Flexible entry strategies for emerging telecom markets

Abstract

The existing technical literature on the telecommunications industry addresses, on both operational and cost dimensions, the relative advantages of different telecommunications technologies. Significant complementary research also exists in the area of entry strategies for developing markets or those without a competitive history. We believe that these two literature bases can combine to form a theory of “flexible entry,” in which a firm's telecom technology decisions support entry of potentially high-growth but also high-risk markets, such as those associated with rapidly developing economies. Specifically, we suggest the definition of a systematic framework to balance technological choice and market conditions—two choices to be undertaken concurrently, under conditions of future uncertainty, for a firm contemplating entry. We suggest the use of efficient frontier analysis, trading off flexibility and commitment, for this purpose. Flexibility in this sense represents the ability to redeploy assets to alternate purposes without loss. Commitment, rather than the opposite of flexibility, denotes the ability of a firm to resist being “forced out” of a favorable market. While flexibility preserves capital in the event of poor demand realizations, commitment is essential to continued profitability in the event of favorable demand realizations. Suggestions for future expansion of this framework are proposed.