Prahalad’s (n.d.) video, The Last Market, uses a bottom of the pyramid diagram to emphasize the enormous number of potential consumers at the lowest level of the pyramid. When viewing markets, companies tend to protect the cost structure rather than modify the structure down to the consumers’ ability to pay (Prahalad, n.d.). There is a misconception that poor people will not pay for technology, but they are willing to spend, as long as it allows for a better quality of life or offers an income earning opportunity; evidence is in the number of individuals using cell phones in developing countries. “Poverty is not stupidity, Poverty is lack of opportunity” (Prahalad, n.d.). This presentation will give an overview of the east African region and the opportunity for market entry. Recommendations for success will be given based on the cultural dimensions and national context.
The countries included in Eastern Africa vary by source. The map above shows eight countries total and was found through a basic internet search and retrieved from www.googlemaps.com. Hofstede and Hofstede (2005) use only Tanzania, Kenya and Ethiopia in measurements of national culture, however they also add in Zambia which is located to the southeast of Tanzania in scoring the dimensions of culture. Griffin and Pustay (2010, p84) defined culture as the collection of values, beliefs, behaviors, customs, and attitudes that distinguish one society from another, and further noted the importance to international business in determining how buying decisions are made a products adapted.
Hofstede surveyed over 116,000 IBM employees in 40 different countries to develop these four dimensions of national culture, one additional variable, short/long term orientation, was added by Hofstede in a later publication (Treven et al, 2008). Hofstede’s original dimensions are power distance (PDI), the accepted unequal division of power among members of society; uncertainty avoidance (UAI), intolerance for uncertainty and ambiguity; individualism (IDV), ease and extent of individual and group integration; and masculinity (MAS), one’s assertiveness, aggressiveness, and competitiveness (Hofstede & Hofstede, 2005) Countries with a lower IDV score, like East Africa, are high in collectivism where group interaction is expected and achieving an individual identity may be nearly impossible (Treven et al, 2008). Accornding to Hofstede and Hofstede (2005) East Africa falls in the middle of the rankings of 60 countries for Power distance tying with both Peru and Thailand; falling in 34-36th position of the countries ranked. The score of 27 in individualism is the same as Portugal and Slovenia and definitely on the low end falling 49-51 out of 60 countries (Hofstede & Hofstede, 2005).
Austria ranked lowest and Malaysia and Slovakia tied for the highest ranking power distance countries (Hofstede & Hofstede, 2005). East Africa falls in the middle of the power distance dimensions suggesting that the culture may have tendencies toward societal inequalities and children/students likely show a fair degree of respect for teachers and parents. In highly collectivist societies the development of a strong brand recognized by influential members of society can benefit company efforts.
Social orientation is a continuum from individualism and collectivism. The US ranked highest in Individualism and Guatemala had the lowest ranking or most collectivist culture. East Africa falls more toward the collectivist end of the continuum. Social networks are the primary resource for gathering information rather than the media which is primary used by individualistic societies (Hofstede & Hofstede, 2005).
Although Hofstede initially refered to this dimension as masculine vs feminine Griffin and Pustay (2010) called the dimension goal orientation. Slovakia was the most masculine/individualistic country, with Japan in second. Western European countries of Denmark, Netherlands, Norway and Sweden take the four most feminine/collectivist ratings.Eastern Africa is a feminine society where more importance is placed on working conditions and time off, decisions are made by men and women equally and advertising, especially when masculine value based, is not popular (Foscht et al, 2008). Highly collectivist cultures can impact consumer behavior and in turn brand management, due to a higher pressure to conform (Foscht et al, 2008).
Slide – Uncertainty AvoidanceGreece and Portugal take the one and two positions for uncertainly avoidance and Singapore and Jamaica lie at the other end of the scale as the lowest ranking in uncertainty avoidance. Societies that are on the low end of uncertainty avoidance tend to be happier, they are more accepting of new products, more risk averse, and they enjoy humor in advertising (Hofstede & Hofstede, 2005).
China ranks first in long term orientations and the US ranks 30th, while Pakistan with a score of 0, ranked 39 of 39 countries measured. East African countries were not measured and therefor the time orientation cannot be reported. Although countries can differ greatly from dimension to dimension across borders, the two African countries measured, Zimbabwe and Nigeria, scored very low in long term orientation (Hofstede & Hofstede, 2005). Short-term oriented societies seek affection from boyfriends as opposed to husbands, believe it is acceptable for young children to be cared for by others, and attribute much success and failure to luck (Hofstede & Hofstede, 2005).
Hall’s work in classifying cultures resulted in distinguishing countries as either having a high-context (HC) or low-context (LC) culture (Hall, 1976). Low-context cultures use clearer communication modes (all communication is based the words used), whereby high-context cultures rely heavily on non-verbal and other relational variables including the time and location of the conversation (Kotabe & Helsen, 2011). HC cultures use more gestures in their communication and disagreements on topics are acceptable unlike LC cultures where people cannot separate the issue from the person (Trevan et al, 2008).
Chea (2011) reported that Sub-Saharan African countries have established better macroeconomic stability through controlled inflation rates and consistent growth in GDP.Rate of FDI by countries increased more than 100% in 2006 with the primary focus on extraction of natural resources (Chea, 2011). What this means for telecommunications is that there has been a large influx of people and industry that will all need to communicate with each other as well as their home countries. A Greenfield foreign direct investment, establishing a new operation, creates jobs but will not gain instant customers like an acquisition would.All four countries included in Hofstede rankings of cultural dimension count English as an official languagese and have primarily Christian religions among the majority (World Factbook, n.d.). Although English is an official language much of the population of there are many other languages, some of tribal affiliation, practiced. Care should be taken to solicit native speakers and use a double translation process, converting the translated messages back to English to assure accurate messages are transmitted.
The Mexican telecommunications companies faced lower than expected earnings due to individuals working around paid services. The caller ID allows customers to see who is calling which can serve as notification without answering the call and using minutes.Bangladesh is one of the poorest countries in the world. The majority of their population is rural and the literacy rate is among the lowest in the world. Surprisingly there is a rapidly growing market for mobile phones which are used not only to communicate with family but primarily as a means of earning an income, getting an education, and receiving information.
Using the experiences from other developing countries is beneficial in setting programs and the associated fees. Islam and Gronlund (2010) surveyed users in Bangladesh and found that 75% use a Nokia ultra-basic handset for durability and the long-lasting battery, as well as the low price. Programs should be designed so that revenue projections area predictable and multiple work a-rounds will not hurt profits.
Although from country to country culture varies as much if not more than within a single country, these dimensions can be useful in helping make decisions needed when entering the telecommunications market in East Africa. In addition to these recommendations I would suggest a complete competitor analysis to aid in final positioning decisions.
International business assignment 2
NorthcentralTelecommunications Eastern Africa Expansion
The East African Market • Burundi • Eritrea • Ethiopia • Kenya • Madagascar • Rwanda • Somalia • Tanzania • Zambia
Hofstede’s Cultural Dimensions• Power Orientation• Social Orientation• Goal Orientation• Uncertainty Orientation• Time Orientation
Power Orientation• Score of 64, Ranked 35 out of 74• Tied with Thailand and Peru• Characteristics associated with high power distance societies: – Obedience of children for parents – Workers and managers see each other as unequal – Inequalities among people are expected and desired
Social Orientation• Score of 27• Ranked 50 out 74 countries• Tied with Portugal and Slovenia• Characteristics associated with low individualism/highly collectivist societies: – Use of the word “I” is avoided – Showing sadness is encouraged but happiness discouraged – Slower waling speed
Goal Orientation• Score of 41• Ranked 54 out 74• Scored closest to Spain and Bulgaria• Characteristics associated with low individualism/goal oriented societies: – Relationships and quality of life are important – Men and women share in making buying decisions
Uncertainty Orientation• Score of 54• Ranked 52 out of 74• Most similar to these countries• Characteristics associated with uncertainty acceptance oriented societies: – Fast acceptance of new products – Shop for convenience products
Time Orientation• East African Countries not ranked• Nigeria and Zimbabwe ranked low in long term orientation; 37th and 33rd respectively out of 39 countries.• Characteristics associated with short terrm oriented societies: – Birth order does not determine status – Living with in-laws is not desirable
Cultural ParametersLow Context High Context• Fact oriented • Emotion oriented advertising advertising• Importance placed • High value placed on on specific terms of interpersonal agreements relations• Use of Lawyers is • Lawyers present at common to protect meetings can signal party interests distrust
New Market Entry• Greenfield Foreign Direct Investment (FDI)• The Primary Language of East Africa is?• Christianity is dominant among religions.• Zain is largest competitor in the telecommunications industry.
Examples from other Regions• Mexico – Trouble with service work-around behaviors• Bangladesh – Expanded use of cell phones for business and educational purposes
Service Options and IssuesW8, did u knowmany people areattending school, • Fee avoidance behaviorsselling products are common inand sourcingsuppliers with text developing countriesmessages? • No roaming charges permitted per government regulation • SMS used as primary communication
Recommendations• Find local champions• Modify pricing and offerings to fit local needs• Aim advertising at enhancing quality of life• Use social media for promotion• Form strategic alliances with educational and business selling platforms• Fit products (phones models/service plans) to actual consumer needs
References• Chea, A. C. (2011). Global Private Capital Flows and Development Finance in Sub-Saharan Africa: Exemplary Performers, Lessons for Others, and Strategies for Global Competitiveness in the Twenty-First Century. Journal of Sustainable Development, 4(5), 18-31.• Foscht, T., Maloles, C.,III, Swoboda, B., Morschett, D., & Sinha, I. (2008). The impact of culture on brand perceptions: A six- nation study. The Journal of Product and Brand Management, 17 (3), 131.• Google Maps (n.d.). Retrieved August 1, 2012, from http://maps-africa.blogspot.com/2012/05/east-africa-map-pictures.html• Griffin, R. W., & Pustay, M. W. (2010). International business. 6th Ed. Upper Saddle River, NJ: Prentice Hall.• Hall, E.T. (1976). Beyond Culture. Garden City, NY. Anchor Press.• Hofstede, G. & Hofstede, G. J. (2005). Cultures and organizations: Software of the Mind. McGraw Hill.• Islam M. & Grönlund, Å. (2010). An agricultural market information service (AMIS) in Bangladesh: Evaluating a mobile phone based e-service in a rural context. Information Development, 26,289-302. doi:10.11177/0266666910385556• Prahalad, C. K.(n.d.). The last market. Retrieved June 20, 2012, from: http://www.youtube.com/watch?v=ew2zQnUh_uw• Treven, S., Mulej, M., & Lynn, M. (2008). The impact of culture on organizational behavior. Management : Journal of Contemporary Management Issues, 13(2), 27-39. http://search.proquest.com/docview/221192233?accountid=28180