Case #2: Bharti Airtel in Africa Competition in African markets is fierce. It really is a war zone. And, as with any conflict, the outcome hinges on decisions regarding strategy – and the available weaponry. Winning wars is not just a matter of having the best weaponry, although that helps. Without a strategy, chaotic retreat is the order of the day.
Roy Johnson Bharti Airtel has a history of making first moves and emerging as the winner just because of that. This is what built the company’s success in India, where it remains the top MNO and second-largest fixed-line operator. In fact, thanks to the massive market it serves at home, at the time it acquired the Zain portfolio in March 2010 Airtel was reckoned to be the fifth largest mobile operator in the world on a proportional subscriber basis, putting it behind the likes of China Mobile, Vodafone Group, American Movil and Telefonica, but ahead of China Unicom[1].\ Airtel has been looking at Africa as a new growth market. While it has a deal with Vodafone for the Channel Islands, Africa is the only other territory outside the Indian subcontinent that the company has entered. The commonalities are compelling: similar markets, needs and infrastructure. The realities on the ground are somewhat more challenging: logistics, legislative compliance and serious local competition being foremost. Africa`s strategy of Airitel takes different approaches of two important players on the continent Vodafone and Orange. Vodafone’s approach has been targeted, achieving a small number of high-value operations. Orange went large, seizing opportunities wherever they appeared. The final result is that Vodafone has good revenue and lower costs, whereas Orange has higher costs and less revenue. The Bharti Airtel`s low price strategy in Africa isn’t working. Consumers haven’t responded to lower tariffs by talking more, which would at least sustain revenue. Instead, “in Africa, subscribers use the money saved on lower-calling rates to buy food and not to talk more.”[2] Many theories abound as to why Airtel’s low-cost strategy failed to work in Africa. Some point to the realization that demand for airtime in Africa is inelastic. The specialist of Blue Label Telecoms issues that the demand for cell phone airtime is fairly inelastic and a decrease in consumer demand for general products in South Africa, as a result of a tightening in monetary policy, should not have a significant effect on the demand for prepaid airtime[3]. At the same time others point to wrong strategy execution. To solve the case problem we need to start with the understanding of the value system of Africans. It`s is based on how well people perceive him as opposed to personal accomplishments. The social nature of Africans is evident in every aspect of life from child naming style, functions such as weddings, funerals, rites of passage and music. Children are named after relatives or occasions, weddings are communal and not a private affair as is in most western societies, funerals as also communal and the more the people attending a funeral, the more the prestige. Richard M. Steers, Carlos J. Sanchez-Runde and Luciara Nardon suggest that “the concept of personal values in Africa is perhaps best described as a clan value that requires members to serve the needs of other group members even at their own expense. It is communal in the sense that it requires people to share what they have when someone else is in need, regardless of who worked to acquire it[4].” This fact means that if Africans use mobile phone they speak for long irrespective of the calling rates. It`s supposed to be rude for them if one call another and straight away go to the subject matter; an African will first need to know how you have been, how your family is doing and so on. Particularly it means that talk time is always constant. With Airtel’s low-cost strategy it is only that initially, it used to cost the African more to say the same thing than it costs today. Africans were ready to pay more to exchange pleasantries because of how high they placed the society they lived in. Lowering call tariffs means that the African will save on calling costs but will have nothing more to say because what he can and would have said is already said anyway. As it was said before “African mobile users are using the money saved from lower calling rates to buy food and not talk more”[5]. Airtel low-cost strategy worked in India because as telecoms professional Tom Makau suggests that “Indians love to share information, more airtime on an Indians handset means that other than talking to you on what he intended to, he will also go further and tell you more about the neighbors, family, work because it’s perfectly normal to do so. But in Africa, to discuss neighbors or other people is deemed as a vice[6]”. In this case I think that Airtel`s strategy in Africa should be based on constant tariffs and be focusing on larger towns and waiting for demand to eventually pick up. The growth of their business can also come from the knowledge that the African user is very social. In addition the penetration of high-end handsets supporting full Internet browsing is still relatively low in Africa that means that many of the most successful solutions, will be those that use technologies available on even the most basic handsets. For example Airtel could offer: 1. MP3 ringtones of popular songs, 2. ring back tones of popular songs, 3. airtime or money transfer to another person: sends the message that you are dependable and can help others in the community, 4. “Please call me” messages, 5. flamboyant handset covers: forms an image of what you define as cool. A different image is formed for a person with a phone cover embellished with leaves of cannabis than that of someone whose phone cover is embellished with say the christian cross. The image formed is aimed at helping place the owner in a certain position in society[7]. 6. Twitter and Facebook: these help in creating and controlling the perception society has towards a person, 7. mobile banking service. Another factor that must be considered in this case study is the way Airtel`s management should be organized. Do they have to hire Africans or Indians to the leader position? Of course this is not easy question as Richard M. Steers, Carlos J. Sanchez-Runde and Luciara Nardon suggest because “it is not surprising that we know and understand far less about managerial behavior in other regions (apart from North America and Europe) of the globe, such as Latin America, Central Asia, and Africa[8]. As known mid-level managers in a wide range of developing countries (like Africa) are frequently understaffed and are characterized by weak and/or inappropriate management systems and organizational controls[9]. And we frequently find situations in African firms where subordinates have little to do while their supervisors are overworked – a typical indication that managers are reluctant to delegate much autonomy[10]. In many cultures, business is built on long-standing personal relationships. This is as true in France and Mexico as it is in China and India. People do business with partners they know, people they can trust. As such, many international negotiations begin with both sides trying to establish a personal bond[11]. Cultural anthropologists observe that in many African societies leaders are often compared to parents[12] while many Indians tend to follow hierarchies fairly rigidly, orders and information tend to flow from top to bottom, and very little formal communication occurs in the reverse direction[13]. Indians prefer leaders who are assertive, morally principled, ideological, bold, and proactive[14]. In Africa, a leader is viewed as someone who is a servant to the clan, tribe, community or group and influences individuals and groups with the community or village towards some desired objective . However leadership became a function to be shared by all villagers or community members, rather than a leadership invested in one person[15]. Concluding the above it can be said that there should be more Africans in the business team of Airtel as they naturally know how market will behave what the market need and so on. The next question is “Would Bharti be able to beat MTN and achieve the dream to be number one in Africa by 2015”? Actually, yes, I think so. Bharti Airtel has deep resources, including enough to offer anything between USD 13 and USD 45 billion (as reported[16]) to buy out its main competitor, MTN.

References

1. Daily Nation on Web, http://allafrica.com/view/publisher/editorial/editorial/id/00010260.html

2. Moses Kiggundu, “Africa,” in Ragu Nath (ed.), Comparative Management: A Regional View. Cambridge, MA: Ballinger, 1988, p. 225.

3. Mzamo Mangaliso, “Building competitive advantage from ubuntu: management lessons from South Africa,” Academy of Management Executive, 2001, 15(3), pp. 23–35.

4. Telecoms Market Research, http://www.telecomsmarketresearch.com

5. Tom Makau, Telecoms Investor alert: Africa is a different ball game, March 19, 2012, http://tommakau.com/2012/03/19/telecoms-investor-alert-africa-is-a-different-ball-game/

6. Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, 439 p.

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[1] Telecoms Market Research, http://www.telecomsmarketresearch.com

[2] Daily Nation on Web, http://allafrica.com/view/publisher/editorial/editorial/id/00010260.html

[3] http://www.bluelabeltelecoms.com/pdf/salient.pdf

[4] Mzamo Mangaliso, “Building competitive advantage from ubuntu: management lessons from South Africa,” Academy of Management Executive, 2001, 15(3), pp. 23–35.

[5] Daily Nation on Web, http://allafrica.com/view/publisher/editorial/editorial/id/00010260.html

[6] Tom Makau, Telecoms Investor alert: Africa is a different ball game, March 19, 2012, http://tommakau.com/2012/03/19/telecoms-investor-alert-africa-is-a-different-ball-game/

[7] Tom Makau, Telecoms Investor alert: Africa is a different ball game, March 19, 2012, http://tommakau.com/2012/03/19/telecoms-investor-alert-africa-is-a-different-ball-game

[8] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, 28 p.

[9] Moses Kiggundu, “Africa,” in Ragu Nath (ed.), Comparative Management: A Regional View. Cambridge, MA: Ballinger, 1988, p. 225.

[10] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, 114 p.

[11] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, p.330

[12] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, p.311

[13] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, p.213

[14] Richard M. Steers, Carlos J . Sanchez-Runde, Luciara Nardon, Management Across Cultures: Challenges and Strategies, CAMBRIDGE UNIVERSITY PRESS, 2010, p.417

[15] M Masango, Leadership in the African context,University of Petoria,2002, p.707

[16] Roy Johnson, Mobile wars in Africa: is Airtel winning? http://www.telecomsmarketresearch.com