Magoosh GRE

Developing access to foreign market

| March 28, 2015

1.1 Introduction

That contemporary firms need access to foreign markets to sustain their market strength and improve their competitive position is not new to the study of strategic marketing. Indeed, foreign market entry is a concept which has gained sway at the height of the Second World War in the late 40s and before the popularization of globalisation which has only become trendy in the past two decades (Tang and Yu, 1990).
Today’s intense competition, turbulent and constantly shifting marketing environment has demanded that firms seeking to sustain their brand strength while improving their capabilities must find different ways of maximizing their values and increasing their marketability. This imperative need for survival has over the years given impetus to both western and emerging market firms to expand into new markets by acquiring smaller competitors, engage in export processes and joint venture adventures.
In the marketing literature and indeed in practice, organisations can access foreign markets in a variety of ways three of which are mainly by direct or indirect export, or production in a foreign country. (See figure 1). Depending on the products or services on offer by the organisation and indeed its resource capability, a range of entry modes can be chosen to enter new markets. According to McDonald, Burton and Dowling (2002) “Foreign market entry modes differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise (p. 34).

Figure 1: Foreign Market Entry Modes

Source: Papadopoulos and Jansen (2005)
Since this paper is not dealing with products in its physical sense, but in the rendering of telecommunication services, such will be its main focus. British Telecommunication (BT), the spotlight of this study, is one of the players that have contributed the globalization of telecommunication. Faced with several strategy alternatives when deciding to enter foreign markets, organisations have to carefully weigh each one in order to make the most appropriate choice. Careful attention and strategic decision making is required for every available approach, coupled with a systematic assessment of the different methods of access/entry into such foreign markets (Sun, 1999).
When the British Government liberalised its telecommunications industry in the early 80s, the emerging competition in the local market forced BT to look for new businesses and opportunities abroad to sustain its strength and improve its profitability which has been eroded by growing competitive forces. This in turn gave rise to British Telecoms planning to sign agreements with several international partners allowing British Telecom to “better meet the out-sourcing needs of multinational users.” This all culminated into a complete reorganisation of BT, aimed at increasing focus on customers –in a whole new global network strategy. The American angle coincided with the UK’s Department of Trade and Industry’s decision to discard the telecommunications industry’s existing duopoly system, in favour of an open market. The duopoly system only allowed British Telecom and Mercury Communications Ltd to compete in the UK market. Thus, due to the fact that British Telecom realised it would be getting more competition at home, it had to become more aggressive in other parts of the world, including North America (Network World, 1 April 1991)
The decision of how to enter a foreign market and which market to enter can have a considerable impact on various organisational outcomes. Expansion into foreign markets is achieved in many ways, as will be discussed in the subsequent sections and chapters.
When it comes to accessing foreign markets, the prospective organisation, after doing all the preparatory planning and assessments required will have to decide on a market entry strategy and a marketing mix. Two main ways exist when it comes to accessing foreign markets: by entering from a home market base, via direct or indirect exporting, or by foreign based production. The organisation then has a choice, within these two possibilities, to either take an “aggressive” or “passive” path (Zou and Stn, 1998).
Licensing, joint venture, contract manufacture, ownership and export processing zones are methods which have their own peculiar advantages and disadvantages – an organisation must carefully consider before making a choice. More so, market entry strategies for telecoms differ from those used for, say, agricultural products or in other merchandise industries. It is, in itself, a process, and contains a sequence of steps which starts from when a company desires to enter a foreign market, to when it establishes its operation in the new market (Levi, 2007).
Once an organisation has finally decided on the possibility of entering a foreign market, it would have to carry out comprehensive market research of the selected country and develop a global operation strategy. Such factors as the demography, economy, political and infrastructure network – and most importantly, trade barriers in the industry concerned to the company, will be considered. Also, the organisation would have to bear in mind the purchasing power and consumer behaviour of potential customers. Of utmost importance is also, considering the kind of competition as well as potential partners, distributors and agents available.
All these factors already mentioned, mean different things to different companies, depending upon the nature of the companies’ products or services. A certain factor may hardly be important for some organisations, while for some others, it might be the determining factor for their success in the foreign market.
At this stage, it would then be paramount for an organisation to select the most appropriate mode of entry, which could be any of the following: exporting, licensing, strategic alliance or joint venture, or setting up of a wholly owned subsidiary. The risks, amount of investment and the level of control and ownership of foreign operations differ from one mode of entry to the other. What the organisation should always keep in mind is that the strategies being adopted to access such foreign markets, should lead to the choice of a good industry segment. Its offers and resources must have competitive advantage in order to stay feasible in the newly-penetrated foreign market.
Certainly, these factors would have come to the attention of British Telecoms Group when it must have first decided to seek access into foreign markets. There was a time, historically, when BT Group’s competitors were so few that they all could be easily fitted into one of the company’s signature red phone booths. Competition has indeed taken the toll, and yet, it is said that the company still wears the crown as the UK’s top telecommunications carrier, and generates almost 80% of its revenues in the UK. While there is need to further shed an operational background to the activities and past foreign market experiences of BT, the research aims and objectives are important at this point hence are presented in the following section. More discussions as regards BTs foreign market history will be explored in section 1.5.

1.2 Aims and Objectives of the Study
While the overarching aim of the research is to examine how organisations can develop strategic options to access foreign markets, the important objectives are to:
1. Explore the pros and cons of various options available to accessing foreign markets
2. Identify and consider the suitable option for BT
3. Understand the processes involved in developing access to foreign markets
4. Identify the need for foreign markets entry
5. Critically examine the barriers for accessing foreign markets
1.3 Research Questions
This research study aims to explore following research questions:

1. What are the main strategic options available for foreign market entry?
2. How can adapting a strategic approach for accessing foreign markets be helpful to BT?
3. What are the processes and criteria’s involved in developing access to foreign markets?
1.4 Research Purpose
Globalisation, which is one of the driving forces of internationalisation, has brought tremendous opportunities for firms to reach global consumers while increasing their brand awareness, at the same time increasing their sales On the other hand globalisation has intensified the growing forces of competition which is rapidly increasing market changes and the pace of external uncertainty (Enderwick, 2011). Today, most firms are literally confused about the most appropriate strategies to adopt to improve their sustenance and maintain their market edge. Over the past ten years, outsourcing was the reigning business concept but the increasing rate of reversal of outsourcing processes attest to the rapidly declining confidence that managers have in the strategy (See e.g. Rundth, 2003). Clearly, localition is not an option because most firms want a larger share of the global cake by accessing foreign markets.
Exporting, while it has been considered a very good option for accessing foreign markets is also faced with numerous challenges which include the fact that cheaper goods and services holds sway in the international market from emerging market economies such as China and India. This growing competition which has become fast apace over the last decade increases the pressure on many western foreign firms in the export market. Indeed, within every possible strategic option lies a barrier and challenge for a firm intending to adopt a new option to expand its market, thus, the challenge for contemporary organisations is how they can access new markets and improve their capabilities in terms of growth, sales and brand without being exposed to the problems faced in their local markets.
What options can such firms adopt that will help towards taking advantage of the opportunities in a foreign market? What are the processes involved in gaining access to foreign markets? Will accessing foreign markets improve a firm’s sales and competitiveness and indeed what are the downsides of foreign market entry? Understanding these questions and many more issues faced by firms in the contemporary marketing milieu is the focus of this study. The study would contribute to literature by bringing a nuanced understanding of the strategic options issue to the fore and also by shedding more understanding into the challenges and processes that firms go through in developing access to foreign markets in practice and beyond theory.

1.5 History and Activities of BT
Incorporated in 1984 as British Telecommunications Plc, it was transformed from a former state utility during the turning point in the development of UK and European telecommunications. Privatisation did not prevent BT from maintaining its dominant position as a provider of local and long-distance telephone services in the United Kingdom. However, increasing competition has seen its market share fall due the continued efforts of the English government to deregulate the market. Subsequently, BT has looked abroad in search of future growth, developing a global telecommunications network for multinational companies in the process.
When the environment became severely regulated, BT lost its security as a state monopoly, without gaining the freedom of action of a wholly autonomous enterprise. Oftel, the semi-independent Office of Telecommunications, set up in August 1984 under the Secretary of State for Trade and Industry and headed by the Director General of Telecommunications, monitored BT’s pricing, accounting, quality of services and investment policies. Oftel also issued licenses to additional competitors and continued to facilitate the interconnection of rival services to the BT network (Lewis,1996)
This was not the only area in which BT faced stiff competition; the mobile communications market offered an unpredictable distraction. With BT’s non-cellular Mobile Telephone System 4, which had 7,000 subscribers at the beginning of 1990, facing capacity problems at peak periods, it had to be replaced by a cellular network, Cellnet. Racal-Vodafone, it’s rival, was using another network.
BT’s challenges became intensive as the 1990s progressed, what with 98 percent of its revenues and profits coming from its home market, and its position in the UK market being eroded by the additional competition allowed under the 1991 review of the Duopoly policy. As many as 150 firms began operations in the UK which were in competition with BT from 1991 to early 1996, including cable firms owned by US Baby Bell companies. BT’s share of the UK telephone market tumbled as a result, with its residential customer market share falling from 99 percent in 1991 to 93 percent in 1995. Its business customer market share also fell from 94 percent to 83 percent between 1991 and 1995.
The impact of the competition and regulation began to show clearly in BT’s revenues and profits, with stagnation in the company’s revenue growth, where the £13.15 billion figure of 1991 only increased to £13.89 billion in 1995.
It became clear that the embattlement at home was increasing and there was more pressure in store, leaving BT with almost no choice but to look abroad for its long-term survival. Failure had already been recorded in early attempts at international expansion, including the purchase in 1986 of Mitel Corp., a Canadian phone equipment manufacturer, which BT sold in 1992 at a loss of £120 million. In 1992, BT also sold its stake in McCaw Cellular.
According to BT, these investments no longer fit the company’s international plans, which were now centred around building a global telecommunications network offering comprehensive services to multinational corporations.
BT’s first attempt at going global was in 1991 when it set up a subsidiary, Syncordia Corp in Atlanta, Georgia to start up a network on its own. There was little success in drawing the customers or the telecommunications partners it required around the world, and so the venture did not succeed. BT realized the error in attempting to go it alone, and Syncordia was shut down three years later.
The second time around, in mid-1993, BT attempted to go global with the announcement of an alliance with MCI Communications Corp, a major U.S. telecommunications firm. The two firms set up a joint venture named Concert Communications Company, which was based in England. To make it work, however, BT required additional partners in other areas of the world. BT then set up alliances with several European companies over the years, including Telecom Finland, Tele Denmark, and Norwegian Telecom. Through these BT now had a solid network of partners in Europe and North America, though it remained weak in the critical Asian market, where the only ally was the International Telecom Japan Inc., which was a small international carrier.
During this time, AT&T was diligently working to set up its own system of global alliances through what was called its World Partners program. Although the U.S. giant was having difficulties making inroads in Europe, it had more success than BT in Asia due to the establishment of partnerships with KDD of Japan and with Singapore Telecom.
As the new century drew nearer, British Telecoms found itself squeezed in its still highly important home market. Profits were slow to come from its international activities which were still very much at a start-up stage and so could hardly be expected to turn the huge investments in them to returns. It became apparent by the time the 21st century loomed, that British Telecommunications was under increasing pressure to look abroad for new opportunities to expand its business.

1.6 Research Outline
Having laid a concise background to the purpose and objective of this study in the present chapter (Introduction), the rest of this study will be outlined through the following demarcations.
Chapter two is the literature review which will present the theoretical part of the study, the main concepts, strategies and methods of foreign market entry will be assessed from the marketing literature while the issues, risks and challenges faced in adopting various strategies will be reviewed through literature in this chapter.
Chapter three is the methodology which will discuss the research design, approach and present the tools of strategic analysis that will be adopted in the following chapter to analyse data and understand the practical issues involved in the study.
Chapter four can be described as the heart of the thesis because it presents the case of BT through a rigorous and detailed analysis of the data collected through both secondary and primary methods. The chapter critically considers how BT has previously accessed foreign markets, the problems, challenges and how it can enter foreign markets in its present quest to achieve more growth and profitability.
Chapter five presents the conclusions which summarizes and evaluates the results and other main ideas discussed in the study. The chapter considers the implication of the result for future studies as well as how the research question and objectives have been answered.

2.1 Introduction
In today’s highly competitive and dynamic global operating business environment, foreign market entry for several organisations is not a choice but an imperative strategy to gain sustained competitive advantage and indeed remain in the game. There are various examples of companies establishing themselves in other markets. A firm such as Tesco, the UK’s largest supermarket chain has entered China, the United States and preparing to go into other new markets. The management claims that the reason for such market expansion is to leverage its strengths and take advantage of increasing opportunities in other markets. Such rationalisation is true for every organisation because of the irresistible opportunities offered by emerging markets and more importantly the growing challenges in the “home front”. As this chapter presents through the review of existing literature, the major challenge for most modern day organisations is not whether to enter a foreign market but what mode of entry to use in entering such market. While indeed, evolutionary thinking is essential according to Arnold (2003) because of existing competition in many potential foreign markets. This chapter scans the literature for market entry modes, strategies and examines some of the processes and risks for organisations seeking to enter into new markets.
2.2 Accessing Foreign Markets: The Objectives
In the modern business climate, possession of some level of experience within the international marketplace is highly regarded due to the exposure and distinct characteristics of international operations; an organisation would therefore do well to take the process of accessing foreign markets just as seriously (Solberg, 2002). Some more-established firms have managed this process with considerable sophistication; however, all too often there is a delegation of strategic options which results in underperformance, as in fact the formulation of a marketing strategy. A number of organisations have made the error of undertaking a “replication” strategy, whereby it merely seeks a larger market showground in which to exploit an advantage. Companies from a smaller domestic country-market will seek to achieve greater economies of scale through foreign markets. It may also be interested in exploiting a distinctive asset, through a brand, patented product, or service model, with emphasis on giving more of the same from its home market – usually with little or no adaptation to the foreign market (Tan, 2001). If such objectives are to succeed, then some control must be retained, using for example, a relatively intensive mode such as joint ventures. Certainly, the basic objectives of any organisation seeking access into a foreign market have been regarded to include market growth and maturity, competitive intensity, and fragmentation of the value chain. When a company decides that future growth can only come from international expansion, then that becomes a good reason as any to access foreign markets (Shah and Laino, 2006). Sometimes, a company may enter markets it would otherwise not have tackled, where the incentive of rapid business evolution is dangled before it. International markets are known, to a reasonable extent, to have the distinct characteristics, and most companies would do well to adopt different entry modes for different markets – as will also be discussed later in the study (Ibid).
Considering its interest to boost business development, then a new market entry must be fast and should aim at catching up with “established” first movers. Resources, organizational culture and managerial skills of the company seeking to penetrate, should be harnessed effectively in order for the various objectives to be achieved.
The main objectives when accessing foreign markets, as in every other business, boils down to the following: sales, profit, expansion. Taking advantage of market opportunities, assessing or evaluating new, international markets as prospective environments to do business is key to the growth of any global-thinking company. “Domesticated” organisations, no matter how successful, always come across as small fry without the bonus angle of a respectable, international network of business. Every good strategy should lead to profit or growth, and if not, then it is necessary to set a different market entry strategy! Below, the modes of access into a foreign market shall be perused in detail, and the challenges involved therein (Shah and Laino, 2006).

2.3 Forms of Market Entry: The Modes of Access
Any market besides the one based in a company’s own country, is a foreign market. To an American organisation, for example, India would be part of the foreign market. And to an Indian company, America will also be regarded as a foreign market. Certainly, any company seeking access into foreign markets would need to analyze such country as a prospective environment to do trade or business – “business” being the key word here. And so, with the mind that the foreign market is intended to be a mode of expansion and development, then such a company seeking entry should carefully consider the different modes of access and which one would best suit their needs as a business.
Two main points stand out when considering mode of entry into foreign markets, and these are risk and control. When a company decides a low-intensity mode of market entry is preferable, then it follows that the risk is minimized. For example, investment is non-existent where a company decides to “contract” with a local distributor, which requires zero sales personnel, marketing campaigns, distribution facilities, or offices. This arrangement also minimizes control, since the international company will have little or no say in most marketing plan elements.
All in all, there are four main mechanisms for accessing foreign markets, which include the following: exporting, licensing, joint venture, and direct investment, discussed in more detail below.
2.3.1 Exporting: Exporting, simply put, is the marketing of goods produced in one country, into another. It is the most traditional and well established form of operation in foreign markets. Licensing involves an agreement whereby a firm (the licensee) in one country is permitted to use the manufacturing, processing, trademark and know-how of another company (the licensor). The process may be Direct or Indirect.
Direct exporting is a strategy commonly taken by firms who wish to establish a greater presence in a foreign market. It has been described to occur when a manufacturer sells directly to an importer or buyer located in a foreign market (Hollensen, 1998). In this case, the manufacturer performs the export task rather than delegating it, as is done in indirect exporting.
Indirect exporting is a less “involved” form of accessing foreign markets. The exporting manufacturer hires an independent organisation which effectively, becomes the export department for the producer. Simply put, the producer sells to others who export (Walvoord, 1982). Thus, the firm becomes an indirect exporter when its products are sold in foreign markets, but no special activity for this purpose is carried on within the firm (Terpstra &Sarathy, 1997). David Arnold (2003) describes this as a more common template followed by companies, and it usually starts with market entry through an indirect distribution channel, usually a local independent distributor or agent.
Both indirect and direct exporting has their advantages and disadvantages. The good thing about indirect exporting is that access to foreign markets is achievable with none of the risks and complexities of direct exporting. The use of a domestic intermediary provides a company which has little or no experience in selling abroad, with readily available expertise (Jeannet & Hennessey, 2004). Major exporting costs are also lessened, such as transportation and distribution, which are handled by an independent organisation (Ibid).
Indirect exporting has a number of setbacks, which includes a lack of control over how, when, where and to whom the products are sold (Doole & Lowe, 2001). This loss of control means that products may end up being sold through unsuitable channels, with poor supporting services/promotions and inappropriate pricing. These all could lead to the reputation of a firm and its products being damaged abroad (Doole & Lowe, 2001).
Taking precautionary methods can avert such a situation from occurring. The firm will have to do a thorough background check to ensure that the domestic intermediary does not have a reputation that will hinder that of the producing firm (Tan, 2001). However, Johansson (1997) warns that the skills and know-how developed through direct exporting experiences are gained outside the firm and not in it.
Direct exporting has no such worries. It handles every aspect of the exporting process, from market research and analysis, to handling the documentation, foreign distribution and collection of payments. Thus, the opportunity to build up expertise in international marketing is greater (Doole & Lowe, 2001). The potential profit is higher, and it is a more proactive approach to foreign markets, due the closer relationships established between buyer and exporter. A vast knowledge of the local customs and environment is gained, and the foreign partner becomes a prime source of invaluable market research (Rundth, 2003).

The drawbacks, of course, would be that more time, personnel and corporate resources will be expended than in indirect exporting. There is a certain level of commitment that is required, which in turn leads to an increase in responsibility and risk faced by the exporting firm (Rundth, 2003).

2.3.2 Contractual Agreements: Licensing and Franchising:
Licensing and franchising are both contractual agreements undertaken whereby certain rights are obtained from one firm to another. They are both major forms of foreign market entry, discussed as follows:
Licensing: Companies who own a distinctive and legally protected asset, such as a brand name, technology or product design, manufacturing or service operating process, turn to licensing as a common method of international market entry. Although such firms may offer licensing in its domestic environment, they consider it a very effective way of entering foreign markets because it offers both a low-intensity, low-risk mode of market participation. The products or services are easily adapted to local markets, for example, Disney having many licensing arrangements in China, which allows its characters to adorn apparel or toys suited to local Chinese taste in colour, styling or materials. As is usual in licensing agreements, the local licensee has a considerable autonomy in designing the products into which it incorporates licensed characters (Arnold, 2003). This is very advantageous to the licensor, whose low level of local involvement ensures that the business is essentially “local” and as such, import barriers such as regulation or tariffs do not apply (Rundth, 2003).

Licensing has also been described as a two-way process; both parties bring substantial benefits to the relationship (Hollensen, 1998). One party, the licensor, allows another party, the licensee, to gain access to their technology, patents and trademarks, to name a few. The licensor also benefits from access to the capabilities of the licensee, in such areas as manufacturing, and local experience (Ibid).

Johansson (1997, p.154), tells us that licensing involves offering a foreign company the rights to use one’s proprietary technology and know-how. It is usually in return for a fee, with a royalty to be paid on revenues. Such things as technical advice and assistance, manufacturing know-how, and patent on a particular product or process, or the use of the company’s trademark or name, can also be given (Hollensen, 1998).

These rights are given for a certain length of time and may vary, depending on the level of investment the licensee is required to make. And since the licensee is the one to undertake all the necessary capital investment in relation to equipment, marketing expenditure and the rest, then it is understandable if the party would probably prefer a lengthy agreement to recover the cost of investment over time.
The major disadvantage of choosing licensing as a mode of accessing foreign markets can be found in the risk of creating future local competitors, where the licensee can end up breaking away from the international licensor and stealing or imitating technology. As can be found in technology businesses, certain designs or processes are licensed to a local business and “secrets” in shape of intellectual property are revealed, which would otherwise not have been available to that local business. And even in a best case scenario, the local licensee certainly benefits from the accelerated learning involved, since the international firm must have a superior asset for it to have a market for licensing it in the foreign country. Even absent of malicious intent, the local company is thus likely to develop into a position in which it can develop its own rival business in time. This makes licensing most suitable for firms participating in international markets, who are able to move on to new products or services thus retaining a competitive advantage over “imitator” ex-licensees (Arnold, 2003).

Franchising: Widely used as a rapid expansion model within major developed markets in North America and Western Europe, Franchising is still an underexplored entry type in international markets (Arnold, 2003). Fast food chains, consumer service businesses (hotels, car rentals) and business services find this option very favourable. It is mainly suitable for the replication of a business model or format, where the operating guidelines are more times than not, fixed in nature. This hardly gives any room for adaptation, a key consideration in employing such an entry mode into new country-markets. However, certain arguments state that major franchisers are demonstrating an increasing ability to adapt their offering to suit local tastes. Thus, though the format and brand is internationally consistent, certain customer-based elements are tailored to suit local preferences. For example, the McDonalds’s franchise, far from being a global seller of American-style burgers, offers considerably different menus in different countries – and even in different country regions. And in any case, it must be noted that there are product-markets which exist whereby customer tastes are similar across countries, so not much local adaptation is required.

Hollensen (1998, p.242) outlined three major types of franchising: trade name franchising, and “package” franchising. The former is a distribution system: suppliers contract dealers to sell products or product lines, where by the dealers use the trade name and trade mark of the firm. Package franchising involves a franchisor and a host country, whereby the former transfers a business package/format which it has developed and owns, to the latter.

Franchising has been called a quick way to enter a foreign market, similar to licensing, which also represents an inexpensive mode of access (Keegan & Schlegelmilch, 2000). However, franchising differentiates from licensing in the sense of giving a greater element of control to the franchisor over the franchisee’s operations. Franchising puts contractual agreements in place which enables the franchisor to uphold and protect the international image of the franchised brand. And since the franchisee’s profits are tied to their effort and performance, this would act as motivation to ensure the business works and the venture is profitable.

When it comes to disadvantages, franchises have been seen to be unable to completely overcome the issue of the difference in cultures between the franchisor’s domestic market and the foreign market (Doole and Lowe, 2001). This drawback shows the difficulty of adapting the franchised asset or brand to local market tastes (Arnold, 2003). And even though some experienced corporations like McDonalds or Marriot hotels have managed to succeed on this trade-off, it took several decades and a few false starts to get to the point of advanced practice they now enjoy.
Another disadvantage of franchising is the fact that although there is a contractual agreement in place between the franchisor and franchisee as to how the franchise operations should be carried out, the risk still remains of problems in relation to performance standards. If a franchise is not operated to the standards set out by the parent company, this may have a damaging affect on the brand (Kotabe & Helsen, 2001).

2.3.3 Joint Ventures & Strategic Alliances (Spotlight: Telecoms):

When it comes to pursuing growth in the global market, a Telecoms company has two distinct choices: it can either enter directly by building the product/service offerings with its own resources in the target country, or it can collaborate with other firms (Joshi, Kashlak, & Sherman, 1998).

This “new entrant” globalization strategy gives the telecoms firm the freedom of choice regarding markets and technologies. It however lacks initial brand name recognition, and is a slower and more costly process. As in the case of the global telecommunications market, this approach is especially undesirable where time and speed are critical, and where resource commitments in a particular market, segment or technology might be too risky a pursuit for a company by itself (Poshi, Kashlak, & Sherman, 1998). Another way a telecommunications company may enter a target market is through strategic alliance relationship with other firms.

“Strategic Alliance” is a term which has been used very frequently in the news reports of today’s telecommunications industry. It is a strategic alliance is a business relationship where two or more companies, working to achieve a collective advantage, attempt to integrate operational functions, share risks, and align corporate cultures. The degree of strategic alliances may range from a simple licensing agreement, to joint marketing effort, to combining resources for joint ventures, to the ultimate form of mergers and acquisitions. Companies may be interested in alliances to capitalize on different expertise, build strategic synergies, mitigate risks, speed up a venture with combined resources, and develop scope economies (Chan-Olmsted, 1998).

“Joint Venture” has been described as “any kind of cooperative arrangement between two or more independent companies which leads to the establishment of a third entity organisationally separate from the “parent” companies (Buchel et al., 1998, pg. 6)”. Entering into a joint venture with a local partner provides a more extensive participation in foreign markets than either exporting or licensing. It is also differentiated from other forms of collaborative agreements due to the fact that the partners form a separate legal entity. Other distinctions of Joint Ventures are that they are partnerships between legally incorporated entities (companies, chartered organisations or governments) and not between individuals. In addition, equity positions are held by each partner (Cateora & Graham 2002).

Joint Ventures provide a less risky way to enter markets , considering the legal and cultural issues that would be the case in an acquisition of an existing company (Keegan & Schlegelmilch, 2000).

BT Group has been a part of a large number of joint ventures, and this is why this particular model holds more interest to this paper than the others. Probably the oldest telecommunications services company in the world, it is fair to say that BT has had more than its share of strategic mishaps in its foreign-market participation. In 2008, BT bought Wire One Communications, which made them the worldwide leaders in video conferencing solutions. In the same year, they also bought Ribbit, a company from Mountainview, California. By May 2009, BT announced they were cutting 15,000 jobs after a poor financial year. And as recently as March 31st, 2010, BT reported a revenue of 20.91 billion British pounds, representing a reduction of 520 million in comparison to the previous fiscal year (BT Group Annual Report, 2010).

We can see from the foregoing that the choices are wide and opportunities are boundless for the discerning participant company interested in accessing foreign markets. So how is it that so many attempts fail or yield little results? It is the aim of this paper to assess how businesses, particularly British Telecommunications, respond to a turbulent commercial environment. Through the 1990s, BT developed an aggressive global strategy, which degenerated to a process of retreat by the end of the decade. The form and nature with which this global strategy was executed has been said to have influenced its failure, resulting in a declining commitment to an aggressive global scheme and leading BT to revert to a more “defensive” corporate strategy (Turner & Gardner, 2007).

As exposited by Buchel et al., (1998) the reasons to form a joint venture can be spread out over internal reasons, competitive goals and strategic goals. Internal reasons would include the need to spread the cost and risk of going global, safeguarding resources which cannot be obtained via the market, improving access to financial resources, benefits of economies of scale and advantage of size, and access to new technology. In the area of competitive goals, Joint ventures would influence the structural evolution in the specific industry, the pre-empting of competitors, the defending of the company as globalisation makes boundaries retract, and the creation of a stronger competitive unit. The creation and exploitation of synergies, the transfer of technologies and skills and the diversification are the focus of the strategic goals.
A notable disadvantage of this foreign-market access mode is that a company incurs very significant costs associated with control issues which arise when working with a partner. There is also the issur of conflict between the two management teams and this may lead to deterioration of relationships – especially if they are competitors. This scenario occurs commonly when Joint ventures are formed as a source of supply for third country markets. Such moves must be carefully thought out in advance, as one of the main reasons for joint venture “separation” is over disagreements about third country markets in which partners face each other as potential competitors (Buchel et al., 1998).
There are still even more problems managements must deal with in this entry mode: insufficient agreement between the partners, issues of harmony, and problems of adjustment i.e. changes in the circumstances of the environment of the joint venture over time (Buchel et al. 1998).
At this juncture, it would be pertinent to ask, what are the strategic options facing global-thinking firms or indeed firms in the knowledge and service industry today, especially in Telecommunications? BT’s strategy of becoming a leading global telecommunications company finally came to an end when it became impossible to finance an aggressive global enlargement programme. At a point, the Concert joint venture with AT&T became a heavy burden, which worsened the already shaky financial position of the both companies. It gave rise to the question that, if these companies could not conquer the telecommunications world, who could? Asked in many articles, and most probably in the boardrooms of telecommunications incumbents, is this query as to whether to be an integrated telecoms company, or to focus on some of the strengths of the company, or to move into a new business?
What can be the most suitable methods or alternatives through which foreign markets can be accessed by BT? This is one more question which is also one of the main pillars upon which this paper has been grounded, and in the chapters following, the discussion will delve into the area of methodology and the suitability of alternatives open to BT for accessing foreign markets in future.

2.3.4 Wholly-Owned Subsidiary (Equity Mode)
Wholly owned subsidiaries (WOS) involve the highest stake of equity ownership and control (Root, 1987). The dominant equity interest can either be obtained by means of acquisition, or by the establishment of a new venture (Greenfield) (Pan & Tse, 2000). Although WOS yields the greatest profit potential, however, the entrant has to bear the entire decision-making responsibility by itself (Anderson & Gatignon, 1986). In general, the choice of entry mode is at the same time also a choice between risk and return or, to put it differently, between costs and benefits (Anderson & Gatignon, 1986; Erramilli & Rao, 1993).
Each mode of entry differs in terms of costs and benefits from another, certainly. Respective companies have to assess the equation of costs and benefits on an individual basis, as it is repeatedly a function of firm-specific resources, capabilities, strategic goals, and environmental settings and contingencies. Not contesting the firm-specificity of entry choices, it is however embedded in the nature of theory to establish general frameworks that aid in the decision making process. In this respect, it appears that most theoretical frameworks agree on the cost side of the equation. More specifically, costs (financial costs, opportunity costs, operating costs, risk, etc.) are perceived to be a function of equity as they are acknowledged to be the lowest in exporting and contractual agreements but are expected to increase with increasing equity investment.

2.4 Foreign Access Modes – Theoretical Angle
In recent decades, rapid globalization has compelled firms to expand their business beyond their domestic markets. Internationalization of a firm not only concerns what foreign markets to serve, but how to enter them. Firms interested in servicing foreign markets face a difficult decision in terms of choice of foreign entry modes. Several factors have been outlined which determine the choice made: ownership advantages of a firm, location advantages of a market, and internalization prospects of amalgamating transactions (Agarwal & Ramaswami, 1992).
Sharma and Erramilli (2004) argue that over the last four decades entry mode literature has been shaped under the influence of numerous entry mode theories of which are explored below.
Internalization: This comparative institutional approach gives an insight to how international strategic management should be modelled. Internalization, as a theory, explains the existence and functioning of the multinational enterprise (MNE), (Rugman 2004). It has made contributions to the better understanding of the boundaries of the MNE, its interface with the exterior environment, and its internal organizational design.
The foregoing points raised highlight the fact that in today’s environment, the intensity of global competition makes the theme on entry modes as contemporary as ever. Multinational enterprises (MNEs) are not only required to expand, but also to cultivate their presence in established as well as in emerging markets. The manifested idea of “national” boundaries has further been blurred by the associated increase in cross border flows of goods, human resources, capital, and technology. And now, transactions can no longer by regarded merely within the context of domestic, but rather as global, markets (Root, 2000). The author further recommends that, instead of fearing the global economy and its growing competitiveness, domestic firms should regard it as an opportunity to “exploit bigger and faster-growing international markets” (Root, 2000, p.2). Accordingly, Root points out that a firm’s prosperous future most likely resides in its ability to determine an efficient entry mode strategy – and hence remain competitive in a global environment (Root, 2000).
Internalization’s great strength lies in its comparative institutional approach to assessing the effectiveness and the efficiency of MNE choices of firm boundaries, selection of specific organizational form, and the establishment of linkages with the external environment. It is unfortunate that despite the insightful elements of this approach, much work in the international strategic management sphere has not taken on board internalization theory thinking.
Historically, Internalization theory was conceptualized by Buckley and Casson (1976). Several working papers contained in their short book were prepared at the University of Reading in the two-year period preceding the book. These two sections of the book: ‘A Long Run Theory of the Multinational Enterprise’(Chapter 2) and ‘Alternative Theories of the Multinational Enterprise’ (Chapter 3) provide the first clear statements of internalization theory. Buckley and Casson were able to briefly demonstrate that the MNE organizes bundles of activities internally, in such a way that it is able to develop and exploit firm-specific advantages (FSAs) in knowledge and other types of intermediate products. Considering the presence of market failure, internalization (which is, performing activities inside the MNE), acts as a governance mechanism to develop and exploit FSAs. An alternative to the external market for developing and exploiting knowledge, internalization demonstrates in general terms that any type of market imperfection (across both goods and factor markets) can lead to pressure for internalization by the MNE.
Buckley and Casson (1976) did well to originate such thinking in the field of international business. The core concept which stated that the MNE can replace the market, was developed, far different from the thinking of Oliver Williamson, whose linkage of internalization theory to the markets was known as the hierarchy approach. This approach was not resolved until Hennart published a dissertation in 1976, where models that distinguish between vertical and horizontal integration, and explore in greater depth the alternatives of firm contracting versus market exchange were developed.

Williamson (1975) may be unable to lay claim to the intellectual origins of Buckley and Casson’s internalization theory, however they are deeply embedded in the work of Hymer (1960, published in 1976). Hymer not only developed the concept of firm-specific advantages (FSAs), he also demonstrated that foreign direct investment takes place only when the benefits of exploiting FSAs across borders allow overcoming the additional costs of doing international business. Hymer’s concept of costs of doing business abroad, was described as the “liability of foreignness” (Zaheer, 1995).

Hymer adopts an essentially firm-level, industrial organization approach to explain foreign direct investment. He contrasted for the first time, such firm-level FDI with orthodoxy by economists that explained FDI as a financial investment decision, determined by interest rate differentials across national borders (Dunning & Rugman. 1985).

To Hymer, FDI was recognized as a firm-level strategy decision and not a capital-market financial decision. Dunning (1976) in a connected paper, also made the Hymer approach popular, contrasting it with the international economics factor-cost explanation of international trade. Dunning later combined this thinking to his Eclectic paradigm, whereby location advantages capture differences among countries and regions. Internalization, on the other hand, reflects firm-level strategy decision and their outcomes.
Interestingly, Rugman and Verbeke (1992) provide the most important paper linking internalization theory with international business strategy with a more modern twist. The authors contrast non-location-bound FSAs with location-bound counterparts. Location-bound FSAs are distinctive in strengths, with limited geographical operation and exploitation potential. In Rugman and Verbeke (2003) a distinction between location and non-location, further extending internalization theory into network analysis. This way, each MNEs affiliate commands specific FSA-bundles. The content of these bundles and their development and exploitation over time determines each affiliate’s role in the MNE and drives interactions with other associates.
The final pillar, known as the internalization advantage, discusses the contractual risks involved in foreign access. Its main message is that firms should prefer low control market entry modes simply because they can “benefit from the scale economies of the market place, while not encountering the bureaucratic disadvantages that accompany integration” (Agarwal & Ramaswami, 1992, p.6). However, in presence of market failure firms have incentives to internalize to avoid the costs of moral hazard, information asymmetries and adverse selection (Dunning, 1995). Furthermore, since these problems are likely to be augmented under situations of environmental uncertainty, bounded rationality and the potential for opportunism (Williamson, 1985)

3.1 Introduction

This section is hinged upon the goals of this study and the methodology by which the goals are to be accomplished. Patton (2002) tells us that methodology is meant to be a collection of methods, procedures, philosophical assumptions, strategies and approaches that underpin a study.
Methodology can also be described as the analysis of the principles of methods, rules, and postulates employed by a discipline. It is the systematic study of methods that are applied within a discipline.
Academic research on the topics in general possesses an inherent characteristic of being subject to various constraints, mainly financial, time and cognitive ones – and the same goes for research into foreign entry modes. Entry mode studies have been numerous and extensive, and each of them have certainly displayed certain limitations and is hence, open to improvement. This study therefore has a general objective to push forward research in the area of foreign entry modes, with British Telecoms Group as a case study. The motives are mainly, to increase the scientific understanding of the determinants of foreign entry mode choices and the subsequent performance of these entry modes with special emphasis on the feats of British Telecoms Group.

3.2 Research Components: BT Case Study
As the title states, this section of the chapter sets out the aforementioned elements in detail so that the reader is availed of an accurate understanding of the cumulative process through which the research was conducted. The basis of both the discussion and the conclusions thereof will also be addressed in order to avail the reader of an accurate understanding of the cumulative process through which the research was conducted, and upon which discussion and conclusions are based.
Accordingly the chapter begins with a preliminary overview of the company chosen to serve as case study for the subject-matter of foreign entry and strategic options that this study focuses on; this is important in other to set the tone for subsequent analysis and establish a concrete basis for relating theory to the evidential data generated from the case study company.
BT’s core service involves voice and data services in the UK and elsewhere in Europe. It consists of operations in four principal segments:
• BT Global Services: provides managed networked IT services to multinational corporations, domestic businesses, national and local government organizations.
• BT Retail: offers broadband, telephony, and TV services, plus IT and telephony for small to medium sized businesses in the United Kingdom.
• BT Ignite, BT’s business services and solutions division serving customers worldwide
• BT Openworld: an international mass-market internet business.
To add to their global capability, they challenge the incumbent operators in a number of key markets for services to national businesses and governments.
This year 2011, BT has put in place certain policies to show their readiness to meet global obligations to their wide market reach. The industry in which BT is present is a highly competitive one, subject to rapid technological change. In a world experiencing significant social, economic and environmental changes, BT has now had to get things right for their global customers, in order for the organisation to succeed.
They have decided to continue to reduce costs, invest in the skills and technology of the future – and maintain a commitment to support the well being of the customers, suppliers, community and environment on which their business depends. Implementing this strategy will of course raise sustainability challenges and dilemmas, and how BT decides to tackle these will reflect on how well they succeed in those markets, both home and global-based.

3.2.1 Research Method: Qualitative Approach
The research approach that is chosen for any particular study often has to do with the researcher’s notion concerning the topic or subject matter of the study as well as their subjective decisions involving the means by which the research questions, aims and objectives are dealt with.
This research is primarily concerned with investigating the strategic options incorporated in developing foreign market access, and this calls for the Qualitative method of research.
As such, since this research is primarily concerned with investigating the extent through which developing strategic options can promote foreign access modes, the qualitative research approach is considered to be at this point the most facilitative of the stated aims and objectives of the study.
The qualitative approach is very appropriate to this study out of its amenability to intensive data analysis, and the inductive evaluation of research information. The ability of qualitative research to implement complex textual issues of the studied phenomena and individual responses to it makes it quite advantageous to the present study.
In comparison with the qualitative method, one can say that the quantitative method, in its own case, largely emphasizes numerical empiricism and statistical representation of date. On the other hand, qualitative approach makes it possible to identify and analyze intangible factors, and to describe and evaluate these factors in a way whereby hidden meanings and correlations between nuances embedded in the diverse variables, are discovered (see Denzin and Lincoln, 2000).
Of note is that in strategic options/planning, especially when discussing business sustainability especially in foreign markets, one should not be concerned merely with financial goals. Deeper considerations pertaining to social and environmental issues, and the way in which managers plan for such issues, form the basis upon which the subject matter of this study is based.
For this reason, a research approach which emphasizes the use of statistical methods to investigate research phenomena may not adequately capture the complex elements and shades of meaning attached to research data.
The qualitative approach, as a whole, represents a more suitable method of analyzing and interpreting the strategic options open to developing foreign market entry, particularly as they concern sustainability decisions and practices.

3.2.2 Research Philosophy: Interpretivism
To better understand the interface of factors which underpin a company’s strategic options and decisions, a facilitated interpretation and in-depth comprehension of otherwise complicated pieces of evidence is in order.
According to Smukowski (2006), the seeming dichotomy of interests which managers face during the reconciling of the strategic options open to current shareholders, as well as sustaining the resources of the business and society in general (for future stakeholders), necessitates an appropriate research philosophy to guide evaluation and facilitate understanding.

With this in mind, the research philosophy to be considered most appropriate for the present study is the Interpretivist philosophy which entails the analysis of “socially meaningful action” in a methodical manner, and undertaken by the observation of phenomena in order to interpret and understand the way in which the elements of the observed phenomena exert influence on each other (see Newman, 1997). Also known as the phenomenological paradigm, this research philosophy is particularly useful in studies where qualitative research approach is utilized. It functions with the underlying belief that human behaviours and actions can not be adequately analyzed using methods of the physical or natural sciences (Borg & Gall, 1989).
In essence, this Interpretivist theory – or phenomenological philosophy – is very useful for the purpose of understanding the relatively intricate elements involved in strategy planning in developing foreign markets. As put by Hussey and Hussey (2007): it permits data to be rich and subjective; it is concerned with generalizing theories. . . . it uses small samples, and it facilitates high validity of outcomes.

3.2.3 Research Strategy: Case Study
The case study strategy as an approach to investigating a particular subject matter, makes it easier for the researcher to gain keen insight and a deep, practical understanding of the context involved in research. Basically, it facilitates an in-depth study of the phenomenon upon which a research is focused (Bryman, 2001).
The case study research method has been described as an empirical academic enquiry into a particular contemporary phenomenon, within its real-life context, particularly where the boundaries between such phenomenon and the relevant contexts are not so clearly defined. These results in the use of multiplicity of evidence sources (see Yin, 1984: 23). Case study tends to, to a large extent; emphasize an extensive and incisive contextual analysis of strategically limited numbers of conditions or events, as well as the relationships governing them. The choice to study a specific subject matter makes it worthwhile to try to be operational and apply the theory arising from such a study, thereby focusing on specific practical examples to the extent possible.

A number of techniques and procedures for organizing research work based on Case Study strategy have been pointed out by several researchers. The essential steps involved, especially for qualitative research purposes include:
• The determination and definition of research questions;
• The selection of appropriate cases and techniques for data gathering and analysis;
• Preparation for data collection; collection of data in the field;
• Evaluation and analysis of data, and preparing final report (see Stake, 1995).
It would be most ideal, under ordinary circumstances, for a study of the strategic options for developing foreign market entry, to examine as many organizations as possible in order for an empirical determination on the subject. The limitation in resources and time will however rule out such a universal scope of study. It is practical to select a manageable forte which would serve as a basis for conducting such investigation.
In view of this, the Case Study method is arguably the most pragmatic approach to the operation of theoretical ideas, examination of real instances of phenomena, and the establishment of conclusions on the basis of evidence which have been evaluated in real-life contexts (see Collins and Hussey, 2003).
The result of these considerations is that this research is based on the viewpoint from British Telecommunications as a case study: their strategic options to foreign market entry, and how these markets can be developed to maximum potential. Case study will thus help to provide deeper insights into the ways that organizations structure their strategic planning systems, and the main influences on their considerations for such planning – and how the process impacts the success or not of foreign-based markets.
There have been suggestions as to the disadvantages of using such a research approach. Some critics point to a typically small number of cases as a fact that impedes the possibility of establishing sufficient reliability of finding. The “narrow” focus and exposure to the studied case may impair the findings with some degree of bias – so they say. Thus, they believe the Case Study method is useful as an exploratory tool and not a reliable research method (see Eisenhardt, 1989, Emory and Cooper, 1991).
These criticisms aside, it is still largely considered very useful in the development of new theories, building on and challenging existing theories, and exploring subjects of interest. It is notably applicable to real life situations, and relates to everyday experiences of the general reader. These effectively facilitate keen understanding of contexts which would other wise be complex.

3.3 Data Collection Methods
Drawing on existing theoretical views and previous research, this study essentially explores the strategic motives, location choice, and international entry mode strategies of multinational enterprises, based on a case study of British Telecoms. Using empirical findings from semi-structured interviews, this study clearly indicates that the main strategic motivation behind BT’s internationalization was essentially opportunity seeking in terms of the enablement of market development and generating higher investment return. It is certain that BT used different entry strategies depending on the host country market characteristics, and so it can be said that the company is more in favour of mergers and acquisitions than Greenfield investments.
That said, it must be pointed out that every research work has in its core, a collection of data which serves as the basis for the entire study. Data collection is therefore an integral part of the research process. So much so, that Allwright (1998: 10) describes it as the “central methodological question” found in performing any research or academic study.
There are thus two categories of data collected and used for research: primary data and secondary data. Primary data are pieces of information directly obtained by the researcher, specifically for the research work being carried out. Secondary data refers to the collection of all openly accessible, publicly obtained information related to the subject matter. Public sources include books, journal publications, research papers, internet-based libraries.
As regards the primary data used in this particular study, they were largely obtained through interviews with five select managers of British Telecoms, while the secondary data were obtained through a wide variety of academic resources – both electronic and non-electronic.
Considering that the research strategy for the present study involves the use of case study, it is well to note that some information on the case study would be derived from the secondary sources mentioned above. In essence, the data collection and analysis will be conducted by means of a systematic, inductive process, or “constant comparative analysis” – or better still, “analytic induction” (see Silverman, 1993).

The primary data for this study as found in the interview element, is just as potent a research instrument, which will be shown in the following section.

A scan through existing literature has revealed the importance of interviews as a means of obtaining primary data. And it has been described as ‘a systematic way of talking and listening to people’ (Kajornboon n.d.). In this case, it is necessary to obtain relevant information via conversations. It could be in any of three different forms: structured, semi-structured or unstructured. The structured type is more standardized and the same sets of questions are asked of all the respondents. But its disadvantage lies in the fact that it is very rigid and cannot be used to probe problem areas when it becomes necessary. The second type, semi-structured form, lies in between the structured and the unstructured forms of interview. It is not as standardized as the structured form but is not too flexible as to be determined by the course of the conversation. The last type is the most flexible in which the conversation is allowed to take its course without any particular structure whatsoever. The bottom-line however is that the form chosen by the researcher would depend on the nature of the data to be obtained, and more importantly, by the objectives of the study.

The design of an interview would go a long way in affecting the results that would be obtained at the end of the day. A wrongly designed, poorly phrased interview would result in inaccurate results leading to wrong feedback. In this study, the design of the interview questions is based on the necessity of foreign market entry and the various options available as regards the experiences of the respondents. The interview design chosen for this study is a semi-structured one in which questions were asked from five randomly selected managers in British Telecom.
Each interview lasted about thirty minutes, in which each respondent was allowed to bare his/her mind about the need for entering foreign markets and the various options available. The results of each interview were initially taken down as notes, but an audio recording equipment served as a backup. The audio records were later transcribed and compared with the notes taken during the course of the interview so as to ensure accuracy and reliability of data.

Each respondent was told the reasons behind the interview, and particularly the aims of the study. Informed consent was obtained from each respondent and confidentiality of information assured. During the course of the interview itself, five main questions were asked with additional questions asked as influenced by the conversation itself. The five main questions which were later used for analysis are as follows:
• Question 1: What are the strategic motives of your organisation?
• Question 2: Do you think your organisation needs to enter foreign markets? Please briefly discuss these needs.
• Question 3: What foreign market entry strategies have been developed and utilised by your organisation?
• Question 4: Do you think that your organisation’s chosen foreign market entry methods have been profitable? From your experiences with the company, please discuss the advantages and disadvantages of the entry strategies if any.
• Question 5: Please discuss any barrier to getting access to foreign markets that your company has encountered.

The response of the interviewees enabled the researcher to gain insight into the reasons why business organisations seek foreign markets. It also revealed the perspectives of the respondents on the issues of foreign markets, especially why it is necessary to access foreign markets and the possible options for doing so. The responses were then later analysed using thematic framework analysis by identifying the themes in the interview transcripts and then using the emerging pattern to back up or disprove some ideas and theories surrounding foreign markets.

As regards the challenges, the study faced a lot of constraints, most particularly logistic issues. One of the major limitations was in recruiting respondents who had served in the company for a relatively long time which would have been enough to gain insight into the running of the company. And especially with this topic, it requires an interviewee to have been in active service of the company for a while so as to be able to give accurate information as regards the company’s history, successes and failures. Also, the researcher believed that top executives in the company would have been able to give more insight into the research questions. But in some cases, interviews were declined for reasons that were undisclosed. Again, the researcher also faced the constraint of sourcing for secondary data from websites, libraries, and other sources. Other challenges were also faced such as verifying the accuracy of information derived from both primary and secondary sources. But the researcher took steps to ensure that the challenges and limitations did not significantly influence the results of the research.

The validity of data in most cases was only verified by repetition of the same information in other sources. Accuracy could not exactly be verified. But the researcher went to great lengths to ensure that whatever data that would be used in this research, especially secondary data, came from known sources and authorities in the research field.

Ethical issues are bound to arise during the course of any study, and as such, measures were taken to address all issues that surround the confidentiality of information given, privacy of the interviewees, and collection of data from secondary sources. As described earlier, as a means of ensuring high ethical standards, the aims and objectives of the research was painstakingly explained to each interviewee, informed consent obtained, and confidentiality assured. During the course of the study, none of the interviewees was harmed in any way whatsoever. And throughout the process of collecting information, the researcher kept in mind the fact any interview had to be terminated or postponed whenever the interviewee got upset.


The objective of this section of the paper is to present British Telecom which is the organisation of study and highlight its development over the years since its establishment, as regards its expansion and entry into foreign markets. This chapter also presents the data derived from the semi-structured interviews. The methods and strategies applied to get this data are as described in the previous chapter, chapter 3. As stated earlier, five managers chosen at random in the company of study, British Telecom, were interviewed and snippets from the interview are recorded here.

As stated in the methodology section, the aim of the semi-structured interviews were to get the perspectives of the five managers on the need for, advantages and disadvantages of their company’s chosen foreign market entry strategies. With this aim in mind, the researcher went about conducting a telephone interview with the five managers. The table below shows the interviewees and the number of years spent with the company.

Table 4.1. Table showing the respondents and the number of years spent with the company.
Respondent Number of years with company
Respondent A 4
Respondent B 12
Respondent C 9
Respondent D 5
Respondent E 3

The reason for obtaining data about the number of years spent with the company is to evaluate whether the respondents were up to date as regards the motives of the company and the foreign market entry strategies being employed in their company.

The same set of five questions were asked from each respondent, although additional questions in form of clarifications and other issues were asked, but only the five important questions and their responses would be evaluated here. And in writing this report, snippets taken from the interview would be used and analysed along with data obtained from secondary sources.

Question 1: ‘What are the strategic motives of your organisation?’
This question attempted to weigh the knowledge of the respondents about the objectives of the company in which they work. The reliability of their responses would be balanced against the number of years each interviewee had remained in the employ of the organisation. But nonetheless, the responses still showed that they still knew what the organisation wants to achieve. Some of the comments are as follows:

Respondent A: ‘As far as I know, the main motive of the company is to achieve a global predominance. But also, the company needs to expand, get more customers . . .globally. . . make more profit. . .’

Respondent B: ‘The company believes in creating quality communications services . . . to its customers . . . in an open and standards-based environments.’

Respondent C: ‘. . . to ensure fast and efficient communication to those who need it, wherever they are.’ ‘

Respondent D: ‘. . . in clear terms, we want to minimize costs, maximise profits and reduce corporate social responsibility’

These responses are in line with the company’s corporate values: trustworthiness, helpful, inspire, straightforwardness, and heart (BT Group Annual Report 2010).

Question 2: ‘Do you think your organisation needs to enter foreign markets? Please briefly discuss these needs.’
According to Respondent B, ‘it is very essential that we access as much foreign markets as possible. Look at the situation in the UK, it is like the telecoms market is becoming saturated. In order to be able to increase our profit margins and at the same time cut costs, we need to see the possibility of going to new markets and establish there. . .” Respondent D also concurs with Respondent A: ‘the major objective of any business organisation is to make profit, and if that is not possible in the home country, then opportunities have to be sought elsewhere’. It appears that the major need that these two respondents have highlighted is the need to make more profits. And also according to Respondent B, the home market is becoming oversaturated, hence the need for accessing new markets. These points have been supported by Muhlbacher, Leihs and Dahringer (2006) who explained that when there are too many local businesses selling the same product or service, the domestic market becomes saturated and unnecessarily competitive. In order to avoid this, the need to internationalize becomes apparent.

The loss of the duopoly that British Telecom has enjoyed over the years is another important reason why the company needs to enter foreign markets. Respondents A, B and D (whose comments are as stated below) agreed with this:

‘. . . [Initially], it was two companies alone, but now there are several telecoms company in the UK alone’

‘Around the 1980s, only British Telecom and Mercury Communications existed as the sole suppliers or telecoms services . . . in the UK’

‘We only competed with Mercury [communications] back then . . .’

The UK government issued a directive in 1991 which officially ended the duopoly that had earlier existed between British Telecom and Mercury Communications. This directive then opened up the telecoms market to new providers resulting in intense competition.

Some of the other needs as identified by the respondents include the need to sustain brand strength, the need to survive stressful market and regulatory conditions, better opportunities in other countries, and new technologies.

Question 3: ‘What foreign market entry strategies have been developed and utilised by your organisation?’
‘British Telecom has acquired smaller telecom companies in other countries as a means of entry that country’s telecoms market. But it seems we do more of joint ventures than any other market entry strategy.’ This was a comment by Respondent B who highlighted the use of mergers and acquisitions, and joint ventures as a means of accessing foreign markets. Other respondents also added to this:
Respondent A:
‘. . .we merged with Mercury and AT&T in the United States . . . bought El Segundo over in California. . .partnered with 21ViaNet in China. . .’

Respondent C:
‘We also bought Radianz from Reuters Corporation . . . acquired Albacom in Italy . . . in 2005’

Respondent D:
‘. . . have acquired, PlusNet, Comsat, Wire One, Ribbit . . . among others’

Respondent E:
‘21st century network was one of the numerous companies we invested in . . .’

All these responses showed that British Telecom has majorly utilised joint ventures and acquisitions as a means of accessing foreign markets although they have also been involved in mergers and acquisitions. The alliance between British Telecom and Mercury Communication Corporation was what launched British Telecom on the global market (McDonald, Burton & Dowling 2002). This association gave the company the ability to create a global network with the objective of providing advanced business services using end-to-end connectivity. This deal which was originally worth a little above $2 billion on the part of British Telecom paid off when the company sold off its stake in MCI to WorldCom to finally bring an end to the alliance (McDonald, Burton & Dowling 2002). Since 1997, the company has been involved in several deals, joining business with other communications providers in other countries. However, some of these deals failed.

Question 4: ‘Do you think that your organisation’s chosen foreign market entry methods have been profitable? From your experiences with the company, please discuss the advantages and disadvantages of the entry strategies if any.’
Buchel et al (1998) stated that one of the disadvantages of joint ventures is conflict of interests which if not well handled can led to break up. This is what happened to a number of mergers between British Telecom and a number of other telecoms companies. A notable example is the joint venture between British Telecom and AT&T which was initiated in 1996 and finally ended in 2000. This joint venture failed because the two partners were unable to work together due to personal differences as claimed by Respondent C. According to him, ‘going down the memory lane, it has been ups and downs . . . we failed in our joint venture with AT&T because of unreconciliable differences’. In addition to this, Respondent A stated that some of the unsuccessful ventures had resulted in loss of money on the part of British Telecom. ‘We have lost money . . . resources . . . due to failed companies’. All these are in line with Foley’s (2010) belief that joint ventures may not succeed if the strategic motives of the partners involved do not converge, each partner wants to maximize the opportunities in the joint venture and at the same time maximize its own competitive position or if the partners cannot learn from each other.

On the other hand however, the foreign market strategies applied by British Telecom have also yielded positive results. According to Respondent B, ‘back in 1997, our alliance with MCI yielded a profit of more than two billion US dollars despite the severance fee . . .’ Based on this assertion, it can be said that profit is one of the advantages of joint ventures. Taking the case of The MTN Group for example, the company through joint ventures achieved revenues of $38 million, $134 million, and $40 million in Rwanda, Uganda and Swaziland respectively, further confirming profit making as one of the benefits of joint ventures (Reviewed interim results 2010).

Also, according to Respondent A, ‘we have been able to get access to numerous customers in other countries . . . which would not have been possible had it been we still limited ourselves to the UK.’ This statement is in support of Joshi, Kashlak and Sherman’s (1998) assertion that joint ventures create access to foreign customers at the cost of fewer resources.

A major advantage of the alliance which British Telecom entered into with some foreign telecoms companies is that it gives the company foreign market access at a rapid rate and less costly process (Respondent B). This is because the foreign company takes advantage of the already recognised brand of the domestic company to gain dominance and reach customers. Also, according to Respondent C, ‘it is less risky entering into joint ventures with other telecoms giants than when those companies are acquired or bought’. Keegan and Schlegelmilch (2000) agree with this. But considering Respondent C’s comments, it can be inferred that some of the acquisitions that British Telecom have made have resulted in legal tussles which can be considered a disadvantage.

Question 5: ‘Please discuss any barrier to getting access to foreign markets that your company has encountered.’

Respondent A: ‘I don’t think we have encountered any barriers so far . . .’

Respondent B: ‘What I have noticed is that the company tends to spend heavily on researching and trying to find out whether a market is viable or not’

Respondent C: ‘In some of the countries we are interested in, some of them have existing monopolies which makes it difficult to access their markets. Also, some of these companies sell their services at a very low rate probably due to exchange rates. But if we should go into these places, we would be operating at a loss.’

Respondent D: ‘We have encountered very stiff regulations in the market environment . . . also high tariffs . . .’

Respondent E: ‘Looking at it critically, we cannot afford to lose so much money when in the first place, our aim is to maximize profits and cut costs. Therefore, any alliance that would lead to excessive spending on marketing or advertising . . . funds that cannot be recovered in case of any exigency . . . we would not bother’

Except for Respondent A who feels there had not been any barriers, all the other respondents had listed one barrier or the other. The most significant is the monopoly existing in the telecoms market of some countries. According to Shah and Laino (2006), the possibility of breaking an existing market’s monopoly is one of the major things that must be considered before a new company can come in. If this is not possible, then it constitutes a barrier to market entry. Also, the issue raised by Respondent E can be termed ‘sunk costs’. For instance when British Telecom broke away from AT&T, the closure cost British Telecom over $2 billion while AT&T lost over $5 billion, not to talk of more than two thousand jobs lost (Turner & Gardner 2007). Thus, a market that needs a lot of capital input with little or no resale value would make it difficult for prospective investors to come in. Other barriers as highlighted by the interviewees include international trade restrictions, unfavourable market environments, excessive spending on market research, cost disadvantages, etc.

The need to access customers in foreign markets is a major factor driving business to seek foreign market entry. According to Lewis (1996), the major factor that initiated the drive to seek foreign markets, in the case or British Telecom, was the loss of duopoly which had hitherto existed in the UK. This is similar to the case of other telecommunications companies. MTN also started in South Africa, but due to changes within the South African telecoms market, the company was forced to seek other options elsewhere. This necessitated the seeking of joint ventures in Uganda, Rwanda and Swaziland (Data Monitor 2010). This is consistent with the explanations of Arnold (2003) who listed loss of monopoly, intense competition, turbulent and constantly changing market environments, profit maximization, need to sustain brand strength and survival as some of the reasons why seeking foreign market entry becomes necessary. From this study, the case of British Telecom was no otherwise different. As shown by existing literature and the comments of the interviewees, the company had several reasons to seek foreign markets elsewhere and which the company did.
But despite seeing a need for entering a foreign market, the next step will be to decide the best entry strategy to use based on good research. In the case of British Telecom, it has been involved mainly in two types: joint ventures and acquisitions. Initially when the company took the decision to achieve global presence, it opted for a joint venture option with MCI. This choice cannot be said to have yielded the results the company wanted, resulting in a break up some years later. McDonald, Burton and Dowling (2002), in line with what most of the respondents, said that the use of joint ventures was very suitable for British Telecom. This entry strategy afforded the company the ability to achieve its objectives in a less risky and cost effective way (Keegan & Schlegelmilch 2000). Through this means, the company did not have to spend unnecessarily on acquiring technological infrastructure. Also, the cost of production was lessened and at the same time, the company acquired the necessary in-depth information about how to run businesses in the foreign country. Other telecoms companies have also applied the joint venture option with good results. When The MTN Group decided to seek businesses in other countries; it started by obtaining joint ventures with other companies in Rwanda, Uganda and Swaziland. And from the company’s results in 2010, it was revealed that these joint ventures yielded a lot of profit (Reviewed interim results 2010).

The second market entry strategy which British Telecom has continued to use over the years is acquisition. The company acquired several companies all in a bid to secure foreign markets. The respondents mentioned El Segundo, Radianz, Albacom,, PlusNet, Comsat, Wire One, and Ribbit as some of the companies British Telecom acquired. By taking over some of these companies, it afforded British Telecom 100% participation in the country’s telecom sector at the cost of great financial commitment and managerial effort (Anderson & Gatignon, 1986). But comparing it with the option of using joint ventures, it seems that acquisition works better for British Telecom considering the fact that most of the company’s joint venture deals ended in failures. And looking at the company’s financial performance since the 2005 when many acquisitions were made, the company recorded profit margins of $1.5 billion, $1.6 billion, $2.8 billion, $1.7 billion, and $1.0 billion in 2005, 206, 2007, 2008 and 2010 respectively (BT Group Annual Report, 2010). It was only in 2009 that the company recorded a little loss. Also, looking at this from another angle, acquisitions lessen the time necessary to penetrate the market in question because the domestic company’s technology, resources and supply lines would initially be used to reach the same set of customers. And when intense competition is anticipated in that domestic market, the quick dominance established by the foreign company helps in discouraging other competitors.

However, other options which are still available include exporting, licensing, foreign direct investments, franchising, turnkey projects, and strategic alliances which have been applied in other telecoms companies with varying amount of success. But in the case of British Telecom, the best so far from available evidence is acquisition.

As regards the forces that militate against successful market entry, British Telecom has come against several barriers. The respondents mentioned some of the barriers which ordinarily would have deterred other smaller companies. For example, the response of Respondent E to this question, ‘. . . any alliance that would lead to excessive spending on marketing or advertising . . . funds that cannot be recovered in case of any exigency . . . we would not bother. . .’ This is a major issue faced by companies in seeking entry into foreign markets. ‘Sunk costs’ is the capital spent on a market that has little or no resale value. These includes money spent on advertising, marketing, etc. Such that when the company decides to pull out of that market, it cannot recover the funds spent on these things. In the case of British Telecom, it lost more than $2 billion when the venture with AT&T failed (Turner & Gardner 2007). This constitutes a barrier which must be considered to see whether it is worth it in the first place before any company can access new markets.

Just like MTN was able to overcome barriers such as unfavourable market environments and trade restrictions, British Telecom have succeeded in overcoming several of these barriers, although some of them had serious impact on the organisation’s successes in the countries of interest. The first attempt to go global ended with little success when the country failed to draw international customers with its subsidiary, Syndia Corp. But when the company learnt its lesson and entered into a joint venture with AT&T, international barriers were successfully broken down and British Telecom was able to break into Asian, North and South American markets.

In concluding this chapter, British Telecom has had its share of ups and downs. Available evidence chronicles the effect of entering foreign markets on the ability of the company to achieve its strategic motives and the appropriateness of each market entry mode to the industry or market in question. But from the results of this research, the researcher can safely conclude that acquisition as a foreign market strategy affords British Telecom a lot of opportunities, and most especially, the ability to achieve its aims and objectives.

This study was done with the aim of identifying the main strategic options available to British Telecom for foreign market entry, adapt a strategic approach for the company to access foreign markets and find out the processes and criteria involved in developing access to foreign markets. This study as investigated various ideas and hypotheses surrounding the best way to use foreign markets to satisfy the needs of business organisations. It has also been able to show that with the present wave of globalisation, it becomes necessary for big companies like British Telecom to search for markets in other countries.

Critical examination of relevant literature reveals that British Telecommunications Plc as an incorporated business organisation has faced a lot of stiff pressure on the home field. This singular need precipitated its desire to search for more market opportunities in other countries. In order to go ahead and access these market opportunities, several options were available for British Telecom to choose from. Over the years, the company has settled on the use of joint ventures and acquisitions to gain access to other markets. Despite the claimed benefits of other market entry strategies, the use of joint ventures and acquisitions has satisfied some of the needs of the organisation, although there have been some recorded failures from the use of these entry strategies. But from research conducted by the company, and despite the disadvantages of these entry strategies, the company feels that these two strategies would go a long way in assisting the company to satisfy its needs.

The use of foreign market entry strategies has been associated with drawbacks, but on the on the other hand, each strategy also has its advantages. The combination of the merits and demerits of each market entry mode has to be carefully evaluated in order to select which one best suits the company’s needs. Also, there are some barriers to accessing foreign markets, just like British Telecom encountered in the course of its operations in some countries. This still reiterates the need for careful evaluation before plunging into a foreign market.

In using the case of British Telecom as an example, this report has been able to fulfil its objectives by exploring the merits and demerits of each available market entry option. It has shown the need for foreign market entry, the processes involved, the best option suitable for the company of study, and the barriers involved in accessing foreign markets.

The first chapter started with an introduction into the concept of foreign markets and the need for business organisations to access these markets. It gave today’s intense competition, turbulent and constantly shifting marketing environment, and the need to sustain brand strength as some of the reasons why a company needs to seek foreign markets.

The second chapter critically examined the concept of foreign market entry further. From existing literature on the subject, it brought out examples of companies that had sought markets in foreign countries. It described the various modes of access with the pros and cons of each but with much focus on joint ventures because it is the strategy that has been mostly employed by the company of study.

The third chapter described the methods and approaches chosen for this study as used on the results and analysis chapter. In order to effectively obtain necessary information based on the objectives of the research, the qualitative method was basically adopted for collecting primary and secondary data. The primary data was derived from transcripts of the interview done with the respondents. The secondary data was sourced from existing literature such as articles, texts, and peer-reviewed journals that bothered on foreign market entry.

Analysis of the data derived was done in chapter four. The analysis was done using thematic framework analysis which was described in the methods section. Themes from the interview transcripts were identified and analysed. And from snippets of the interview, it was discovered that British Telecom actually had a need for foreign market entry which served as a good rationale behind the company’s decision to seek markets in foreign countries. Nonetheless, there were still some disadvantages with the company’s chosen market entry strategies. Although this research has been able to fulfil its objectives by maximising the available resources, there are still some limitations to this study. The researcher believes that a more comprehensive picture would have been attained had it been respondents in the foreign countries where the company had established business were interviewed to obtain their opinions. The above listed limitations and several others therefore suggest that other areas would need to be investigated fully before coming to a conclusion as regards the strategic options available for entering a foreign market.


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