The Story of the Cellular Phone Brand Orange by Tom Mulumia

1.0 Executive Summary

The case gives an overview of the issues concerning the ownership of the 'Orange' brand in India. It outlines the rise and the subsequent problems confronted by the rights holder of the 'Orange' brand, Hutchinson. In February 2000, Hutchison Max introduced its Orange brand in India. In May 2000, France Telecom purchased the worldwide rights for the brand from Vodafone. However, Hutchison, through an earlier agreement had retained the rights over the brand in India. Hutchison had to pay royalty to France Telecom. After taking over the brand, France Telecom wanted to own the brand in India and made an offer to pick up a significant stake in Hutchison's India operations. But this was turned down by Hutchison.

Subsequently, France Telecom demanded that the Orange brand licensing agreements be reworked and a higher royalty be paid by Hutchison for use of the Orange brand. Hutchison officials rejected a higher royalty payout. In late 2000, Hutchison officials announced that they were no longer interested in Orange. This seemed to have put to rest the issues relating to the ownership of the Orange brand.

2.0 Background

- There is hyper competition in the cellular business.

- Strategies in the industry: acquisitions, mergers,

- Hutchison strategy to use a known brand and this is places as superior in the market, gains high market share in major cities in India (succeeds)

- France telecom buys rights to use worldwide hence demand more loyalties, or higher stakes from Hutchinson if Hutchinson has to continue to use the brand name.

- Hutchison are in dilemma

3.0 Key tools of Analysis

3.1 Michael Porter's Five Force model

Porters model recognizes five forces in an industry namely, threat of substitute goods, threat of entry, bargaining power of buyers, bargaining power of suppliers rivalry in the industry. Regarding this case the following are noted. There is cut throat competition (rivalry) in the industry. There were 22 mobile players in the cellular industry. This gives a great deal of choices for the customers. They easily switch brands.

(a) Franchising Strategy: This was for the first time that a globally recognized cellular service brand was available in India. Said Ghosh, "What that means to our subscribers is that they will now benefit from the technology advantages that Orange has."

(b) Cost leadership: This is offering products and services to a wide range of customers at the lowest price available on the market (David, 2001, P.192). It is pricing a player's prices lower than other players in the same industry. This could be as a result of using cost effective methods that have resulted to reductions in production or operation costs. As regards Orange brand, it said that tariffs were lowered from 4 average tariff to 2.8 and 1.6. This shows that Orange's own prices were the lowest compared to other players in the industry. One would only question as to whether this strategy would hold for long term, or would be a strategy just to gain market share then return to the market price.

(c) Aggressive marketing and Positioning: the print campaign, the company planned to launch an advertisement campaign and ground promotions. Orange is utilizing the positioning strategy to gain market share. Positioning is how the customers perceive Orange in the midst of other players in the industry. The perception is that it is refreshing, honest, straightforward, innovative and friendly.

(d) Generic strategies: The case points out that there were a lot of acquisitions, mergers, alliances for players to survive in the industry. As noted in this "...you can either acquire or get acquired. There is no third option...".

3.2 Political