BCE Inc: Facing the Future Harvard Case Solution & Analysis

ANALYSIS

SITUATIONAL AND STRATEGIC ASSESSMENT

The main or key problem with BCE business is the competition as there are many competitors which have entered in this market and have captured the majority of market share. BCE is currently the third largest telecommunication company; the other two largest telecommunication companies are TELUS and the Rogers. These companies have captured the significant market share of the high growth and the high margin wireless market to make sure of their existence in the Canada.

BCE’s share price is at the lower level as compared to the competitors mentioned above. It is flat since 2000 as it has just increased by 10.4% which is a sign of bad performance because for the same period, the share price of its competitors and the Canadian market increased by 56.7%. Furthermore, the revenue from the wireless segment of the BCE has recently declined significantly, so the overall wealth of its shareholders has also declined.

Currently, BCE is undervalued as compared to its competitors. There can be many reasons behind this fact. The first and the basic reason can be the undervaluation by the market, such that the market does not perceive BCE at its actual value. Other reason is that it is not showing a positive growth in its revenue and the profit margins, as its profit margin has reduced in 2006 as compared to the previous operating years. It is very important to show a stable growth in the profit margins to get the right market price of business from the market.

The key issues, which currently BCE is facing, are competition in the telecommunication market as they have lost the share of the fast growing and the high growth wireless market and the government regulatory authority has approved some of un-favorable rules for the telecommunication sector, which has affected BCE.

The Government regulatory authority in Canada has a favorable option to the users that they can switch the service provider and can retain the previous number as they were using at their previous service providers. This is the key problem which BCE is facing. This can lead to a decrease in the overall revenue of the company because the customers can switch at any time from BCE to the other service providers.

Another problem, which BCE is facing, is that the Government authority is actively interfering in the telecommunication sector in Canada. They are going to issue spectrum in the 2 GHz range including advanced wireless services. The process of auction is in the pipeline. Therefore, this will allow entry to the new players in this telecommunication sector. As a result, this is the key issue for BCE as this can significantly deteriorate the revenue of the company.

STRENGTH: BCE is the leading telecommunication company in the market.Its key strength is that it is the third largest player in this sector. BCE can use this strength if it can make a deal with other two service providers to create a monopoly in the market regarding the prices for the services that it is providing;therefore it is quite possible that it can capture the whole market regardless of the any new entry of the rivals in this market.

The other strength is that it has a strong brand in Ontario and Quebec. It has a key presence over there and has captured more than 90% of the market share in Ontario and Quebec and has created a brand known as ‘Bell’ in those regions.

WEAKNESS:The key weakness is that BCE has the slower wireless spectrum. Rogers has 85 MHz of spectrum in the wireless market, whereas the TELUS and the BCE have below than 55 MHz. This is the key weakness of BCE as it is not competitive in this market. This is major competitive advantage that Rogers is enjoying right now. However, BCE should also consider the beat in this matter as the wireless market is the fast growing and the high profit margin market. In the capital market the interest rates are declining throughout the period therefore, this will attract people to invest in the real state. Usually people invest in the stock when the interest rate will be higher and vice versa. Therefore, in this way BCE will face difficulty to raise the funds and this will impact the overall liquidity of the company........................

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