What drives the growth of international business? Using a PESTEL analysis, discuss the issues that any foreign firm of your choice would find if they were to enter your home market.
International business refers to a commercial dealing between countries and their borders. Due to intense local and domestic competition, business organizations are forced to look for new market opportunities outside their localities. With the burning desire to gain and maintain competitive advantage organizations have developed quest for international business. In this respect entrepreneurs are set to achieve high cost efficiencies, expand market niches and establish outstanding organizational brands. (Buzzle.com, 2009)
However, before this is done a firm has to carry out a feasibility study to determine the viability of the identified objectives. This feasibility study entails analytical evaluation of political, economical, social, technological and legal factors that are likely to affect a firm's bid to explore international markets. This is also referred to as PESTEL analysis. This study tries to explore how factors identified above may affect T-Mobile phone service provider in its attempts to enter into the Kenyan Markets. T-Mobile is an organization that specializes in operating mobile network with its headquartering based in Bonn, Germany. It is a subsidiary of Deutsche Telecom under the ownership of Free Move Business Alliance. (Holston & Heft, 2008)
T-Mobile is a group of mobile phone subsidiaries widely known for providing GSM and UMTS networks mainly in the United States and Europe. With continued pressure from both small and medium size corporations, T-Mobile must think beyond the European and American Borders so as to remain the customers' only choice now and in the future. With particular emphasis in to the Kenyan telecommunication industry T-Mobile may make a considerable impact on its image as well as the Kenyan environment. Considering the PESTEL analysis, if T-Mobile is to venture into the Kenyan Market the following should be considered. (Regents of the University of Michigan, 2008)
Kenya has been one of the most politically stable countries in Africa until 2007 when the country almost went to the dogs following a protest over a disputed election. This saw the different presidential contenders signing a power sharing deal and eventually forming a coalition government. Right now Kenya is governed by a coalition government headed by two political parties. During this time the investor confidence was said to be dented, this led to the delay of an IPO of the country's leading mobile service phone provider, Safaricom. The Kenya Telecom also had to delay their construction on some of its projects and other investment as had been planned. (Holston & Heft, 2008)
Analysts now begin to express their fears following the way in which coalition partners are behaving as each partner begin to point accusing fingers as to the real power sharing. Of late there have been constant squabbles from both the sides concerning who should be the leader of government in the parliament. As this continues the dollar and the pound have gained marginal strengths over the Kenyan shilling eventually putting investors' confidence into dilemma. Despite the relative political instability in Kenya, big players in the telecommunication industry are on the course of building and establishing their brands. In general most African states are characterized by political instability, where leaders tend to monopolize power on ethnic diversities. The notable examples include Zimbabwe and Uganda. Despite all these political conflicts, most scholars argue that Africa especially Kenya still has the lowest world's penetration rates. This gives foreign investors opportunities to scramble for positions in this lucrative market niches. T-Mobile can take this advantage to explore into the Kenyan Market at the earliest time possible. (Regents of the University of Michigan, 2008)
The current economic credit crunch has hit Kenya hardly. In fact most telecommunication service providers have already laid off people in an attempt to reposition themselves into the industry. Zain Kenya recently retrenched over 140 employees. Telecom Kenya has also announced a retrenchment plan where 500 employees are going to be shown the door. This represents the impact of the global economic downturn on the Kenyan telecommunication industry. (Pennsylvania Small Business Development Centers, 2009)
Another factor is the pressure from the giant players in the telecommunication sector. Kenya has a population of about 40 million of which 60% are youths. The giant players in this industry include Safaricom Kenya, Zain Kenya, Telecom Kenya/ Orange, and Yu. Among the four, Safaricom has a subscriber base of 75% in the industry. While the remaining four shares the remaining 25%. Safaricom has brought a fierce competition thereby making matters worse for other service providers. The effect has been and still being tremendously felt by Zain. Over the past four years Zain has changed its name two times in an attempt to position itself strategically to the subscribers. With new players coming in each year competition is believed to take a different style as firms continue to work on strategies every day. (Buzzle.com, 2009)
Thirdly the Kenyan market consists of numerous individuals whose income per capita is less than a dollar a day. This means that majority of Kenyans live below the poverty line. Successful service phone providers in Kenya like safaricom have capitalized on this and are making considerable profits by adjusting call rates to an acceptable and affordable rate. If T-Mobile is to venture into the Kenyan market it has to adopt a new strategy that will take account of the economic status of every Kenyan individual. (BUYUSA.GOV -- U.S. Commercial Service, 2009)
Kenya has a population of almost 40million people; out of this number 60% is constituted by mainly youths and children. Most of Kenyans live below the poverty line and therefore life is difficult for a common man in Kenya. A good percentage of Kenyans live and work in urban cities implying that life is likely to be different in the cities as opposed to rural areas. In order to capture a good subscriber base successful firms have put lot efforts in towns and rural suburbs. (Buzzle.com, 2009)
Most people in Kenya are Christians even though some provinces are inhabited by a considerable number of Muslims. Since Kenya is a multi-ethnic society, ethnic chauvinism has always featured prominently at the work place. There have been allegations of tribalism cases associated with particular individuals working in some of the telecommunication firms in Kenya. This has impacted negatively on some of these firms minimizing their returns in areas perceived to be adversely aggrieved. These are some of the social considerations that T-Mobile should make before it ventures into the Kenyan Market. (Pennsylvania Small Business Development Centers, 2009)
With promising technological development identified with T-Mobile, there is no doubt that it can progress well in to the Kenyan mobile subscriber industry. Kenya is still a developing nation. However with the 2030 vision in the telephone service industry it is meant to be the leader in Africa. Safaricom Kenya has been relying in its already existing networks in, Kenya and around the East and Central Africa. (Regents of the University of Michigan, 2008)
With inadequate infrastructural design, poor communication and networking has been the biggest problem in the telecommunication industry in Kenya. The government of Kenya is working so hard to ensure that they create favorable investing opportunities in the telecommunication industry. This has been through rural electrification programs, zero rating computer accessing imports and etc. This has been seen as a boost towards the fulfillment of the 2030 vision in the telecommunication industry. (Wroldbiz, 2009)
Of late there has been a legal battle between Safaricom, Zain and Communication Commission of Kenya (CCK) over the licensing of M-pesa and Zap money transfers. These are electronic money transfer technologies developed by Safaricom and Zain respectively. There was a confusion as to whether this was a banking service or not. Under normal circumstances a telephone service provider must be licensed by CCK before it commences work in Kenya. Through this process an organization in question goes under legislative scrutiny. Any company planning to venture into the Kenyan market should be ready for such processes. (Holston & Heft, 2008)
An organization with prospects of international growth should carry out a feasibility study to determine the viability of its option plans. By carrying out an analysis of political, social, legal, economical as well as environmental factors one is better placed to make relevant decisions that are likely to result into a meaningful investment.
List of Reference
- Holston, L & Heft, M. (2008). "Smartphone Is Expected via Google". New York
- Times. Retrieved on15 Aug 2008.http://www.nytimes.com/2008/08/15/technology/15google.html?_r=1&ref=technology&oref=slogin.
- Wroldbiz. (2009).Factors considered before doing international business. Retrieved on 27 Apr 2009 http://www.worldbiz.com/.
- Regents of the University of Michigan. (2008). International business. Retrieved on 25 Apr 2009 http://www.ipl.org/div/subject/browse/bus45.00.00/.
- Pennsylvania Small Business Development Centers. (2009).Doing international Business. Retrieved on 23 Apr 2009 http://www.pasbdc.org/index/faqs/international.asp.
- Buzzle.com. (2009). Doing Business in Kenya. Retrieved on 24 Apr 2009 http://www.buzzle.com/articles/doing-business-kenya-questions-residence-security-labour-taxes-registration-land.html.
- BUYUSA.GOV -- U.S. Commercial Service. (2009). Doing Business in Kenya. Retrieved on 21 Apr 2009 http://www.buyusa.gov/eastafrica/en/doing_business_in_kenya.html.