Case Study France Telecom

France Telecom (FT) is a French telecommunication company. It was created in 1988 but only became a self operating company in 1991. It first had a monopolistic as it was the only phone company in France and was nationalized. Formerly the creation of France Telecom, a specific entity of the State was operating the communications for the entire population and was known as the “Direction gйnйrale des postes et des telecommunications”. The France Telecom Group, with its principal subsidiaries Orange, the TP Group (the Polish telecommunications operator TP S.A. and its subsidiaries), Equant and the PageJaunes Group, offers its consumers, business customers and other telecommunications operators, a broad selection of services ranging from fixed line and wireless telephony, data transmission, Internet and multimedia services and other value-added services. France Telecom currently serves 125 million customers worldwide.

In recent years, the European market for telecommunications has grown rapidly as a result of the culmination of a number of factors: the globalization of trade, the increasing consolidation of European markets, the rapid growth of wireless telephony, the advent and growth of the Internet and the development of data exchange.

Against this background and in an increasingly competitive environment, France Telecom pursued, from 1999 to 2002, a strategy for the development of new services and accelerated its international development through external growth with the goal of reaching critical mass in high growth markets on the European level, particularly in the wireless and Internet markets. These strategic investments could not, for the most part, be financed through equity, leading to a significant increase of France Telecom’s debt.

Today, France Telecom has over 125 million customers worldwide and its shares are traded in Paris and New York Stock Exchange. It is not anymore a phone company but an integrated company providing internet, fixed-lined, wireless phone and cable. In less than twenty years, France Telecom turned from a nationalized company only operating on a domestic market into a telecommunication giant, the number 1 European telecommunication company and does not intend to stop its development here.

In this document, I will study the success factors of FT. I will focus on the strategy that enabled FT to grow and become multinational company. As a framework , I will here use Henry Mintzberg “ 5 P’s for strategy” and explain the transformation of this company through his typology of strategy.

In his article “The Strategy Concept I: Five Ps For Strategy”, Mintzberg explains that strategy can not be restricted to a single definition but covers different perspectives and the best way to deal with that field is to acknowledge this multiplicity in order to avoid any misunderstanding. So strategy has five definitions-as plan, ploy, pattern, position, and perspective- and these definitions are interrelated.

Plan:

Strategy is always first seen as a plan, “some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation” (Mintzberg). Mintzberg explains that strategies have two main characteristics: “they are made in advance of the actions to which they apply, and they are developed consciously and purposefully”. France telecom did use this method and the latest plan is known as “Ambition FT 2005” plan.

“AMBITION FT 2005” PLAN

The France Telecom management team was reorganized at the end of 2002, firstly adopting a simpler organizational structure

which clearly distinguishes the operating divisions and the central functions with responsibility for the whole Group, and

secondly, by giving a greater degree of accountability to senior managers. This team is responsible for implementing the

“Ambition FT 2005” Plan in order to fundamentally transform the France Telecom group, based on three major priorities:

_ “TOP”: a program to improve operational performances which strives to free up more than Ђ15 billion in net cash generated

by operating activities less net cash used in investing activities during the period from 2003 to 2005. This free cash flow will be

allocated to reducing debt. In operational terms, “TOP”‘s goal is to attain a level of excellence in the performance of all

processes of the company by 2005. See “Item 4.2.2 ‘TOP’ Program”.

_ “15+15+15”: a plan to strengthen the Group’s financial structure:

-