Distribution Channel Strategy

Madrid, July 17th, 2001

Contents

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

Contents

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

Introduction

The wireless industry globally is facing significant changes: High license cost that have to be recovered. Constant pressure by the stock market. Slow growth due to market saturation. Falling ARPU as consequence of decreasing tariffs and commoditization of voice services. The challenge for the operator is to capitalize on GPRS/UMTS technology by launching mobile data services to generate additional revenue streams to stop ARPU decrease. Data services are far more complex than voice services, thus the sales and service organizations of the operator have to adapt to that increasing complexity. Due to market saturation, the marketing focus of the operator shifted from customer acquisition to customer retention. Todays distribution channels are poorly prepared for selling and servicing data services, as their traditional function was mere dispatching of products to cope with high growth rates. The future distribution channel must be able to sell complex services and play a important role in customer retention.

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

The Spanish mobile market has experienced a strong growth in the past three years and is now entering a maturity stage
Evolution of Total Mobile Subscribers Spanish Market (Un: 1000 subs)
120 CAGR = 490% Penetration rate (%)
24.052

Mobile Voice Lifecycle

100 80 60 40 20 0

Alternative Stage

Complementary Stage

15.005

Sweden Finland Spain

7.051 2.996 944 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 4.337

USA

Substitution Stage

India

Saturation Stage

No fixed line available

Mobile as a complement for fixed voice communication

Source: Comisin del Mercado de las Telecomunicaciones

The mobile starts to substitute the fixed telephony for voice communication

Mobile telephony dominates and extends itself to data and video services

According to EMC, by February 2001, the total Spanish mobile market reached 25.847 thousand subscribers and a market penetration of aprox. 63%. The high growth rate verified since 1999 is related to the entry of the 3 rd GSM operator Amena.

As a result of the penetration of low-end market segments and decreasing tariffs, ARPU is constantly eroding
Summary ARPU Assumptions

70 60
ARPU (EUR per month)

50 40 30 20

ARPU and MOU have constantly decreased due to the penetration of lowend market segments. The market converged into a mass market where sales volume is key to success.

Fierce competition and the consequent reduction of voice tariffs had an additional negative impact on the ARPU.
High market growth rates have so far offset the ARPU decrease. Thus the total revenue of each operator is still increasing.

10 0 1999 2000 2001 Airtel

Source: Lehman Brothers

2002

2003

2004

2005

Vodafone EMEA

However, that situation will dramatically change due to market saturation.

Despite the entrance of a 3rd operator in 1998, Client was able to maintain its market share. However, recently Clients market share is decreasing

Market Share GSM Market

100%

Amena was able to capture significant market share right from its launch in 1998. Despite the entrance of Amena, Client was able to maintain and even increase its market share during 1998.

80%

60% amena Airtel Telefnica 40%

In 1999 however, Amena gains caused equal losses in market share of both, Client and Telefnica Mviles Espaa, thus Clients market share suffered a decrease by 4 % points.
This trend is partly due to the fact that Client started shifting its focus on retaining its valuable customers rather than acquiring additional lowend customers.

20%

0% 1.1.98 1.7.98 1.1.99 1.7.99 1.1.00 1.7.00 1.1.01

Source: Expansin directo

The entry of a 4th player, combined with the launch of GPRS / UMTS services, is slowly leading the Spanish mobile operators to change their market approaches

Client has structured its short-term strategy around three main axes:

Focus on high value market segments Being the market challenger and Spains first convergent operator (wireless, wireline, Internet), Client has adopted a positioning rather similar to Telefnica Mviles, targeting all market segments with main focus on high usage customers. This is a different market approach from the other two alternative operators (Amena and Xfera), which have chosen to focus on young dynamic customers mainly through the launch of innovative products with competitive pricing schemes Retention policies Costumer retention has made Client and Telefnica Mviles Espaa adopt a variety of loyalty programs mainly based on the accumulation of points - with the objective of decreasing churn, while keeping its most valuable clients. On the other hand, Amena and, after Fall 2001, xfera will still be mainly focused on customer acquisition.

Adding value through data services UMTS service launch in 2003 (after an initial postponement) will allow all four operators to offer a broad variety of rather complex solutions to their end customers. The early launch of GPRS this year represents a way of dealing with UMTS delays and a test bed for UMTS applications, while locking in the client.

In conclusion, the operators are facing a unseen series of challenges to which are being forced to react accordingly

Competition is stronger than ever before Tariffs are eroding

KEY ISSUES
ARPU is decreasing Market growth is slowing down Voice services become a commodity Data services get more and more complex Investments in licenses reached exorbitant levels Capex requirements for infrastructure are enormous New technologies are not mature, causing significant delays

Develop new products and services based on 2.5G/ 3G technologies Focus on customer profitability and retention

Conversion of distribution channels from dispatchers to customer service centers

Key issues (I) - Develop new products and services based on 2.5G/3G technologies

Solution Integrators Hardware/ Network Vendors

GPRS providers UMTS providers Supporting software System integrators Hardware vendors

Mobile Network Operators

Existing mobile operators Greenfield operators MVNOs

Mobile Portals

Direct competition for customer ownership

Content Providers & Merchants

Infotainment Merchants Vertical market Aggregators

Within the 2.5G/ 3G value network, the operators ability to extract value and maintain ownership of the customer is threatened by a variety new market enablers and competitors. While costs associated with advanced wireless services are clear and substantial, the revenue generated by these services and who captures this revenue is less clear.

Distribution Channels
Internet Direct / indirect

Customers
Consumers Corporate MVNO 3rd Parties

Application Providers
Horizontal applications (e.g. E-mail, CRM) Vertical applications (e.g. Mobile banking, Telemetry) Customized mobile internet services

Transaction/ Settlement Processors

Technology Platform Vendors

Financial institutions Browsers Mobile wallets OS (e.g. EPOC/Palm/Symbian) Internal OSS Gateways

Terminal Device Suppliers

WAP handsets Bluetooth or MExE - enabled devices PDA / other devices

There are still no proven economic models, product profitability is the overarching issue.

Source: X Consulting Advanced Mobile Services Solution Set

10

Key issues (II) - Focus on customer profitability and retention

Client vs. Telefnica Moviles Espaa Churn (%)

40

The churn rate was very high in 1999, mainly due to the entry of the 3rd new entrant, Amena. It has subsequently decreased. The first challenge would be to keep churn low through customer retention to minimize churn-off to the

%
37,2

35

32
30

28,2 24,5 23,2 22,2 20,6 20,6 20,8 18,5

25

4th new entrant, xfera. Another associated challenge would be to retain the most valuable customers to turn around ARPU decrease.

20

15

1999A

2000E

2001E

2002E

2003E

Churn Client

Churn Telefnica

Source: Bear, Stearns International Ltd; EMC Database

11

Key issues (III) - Conversion of distribution channels from dispatchers to customer service centers

Distribution Channels

The distribution channel strategy in the past was designed to achieve a broad coverage of the population to support strong subscriber growth.

Own shops Sales Force Contact Center Web Channels Agents Franchises Small retailers Major Retailers

The basic function of a distribution channel was to dispatch handsets or pre-paid packs and activate basic voice service.
Given the low level of growth, the current distribution channel network is overdimensioned. Due to the complexity of future data services, distribution channels have to convert from mere dispatchers of handsets to customer service centers that offer a wide range of services ranging from technical assistance, product configuration, installation and maintenance, training, help desk, etc. The products offered will have to include PDAs, handheld computers, PCs, software,

and a wide range of accessories.

Future distribution channels also have to assume customer care functions to play an important role in customer retention.

12

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

13

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

14

As in other european countries, strong client / service orientation will be key factors to effectively address the future challenges of the Spanish mobile market
Non exhaustive MARKET ISSUES
Market saturation / massification Maturity stage for mobile voice Data traffic growth Increased product complexity Increased product variety Increased Competition Individualised / non-standard customer needs

Heavy competition
Lower tariffs Lower product differentiation / commodity

INTERNAL ISSUES

High churn rates Lower voice MoU Decreasing ARPU Strong weight of SAC on cost structure Lower operational margins

Increased replacement of SAC by SRC Different costumer profiles Decrease on churn rates Expected increase on value per subscriber

Higher focus on customer service as differentiation factor

time
CLIENT ACQUISITION STAGE CLIENT RETENTION STAGE

CRITICAL SUCCESS FACTORS

Client knowledge Client segmentation Customer care Integrated sales approach
15

Internal process efficiency & cost control Broad scope of service offer

Therefore, client-related activities, mostly developed by the distribution channels, are gaining overall importance in the process of achieving competitive advantage
Non exhaustive

CRITICAL SUCCESS FACTORS

Client knowledge Client segmentation Customer care Integrated sales approach Internal process efficiency & cost control Broad scope of service offer
Information Education Pre-qualification Promotion

Core Distribution Activities towards the customer

ACQUISITION
Sales Credit scoring Financing Ordering / Provisioning Contract negotiation Billing and payment processing Service activation

TRANSACTION / DELIVERY

SERVICING / MAINTENANCE
Costumer care Customer monitoring Detection of cross-selling opportunities Training and technical support Customer training Help Desk Maintenance

POS marketing, Merchandising Prospection Product/service selection

Product configuration
Installation

Problem/complaints handling
Customer retention

Direct channels Indirect channels

Own Shops Agents

Sales Force Small Retailers

Contact Centers Major Retailers

Web Channels Franchises

16

Distribution channels main characteristics (1/2)

MAIN RESPONSABILITIES

Non exhaustive DESCRIPTION

Own Shops

5 5

5 5

5 5

Directly owned and managed by the mobile operator; High initial investment associated; high maintenance costs; Location is a key issue central/ commercial urban areas; Promotes operators brand awareness, allows end-to-end servicing. Directly employed and coordinated by the mobile operator; Covers almost all distribution activities; High set-up and maintenance costs associated; Personalizes client / channel relationship; Generally suited to high value customers.

Sales Force

Contact Centers

Directly owned or outsourced to a 3rd party (specialist); Lower operational costs than previous 2 channels; Generally focused on after-sales activities; Problems regarding staff turnover and training; Can be combined with other channels, namely web, media and mailing concept of contact center; Less personalized contact, though allowing a proactive behavior towards the costumer in terms of monitoring, promotion; campaigns, etc. Directly owned by the operator or by a V-Partner; Bi-directional, interactive, personalized low-cost channel; Increasing spectrum of activities; may allow self-provisioning; Constraints regarding information availability, customer usage (depending on Internet penetration rate).

Web Channels

3
Legend: from

4
17

5 Major role to 1 Less important role

Distribution channels main characteristics (2/2)

Not exhaustive MAIN RESPONSABILITIES

DESCRIPTION
Independent sales representative; Low cost, good time-to-market; Allows broad coverage of disperse customers; Exclusivity is a major issue, as generally distributes services of multiple operators; Risk of lack of control - alignment with operators sales & marketing and commission strategy can be a major issue. Exclusive distribution of the service of a single operator; Works as an extension of the operators own shops, acquiring costumers and giving technical support; Close relationship operator / channel: investment sharing, strong level of control, transversal branding / promotion.

Agents

Franchises

Small Retailers
(Kiosks; Gas Stations; Stationary Shops)

1 2
Legend: from

5 5

1 2
18

Generally non-exclusive agreements; Broad coverage, low cost and good time- to-market; Limited range of activities, focus on selling pre-paid products; Requires strong distribution relation management efforts.

Major Retailers
(Store-within a-store; Department Stores; Supermarkets; Electronic Shops)

Generally non-exclusive agreements; Strong channel negotiation power; risk of lack of control; Broad coverage, high sales rotation ideal for fast growing markets with standardized products/services; Main focus on selling activities to mass market.

5 Major role to 1 Less important role

Channel mix choices often reflect a specific mobile operators strategic positioning, service offering and life-cycle stage
Mass Market Strategic Positioning Niche player

Direct channels

Own Shops Sales Force Contact Centres Web Channels Agents Franchises

Indirect channels

Small Retailers
Major Retailers

Product differentiation
More important Less important

+
Average channel cost per costumer Costumer loyalty Average revenue per costumer
19

Costumer-related costs, including the ones directly related to distribution channels, have a strong impact on the total cost structure of a mobile operator

Operational service costs (2000) - mobile operator -

Other 10% MS support other than biling 10% Interconnection Fees 26%

Costumer service, Biling and other MS support represent aprox. 42% of the total operating costs in a standard mobile operators cost structure.

Biling 10%

Network Maintenance and Operations 22%

Customer Service 22%

Therefore, distribution is one of the areas where cost reduction and process efficiency would have a major impact on overall business profitability.

Source: X Consulting Survey

20

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

21

The changes in the Spanish mobile market are shaping the evolution of both distribution channel roles and mix
GPRS / UMTS Non-standardized costumer needs Increase on Internet penetration and usage Non-standardized complex solutions Commoditization of voice needs

Increased product variety Entry of a 4th operator

MARKET DEMAND TECHNOLOGY

COMPETITION

MOBILE OPERATORS DISTRIBUTION CHANNELS

New client acquisition Customer relationship Customer loyalty

Revenues per client

Acquisition cost Retention cost

Customer/ Channel profitability

22

Technology is changing the economics of distribution channels, while allowing role sharing by broadening the range of activities performed by non-physical channels
Illustrative

Impact of technology in channel mix and distribution costs (Financial Services / Banking system France)

Operations Increase in transactions 1998 2002 (CAGR) Channel mix

Current account status 10 - 20 %

Tranfers 5-7%

Information requests 10 - 20 %

Sales

Internet has broadened the channel mix, by increasing the usage potential of a set of nonphysical low-cost channels, namely the web. Additionally, IT improvements mostly related to internal systems integration - have contributed to a overall decrease in channel costs,

2-5%

Agencies Call center ATM Mailing Web

70 % 35 % 5% 10 % 15 % 20 % 5% 20 % 20 % 30 % 5% 15 % 5% 15 % 80 % 50 %

as well as improved channel control.

In the near future, the extent of utilization of the web channel will depend upon Internet penetration and e-commerce rates, which are

Average reduction on channel costs

- 82 %

- 37 %

- 33 %

- 15 %

still low in the Spanish Market.

Source: X Consulting - France

23

As a result, overall customer-related costs will tend to decrease in the folowing years, while investments will shift from acquisition to susbcriber retention

Evolution of SAC and SRC as a percentage of revenues

D2 Vodaphone
25% 20%

Effects of the Web call center

(French Mobile Market)

% of Revenues

Quality of client service

15% 10% 5% 0% 2001 2002 2003 SAC's

Source: Lehman Brothers estimates

Profitability

2004

2005

0%

20% Increase

40%

60%

80% Decrease

100%

SRC's

No Change

Source: IDC 2000, Datamonitor 2000

The slow down on mobile market growth will result on a major shift from customer acquisition effords to costumer retention Non-physical channels will play a major role on achieving profitability, while maintaining high standards of customer service for basic customer needs

24

As the voice market matures, the link between channel strategy and Customer Value Management will need to increase
Illustrative Client Profitability Mobile Market -

Post-paid high usage

CLIENT VALUE

CLIENTS PROFITS

PROFITABLE NON-PROFITABLE
Low Usage, No Features

Profitable

30% 280%

Non-profitable

70%

Pre-paid

-180%

Web

Sales force / Own shops CHANNEL COSTS

Source: X Consulting analysis

The alignment between client needs/value and channel capabilities/cost results on the migration of less attractive segments to lower cost channels

Effective segmentation and continuous assessment of client/channel profitability will become major issues

25

The introduction of GPRS / UMTS services will change competition, increasing the complexity of distribution channel activities, by incorporating a strong technical component into the sales process Illustrative
UMTS Services and Business Model Wireless Unique Solutions
Enterprise

+
COMPLEXITY / COSTUMIZATION

Distribution channel Main activities Customization Technical Advice Installation Complex Service Maintenance Complex Service Assurance Training

Consumer

Field sales & service Wireless POS Inv. management Location based services ASP Services Personalization Telemetry< (customized services)

Wireless Extensions
Enterprise Extensions
CRM/ERP/SCM Custom legacy applications High-speed dial-up

Consumer Extensions
Mobile advertising Personalization (customized information) M-wallet

Enterprise Extensions

Basic Wireless Data Services

Consumer Extensions

Standard Corporate Applications (PIM, E-Mail, messaging) Limited intranet access

First level/ second level support

Cross-selling: PCs, PDAs, Software Enterprise solutions

Standard 2nd Generation Services

SMS Voice mail Caller ID

Roadside assistance E911 Directory Assistance

In a first stage, enhanced need for control on the sales/ after-sales process will increase the importance of direct channels, as well as the pressure for tighter links with indirect channels.
26

Channel strategy will need to be lifecycle timed, as it will have to support simultaneously two product lines at different lifecycle stages GSM and GPRS/ UMTS mobile services
Product Lifecycle /Distribution Channel Relation

Illustrative

Own channels
Mobile data services (introduction)

Specialized distribution

The mobile operators service portfolio will be composed of multiple products, with different characteristics, in different stages of the product lifecycle (GSM voice services and GPRS/UMTS complex solutions).
As voice services become commoditized, channels with wider coverage/activity scopes and lower distribution costs become essential for maintaining profitability. However, due to their specific characteristics, these channels are not sufficient for the selling

GROWTH POTENTIAL (revenue & profitability)

Mobile voice services (introduction)

Mobile data services (near future)

Non-physical channels

Mass distribution
Mobile voice services (today)

Mobile voice services (near future)

MARKET DEMAND MARKET DEMAND

GPRS/UMTS GSM voice

and servicing GPRS/UMTS services. That gap has to be covered by specialized distribution channels.

Operators will need to assure the alignment from their market segment and product strategies with their distribution channel strategy
27

Channel Strategy is evolving towards a more clear definition and separation of roles and responsibilities
Channels

Independent Channels Approach

Focus on client acquisition activities

Sales Process

Parallel initiatives on different channels Multiple points of contact with the client

TIME

Target segments

Risk of info duplication and dispersion between channels

Channels

Multi-channel integration Approach

Focus on client retention activities Single point of contact with the client

Sales Process

Information sharing between channels Single integrated customer profiling

Target segments

Cross-selling / bundling One-stop-shopping concept

The effective integration of different channels will become one of the major issues for a mobile operator

28

Distribution channels in the Spanish mobile market emerging issues (1/2)

Non exhaustive EMERGING ISSUES
Usage across all costumer segments is declining, due to client migration to more cost effective channels Enhanced role on sales of complex products/services information, configuration, installation, training Complex solutions / handsets require new shop displays, different logistics as well as specific re-training of sales personell Complementarity Vs. Canibalisation on distribution activities Standard Vs. personalised/customized contact with the client (residential/ business /corporate) Value chain integration between operators and direct / indirect channels Control over the clients information Self-provisioning and availability of costumer self-care (information, service advertize, subscriptum, loyalty program) Mobile enablement of web channels Web enablement of distributor care

Own Shops

Web Channels

Contact Centres

Possibilities of channel overflow , due to the increasing demand related with mass customer migration Leveraging of economies of scale to increase non-traditional functions as opening client accounts and new service subscription Level of authonomy to trigger real-time responses to sales leads Increase in the level of complexity of information/servicing/technical support required by the customers Function as application Help Desk Integration with web channels Sales of complex solutions Teaming with consultants and system integrators to provide entreprise solutions Important role in cross-selling, up-selling and costumer retention Focus on corporate costumers and SME

Sales Force

29

Distribution channels in the Spanish mobile market emerging issues (2/2)

Not exhaustive EMERGING ISSUES
Consolidation as market growth declines reduction in the number of agents Increase in product variety and complexity lead to strong skill development needs training,etc. Enhanced role on customer advising and support, due to data services introduction Broader range of products, diferente product lifecycles associated with changing of non-standardised client needs and profitability will increase problems regarding performance measurement, control and rewards/comissions Non-sales activities will be provided only if operator exclusivity exists Agent loyalty becomes an issue; partnering with additional third parties (vendors of PCs, PDAs, software) Additional focus on SME and SoHo Enhanced role on all distribution activities related to complex solutions Increased complexity implies training and redeployment increased investment requirements from the operator; franchisees tend to become certified dealers Broader range of products, diferente product lifecycles associated with changing of non-standardised client needs and profitability will increase problems regarding performance measurement, control and rewards/comissions Negative growth, in a first stage, due to its strong focus on plain transaction activities New products will be less like commodities Activities will be limited to sales of commodities Need for new revenue sources and new roles on the distribution process as mass market matures and declines Reconversion needs as new mobile services will, at least in a initial stage, be less standardized Strong brand display possibilities Tendency to broader the scope within the value chain (e.g. through strategic alliances)

Agents

Franchising

Small Retailers
(Kiosks; Gaz Stations; Station Shops)

Major Retailers
(Store-within a-store; Department Stores; Supermarkets; Electronic Traders)

30

These changes are generating a new set of challenges regarding distribution channels, which must be taken into account during channel strategy definition
Non-standardized costumer needs Increase on Internet penetration and usage Non-standardized complex solutions Commoditization of voice needs

GPRS / UMTS

Increased product variety

MARKET DEMAND TECHNOLOGY

COMPETITION

MOBILE OPERATORS DISTRIBUTION CHANNELS

Channel integration Information sharing Single customer profiling Channel relationships Performance measurement Commissions

Increased technical complexity on sales process Training Up-selling Cross-selling Bundling Customer / Channel profitability

Customer ownership Exclusivity Channel conflict Customer care as diferentiation factor Customer satisfaction index

31

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels in a customer-centric market Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

32

Client needs to develop a channel strategy, which effectively addresses the following key points

How should Client manage sales process and distribution mix changes related to the decline in market growth? How can Client shift effectively from an acquisition-centric to a more customer retention approach? What is the right economic model for each channel in the light of a customer retention philosophy? What will be Clients most profitable service/channel/segment combination? How can Client avoid channel canibalisation and manage channel conflict? How should the flow of single customer information be oriented? How should Client face more complex GPRS / UMTS products selling and servicing? What type of skill set should Client develop in its distribution channels? What will be the right size of each channel in the future? Will Clients own shops play a major role? How can channel performance be measured and controled? How should the commissions Model be designed in the future?

33

1. Introduction 2. The Spanish mobile market 3. Channel Strategy

The role of distribution channels in a customer-centric market Trends and emerging issues

4. Clients main challenges regarding Channel Strategy 5. DCs Channel Strategy approach and methodology

34

To help Client defining the most suitable Channel Strategy for facing the future challenges of the Spanish mobile market, we would recommend an approach structured around three stages

STAGE 1
External Market Analysis Market Demand Competitors Technology

STAGE 2

STAGE 3

Gap Analysis Identification and evaluation of strategic options for Clients future channel strategy

Internal Assessment

Recommended Channel Strategy

&

AS-IS Channel Strategy

(Scenario Development)
(Detailed approach)

Strategy Implementation Roadmap

35

Stage 1 - External Market Analysis

Activities
Analysis of Market Demand evolution Market segmentation: Identification of independent segment clusters in terms of potential for revenue / profitability generation (Market Vs. Client) Characterization of customer service and channel needs, expectations and preferences (Market Vs. Client) Characterization of customer purchase behaviour and usage of services / distribution channels (Market Vs. Client) Segment profiling, size and evolution match between customer potential and customer characteristics (Market Vs. Client) High level analysis of segment profitability evolution (Client) Benchmark on competitors channel strategy Identification of the corresponding competitors activities regarding channels policies Analysis of competitive advantages International telecom channel strategy case studies and identification of best practices
MARKET DEMAND COMPETITION TECHNOLOGY

Integrated analysis of changes in the mobile distribution value chain related with automation and technological integration Analysis and quantification of cost reductions associated with technological changes Evaluation of process efficiency improvements associated with technological changes Introduction of GPRS / UMTS services - Analysis of impacts on the distribution value chain

36

Stage 1 Internal Assessment

Activities
Identify channel mix characteristics (ability to meet client needs) Match channel characteristics against customer needs Economics of each channel - Analysis of main indicators: - contribution margin - channel profitability - Productivity - KPIs Channel / Product / Client match analysis Identify constraints and strenghts of each channel Detection of channel conflicts Analysis of relationship with other players of the distribution value chain: - Indirect channels (namely commissions, reporting, planning and control, etc.) - Manufacturers

AS-IS DISTRIBUTION

37

Stage 2 Scenario Development

Activities
From the conclusions of the first workshop, identification of the major dimensions to structure scenario development and modeling on Market evolution and channel strategy Characterization of Clients strategic positioning and objectives (short and long-term) Analysis of the impacts of strategic positioning and objectives on distribution strategy Identification of key variables within the chosen dimensions relevant for scenario building Structuration of relationships and hierarchies between the identified key variables (cause/effect, hierarquisation) Scenario structure Development of qualitative/quantitaive scenarios on Market evolution (2001-2006) Identification of main strategic options regarding Clients distribution channels (mix and role trends) Identification of emerging issues / risks associated to each option

SCENARIO DEVELOPMENT

38

Stage 3 Recommended Channel Strategy

Activities
Definition of detailed channel strategy, in the light of strategic guidelines, focusing on the following points:
RECOMMENDED CHANNEL STRATEGY

- Channel mix - Definition of each channels roles and activities - Channel/Service/Customer alignments - Channel relationship management - Performance measurement and rewards - Control, reporting and planning - Channel conflit resolution mechanisms - Order management and Service provisioning

- etc.

39

Stage 3 Gap Analysis and Strategy Implementation Roadmap

Activities
Comparison between Clients AS-IS channel strategy and the recommended TO-BE channel strategy Gap identification and analysis Identification of additional issues related to the new channel strategy, namely on the related areas: - Organisational Structure - IT Systems Elaboration of a Road-map for implementation, including: - Sequence of activities to develop - Roles and responsabilities of each intervenient in the process - Deadlines to fulfil Identification of possible drivers and inhibitors of the change process

GAP ANALYSIS

40