1、ENTRY FOR PROFITTRANS-COSMOS INC. CHINA ENTRY STRATEGY PRESENTATION February 8, 2001AGENDA Executive Summary Call Center BusinessMarket OverviewCC Customer Segmentation-In-house users-OutsourcersDemandCustomerEconomicsCompetitionRecommendations-Success business model-Partnering strategy E-Commerce M
2、arket OverviewTCI TianjinCurrent Situation AnalysisRecommendationsAGENDA Executive Summary Call Center BusinessMarket OverviewCC Customer Segmentation-In-house users-OutsourcersDemandCustomerEconomicsCompetitionRecommendations-Success business model-Partnering strategy E-Commerce Market OverviewTCI
3、TianjinCurrent Situation AnalysisRecommendationsCHINA IS BECOMING A HIGHLY DYNAMIC CC MARKET Chinas call center market took off since 1998 with an annual growth rate over 100%Non-paging market size reached 54,000 seats in 2000 However past growth was largely driven by demands from administrative dri
4、ven sectorOver 60% of the new CC demand comes from four pillar industries: Banking, Post Services, Fixed-line Telecom, and InsuranceDistinctive purchasing behavior identified for these purchases Future growth will be propelled by service oriented and outsourcing segmentsService oriented segment expe
5、cted to be 50% of total CC marketOutsourcing market will grow at least 50% a year for the next few years-However large variance exists for outsourcing segment growth Overall, China CC market is expected to reach over 130,000 seats in 2004 and 340,000 seats in 2010CC OURSOURCERS ARE EMERGING BUT STIL
6、L EXPLORING (I) Currently, CC outsourcing business is brand new in China No more than 30 companies providing merely about 3,200 seats in serviceOver 70-80% supply concentrated in 4 major cities Future outsourcing development is highly dependent on current players performance and strategiesPotential
7、customers concerned about quality, confidentiality, information processing ability, HR, and priceGrowth will fluctuate widely according to the industrys ability to satisfy customer concerns and requirements now In short term, competition will be minimum due to highly differentiated positions and lar
8、ge number of unexploited potential outsourcing customers In medium term, paging companies can be powerful and desperate competitors in the low-end outsourcing marketThat might distort the industry profitability and trigger vicious competitionHowever high-end outsourcing market might be intact Curren
9、tly, only low-price/standard service vendors are profitableUtilization, and therefore, long-term customers, is the key for profitabilityHowever, high-priced outsourcing solutions not widely accepted by the marketBut in the long-run, we believe high-end services will be valued by customersWe are enco
10、uraged by recent positive news on clients long-term commitments to high-end outsourcersWith Chinas pending WTO Entry and continued economic growth, we believe its the direction High-end outsourcers can win the game by aggressively establishing long-term client base, and targeting various outsourcing
11、 opportunities along the value chainFive successful strategies identified for new customer developmentTelemarketing and value-added information service most likely to be outsourcedCC OURSOURCERS ARE EMERGING BUT STILL EXPLORING (II)TCI SHOULD PARTNER WITH RIGHT LOCAL CC OUTSOURCERS A partnering stra
12、tegy is essential for TCI to capture the great opportunities in ChinaTCI lacks a bunch of local capabilities, while time is contingent TCI should target both money making, and money losing tech advanced outsourcers during negotiation process, based on two plausible partnership strategiesMoney making
13、 ones: share profits and leverage local strengthMoney losing ones: control and negotiate for a bargain dealConsidering the limited number of candidates in China and TCIs tight schedule, a broader search can strengthen TCIs negotiation positionFive promising outsourcers identified during the intervie
14、w processMoney making ones: China Motion, 800 Teleservices, and Compaq-StarMoney losing ones: TCY, ITS ShanghaiEC: ONLY SOFTWARE FIRMS AND SIs WORTH PURSUING Although under booming, China E-Commerce market are experiencing bottlenecksOnline population and revenues grew 10 times in the past 3 yearsHo
15、wever, macro-environment and infrastructure are problematic and only few ICP/ISPs are making money ICP, ISP and technology companies, as a sector, are not worth TCIs pursuitICP: Market is down while most China ICPs are still at their early stage developmentISP: Highly fragmented and regulated, which
16、 suffocate both foreign participation and profitabilityTech companies: Superior ones can hardly survive in China However, several top ventures in the above sectors are quite interesting, which are identified and illustrated in detail for TCIs further interestICP: ; S; A; DISP: 263Net; Eastnet TCI-TJ
17、: RSTRUCTURING AND BUILDING STRATEGIC ALLIANCES TCI-TJ experienced difficulties due to both promotion and management issuesThough improving, the firm is intrinsically uncompetitive in China market It should restructure for better performanceRedefine corporate missions and strategiesRestructure proje
18、ct arrangement, reporting, measurement and incentive systemsRefocus its sales on Japanese companies in China and in Japan and find strategic alliance for TCIs China expansionTCI should only partner with prestigious local software company or system integratorsWiseway screened all the potential candid
19、ates lists and funneled down 5 most promising companies for TCIs further contact-Longshine; Global eForce; eBIS; Modern Computer; Huateng SoftwareAGENDA Executive Summary Call Center BusinessMarket OverviewCC Customer Segmentation-In-house users-OutsourcersDemandCustomerEconomicsCompetitionRecommend
20、ations-Success business model-Partnering strategy E-Commerce Market OverviewTCI TianjinCurrent Situation AnalysisRecommendationsCC MERELY A BUSINESS PRACTICE BEFORE 1997High telecom chargeLow phone penetrationWeak service attitudeWidespread industry monopolyCommercial CC less than 10,000 seats in 19
21、97(2)Phone call charge(cents per minute)ChinaUSPhone penetration (%)# of phones(1)(million)1997825399229Automotive Example: Expert Survey1997PriceCompetition focus (%)(1) Fixed line + mobile (2) Excluding about 50,000 seats in paging companySource: World Development Report 1999/2000; China Auto Mark
22、et 1997; Jarding Fleming Research; interviewsQualityService StyleNational monopoly Banking Telecom Insurance UtilitityRegional protected Steel Auto Petrochemical Tobacco .Monopolized industry estimated 55% of industrial outputHigher telecom penetrationCOMMERCIAL CC TOOK OFF SINCE 1998Especially in N
23、on-Paging Service SectorPenetration (%)YearCAGRFixed lineMobile37%83%Non-paging CC seats (000)YearCAGR = 129%Intensified competitionMost industries capacity over productionDeclining retail pricesYearGDP indexRetail price indexIndexGrowing awareness of technologyInternet users (mio)E-Commerce revenue
24、 (US$M)Gradually reduced telecom feeSource: Jarding Fleming Research; China Statistics Yearbook; interviews; OECD; China TelecomLong distance (RMB/min)(1.2)(0.8)(1.0)(0.7) 800 km3518-35 RMB 10 millionRMB 5-10 millionRMB 1-5 millionSource: Huicong IT Business NetworkICPSIGNIFICANT TRANSITION AND SHAK
25、EOUT EXPECTEDSmall-to-medium, generic information service portals will face bankruptcy in a yearRegional portals with similar business will seek merger to survive in the coming shakeoutB2B will focus more on providing proprietary, value-added services (online and offline) to small-to-medium corporat
26、e customersLarge corporations will extend its corporate web site into B2B or B2C areaOnly the top two to three E-Commerce web sites in each area will surviveHuicongs Projection100%Under current volatile market, Wiseway believe market situation can only go harsher than Huicongs projectionSource: Huic
27、ong IT Business NetworkEnterpriseE-CommercewebsiteOthersTechnical serviceInformation serviceICPSELECTED ICP PROFILE: 51JOB.COMCompany backgroundStrengths and weaknessesEstablished in 1998No. 1 job search online site in ChinaOver 30,000 jobs postedRegistered users over 100,000Potential to provide HR
28、services for foreign-invested companiesTargeting white-collar workers and managerial level customersStrengths No. 1 job hunting portal in China, established brand name and customer base Synergies with “Career Weakly” magazine and a heal hunting firmWeaknesses Little information about job/career advi
29、sory Still small: vulnerable to competitionRevenue source and financial dataAlliances1999 revenue reached US$ 1 million, 2000 revenue projected to be US$ 8 million, and 2001 revenue to be around 20-30 millionCurrent profitability 10-15%1/3 advertisement income, 1/3 revenue from ASP service, and the
30、rest from providing information of its HR databasePlanned Nasdaq IPO in 2001Synergies created by building alliance with traditional HR functions- “Career Weekly” magazine- Career Head Hunting CompanyICPSELECTED ICP PROFILE: STOCKSTAR.COMCompany backgroundStrengths and weaknessesEstablished in 1997No
31、. 1 stock trading portal in ChinaBusiness covered quote, information, advisory and online trading servicesRegistered users over 1.5 millionPositioned to provide not only trading but comprehensive investing servicesStrengths Established customer base Comprehensive services on trading, information and
32、 advisory Good relationships with security firmsWeaknesses No stock trading license Projected competition in the futureRevenue source and financial dataAlliancesRevenues from securing companies advertisement, online trading commission, and data usage fees to institutionsPlanned to expand revenue sou
33、rces to construct online site for security companiesOnly less than 10% cuts on promotion, 50% cash flow consumed on infrastructure and 15% on R&D Goldman Sachs second round financing of $ 10 million, based on $40-50 million valuationShanghai Alliance Investment Co. and Shanghai Telecom controls 20%
34、stake, respectivelyICPSELECTED ICP PROFILE: ALIBABA.COMCompany backgroundStrengths and weaknessesEstablished in 1997No. 1 B2B portal in China, ranked the best Asia B2B portal in 2000 by Far East Economic ReviewRegistered members over 420,000, representing 220 countriesDaily trading involves 50,000 b
35、uyers and 12,000 sellersProvide quotes, industry information and advisory through 27 industriesStrengths First mover advantage One stop shop especially convenient for international trading Worldwide recognition Strong VC tackingWeaknesses Scalability not demonstrated B2B not hot concept anymoreReven
36、ue source and financial dataAlliancesRevenue from trading information fee, registration, and advertisementStill not breakeven, but analyst quite optimistic about its financialsNew registration reaching 1000 members a dayFirst round financing of $5 million capital infusion by Goldman Sachs, Transpac,
37、 Singapore TDF, Investor AB and Fidelity Investment- October, 1999Softbank invested $ 20 million in January 2000Planned but postponed IPOICPSELECTED ICP PROFILE: DANGDANG.COMCompany backgroundStrengths and weaknessesEstablished in 1996No. 1 online bookstore in ChinaBook online storage over 200,000 t
38、ypes, accounting for 90% of all domestic published books20% registered users are resided in foreign countriesEstablished transportation and inventory systemStrengths Customer recognition and national reputation Business already reached scale Developed order to delivery systemWeaknesses Severe compet
39、ition: more than 300 online bookstores Pending alliance with publishers and book storesRevenue source and financial dataAlliancesRevenues from book retail margin and publishers advertisementBreakeven expected this yearA new, 10 K square metre warehouse is under construction in BeijingFirst round fin
40、ancing completed in 1997Second round financing completed in November, 1999Third round financing by IDG, LCHG and Softbanks completed by April, 2000ICPISP: A HIGHLY FRAGMENTED SECTOR WITH VOLATILE PROFITABILITYISP/ASPHighly fragmentedNot profitableOver 5001234 M5 nationwideISPs(1) 500 regional/local
41、ISPsIn deficitProfitableISP an attractive local government investment area Potential of high return Able to create monopoly locallyNumerous agency costs Equipment purchase Appraisal of “New Economy Mindset” from the above More budget/HR to manage and controlSignificant upfront investment and fast up
42、grade Demanding frequent capital expenditureHigh marketing expenses and maintenance costMarket still small Only 16.9 million internet users (July 2000) Much smaller if only focusing on local market(1) They are: ChinaNet; ChinaGBNet; UNInet; CSTNet; CERNetSource: CIIC: China Info Bank FOREIGN PARTICI
43、PATION IN ISP ONLY ERECTED IN NEAR FUTURE ISP/ASPChinas WTO entry signed20012002200320042005Post-entry conditionPre-entry conditionSource: EIU; China Info Bank ICPISPOfficially, no foreign ownership in internet services sector (both ICP and ISP) is allowed. Yet foreign investment is known to have en
44、tered the ICP business via alternative path30% ownership allowed in Beijing, Shanghai & Guangzhou49% ownership allowed in other 17 cities50% ownership allowed nationwide49% ownership allowed nationwide25% ownership allowed in Beijing, Shanghai & Guangzhou35% ownership allowed in major citiesISP SECT
45、OR WILL CONSOLIDATE THROUGH BOTH VERTICAL AND HORIZONTAL INTEGRATIONSISP/ASPMany current ISPs are not profitable due to small subscriber base I.e, a 2M bandwidth line needs to attract at least 1650 customers Of all 28 inter-provincial ISPs, only 13 have more than 1000 subscribers after 2.5 years of
46、service, let alone local ISPs, with even smaller baseFuture competition will only worsen the situation Only sizable ISPs can provide satisfactory services Both domestic and foreign players will raise wars on price and serviceMerge with nationwide ISPs to become an affiliateExtend business to leverag
47、e ISP advantage ASP (?) ICP InfrastructureSELECTED ISP PROFILE: 263.NETCompany backgroundStrengths and weaknessesTop ISP Provider in China: 40% market share in Beijing, with another 40% by China Telecom, and the rest 20% by other 170 ISPs in Beijing;Top ICP site with 6 million registered users and 2
48、5 million pageview each day;263 IDC started in Beijing, and will also be in Shanghai, Guangzhou and 20 other cities;Shareholders simple but diversified: corporate and personal; strong backing from China Telecom.Strengths Big market share in Beijing Good combination of ISP, ICP and IDC, maximizing th
49、e customer base; Profitability; Started in Beijing, but are also spreading to Shanghai, Guangzhou, Wuhan, XiAn and 10 other Chinese cities Weaknesses Business scalability in other citiesRevenue source and financial dataAlliances15 million RMB profit the first year, and has been profitable in the pas
50、t three years;Internet connection fees collected from telephone bills;IDC serving coporate customers, providing E-commerce solutions;ICP () is also shifting to E-commerce business Good alliance with China Telecom (Beijing)Alliance also with other international hardware suppliersHave not heard of bac
