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Best in France Case Study HEC January 2005

CABLE & WIRELESS

European Headquarter

in Paris, France

Best in France

MBA 2006 ES2
-
I Group

Mr Minh
-
Tho DAO

(Minh
-
tho.DAO@mailhec.net)

Mr Timo PFLUEGER

(Timo.PFLUEGER@mailhec.net)


Ms Ying ZENG

(Ying.ZENG@mailhec.net)

Mr Yuri VENTURA

(
Yuri.VENTURA@mailhec.net)

Best in France Case Study HEC January 2005

We Thank

Mr Bruno DAVOINE

Chief Executive Officer, C&W France

Vice President of Enterprise Europe, C&W Europe

Joined C&W in June 2002

Http://www.cw.com/europe/about_us/company_profile/directors/direct_bdavoine.html

E
-
mail: Bruno.Davoine@cw.com

PA tel: +33 (1) 55 70 14 12


Mr François GUIRAUD

Marketing Manager, C&W France

Joined C&W in 2000

E
-
mail: Francois.Guiraud@cw.com

Tel : +33 (1) 55 70 13 19


Best in France Case Study HEC January 2005

Best in France

The "Best in France" Case Study Project is an initiative
organised by Professor
Michael Segalla

Ph.D. of the
HEC School of Management
designed to identify what
adaptations firms must make when opening business
units in France.


Targeted firms are companies that have their
Headquarter outside France and that decided to start a
business unit in France.

Best in France Case Study HEC January 2005

Executive Overview


Company presentation


Why did C&W go to France ?


Constraints in France


Adaptation to France


Comments on other countries


General advices


Final conclusion

Best in France Case Study HEC January 2005

Company Presentation

C&W Profile


Cable & Wireless is a British telecommunication
company, with international customers in 80
countries, that provides IP, voice and data services
to business customers.


It provides also services to other telecoms carrier,
mobile operators and providers of content,
application and Internet services.


Cable & Wireless was founded more than 130 years
ago in the UK and has today more than 15000
employees in 80 countries worldwide.


Turnover Group 2003/2004:
£

3,868 million.


C&W relies on its worldwide network backbone.

Best in France Case Study HEC January 2005

Company Presentation

C&W France Profile


C&W France was founded in 1990 as the
first
European location
within a continental Europe
development strategy
.


During the rapidly growing days (mainly the ”Internet
bubble”) C&W France had reached 565 employees.


Today C&W France has approx. 65 employees and
has its headquarter in Paris
-
La
-
Défense.


Turnover Europe:
£ 262 million

Best in France Case Study HEC January 2005

Company Presentation

C&W France products and customers


In the 90’s, C&W France started by selling
telecommunication B
-
end solutions to businesses.


In 1998, C&W France started selling A
-
end solutions
also.


During the Internet bubble, C&W has oriented its
strategy around IP services through internal and
external growth (Acquisition of Internet companies in
France) and tried to reach residential customers.


After the Internet bubble blew up, C&W decided to
revert back and just address the market of
enterprises that have an international infrastructure.

Best in France Case Study HEC January 2005

Company Presentation

C&W France products and customers


Now C&W France sells the group key products to
French entities of international business customers.
They don’t address the strictly national businesses
anymore.



The future promising product of C&W will be Voice
over IP services which is regarded as the main point
of growth and competitiveness.


C&W will probably not enter the residential business
in the near future as the price war in that segment
makes it unattractive.

Best in France Case Study HEC January 2005

Why Did C&W Come To France?

The Ride for continental Europe


European market (including UK) is bigger than that of
the U.S. This market was critical for C&W to penetrate
in the late 80’s.


Once an IT company like C&W decided to expand in
continental Europe, 3 major markets where
considered at the first place for their size and IT
infrastructure :

-

UK (already domestic market for C&W)

-

Germany

-

and France


Then the other European countries were considered.


During the Internet bubble, continental Europe growth
has continued through acquisitions of more than 20
small European companies, including 2 in France.

Best in France Case Study HEC January 2005

Why Did C&W Come To France?

1990: Germany vs. France

As

the

most

important

European

IT

markets

are

the

UK

and

France

and

Germany,

the

decision

regarding

where

to

enter

the

continental

Europe

market

had

to

be

made

between

France

and

Germany
.


Market structure

All main targeted customers in France are located around
Paris, i.e. that a French market centralized around Paris has
many advantages compared to the German market where the
big companies are located at several different locations like
Frankfurt, Stuttgart, Munich, Berlin, Hamburg etc.

80% of the French business is generated in the Paris area.


Geographical location & travel expenses

France is central to Europe and has a big international airport
(Charles De Gaulle). Travel expenses are lower in France not
only because of the central location of Paris but also due to
much lower flight costs comparing Paris and Munich as
starting points.

Best in France Case Study HEC January 2005


Infrastructure

The IT infrastructure (Telecommunication, Internet,…) is very
well developed.

The cost of office spaces is quite the same in France and
Germany.


Labour legislation

The social systems regarding expenses for people and
involvement of unions and work councils are comparable in
France and Germany (a bit easier to deal with in Germany
though).

The French 35 hours law is not a big deal as people end up by
naturally working more in C&W. In Germany, people work the
minimum they need to work.



Why Did C&W Come To France?

1990: Germany vs. France

Best in France Case Study HEC January 2005


Qualified employees

It looks like Germany and France have the same advantages
of getting access to qualified employees at all levels.


Education

France is regarded as the European country with the most
international education system.


Quality of Life

Managers tend to prefer staying in Paris compared to many
other big cities in Europe.


Why Did C&W Come To France?

1990: Germany vs. France

Best in France Case Study HEC January 2005

Adapting to France

Constraints and Adaptations


Market specifics

The European/French market develops and is structured in a
different way than the company domestic country (UK).
Education has to be made towards UK in order for the top
management to understand the local market and products that
should be developed.

Then, it is mandatory to put local people in the management
team of the local business unit.


Customers

From the marketing perspective there are different approaches
necessary for each country, e.g. the way to reach potential
clients is totally different in France compared to Germany or
the UK. (For example in France there are special events on
which a telecommunication company has to be present while

As

the

headquarter

of

Cable

&

Wireless

is

located

in

the

UK,

the

France

(and

other

European)

office

has

to

find

a

way

to

balance

the

interests

of

the

HQ

with

the

needs

of

the

European

/

French

markets
.

Best in France Case Study HEC January 2005

Adapting to France

Constraints and Adaptations

in other countries fairs and special journals are more
important.)

In France it is more important than in any other country to
reach the decision maker directly, which might not only be the
CIO but also the CEO.


Authorities

C&W France don’t have to deal a lot with governmental
organizations. Nevertheless, it has to sometimes cope with the
ART which is the French telecommunication sector regulator.


Financing

In France, the access to venture capital is more difficult and
the people put in the board are not really involved in the
business.

In the opposite, In the UK and the US, the board member who
was appointed by venture capitals will be highly involved in the
business. So it becomes easier to look for US or UK capital.



Best in France Case Study HEC January 2005


Labour legislation

The labour legislation is very strict and lacks of flexibility in
France so special attention is put on that topic at C&W.

It is possible to make several people redundant only in case of
loss and still then, the company needs to explain to the
authorities how they will maintain an agreed fixed number of
employees.

The cost of hiring and releasing employees in France is very
high in time and effort and cost because of the French labour
legislation that involves long procedures including discussions
between unions/work councils and management.

Also in practical, unions don’t really have the will to discuss
with management and don’t make any difference between
different profiles of concerned employees.

Adapting to France

Constraints and Adaptations

Best in France Case Study HEC January 2005

The labour legislation was very costly for the company
especially during the difficult time of the internet bubble blow
where C&W had to reduce headcounts.

C&W has recently tremendously shifted the allocation of
resource of its operations departments from France to
Germany partly because of this lack of flexibility.



The top management has to take the constraints of the
French social system into account and has to develop
strategies of relationship (or avoidance) with the unions and
the work councils.


Management style

The management style in the UK is different to France but
C&W France had to adapt to the mother company, e.g. the
way to deal with conflicts and targets.



Adapting to France

Constraints and Adaptations

Best in France Case Study HEC January 2005

Comments on other countries


Italy

Italy causes the biggest problems for entering as the business
is spread out all over the country and the market is fragmented
among a lot of small companies. The market is mature but the
way people do business is not as mature as the rest of
Europe.


Spain

Spain can be the perfect bridge to South America if you want
to do business there as well. Nevertheless, C&W don’t plan to
expand a lot in South America.


UK

UK is the first country to go if a company needs to penetrate
Europe because of its business similarities with the US. The
communication style is very different, e.g. in regards to the
way how to deal with conflicts.



Best in France Case Study HEC January 2005

General Advices

For Opening a BU in France


Size of Business Unit labour

Be very careful of the headcount because of the flexibility problem.

Try to keep the size of each B.U. below 49 to avoid influence of
Unions and work councils otherwise be prepared to deal with them in
difficult times.

Carefully plan and budget the cost of labour that is very confusing for
foreigners (pay to the employee, pay to the government, social
security, retirement plan, cost of headcount reductions…)


Mother company and subsidies in Europe

Always make sure that the mother company understands that there is
a difference between the individual countries within Europe and that
the European market is heterogeneous. Europe can generally not be
treated as the US for example!


Acquiring local companies

When generating global growth through local acquisitions, it is a
mistake to appoint the management of the local company into group
positions for integration reasons without ending the former local
responsibilities.


Best in France Case Study HEC January 2005

Final Conclusion


France is a good place to do business if local
requirements are known and the mother
company is properly educated.



Local management is the key to success in any
European country.

Best in France Case Study HEC January 2005

References


C&W web site : http://cw.com



Interviews from Mr Davoine and Mr Guiraud



Mr Davoine did a presentation at Cambridge
University about European business and its
pluricultural environment and recommended us
these 2 books:

«

We Europeans

»



from Richard Hill
-

Europublications

«

Euro Managers

& Martians

»



from Richard Hill
-

Europublications