Sample of Evaluating Internationalisation strategy
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Business organisations function towards certain goals and objectives which are defined by the leaders. Once these objectives are accomplished, further expansions are planned to increase the current profit margins and customer share. These business expansions can be in both domestic and international markets depending on the resource capacity and competencies of the company. MTN Group is leading telecommunications company based in South Africa. The current functioning of the organisation is guided with strong ethical functioning background and strategic approaches towards sustainability (Cavusgil, and et. al., 2014).
In this report, the basic concept of internationalisation and the perception of business organisations towards expansion in foreign countries has been explained. A summarised form of environmental audit has been depicted in this report. SWOT analysis tool is used for understanding the internal environment functioning of MTN Group. There are two types of environments surrounding a business organisation i.e. external and internal. For understanding the internal conditions of the company SWOT analysis is performed and external factors surrounding MTN Group are evaluated using PESTLE tool. It includes the political, economical, social, technological, legal and environmental factors that influence the business functioning of a company.
The audit that has been carried out in this report aims to analyse the factors of business expansion in two target markets of telecommunications industry which include China and Ukraine. The potential customers and market structure of both the countries is quite diverse and entirely different from that of the domestic marketsb (Clarke, Tamaschke, and Liesch, 2013). This report will help in understanding the suitability and feasibility of operations in both the markets and certain conclusions can be achieved through this analytical approaches. The national competitive advantage and the motive of internationalisation for MTN Group has been described in this assessment so that main purpose behind entire functioning is clearly communicated. Lastly, the modes of entry for the company in foreign markets have also been evaluated in this report. This will help in making effective judgements regarding what options are suitable and feasible (Assessing and evaluating internationalization strategies of American higher education institutions, 2015). Certain recommendations have also been provided in this report which can be implemented for strengthening future strategies.
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The environmental audit is the assessment of identification of various agreements and management system. Compliance audits includes all the legal agreements made in the operation of the company. These can be local permissions, regulations, settlements etc. The growth of telecom industry in telecommunication industry is expected to enhance in 2017 (De Beule, Elia and Piscitello, 2014). Use of smart phones has become an addiction rather than necessity. Increasing consumption of mobile phones will continue the growth of this sector as the penetration upto 10 percent is constant from years and is expected to be so in the coming years. The telecom market is focusing on the effective delivery of the contents to the screens and on improved internet connections. Internet of things (IOT) Includes systems like phone connectivity to cars, homes, parkings, cities etc and also introduction of 5G network is trending in telecom companies. On the other hand mergers and acquisitions with other companies has also boosted the growth like Motorola and Google etc, Microsoft and Nokia etc. Also increase in consumption of autonomous vehicles adds to the rise in this sector. A survey shows that these cars are in great demand and many customers are intending to buy these cars.
Swot analysis of MTN
Strengths – A strong position in the market is difficult to obtain and once done then it boosts up the resource capacities of the company. The cited company has established its name as a big brand in the market which is a major strength to introduce any new product or selling of existing products. Brand name retains the belief and trust of the customer in their products. Being first amongst the telecom company is another aspect which helps it to gain trust in the market (Dunning, 2013). This company is serving from years ago and was the first one to do so. Another strength is that the company has efficiently done advertisement part and good advertisements helps a lot in selling the product as the message that is conveyed by the company is proper and reached to every audience. This company has an efficient brand visibility. Moreover, the company is good in terms of understanding of customer's business and also supports all the sales activities. Another strength is its sales team and its service provided for the customers.
Weakness - Usage of phones is increasing worldwide and its advantage could be taken by spreading the business to the international markets. Globalisation has given major profits to many of the industries and has opened up many choices for the customers too. The major weakness of the cited company is that it has not yet extended its roots in the global market. International market shares are limited to several countries (Earnhart and Leonard, 2013). The limited global market consumption of the company needs to be taken into considerations. Another weakness of the company is the rivalry of price of products in the market. Many other companies are offering more features at a considerable price to the customers, the result of which is the fluctuations of the customers. The company is still in the process to use fibre optics cables. Installation of these kinds of cables eases the communication process. Other companies have already taken it into use which is a major drawback. Also, transportation is another weakness of the cited firm.
Opportunities – Global market is rising year by year in the telecom sector and also internet and digitalisation has given a tonic boon to the telecom bodies. Increasing consumption of phones has opened up many opportunities for telecom companies. The cited company can make use of these opportunities by keeping a good foresight of the future demands. Being upto date with activities of market and with the actions and strategies of competitors will help in gaining the knowledge and responding to the needs of the customers accordingly(Fernández-Méndez, Garcia-Canal and Guillen, 2016). Company has undertaken many acts to reach to the unserved areas and provide the best possible service to them also. Expansion of its business in the international markets and exceeding its limits is another opportunity for the company and it is on the route of expansion. Free mid night calling is another feature of the company as it allows the loved ones to talk without any fiscal boundation. More and more customers are attracting to this feature and are aiding in the growth and development of the company. Companies vision to provide better and good quality voice and internet service is expected to serve as great aspect for enhancement of the company's share.
Threats – Increasing number of rivalries has made it difficult for the quoted company to hold to its brand position. Many other companies are in the race of providing more featured service with reduce prices. They are introducing new schemes like offers on internet and voice calling, reduced call rates, special tariffs etc. All such factors are challenging the market shares and customers of the quoted company. Other companies such as Vodafone, Three mobile, Telenor etc are the major competitors of the company (Ferreira, Pinto and Serra, 2014). Also, expansions in too many markets can deviate the focus from the objectives of the cited company and deviation in focus can lead to disadvantages. Moreover, porting of mobile numbers and hence the telecom company has become easier and customers more frequently fluctuates from the existing company. Such kind of practices may result in reduction in growth of company. The issue of destruction of the cables and structure is another threat for the company as the organisation has to invest a lot of money for the rectification of the materials and equipments in order to ensure continue and quality service.
Macro analysis for Ukraine
Political Factor- Internal and external inverters have noticed a positive change in the competitions. Many laws for the employee have been proposed but the Labour Laws are still the same and no norms of WTO have been changed (Genç, 2016). But Ukraine has recovered from the recession after 2008.
Economic factors-The inflation analysis shows that highest inflation was recorded in 2008 and after that it has continuously decreased which indicated that economy of the country is getting better after the recession of 2008 . After, it joined the world bank it has taken loans more than $5 billion. Social Factors-There are two big groups Ukrainians(77.8%) and Russians(17.3%). There is a decline in the age group of 0-14 years and more population is covered by age group of 65 years and is expected to increase by 22% by 2030. IT has more educated population and less workforce cost.
Technological Factors- The government here is not contributing much to enhance existing technology. Orange revolution has lead to an increase in interaction between legislatives, businessman and customers (Gonzalez-Perez, Vasquez-Melo and Rios-Molina, 2015). The collaboration has opened up many opportunities. A programme for enhancement of information and communication has been developed by the Ministry Of Transport and Communications
Ukraine has well organised structures and the labours are hard working and skilled. The companies get low loans and it has a large coverage in the market. The disadvantage is that there are no reliable contacts of business within Ukraine. There is much possibility to increase revenue slowly. The major threat is the state of war and there may be economic drop because of unsettled issues. But most of the feedback from the customers and from the market is positive. There is less competition therefore have higher opportunities of expansions. Orange revolution has given a boon to the telecom sector and more profitability is observed after that. New companies can find larger opportunities in the market of Ukraine because the market is open and a major recovery after 2008 has been observed. In 2008 highest inflation was observed and inflation has constantly decreased and is expected to reduce further in the coming years. Although, literacy rate is low but analysis shows that telecom industries are successful in the expansion of their business.
Macro Analysis of China
Political Factors - The political force in China is one of the most unsettled force. The e-commerece structure is still in initial stage. There are many digital issues, privacy is not much supported, updation of electronic equipments is not yet done, consumers rights are still not regulated.
Economic Factors – The growth rate of GDP has seen a significant rise over the years. This rise has lead to an increase in purchasing power of customers. The bank of China has increased their interests rates. Also, commercial banks reserves are increased very much. More limits are to be imposed on customers on home purchases which affects the e-business and the telecom companies.
Social Factors – Frequent fluctuations in choices and trends are major social problems. Lifestyles, education etc are also affecting the companies. Literacy rate of China is high and more people have access to internet. E-business is growing fast and is expected to grow more in the future years.
Technological Factors – The major problem in China is it has weak and insecure online payment system. The credit card penetration is very low. Chinese customers face larger uncertainty New technology and manufacturing is also enhancing in the market and there is more competition in Chinese market.
The market of china has the largest wireless Wifi networks over 30,000 located hotspots. China offers good services and good increase on returns. It stands third in telecom sector (Huang and Li , 2013). They adopt more activities like awards and rewards. But the market share in this industry is not growing rapidly. It is successful in providing strong subscriptions. It has over 45 million subscribers. The geographical area is limited and restricted. Increase in 3G technology demands has created new opportunities for telecom companies (Yoder, Visich and Rustambekov, 2016). The competition in China is also rising with its market growth. More and more companies are in the race of providing better and cheaper services. Also, Chinese market undergoes through rapid changes in trends and technology which requires more amount of investment and also the regulations keeps varying which are affecting the companies to a great extent. Licensing of many companies is also a major threat.
In the modern contemporary world many companies are seeking to expand their business in international markets. They intend to expand their business in abroad. Most of the companies start with a small vision but with their business growth they tend to cross the boundaries in order to serve large number of audience and increase their profits (Karagiannakis and et.al., 2014). Internationalisation not only benefits the companies as well as the customers as they have wide range of options and can choose the best for themselves. There are two main motives for internationalisation of the cited company: Market seekers and strategic resource seekers. Market seekers are the ones who focuses on the demand and profit. The company has gone for internationalisation in order to gain advantage of the market demand and increase profit. Another motive is to seek strategic resource. The company aims to benefit from the other competitors as they are fewer competitors in Ukraine (Ying, Ping and Yang, 2016).
Mode of Entry
These are the following mode of entry to the company can chosen by the MTN Group for expanding business
Exporting – it allow to the small business to hold their current model and trade line goods in the foreign market benefit of the export is that it reduce the low implementation cost and low level of risk to the owner of the company. in the export this is the mode of export the foreign country - transportation cost,government tariff market demand and preferences of the customer ,repackaging ,infrastructure of market. this is the feasible and suitable option for the china the MTN group can adopt the mode of entry (Langbein, 2015).
It required the limited finance for the international business.
It also motivate the country for proactive and reactive both the way.
Maximizing the scale and existing facility for the users.
Licensing – it is the way to enter into the international market establishing the presence in the market. it is the process where the company granted the permission in the written format for established the company. It does require the monitoring training and renew le in the timely. every country have a different rules for making the license (Laufs and Schwens, 2014).
It reduce the risk related to the financial to the licensor.
It get the benefits with the less investment on research and development.
It also reduce the risk which related to product failure.
Franchising – It is the independent organisation is known as the franchisees it operate the business the name of another entity .it is the written agreement between the franchisee and franchisor. the franchisor pay the fees to the franchisor. the franchisor provide the services to the franchisees like -trade mark ,oration system of the product,continued support to the advertisement of the product,training and resolution of the training of product which existing in the market.
No experience require and training require for receiving the franchise.
The market share are in the market they have not need for research and need of the market (Maftei, constantinescu and Cojocea, 2013).
The franchisee also comparing the big business for generating profitable in the market.
The relationship of the stakeholders are their not require for the suppliers identity in the market.
feasibility refer to the analysis and evaluation of the project market trend and government regulation cost will be profitable to the expanding the business business (Wild, Wild and Han, 2014). it create the minimizing the risk and increasing value of portfolio.
It prevent the help to identifying the risk and opportunity in future market trend in the china It give the information related to primary and secondary market data and also understand the regulatory environment and expanding the business (Mudambi, Piscitello and Rabbiosi, 2014).
Suitability- it describe the requirement to determined the investment strategy are appropriate or suitable for the given project of the investors this is related to the investor goal and financial situation for the business.
Evaluation of National Competitive Advantage
In order to establish in new market, there are different type of strategies that can be implemented in order to attain competitive advantages. There are many companies similar to MTN telecom that provide their customers with products and services. In order to be competitive in market of China and Ukraine, below given are the few of the strategies that will be implemented to attain competitive advantage:
Low price: Price can be determined as an effective factor that highly affects the buying behaviour of customers (Norton, 2014). In this context, the services delivered by MTN telecom at China and Ukraine will be at low price when compared with other competitors. This will be helpful enough to attract customers and they will make use of the services that are delivered by cited firm in order to get benefits of lower cost.
Marketing strategy: This can be determined as the strategy, that enables to provide information to customers related with the products and services that cited firm provides. With the help of marketing tools like television, newspaper, radio, social media, etc. MTN telecom will provide information about the product and services and this will help to make customers informed and this will also raise the sales and profitability (Osemene, Kasum and Yahaya, 2016).
Skilful employees: Workers can be determined as the main source for develop business. They are the one who have direct interaction with customers. They are the one who present the products and services delivered by the firm. There will be strict policies that will be applied for recruitment and section so that skilful and capable workers are hired. This will be helpful enough to present the services to customers (Vida, 2015). This way strong customers base will be developed and desired goals can be achieved. Further, this is also an effective way through which competitive advantage is attained.
MTN Group being the leading telecommunications company in South African markets or domestic market has various advantages when planning a business expansion in Ukraine. The internationalisation concept and its basic requirement for the company have been described in this report. Although the company is functioning ethically in the domestic market there are certain attributes which need to be considered while planning business expansion. The SWOT analysis performed for gaining an insight over the internal functioning of the country has evaluated that organisation holds strong position in terms of acquisition of resources. But lack of innovation and an increasing threat of competition is hindering the speed or growth of the organisation.
From the PESTLE analysis, it has been evaluated that there is lack of political flexibility for the company while planning international expansion in Ukraine and China. But the scope of growth and development in terms of profits and productivity is more in Ukraine as compared to the other country. The different modes of entry in both the telecommunication markets of these countries are exporting, licensing and franchising. Despite of these many modes and options available for business expansion, it is important for the company to opt for exporting and licensing at the initial stage because they are more feasible and suitable. To be more specific, international expansion is suitable for MTN Group when aimed at Ukraine because of less competition and least exposure of citizens towards latest technology.
The current strategies of the company in domestic markets has been efficiently planned and functioning quite smoothly. Business expansion is a critical situation and requires a lot of efforts and analysis before making the actual investment. A strong recommendation has been provided to the company MTN Group that it should plan internationalisation strategies with a target market of Ukraine. The operational conditions and current market structure of the country favours the company to expand its roots and develop with a greater speed. Although there is less flexibility available to the company in terms of policies and legislations, but effective support and well planned marketing strategy can help in overcoming these barriers. Hence, it is advised that organisation must develop innovative strategies in all respects for gathering attraction of potential customers.
An important aspect which needs to be considered before implying any strategy in foreign markets is efficient planning of entry mode. There are various types of entry modes discussed in this report which include exporting, licensing and franchising. Out of all the three, it is recommended that MTN Group should opt for exporting and licensing with proper documentation and updated agreements. The legal framework of Ukraine is quite strict but the amount of taxes applicable are quite less. Hence, less amount of investment is required in Ukraine as compared to China. The company can use latest technology in the country so that potential customers will be more interested in opting for such products that enable them to adapt to current technology.
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Brouthers, K. D., 2013. Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies. 44(1). pp.1-13.
Cavusgil, S. T. and et. al., 2014. International business. Pearson Australia.
Clarke, J. E., Tamaschke, R. and Liesch, P. W., 2013. International experience in international business research: A conceptualization and exploration of key themes. International Journal of Management Reviews.
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