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Activities to be completed in this presentation:
Carry out a SWOT analysis for Econet Wireless International, identifying the key issues that Econet needs to address from the results of your analysis. Undertake an industry analysis of the African Telecommunications market using Porter’s Five Force Model. Using a competitor analysis framework of your choice, analyse the Big Five mobile operators in the African market Econet Wireless International is facing or faced challenges in a number of markets it entered. Identify these challenges and the sources of these challenges.
What Marketing 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?
Introduction
The selection of a growth strategy is ultimately determined by the company’s strategic goals, core competencies and strategic assets as well as by its target customers, collaborators and the overall economic, technological, socio cultural, regulatory and physical context. An integrative approach of analysing these factors is essential for the development of a successful growth strategy.
Overview
Econet Wireless International (hereafter to be referred to as EWI) is a Zimbabwean –owned international telecommunications group.
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The result of Dr. Strive Masiyiwa’s vision, Econet began in mobile telephone service in July 1998, after years of legal battles. Thus it began leading the change in the telecommunications terrain. Zimbabwe has issued only 3 mobile telecommunication licenses to EWI, Orascom-owned Telecel and the government-owned NetOne.
SWOT Analysis for Econet Wireless International
As a result of the internal and external analysis, our SWOT analysis is as follows:
Strengths
Growth through international expansion.
As EWI expands onto 3 continents in 10 countries, they are able to develop global footprint, thus increasing their capital base 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 example, in Zimbabwe alone, they have a number of viable product offerings, namely Buddie, Ecocash, EcoFarmer, EcocashSave, Econet Solar, Econet Broadband and BusinessPartna Contract Lines.
Their business model enabled them to offer quality products at competitive prices. They collaborated in the form of consortium partnerships and also joint ventures. For example, it was able to penetrate markets such as Nigeria, Kenya, Botswana, New Zealand, Lesotho, Malawi and Burundi. Their joint venture was with Altech in South Africa. The benefit of this partnership firm was listed in the Johannesburg Stock Exchange thus exposing them to a new source of capital. Their mutually formed company, Newco, would have eventually taken over almost all of Econet’s companys, allowing EWI to backward intergrate with a supplier which in terms 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 EWI’s mobile network.
Multi-branding. EWI used it’s 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 management structure was such that in each country, the operation was headed by a national, who knew the business climate in that country but the financial aspect was headed by an expatriate from head office thus maintaining effective control and providing support. This encouraged business relations in those nations as the national heading the operation was able to negotiate deals from a knowledgeable point.
Weaknesses
Limited capital for operations, thus curtailing their growth, especially in New Zealand and Nigeria as the case study says, the consortium partners resisted a higher stake in Econet, believing they did not have the financial means 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 within the given time 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 subscriber base, boosting the sales of their competitor.
Econet gave their competitors an edge over them in Nigeria, as evidenced by the outcome 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. 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. It’s strong 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.
Opportunities
Their 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 as Nigeria, Kenya, Botswana, Morocco, New Zealand, Lesotho, Malawi and Burundi though from a minority position in the consortium. They were able to obtain licenses in various countries.
Threats
Stringent government controls. Restrictions to remit it’s foreign currencies to finance it’s operations in other countries, e.g. in New Zealand Intense competition, e.g. in New Zealand where the market was duopoly delaying their entry into that market. Low 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 promotions, EWI could not in depend totally on that these subscribers would be faithful.
Key Issues
Limited capital for operations. They could list on the Stock Exchange to attract investors. They could offer rights issues to existing 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 notice:
Stringent government controls
Intense competition
Low switching costs
Mergers and acquisitions present an attractive and profitable opportunity thus Econet should explore this avenue further.
Industry analysis of the “Big Five” using Porter’s Five Forces model. Threat of new entrants – High because:
There are strong barriers to entry in terms 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 be disqualified as they did not meet tender 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 because:
Low 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 subscribers. The buyer’s power is strong in Burundi because they have a population of 7 million people with only 4 mobile subscribers.
Bargaining power of suppliers – High because:
The 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 because:
Customer base grew rapidly between year 2000 and 2005
Intense competition among players in the mobile industry.
Substitutes – Low because:
Landlines penetration 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 Analysis
Competitor
Key Strengths
Key Weaknesses
Perceived Strategies
Key Segments
Millicom
First-mover position
Market leader status
Cost leadership
Multi-branded
Wide market coverage within South America
Less aggressive business approach
Easy to attack
Low revenues in the big five
Mass-marketing
Multi-branding
Cost leadership
Low population markets
International markets
MTC
Innovator
High capital base
Strong market coverage
Market strength through acquisition
An aggressive player
High rate of economic growth
Narrow product range
Multi-branding
Full market segmentation
High population areas
MTN
Market coverage
Market leader
Strong capital base
Economies of scale
Resource utilisation
Wide product range
No multi-branding
Blue ocean
Leveraging existing business
Growing new markets through acquisitions
Research and development
High population areas
Niche, e.g. Middle Eastern
Orascom
Strong capital base through conglomeration
Multi branding
Cost leadership
Wide product range
Market leader
Multi-branding
Removed operations in Africa
Market development
High population
Vodacom
Strong revenue base
Market leader
Adequate resources for expansion
Investment opportunities
Least internationalised
Market growth limitations
Taking unnecessary risks
Joint venture franchising
Forward integration
Domestic
International
Table 2
Company
Capital/ Revenue (in billions $)
Market Coverage (number of countries)
Mobile Subscriber Number (in millions)
Millicom
1.4
16
13
MTC
3
20
23
MTN
3
21
32
Orascom
2.1
9
41
Vodacom
3
5
27
From 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.
Challenges
Legislation
Government controls in the form of price controls, barring establishment of private mobile networks Trading policies
License to operate
Government regulations – licensing board
Intense competition
Duopoly in New Zealand
Infrastructure problem
Network support
Lack of foreign currency
Government foreign currency regulations in Zimbabwe
Changes in exchange rate
Economical meltdown in Zimbabwe
Lack of capital
Delay in listing on stock exchange
Poor quality Buddie cards in Nigeria
Product development and testing was poor
Marketing Strategy Options
Ansoff Matrix
Market penetration – The organisation tries to grow it’s 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 Development – 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 ocean
The process of identifying an untapped market in an effort to run away from competition. For example, Econet came up with Econet Solar 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 much 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.
Econet Wireless International and the African Telecommunications Industry. (2016, Apr 17). Retrieved from https://studymoose.com/econet-wireless-international-and-the-african-telecommunications-industry-essay
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