Question 1:Why has MTN been successful?
MTN has been successful due to the following reasons;
1.TARGET UNDERDEVELOPED MARKETS: MTN has operation in 21 Africa countries and the Middle East. Cellular telephones were popular in Africa because of lack of land line telecommunications in many countries. This boosted the company’s revenue with 43% increase in 2007 resulting to after tax profit of R11.9 ($1.6) billion. MTN strongest growth was in South Africa and Nigeria.
2.OPERATING STRATEGIES: MTN relied on local talent in its operations in each of the Countries; as well have local shareholder participation in its national operations. In Cote d’Ivoire local shareholder participation has increased to 40%. Meanwhile MTN always maintain the controlling interest.
3.MARKETING STRATEGIES: MTN covered the rural areas in its marketing policies by going to the people, using vans in rural areas and selling its pre-paid phones at traffic lights. This strategy made MTN to serve both the poor and rich thereby increasing their market share.
4.LOCAL, REGIONAL, AND NATIONAL INVOLVEMENT: MTN is involved in so many corporate social responsibilities in the countries it operates. For instance the “21 day Y’ ello care” in Nigeria in 2007, the R5 million rand contribution to refugees who fled to South Africa. Such activities help reduce political risks, create awareness of the company, thereby increase market share, which in turn leads to high revenue generation.
5.OTHER SERVICES: MTN did not rely on telephone services alone, but incorporated other services like Data solutions, Blackberry, International Roaming, Banking, EVD, Mobile TV, Me2U, callerTunes, Broadband in Nigeria, and internet services.
QUESTION 2:Identify the Risks MTN Faces
MTN having operations mostly in Africa and Middle East will face the risks and challenges of operating in emerging countries. Such risks include; 1.WEALTH DISTRIBUTION: In emerging market, small minority controls a majority of the wealth, while the rest lives in poverty. One limit to companies’ growth in emerging market is the price of a handset. Most people were unable to afford handsets. The cheapest handset was sold for about $30, but half of the people are living on less than $2 a day.
2.COMPETITION: MTN faced competition from other wireless companies in Africa as well as other companies from outside Africa. Other wireless companies include; Orascom of Egypt, Vodafone in Egypt and eight other countries, Orange in 13 African countries.
3.THE REGULATORY SYSTEM: Telecommunications is a regulated industry. MTN faces variety of regulatory challenges in each of the countries in which it operated. It had experienced problems in repatriating cash from Ghana and Syria, and in2007 Benin has suspended MTN for three months.
This made MTN to engage actively with governments and regulators in all the countries in which it operates. The management strives to participate fully in dialogue with governments and regulators in policy and legislative issues and frameworks, and continuously lobby for fair treatment in the business interest.
4.TAXATION: Taxation is a major problem for wireless companies operating in emerging countries. The billing systems of wireless companies provided an opportunity for countries to raise funds at little cost to the government. Especially in Africa where most countries were strapped for revenue.
In addition to value-added tax, countries imposed special levies on wireless service. According to GSM association, the tax on wireless service represented 47% of mobile phone service charges in Congo, 35% in Ghana, 27% in South Africa, and 22% in Nigeria.
5.INFRASTRUCTURES: High cost of infrastructures is another challenge facing MTN. Such high cost hinders the company from keeping prices low to attract customers. Serving customers in a new country or expanding into new areas in a country require building...