An Analysis of the Kenyan Mobile Phone Market

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An Analysis of the Kenyan Mobile Phone Market

Author :Kevin Singh

CONTENTS

QUESTION1: ANALYSIS OF THE KENYAN MOBILE PHONE MARKET3
1.1COMPETITION3
1.2 TECHNOLOGY4
1.3 FOREIGN TRADE POLICY5
1.4 ECONOMY7

QUESTION 2: SUCCESS OF SAFARICOM AND LESSONS FOR OTHER FOREIGN MOBILE PHONE CARTELS AND VENDORS8 2.1PEOPLE8
2.2 PRODUCTS9
2.3 CUSTOMER SERVICE9
2.4 CONTINUOUS IMPROVEMENT9
2.5 SOCIAL INVESTMENT9
2.6 CONCLUSION10

QUESTION 311

3.1 THE LIKELIHOOD OF SAFARICOM LOSING COMPETITIVE ADVANTAGE BY NOT CUSTOMIZING PRODUCTS11

3.2THE STRATEGY THAT SAFARICOM NEEDS TO ADOPT TO CUSTOMIZE ITS PRODUCTS FOR THE LOCAL KENYAN MOBILE PHONE MARKET12 3.2.1Affordability12
3.2.2Market Research13
3.2.3 Value Adding Services14
3.2.4 Customer Relationship Management14

Q4: HOW SAFARICOM TURNED THE POOR INTO ENTREPRENEURS AND VALUE CONSCIOUS CONSUMERS15

REFERENCES18

Question1: Analysis of the Kenyan Mobile Phone Market

1.1Competition

Traditionally research by the Massachusetts Institute of Technology (MIT), (2008), indicates that, “[the number of ] subscribers in developing countries… now represent (s) the majority of 2.4 billion mobile phone users worldwide”.

The Kenyan mobile phone market is no exception and has been described as being one of the fastest growing industries in Kenya (Karobia, C, (2006)). Since competition is usually related to the supply and demand of products, the following graph is presented:

Figure1: Fixed Line Subscribers versus Mobile Phone Subscribers (Source: MIT 2008)

Figure 1 shows that from 1994 until 2004 the number of fixed line subscribers has been fairly constant with very little growth. The number of mobile phone subscribers however has exponentially grown from early 1998 until 2004. According to statistics from MIT (2008) prior to June 1999, Kenya had 15000 mobile phone subscribers and by the end of 2004, the number of subscribers had grown to 3.4 million. Just 18 months later at end of July 2006 the number of mobile phone subscribers was recorded as 5.6 million. Clearly the mobile industry is one of the faster growing sectors in the country when one considers that only 200 000 households have electricity (MIT, 2008). Needless to say that the demand for mobile service providers and mobile products in Kenya has resulted in the uprising of new mobile phone companies.

According to Schiller, B (2006:477), “a duopoly is a market structure in which two firms supply the entire market”. A duopoly is usually formed when there are high barriers to entry and often results in substantial control of the price and standardized or differentiated products. Thus the Kenyan mobile industry is a duopoly with Safaricom (owned by Telkom Kenya with a 40% stake by Vodafone) currently holding 84% of the mobile market share and the remainder being held by Celtel (owned by Kuwaiti Mobile operator MTC) (Saturday Nation, 2008).

From its market share of 84%, Safaricom is clearly the dominant market leader. In 2009 however Econet Kenya (owned by Indian Essar) and Telkom Kenya (51% owned by France Telecom) will also join the Kenyan mobile industry (Saturday Nation, 2008). The presence of the new market entrants should result in the formation of an oligopoly if they are able to offer products at similar prices.

However, research by Morgan Stanley, as cited by the Saturday Nation (2008), states that,

“the competition should not be a great threat to Safaricom [and are confident that] with over 80 per cent market share, …[Safaricom] is well positioned to benefit from the growth in mobile phone use in Kenya, even with two new operators joining the market in 2009.”

The competitors however offer a different opinion and are confident that they can offer products at competitive prices with the aim of claiming a stake of the very high growth mobile industry in Kenya. The stage is thus set for fierce competition among Mobile service providers in Kenya with...
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