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Prepared by Fred M’mbololo Page 1
SAFARICOM MARKETING MIX AND IT’S
ENVIRONMENT.
PREPARED BY FRED M’MBOLOLO
(ACCA), CPA (K)
Prepared by Fred M’mbololo Page 2
Table of Contents
1.0 Brief History of Safaricom
1.1 Business Objective
1.2 Safaricom Vi...
Prepared by Fred M’mbololo Page 3
4.1.1 Kenya
4.1.2 Tanzania
4.1.3 Afghanistan
4.1.4 South Africa
4.1.5 India
4.1.6 Easter...
Prepared by Fred M’mbololo Page 4
8.0 Future Expansion Opportunities
9.0 Conclusions
10.0 References
Table 1.1-Internal En...
Prepared by Fred M’mbololo Page 5
Disclaimer Statement
The information contained herein is provided as a public service wi...
Prepared by Fred M’mbololo Page 6
1.0 Brief History of Safaricom
1.1 Safaricom’s Logo
Safaricom Limited was incorporated o...
Prepared by Fred M’mbololo Page 7
Government of Kenya’s shareholding in Safaricom Limited. therefore GoK ceased to
have a ...
Prepared by Fred M’mbololo Page 8
1.3 A Strategic SWOT analysis
A Strategic SWOT (strengths, weaknesses, opportunities and...
Prepared by Fred M’mbololo Page 9
Table 1- Internal Environment
Strengths Weaknesses
 Strong capital base and
partnership...
Prepared by Fred M’mbololo Page 10
Table 2 – External Environment
Opportunities Threats
 A wide market potential in Afric...
Prepared by Fred M’mbololo Page 11
1.4 The STP model
The STP model is useful when creating marketing communications plans ...
Prepared by Fred M’mbololo Page 12
The needs of each segment are the same, so marketing messages should be designed
for ea...
Prepared by Fred M’mbololo Page 13
2.0 What is marketing
Marketing can be defined as a process by which organizations, ind...
Prepared by Fred M’mbololo Page 14
2.1 Marketing mix
 In order to understand which strategy Safaricom has used to achieve...
Prepared by Fred M’mbololo Page 15
Marketing mix is a process where specific marketing elements are used to achieve an
org...
Prepared by Fred M’mbololo Page 16
2.1.1 Product
Followings are products of SAFARICOM
 Safaricom Pre-paid services
 Safa...
Prepared by Fred M’mbololo Page 17
Product refers to all the goods and services a company offers to the market. Also
produ...
Prepared by Fred M’mbololo Page 18
With the advancement of technology there have been new channels of selling products,
an...
Prepared by Fred M’mbololo Page 19
 Has a reputation for a strong and wide coverage, it owns 75% of base stations
in Keny...
Prepared by Fred M’mbololo Page 20
2.1.3 Promotion
 Biggest artistes in Kenya music scenes like gospel master Daddy Owen,...
Prepared by Fred M’mbololo Page 21
management, product placement and public relations tools. It has been established that
...
Prepared by Fred M’mbololo Page 22
should understand how to set the price by considering lost margin and lost sales. Also
...
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2.1.5 People
 Total Employees about 5,000 workers
 Dedicate and passionate workforce....
Prepared by Fred M’mbololo Page 24
Thorough research is important to discover whether there are enough people in your
targ...
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2.1.7 Psychical evidence
 Safaricom products are well packed and labeled with the Safa...
Prepared by Fred M’mbololo Page 26
You immediately know exactly what their presence is in the marketplace, as they are
gen...
Prepared by Fred M’mbololo Page 27
 Communication – According to Lauterborn, “promotion” is manipulative while
communicat...
Prepared by Fred M’mbololo Page 28
2.2.1 Competition
The competitive environment often affects a company’s marketing effor...
Prepared by Fred M’mbololo Page 29
holistic approach to brand management, in which all members and aspects of an
organizat...
Prepared by Fred M’mbololo Page 30
Brand positioning refers to consumer’s perception and insights about a special brand
as...
Prepared by Fred M’mbololo Page 31
experimental dimensions rather than promotional effort ( Kalafaties ,Tsogas ,and
Blanks...
Prepared by Fred M’mbololo Page 32
handset and be registered on M-PESA! There are no physical forms or additional
document...
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customers industry wide acknowledge the superiority of the firm, not all customers will...
Prepared by Fred M’mbololo Page 34
4.0 Global Networking
Networking depicts a relationship between two or more individuals...
Prepared by Fred M’mbololo Page 35
4.1.2 Tanzania
M-Pesa was launched in Tanzania by Vodacom in 2008 but its initial abili...
Prepared by Fred M’mbololo Page 36
in each country. According to MoneyWeb, a South African investment website, "A tough
re...
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4.1.6 Eastern Europe
In March 2014, M-Pesa expanded into Romania, while mentioning that...
Prepared by Fred M’mbololo Page 38
Table 3- Pestle for Safaricom
Political factors:
 The Kenya Information and
Communicat...
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5.0 Pestle Overview
Enterprise planning involves taking a look at the environment in wh...
Prepared by Fred M’mbololo Page 40
economic uncertainties like inflation and currency/exchange rate fluctuations and low
i...
Prepared by Fred M’mbololo Page 41
5.5 Ecological:
Include environmental issues and natural occurrences like earthquakes a...
Prepared by Fred M’mbololo Page 42
6.0 Porter’s 5 Forces
The model of the Five Competitive Forces was developed by Michael...
Prepared by Fred M’mbololo Page 43
THREAT OF NEW ENTRY
The Telecoms business is capital intensive and requires
huge start-...
Prepared by Fred M’mbololo Page 44
7.0 Ansoff Matrix
To portray alternative corporate growth strategies, Igor Ansoff prese...
Prepared by Fred M’mbololo Page 45
the useful brand, with more than 13 million registered customers and served on
consiste...
Prepared by Fred M’mbololo Page 46
7.3 Product Development
The firms develops new products targeted to its existing market...
Prepared by Fred M’mbololo Page 47
customers participate in the roadmap towards new product release by way of
interviews, ...
Prepared by Fred M’mbololo Page 48
Safaricom also partners with the Government of Kenya through E-citizen to provide one
P...
Prepared by Fred M’mbololo Page 49
67.4 % of the total subscribers, Airtel were the second largest operator, accounting fo...
Prepared by Fred M’mbololo Page 50
value to customers and mobile money (MM) operators. The Central Bank of Kenya, the
regu...
Prepared by Fred M’mbololo Page 51
10.0 References
Books Sources
Baron, S. Kim, H. 2003.Services Marketing.Basingstoke.Pal...
Prepared by Fred M’mbololo Page 52
Ludow and Schmidt 2002. Palgrave Macmillan, Oct 22, 2002 - Business & Economics
Mark, S...
Prepared by Fred M’mbololo Page 53
Websites
www.cbagroup.com
www.investopedia.com/terms/b/brand.asp
www.safaricom.co.ke
ht...
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Safaricom marketing mix and it's environment

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Safaricom marketing mix and it's environment

  1. 1. Prepared by Fred M’mbololo Page 1 SAFARICOM MARKETING MIX AND IT’S ENVIRONMENT. PREPARED BY FRED M’MBOLOLO (ACCA), CPA (K)
  2. 2. Prepared by Fred M’mbololo Page 2 Table of Contents 1.0 Brief History of Safaricom 1.1 Business Objective 1.2 Safaricom Vision statement 1.3 Strategic (SWOT) analysis 1.4 The STP model 2.0 What is marketing 2.1 Marketing mix (7PS) 2.1.1 Product 2.1.2 Place 2.1.3 Promotion 2.1.4 Price 2.1.5 People 2.1.6 Process 2.1.7 Physical evidence 2.2 Marketing Mix (4CS) 2.2.1 Competition 3.0 What is a Brand. 4.0 Global Networking 4.1 A brief summary of market expansion plans
  3. 3. Prepared by Fred M’mbololo Page 3 4.1.1 Kenya 4.1.2 Tanzania 4.1.3 Afghanistan 4.1.4 South Africa 4.1.5 India 4.1.6 Eastern Europe 4.1.7 Other markets 5.0 Pestle overview 5.1 Political 5.2 Economic 5.3 Social 5.4 Technological 5.5 Ecological 5.6 Legal 6.0 Porter’s 5 forces 7.0 Ansoff Matrix 7.1 Market Penetration 7.2 Market Development 7.3 Product Development 7.4 Diversification
  4. 4. Prepared by Fred M’mbololo Page 4 8.0 Future Expansion Opportunities 9.0 Conclusions 10.0 References Table 1.1-Internal Environment Table 1.2-External Environment Table 3.0 Pestle for Safaricom Table 4.0 Ansoff Matrix Figure 1.1 Safaricom’s Logo Figure 1.2 The STP model Figure 1.3 The 7PS marketing mix Figure 6.1 Five forces analysis of Safaricom Kenya Figure 8.1 Kenya’s GSM Subscriber distribution
  5. 5. Prepared by Fred M’mbololo Page 5 Disclaimer Statement The information contained herein is provided as a public service with the understanding that the Author makes no warranties, either expressed or implied, concerning the accuracy, completeness, reliability, or suitability of the information. Nor does the Author warrant that the use of this information is free of any claims of copyright infringement. The Author does not endorse any commercial service providers or their products.
  6. 6. Prepared by Fred M’mbololo Page 6 1.0 Brief History of Safaricom 1.1 Safaricom’s Logo Safaricom Limited was incorporated on 3 April 1997 under the Companies Act as a private limited liability company as a fully owned subsidiary of Telkom Kenya. It was based on an analogue ETACS network and was upgraded to GSM in 1996 (licence awarded in 1999). By virtue of the 60% shareholding held by the Government of Kenya (GoK), Safaricom was a state corporation within the meaning of the State Corporations Act (Chapter 446) Laws of Kenya, which defines a state corporation to include a company incorporated under the Companies Act which is owned or controlled by the Government or a state corporation. In May 2000, Vodafone group plc, the world’s largest Telecommunication company acquired a 40% stake and management responsibility for the company. It was converted into a public company with limited liability on 16 May 2002. Until 20 December 2007, the GoK shares were held by Telkom Kenya Limited (“TKL”), which was a state corporation under the Act. In accordance with the Government of Kenya’s policy of divesting its ownership in public enterprises, the Government of Kenya through the Treasury Department, on 28 March 2008 made available to the public 10,000,000,000 of the existing ordinary shares of par value Ksh 0.05 each, of the Company. This represents 25% of the total issued share capital of Safaricom from the
  7. 7. Prepared by Fred M’mbololo Page 7 Government of Kenya’s shareholding in Safaricom Limited. therefore GoK ceased to have a controlling interest in Safaricom under the State Corporations Act and therefore the provisions of the State Corporations Act no longer apply to it. Safaricom’s aim is to remain the leading Mobile Network Operator in Kenya. With the growing subscriber base, the company has employed over 1000 employees and opened 10 retail shops in Nairobi, Mombasa, Nakuru and Kisumu. The firm has a wide dealer network of over 152 dealers countrywide, (www.safaricom.co.ke) Safaricom is partly owned by the Government of Kenya 35%, Vodafone 40% and 25% is owned by the shareholders. It is worth forty billion Kenyan shillings in shares. This is approximately four hundred million Euros. Its market capitalization is worth two hundred and twenty two billion Kenyan shillings as at 31st of March 2010. Safaricom is listed in the Nairobi stock exchange market with a rather low but steady share price ranging from 4-6 Kenyan shillings. This share price is interestingly low as it has been trading in the stock exchange market for more than 2 years having started at 5 shillings during its Initial Public Offering (IPO) way back in 28th March 2008. Some reports indicate the Safaricom IPO was oversubscribed by 532%. 1.1 Business Objective “Our key initiatives are targeted at sustaining customer focus and positioning us for future success and maintain the number one- market Position” 1.2 Safaricom Vision statement: Safaricom is dedicated to transforming the lives of our customers, communities and colleagues. We pride ourselves in our track record of the same, and know that this is just the beginning; we will continue to work collaboratively to impact positively the lives across the country and beyond.
  8. 8. Prepared by Fred M’mbololo Page 8 1.3 A Strategic SWOT analysis A Strategic SWOT (strengths, weaknesses, opportunities and threats) Analysis provides a comprehensive insight into the company’s history, corporate strategy, financial data, business structure, business divisions and key operations. Each report contains a detailed SWOT analysis with additional information on the key competitors, market structure, major products, brands and services, as well as detailed financial data for the last 5 years. Southerland and Canwell (2004, 276) “Swot analysis is a very suitable technique in understanding the overall future of an organization considering the launch of new projects. Taking advantage of these strengths and opportunities will enable this company to manage its threats and weaknesses to ensure it maintains its high market share and provide better services for its customers”. In the table below depicts a detailed SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to identify their strengths and how it can be utilized in view of available opportunities in the market; and how their weaknesses can be downplayed such that it does not adversely affect them, considering the threats from the internal and external environment. Analysis for Safaricom indicates that the Internal Environment is addressed using the strengths and weaknesses of the company and the External Environment is addressed using the opportunities and threats facing the company.
  9. 9. Prepared by Fred M’mbololo Page 9 Table 1- Internal Environment Strengths Weaknesses  Strong capital base and partnership with vodafone  Safaricom has strong roots in the Kenyan market, being a home- grown company.  A good knowledge of local cultures and purchase-behavior of intended customers  Huge Investments in research & development activities in equipment and other facilities (a wide network coverage)  Commitment to corporate social responsibility that has ingratiated them to the hearts of the people, like sponsoring the economic empowerment projects, medical camps, water projects and sports projects among other projects  Wide range of products to offer.  Tough start-up and operations legislations  Operating M-pesa (mobile banking) has seen its subscription base grow even more.  Even though they have a vision of being the biggest network in Africa, their major operations are still limited to a few East African countries.  Relatively low levels of customer satisfaction characterized by slow moving very long queues at the customer services stations  Jamming of network because of many subscribers  Telecoms business is capital- intensive, hence the slow pace of international expansion.  Higher mobile charges and money transfer charges as compared to its competitors Airtel, Orange, Yu
  10. 10. Prepared by Fred M’mbololo Page 10 Table 2 – External Environment Opportunities Threats  A wide market potential in Africa, a developing continent.  Communication is a basic necessity in life, not a luxury, so the market is limitless.  It is stability provides assurance in it is customers. It is biggest competitor has had many changes in ownership and leadership over the past years.  M-Pesa and its related products and  scope to increase customer base  New fiber network  Global Market  New Products and Services  Price Wars and competition  Network congestion due to many subscribers  Government regulation like changes in tax rates and further MTR cuts  Increase in labour costs  Lack of basic amenities like power supply, roads and water in Kenya, leading to high cost of doing business.  Strong competitors: especially Airtel Bharti
  11. 11. Prepared by Fred M’mbololo Page 11 1.4 The STP model The STP model is useful when creating marketing communications plans since it helps marketers to prioritize propositions and then develop and deliver personalized and relevant messages to engage with different audiences. This is an audience rather than product focused approach to communications which helps deliver more relevant messages to commercially appealing audiences. The diagram below shows how plans can have the flow from. Audience options > Audience selection > Production positioning Figure 1.2 The STP model diagram Through segmentation, you can identify niches with specific needs, mature markets to find new customers, deliver more focused and effective marketing messages.
  12. 12. Prepared by Fred M’mbololo Page 12 The needs of each segment are the same, so marketing messages should be designed for each segment to emphasize relevant benefits and features required rather than one size fits all for all customer types. This approach is more efficient, delivering the right mix to the same group of people, rather than a scattergun approach. Safaricom broad customer base encompasses the full spectrum of individuals and organizations across Kenya. They offer voice, data and financial (mobile money) products and services to both consumer and enterprise customers. Consumer customers are individual purchasers of goods and services while enterprise clientele are business of all sizes, ranging from small-to-medium enterprises (SMEs) to large corporate firms. Their total customer base, 99% are consumer customers and 1% are enterprise clientele. Each type of customer is managed by its own Business Unit; namely, the Consumer Business Unit (CBU) and the Enterprise Business Unit (EBU). They also have two customer segments in the Enterprise Business Unit these are the SMEs and large corporate clients. Currently the individual customers are given a bonus storo time after hitting a certain target time of talking, also if one subscribes to their facilities, the customer can send text messages at subsidized rates, voice mail services and automatic call me back text messages. The M-pesa money transfer services though expensive is very reliable and has wide network coverage unlike its competitors. It also offers roaming facilities to individual customers, at times free promotions for Facebook and wattsapp users. In respect to the enterprise customers they provide them with reliable internet connection, calling services, M-pesa services, web-hosting and data solutions, on-line payroll and on-line accounting.
  13. 13. Prepared by Fred M’mbololo Page 13 2.0 What is marketing Marketing can be defined as a process by which organizations, individuals and groups investigate the needs and wants of the customers, create products/services that satisfies them to the intended markets (Kotler 2000, 8). Services marketing can be used to market a product or service and is based on relationship and value. A service unlike a product is intangible and this means that the service cannot be returned by the customer in case of dissatisfaction. Service Marketing mix adds 3 more ps such as, People, physical environment and process. (Baron & Harris 2003, 21-26). The role of advertising is to create demand for a product. It is also important to consider the cost of advertising so that it does not exceed the intended return. However the expenses to be incurred vary based on the nature of the product. For example, new products need a larger advertising budget to help create awareness and to encourage consumers to try the product. A product that is highly differentiated may also need more advertising in order to gain competitive advantage, emphasizing on the difference. To achieve the objectives, marketers should select carefully their market segments. Attractiveness of the market may be due to size, income level and competition available. The implication of selecting target segments is that the business will subsequently allocate more resources to acquire and retain customers in the target segments than it will for other, non-targeted customers. In some cases, the company may operate to the extreme of discouraging customers that are not in its target segment.(Baron & Harris 2003, 8-9).
  14. 14. Prepared by Fred M’mbololo Page 14 2.1 Marketing mix  In order to understand which strategy Safaricom has used to achieve its objectives, we will look at the different kinds of marketing mix of the company.  As marketing strategy shapes the marketing mix for the products and services offered by the company, the marketing mix will point to the strategic choice of the company.  The marketing mix is a synonym for 7ps, which is constructed of the four most important components of every product’s strategy - Product, Price, Promotion Place, People, Psychical evidence and Process. Figure 1.3 The 7PS Marketing Mix
  15. 15. Prepared by Fred M’mbololo Page 15 Marketing mix is a process where specific marketing elements are used to achieve an organization’s or individual’s objectives and satisfy the target market. This is achieved by using seven tools such as Product, distribution, promotion and price. Besides the four Ps, services marketing comprises more categories such as People, which means any person meeting customers. They are particularly important because, to the customers, their personal presentation creates either a positive or a negative impact to them. Because of this, they must be appropriately trained, well-motivated and the right type of person assigned the duties. Process involves the steps in providing a good or service and the behavior of people, which can be important to customer satisfaction. Physical evidence is important to be considered because unlike a product, a service is intangible. This, therefore, means that potential customers could perceive greater risk when deciding whether to use a service. To reduce the feeling of risk, thus improving the chance for success, it is often important to make the consumers visualize what a service would be (Baron & Harris 2003, 5-8) Kotler (2006,536) discovered that the effectiveness of promotion in marketing of services is generally affected by four distinct elements, namely advertising, public relations, word of mouth and point of sale. It was realized that there is an outcome when promotion uses the four principle elements together, which is common in film promotion. Advertising involves any communication that is paid for, from television and cinema commercials, radio and Internet advertisements through print media and billboards. Public relations is where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word-of-mouth is any apparently informal communication about the product by ordinary individuals or satisfied customers.
  16. 16. Prepared by Fred M’mbololo Page 16 2.1.1 Product Followings are products of SAFARICOM  Safaricom Pre-paid services  Safaricom Post-paid services  M-Pesa money transfer, M-kesho, M-Co-op, M-shwari and other related products  Cell phones with warranties depending on their sizes and prices  Discounted cell phone prices  A Safaricom SIM-Card plugged into their customer mobile devices, this promotes loyalty in a market in which many customers own multiple SIMS.  Value Added Services (VAS)  Fixed line and telephony  Broadband and fixed-line internet services  Digital television and IPTV  DTH operator The different value added services provided by Safaricom are-  Instant Balance Enquiry  Bonus talking time and bonga points that can be redeem later as air time.  Okoa jahazi, where short time credit facilities for buying air-time is extended to pre-paid customers  Caller line identification  Call divert, Call wait & Call Hold  Multimedia messaging service (MMS)  Live Portal  SMS based Information Service
  17. 17. Prepared by Fred M’mbololo Page 17 Product refers to all the goods and services a company offers to the market. Also products may comprise physical products, services, information, places, organizations or ideas that can be offered for attention, acquisition or consumption that might satisfy a want or a need. Products are classified in two categories; tangible and intangible products. (Kotler 2001, 7) The product is therefore more than a branded, packaged good offered for sale. Its definition has been widened to include services and benefits and the services that can be achieved from the product. This refers to a core product or service, which can be changed by adding features and options. It consists of multidimensional entities and benefits offered to customers. In business-to-business markets, products satisfy buyers` wants or needs. The products should be developed to satisfy the group intended. Product should clearly define who the intended users are and the customer’s preferences and needs. Through the product concept, the product idea can be analyzed through several concepts by considerations such as who will use the product, what are primary benefits and when it should be consumed (Kotler 2001, 164). Product consists of elements such us packaging, branding labeling and product attributes that are of good quality, style, features and design. Strong brand preference is an added feature to the product. A product which is an object or a service, is produced or manufactured on a large scale with a specific volume of units. A less obvious but a common mass produced service is a computer operating system. A successful new product is the result of careful marketing (Kotler & Keller 2009, 46). A product has its concepts; brand, product line and product mix. A brand is a distinctive product offering created by use of a name, symbol, design, packaging or some combination of these intended to differentiate these from competitors. A product line is a group of brands that are related in terms of the functions and benefits they provide. Product mix is a total set of products marketed by the company. (Jobber 2004, 296). The use of information technology influenced introduction and application of effective promotion methods that eased marketing of organization services in the target market
  18. 18. Prepared by Fred M’mbololo Page 18 With the advancement of technology there have been new channels of selling products, and this has also provided consumers with a good quality of the products, this is due to high rate of competition. The product information can be accessed easily. The consumers can sort products based on any desired attribute. IT has made the companies to be flexible in changing and managing their portfolios of options and products. Another impact is that IT has significantly reduced transaction cost, thus making products cost cheaper and ease of doing business and actual product improvement. The use of information technology increases the pace of product development and this facilitates effective marketing of communication services. The evolution and introduction of more effective communication services is greatly influenced by development of new information communication technology. New product development leads to a wide product range that influences attraction and retention of many customers. Lack of product development leads to loss of market share, as the few products do not satisfy many customers’ interests. This also negatively affects marketing of communication services in various market segments. (Turban, Lee, king & Viehland 2004, 16) 2.1.2 Place  SAFARICOM is getting its products to the market through distributors channels both formal (traditional) ones and informal channels.  It mainly sells its Products and services through Mobile operators and retailers, which is common for the industry with a distict Safaricom logo  The Safaricom retail shops adopted a strategy of being a one shop for all mobile telecommunication equipment.  It has wide and extensive presence even in the remotest areas, Safaricom boasts of a distribution foot print of 2,000 exclusive distribution network and ensuring that subcribers can access airtime wherever they are  Safaricom Customer Care centres and Distributors like E.g. shops, stalls, supermarkets, chemists, retail outlets etc. also helps as a place of availability of product.
  19. 19. Prepared by Fred M’mbololo Page 19  Has a reputation for a strong and wide coverage, it owns 75% of base stations in Kenya, of which 53% are 3G, enabled. Place or distribution involves delivering of products or services to the final user. The channel of distribution is very important to be considered depending on the size of the company and the nature of the product. It should also be estimated on whether to sell directly to the consumer or use intermediaries such as wholesalers and retailers. Cost is the most important factor to be considered when deciding on the distribution channel. Proper distribution planning which means a systematic distribution decision making process, is also important for effectiveness and cost reduction (Evans & Berman 1994, 480) The distribution channel needs to be designed and monitored frequently to withstand changes in the market and to reduce channel problems resulting from inefficiency using features such as transportation and storage in the market place. (Chaffey 2002, 314) Distribution chain or the channels refer to the stages involved in delivering the product to the market. Each of the elements in these stages has specific needs it meets for both the seller and the end user and are very important to be considered especially by the producer because the main objective is to satisfy the needs of the customers. There are different types of these channels such as selling direct to the consumer, wholesalers who sell in bulk and retailers who sell the products in smaller units to the customers. There are two basic types of channels, a direct channel of distribution and indirect channel of distribution. Direct involves the movement of goods and services from producer to consumers without the use of independent intermediaries. It is mostly preferred by companies that want control over their entire marketing programs, desire close customer contact and have limited target markets. An indirect channel of distribution involves the movement of goods and services from producer to independent intermediaries to consumers and is usually used by companies that want to enlarge their markets, raise sales volume, reduce distribution functions and costs, and are willing to waive some channel control and customer contact.(Evans & Berman 1994,486)
  20. 20. Prepared by Fred M’mbololo Page 20 2.1.3 Promotion  Biggest artistes in Kenya music scenes like gospel master Daddy Owen, P-Unit, gospel sensation-Gloria Muliro, love ballads are roped in to support the product.  Two way communication channels, such as social media marketing like the Bring Zack back home and Kenyans for Kenyans promotions won the best private sector product/services campaign actually 2nd place on twitter and 4th place on facebook.  Safaricom uses the SKIZA tunes which are widely downloaded at a small fee.  Customer awareness of new products and services offered to them. Safaricom uses following promotion ways...  Television  The print media  Posters  Internet  Hoardings can be related to compulsive buying (such as never passing up a bargain), the compulsive acquisition of free items (such as collecting flyers), or the compulsive search for perfect or unique items (which may not appear to others as unique, such as an old container).  Sponsors of various events like football, athletics and rugby management. Promotion is important because the consumers are informed about the new products and their attributes before they develop positive attitudes toward them. For the goods and services in the market, promotion acts as a way to persuade and informing the end users so that they attain the product knowledge and hence like the product. A Satisfied customer will send word-of-mouth to the others thereby increasing the demand of the product. A good promotion involves product, distribution and price components of marketing. (Evans & Berman 1994, 574) A business' total marketing communications programme is called the "promotional mix" and consists of a blend of advertising, personal selling, sales promotion, brand
  21. 21. Prepared by Fred M’mbololo Page 21 management, product placement and public relations tools. It has been established that many companies apply these promotion mix elements in order to increase sales revenue. Decline in sales revenue has been a result of poor implementation of the most effective promotion mix elements. Each of the applied promotional mix elements has strengths and weakness and it should be the company management`s responsibility to determine the most effective promotion mix element that will increase sales revenue. (Evans & Berman 1994, 591) 2.1.4 Price  Customers often perceive high priced brands to be of higher quality and less vulnerable to competitive price cuts than low priced brands  Call rates available are communicated via cell broadcast service (CBS)  This price varied for different kinds of services like the caller ring back tone and money transfer charges  Content localization, that is the process of adapting a product or service to a particular language  Customer based pricing strategies.  Communication commission of Kenya (C.C.K) has gradually decreased the mobile termination rates (M.T.Rs) Price represents the value of a good or service for both the seller and the buyer. In order for it to be of importance there has to be a defined price planning which means a systematic decision-making relating to all aspects of pricing by a company involving both tangible and intangible factors, purchase terms, and the non-monetary exchange of goods and services. It is the only element in the marketing mix that produces revenue; the others produce costs. Price balances demand and supply because it makes the buyer and the seller agree on a certain value for goods and services. (Evans & Berman 1994, 690) Price is one of the positioning methods and should be implemented in relation to target market, product mix, services and competition. Price should involve all the cost, otherwise companies will incur losses. Therefore, the management and the managers
  22. 22. Prepared by Fred M’mbololo Page 22 should understand how to set the price by considering lost margin and lost sales. Also factors such as demand, competition, distribution channels, internal environment and public authorities affect price setting. Understanding how to set a price is an important aspect of marketing decision-making because of changes in the competitive market that many believe will act to decrease prices in many countries. Developing a coherent pricing strategy assumes major significance (Jobber 2004, 376). Pricing decisions include determining the overall level of prices (low, medium, or high), the range of the prices (lowest to highest), the relationship between price and quality, the emphasis to place on price, how to react to competitors` prices, when to offer discounts, how prices are computed and what billing terms to implement such as cash or credit policy. (Evans & Berman 1994, 37) Customary pricing occurs when a company sets goods or service prices and seeks to maintain them for a period. Price does not change for a given period. It is used for items such as candy, gum, magazines and restaurant food. Rather that modify prices to reflect cost increases, a company may decide to reduce package size or change ingredients. The consumers will tend to prefer these alterations to price increment. Odd pricing is used when selling prices are set at levels below currency values for instance dollar or Euro. It is a popular strategy for several reasons. Consumers like obtaining change, they also gain an impression that the company thinks carefully about prices and sets them as low as possible and customers may believe that odd prices represent price reduction. Prestige pricing is a pricing strategy that indicates consumers may not buy a product when the price is low. Many people tend to correlate price and quality and perceive that a high quality product should be expensive. People will buy a premium priced product because they believe the high price is an indication of good quality and a sign of self-worth. It indicates their success and status. It is a signal to others that they are a member of an exclusive group. In psychological pricing, the consumers are sensitive to certain prices and tend to avoid purchasing products decreasing the demand. Customary, odd and prestige pricing strategies are all forms of psychological pricing. (Evans & Berman 1994, 716-718).
  23. 23. Prepared by Fred M’mbololo Page 23 2.1.5 People  Total Employees about 5,000 workers  Dedicate and passionate workforce.  One of the best customer support base and service in the industry.  Overall, our employees are young, dynamic Kenyans, with 70% of our workforce in their 30s, 16% still in their 20s and 85% of our workforce are based in Nairobi.  On the whole, our staff complement is pretty evenly split between men and women, although the number of women in more senior management positions remains relatively low  Safaricom is one of the best employers in Kenya. Of both target market and people directly related to the business.
  24. 24. Prepared by Fred M’mbololo Page 24 Thorough research is important to discover whether there are enough people in your target market that is in demand for certain types of products and services. The company’s employees are important in marketing because they are the ones who deliver the service. It is important to hire and train the right people to deliver superior service to the clients, whether they run a support desk, customer service, copywriters, programmers…etc. When a business finds people who genuinely believe in the products or services that the particular business creates, it’s is highly likely that the employees will perform the best they can. Additionally, they’ll be more open to honest feedback about the business and input their own thoughts and passions which can scale and grow the business. This is a secret, “internal” competitive advantage a business can have over other competitors which can inherently affect a business’s position in the marketplace. 2.1.6 Process  Safaricom shops are easily accessible and everywhere in the country  Processes for services are very simple, easy and customer can access it very easily.  100 and 234 are the customer support numbers which can be dialed from anywhere in Kenya and are also free of charge.  Through M-pesa pay system, one can deposit and withdraw money from their bank accounts, send money to relatives, employees and also buy airtime. The systems and processes of the organization affect the execution of the service. So, you have to make sure that you have a well-tailored process in place to minimize costs. It could be your entire sales funnel, a pay system, distribution system and other systematic procedures and steps to ensure a working business that is running effectively. Tweaking and enhancements can come later to “tighten up” a business to minimize costs and maximize profits.
  25. 25. Prepared by Fred M’mbololo Page 25 2.1.7 Psychical evidence  Safaricom products are well packed and labeled with the Safaricom logo.  The Safaricom staff are well informed and aware of their brand name and their product and services  On line experience of dealing with customer’s queries  Interface of the customer care centres In the service industries, there should be physical evidence that the service was delivered. Additionally, physical evidence pertains also to how a business and its products are perceived in the marketplace. It is the physical evidence of a business’ presence and establishment. A concept of this is branding. For example, when you think of “fast food”, you think of McDonalds. When you think of sports, the names Nike and Adidas come to mind. While in Kenya when you think of telecommunication, you think of Safaricom first.
  26. 26. Prepared by Fred M’mbololo Page 26 You immediately know exactly what their presence is in the marketplace, as they are generally market leaders and have established a physical evidence as well as psychological evidence in their marketing. They have manipulated their consumer perception so well to the point where their brands appear first in line when an individual is asked to broadly “name a brand” in their niche or industry. 2.2 Marketing Mix 4C’s The 4Cs marketing model was developed by Robert F. Lauterborn in 1990. It is a modification of the 4Ps model. It is not a basic part of the marketing mix definition, but rather an extension. Here are the components of this marketing model:  Cost – According to Lauterborn, price is not the only cost incurred when purchasing a product. Cost of conscience or opportunity cost is also part of the cost of product ownership.  Consumer Wants and Needs – A company should only sell a product that addresses consumer demand. So, marketers and business researchers should carefully study the consumer wants and needs.
  27. 27. Prepared by Fred M’mbololo Page 27  Communication – According to Lauterborn, “promotion” is manipulative while communication is “cooperative”. Marketers should aim to create an open dialogue with potential clients based on their needs and wants.  Convenience – The product should be readily available to the consumers. Marketers should strategically place the products in several visible distribution points. Whether you are using the 4Ps, the 7Ps, or the 4Cs, your marketing mix plan plays a vital role. It is important to devise a plan that balances profit, client satisfaction, brand recognition, and product availability. It is also extremely important to consider the overall “how” aspect that will ultimately determine your success or failure. By understanding the basic concept of the marketing mix and its extensions, you will be sure to achieve financial success whether it is your own business or whether you are assisting in your workplace’s business success. The ultimate goal of business is to make profits and this is a surefire, proven way to achieve this goal. According to Philip Kotler (2001, 215) technology is taking us back to an era of negotiated pricing. The internet, corporate networks, and wireless setups are linking people, machines, and companies around the globe connecting sellers and buyers than before. Websites such as compore.Net and priceScan.com allow buyers to compare products and prices quickly and easily. Price is one of the flexible elements and can be changed quickly. The pricing power has changed from companies to consumers e.g. in auction homes such as ebay.com and priceline.com, the customer proposes the price to the company. IT has also reduced many transactions, hence lowering the prices. This is also due to intense competition. It provides comparative price information that may reduce the cost. Concerning the consensus over competition on the internet, it has also created the issue of price discrimination, whereby the seller can charge different prices to different consumers for the same product. From the figure below, it can be established that the pricing process involves the steps shown and based on the market segment and the prevailing market situation.
  28. 28. Prepared by Fred M’mbololo Page 28 2.2.1 Competition The competitive environment often affects a company’s marketing efforts and its success in attracting a target market. Thus, a company needs to analyze the structure of the industry in which it operates and to examine it competitors on the basis of these characteristics: It is important that a company to develop reputation for reliability, sell products at the lowest profitable prices, and convince as many distributors or retailers as possible to stock their products. (Evans & Berman 1994, 43) 3.0 What is a 'Brand' www.investopedia.com/terms/b/brand.asp website defines a brand as: A brand is a distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market. Legal protection given to a brand name is called a trademark” Doole and Lowe (2008, p.283) opine that because a brand’s image is the most visible part of a product or service, customers relate it to the perceived value and it plays a vital role in positioning the product in the market. I concur that a brand, if managed properly, is capable of generating additional value to a company and is a source of strategic competitive advantage. Brands are custom-made to the demands of the target market using the marketing mix of product, price, place and promotion. However, in a service industry they are additional 3 P’s namely people, physical evidence and the process. The concept of corporate branding finds its origin in product branding. Branding refers to the creation of such a distinctive product or service. Corporate branding brings to marketing the ability to use the vision and the culture of a company as part of a unique selling proposition (Hatch and Schultz, 2003). The idea of corporate branding is based on the assumption that consumers create images of companies based on the whole experience of these companies (Heding et al., 2009). Corporate branding requires a
  29. 29. Prepared by Fred M’mbololo Page 29 holistic approach to brand management, in which all members and aspects of an organization behave in accordance with or are in line with the brand (Harris and de Chernatony, 2001). Figure 3.1 Corporate Reputation Basically Branding is about creating a unique position and distinguishing the organization from its competitors. Schmidt and Ludlow (2002) defined positioning as it is normally used in marketing to denote the distinctive market position which a brand has, or wishes to have in regard to competition. They presented a holistic approach to positioning . Keller (2000) identified some characteristics for a successful brand which is effectively positioned. De Chernatony and McDonald (2003) explored two types of competitive brand advantage: cost -driven and value -added Positioning is the differentiation of a brand or a product according to the target market perception relative to similar offerings in the given markets. All elements of a company’s behavior affect the position in customers mind.
  30. 30. Prepared by Fred M’mbololo Page 30 Brand positioning refers to consumer’s perception and insights about a special brand as well as the niche the brand occupies in their minds. Strategic position of a corporation is the outcome of decisions made at the corporate level , and is influenced by external environment and internal environment such as the availability of internal resources and core competencies, and expectations of various internal stakeholders and external stakeholders (Johnson , Scholes , and Whittington, 2006) Strategic Position at organizational level is a long term process of developing the organizational overall competitive advantage in market place. It identifies organizations place in the environment in relation to vision, mission and core competency (Hooley, 2001; Hamel and Parahalad ,1993). The primary motivation for Safaricom to expand locally is the company’s business objective that its key initiatives are targeted at sustaining customer focus and positioning themselves for future success and maintain the number one- market position” When Niko na Safaricom was launched in 2009, the subsequent campaign in 2010 captured a stunning glimpse of Kenya’s diversity in a heartwarming way that was culturally relevant to them and in line with the company’s vision which is dedicated to transforming the lives of their customers, communities and colleagues. This campaign not only helped them define them through the brand, but also to define their lives with a single and powerful line said in everyday-speak, Mimi ni Safaricom. This was a proud statement of ownership and progress by their customers. With time, Niko na Safaricom has been the single most compelling association with their brand. It is thus a dynamic brand and wherever you go in Kenya, Safaricom is closely woven into our cultures, making it an essential part of every Kenyan’s life. For the brand, a natural progression would flow from this insight. The direction of the brand commercial explores this mutual relationship of brand and consumer by cleverly delving into our lives. It also requires manager to take deliberate and proactive actions to identify and develop the organization‟s competitive position based on its operational and
  31. 31. Prepared by Fred M’mbololo Page 31 experimental dimensions rather than promotional effort ( Kalafaties ,Tsogas ,and Blankson ,2000) Safaricom M-pesa is such a strong brand with a wide network coverage and it is also fast and reliable though fraudsters have recently targeted the customers. M-PESA (M for mobile, pesa is Swahili for money) is a mobile phone-based money transfer, financing and micro financing service, launched in 2007 by Vodafone for Safaricom and Vodacom. M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash. But after the pilot,testing it was broadened to become a general money- transfer scheme. M-Pesa is devised from a Swahili word that denotes to send money; it is a product that enables customers send money via the mobile phone not only locally but also internationally. Through continued customer sensitization and education they are able to help minimize the cases of fraud that affect our M-PESA customers. They have well developed systems and procedures in place to protect our customers on all these fronts. Also Safaricom partnered with Equity Bank and launched a service known as M-KESHO on the 18th March, 2010, M-KESHO, is a full savings account issued by Equity Bank but marketed as an “M-PESA Equity account.” Like M-PESA accounts, M-KESHO accounts have no account opening fees, minimum balances or monthly charges. But unlike M- PESA accounts, M-KESHO accounts pay interest, do not have a limit on account balances, and are linked to limited emergency credit and insurance facilities. And unlike its regular Equity account holders who can only transact at the bank’s 140 branches, Equity’s M-KESHO customers is able to transact at any of the 17,000 retail outlets that accept M-PESA. Also Safaricom partnered with Commercial Bank of Africa (CBA) to launch M-Shwari, a banking product within M-Pesa in the year 2012. M-Shwari is invented from a Swahili word that denotes to smoothen or make something better or good, it is a revolutionary product set to change the lives of millions of Kenyans. It is not accessible through any CBA branches but, on the consumers handset. All the consumer’s requires is their
  32. 32. Prepared by Fred M’mbololo Page 32 handset and be registered on M-PESA! There are no physical forms or additional documentation required for them to sign up into M-Shwari (www.cbagroup.com). In 2014 Safaricom partnered with Britam and Changamka Micro Health to provide insurance to Kenyans with low income and launched another service called Linda Jamii. Safaricom also partners with the Government of Kenya through E-citizen to provide one Paybill number 206206 for use in payment of government services through the governments e-citizen platform. It is also partners with so far 17 banks that have been on boarded for the Real-Time Gross Services (RTGS) Michael Porter, in 1980, identified three generic strategies that organizations use in gaining competitive advantage namely Cost leadership, Differentiation and Focus. Safaricom uses the differentiation and focus strategy to market its products and services, where by they gain market share by having using their brand loyalty and maintaining high and having higher returns and profitability through offering a wide range of products like M-Pesa, M-Shwauri, M-Kesho. (Porter 1980, pg 67-68) in his book on the competitive strategy he reckons that: Differentiation provides insulation against competitive rivalry because of brand loyalty by customers and resulting lower sensitivity to price. It also increases margins, which avoids the need for a low-cost position. The resulting customer loyalty and the need for a competitor to overcome uniqueness provide entry barriers. Differentiation yields higher margins with which to deal with supplier power, and it clearly mitigates buyer power, since buyers lack comparable alternatives and are thereby less price sensitive. Finally, the firm that has differentiated itself to achieve customer loyalty should be better positioned vis-a-vis substitutes than its competitors. Achieving differentiation may sometimes preclude gaining a high market share. It often requires a perception of exclusivity, which is incompatible with high market share. More commonly, however, achieving differentiation will imply a trade-off with cost position if the activities required in creating it are inherently costly, such as extensive research, product design, high quality materials, or intensive customer support. Whereas
  33. 33. Prepared by Fred M’mbololo Page 33 customers industry wide acknowledge the superiority of the firm, not all customers will be willing or able to pay the required higher prices.
  34. 34. Prepared by Fred M’mbololo Page 34 4.0 Global Networking Networking depicts a relationship between two or more individuals or organizations that involves sharing of mutual resources and information to their individual advantages (Boonchoo and Tongurai, 2012). Companies expanding into international markets utilize networking in activities like identifying the target customers and their needs, establishing relationships with suppliers, identifying competitors and their activities and identifying with professional bodies/ trade unions to enable them survive in those markets. A company starting up in a new market has to analyse and get as much information as they can from the market (macro environment) and compare it with their internal processes (microenvironment) before they decide for or against investing. There are several approaches to study the external environmental but I emphasize two for the purpose of this paper, i.e., PESTEL and Porter’s Five Forces analysis. 4.1 A brief summary of Safaricom M-pesa markets expansion plans 4.1.1 Kenya M-Pesa was first launched by the Kenyan mobile network operator Safaricom, where Vodafone is technically a minority shareholder (40%), in March 2007. M-Pesa quickly captured a significant market share for cash transfers, and grew to 17 million subscribers by December 2011 in Kenya alone. The growth of the service forced formal banking institutions to take note of the new venture. In December 2008, a group of banks reportedly lobbied the Kenyan finance minister to audit M-Pesa, in an effort to at least slow the growth of the service. This ploy failed, as the audit found that the service was robust. At this time The Banking Act did not provide basis to regulate products offered by non- banks, of which M-Pesa was one such very successful product. As at November 2014, M-Pesa transactions for the 11 months of 2014 were valued at KES. 2.1 trillion, a 28% increase from 2013, and almost half the value of the country's GDPOn 19 November 2014, Safaricom launched a companion android app Safaricom M-Ledger for its M-Pesa users. The application, currently available only on Android, gives M-Pesa users a historical view of all their transactions.
  35. 35. Prepared by Fred M’mbololo Page 35 4.1.2 Tanzania M-Pesa was launched in Tanzania by Vodacom in 2008 but its initial ability to attract customers fell short of expectations. In 2010, the International Finance Corporation released a report which explored many of these issues in greater depth and analyzed the strategic changes that Vodacom has implemented to improve their market position. As of May 2013, M-Pesa in Tanzania has five million subscribers. 4.1.3 Afghanistan In 2008 Vodafone partnered with Roshan, Afghanistan's primary mobile operator, to provide M-Pesa, the local brand of the service. When the service was launched it was initially used to pay policemen's salaries set to be competitive with what the Taliban were earning. Soon after the product was launched, the Afghan National Police found that under the previous cash model, 10% of their workforce were ghost police officers who did not exist; their salaries had been pocketed by others. When corrected in the new system, many police officers believed that they had received a raise or that there had been a mistake, as their salaries rose significantly. The National Police discovered that there was so much corruption when payments had been made using the previous model that the policemen did not know their true salary. The service has been so successful that it has been expanded to include limited merchant payments, peer-to- peer transfers, loan disbursements and payments. 4.1.4 South Africa In September 2010 Vodacom and Nedbank announced the launch of the service in South Africa, where there were estimated to be more than 13 million "economically active" people without a bank account. M-Pesa has been slow to gain a toehold in the South African market compared to Vodacom's projections that it would sign up 10 million users in the following three years. By May 2011, it had registered approximately 100,000 customers. The gap between expectations for M-Pesa's performance and its actual performance can be partly attributed to differences between the Kenyan and South African markets, including the banking regulations at the time of M-Pesa's launch
  36. 36. Prepared by Fred M’mbololo Page 36 in each country. According to MoneyWeb, a South African investment website, "A tough regulatory environment with regards to customer registration and the acquisition of outlets also compounded the company's troubles, as the local regulations are more stringent in comparison to our African counterparts. Lack of education and product understanding also hindered efforts in the initial roll out of the product." In June 2011, Vodacom and Nedbank launched a campaign to re-position M-Pesa, targeting the product to potential customers who have a higher Living Standard Measures (LSM) than were first targeted. Despite efforts, as at March 2015, M-Pesa still struggled to grow its customer base. South Africa lags behind Tanzania and Kenya with only c.1 million subscribers. This comes as no surprise as South Africa is well known for being ahead of financial institutions globally in terms of maturity and technological innovation. According to Genesis Analytics, 70% of South Africans are "banked", meaning that they have at least one bank account with an established financial institution which have their own banking products which directly compete with the M-Pesa offering 4.1.5 India M-Pesa, was launched in India as a close partnership with ICICI bank in November 2011. Development for the bank began as early as 2008. The service continues to operate in a limited geographical area in India. Vodafone India had partnered with both ICICI and ICICI bank, ICICI launched M-Pesa on 18 April 2013. Vodafone plans to rollout this service throughout India. The user needs to register for this service by paying 100 Rupees, on which 25 Rupees will be credited back to the users account and there are charges levied per M-Pesa transaction for money transfer services and DTH and Prepaid recharges can be done through m-pesa for free
  37. 37. Prepared by Fred M’mbololo Page 37 4.1.6 Eastern Europe In March 2014, M-Pesa expanded into Romania, while mentioning that it may continue to expand elsewhere into Eastern Europe, as a number of individuals there possess mobile phones but not possess traditional bank accounts. It is unlikely, as of May 2014, however, that the service will expand into Western Europe anytime soon. In May 2015, M-PESA was also launched in Albania. 4.1.7 Other markets M-Pesa expanded into Mozambique, Lesotho, and Egypt in May, June, and July 2013, respectively. A full listing of countries in which M-Pesa currently operates can be found on M-Pesa's website.
  38. 38. Prepared by Fred M’mbololo Page 38 Table 3- Pestle for Safaricom Political factors:  The Kenya Information and Communications (Amendment) Act, 2013  Concerns over radiation from Mobile Telephones  Industry regulation bodies       Economic factors:  Middle income families in Kenya encourage its expansion.  Inflation and low incomes in other East African countries  Currency exchange fluctuations  There is also rising competition from it is main competitor Airtel Kenya and the other competitors like Orange and Essar- Yu in terms of services offered and the lower prices charged.     Social factors:  Inclination towards Internet Information  Increasing need for communications  Internet at home and in public places         Technical / technological factors:  Wireless and Mobile communications  Real time and on-demand communications  The next generation nextwork and 4 G speed mobile phones       Legal factors:  Licensing framework  Mobile phone and driving       Environmental factors:  Corporate social responsibilities through transformation of lives of its customers, communities and colleagues.  The Waste Electrical and Electronic Equipment recycling     
  39. 39. Prepared by Fred M’mbololo Page 39 5.0 Pestle Overview Enterprise planning involves taking a look at the environment in which you operate as well as looking inside the organisation to see what’s working well and what needs to be improved. The PESTLE analysis is a common tool for helping you articulate and structure this type of analysis. It focuses on the external environment and can be a useful piece of analysis to inform the areas that you will need to highlight and / or address through your business plan. The PESTLE framework allows you to evaluate, anticipate and plan for external factors that affect your organisation. PESTLE analysis groups these factors into Political (P), Economic (E), Social (S), Technical (T), Legal (L) and Environmental (E). Note these categories will necessarily be equally important to your enterprise 5.1 Political Regulation and KYC rules M-Pesa sought to engage Kenyan regulators and keep them updated on the development process. M-Pesa also reached out to international regulators, such as the UK's Financial Conduct Authority (FCA) and the Payment Card Industry (PCI) to understand how best to protect client information and adhere to internationally recognized best practices. Know Your Customer (KYC) requirements impose obligations on prospective clients and on banks to collect identification documents of clients and then to have those documents verified by banks. The Kenyan government issues national identity cards that M-Pesa leveraged in their business processes to satisfy their KYC requirements This partnership comes months after Safaricom roped in Vodacom Tanzania and MTN Rwanda to introduce cross-border transaction between customers on the respective networks 5.2 Economic: The middle income earning families in Kenya has encourage Safaricom’s expansion plans The East African markets, in which Safaricom has established presence, comprise of developing countries. Such markets are not predictable and are characterized by
  40. 40. Prepared by Fred M’mbololo Page 40 economic uncertainties like inflation and currency/exchange rate fluctuations and low income earning families. In Afghanistan, it has been very successful, and soon after the product was launched, the Afghan National Police found that under the previous cash model, 10% of their workforce were ghost police officers who did not exist; their salaries had been pocketed by others. When corrected in the new system, many police officers believed that they had received a raise or that there had been a mistake, as their salaries rose significantly. The National Police discovered that there was so much corruption when payments had been made using the previous model that the policemen did not know their true salary. The service has been so successful that it has been expanded to include limited merchant payments, peer-to-peer transfers, loan disbursements and payments. There is also rising competition from it is main competitor Airtel Kenya and the other competitors like Orange and Essar-Yu in terms of services offered and the lower prices charged. 5.3 Social: Social normally includes cultural issues like life style, language and demography. Inclination towards Internet Information has contributed to the growth of Safaricom subscribers by offering them internet facilities on their mobiles and other public places through the usage of wifi wireless internet. There have been challenges for instance that 70% of South Africans are "banked", meaning that they have at least one bank account with an established financial institution which have their own banking products which directly compete with the M-Pesa offering. Lack of education and product understanding also hindered efforts in the initial roll out of the product in South Africa. Increasing need for communication in Africa, the population has been on a steady increase and there are few telecom operators per country. This translates to an increasing potential market for Safaricom. They offer Wireless and mobile communication, real-time and on demand communications, the next generation nextwork and 4 G speed mobile phones 5.4 Technological: Safaricom invests highly in research and development activities and the infrastructure to render outstanding services, especially in the telecoms industry that is highly dependent on information technology.
  41. 41. Prepared by Fred M’mbololo Page 41 5.5 Ecological: Include environmental issues and natural occurrences like earthquakes and floods. The African climate is not prone to such, but there are tendencies in the East European countries and Asian countries where Safaricom has strategic alliances. There is also a need to carry out some social responsibilities, they aim to support sustainability in many aspects of living and improve the general living standards through the transformation of the lives of their customers, communities and colleagues. The Waste Electrical and Electronic Equipment recycling needs to done and the waste which cannot be recycled disposed of safely 5.6 Legal: Usually includes regulatory laws and bodies guiding businesses. In the year 2014 Safaricom has been on an expansion plan for its mobile money transfer service M-Pesa across the region, after the Central Bank of Kenya (CBK) awarded it a cash remittance operating license, enabling it to carry out money transfers out of the country Telecommunications in Kenya is governed by the Communication Commission of Kenya; in Uganda, by Uganda Communications Commission, in Tanzania by, the Tanzania Communications Regulatory Authority (TCRA)
  42. 42. Prepared by Fred M’mbololo Page 42 6.0 Porter’s 5 Forces The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
  43. 43. Prepared by Fred M’mbololo Page 43 THREAT OF NEW ENTRY The Telecoms business is capital intensive and requires huge start-up capital and technological expertise so there is little threat of new entrants. Safaricom has a few competitors in Kenya. Vodafone Kenya owns 40% stake in Safaricom and hence it has strong corporate governance. However, there is room for more players because some parts of the population still don’t have access to telephone services. COMPETITIVE RIVALRY Safaricom main competitor is Airtel Kenya, a subsidiary of the Indian-owned company Airtel Bharti which has apparently partnered with MTN, a South African-owned company to expand internationally. Its main rival is Airtel Kenya. Other rivals include Essar's YU (which they recently purchased, in conjunction with Airtel) and Orange Wireless. THREAT OF SUBSTITUTION The substitutes to Safaricom GSM services are the fixed lines and mobiles. SAFARICOM is the market leader in Kenya. Their great achievement is the coverage area, which assisted by Aviat. It was the first company in East Africa to possess 3G Internet technology with recent success of 4G / LTE connectivity currently in Nairobi and Mombasa. Safaricom use LTE (advanced) offers 4G services, the substitutes are other Internet Service Providers like Airtel that offer only offer 3G services at the moment. Other substitutes offer only 1G and 2G services. BARGAINING POWER OF BUYERS Subscribers switch networks mainly for quality network coverage and price. Switching cost is very low; free for a new SIM card. The new number portability introduced in Kenya was futile and does not enable subscribers to switch service provider whilst maintaining old numbers. Hence, Safaricom still dominates this market due to the superiority and reliability of their goods and services. BARGAINING POWER OF SUPPLIERS The main suppliers to Safaricom are its human resources. Safaricom operates a direct employment policy and their remuneration is the highest in the industry. They partner companies like Equity Bank, Commercial Bank of Africa, Alcatel and Aviat Networks, a leading global provider of microwave networking solutions roll-out. Hence, no supplier has monopoly or control. Fig 6.1: Five Forces Analysis of Safaricom Kenya
  44. 44. Prepared by Fred M’mbololo Page 44 7.0 Ansoff Matrix To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's present and potential products and markets (customers). By considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations. Ansoff's matrix is shown below: Table 4.0 -Ansoff Matrix Existing Products New Products Existing Markets Market Penetration Product Development New Markets Market Development Diversification Ansoff's matrix provides four different growth strategies: 7.1 Market Penetration The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. Safaricom had penetrated the market through advertising on different media platforms, increasing it is customer responsiveness, marketing and image management, in responding to the complexity of the environment. Through its dealer management team, most of its customers have been able to get access to goods and services provided by Safaricom. M-PESA being
  45. 45. Prepared by Fred M’mbololo Page 45 the useful brand, with more than 13 million registered customers and served on consistently branded stores, has ensured customer experience has been transferred to local communities. The stores are recognizable as they are painted Safaricom green with a prominent M-PESA logo. On the number of agency networks, Safaricom has more than 5000 Head office agent networks supported by over 90,000 agent outlets. This has helped the company widen their reach and preach the gospel of their products and services 7.2 Market Development The firm seeks growth by targeting its existing products to new market segments. Differentiation involves achieving competitive advantage by providing unique services or products that provide an added value to consumers. Its aim is to provide products and services that are different from those of competitors. The uniqueness of the provided service or product can be derived from different activities, including product performance, marketing, technology, location and experienced employees. Since most of the mobile telephony industry products are the same and the current regulation of ceiling imposed by the government on interconnection fee discourages firms from lowering further their call charges, then the mobile companies had to look other ways of differentiating themselves to attract and retain customers. Safaricom Kenya Ltd has continuous come up with unique products to satisfy the various levels of customers they serve. M-PESA product for example has yielded more than 50 unique products. Other unique products serve particular segments of customers for example Zidisha products, corporate value packs. Segmented customer service experience also has been created to elevate the brand. Platinum shops and both prepay and Post Pay sections have been set up in their retail outlets.
  46. 46. Prepared by Fred M’mbololo Page 46 7.3 Product Development The firms develops new products targeted to its existing market segments. Product development involves modification of existing products or the creation of new but related products to be marketed to the existing customers through the existing channels. When asked whether Safaricom Kenya Ltd adopted new product development strategy in their quest for growth, all the interviewees, from the findings, indicated that Safaricom Kenya Ltd has continuously developed new products and services to meet the needs of the consumers. They do so by analyzing market needs and determining the opportunities available in the industry. The company serves most of the market segments within the environment it operates in therefore have to come up with strategies that will enable it maintain and grow its business and customers. Examples of New Products and modified are fourth Generation Internet access recently launched in the brand name 4G, Mobile Money Transfer Services in the Brand name of M-PESA which has generated other products like Lipa na MPESA, Paybill services, M-ticketing, M-distribution, Mshwari & KCB- MPESA loans and savings account, Wifi Services for Internet, Short Messaging Services (SMS) promotion offers and Directory services. The company has also been reviewing existing products and introducing more value added benefits like Okoa Jahazi for prepay customers to borrow airtime and repay later, Call back Ringtone Services in the brand name SKIZA for all customers. The company has also been in fore front to ensure new products and services are availed. From the findings, the interviewees affirmed that the company has invested heavily on development of new products and services through their strategy and innovation division. The team ensures the company comes up with new products and services that give their customers continuous satisfaction through different products and services availed. The company runs promotions and does customer education to ensure that all its customers are aware of their new products. They ensure that
  47. 47. Prepared by Fred M’mbololo Page 47 customers participate in the roadmap towards new product release by way of interviews, opinions, roadside shows and pretest launches. For example for the launch of latest products for example advantage plus services for post pay, promotions like Shangwe Mtaani, customers are educated by w ay of text messages, newspapers adverts and outsourced marketing companies. 7.4 Diversification The firm grows by diversifying into new businesses by developing new products for new markets. Diversification is a strategy that allows a company to enter additional lines of business different from the current products, services and markets. Diversification strategies help organization widen organization’s scope across different products and market sectors. Safaricom’s core business which is mobile voice service provider, however over the years it has diversified to mobile and fixed data services, video conferencing and mobile money transfer services under the brand name M-PESA. The data services target both corporate and individual consumers mainly for internet access services, e-mail services. Cloud services have been the latest development which the company has launched. The various diversification options include Concentric Diversification which has seen Safaricom Kenya Ltd add new products to fully utilize existing technologies and market systems. This includes MPESA Products, Data services. It has also practiced corporate diversification through production of unrelated but definitely profitable goods for example Data services and M-PESA. Also Safaricom partnered with Equity Bank and launched a service known as M-KESHO on the 18th March, 2010, M-KESHO, is a full savings account issued by Equity Bank but marketed as an “M-PESA Equity account. Also Safaricom partnered with Commercial Bank of Africa (CBA) to launch M-Shwari, a banking product within M-Pesa in the year 2012. In 2014 Safaricom partnered with Britam and Changamka Micro Health to provide insurance to Kenyans with low income and launched another service called Linda Jamii. It has also invested in Venture Capital markets and started a Safaricom Investment Committee where citizens can get credit and buy parcels of land over a given period of time.
  48. 48. Prepared by Fred M’mbololo Page 48 Safaricom also partners with the Government of Kenya through E-citizen to provide one Paybill number 206206 for use in payment of government services through the governments e-citizen platform. It is also partners with so far 17 banks that have been on boarded for the Real-Time Gross Services (RTGS) 8.0 Future Expansion opportunities In considering what course of action a company will take in order to expand its market, it has to consider several options and the determine the most lucrative markets, the strengths, weaknesses and the intended strategies to be implemented by the company. The characteristic risks in international expansion can be lessened by appropriate planning, employing competent personnel and expertise, use of the required information technology and skills. Figure 8.1 Kenya’s GSM Subscriber Distribution The CA report was as at 3rd, March, 2015 and it indicated that Safaricom was the leading telecommunications operator in Kenya in terms of subscriber base, commanding a
  49. 49. Prepared by Fred M’mbololo Page 49 67.4 % of the total subscribers, Airtel were the second largest operator, accounting for 22.6% of the entire market and then followed by Orange which had only 10% of the total market as at that date. 9.0 Conclusions: Safaricom has been successful due a combination of factors especially it is marketing mix of the Seven (7Ps) of marketing and other strong marketing strategies. It has also managed to partner with several parties with the aim of enhancing it is brand name and increasing it is customer base. Safaricom's mobile banking product MPesa has been wildly successful in Kenya, but similar products have not taken off in countries like South Africa or India. The success of M-PESA was driven by mainly two factors which were particularly instrumental. The first factor was the financial exclusion was pervasive in Kenya before the launch of M-Pesa and proliferation of MFIs and SACCOs (Micro-credit savings unions). A significant majority of Kenyans, mainly from lowly penetrated rural areas and low income earners, were not captured by the incumbent banking institutions. Banks were not accessible in remote areas and had done little to bring financial services to the inhabitants of these areas. The requirements for opening a bank account were stringent and unfavorable to low income earners. A banking service had little to offer to a low income earner. These people need to access their money in form of cash as most of their daily expenses are met in such. A debit card or standing order offers no value for a person who lives day to day based on what he earns. MPESA offered a more accessible 'banking' option that was simple to use, less discriminative and fit right in with liquid requirements. Another factor is the regulatory environment in Kenya that fostered and continues to foster an enabling environment for innovation and financial inclusion through mobile money. Financial regulators in this region, East Africa, have recognized the power of mobile money (and MPESA) in driving a more inclusive financial system that contributes to economic growth. Regulators work collaboratively with commercial issuers to bring
  50. 50. Prepared by Fred M’mbololo Page 50 value to customers and mobile money (MM) operators. The Central Bank of Kenya, the regulator, recognizes the global position of Kenya as a pioneer of mobile money( MM) The global attention motivates them to lead the pack in mobile money (MM) innovations through favorable policy and regulation. It is thus obvious that marketing plays a fundamental role in enhancing a company’s growth and performance in capturing new markets, retaining the market and stimulating financial strengths in income returns of an organization.
  51. 51. Prepared by Fred M’mbololo Page 51 10.0 References Books Sources Baron, S. Kim, H. 2003.Services Marketing.Basingstoke.Palgrave Blythe, J. 2006. Principles and practice of marketing.London: Thompson Chapman, J. Holtman, C.1994.IT in marketing.England.Alfred Waller Ltd. Combe, C. 2006. Introduction to E-business.Amsterdam: Boston: Butterworth- Heinemann Chaffey, D.2002.E-business& E-commerce management.England: Prentice Hall De Chernatony and McDonald, 2003, Creating Powerful brands Doole and Lowe. 2008, Cengage Learning EMEA. ALL RIGHTS : Image, branding and positioning Evans, J. Berman, B.1994. Marketing. New York: Macmillan Jobber, D.2004.Principles and practice of marketing.London: McGraw-Hill Johnson , Scholes , and Whittington, 2006, Exploring the Corporate strategy. Kotler, P.2000.Marketing management.New Jersey: Prentice Hall Kotler, P.2003.Marketing management.New Jersey: Prentice Hall Kotler, p. Keller, L.2005.Marketing Management. New Jersey: Prentice Hall Kotler, P. Keller, L.2006.Marketing Managerment.New Jersey: Prentice Hall. Kotler, P. Keller, L.2009.Marketing Management.New Jersey: Prentice Hall Kotler, P. Amstrong, G.2001.Principles of marketing: New Jersey: Prentice Hall.
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  53. 53. Prepared by Fred M’mbololo Page 53 Websites www.cbagroup.com www.investopedia.com/terms/b/brand.asp www.safaricom.co.ke http://en.wikipedia.org/wiki/Internet www.smartinsights.com/marketing.../marketing.../4cs-marketing-model/ www.smartinsights.com/.../segmentation-targeting-and-positioning/ www.mindtools.com › Strategy Tools

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