Professional Documents
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IN TELECOMMUNICATIONS INDUSTRY
TEAM 9 GREENWICH COHORT Thu Ha Le Almudena Jimenez Cruz Stephano Bosman Clarisse Herbreteau Nabila Laraki Jacob Parackal
Macro environment
Political, economic, social, technological, environmental, legal
Markets
Political factors: Many African countries are just out of the civil war. Corrupt previous governments have left behind them disorderly regulatory regimes. Governments tend to intervene in the industry.
Economic: factors: 6% growth rate predicted in the sector for the year 2011 in Africa. Very fertile market, with a significant increase in consumption of new technologies. Sensitive economical disparity depending on the regions of the continent Tremendous investment in the sector since 2007.
Legal factors: Unified licensing introduced in 2006. Continuing liberalization of VOIP (Voice Over Internet Protocol). Privatization of national telecommunications services in the region is continuing with significant premiums over reserve prices being paid.
Socio-cultural factors: Women in sub-Saharan African countries contribute over 40% of the economic activity of most nations. The literacy of women is low. Increase in the use of mobile phones.
Environmental factors: Stress on saving energy due to high energy consumption in the industry. New technologies for energy saving network towers and grids.
Technological factors: 3G mobile services Expansion of GSM networks Upgrades in data transmissions due to rapid growth of ADSL and wireless broadband services.
HIGH HIGH
LOW
LOW
HIGH
COMPANIES
1. 2. 3. 4. 5. 6.
1. VIRGIN MOBILE
Strengths
* 3rd largest mobile operator * 7.4 million suscribers * Net-density around 20% * Strong marketing campaigns
Weaknesses
* Network costs * Limited (cheap) internet access * Limited point of sales
Threats
* Local competition * Price competitiveness
Africa strategy
Joint venture with Cell C in South Africa since 2006 Cell C is 100% owned by 3C Telecommunications Virgins marketing know-how Opportunities and colonial ties Try-out of emerging market
2. VIVENDI TELECOM
Strengths
* Top leader in telecommunications in France and Morocco , and Brazil * Large product diversification ranging from telecommunications to music production, to cable TV network. * A strong international brand presence and brand recognition. * Strong assets and higher ability to invest .
Weaknesses
* Intense Control of subsidiaries . * Liquidity problems.
Threats Opportunities
* Partnerships and co-operations in different industries. Economic recovery from the financial crisis * Increased competition in telecommunications . * Piracy Saturation of network capacity in some countries Telecom operators are becoming dumb pipes. .
Africa strategy
Acquisition of 53% of MAROC TELECOM Maroc telecom subsidairy is 2nd largest operator in Africa 15,3 M mobile telephone customers. 60,3% of market share in Morocco. Competition: MEDITEL & WANA. Geographic expansion of Maroc telecom group with acquisitions of Mauritel in Mauritania, Onatel in Burkina Faso, and Gabon Telecom, and SOTELMA in Mali 3G telecommunication Introduction of Mobi cash the first money transfer and payment in Morocco Intensive marketing campaigns and promotions offers
3. AIRTEL
Strength
* Top leader in telecommunications in India. * 5th largest in the world. * A strong brand recognised widely. * Strong assets and higher ability to invest . * Outsources everything apart from marketing, finance and sales * Great marketing and publicity stratergies.
Weaknesses
* Invests heavily into new and never explored markets and prefers acquisition over joint-ventures.
Opportunities
*The investment into new markets can trigger immense growth in the near future. The groups hunger for growth even if it means to sacrifice some profits for the stake-holders.
Threats
* Customer loyalty Tough and high competitive tariff fights.
Africa strategy
Operates in 16 African Countries. Mode of entry: Acquisition Focus: Rebranding, improved network coverage, excellent customer care and range of products to chose from. CAPEX: Expand with lower capex and discussion with the government for utilizing USO fund for network. Partners: Looking for strategic partners and setting up of base in Nairobi. Telecom Population: Increase minutes of usage from 50-60 minutes to 250 minutes and increase the net density. Make Phone the mobile laptop for the common man in Africa.
4. ETISALAT
Strengths
Leadership position: 12th largest voice carrier in the world with 135 million subscribers. Operates in 18 countries across Asia, the Middle East and Africa. An aggressive strategy: capture a 30% market share in less than 2 years. Development of innovative products.
Weaknesses
No brand strategy. There is no brand strategy. The image given by the company is quite heterogeneous. The high level of geographic disparity could affect markets understanding and difficult operation management.
Opportunities
Entering emerging markets with low penetration and high populations. Better services than its competitors. It will be able to increase its market share easily.
Threats
Entering into growth markets in developing countries without looking for market leadership could weigh down on total company profitability. Emergence of new local competitors. Changes in the political stability.
Africa strategy
Direct investment in Egypt, Sudan, Nigeria and Tanzania; and through Atlantic Telecom in West Africa (Benin, Burkina Faso, Togo, Niger, Central African Republic, Gabon and Ivory Coast). Then, all them were rebranded to Moov. EXPANSION STRATEGY (no leader position): be available in more countries and to more customers. MORE COUNTRIES: Diversification of sources of income regionally and internationally through entering markets with low penetration and high population. MORE CUSTOMERS: focus on private customers and business sector. Better services and stable profit.
5. VODAFONE
Strengths
* Leadership position: Largest mobile telecommunications network company as measured by turnover 332 million proportionate subscribers 7% share of the global market. * High geographical reach: Operations in over 30 countries and partner networks in a further 42 countries
Weaknesses
* Centralised control * Low flexibility
Threats Opportunities
* Expanding market boundaries * Growth through 3G * Increased competition * Market saturation in Europe * Regulatory intervention on tariffs creates pressure on revenues
Africa strategy
Operates in 9 countries with high market shares: Egypt (44.35%); DCR (49%); Kenya (73%); Lesotho (80%); Mozambique (40%); South Africa (59%); Tanzania (46%), Ghana (17%), Libya (15%) Market entry mode: acquisition (Telecom Egypt 1998, Safaricom Kenya 2000, Ghana Telecommunications 2008); joint venture with Telkkom and Venfin in South Africa => Vodacom 1993; non-equity partnership agreement with Almadar Aljadid Libya 2010. Shift towards multi-media and high-end data services, . Focusing on the business segment through including IT Services within its portfolio.
6. ORANGE
Strengths
* Market share leadership: 7th largest telecom company in the world, 1st operation in Africa in 2006, region yielding 3.4 Euros revenue / year * Strong brand equity
Weaknesses
* Diseconomies to scale * Poor supply chain
Threats Opportunities
* Online Selling * Loyal Customers * Cheaper technology * Lower cost competitors or imports * Product substitution
Africa strategy
Implemented in 15 African countries, primarily focused on the French-speaking areas of North and West Africa, and has then expanded its operations to the English- speaking region of Africa and to other more rural areas. Development and modernization of services through 3G network. Offer low-cost handsets In Kenya, launched One Kenyan Shilling per MB tariff to become the most affordable internet bundle Launch of Orange Money online payment services
WHY AFRICA?
-
Telecom Industry in developed markets has been saturated Africa market: Cellular and fixed-line telephone penetration rates are low, offering significant customer and revenue growth potential. Wages are low; many workers speak English, French along with the enormous number of the available workforce. Government policies attract FDI: improved environment, economic reform, private sector encouragement and better FDI regulatory framework (allow profits to be repatriated freely or offer tax incentives etc)
Transnational strategy
Acquisition
Orange Etisalat
License
Airtel
Jointventure
Low (<$1,000)
Medium ($1,000-4,000)
High (>$4,000 )
Market entry mode: Most cases through dominant acquisition Timeline: Case-by-case basic Geographic expansion: Operates in the countries that used to be colonized and are open to foreign equity ownership Strategy: Parent Driven Investment Products and services: Centralized product strategy Pricing: cheap
DIFFERENCES Market entry mode: some cases through buying license (Vodafone, Orange, Etisalat) or joint venture (Vodafone, Orange, Virgin) Brand name: While others operates under its own brand name in Africa, Vodafone operates under name of its subsidiaries in some African countries e.g. Safaricom in Kenya, Vodacom in South Africa, Almadar Aljadid in Libya Geographic expansion: Virgin only operates in South Africa, Vivendi operates in 4 Northwest African countries, others expand to operate in most areas of Africa. Products & services: Virgin - Online store, limited package deals, pre-paid billing ; Airtel high innovation (e.g customer relationship management solution)
Target new emerging market Takeovers, buy-outs, joint ventures Direct marketing Nation wide network coverage Cheap pricing Limited services Colonial entry barriers Rural area vs major cities
REFERENCES
Airtel Etisalat
http://www.etisalat.ae/index.jsp [Accessed 3 March 2011] http://www.ameinfo.com/137846.html [Accessed 3 March 2011] http://www.bi-me.com/main.php?id=25953&t=1&c=33&cg=4&mset= [Accessed 3 March 2011] http://www.balancingact-africa.com/news/en/issue-no-254/money/uaes-etisalat-buys-5/en [Accessed 3 March 2011] http://www.arabianbusiness.com/etisalat-considers-africa-investments-198228.html [Accessed 3 March 2011]
http://www.itweb.co.za/index.php?option=com_content&view=article&id=38751:orange-outlines-strategy-for-africa [Accessed 6 March 2011] http://euroafrica-ict.org/wp-content/plugins/alcyonis-event-agenda//files/Orange_development_strategy_in_Africa.pdf [Accessed 6 March 2011] http://hbr.org/product/orange-cameroon-a-global-telecommunications-compan/an/BAB136-PDF-ENG [Accessed 6 March 2011] http://www.telecompaper.com/commentary/france-telecom-sets-tough-goal-to-double-emerging-markets-revenue [Accessed 6 March 2011]
Vodafone
http://enterprise.vodafone.com/discover_global_enterprise/global_reach/ [Accessed 3 March 2011] http://www.safaricom.co.ke/index.php?id=1025 [Accessed 3 March 2011] http://allafrica.com/stories/201002161110.html [Accessed 3 March 2011] http://www.vodacom.co.za/vodacom/ [Accessed 3 March 2011]
Vivendi Virgin
APPENDIX
The most attractive industry is one in which barriers are low which means that few can hardly enter in the market and non-performing firms can exit easily. Threat of new entrants: LOW. At first glance, it might look like the more profitable the industry is, the more attractive it will be to new competitors; although the attractiveness of the industry is depend on other factors:
The capital required to set up this kind of industry in Africa, where the infrastructure is obsolete , is very high. The access to distribution is also another big barrier taking in consideration that getting telecom licenses is not easy. Customer loyalty in this kind of industry is quite high so, that is a factor that could motivate strong-branded companies to establish themselves in Africa. Many African governments provide subsidies to home-companies, which made even harder playing in this industry.
Threat of substitute products or services: LOW / MODERATE. Recently it has come out the threat of new substitutes: the voice over IP (VoIP), which is a way to transmit voice conversations over a data network using IP, and the Internet telephony (or peer-to-peer telephony), which allows voice calls to be made between PCs over the public Internet using IP. However, at the moment, this threat is reasonable moderate.
The quality of the sound is not as better as it could be with a regular call. Although some people that usually call over long distances can instead of picking up a phone go to a computer and call through that but it is not because it is more convenient, it is because just the high price of a long-distance call. The low costs of computer calling could potentially take over most long distance calling. The more local calls and business calls would be more secure for the mobile market, although cell phones with the ability to use the internet to make calls are being made available and will soon take a considerable market share of calls made.
Bargaining power of consumers: LOW. The threat of buyers in this industry can be considered fairly low. The individual buyer has no impact on the price of the products offered.
Africa market size is huge. While in United Stated and Europe the market has achieved their maximum and they are sutured, in Africa the market is experimented the fastest growing at the moment and it is expected to continuously increasing. Telephone and data services do not vary much, regardless of which companies are selling them. For the most part, basic services are treated as a commodity. Buyers are not usually tough, however, customers seeking low prices from companies that offer reliable service. The telecom industry is expected to always increase. The technology could be improved, change to new system that force companies to be constantly undated but it is not expected to be abandoned.
Bargaining power of suppliers: HIGH. The suppliers in this industry are those who provide the broadband switching equipment, fiber-optic cables, mobile handsets and billing software, but also, managers and engineers. We can say that suppliers power in some aspects of this industry is high.
There are few dominant suppliers taking in consideration the limited pool of talented managers and engineers, especially those well versed in the latest technologies that place companies in a weak position in terms of hiring and salaries. The brand of the supplier is very strong. You can think in the case of a highly-demanded fashionable phone (ex. I-phone) that is only offered by a company that have sign a contract of exclusivity with Apple. Just for that exclusive right to be the i-phone provider, the company will increased the number of customers who want to have an i-phone. Their role in the quality of the service is also very strong. If a Company have a signal service that does not provide a good reception in a certain area, the customers who live there will switch for another company who provide better reception. As we saw before, in the case, for example, the phones supplier, is very easy to find a new customer, above all, when the product or service provide for the supplier is so demanded.
Competitive rivalry within an Industry: HIGH In the telecom industry, technological advances are crucial to have a competitive advantage in the market. Companies that are successful with introducing new technology are able to charge higher prices and achieve higher profits, until competitors imitate them.
Rivalry will be more intense if there are equally size competitors, but in almost all African countries we find a clear market leader firm which dominated the market share. There are a few numbers of large firms worldwide that competes for the market share; this lowers the threat of rivalry. The firms that are in the business, however, fight to increase their market share and that increase the threat. The Industries that have a high fixed cost encourages competitor to manufacture at full capacity by cutting prices if needed. In this field, companies apply the vertical integration which is a strategy to reduce a business' own cost and thereby intensify pressure on its rival. Is not very hard to switch to another company, the rivalry among companies here is also high. Due to all companies which play in this industry play with huge amount of capital and pursue aggressive growth strategies, the barriers to leaving the industry are very high and competitors tend to exhibit greater rivalry.
Accordingly, we can affirm that the telecom industry in Africa is very attractive.
APPENDIX 3