Econet Wireless International and the African Telecommunications Industry Essay

Activities to be completed in this presentationCarry out a SWOT compendium for Econet Wireless International, identifying the key issues that Econet needs to address from the results of your outline. secure an industry analysis of the Afri foot Telecommunications market using Porters Five Force Model. Using a competitor analysis framework of your choice, study the Big Five mobile operators in the Afri flush toilet market Econet Wireless International is facing or faced challenges in a number of markets it entered. station these challenges and the sources of these challenges. What marketplaceing strategy options should Econet use at it tries to grow its operations (Justify your options) and what should it do to successfully implement these strategies?IntroductionThe selection of a growth strategy is at last determined by the companys strategic goals, core competencies and strategic assets as well as by its tar take a shit customers, collaborators and the overall economic, techn ological, socio cultural, regulatory and somatogenic context. An integrative approach of analysing these factors is essential for the development of a successful growth strategy.OverviewEconet Wireless International (hereafter to be referred to as EWI) is a Zimbabwean owned global telecommunications group. The result of Dr. Strive Masiyiwas vision, Econet began in mobile telephone service in July 1998, after forms of legal battles. Thus it began leading the change in the telecommunications terrain. Zimbabwe has issued only 3 mobiletelecommunication licenses to EWI, Orascom-owned Telecel and the government-owned NetOne.SWOT abbreviation for Econet Wireless InternationalAs a result of the internal and external analysis, our SWOT analysis is as followsStrengthsGrowth finished international expansion. As EWI expands onto 3 continents in 10 countries, they are competent to develop global footprint, thus increasing their peachy hindquarters and securing their company. Innovative product range. They continuously developed product range, they developed into becoming a full-service communications company offering mobile telephony, traditional landline telephony, Internet services, data streaming services, transactions systems and contract services for other operators. For guinea pig, in Zimbabwe alone, they have a number of viable product offerings, namely Buddie, Ecocash, EcoFarmer, EcocashSave, Econet Solar, Econet wideband and BusinessPartna Contract Lines.Their business model enabled them to offer calibre products at competitive prices. They collaborated in the form of consortium partnerships and also joint adventures. For example, it was able to penetrate markets such as Nigeria, Kenya, Botswana, New Zealand, Lesotho, Malawi and Burundian. Their joint venture was with Altech in South Africa. The benefit of this partnership firm was listed in the Johannesburg computer memory Exchange thus exposing them to a natural source of capital. Their mutually formed company, Newco, would have eventually taken over almost all of Econets companys, allowing EWI to backward intergrate with a supplier which in hurt of future growth, would enable them to develop an even wider product offering. This alliance would have been mutually beneficial, with Econet getting access to technology products, finance and administrative structures while Altech would get the opportunity to diversify riding on EWIs mobile nedeucerk.Multi-branding. EWI used its name in countries where it had a controlling stake such as in Nigeria, Lesotho, New Zealand, Malawi and Burundi. In countries where it was the minority shareholder, it operated under different names, namely Mascom ( Botswana), Gulfsat Maghreb SA ( Morocco). Their care structure was such that in each country, the operation was headed by a national, who knew the business climate in that country provided the financial aspect was headed by an expatriate from headoffice thus maintaining effective control and providing support. This back up business relations in those nations as the national heading the operation was able to negotiate deals from a knowledgeable point.WeaknessesLimited capital for operations, thus curtailing their growth, peculiarly in New Zealand and Nigeria as the case study says, the consortium partners resisted a higher stake in Econet, believing they did non have the financial sum and/ or resources to invest. In addition, Econet did not have enough money to finance the upgrading of its network and it came under government threat of having its licence revoked, thus they had to borrow $75 million Export-Import Bank. Also, in Kenya, their license was cancelled due to failure by the consortium to fully honour the license fee obligations in spite of appearance the given condemnation frame. They failed to provide a service recovery alternative for the suspended Buddie cards in 2002 in Nigeria. The implication here was that they created low switching costs for their reviewer base, boosting the sales of their competitor.Econet gave their competitors an edge over them in Nigeria, as evidenced by the out flow of their decisions to suspend Buddie cards and also, during their subsequent reintroduction. Both times, MTN gained from these moves. In reintroducing the cards, they were not able to support the resulting call volumes. They had not had the foresight to prepare for this possibility as a result of their reintroduction. electronic network quality problems resulting from failure to support capacity when the Buddie lines were reintroduced. It was a situation of demand outstripping supply.They had also not expected this outcome as a result of reintroducing the previously popular lines. Its hefty dependance on their Zimbabwean operations means they weakened their efforts at expansion due to the unfavourable economic climate. They had raised capital via the Zimbabwe Stock Market but could not use it externally due to stringent government controls on the basis of hard currency remittance limitations. Their failure to capitalise on the license in New Zealand meant a loss on their part.OpportunitiesTheir listing on the Zimbabwe Stock Exchange gave them the opportunity to raise more capital. Acquisition of licenses in various countries through consortium partnerships meant they gained a foothold in countries such asNigeria, Kenya, Botswana, Morocco, New Zealand, Lesotho, Malawi and Burundi though from a minority position in the consortium. They were able to welcome licenses in various countries.Threatsfuddled government controls. Restrictions to remit its foreign currencies to finance its operations in other countries, e.g. in New Zealand bad competition, e.g. in New Zealand where the market was duopoly delaying their entry into that market. starting time switching costs. In most of their markets, subscribers are multi-networked. As subscribers used a number of networks to maximise on particular network availability and prom otions, EWI could not in depend totally on that these subscribers would be faithful.Key IssuesLimited capital for operations. They could list on the Stock Exchange to attract investors. They could offer rights issues to animated shareholders, thereby attracting new capital. Network challenges. They need to upgrade their systems. They need to ensure they have enough technological infrastructure, e.g. base stations, to be able to cater for network loads. Collaboration with suppliers. Government regulations and restrictions. They need to form relationships with the host governments. Decision making. Improve their decision approach at corporate level, e.g. their decision to limit the number of days subscribers had access to the network. From the above analysis, the following threats are of high importance and Econet would do well to take noticeStringent government controlsIntense competitionLow switching costsMergers and acquisitions present an attractive and profitable opportunity th us Econet should explore this avenue further.Industry analysis of the Big Five using Porters Five Forces model. Threat of new entrants High becauseThere are strong barriers to entry in damage of obtaining an operational license due to government restrictions, e.g. Zimbabwe, as shown in the case when Masiyiwa argued the case that the Telecel consortium should bedisqualified as they did not meet cranky specifications. Restrictive license fees in terms of costs of getting the license such as in Kenya when EWI had their license cancelled after only two months due to failure to meet their obligation in terms of the license fee. A lot of capital is needed to start the business. It is estimated that $14 billion on average is needed as investment in the mobile phone business.Bargaining power of buyers High becauseLow switching costs such as in Nigeria when Econet opted to suspend the sale of its prepaid Buddie cards for 6 months due to quality problems, resulting in them losing subscriber s. The buyers power is strong in Burundi because they have a commonwealth of 7 million people with only 4 mobile subscribers.Bargaining power of suppliers High becauseThe government controlled operator supplier, Nitel, had strong bargaining power, as evidenced by their holding back to supply Econet with transmission links for more than a year and Econet had no option but to wait. There were few suppliers.Industry rivals High becauseCustomer base grew rapidly between year 2000 and 2005Intense competition among role players in the mobile industry.Substitutes Low becauseLandlines brainstorm rates were low, for example, in Chad, the rate was on average one landline per 70 people while the mobile phone users expanded between year 2000 and 2005 from 15.6 million to 135 million. The overall rating is high because rivalry is high, threat of new entrants is high, bargaining power of suppliers is high and bargaining power of buyers is high.Competitor AnalysisCompetitorKey StrengthsKey W eaknessesPerceived StrategiesKey SegmentsMillicomFirst-mover positionMarket leader statusCost leadinghipMulti-brandedWide market coverage within South AmericaLess aggressive business approachEasy to attackLow revenues in the big fiveMass-marketingMulti-brandingCost leadershipLow population marketsInternational marketsMTCInnovatorHigh capital baseStrong market coverageMarket strength through acquisitionAn aggressive playerHigh rate of economic growthNarrow product rangeMulti-brandingFull market segmentationHigh population areasMTNMarket coverageMarket leaderStrong capital baseEconomies of scaleResource utilisationWide product rangeNo multi-brandingBlue oceanLeveraging existing businessGrowing new markets through acquisitionsResearch and developmentHigh population areasNiche, e.g. Middle EasternOrascomStrong capital base through aggregateMulti brandingCost leadershipWide product rangeMarket leaderMulti-brandingRemoved operations in AfricaMarket developmentHigh populationVodacomStron g revenue baseMarket leaderAdequate resources for expansionInvestment opportunitiesLeast internationalisedMarket growth limitationsTaking unnecessary risksJoint venture franchisingForward integrationDomesticInternationalTable 2CompanyCapital/ Revenue (in billions $)Market Coverage (number of countries)Mobile Subscriber Number (in millions)Millicom1.41613MTC32023MTN32132Orascom2.1941Vodacom3527From the analysis above, the market leaders are MTC, MTN and Orascom in terms of revenue. Millicom and Vodacom take the role of market challengers. In looking at mobile subscriber, Orascom and MTN are the market leaders followed by Vodacom, MTC and Millicom respectively. In terms of market coverage, MTN leads followed by MTC. Millicom is the market challenger. Orascom and Vodacom are nichers as they focus on specific markets.ChallengesLegislationGovernment controls in the form of price controls, debar establishment of private mobile networks Trading policiesLicense to operateGovernment regulat ions licensing boardIntense competitionDuopoly in New ZealandInfrastructure problemNetwork support escape of foreign currencyGovernment foreign currency regulations in ZimbabweChanges in exchange rateEconomical meltdown in ZimbabweLack of capitalDelay in listing on stock exchangePoor quality Buddie cards in NigeriaProduct development and testing was piteousMarketing Strategy OptionsAnsoff MatrixMarket penetration The organisation tries to grow its market share through sales of existing products to the present market, for example Econet Zimbabwe trying to grow its market share from 70% to 80%. They could achieve this through promotions such as offering discounted tariffs. This can be done through ensuring that they have got enough capital to support the reduction of cost on pricing. The company needs to develop budgets to steer ample resources towards promotion and advertising.Product exploitation Coming up with new or modified products, for example Ecocash has been modified to include an account, that is, EcocashSave. They need to invest in a Research and Development department, tasked to come up with more innovative products. They also to need to emphasize on Total Quality Management to avoid product recalls, for example, in Nigeria where the cards had quality problems.Market development The company seeks for and finds new markets in which to expand, for example they go into a totally new market such as penetrating Canada. They can do this through acquisition of licensing in that country.Before acquiring the license, they would need carry out market research to ensure that that market is attractive and can be profitable for them. They should also ensure that they have enough capital to successfully implement this marketing strategy. In addition, they need to have the right management and organisational structures.Blue oceanThe process of identifying an untapped market in an effort to run away from competition. For example, Econet came up with Econet Sol ar where they tapped into the solar provision market in an effort to ensure that their customers phones battery life did not affect their network accessibility. In these topsy-survy times where clients have become complicated, the only way to survive in business is through eliminating competition through investing in new technology and/ or Research and Development. As a result, they can realise oftentimes in terms of profit. We advise Econet to take the Ansoff matrix strategies because it covers the wide scope of marketing strates or options of growth.