Ownership Of Multinational Enterprises In Tanzania Commerce Essay

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Vodacom Tanzania has shown its business muscles to other mobile operator for the last decade. Having good expert from Mother Company in South Africa, the company is able to make constructive decisions that has positively regard the company as leader in the market. Till now the majority shares are held by Vodacom South Africa and the rest are distributed to local shareholder.

Ten years back Vodacom Tanzania came into the country to start their operation. The company had a few prospect competitors at that time, with the remaining Companies unable to pose a threat to Vodacom Tanzania.

The company is having a lot of competitors locally but only a few pose a significant threat. This is shown when you looked at the table market share and subscribers distribution in the industry.

The document went further looking at the whole industry analysis using SWOT as tool of analysis in relation to Vodacom Tanzania. The tool helps in analyzing the strength and weakness that any company (Vodacom Tanzania) might encounter internally during operations, also external factors that might influence the Company during operations or when starting.

The structure of the industry can change if the factors that influence it are adjusted somewhat. These factors include the internal ones such as technology and external ones like government intervention or customer change in preferences. The core objective of this document is to show how Vodacom Tanzania can create value to its operations by looking how the company set up its strategies both marketing and pricing.

TABLE OF CONTENTS

CONTENTS Page no.

Abstract…………………………………………………i

Introduction…………………………………………….iii

Vodacom Tanzania Limited……………………………………………4

Emergence………………………………………………………4

Ownership………………………………………………………4

Competitors……………………………………………………..4

Market share…………………………………………………….4

Industry analysis………………………………………………………..5-6

Strength………………………………………………....……….5

Weakness………………………………………………………..6

Opportunity……………………………………………………...6

Threats…………………………………………………………..6

Events influencing industry structure…………………………………...6-7

Vodacom Tanzania strategy and Value Creation………………………7-8

Value Chain…………………………………………………………….8-9

Configuration……………………………………………………8

Factors influencing configuration……………………………….8-9

Coordination……………………………………..........................9

Conclusion and Recommendation ……………………………….……..10

Reference and bibliography………………………….………………….11

Introduction

The fundamental objective of this assignment was see how an International company with some foreign ownership can create value to its customers. By looking at the strategy that is being used for instance Vodacom Tanzania is using differention strategy to boost value creation.

Also the assignment went further to discuss the mobile communication industry and its up and down events that can change it. By looking how the government is involved so as customer can get value for their money they use.

Vodacom Tanzania Limited

Due to globalization and its factors investment has been made easy. This is because many countries changed their political view towards business environment. Many governments encourage investor to come to their respective countries to do business. Likewise companies can not only invest in foreign country but also buy prospect business in the host country.

Emergence of Vodacom Tanzania Limited

The company was created in the late 1999 as a subsidiary of Vodacom South Africa and it completed GSM infrastructure in 14th August 2000 and announced start of operations the following day. Vodacom is a joint venture between Vodacom group which has majority share of 65% and Tanzania shareholders, which are Planetel communication Limited and Capsian Construction Limited sharing the rest of equity. The company became the largest mobile operator during the year of launch and with up-to-date information it is still the leading mobile communication operator in Tanzania. [ [1] ]

Ownership

As it has been mentioned above that Vodacom Tanzania is a subsidiary of Vodacom South Africa and Vodacom group being the majority shareholder with about 65% shares. The home shareholders are Planetel communication Limited and Capsian Construction limited who owns the rest of shares. A collaborative alliance has been adapted by Vodacom to help the company achieve its mission and to better customer service. Examples of stakeholders are

Azania Bank[ [2] ]

Government

Customer

NB: The stakeholders mentioned above are not the only ones who are involved with Vodacom Tanzania operations.

Vodacom competitors

It has been 10 years since Vodacom started operating in Tanzania but its dominance is still recognize, yet it was not the first mobile operator in Tanzania. With likes of Tigo initially known as Mobitel and TTCL operating as landline operator respectively, still Vodacom was able to penetrate the market. Other competitors

Zain Tanzania

Zantel

Market share

Growth was much strong in the year 2008 for the mobile operating companies nevertheless the overall total fell slightly by 0.1%. Vodacom continued to enjoy the leading role it established from the beginning with over 40% of the market share. The below chart show the "cake" shared by mobile communication operators.

Vodacom

Zain

Tigo

Zantel

TTCL

Market Share

(%)

43

27

16

10

3

Subscribers

(millions)

5.918

4.436

Undisclosed

Undisclosed

Undisclosed

(Table.1)

Since its inception Vodacom has been leading the market with reasonable margin over its competitors. Nevertheless Vodacom's competitors are still keeping up with pace as we have seen a number of them are growing rapidly for instance Zantel and the take over of formerly Celtel to Zain. The strategy of these two companies has revamp competition in Tanzania mobile communication operators with unprecedented funding. [3]

Industry analysis - SWOT Analysis

Although telecommunication industry is not extremely tapped both mainland and island Tanzania and Zanzibar respectively evidence shows that some sectors are growing so is the technology. The fixed line sector which TTCL has been the main operator since the year 2000, the mobile operator is increasingly growing rapidly in the past decade. With six companies operating two more are expected to join the race hence high competition. [4]

SWOT Analysis

Strength

Foreign ownership

Expert from South Africa

Weakness

Unpredictable strategies

Tanzania investors selling shares

Opportunity

Market share

Technology

Infrastructure

East African configuration

Threats

New companies entrants

Government policies and regulation (TCRA)

Tight competition

East African configuration

Table 1.1

Summary

Strength

As it has been mentioned in the course of this assignment the foreign ownership the company is being operated on. There are many shares owned by Vodacom group located in South Africa only a few shares are being owned by local Tanzania investors. So the foreign ownership is what is dominating the operations of the Vodacom Company with 65% share and rests belong to the local investors. Vodacom Tanzania is the second company in Africa, to move to 3G High-speed downlink Packet access (HSDPA).

Another strength that the company is relishing is experts from South Africa the birth place of Vodacom. This also reflects about the culture of the company in the sense of having good working procedure compare to the host country. For instance the managing director Romeo Kumalo who is a South African bringing South African experience and culture to Tanzania.

Weaknesses

Yet the company is having weaknesses that are still pressuring the performance. Unpredictable strategies that counter the objectives of the company, for instance the recent marketing strategies "cheka time". The strategy has a promising future but still the certainty of total success would depend on competitors' counter strategies strength. Moreover the strategies might not work at all due bad market forecasting i.e. not knowing future outcomes of for instance economic. [5]

Tanzania investor selling shares

Another threatening weakness that might halt Vodacom activities is the announcement local shareholders seeking a way out. This move would hinder Vodacom Company to retain its long lasted market share. The investors have already approached the Tanzania communication regulatory authority. Different shareholders wouldn't bring result in short-run. As per the TCRA policies that for licensing to be given for telecommunication one shareholder must have Tanzania originality.

Opportunity

Vodacom Tanzania has been the market leader ever since its inception in Tanzania. This is an opportunity that needs to be retained at all cost by Vodacom Tanzania. The gap is huge to be covered by Vodacom's competitors in short run basis. The competitive edge that that company is enjoying came about having good strategies.

The opportunity has been further realized when the government of Tanzania decided to join the east African configuration. The laws of doing business in the region have been revised to encourage free market movement and also factor mobility.

Vodacom was one of the first companies to come to Tanzania beside Tigo which was initially known as Buzz. Still Vodacom was able to surpass Tigo activities and become the leader, thanks to high technology and advanced infrastructure. For instance the 3G High-speed downlink Packet access (HSDPA) has helped the company to better its services and able retain its leading role. [6]

Vodacom Company has been able to set up good infrastructure that is giving the company a step a head to the competitors. Government had to intervene on companies' infrastructure set up due environment damages and debated healthy issues. Due to this intervention those companies who had already set up their infrastructure were better off unlike company like Zantel who were legally forced to collaborate with Vodacom infrastructure for some period of time. Hence the intervention also helped Vodacom Tanzania to earn from the collaboration arrangement made between the two companies.

Threats

Vodacom Tanzania is facing a huge threat from the arrival of new companies such as Sasatel which recently joined the industry. Similarly the company also offers internet service at a cheap and reasonable price compare to Vodacom Tanzania. The coming of new companies would mean new competitive strategies introduction.

The Company is getting serious drawbacks from government's intervention of laws and regulation through Tanzania communication regulatory authority (TCRA), for example the stoppage of setting up infrastructure due environments condition, the extensive of the project was shorten as a result.

Competition is increasingly growing especially from Zain after the takeover. This is giving Vodacom Tanzania a no rest period but strategizing. Still the government has to intervene if Vodacom somewhat practice unfair competition as result.

As much as east African configuration is regarded as an opportunity on the other hand its threat to Vodacom Tanzania since mobile companies from community can freely get into the country and compete.

Events that influence industry structure

Competitors' move

Vodacom is the market leader so her move is ever influential to the industry be it either negative or positive move. The stronger companies can have the impact on the industry and force the less powerful companies to follow the direction they did not intend to follow. The competitors move lie much on the pricing strategy and marketing strategies. If Vodacom Tanzania tries to change it's pricing strategies the impact would be felt even to those market follower, the same appears to the market strategies.

Government

The government also can change the structure of the industry from the policies it imposes to the companies. For instance new entries to the industry are required to have at least one local shareholder. Any change of law then adjustment would be made by the whole industry. Similarly industry can be changed when the government decides to privatize some of its states assets e.g.

TTCL which was a government property.

Changes in economics

Recently there was a global economic crisis which shook the business activities worldwide, but although the economic downtown did not have a huge impact in Tanzania companies were safeguarding there interest. Despite assurance from the government that the country economy was not linked to international financial system still the worst crippled in, making multinational companies close their operations. [7]

Shifting of customer preference

The predictability of consumer preference towards communication is unclear. Customers tend to change their likings trend wise. This is when there is mass liking of new product or service making them adapt to what the mass is onto at that particular moment. Hence chances of Vodacom Tanzania's customer shifting to other mobile operator are significant high.

Technology developments

A big potential threat to Vodacom is the introduction of Fibre-optic. Communication would be made much easier when there is a fully operation of the project. Consumer like speedy and efficient means communication and that is fibre-optic is all about. The threat to Vodacom Tanzania comes from not using their service but using internet as cheap means of communication in the future.

Rate of market growth

This factor would not change communication industry in Tanzania, because the industry is having a very steady promising growth due to increase in population. The industry also is still in growing stage yet in maturity stage that may we might think otherwise.

Collaborative strategies

When a company decides to invest in collaborative arrangements then the industry might have positive look since the company would be adding value to the community in different perspective.

NB: The seventh point is student view rather than written academic theory.

Vodacom Strategy and Value creation

Vodacom Tanzania is known for its differention strategies. Companies that go for this kind of strategies tend to have unique product and service. In the other hand their customers perceive those goods to be sufficient compare to competitors' goods or service. The uniqueness of the Vodacom Tanzania mobile service is what is making them to charge more to cover for the extra value that is added. Value is created by Vodacom Tanzania when the customers can be able to parallel associate with company strategy hence any either negativity or positives feedback would relate to them.

Marketing strategies

The company is implementing its differention strategies through well planned marketing strategies which help in creating value and retaining the good reputation. The marketing plans set by Vodacom Tanzania are creating value to the company since company is still the leading in the market despite adapting differention strategies which seem to have highest prices when adapted. The uniqueness of these marketing strategies is what gives the company better way to perform in the strategy (differention).

Pricing strategy

Vodacom show cases their strategy through price the offer to customer and the service they introduce. The company offer different prices to the customer the price prices include low income earners and high income earners. The rate at which Vodacom charges its customer is what differs to other competitors who have gone for low cost strategy. Recently Vodacom Tanzania has introduced a service called "Cheka time", which let low income customer to afford the service at very cheapest price. This strategy is being used by the other mobile operators and it has proven successfully, but recently the pricing strategy has been falling in popularity, making the right for Vodacom Tanzania to reinstate the strategy position in the market.

Value Chain

A well designed and managed value chain will absolutely determine the competitiveness of the company in question in this case Vodacom Tanzania. Value chain assist managers affiliate their resource, knowledge and skills of the employees around the firm. These activities help the company to reduce cost or better up differentiation. Two aspects that are related but uniquely different are

Configuration

Vodacom as Multinational enterprise seem to be a tremendous choice to locate their value activities. This is because Multinational enterprise improves their competitiveness by exploiting the untapped market in this case Tanzania. Vodacom Tanzania had made the right choice since our economy was performing in the right direction due to the adjustment positively of the following factors.

Economic

Political

Legal, and

Cultural

Factors that influence configuration in the value chain in relation to Vodacom Tanzania operations

Cost factors

The different in salary, worker productivity, inflation rate and government regulation is what creates disparity in production cost from one country to another. Success has been achieved by Vodacom Tanzania by taking advantage the cost factors and analyzing Tanzania environment. [8]

Business environment

Vodacom Tanzania has able to dominate the market by having good configuration on where to locate their operations. Production cost alone can not determine the location of the business decision. When Vodacom came to the country, at that time, the business environment was conducive compare to now where companies are limited to with a lot of limitations.

Clusters effects

Value creation is much affected also with this factor; an industry can be affected when there are no clusters in the industry. Hence the company that has dominated the market can monopolize the whole market. This is not the case for Tanzania communication industry where we have different companies.

Logistics

Vodacom is doing a lot of product transfer and also expert's ones. This is making logistics in Vodacom Tanzania important also. For value chain to be successful the control of logistics should be done in well organized manner. Vodacom Tanzania is doing logistics with Vodacom South Africa by printing Vouchers and transporting them into the country.

Economic of scale

The Reduction of unit cost which is a result of producing high volume of product or expanding the service to other location is what is characterized as economic of scale. For Vodacom Tanzania to be able use this factor utmost, the need to spread to other location should be high so that they can reduce cost for their service as one unit.

Buyers needs

The configuration of service that Vodacom Tanzania has "structurized" is definitely what is making the company prosper. The buyer needs are recognized in the first hand without lagging behind. The Vodacom is able to know the needs of its customer via deep research.

Coordination

Arguably, Vodacom Tanzania has a good coordination with Vodacom South Africa as the headquarter where most of the high level universal strategic decision are made. The Company resources that add value and increase company's competitive edge come from South Africa. Locally managers coordinate things that relate to the host country. Like configuration, coordination has some factors own its own that influence value chain.

Core competences

Vodacom Tanzania core competence is the strategy that has been put in place. The different ion strategy has been working so well for the decade of operation. This has led to Vodacom leading the marketing for that long period with no sign of letting the led slip. Moreover, the fast adoption of new technology is what is helping Vodacom Tanzania establishing its operation basis.

Operation obstacles

Multi national enterprises always find hard to establish themselves further globally. This scenario should seem to have equal effect on Vodacom Tanzania but no, Vodacom Evaluation and selection of where to operate seem to have been done well. This is because the company has managed to work in the country without stumbling blocks.

National culture

Globalization of a company's value chain, such as promotion and advertising were able to be adjusted by Vodacom Tanzania so as to capture many customers without interfering with their culture hence achieving the objectives.

Learning effects

This refers to the cost saving when learning is carried out. This is an important aspect companies tend to bring best reasonable practices from their company so that failure is never experienced. We have seen this from Vodacom Tanzania bring expert from their country, a good example is the managing director Romeo Kumalo from South Africa also other important departments that need expert from the origin company. [9]

Conclusion

We have seen in the course of the assignment where the company originated and the ever important ownership. Vodacom Tanzania is being owned by Vodacom Group of company but also local shareholders have their part to play.

We have the local shareholders in the company also because the law and regulation state that for a foreign mobile company to operate in the country it should have at least one local shareholder. We are also seeing the market share the company is enjoying from its inception, a reasonable margin is owned by Vodacom Tanzania.

We have the industry analysis and its good and bad side towards Vodacom Tanzania internally and externally. Vodacom Tanzania strategies have been discussed and its benefits or value creation towards the company. The task has explained events that can change industry structure and lastly I have looked at factors that influence configuration value chain in relation to Vodacom Tanzania.

Recommendation

Even though there are many things that Vodacom Tanzania can cheer about still a lot of adjustment need to be made. The success that Vodacom has achieved should not blind company to see the future.

The company by this time should focus on local expert involvement. Since its inception Vodacom Tanzania has been having the foreign managing director who has been making the strategic decision. This concept should be looked at for company to have an equal share of decision making. Other areas that should be looked at are:

Bringing printing machines into the country to cut transportation cost.

Exploit the villages market

Basing much on the local culture that the company is operating

Reference and Bibliography

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