THE STORY OF A HIGH-TECH ENTREPRENEUR IN A LOW-TECH WORLD
INTERNATIONALIZATION OF SMALL AND MEDIUM ENTERPRISES
PREPARED BY: LAURA PLANTJE
PREPARED FOR: ERNESTO TAPIAS-MOORE
MARCH 9, 2011
Monique Maddy is a Harvard Business School graduate turned visionary entrepreneur who founded Adesemi Communications International. Adesemi was supposed to revolutionize the information technology sector in her home continent of Africa, by enabling thousands of lower and middle-income families access to affordable wireless communications services. Unfortunately for her, and Adesemi, their demise came six years into the venture, when they were forced to liquidate. This paper discusses several crucial categories of issues that should have been addressed during the internationalization of Adesemi, backed my theories developed in scholarly articles.
A) MANAGEMENT ISSUES:
Maddy knew right off the bat that she wanted to set up her business in a third world country, as she figured she capitalize on an untapped market. She was also some what of a philanthropist by nature, having worked for the UN, and fully supporting their mission for improving the quality of life for the unfortunates. She conducted thorough research as to where and how she would enter a foreign market. With her findings she decided to move forward into Tanzania because it seemed fitting because it was “aggressively privatizing its economy and vigorously courting foreign investments.” Her research however was not thorough enough. Somehow she overlooked the strict regulations on FDI and government policies. Her business model was built around the impression that she would be receiving commissions on all the calls that were placed each day on her network. Johansson and Vahlne state that psychic distance usually refers to the obstacles to information flows between countries due to differences in business laws, education levels, business language, etc. Even though Maddy was born in Africa, and had done her research, the psychic distance played a role in the demise of Adesemi. She would never receive the commissions she thought she would receive, which was a cause of the demise of Adesemi.
Setting up in a third world country imposed other issues for Adesemi. When starting up a company, the manager needs to select other people with whom she trusts, and can rely on to run the company. Maddy was unfortunate in that she had such a small pool of workers to choose from. She was also under time pressure, and financial constraints, which lead her to hire people through word of mouth, and advertising. Generally these are not optimal mediums to hire people who would eventually be helping run a company.
B) INTERNATIONALIZATION ISSUES:
Maddy starts off in the article by saying foreshadowing a prosperous future with Adesemi, stating she would be rich and famous. This was extremely premature of her, as she later on states that the eventual demise was from a lack of experience, and that she underestimated the magnitude and complexity of what she was getting herself into. As she was a graduate from the Harvard School of Business (HBS), she was well versed in the research implications of doing business in a foreign country, however text-book knowledge would not be sufficient in her case.
Figueira-de-Lemos, Johansson and Valhne solidifies the aforementioned by looking at the risk management perspective. They state “risk increase occurs not only as a consequence of the operations’ scale increasing in foreign market, but also following an uncertainty increase as for example when the entry difficulty is underestimated by managers.” Additionally, Johansson and Vahlne state, “Only by doing business in a specific country is it possible to learn how customers, intermediaries, competitors, and public authorities act and react in different situations. This subtle understanding of the market can never be replaced by general market...