Harvard Case - Tequila Mobile SA
"Tequila Mobile SA" Harvard business case study is written by Hanna Halaburda, Jerzy Surma, Aldo Sesia. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Apr 13, 2012
At Fern Fort University, we recommend Tequila Mobile SA (TMS) pursue a multi-pronged growth strategy focused on leveraging its existing strengths in the Mexican market while expanding into new markets through a combination of organic growth, strategic partnerships, and selective acquisitions. This strategy aims to capitalize on the growing demand for mobile services in emerging markets, while mitigating risks associated with rapid expansion.
2. Background
Tequila Mobile SA is a Mexican mobile telecommunications company facing significant challenges in a rapidly evolving market. The company is struggling to maintain its market share amidst intense competition from established players like Telcel and Movistar. TMS has a strong brand presence in Mexico but lacks the financial resources and technological capabilities to compete effectively on a global scale. The case study highlights the company's need to develop a strategic plan that addresses its competitive disadvantages and capitalizes on emerging opportunities in the mobile telecommunications industry.
The main protagonists in this case are:
- Alejandro Ramirez: CEO of TMS, responsible for leading the company through a period of significant change.
- Ana Maria Sanchez: Head of Strategy and Business Development, tasked with developing a strategic plan to address the company's challenges.
- The Board of Directors: Responsible for overseeing the company's overall strategy and approving major decisions.
3. Analysis of the Case Study
To analyze TMS's situation, we can utilize several frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: High, due to low barriers to entry in the mobile telecommunications industry.
- Bargaining Power of Buyers: High, as consumers have many choices and can easily switch providers.
- Bargaining Power of Suppliers: Moderate, with a limited number of key suppliers for network infrastructure and equipment.
- Threat of Substitute Products: High, with the emergence of over-the-top (OTT) communication services like WhatsApp and Skype.
- Competitive Rivalry: Intense, with established players like Telcel and Movistar aggressively competing for market share.
2. SWOT Analysis:
Strengths:
- Strong brand recognition in Mexico.
- Established customer base.
- Experienced management team.
- Focus on customer service.
Weaknesses:
- Limited financial resources.
- Lack of technological innovation.
- Dependence on the Mexican market.
- Inefficient operational processes.
Opportunities:
- Growing demand for mobile services in emerging markets.
- Development of new technologies like 5G and IoT.
- Increasing adoption of mobile payments and financial services.
- Potential for strategic partnerships and acquisitions.
Threats:
- Intense competition from established players.
- Regulatory changes and government policies.
- Economic instability in emerging markets.
- Technological disruption from new entrants.
3. Value Chain Analysis:
TMS's value chain can be analyzed to identify areas for improvement:
- Inbound Logistics: Optimizing supply chain management and negotiating better prices with suppliers.
- Operations: Streamlining manufacturing processes and improving operational efficiency.
- Outbound Logistics: Enhancing distribution channels and customer delivery processes.
- Marketing and Sales: Expanding marketing efforts to reach new customer segments and leveraging digital channels.
- Service: Providing excellent customer service and building customer loyalty.
4. Business Model Innovation:
TMS needs to explore new business models to address its competitive disadvantages. This could include:
- Value-added services: Offering bundled services like mobile payments, financial services, and entertainment.
- Data-driven insights: Utilizing data analytics to understand customer behavior and personalize services.
- Strategic partnerships: Collaborating with other companies to expand into new markets and offer complementary services.
- Subscription-based models: Offering flexible subscription plans to cater to different customer needs.
4. Recommendations
1. Strengthen Core Competencies:
- Invest in technology and innovation: TMS should invest in research and development to stay ahead of the technological curve and offer innovative services like 5G and IoT.
- Improve operational efficiency: Streamline manufacturing processes, optimize supply chain management, and implement lean methodologies to reduce costs and improve productivity.
- Enhance customer service: Invest in customer service training and implement customer relationship management (CRM) systems to improve customer satisfaction and loyalty.
2. Expand into New Markets:
- Target emerging markets: TMS should explore opportunities in fast-growing economies with high mobile penetration rates, like Latin America, Africa, and Asia.
- Strategic alliances and partnerships: Partner with local companies in target markets to leverage their expertise and networks.
- Selective acquisitions: Consider acquiring smaller, innovative companies in target markets to gain access to new technologies and customer bases.
3. Leverage Digital Transformation:
- Implement digital marketing strategies: Utilize social media, search engine optimization (SEO), and other digital channels to reach new customers and build brand awareness.
- Develop mobile applications: Offer mobile apps that provide value-added services and enhance customer experience.
- Embrace cloud computing: Migrate to cloud-based solutions to improve scalability, flexibility, and cost-efficiency.
4. Foster a Culture of Innovation:
- Encourage employee creativity: Create a culture that values innovation and empowers employees to contribute ideas.
- Invest in employee training: Provide employees with the skills and knowledge they need to adapt to changing technologies and market demands.
- Establish a dedicated innovation team: Create a team focused on identifying and developing new products and services.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations focus on strengthening TMS's core competencies in customer service and brand recognition while expanding into new markets.
- External customers and internal clients: The recommendations aim to enhance customer experience, provide value-added services, and empower employees to contribute to the company's success.
- Competitors: The recommendations address the competitive threats from established players by focusing on innovation, operational efficiency, and market expansion.
- Attractiveness ' quantitative measures: The recommendations are expected to generate positive returns on investment through increased revenue, market share, and profitability.
Assumptions:
- The global mobile telecommunications market will continue to grow in the coming years.
- Emerging markets will offer significant opportunities for expansion.
- TMS will be able to successfully implement its strategic plan and adapt to changing market conditions.
6. Conclusion
Tequila Mobile SA has a strong foundation in the Mexican market but needs to evolve to address the changing landscape of the mobile telecommunications industry. By focusing on strengthening its core competencies, expanding into new markets, leveraging digital transformation, and fostering a culture of innovation, TMS can achieve sustainable growth and maintain its competitive edge.
7. Discussion
Alternatives not selected:
- Focusing solely on the Mexican market: This would limit TMS's growth potential and expose it to increasing competition from established players.
- Aggressive acquisitions: While acquisitions can be a quick way to enter new markets, they carry significant risks and may not be financially feasible for TMS.
- Divesting non-core assets: This could generate short-term cash flow but may weaken TMS's overall position in the market.
Risks and key assumptions:
- Economic instability in emerging markets: Political and economic volatility could negatively impact TMS's expansion efforts.
- Technological disruption: The emergence of new technologies could render TMS's existing infrastructure and services obsolete.
- Competition from established players: Established players may aggressively counter TMS's expansion efforts.
8. Next Steps
Timeline with key milestones:
- Year 1: Develop a detailed strategic plan, invest in technology and innovation, and begin expanding into new markets through strategic partnerships.
- Year 2: Implement digital transformation initiatives, optimize operational processes, and acquire smaller companies in target markets.
- Year 3: Continue expanding into new markets, build a strong brand presence in key regions, and focus on customer service and loyalty.
Key milestones:
- Develop a detailed strategic plan: This should include specific objectives, strategies, and action plans for each area of focus.
- Secure funding: TMS will need to secure funding to support its growth initiatives.
- Build a strong management team: TMS will need to recruit and retain experienced professionals to lead its expansion efforts.
- Develop a robust communication strategy: TMS will need to communicate its strategic vision to employees, customers, and stakeholders.
By taking these steps, Tequila Mobile SA can position itself for long-term success in the dynamic and competitive mobile telecommunications industry.
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Case Description
Wojciech Woziwodzki, co-founder, president, and CEO of Tequila Mobile SA, a mobile games developer, publisher, and service provider, had to make some important strategic decisions. Tequila Mobile SA had already decided to shift to a new "free2play" revenue model but needed to decide whether to focus on building its business in markets where penetration of smartphone devices was high and the economy was developed or in markets where the use of mobile devices was taking off but the economy was still developing. The other critical decision was whether to continue to invest in in-house game development or focus on being a platform providing tools for third-party developers. The mobile game industry had exploded in recent years with the introduction of smartphones, application (app) stores, and cell phone penetration into developing economies. It brought with it a significant increase in the number of mobile games being developed and published, and Woziwodzki wanted to differentiate Tequila Mobile SA from the growing number of players in the quickly evolving industry.
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