performing share in 1998 under the name Orange Plc. In June 1999 Orange is described as 'one of the outstanding business success stories of the past few years' and a company who has 'courageous vision and commitment to the long running potential of mobile telecoms ('History of Orange', 2005). III. Influential Aspects III.1 Earlier Market Condition In its first year of operations, the group faced difficult times. The social condition of the market was hardly conducive for development of mobile phone business. The mobile phone markets in 1994 were a confusing place for customers in UK. Digital networks are new stuffs and only few people understand the benefits. Tariffs regulations are complex and prices are high making the industry only attractive to business customers. For illustration of the inconvenient system, users had to sign-up to a three year contract, with high monthly rental fees, high call tariffs and with little flexibility regarding the type of services offer ('History of Orange', 2005). Today however, the business has developed into millions of dollars worth of industry in UK. Rapid innovation produces new types of communication services, competing in terms of prices and service qualities. Rapid innovation also causes customer to become more critical toward every aspect of the product and service provided. Challenges today is not attracting uninformed customers, but competing against other large and competitive corporations to obtain the largest market share. Consequently, corporate programs had changed in order to adjust corporate products and services to present preferences. For example, prices of products are greatly influenced by the evolving market. Companies launch various corporate programs in efforts to enhance value offered to customers. Due to the changing social condition of the market, orange mobile has offered free trials of their services to their customers. For example, people who want to try photo messaging can receive 30 free photos and those who want text messaging get 30 free text messages (Rohde, 2004). III.2 Competition Competition is an important economic factor that influences the industry. Corporations constantly try to get ahead of their competitor by producing various innovations of the services. Marketing activities have a developing cause and effect relationship to changes in competition. Furthermore, issues often arise from the similar nature of programs from different corporations. For example, the intense competition between Orange and its rival, Vodafone produces similar programs which aim is to provide free trials for mobile internet services. Vodafone spokeswomen Anna Clokeon stated: "We have been offering free access to such services as mobile Internet and to picture messaging, so its sound a lot like the new offer from Orange is along a similar line to ours" (Rohde, 2004). The intense atmosphere of competition is also one of the main factors that result in the free trial concept that is popular today. III.3 Global Business Condition Another economic and social aspect that causes significant changes in mobile phone international business environment is globalization. According to Klein and Pauly, globalization contains a fundamental premise of increasing degree of integration among societies. This increasing integration plays a crucial role is most types of political, social and economic changes. In terms of social and politics, global communication systems are gaining increasing importance every day. Societies from around the world are interconnected, not only in governmental level but also citizenry. The effect has now reach developing regions like Asia Pacific and Asia, creating the concept 'global village' ('Globalization: Current Scenario', 2004). In terms of economic activities, the situation creates completely new environment for carrying out economic transactions, utilizing productive resources, equipment, trading products, and taking advantage of virtual money mechanism. Culturally, globalization is uniforming patterns of communication all over the world, for the very least, in terms of economic transactions ('Globalization: Current Scenario', 2004). These phenomena influence the telecommunication in many ways. First of all, the business is gaining importance as international communication tools are increasingly required. Marketing publications do not have to elaborate benefits of an internationally integrated communication system as in the earlier days. Instead their challenge is how to utilize their competitive advantages in order to provide an appealing offer to customers. The issue of vast developing globalization is also represented by the presence of internet as a symbol of the modern information age. In the year 2001, the concept of providing internet services as a feature of mobile phones has became popular. Afterwards, observers of the industry have witnessed a fundamental change as mobile phone corporations strives to take advantage of the 'merger' between internet and the mobile phone industry. Globalization has increased competition and changed the way telecommunication services perform their operation and marketing activities ('Globalization: Current Scenario', 2004). III.4 The Changing Global Demand Innovation and new discoveries is not the only factor that influences the sales numbers of technological products. In fact, they are not the strongest one. The mobile industry is also influenced by market response to new discoveries and future market demands. After the success of Short Message Service, several operators have begun offering such capabilities over data network. While United States date services are not yet properly established, in Europe, United Kingdom's Vodafone and O2 have introduced video and music services, using a single Global System of Mobile Communication Standard. The trend of providing such services is predicted to continue fueling the European mobile market as demand for the services is growing ('IDC: Games', 2004). III.5 How Government Policies Affect Structure and Operations of Europe's Mobile Industry Telecommunication business is also subject of various environmental changes derived from regulatory activities by the government. Entry barriers, taxes, privacy-related, and other policies have significant influence toward daily activities of telecom corporations. For example, in the year 2000, as the mobile phone business converged with the internet ('Mobile Growth', 2001), governments of European countries issued new regulations which aimed to control and monitor development of the merging industries. Some of the new regulations involve licenses with increasingly expensive charges. In consequence, consolidation of large mobile phone companies became increasingly popular as effort of tackling the expensive license fees. Vodafone for example, was glad to receive enough from its sale of Orange to pay for the cost of future bids for new generation licenses in France and Italy ('Shifting Europe', 2000). The license policies placed by the European countries affected the industry greatly. In Britain alone, Vodafone, Orange, German Operator T-Mobile, Britain's mmO2 and Hutchinson 3G paid a total of 22 billion pounds for licenses to operate 3G. Consequently, these companies (including Orange Mobile) are very anxious to persuade millions of customers to make the switch to the new 3G services with high speed internet access and video & music download. It has then become the focus of their marketing strategy for a certain amount of time. If the scheme does not work, than Orange, one among others, would have lost billions in vain ('Crunch Time', 2004). The new policy caused a significant change in the global structure of mobile phone business. With the new tendency to perform acquisition for growth, several companies that were the largest in their local market, became interesting 'targets' of acquisition for larger multinationals. Some of the tempting targets are: Orange Mobile, Dutch's KPN, Germany's E-Plus and Spain's Telefonica. Vodafone and the France Telecoms have been aiming to purchase these companies within the near future. Because acquisition is increasingly seen as growth, the future of the global industry will be characterized by increasing level of ownership of large multinationals ('Shifting Europe', 2000). IV. Conclusion The extent to which environmental changes affect business operations vary according to the nature of the business. Several companies are more sensitive to environmental changes than others. Telecommunication business however, is one of the most sensitive industries toward environmental changes. Economic and political changes affect the course of business significantly. Economically, the industry has now developed into one of the most competitive industry in the world, where price wars and competition for higher service value is common. Consequently, for survival, a communication business must be connected to the area in which it operates. Lack of flexibility toward new developments will cause a company to be overrun by its competitors. The change of global trend also impacted the operations of companies within the industry as entertainment and network services are dominating international market demand. Politically, governmental regulation has greatly influence the industry by placing license fees for 3G operations, causing increased tendencies toward mergers and increased marketing focus on selling 3G products. Bibliography 'Consolidated Financial Statements'. 2003. Orange. November 2, 2005. 'Crunch Time for Europe's mobile Operators as 3G hits Mainstream'. 2004. Turkish Press.com. November 24, 2005 'Globalization: The Current Scenario of Economic Development and Structural Adjustment Programs'. 2004. Ilustrados. November 21, 2005. 'History of Orange'. 2005. Orange. November 21, 2005. Sharma, Dinesh C. 'IDC: Games, Video to Fuel Europe Mobile Market '. 2004. C-Net News.com. November 24, 2005. < http://news.zdnet.com/2100-9584_22-5217861.html> 'Mobile Growth Slows Europe PC Sales'. 2001. CNN.com. November 24, 2005 Read More