Harvard Case - Telenor (A): From Cellular Networks to Financial Services
"Telenor (A): From Cellular Networks to Financial Services" Harvard business case study is written by Shazib E. Shaikh, Syed Zahoor Hassan. It deals with the challenges in the field of Strategy. The case study is 26 page(s) long and it was first published on : Jan 1, 2014
At Fern Fort University, we recommend that Telenor continue its strategic expansion into financial services, leveraging its existing infrastructure, customer base, and brand recognition to become a leading provider of mobile financial solutions in emerging markets. This strategy should prioritize a phased approach, focusing on building a robust digital ecosystem, fostering strategic partnerships, and aligning its offerings with the evolving needs of its customer base.
2. Background
The case study focuses on Telenor, a Norwegian telecommunications company, as it navigates the transition from a traditional cellular network provider to a diversified player in the financial services sector. Telenor's journey is marked by its entry into emerging markets like Pakistan and its subsequent exploration of mobile financial services (MFS) through its subsidiary, Easypaisa. The case highlights the challenges and opportunities associated with this strategic shift, including regulatory hurdles, competition from established financial institutions, and the need to adapt to evolving customer needs.
The main protagonists are:
- Sigve Brekke: Telenor's CEO, who leads the company's strategic transformation and expansion into emerging markets.
- Easypaisa: Telenor's mobile financial services subsidiary, spearheading the company's foray into the financial services sector.
- The Pakistani market: A key target market for Telenor's MFS expansion, presenting both opportunities and challenges.
3. Analysis of the Case Study
Telenor's strategic shift into financial services can be analyzed using a combination of frameworks:
1. Porter's Five Forces:
- Threat of new entrants: High, due to the relatively low barriers to entry in the MFS market.
- Bargaining power of buyers: Moderate, as customers have choices in MFS providers, but Telenor's brand recognition and existing customer base provide a competitive advantage.
- Bargaining power of suppliers: Low, as technology and infrastructure are readily available.
- Threat of substitutes: Moderate, as traditional financial institutions offer similar services, but MFS offers convenience and accessibility.
- Intensity of rivalry: High, as the MFS market is increasingly competitive, with both established players and startups vying for market share.
2. SWOT Analysis:
Strengths:
- Strong brand recognition and existing customer base in emerging markets.
- Extensive network infrastructure and distribution channels.
- Expertise in technology and analytics.
- Strong commitment to corporate social responsibility.
Weaknesses:
- Limited experience in the financial services sector.
- Regulatory hurdles and competition from established players.
- Dependence on mobile phone penetration and internet access.
Opportunities:
- Growing demand for mobile financial services in emerging markets.
- Potential for partnerships and collaborations with financial institutions.
- Expanding use of mobile technology and digital payments.
Threats:
- Economic instability and political uncertainty in emerging markets.
- Technological disruption and competition from fintech startups.
- Regulatory changes and increasing compliance requirements.
3. Value Chain Analysis:
Telenor's value chain can be analyzed in terms of its core activities:
- Inbound logistics: Managing network infrastructure and technology.
- Operations: Providing telecommunications services and developing MFS products.
- Outbound logistics: Distributing services through mobile networks and agents.
- Marketing and sales: Building brand awareness and customer acquisition.
- Service: Providing customer support and resolving issues.
Telenor's strategic shift into financial services requires strengthening its value chain in areas like product development, customer service, and regulatory compliance.
4. Business Model Innovation:
Telenor's transition into financial services represents a significant business model innovation. The company is leveraging its existing infrastructure and customer base to offer a new range of services, creating a digital ecosystem that encompasses telecommunications, financial services, and other digital solutions. This approach allows Telenor to tap into new revenue streams, diversify its offerings, and enhance customer value.
5. Strategic Planning:
Telenor's strategic planning should focus on:
- Market segmentation: Identifying specific customer segments within emerging markets and tailoring MFS offerings to their needs.
- Product differentiation: Developing unique value propositions and features that differentiate Telenor's MFS products from competitors.
- Pricing strategy: Determining competitive pricing models that balance revenue generation with customer affordability.
- Marketing strategy: Utilizing a mix of digital marketing, social media, and traditional channels to reach target customers.
6. Globalization Strategies:
Telenor's expansion into emerging markets requires a nuanced approach to globalization:
- Localization: Adapting products and services to local cultures and languages.
- Strategic alliances: Partnering with local financial institutions and government agencies.
- Cultural sensitivity: Understanding and respecting local customs and practices.
4. Recommendations
Telenor should pursue a multi-pronged strategy to solidify its position as a leading provider of mobile financial services:
1. Build a Robust Digital Ecosystem:
- Invest in technology and analytics: Enhance its platform to offer a seamless and secure user experience, integrating advanced features like AI-powered fraud detection and personalized recommendations.
- Develop a comprehensive suite of MFS products: Expand beyond basic payments to include microloans, insurance, savings, and other financial services tailored to specific customer segments.
- Foster a digital culture: Encourage employees to embrace innovation and digital transformation, fostering a culture of continuous improvement and customer-centricity.
2. Foster Strategic Partnerships:
- Collaborate with financial institutions: Partner with banks, microfinance institutions, and other financial service providers to expand reach and offer a wider range of products.
- Engage with government agencies: Work with regulators to create a favorable regulatory environment for MFS and promote financial inclusion.
- Explore strategic alliances with technology companies: Partner with fintech startups and other technology providers to leverage their expertise in areas like mobile payments, data analytics, and cybersecurity.
3. Align Offerings with Evolving Customer Needs:
- Conduct market research: Regularly assess customer needs and preferences, incorporating insights into product development and marketing strategies.
- Embrace mobile-first design: Ensure all MFS products are optimized for mobile devices, providing a user-friendly and intuitive experience.
- Leverage social media and digital marketing: Utilize social media platforms and digital marketing channels to engage with customers, build brand awareness, and promote MFS products.
5. Basis of Recommendations
These recommendations consider the following factors:
1. Core Competencies and Consistency with Mission:
Telenor's core competencies in technology, infrastructure, and customer base align well with the strategic shift into financial services. The company's mission of connecting people and empowering communities is further strengthened by offering accessible and affordable financial solutions.
2. External Customers and Internal Clients:
The recommendations prioritize customer-centricity, focusing on understanding their needs and providing tailored solutions. Internal clients, including employees and partners, are also considered, fostering a collaborative and innovative environment.
3. Competitors:
The recommendations acknowledge the competitive landscape and emphasize differentiation through product innovation, strategic partnerships, and a focus on customer experience.
4. Attractiveness ' Quantitative Measures:
While specific quantitative measures are not provided in the case study, the recommendations aim to drive growth and profitability through increased market share, expanded product offerings, and improved customer engagement.
5. Explicit Assumptions:
The recommendations assume a continued growth in mobile phone penetration and internet access in emerging markets, as well as a supportive regulatory environment for MFS.
6. Conclusion
Telenor's strategic expansion into financial services presents a significant opportunity to leverage its existing strengths and capitalize on the growing demand for mobile financial solutions in emerging markets. By building a robust digital ecosystem, fostering strategic partnerships, and aligning its offerings with evolving customer needs, Telenor can solidify its position as a leading provider of MFS, driving sustainable growth and creating value for its stakeholders.
7. Discussion
Alternative Options:
- Focusing solely on traditional telecommunications: This would limit Telenor's growth potential and expose it to increasing competition in a mature market.
- Acquiring an existing financial institution: This would provide immediate access to financial services expertise but could be costly and risky.
Risks and Key Assumptions:
- Regulatory uncertainty: Changes in regulations could impact the MFS market and Telenor's business model.
- Technological disruption: Emerging technologies could challenge Telenor's platform and competitive advantage.
- Economic instability: Political and economic turmoil in emerging markets could negatively impact customer demand and profitability.
Options Grid:
| Option | Advantages | Disadvantages | Risk |
|---|---|---|---|
| Expand into Financial Services | Growth potential, diversification, customer value | Regulatory hurdles, competition, expertise required | Regulatory uncertainty, technological disruption, economic instability |
| Focus on Traditional Telecommunications | Stability, established market | Limited growth potential, increased competition | Market saturation, technological disruption |
| Acquire Existing Financial Institution | Immediate access to expertise, established customer base | Costly, integration challenges, potential for cultural clashes | Regulatory hurdles, integration risks, economic instability |
8. Next Steps
Timeline:
- Year 1: Focus on building a robust digital ecosystem, developing core MFS products, and forging strategic partnerships.
- Year 2: Expand product offerings, enhance customer experience, and establish a strong brand presence in key markets.
- Year 3: Continue to innovate and adapt to evolving customer needs, expanding into new markets and exploring new business opportunities.
Key Milestones:
- Launch of new MFS products and services.
- Establishment of strategic partnerships with financial institutions and technology companies.
- Increased market share and customer engagement.
- Expansion into new markets and regions.
By implementing these recommendations and taking proactive steps to mitigate potential risks, Telenor can successfully navigate the transition from cellular networks to financial services, positioning itself for sustainable growth and long-term success in the evolving digital economy.
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Case Description
Telenor Group, based in Norway, experienced stagnating growth in average revenue per user (ARPU) at its 11 subsidiary cellular networks in Europe and Asia. Buying GSM licenses to expand to new markets was now too expensive. Having favoured Telenor Pakistan with more than $1.2 billion of capital expenditure, it was now especially in need of substantial profits from this wholly owned subsidiary. Given this context, Telenor Pakistan and several other subsidiaries were directed to explore diversification avenues. They sought a self-subsisting "growth story." In the case, we follow how the VP Strategy at Telenor Pakistan presented mobile financial services for the "unbanked" as the way forward. However, at the decision point in the case (March 2008), the central bank of Pakistan had sanctioned only a certain set of business models from which the telecommunications company (telco) had to choose one, if it was to provide mobile financial services. A basic constraint was that the venture should be "bankled." There were already various novel mobile financial service models in other emerging markets that were making headlines, such as SMART Money in the Philippines and Vodafones' M-PESA in Kenya. The VP Strategy at Telenor Pakistan had to prepare a presentation to the Board of Directors regarding how to proceed. The major issues and decisions were the following: (1) why and how Telenor Pakistan would achieve a "growth story" by diversifying into financial services; (2) given the peculiarities of the Pakistani market, what type of alliance with a bank should be pursued given the local legal restrictions and the benchmark models in other countries.
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