Investing in Africa Essay

This essay has a total of 3990 words and 24 pages.

Investing in Africa

MTN: Investing in Africa


Around the 1980's mobile telephones started showing up for commercial use. They were
analog style, cumbersome and expensive to purchase. In the 1990's digital technology was
born and mobile phones became readily available to everyone and less expensive than the
previous ten years. By 1998 over 30% of the world population within the areas of Europe,
Asia, and North America had mobile telephones.


With this type of usage of mobile telephones, Mobile Telephone Network plc (MTN) was born
in 1993 attempting to earn their share in the South Africa market for mobile telephones.
By 1999 MTN had over 1.3 million subscribes in South Africa. MTN is only one of three in
the southern hemisphere to receive the ISO 9001 Certification for Highly Qualified
Service. MTN is also one of only two mobile phone operator services in South Africa. The
competition is a company called Vodacom.


A meeting was held in Johannesburg in 1999 to decide if MTN should go global.
Globalization refers to markets and production. Globalization also refers to the merging
of separate national markets into one global marketplace. Most global markets products are
now industrial goods and materials that serve a universal need the world over. As
companies grow beyond domestic to international areas they bring many of the assets that
served them well. Such as the product, operating and marketing strategies, and brand name.
With this in mind MTN's key issues to be discussed included:


 Should MTN attempt additional foreign entries?

 How should MTN assess the eleven countries open for bid in the next year?
Along with which countries are the more promising?


 What should MTN do to prepare for successful international growth?

MTN, in late 1999, was already in the process of securing a license in Nigeria. After
securing the license, MTN planned to go live in Nigeria in a 6 month period. 20 to 30
expatriates had already been selected and were prepared to begin roll-out of business and
services as soon as the license was in place. There were a number of reasons for the
urgency of this operation. The population of 129 million plus, this was a single license
for MTN, Nigeria has a costal port attracting new ventures and Nigeria has a great amount
of natural resources, which would indicate that the country has much growth potential,
regardless of the corruption in government at the present time. Phone services could
possibly be the trigger to help that country and that economy explode.


A SWOT analysis will show the strengths, weaknesses, opportunities and threats of MTN as
they are related to MTN moving into market globalization.


STRENGTHS:
• MTN has had success in all it's current ventures domestically and with a few countries in Africa as well.
• MTN has competed for licenses and been the corporation to win the bid for licenses against larger corporations
• MTN has the technical expertise to start up new services and support those services
• MTN has established excellent training practices and become aligned with ISO 9001.
• MTN has been able to supply services consistently under less than ideal circumstances
• MTN has been very profitable in its initial ventures.

WEAKNESSES:
• MTN must be able to retain current employees, while training new employees. While
other competitors are attempting to recruit.

• MTN must control all costs to insure international success.
• MTN must choose countries which are more likely to succeed, based on barriers of
language, culture, economics and geography.

• MTN must be able to assess quickly a country's rules of engagement and respond appropriately.

OPPORTUNITIES:
• Other countries of Africa are virtually an open market where MTN will be the first phone system there.
• MTN can establish brand loyalty from the first phone having reliable and economical services.
• As MTN successfully establishes their corporate reputation in each country, it
makes entry into the next country much easier.


THREATS:
• Each new country entered will present new challenges of entry such as different
languages, tribal laws or politics, and local geography.

• Difficulties with installation and maintenance of new stations and equipment.
• Unknown quantities of resources may be depleted with each country added, over and
above the normal or planed cost of the project.

• MTN must train enough people to provide services and be able to retain those individuals.
• Competitors may undercut pricing to gain market share.

Following Nigeria the countries that MTN are interested in are Cameroon, Ethiopia, Gabon,
Ghana, Kenya, Malawi, Mauritius, Mozambique, Senegal, Zambia, and Zimbabwe. MTN's first
key issue holds many facets in determining entry into the other foreign countries. The
main areas of concern include, but certainly not limited to, cost, culture and ethics.


Cost
To determine if a country will be profitable in the long run, MTN must review all
benefits, costs and risks involved. The eleven African countries MTN's is investigating
are considered to have a relatively small economic market because of their low living
standards and small purchasing power.


However, 6 of the 11 countries, Gabon, Mauritius, Senegal, Cameroon, Mozambique and Ghana,
are on a coast or have a costal port. Geography in these countries insures they have
markets and access to export goods through out the world. Telephone services would only
help that type of industry take hold.


The other 5 countries, Ethiopia, Kenya, Malawi, Zambia and Zimbabwe, are either directly
connected to South Africa physically, or are connected with a country that has already
been in MTN developing business plan. This would mean that MTN has already established
ties with the cultures and people of these counties making entry access less of an
unknown.


• Need to establish a marketing plan to roll out to all potential customers. This
can determine how strong the market is.

• Plan to centralize the head office or corporate functions. This will ensure that
the South African Bank will let MTN have the benefit of the larger amount of money
earmarked for the companies expanding in the local region. MTN would be able to use the
$43 million on their centralized expansion.

• Training new employees will pose a serious difficulty and cost per person.
• Equipment is a large capital outlay for a new venture.


If MTN makes solid and swift decisions to move into these other eleven countries, the
brand of MTN will become know and established early on promoting brand loyalty.




Culture
Gert Hofstede, expert on cross-cultural differences and management defines culture as,
"the collective programming of the mind which distinguishes the members of one human group
from another…this includes systems of value; and values are among the building blocks of
culture." Values include what a group believes to be right. Norms are social rules and
guidelines for appropriate behavior of a society.


Many African nations have multiple cultures therefore causing difference between tribal
groups. Rwanda disrupted into a civil war because of two powerful tribes, the Tutsis and
Hutus.


With brand loyalty MTN will also discover each country's business practices. The culture
of a foreign country can vary tremendously; therefore, it is very important that MTN
complete a thorough research in all areas of the countries. MTN also must understand some
cultures may be more sensitive than others.


Elimination of cross-border barriers makes it easier for companies to enter into the
international trade market. Differences will still exist between national markets along
with preferences, distribution channels, culture value systems, business systems, and
legal regulations. In countries where collective goals are given preeminence, the
government may have control over many of the enterprises and therefore likely to restrict
companies attempting to enter that countries' trade market.


Cultural barriers may include religion, education, language, social culture, political
philosophy, and economic philosophy. Religion as it relates to culture is important in the
African countries that MTN wants to expand into because each society may have a different
set of moral principles or values differing from what MTN is accustomed to. Many different
religions shape the attitudes toward business and the degree of costs of doing business in
a country.


Africa countries are divided between two main factions of religion, Animism (tribal) and
Islam (Sunni), with a few exceptions. One exception is that South Africa is mainly
Protestant, and along the west coast of Africa religion has mixed sects.


The spoken language is another culture barrier that MTN must face in moving to new
countries. To help define cultures in each country languages help shape the way societies
perceive the world. English is considered the most widely used form of language in the
world, although many countries in Africa speak in their own tribal tongue. MTN must be
sure to investigate what each society speaks in order to reduce costly advertisement
errors and taboos. Unspoken language is an important behavior that must be understood
because different mannerisms in a society may be interpreted differently in other
societies. Therefore it is very important that MTN review all cultural areas of concern
before entering the trade market.


With the advances of transportation and communication technologies globalization trade are
creating conditions for the merging of cultures allowing it easier for companies to expand
into other countries.


Ethics
Should MTN be involved with countries where human rights are non-existent, or near non-existent?

Tribal totalitarianism exists when a tribe with a political party represents the tribe's
interest and monopolizes power. Tribal totalitarianism still exists in many African
countries such as Zimbabwe, Tanzania, Uganda, and Kenya. In 1996 MTN entered the Uganda
market that exists as a tribal totalitarianism country. This could not have been
accomplished without the help of certain investors connected politically to the state of
Uganda. Zimbabwe and Kenya are two other countries that MTN is seriously considering
entering into the mobile phone market.


With political power comes much corruption in many countries, according to the
Transparency International "Global Corruption Report 2003," Nigeria is considered the
second largest corrupt country, following only Bangladesh, out of 102 countries.


Nigeria is the most populous country in the entire Africa continent, with oil as a natural
resource that is abundant in Nigeria. Because the corruption rate is so high even though
Nigeria made $300 billion between 1970 and 200, they still remain one of the poorest
countries in the entire world. Most of Nigeria's problems are due to competitive tribes
whose ethic and religions are in constant conflict.


According to Freedom House's "Freedom of the World 2003: The Annual Survey of Political
Right and Civil Liberties," South Africa is the only state within the African continent
that is rated as having the most freedom of political power. Political freedom is import
for these countries in Africa to be become stabilized and rid itself of corruption, or at
least to minimize the corruption.


Within the countries that MTN is investigating to enter, and again according to the
Freedom House's survey, Cameroon, Ethiopia, Gabon, and Zimbabwe are listed as poor in
political freedom; whereas, Ghana, Kenya, Malawi, Mauritius, Mozambique, Senegal, and
Zambia are all listed as half way or more for having political freedom. In the countries
that MTN has already entered, Rwanda is the only one with political freedom, with
Swaziland and Uganda listed as poor.


Should MTN be involved with countries where human rights are non-existent, or near
non-existent? In 1994 South Africa's apartheid system was eliminated mostly due to
economic sanctions by Western nations who boycotted by not investing in South Africa. The
argument continues whether sanctions work in obliterating countries non-existence of human
rights.


Since human rights are near or non-existent in third world countries the Ethics Institute
of South Africa (EthicSA) was incorporated in September 1999. They are an independent,
nonpartisan nonprofit organization headquartered in Pretoria, South Africa. The Ethics
Resource Center (ERC) assisted the people of South Africa in its establishment with
generous support from The Merck Company Foundation to an ethics institute.


EthicSA's mission is to promote and advance ethical practices in South Africa - in the
profession, business, and public policy and among individuals. To this end EthicSA serves
as resources, facilitates ethics initiatives and works in partnership with private and
public institutions as well as individuals.


EthicSA is comprised of leading business, healthcare and civic figures. Initiated and
developed by South Africans with a view to local requirements and conditions, EthicSA's
operational and substantial activities are guided by values such as honesty, integrity,
responsibility, excellence, equity and fairness.



Business ethics activities include:
• Business Ethics Direct, an e-mail based newsletter published twice a week,
focusing on business ethics and corporate governance

• Business Ethics South Africa survey, serving as a benchmark of business ethics in South Africa
• South African Business Ethics Information Service, a database on the ethical
performance of South African companies, available to consumers and investors

• Ethics/compliance officer accreditation
• Capacity building presentations, workshops and training sessions

Continues for 12 more pages >>




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