Introduction
During the last two decades the world has experienced a globalization
process influenced by factors such deregulation, economic
agreements between countries and a great development in the
technology area. On top of that, the actual economy is based
more on flows of information rather than on materials or fixed
assets (Child and McGrath, 2002:2). As a consequence, competition
has increased dramatically around the world.
In addition to these factors, the pace of change has been
very rapid. This means that organisations must be prepared
for unexpected challenges imposed by the markets. 
As a consequence, it would be of considerable interest to
analyse, within this challenging environment, the international
strategy of a business. As it was mentioned above, technology
has influenced the actual economic scenario where, telecommunications
industry has played an important role. For this reason, Cable
& Wireless, one of the world's leading telecommunications
companies, is the company chosen for this essay. However,
in order to analyse its international strategy it is essential
to study more than one subject. Therefore, the paper will
be divided in three main parts. The fist part will state the
international business environment including an analysis not
only of the industry but also of the economic conditions.
The second part will analyse the company's international strategy
as well as its effectiveness including operations. In addition,
due that Cable & Wireless is a multinational company with
operations in more than 30 countries that imply a large number
of competitors, the second part will be only focused on the
company main competitors in Europe and the UK which will be
one of its key markets. Finally, some recommendations for
improvements and/or development of the company's international
operations will arise after the development of this paper.
INTERNATIONAL BUSINESS ENVIRONMENT
Telecommunications IndustryTelecommunications industry was influenced by a process of
deregulation undertaken in several developed countries since
1980. For instance, in the United States, the Modified Final
Judgement (Bradley, Hausman and Nolan 1993) established the
framework in order to deregulate this economic sector. According
to Burton (1995), since the mid-1980s, the European Commission
began, as well, a process of deregulation of telecoms services
markets and equipment choice by Public Telecommunications
Operators.
Bradley, Hausman and Nolan (1993) also identify the beginning
of a crucial relationship between the information technology
and the telecommunications industries, which would affect
the competitive environment. More specifically, they identified
increasing competition among companies, which have allowed
them to become global competitors.
For the reasons stated above, in 1998, large and well recognized
telecoms companies were already under severe pressure from
"new technology, aggressive regulators and entrepreneurial
rivals" (The Economist, 1998). As a consequence, they
reacted becoming even bigger through processes of mergers,
acquisitions, joint ventures or strategic alliances. There
was like a general consensus that only the biggest companies
would prevail in the competitive market. Therefore, size and
capital expenditure represented key factors for success within
the industry; for instance, BT and AT&T created a $10
billion joint venture (The Economist, 1998) which can be considered
as an horizontal integration.
Due to the latest optical-fibre technology, the capacity
increased dramatically. Moreover, IP (internet protocol) technology
appeared which allowed not only the union of voice, data and
video but also it did not have any restriction on distance,
capacity or speed. For this reason, traditional and new players
such as RSL Communications, Qwest, Equant and even WorldCom
created huge "next generation" networks which not
only symbolized another key factor for success but also forced
regulators to liberalize markets.
The 90´s was characterized by a period of economic
boom, mainly in the US and some European countries, which
could finance a huge capital expenditure and therefore, a
rapid growth for telecommunications companies. However, as
was pointed out by The Economist (March 2001) "investors
were financing more competitors in each sector than the market
could support. In industries such as telecoms, this led to
the creation of overlapping, redundant infrastructure".
Therefore, an over capacity problem in infrastructure started
to arise. At the same time, telecoms companies continued to
invest in new projects. In fact, European telecoms felt they
needed the 3-G (The Economist, March 2001) not only to offer
access from mobile phones but also because it represented
the future of telecommunications. As a consequence, they paid
$99.3 billion (The Economist, August 2001) on licences from
several European Governments in the year 2000.
Nevertheless, by March 2001, the market started to punish
the telecom companies because of their performances where
share values drop dramatically (The Economist, March 2001).
As it can be seen, telecoms industry lived a period of growth,
expansion and high level of capital expenditure until the
year 2000, which correspond to the peak value of shares. After
that, the situation has changed dramatically where companies
have been facing an elevated level of debt; decrease in share
value and over capacity on infrastructure.
Economic Environment
The performance of companies cannot be isolated from the
economic environment. In fact, as it was stated above, telecoms
industry began to suffer after the year 2000. This period
coincided with an economic slowdown or recession not only
in the US but also in other continents. As it was affirmed
in The Economist (March, 2002), "some forecasters thought
that globalisation might make this the first worldwide recession
in history". Moreover, just when governments were focused
on improving economies, the world was shocked by the terrorist
event of September the 11th which certainly affected economies
around the world.
For decades, the aim of central banks has been the reduction
or control of inflation rate. And, it looks now that deflation
(The Economist, Oct. 2002), or falling prices, could be a
more serious threat not only in Japan but also in the US and
Europe.
In addition, the European Central Bank lowered its forecast
for economic growth this year to 0.4 percent and said inflation
could decrease next year to 0.7 percent (Bloomberg, 2003).
On one hand, the danger of deflation is still alive and, on
the other hand, expectations increase for additional reduction
in interest rates.
Finally, it is important to point out some key figures for
the UK economy. At the beginning of 2002, the UK economy was
in good health. Consumer consumption was high, unemployment
was low, and the housing market was booming. However, in the
fourth quarter of 2002, the UK economy slowed significantly.
As a consequence, despite an inflation rate above the government's
target of 2.5%, the Bank of England cut the interest rate
on February 6, 2003 (Forex and Capital Markets, 2003).
- Japan has been suffering from deflation since the mid-1990s.
According to The economist (Oct. 2002), If deflation reflects
a slump in demand and excess capacity, it can be dangerous,
as it was in the 1930s, triggering a downward spiral of
demand and prices.
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Julian Hewett, Chief Analyst.
6 June 2003
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