By Team … Title IntroductionAgendaAlternativesProblemConclusionRating

TitleIntroduction Agenda AlternativesProblemConclusionRating Agenda  Introduction  Problem Statement  Alternatives  Ratings  Conclusion

Title Introduction AgendaAlternativesProblemConclusionRating Introduction  Atlanta, Georgia  Telecommunications Company – 1991 Annual Sales - $14.4 billion – Income after taxes - $1.5 billion Ranked among top 25 U.S. Corporations  1984 AT&T Breakup  Cellular Communications

Title Introduction AgendaAlternativesProblemConclusionRating 1986 – BellSouth Enterprises BellSouth International Legal aspects of foreign countries International Systems Support with the installation of financial systems World Wide Wireless Technical operations of cellular telecommunications

Title Introduction AgendaAlternativesProblemConclusionRating  Need for a billing system – Linking capacity of cellular phones – Large number of different billing plans – Different ways of doing business in countries

Title Introduction AgendaAlternativesProblemConclusionRating  Identification number – Inbound and Outbound calls – Exchange of billing information  Highly competitive industry – Variety of billing plans Flat rate Per minute

Title Introduction AgendaAlternativesProblemConclusionRating  BellSouth in international markets – Uniform billing system Languages Currency Business practices

 BellSouth wanted to introduce a revolutionary software to cope with the complexities of all the different markets BellSouth had already entered or sought to enter.  Such technology was intended to give BellSouth a competitive advantage, and help the company enter new markets faster than the competition.  The company had several options in obtaining software that could handle cellular billing. TitleIntroductionAgendaAlternatives Problem ConclusionRating

Options for a Solution 1)Outsource the billing system to a service bureau : service bureaus weren’t operating in the cellular market. 2) Develop a software system using in-house programmers. - Lack of resources. - threat of computer technicians driving the project. TitleIntroductionAgendaAlternatives Problem ConclusionRating

Options for a Solution 3) Purchase a software package. - Software available did not meet the requirements. 4)Contracting with a vendor to customize a product. - Traditional vendor-client relationship was not going to solve the companies problems. TitleIntroductionAgendaAlternatives Problem ConclusionRating

1 Search for a strategic partner Vendor Stability 2 Vendor Vision 3 Product Fit 4 Worldwide Support 5 Cost

TitleIntroductionAgendaAlternatives Problem ConclusionRating Motivation for BellSouth to join strategic alliance Influence on product development Strategic Alliance between BellSouth and TeleSciences Contribution of BellSouth to strategic alliance Expertise about the required functionality of billing software package Contribution of TeleSciences to strategic alliance Design billing software package according to the requirements of BellSouth

TitleIntroductionAgendaAlternatives Problem ConclusionRating  BellSouth has committed to a deadline in New Zealand  The deadline is of little importance to TeleSciences since the company would be able to sell the product even if the deadline was not met  Contract does not provide for recourse against TeleSciences Interests are not congruent  BellSouth contributes its expertise in the early stages of the cooperation  Later, BellSouth is not allowed insight into the documentation of the product development Unequal share of cost and benefits

TitleIntroductionAgendaAlternatives Problem ConclusionRating  No direct input into the product development process by BellSouth  TeleSciences owns the product definition Lack of Communication  Frequent management changes  Both parties can terminate the agreement on a 30 days notice at any time Instability of the alliance

TitleIntroductionAgendaAlternatives Problem ConclusionRating Problem Statement It soon became obvious that the contractual details of the agreement between BellSouth and TeleSciences were not appropriate to facilitate a balanced long-term business relationship Driving forces for the formation of Joint Ventures

Alternatives  Redesigned Contract –Must Support Long-Term MOU and 30-day termination –Long-Term Contract Common Objective Form of Strategic Alliance Responsibilities of each party TitleIntroductionAgenda Alternatives ProblemConclusionRating

–Long-Term Contract Specifics Contractual Penalties and Commitments –Support Common Objectives and Benefits Risk Allocation –Clear Definition of Risks and Responsibilities Communication and Party Changes –Quantity, Quality, and Form of Information –Consequences of Party Changes TitleIntroductionAgenda Alternatives ProblemConclusionRating

–Problems with Contract Redesign Specifics hard to monitor Free-Rider-Maximizing Benefits Divergent Objectives TitleIntroductionAgenda Alternatives ProblemConclusionRating

TitleIntroductionAgenda Alternatives ProblemConclusionRating  A contractual agreement  Joining together two or more parties  Purpose of executing a particular business venture  All parties agree to share in the profits and losses of the enterprise Definition: Joint Venture  Business expansion  Development of new products  Moving into new markets, particularly overseas Driving forces for the formation of Joint Ventures

TitleIntroductionAgenda Alternatives ProblemConclusionRating  More resources  Greater capacity  Increased technical expertise  Established distribution channels Advantages - generally  Objective of the Joint Venture is not absolutely clear  Objective of the Joint Venture is not communicated to all the staff involved  Different cultures and management styles can result in poor integration and cooperation between partners Risks - generally  Sharing of risk with partner  Access to specialized staff and technology  Access to new markets

TitleIntroductionAgenda Alternatives ProblemConclusionRating  Benefits from pooling resources  Benefits from pooling expertise  Sharing of expenses  Sharing of project risk  Access to increased technical expertise  Benefits from pooling resources  Benefits from pooling expertise  Sharing of expenses  Access to established distribution channels BellSouthTeleSciences ……  Share of control and profits  Theft of core competency  Share of control and profits  Theft of core competency

TitleIntroductionAgenda Alternatives ProblemConclusionRating 1 Benefit of a JV for the Cellular Billing Project An establishment of a JV does not represent a temporary cooperation 2 Parties’ investments evidence their interest in building and maintaining a long-term relationship 3 Management changes are generally restricted 4 Allocation of risks and rewards is explicitly addressed in the JV agreement

TitleIntroductionAgenda Alternatives ProblemConclusionRating 5 Benefit of a JV for the Cellular Billing Project 6 Parties are interested in effective documentation, communication, and knowledge sharing 7 Flow of information is expected to be better within a Joint Venture Problem of divergent interests or objectives can be eliminated, or at least reduced to a reasonable level The formation of a joint venture could have avoided many of the problems faced by the strategic alliance.

TitleIntroductionAgendaAlternativesProblemConclusion Rating

TitleIntroductionAgendaAlternativesProblem Conclusion Rating A Joint Venture between BellSouth and TeleSciences could eliminate, or at least reduce, many of the problems faced by the strategic alliance. Lack of communication Incongruity of interests Instability of the alliance Unequal risk sharing Major problems Conclusion

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