1、ENTRY FOR PROFIT TRANS-COSMOS INC. CHINA ENTRY STRATEGY PRESENTATION,February 8, 2001,AGENDA,Executive SummaryCall Center Business Market Overview CC Customer Segmentation In-house users Outsourcers Demand Customer Economics Competition Recommendations Success business model Partnering strategyE-Com
2、merce Market OverviewTCI Tianjin Current Situation Analysis Recommendations,AGENDA,Executive SummaryCall Center Business Market Overview CC Customer Segmentation In-house users Outsourcers Demand Customer Economics Competition Recommendations Success business model Partnering strategyE-Commerce Mark
3、et OverviewTCI Tianjin Current Situation Analysis Recommendations,CHINA IS BECOMING A HIGHLY DYNAMIC CC MARKET,Chinas call center market took off since 1998 with an annual growth rate over 100% Non-paging market size reached 54,000 seats in 2000However past growth was largely driven by demands from
4、administrative driven sector Over 60% of the new CC demand comes from four pillar industries: Banking, Post Services, Fixed-line Telecom, and Insurance Distinctive purchasing behavior identified for these purchasesFuture growth will be propelled by service oriented and outsourcing segments Service o
5、riented segment expected to be 50% of total CC market Outsourcing market will grow at least 50% a year for the next few years However large variance exists for outsourcing segment growthOverall, China CC market is expected to reach over 130,000 seats in 2004 and 340,000 seats in 2010,CC OURSOURCERS
6、ARE EMERGING BUT STILL EXPLORING (I),Currently, CC outsourcing business is brand new in China No more than 30 companies providing merely about 3,200 seats in service Over 70-80% supply concentrated in 4 major citiesFuture outsourcing development is highly dependent on current players performance and
7、 strategies Potential customers concerned about quality, confidentiality, information processing ability, HR, and price Growth will fluctuate widely according to the industrys ability to satisfy customer concerns and requirements nowIn short term, competition will be minimum due to highly differenti
8、ated positions and large number of unexploited potential outsourcing customersIn medium term, paging companies can be powerful and desperate competitors in the low-end outsourcing market That might distort the industry profitability and trigger vicious competition However high-end outsourcing market
9、 might be intact,Currently, only low-price/standard service vendors are profitable Utilization, and therefore, long-term customers, is the key for profitability However, high-priced outsourcing solutions not widely accepted by the marketBut in the long-run, we believe high-end services will be value
10、d by customers We are encouraged by recent positive news on clients long-term commitments to high-end outsourcers With Chinas pending WTO Entry and continued economic growth, we believe its the directionHigh-end outsourcers can win the game by aggressively establishing long-term client base, and tar
11、geting various outsourcing opportunities along the value chain Five successful strategies identified for new customer development Telemarketing and value-added information service most likely to be outsourced,CC OURSOURCERS ARE EMERGING BUT STILL EXPLORING (II),TCI SHOULD PARTNER WITH RIGHT LOCAL CC
12、 OUTSOURCERS,A partnering strategy is essential for TCI to capture the great opportunities in China TCI lacks a bunch of local capabilities, while time is contingentTCI should target both money making, and money losing tech advanced outsourcers during negotiation process, based on two plausible part
13、nership strategies Money making ones: share profits and leverage local strength Money losing ones: control and negotiate for a bargain deal Considering the limited number of candidates in China and TCIs tight schedule, a broader search can strengthen TCIs negotiation positionFive promising outsource
14、rs identified during the interview process Money making ones: China Motion, 800 Teleservices, and Compaq-Star Money losing ones: TCY, ITS Shanghai,EC: ONLY SOFTWARE FIRMS AND SIs WORTH PURSUING,Although under booming, China E-Commerce market are experiencing bottlenecks Online population and revenue
15、s grew 10 times in the past 3 years However, macro-environment and infrastructure are problematic and only few ICP/ISPs are making moneyICP, ISP and technology companies, as a sector, are not worth TCIs pursuit ICP: Market is down while most China ICPs are still at their early stage development ISP:
16、 Highly fragmented and regulated, which suffocate both foreign participation and profitability Tech companies: Superior ones can hardly survive in ChinaHowever, several top ventures in the above sectors are quite interesting, which are identified and illustrated in detail for TCIs further interest I
17、CP: ; S; A; D ISP: 263Net; Eastnet,TCI-TJ: RSTRUCTURING AND BUILDING STRATEGIC ALLIANCES,TCI-TJ experienced difficulties due to both promotion and management issues Though improving, the firm is intrinsically uncompetitive in China marketIt should restructure for better performance Redefine corporat
18、e missions and strategies Restructure project arrangement, reporting, measurement and incentive systems Refocus its sales on Japanese companies in China and in Japan and find strategic alliance for TCIs China expansion TCI should only partner with prestigious local software company or system integra
19、tors Wiseway screened all the potential candidates lists and funneled down 5 most promising companies for TCIs further contact Longshine; Global eForce; eBIS; Modern Computer; Huateng Software,AGENDA,Executive SummaryCall Center Business Market Overview CC Customer Segmentation In-house users Outsou
20、rcers Demand Customer Economics Competition Recommendations Success business model Partnering strategyE-Commerce Market OverviewTCI Tianjin Current Situation Analysis Recommendations,CC MERELY A BUSINESS PRACTICE BEFORE 1997,High telecom charge,Low phone penetration,Weak service attitude,Widespread
21、industry monopoly,Commercial CC less than 10,000 seats in 1997(2),Phone call charge (cents per minute),China,US,Phone penetration (%),# of phones(1) (million),1997,82,53,99,229,Automotive Example: Expert Survey 1997,Price,Competition focus (%),(1) Fixed line + mobile (2) Excluding about 50,000 seats
22、 in paging company Source: World Development Report 1999/2000; China Auto Market 1997; Jarding Fleming Research; interviews,Quality,Service,Style,National monopoly Banking Telecom Insurance Utilitity,Regional protected Steel Auto Petrochemical Tobacco .,Monopolized industry estimated 55% of industri
23、al output,Higher telecom penetration,COMMERCIAL CC TOOK OFF SINCE 1998 Especially in Non-Paging Service Sector,Penetration (%),Year,CAGR,Fixed lineMobile,37%83%,Non-paging CC seats (000),Year,CAGR = 129%,Intensified competition,Most industries capacity over production Declining retail prices,Year,GD
24、P indexRetail price index,Index,Growing awareness of technology,Internet users (mio),E-Commerce revenue (US$M),Gradually reduced telecom fee,Source: Jarding Fleming Research; China Statistics Yearbook; interviews; OECD; China Telecom,Long distance (RMB/min),(1.2),(0.8),(1.0),(0.7),CC INDUSTRY WILL R
25、EACH 330-370 K SEATS IN 2010,Illustration,Identify major driving factors to CC adoption - market competition and service awareness - telecom charges and phone penetration Quantify relationships between drivers and CC adoption here we used US benchmark Project CC development by forecasting developmen
26、t of driversProject CC penetration in major users industries - banking, telecom, insurance Add up numbers of each industry to give a CC market overviewInterview industry experts or knowledgeable industry practitioners for their opinion of CC market growth - system integrators and experts,2004 projec
27、tion(1) (000 seats),158132145,2010 projection(1) (000 seats),368337N.A.,Driving factor analysis,Bottom-up analysis,Experts opinions,(1) Without paging company,TOP-DOWN APPROACH REVEALS A PROMISING END GAME,Phone line per 1000 people,CC agents per 1000 people,US benchmark,Y = 0.00146X + 4.79,Deflated
28、 telecom fee index,Phone line per 1000 people,China phone line,Year,Non-paging CC seats (000),Source: US Telephone Statistics; Datamonitor; MII data; China Statistics Yearbook,1998,99,2000,01,04,10,REDUCING TELECOM CHARGES WILL BOOST FIXED-LINE ADOPTION,Backup,Competition pushes further telecom redu
29、ction,Most alternatives at least 50% cheaper IP, internet phone call, “call back” services Ministry determined to further reduce telecom charges “Current telecom charge still does not reach its optimum stage yet” - Minister of MII,Telecom reduction projection,Phone penetration per 1000,Deflated pric
30、e index(1),Phone line per 1000 people,Year,(1) Price deflated by GDP index Source: China Telecom Charges Policy Book; BCG analysis,TELECOM IS THE MOST SIGNIFICANT CC USER NOW Bottom-up Analysis,Industry,Telecom Mobile Banking Insurance Post service Manufacturing Computer Airline Security Courier Hom
31、e appliance TV selling OthersOverall,Projected seats,CAGR,200025,000 7,667 4,545 2,000 1,600 1,501 800 594 257 240 240 300 6,67551,419,200435,714 22,857 11,100 3,760 6,000 7,519 5,250 4,100 4,158 1,000 2,460 1,000 26,669131,588,201041,667 50,000 47,000 9,850 20,833 25,184 14,000 9,600 32,600 3,333 8
32、,800 2,000 71,965336,832,2000-049% 31 % 25 % 17 % 39 % 50 % 60 % 62 % 101 % 43 % 79 % 35 % 41 %26 %,2004-103% 14 % 27 % 17 % 23 % 22 % 18 % 15 % 41 % 22 % 24 % 12 % 18 %17 %,Source: interviews; online research; experts opinions; BCG analysis,EXPERT OPINIONS REVEAL A MARKET OF 145,000 IN 2004,“Fast d
33、evelopment is expected to continue in the next five years. I believe that call centers seats will grow at 30% a year for the next five years (which means 145,000 in 2004)” Director, CTI Forum“Compared to 1999, in 2000 call center seats increased by 142%, or 16,000 seats” China Computer News“In the n
34、ext three years, we project that call center seats will double. Its our conservative estimate.” Manager of Business Development Dept, Huawei,Source: BCG interviews,AGENDA,Executive SummaryCall Center Business Market Overview CC Customer Segmentation In-house users Outsourcers Demand Customer Economi
35、cs Competition Recommendations Success business model Partnering strategyE-Commerce Market OverviewTCI Tianjin Current Situation Analysis Recommendations,CHINA CC USER BASE VERY DIFFERENT FROM U.S.,Selected industry explanation,Telecom China telecom call center investment is still quite government d
36、riven. To promote “189” service line, MII demand call center at each city/county levelManufacturing Manufacturing CC usage still not widely adopted yet. Most state-owned companies are unwilling and unable to invest in serviceRemote shopping Although remote shopping is the biggest CC user in the US,
37、its merely the case here because of inconvenient payment, credit and delivery system. Also, shopping convenience in metropolitan area and general poor consumption power make remote shopping economically unsound,OthersOutsourcing,Security TV selling News & media Airline Computer/Tech,Manufacturing Po
38、st service,InsuranceBankingMobileFixed-line Telecom,China,US,OthersOutsourcingTransport Healthcare UtilitiesRemote shoppingSecurities,AirlineTechnologyManufacturing,InsuranceBankingTelecom,Our 1.5 months interviews have well covered the above industries,Source: Datamonitor; Interviews; online resear
39、ch; expert opinions; BCG analysis,CC MARKET ROUGHLY SEGMENTED INTO FOUR CATEGORIES According to Area of CC Usage, and Willingness to Outsource,Selected industry examples,Willingness to outsource,High,Low,Service-oriented,Outsourcing,Generic service,Admin-driven,Securities,Home appliance,Computer/tec
40、hnology,Courier service,Publication,TV selling,Messaging,Travel,Simple order taking,Paging,Telecom,Insurance,Bank,Post service,Community service,Utility,Core area,Non-core area,Area of CC usage,THREE CRITERIA TO DISTINGUISH CORE AND NON-CORE AREA,Industry,Core Area,Securities Courier service Compute
41、r/technology,“Grey Area”,Home appliance Banking Insurance Publication Telecom Traveling,Non-core Area (generic),Paging service Messaging TV selling Utilities,Functionality,Technical assistance Aftersales service Customer complaint settlement,Sourcing/supplier coordination Customer inquiry settlement
42、 Telemarketing,Message delivering Simple order taking,Call Centers impact to overall business - Core: When CC function is critical to the performance of the industryConfidentiality requirement - Core: If the industry/functionality commands strict confidentialityCall Center operational complexity - C
43、ore: If operating CC in this industry requires great sophistication,Criteria,Many industries have both core and non-core areas,Backup,MANAGEMENT AND OWNERSHIP STRUCTURE AFFECT WILLINGNESS TO OUTSOURCE,Considerations,Ownership structureCompany sizeCompetitionManagement sophistication,Reasons,SOEs con
44、sider economics less and “management authority” more - Prefer to build in-house in order to increase management power and assetsCall Center investment is less significant to large companies. Also, their agents needs can justify a sizable in-house operationMonopolized industry tends to be admin-drive
45、n, or to disregard CC solution totallyPoorly managed companies/industries see much less value of call centers to their business improvement,SOE(1)LargeMonopolized industryPoorly managed,Privately owned foreign investedSmall-to-mediumMarket-driven, competing industryWell managed,Less willing,More wil
46、ling,(1) SOE = State-owned enterprise,Backup,AGENDA,Executive SummaryCall Center Business Market Overview CC Customer Segmentation In-house users Outsourcers Demand Customer Economics Competition Recommendations Success business model Partnering strategyE-Commerce Market OverviewTCI Tianjin Current
47、Situation Analysis Recommendations,ADMIN-DRIVEN SEGMENT: MOST IMPORTANT FOR NOW,High % in total new CC demand,Driven by “Pillar industries”,Demand surged in a group of Chinas important industries since 1999, aiming to improve service level Bank Post service Fixed-line telecom InsuranceRequired mostl
48、y mid-to-high end call center solutions (Nortel, Lucent, IBM, Huawei) Big, monopolized, profitable corporations High cost of failure Budget approval from above Often in conjunction with structural reform,4.9,# of new CC seats (000),Year,Admin-driven,11.2,29.5,Total new demandAdmin-driven,66%,76%,62%
49、,Source: BCG modeling,HOWEVER DEMAND EXPECTED TO FLUCTUATE IN THE FUTURE,Underlying Reasons,Admin-driven segment orders come in batches Call center construction proposal often initiated by government-controlled corporate headquarters, or even ministries Branch companies required to complete call cen
50、ter construction within similar period of timeAdmin-driven corporations tend to over-invest Branch offices incentivized to use up the budget advised by headquarterHowever few admin-driven industries are expected to invest in call centers for the following years Only two industries expected: utility and rail transportation,
