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SLIDE TITLE,Body Text,First Level,second level,third level,Quotation Level,-,115,-,ENTRYFORPROFITTRANS-COSMOSINC.CHINAENTRYSTRATEGYPRESENTATION,February8,2001,AGENDA,Executive Summary,CallCenterBusiness,Market Overview,CC CustomerSegmentation,In-houseusers,Outsourcers,Demand,Customer,Economics,Competition,Recommendations,Successbusinessmodel,Partnering strategy,E-Commerce Market Overview,TCITianjin,CurrentSituation Analysis,Recommendations,AGENDA,Executive Summary,CallCenterBusiness,Market Overview,CC CustomerSegmentation,In-houseusers,Outsourcers,Demand,Customer,Economics,Competition,Recommendations,Successbusinessmodel,Partnering strategy,E-Commerce Market Overview,TCITianjin,CurrentSituation Analysis,Recommendations,CHINA ISBECOMING AHIGHLY DYNAMIC CC MARKET,Chinascallcentermarket tookoffsince 1998 withan annual growthrate over 100%,Non-paging market size reached 54,000 seatsin 2000,Howeverpastgrowthwaslargelydriven by demands from administrative drivensector,Over60%ofthenewCC demand comesfromfour pillarindustries:Banking, Post Services,Fixed-lineTelecom,andInsurance,Distinctivepurchasing behavioridentified for thesepurchases,Future growth will be propelledby service orientedandoutsourcingsegments,Serviceorientedsegmentexpected tobe50%of totalCCmarket,Outsourcingmarket willgrowatleast 50% ayearforthenext few years,Howeverlarge variance exists for outsourcing segment growth,Overall,China CC marketisexpectedtoreach over 130,000 seatsin2004and340,000seats in 2010,CC OURSOURCERS ARE EMERGINGBUTSTILL EXPLORING(I),Currently, CC outsourcing business is brandnewin China,No morethan30companies providingmerely about3,200 seatsinservice,Over70-80%supply concentratedin 4major cities,Future outsourcing development is highlydependent on current player,s performance and strategies,Potential customersconcerned aboutquality,confidentiality, information processingability, HR, and price,Growth willfluctuate widelyaccording to the industrysabilitytosatisfycustomerconcerns and requirements now,In shortterm, competition willbe minimum due to highlydifferentiatedpositions and largenumber of unexploited potentialoutsourcingcustomers,In medium term,paging companiescanbepowerfulanddesperate competitors in the low-end outsourcing market,Thatmight distort the industryprofitability and trigger vicious competition,Howeverhigh-endoutsourcingmarketmight beintact,Currently, onlylow-price/standard service vendors are profitable,Utilization,andtherefore,long-term customers,isthekeyforprofitability,However,high-pricedoutsourcingsolutions not widely accepted by the market,Butin the long-run,webelievehigh-endservices will be valuedbycustomers,We are encouraged byrecentpositivenews onclients, long-termcommitmentsto high-endoutsourcers,WithChinaspendingWTOEntry and continuedeconomic growth, webelieveits the direction,High-endoutsourcerscanwinthegame byaggressively establishing long-termclientbase, and targetingvariousoutsourcingopportunities alongthevalue chain,Fivesuccessfulstrategies identified for new customer development,Telemarketing and value-added information service most likely tobeoutsourced,CC OURSOURCERS ARE EMERGINGBUTSTILL EXPLORING(II),TCISHOULD PARTNER WITHRIGHT LOCALCC OUTSOURCERS,A partneringstrategy isessential for TCI to capture the greatopportunities inChina,TCIlacks abunch oflocal capabilities,while timeis contingent,TCIshould target both moneymaking,andmoney losing tech advancedoutsourcersduring negotiation process,based ontwoplausible partnership strategies,Money makingones: shareprofitsandleverage localstrength,Money losingones: control and negotiatefora bargain deal,Consideringthelimitednumber of candidatesinChina and TCIstight schedule,a broader searchcanstrengthenTCIs negotiation position,Fivepromising outsourcers identified duringtheinterview process,Money makingones: ChinaMotion,800Teleservices, and Compaq-Star,Money losingones: TCY,ITSShanghai,EC:ONLYSOFTWARE FIRMSANDSIsWORTH PURSUING,Althoughunder booming,China E-Commercemarketareexperiencingbottlenecks,Online population and revenues grew10 timesinthepast3 years,However,macro-environment and infrastructure are problematic, and only few ICP/ISPsaremaking money,ICP,ISPandtechnologycompanies, as asector,arenotworth TCIspursuit,ICP:Marketis downwhile most ChinaICPs are stillat theirearly stagedevelopment,ISP:Highlyfragmented and regulated, whichsuffocate both foreign participationandprofitability,Techcompanies:Superiorones can hardlysurviveinChina,However,severaltopventures intheabove sectors are quiteinteresting, whichareidentified and illustrated in detailforTCI,s further interest,ICP:;S; A;D,ISP:263Net;Eastnet,TCI-TJ:RSTRUCTURINGANDBUILDING STRATEGICALLIANCES,TCI-TJ experienced difficultiesdueto bothpromotion and managementissues,Though improving, the firm is intrinsicallyuncompetitive inChina market,It should restructure for betterperformance,Redefinecorporate missionsandstrategies,Restructureprojectarrangement,reporting,measurementandincentive systems,Refocus itssalesonJapanesecompaniesinChinaand in Japan, andfind strategicallianceforTCIsChinaexpansion,TCIshould onlypartnerwith prestigious local software companyorsystem integrators,Wiseway screened allthepotential candidateslistsand funneled down5most promisingcompaniesfor TCIs furthercontact,Longshine; GlobaleForce; eBIS; ModernComputer;HuatengSoftware,AGENDA,ExecutiveSummary,Call CenterBusiness,MarketOverview,CCCustomerSegmentation,In-houseusers,Outsourcers,Demand,Customer,Economics,Competition,Recommendations,Success business model,Partnering strategy,E-Commerce MarketOverview,TCITianjin,Current SituationAnalysis,Recommendations,CCMERELYABUSINESSPRACTICEBEFORE1997,High telecomcharge,Lowphonepenetration,Weak serviceattitude,Widespread industry monopoly,Commercial CC lessthan10,000seatsin1997,(2),Phonecall charge,(centsper minute),China,US,Phonepenetration(%),#,ofphones,(1),(million),1997,82,53,99,229,Automotive Example:ExpertSurvey,1997,Price,Competitionfocus(%),(1),Fixedline +mobile(2)Excluding about 50,000seatsinpagingcompany,Source:WorldDevelopmentReport1999/2000;ChinaAuto Market1997;Jarding FlemingResearch; interviews,Quality,Service,Style,Nationalmonopoly,Banking,Telecom,Insurance,Utilitity,Regionalprotected,Steel,Auto,Petrochemical,Tobacco,.,Monopolizedindustryestimated55% of industrialoutput,Highertelecompenetration,COMMERCIAL CC TOOKOFF SINCE 1998,Especially in Non-PagingServiceSector,Penetration(%),Year,CAGR,Fixedline,Mobile,37%,83%,Non-paging CC seats (,000),Year,CAGR =129%,Intensifiedcompetition,Most industriescapacityoverproduction,Decliningretail prices,Year,GDPindex,Retailpriceindex,Index,Growing awarenessoftechnology,Internetusers(mio),E-Commerce revenue(US$M),Graduallyreducedtelecom fee,Source: JardingFlemingResearch;China,Statistics Yearbook;interviews;OECD;,ChinaTelecom,Long distance (RMB/min),(1.2),(0.8),(1.0),(0.7),800,km,800 km,CCINDUSTRYWILL REACH 330-370KSEATSIN2010,Illustration,Identifymajordriving factorstoCCadoption,-marketcompetitionandserviceawareness,-telecomchargesandphonepenetration,Quantifyrelationships betweendriversandCCadoption,here we usedUSbenchmark,Project CC development by forecasting development of drivers,Project CC penetration in major user,sindustries,-banking, telecom, insurance,Addupnumbersofeach industry to giveaCCmarketoverview,Interviewindustryexpertsorknowledgeable industry practitionersfor their opinionofCCmarket growth,-systemintegratorsandexperts,2004,projection,(1),(000seats),158,132,145,2010,projection,(1),(000seats),368,337,N.A.,Driving factoranalysis,Bottom-upanalysis,Experts opinions,(1),Without pagingcompany,TOP-DOWNAPPROACHREVEALS APROMISING ENDGAME,Phoneline per1000 people,CCagentsper 1000people,USbenchmark,Y =0.00146X+4.79,Deflatedtelecom feeindex,Phoneline per1000 people,Chinaphoneline,Year,Non-paging CC seats,(000),Source:USTelephoneStatistics;Datamonitor;,MIIdata;ChinaStatisticsYearbook,1998,99,2000,01,04,10,REDUCING TELECOM CHARGESWILLBOOSTFIXED-LINE ADOPTION,Backup,Competition pushes further telecomreduction,Mostalternatives atleast 50%cheaper,IP, internet phone call,“,“callback,”,” services,Ministry determinedto furtherreduce telecomcharges,“Current telecom charge stilldoesnot reachits optimum stage yet”,-Ministerof MII,Telecom reduction projection,Phonepenetration per 1000,Deflated priceindex,(1),Phonelineper1000people,Year,(1),Pricedeflatedby GDP index,Source: ChinaTelecom ChargesPolicy Book; BCG analysis,TELECOM ISTHEMOSTSIGNIFICANT CCUSERNOW,Bottom-upAnalysis,Industry,Telecom,Mobile,Banking,Insurance,Postservice,Manufacturing,Computer,Airline,Security,Courier,Homeappliance,TV selling,Others,Overall,Projectedseats,CAGR,2000,25,000,7,667,4,545,2,000,1,600,1,501,800,594,257,240,240,300,6,675,51,419,2004,35,714,22,857,11,100,3,760,6,000,7,519,5,250,4,100,4,158,1,000,2,460,1,000,26,669,131,588,2010,41,667,50,000,47,000,9,850,20,833,25,184,14,000,9,600,32,600,3,333,8,800,2,000,71,965,336,832,2000-04,9%,31 %,25 %,17 %,39 %,50 %,60 %,62 %,101 %,43 %,79 %,35 %,41 %,26 %,2004-10,3%,14 %,27 %,17 %,23 %,22 %,18 %,15 %,41 %,22 %,24 %,12 %,18 %,17 %,Source: interviews;online research; expertsopinions;BCGanalysis,EXPERT OPINIONSREVEAL AMARKET OF145,000 IN2004,“,Fastdevelopment isexpected to continuein the next five years.I believethatcallcenters seats will grow at 30%a year for thenextfiveyears (which means145,000 in2004)”,Director,CTI Forum,“Comparedto 1999, in 2000 call center seatsincreasedby 142%, or 16,000 seats”,ChinaComputerNews,“In the next three years,we project that call center seatswilldouble. It,s our conservativeestimate.”,Manager ofBusinessDevelopment Dept, Huawei,Source: BCG interviews,AGENDA,ExecutiveSummary,CallCenter Business,Market Overview,CC Customer Segmentation,In-house users,Outsourcers,Demand,Customer,Economics,Competition,Recommendations,Success business model,Partneringstrategy,E-CommerceMarket Overview,TCI Tianjin,Current Situation Analysis,Recommendations,CHINACC USER BASE VERY DIFFERENT FROM U.S.,Selected industry explanation,Telecom,Chinatelecom call centerinvestment isstillquite government driven.Topromote “189” service line, MII demand call centerat each city/countylevel,Manufacturing,Manufacturing CC usage still not widelyadopted yet. Most state-ownedcompaniesareunwillingand unableto investin service,Remote shopping,Although remoteshoppingis the biggestCC user intheUS, its merelythecaseherebecause ofinconvenient payment, creditand delivery system.Also, shoppingconvenience inmetropolitan area and generalpoorconsumption power make remoteshoppingeconomically unsound,Others,Outsourcing,Security,TV selling,News& media,Airline,Computer/Tech,Manufacturing,Postservice,Insurance,Banking,Mobile,Fixed-lineTelecom,China,US,Others,Outsourcing,Transport,Healthcare,Utilities,Remote shopping,Securities,Airline,Technology,Manufacturing,Insurance,Banking,Telecom,Our 1.5 monthsinterviewshavewellcovered the above industries,Source: Datamonitor; Interviews; onlineresearch;,expert opinions; BCGanalysis,CC MARKETROUGHLY SEGMENTED INTO FOUR CATEGORIES,Accordingto Area ofCC Usage,andWillingness toOutsource,Selected industry examples,Willingness tooutsource,High,Low,Service-oriented,Outsourcing,Generic service,Admin-driven,Securities,Homeappliance,Computer/technology,Courier service,Publication,TV selling,Messaging,Travel,Simple order taking,Paging,Telecom,Insurance,Bank,Postservice,Communityservice,Utility,Corearea,Non-core area,Areaof CCusage,THREECRITERIATO DISTINGUISHCOREAND NON-CORE AREA,Industry,CoreArea,Securities,Courier service,Computer/technology,“,GreyArea”,Homeappliance,Banking,Insurance,Publication,Telecom,Traveling,Non-core Area (generic),Paging service,Messaging,TV selling,Utilities,Functionality,Technicalassistance,Aftersalesservice,Customer complaint settlement,Sourcing/supplier coordination,Customer inquiry settlement,Telemarketing,Message delivering,Simple order taking,CallCenters impactto overall business,-Core: When CC functionis critical totheperformance ofthe industry,Confidentialityrequirement,-Core: If theindustry/functionality commands strictconfidentiality,CallCenter operational complexity,-Core: If operating CCin this industry requiresgreat sophistication,Criteria,Manyindustrieshavebothcoreandnon-core areas,Backup,MANAGEMENTANDOWNERSHIPSTRUCTUREAFFECT WILLINGNESS TO OUTSOURCE,Considerations,Ownershipstructure,Company size,Competition,Managementsophistication,Reasons,SOEsconsidereconomicslessand,“,“managementauthority,”,”more,-Prefertobuildin-houseinordertoincreasemanagementpowerandassets,CallCenterinvestmentislesssignificanttolargecompanies.Also,theiragents,needscanjustifyasizablein-houseoperation,Monopolizedindustrytendstobeadmin-driven,ortodisregardCCsolutiontotally,Poorlymanagedcompanies/industriesseemuchlessvalueofcallcenterstotheirbusinessimprovement,SOE,(1),Large,Monopolizedindustry,Poorlymanaged,Privatelyownedforeigninvested,Small-to-medium,Market-driven,competingindustry,Wellmanaged,Lesswilling,Morewilling,(1),SOE=State-ownedenterprise,Backup,AGENDA,ExecutiveSummary,CallCenterBusiness,MarketOverview,CCCustomerSegmentation,In-houseusers,Outsourcers,Demand,Customer,Economics,Competition,Recommendations,Successbusinessmodel,Partneringstrategy,E-CommerceMarketOverview,TCITianjin,CurrentSituationAnalysis,Recommendations,ADMIN-DRIVENSEGMENT:MOSTIMPORTANTFORNOW,High%intotalnewCCdemand,Drivenby,“,“Pillarindustries,”,”,DemandsurgedinagroupofChinasimportantindustriessince1999,aimingtoimproveservicelevel,Bank,Postservice,Fixed-linetelecom,Insurance,Requiredmostlymid-to-highendcallcentersolutions(Nortel,Lucent,IBM,Huawei,),Big,monopolized,profitablecorporations,Highcostoffailure,Budgetapprovalfromabove,Ofteninconjunctionwithstructuralreform,4.9,#,ofnewCCseats(000),Year,Admin-driven,11.2,29.5,Totalnewdemand,Admin-driven,66%,76%,62%,Source:BCGmodeling,HOWEVERDEMANDEXPECTEDTOFLUCTUATEINTHEFUTURE,UnderlyingReasons,Admin-drivensegmentorderscomeinbatches,Callcenterconstructionproposalofteninitiatedbygovernment-controlledcorporateheadquarters,orevenministries,Branchcompaniesrequiredtocompletecallcenterconstructionwithinsimilarperiodoftime,Admin-drivencorporationstendtoover-invest,Branchofficesincentivizedtouseupthebudgetadvisedbyheadquarter,Howeverfewadmin-drivenindustriesareexpectedtoinvestincallcentersforthefollowingyears,Onlytwoindustriesexpected:utilityandrailtransportation,#,ofnewcallcenterseats(,000),Year,Bankingexample,Source:BCGmodeling;interviews,literatureresearch,Admin-driven,UNIQUETHREE-TIERDECISIONMAKINGPROCESS,SystemIntegratorsShouldPutEffortstoAll,Top-downinitiatives,Advocateimprovingservicestandard,Make,“,“servicefacilities,”,”anevaluationcriteria,Maysuggestcallcenterasanoption,Determinerollingoutcallcenters in thecorporation,Raisea listofrecommendedsystem integrators,Present thelist to branchcompanies,Setabudgetfor differentbranchcompanies,Decidecallcentersizeandsophisticationbasedoncorporate budget,Negotiateand selecta systemintegrator mostlysuitabletothebranchsrequirements,SIshouldpay attentiontoMinistrys recentservice improvement incentive,Ministry,SIshouldapproachpromising corporateheadquartersinadvancetogetthe nameonthe list,Corporateheadquarter,SIshouldput mosteffortstoinfluencebranch company,sselection,Provincial/regional branches,Admin-driven,OUTSOURCINGALMOSTNEVERANOPTION FORADMIN-DRIVENCOMPANIES,Outsourcingisnotconsideredanoptionfor CC adoption at corporatelevel,Worried about unforeseeableconsequences,Moneysavingisnot apriorityfor these big,monopolizedSOEs,Unabletodistinguishdifferent conditionsindifferent geography,some areas dont havesatisfactory outsourcers,Politicallyriskyforbranch managers to be “creative”,Ifusingoutsourcers,branch managers havetobearallresponsibilities,potentialfor failureisconsiderable,CCconstructionbudget would be in vainifnot usedup,whileoutsourcingbudgetneedstobereportedfor upper approval,And,themoneyisnot mine,Only exceptionisGuangzhouMobile Company,soutsourcingofits,“,“MobileSecretary,”,” service,Bynatureapagingservice:Ideal to be donebyapagingcompany,“Mobile Secretary”serviceisnotplannedandbudgetedfromthecorporation(China Mobile),Guangzhou,sbusinesspracticeismore liberalthanrest of China,Admin-driven,SERVICE-ORIENTED SEGMENT: ADRIVER FORLONG-TERMCCPENETRATION,Rapidgrowthinthe long-term,Widespread adoption expected in market-drivenindustries,HeatedcompetitionwillstimulateCCusageinmass-marketindustries,WTOwillnotonlylift variouslocalprotectionism,but alsointroduce globalcompetition,Current over-capacitysituation wont alleviateforthe nextseveralyears,Therefore, servicewillbemore andmore importanttocreatedifferentiation,With bettermarketenvironment, consumersareeducatedtoappreciateservice,WTOwillintroduceworld-levelserviceconcepts,including callcenter,toChina,Totalnon-paging CC seats (,000),Service-oriented,10,Year,50,337,TotalCCseats,Service-oriented,26%,24%,50%,132,42%,Source:Interviews;onlineresearch; expertopinions;BCG analysis,MOREINDUSTRIESARELIKELY TO ADOPTCC OVERTIME,CC Adoption,Area,Homeappliance,Automotive,Computer,Mobile,Securities,Retailing,Petrochemical,Distribution,FMCG,(1),Taxi,Textile,Machinery,Chemical,Publication,Health care,Government,Entertainment,Broadcasting/TV,Aviation,GeneralTechnology,High,Moderate,Low,Competitionintensity,High,Horizontal will,extend overtime,Importance of service,(1),Fast-movingconsumergoods,Source:Interviews;literature researchsummaries; BCG analysis,Horizontal will,extend overtime,Service-oriented,COMPANIES QUITESELECTIVE ONCCUSAGE,Notblindlychasingafter high-end solutions,Integratingcallcenterswith its core businesspractice,Interviews summary,Source:Interviews,%,Investment per seat(000 RMB),Interviews summary,%,Aftersales service,Order taking,Informationservice,Telemarketing,10-70,Service-oriented,VERYCAUTIONS ONCCOUTSOURCING,Price,“,Theprice for outsourcing istoohigh now, for example,95Info charges 15,000RMB/month (180,000RMB/year)perseat, mostcompanies can not undertakeit.”,Sales Manager, SIEMENS,Quality,“,Chinesecallcenteroutsourcershaveinadequateservicementality, we mostlyworriedabout theirservicequality.”,HotLineSupervisor,EPSON China,Human resources,“,Ordinaryoutsourcers agentscanonly handlesimplequestions. It requires experienced engineerstodealwith complex problems.”,HotLineSupervisor,EPSON China,Confidentiality,“,We oncewanted to outsourcemanagement to 95Info, but salesdataaresecretto the company,so we gave up the outsourcing option.”,CallCenterVice-Manager, Founder Computer,Informationprocessing,“,Ourcallcenteris mainly used to provide cross-department information for management, outsourcing callcenter mightmake the information processinglosingcontrol.,”,”,Executive Officer Beijing, GuangdongMacro,Major concerns aboutoutsourcing,Their outsourcing possibility highlydependsonoutsourcersabilitytosatisfytheir concerns,Source:Interviews,Service-oriented,GENERICSERVICE:A GENERALLYDECLINING SEGMENT,ConsistsMainlyof Paging Services,Genericservice,Declining pagingservicesegment.,Becauseof strong substitution,#,of paging seats(000),Year,Paging service market has been graduallyerodedby widespread mobileandinternet communicationservices,fulfilled pagers message function,butbeing eithermore economical(internet communication), or more versatile(mobilephone),paging customerswill decline from 50 million in1998 to20millionin 2010,Small-to-medium,non-scaleable paging companiesarebeing squeezed out of business,#,of companies,1998,2000,2000,1736,2004,500,2010,200,Source:Interviews,GENERICSERVICEDEFINEDAS ACROSS OF INDUSTRIES AND FUNCTIONS,Genericservice,Functionality,Messagetaking and delivering,Simple ordertaking,Standardtelemarketing,Standardcustomer question answering,Stan
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