The mobile phone service market in Africa has experienced massive growth over the recent past. According to Mohapatra and Ratha (2011), the African continent is using mobile phones to transform the lives of people in different ways. The primary service offered by mobile phones is the ability to communicate. The continent has seen the emergence of numerous mobile operators keen on offering voice and data services to the customers. MTN and Vodacom are the leading mobile service providers on the continent. Other dominant players include Orascom Telecom, Maroc Telecom, Mobini, and Safaricom.
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These giant mobile service providers operate in different countries and they offer a variety of services. A study by Baack, Harris, and Baack (2013) found out that the mobile phone service market in Africa has gone beyond the voice and data services. In East Africa, Safaricom came up with M-Pesa services that allow customers to send, receive, and save their money using their mobile phones. This was a revolutionary technology as it made it easy to send and receive money anywhere within East Africa. It also created a platform where those working in the informal industry could get mobile banking services without having to open bank accounts. This service was a huge success.
The mobile phone service market in Africa has also experienced the emergence of other new products that have never been seen in other parts of the world. MAMA is a new service that allows people to get health tips using their mobile phones. It connects mobile phone users with doctors so that the users can get doctors’ advice on what to do in cases of emergence before a patient can be rushed to the hospital. E-soko is another service that has become very popular in this region (Ekine, 2010). It allows mobile phone users to get important tips on the market price for various products and the possible changes that are likely to be experienced based on the market forces. Track-it is a mobile phone service that allows Smartphone users to track the location of their cars in real-time. They can even switch off their car engines remotely using their mobile phones. This service is very popular in Africa because of the common causes of car theft in the region. Goliama (2011) says that many other innovative mobile phone services have emerged in the region and they have registered impressive results. This market is dominated by local firms in Africa.
Challenges Involved In Market Entry Strategy
A foreign firm planning to enter the African market with mobile phone services may face a number of challenges, especially if direct market entry is used. The biggest challenge is the dominant position of some of the local firms, making it difficult to penetrate the market (Elliott, Sieper, & Ekpott, 2011). For instance, Safaricom is a dominant player in Kenya when it comes to offering voice and data services. The company also controls the mobile banking industry in the country. The customer loyalty is high and it may not be easy to take away part of its market share. According to Chuhan and Angwafo (2011), foreign firms targeting the mobile phone service market in Africa may face a big challenge of understanding the specific needs of the customers. Services such as M-pesa, MAMA, and E-Soko were very successful because they were developed by individuals who understand the unmet needs in the African market. Foreign firms may be forced to spend a lot of time in research trying to understand the market forces in Africa in order to identify existing gaps. It is through addressing these gaps that foreign firms can achieve success in the mobile phone service market in Africa.
Developing Global Competitiveness in Developing Country
Foreign investment into the African mobile phone service market may be very challenging because of the uniqueness of the market compared with other parts of the world. Developing global competitiveness in developing countries requires a firm to understand the unique local needs and find ways of meeting them in the best way possible. Amoah (2014) says that the African continent is significantly affected by insecurity because of the level of poverty and poor policing services. Many people are keen on finding ways of enhancing security at their homes, in their cars, at work, and in many other areas where theft may be common. A foreign firm may need to take time to understand these unique and unmet needs and develop mobile phone services that can address these needs in unique ways that meet or exceed the expectations of the market. Being a pioneer in offering a given service is the best way of achieving a competitive edge because it has been proven that once the market becomes loyal to a given firm, it becomes almost impossible to convince them to trust a different brand.
Assessing Barriers to Entry
Foreign firms planning to enter the mobile phone service market in Africa may face a number of challenges. The biggest challenge is stiff competition in the market (Yamano, Otsuka, & Place, 2011). A number of foreign firms, such as YU, tried to enter the East African market, but the competition was so stiff that it opted out because its operations were not sustainable. Another barrier to market entry is a high level of loyalty that the African market has towards specific brands. For instance, in Kenya, a number of companies such as Airtel have come up with products similar to M-pesa. They charge low fees compared with what M-pesa charges but they have failed to achieve success in the market (Mataen, 2012). It shows the mistrust that the market has towards new brands offering services already available in the market. Some parts of Africa such as Somalia, South Sudan, Libya, Congo, and Burundi are currently experiencing varying cases of civil wars, making these environments unsuitable for business operations. These external environmental forces may make it impossible for a foreign firm to successfully enter this market.
Alternative Entry Strategies
To overcome the above barriers to market entry in Africa, a foreign firm may opt to use a number of strategies. One of the best strategies may be through mergers and acquisitions (Maumbe & Okello, 2013). This strategy has been a success in developed countries and it may be the best alternative strategy for foreign firms entering the mobile phone services market in Africa. Through this strategy, a firm will be buying the facilities of a local firm, its employees, and the existing customers. It will be easier to expand when a firm already has a footing in the market. A strategic alliance may be another approach for a foreign firm willing to offer a new product that is not yet available in the target market. Instead of making a direct market entry, the firm will enter into an alliance with a known popular brand. The foreign firm will benefit from the brand and the existing structures of the partner.
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