04.02 The Great Call of China - Case Study

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04.02 The Great Call of China - Case Study

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heitorvicoso

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The Great Call of China

The number of mobile phone users in China hit a new milestone of 1 billion at the
end of February, according to a report in today’s Shanghai Daily, citing the
Ministry of Industry and Information Technology. The figure is double the
combined number of people in the United States and Japan, the report noted.

Because the number of users is equivalent to only 74% of China’s population and
only about 14% among them have a 5G phone, there is still room for the market
to grow, the paper said.

China’s GDP (Gross Domestic Product) is growing at one of the highest rates in the
world. Emerging Asian economies have traditionally shown a high level of
interest in “status” goods that indicate a degree of wealth. Mobile phones have
become a fashion accessory. Everyone from university professors to taxi drivers
regards a mobile phone as a necessity. Young Chinese also use additional mobile
services such as text messages. Mobiles are not uncommon in the countryside as
migrant workers buy mobiles to call their villages.

The telecommunications industry in China is dominated by three state-run

businesses: China Telecom, China Unicom and China Mobile. De-regulation of the
market and foreign part-ownership occurred after China’s entry into the World
Trade Organization.

As a result of China’s entry into the World Trade Organization (WTO) in 2001, a
new regulatory regime is now being established and foreign operators are
gradually being allowed to access the market. Many of these foreign operators
have already begun forming joint ventures with the Chinese telecommunications
companies.

● Examine how the objectives of a Chinese telecommunication company

might change if it moved from the public to the private sector of the
economy. (10 marks)
If a Chinese telecommunications company were to transition from the public to the
private sector, its objectives would likely undergo significant changes due to shifts in
priorities and operational practices. Here’s an analysis of how these objectives might
evolve:

Firstly, in the public sector, a telecommunications company is generally focused on

broad, societal goals such as providing universal access to communication services and
supporting national development. The emphasis is often on ensuring equitable service
coverage, including in rural and underserved areas. This is driven by the public sector’s
role in serving the entire population and supporting government policies. However,
when moving to the private sector, the company would shift its focus towards
profitability and shareholder value. The new priority would be maximizing financial
returns, which could lead to more selective service provision based on market demand
rather than broad-based access.

Secondly, in a private sector setting, the company’s strategic goals would likely pivot to
include competitive positioning and market expansion. Unlike its public counterpart, a
private company must compete with other market players to attract and retain
customers. This could involve investing in advanced technologies, improving service
quality, and differentiating itself from competitors. The emphasis would shift from
providing universal service to creating unique value propositions that cater to specific
customer needs and preferences.

Thirdly, a private telecommunications company would likely place a greater emphasis

on operational efficiency and cost management. Public sector companies may have
more leeway in terms of budget and financial constraints, as they are often subsidized
or supported by the government. In contrast, a private company must operate within the
constraints of its budget and seek to optimize its operations to maximize profit margins.
This might involve streamlining processes, reducing overheads, and investing in
technology that improves operational efficiency.

Furthermore, marketing and customer acquisition would become more central to a

private company’s objectives. In the public sector, marketing efforts might be minimal,
with a focus on maintaining and expanding service coverage. In the private sector,
however, there would be a strong emphasis on branding, customer engagement, and
targeted promotions to build a customer base and drive revenue. The company would
invest in market research to understand consumer behavior and tailor its services and
marketing strategies accordingly.

Lastly, regulatory compliance and interaction with government bodies might change. In
the public sector, regulatory compliance is more about aligning with government policies
and supporting national goals. For a private company, while compliance remains
important, the focus would also include navigating competitive regulations and seeking
opportunities for favorable regulatory conditions that enhance profitability. The company
would need to balance its business interests with adherence to industry standards and
regulations.

In summary, moving from the public to the private sector would lead a Chinese
telecommunications company to shift its objectives from universal service provision and
broad societal goals to profitability, competitive positioning, operational efficiency,
targeted marketing, and strategic regulatory compliance.