Why was the company facing these obstacles? What were the roles of government officials, competitors, and partners? There a number of obstacles that hindered Deism’s success in Tanzania: owe income and correspondingly low capacity to pay for goods and services In 2000, average GAP per capita was $1,565, 20% lower than world average and less than 4% of the U. S Life expectancy in ASS was less than fifty years, 17 under the world average Literacy rates at 57% Electricity consumption per capita was only a quarter of the world average Relatively poor infrastructure, underdeveloped industry and widespread poverty (Exhibit 2) Partners:
First partner: Tenanting, founded one of the two competitors in Tanzania; Resources Consulting Group. Owned six payphones, was intellectualized and lacked technical experience. He decided to raise the funds himself and become a direct competitor. Second partner: Maori, local businessman, didn’t have the right connections at the TCL or ETC, but had given him a 5 percent equity up front Third partner: Paul Rapid: former Member of Parliament and was experienced in ‘navigating the government groups’, gave Daddies legitimacy at the cost of another portion of equity. Government:
Corruption, red tape and lack of transparency In ASS, the average cost of enforcing a contract equaled 51 % of the claim, and an average time of 61 0 days for 43 procedures. Next major hurdle came in obtaining a payphone license The purveyor of licenses seemed to be the ETC, which had only just become operational and was managed by competitor TCL ex employees Inexperienced and lacking cellular expertise, ETC created a long and rigorous process for Daddies to get its license. In 1 995 Daddies obtained an operating license for ETC and interconnection agreement from TCL TCL hen notified Daddies that the agreement was not valid.
Representatives asked for bribes, and for the next two years they were at an impasse, bleeding nearly $50,000 each month These delays also caused headaches for investors World Bank president was called in and negotiated an agreement This act poisoned the relationship with TCL, and as such Daddies did not get interconnection fee, commission on traffic and revenue it generated for Tact’s network. Corruption: In 2005, UK Commission for Africa: ‘corruption is systemic in much of Africa’ African Union estimated that it cost more than $148 billion in 2002
Transparency Internationally Corruption Index perennially showed many ASS countries at the bottom of the rankings In trying to get an operating license, the government representatives would often profess not to have the authority to help, but could raise the issue to the proper levels for a ‘fee’. Daddies would have nothing to do with bribery. It’ll be easy to find industry reports on corruption, lack of transparency and red tape in Africa 3. What strategies could Daddies have applied to overcome its operational problems once they occurred?
What strategies might the company have applied prior to its investment? Once operational problems occurred: Straight from theory: Making culture work for marketing success: Embrace local culture BUILD RELATIONSHIPS Employ locals Help employees Adapt to local market Im sure it would be easy to find an article about the culture in marketing there’s probably stuff in the articles we already have In Practice: Perhaps World Bank should have been involved earlier, that way the relationship between Daddies and TTS wouldn’t have broken as a result of that mediation.
Developing a partnership with World Bank earlier on in the ice would have meant more stability More sound research in to partners during ongoing partner crises, and also with competitors, obviously with ex TTS employees establishing ETC, there could have been a relationship developed so that it didn’t come to years of waiting etc Before investment: Cultural analysis: Guidelines for 4 As analysis Adoption tendency: likelihood of acceptance The natural self-reference criterion: unconscious reference to one’s own cultural values Defining the problem in terms of the domestic culture Defining the problem in terms of the foreign culture Isolate the self-reference criterion Redefine the problem without the self-reference criterion Consider different strategies for entry: I. Licensing No capital investment, knowledge, or marketing strength Huge profit potential Minimal risk of government intervention A stage in internationalization Pre-empty market entry before competition Increasing global protection of intellectual property rights In practice: Development Of relationships in the market, government and country before investment Especially research on partners etc so as to avoid the merry go round that occurred More research into competitors and licensing acquirement Should have perhaps been more prepared for the interference of government regulatory body and the time it would take to get set up Entry strategy was very rigid and didn’t/couldn’t adapt to the operational issues as they arose. Start up capital was low which heavily restricted the amount of supporting infrastructure 4. Overall how would you describe the quality of Deism’s political strategies? Involvement of World Bank: This act poisoned the relationship with TCL, and as such Daddies did not get interconnection fee, commission on traffic and avenue it generated for Tact’s network. According to Rhodes; The World Bank has a lot of clout… Wooed they intervene on your behalf?
No, that might upset the apple cart and they wouldn’t want to get involved in a commercial dispute’ Appears that Deism’s only relationship with the government and the ETC regulatory body was a poor one, and as a result the time wasted trying to get an operating license and bleeding money. A lack of knowledge of partners and competitors also led to several blunders by Daddies 5. Does Cell’s experience raising funds reinforce or contradict Deism’s experience? What strategies did Celt employ against paying bribes? What strategies did Celt employ when investing amid a civil war? Were these strategies effective? If Nan icing While finding funding was a major ongoing challenge for both companies, Celt was better initially capitalists, allowing it to enter multiple countries.
Similarly, it would face some of its biggest challenges in Tanzania Had requirements for investors that beyond simply financing-‘l wanted our investors to be active and involved with the company Also had to possess characteristics: had to have the most of business ethics and also must have he patience to invest in the highly risky African telecommunications industry and appreciate the realities of Africa-Daddies did not fully acknowledge this Celt was able to build a strong contingent of active investors, but there was limitations to what Celt could expect from investors. Even with heavyweight investors, Celt still had to be very shrewd in how it operated.
Strategies against bribes As already mentioned each investor had to specifically have the most of business ethics In 1999, purchased a mobile license in Guiana for $750,000, but continued to have issues with an interconnection agreement and a paving of import duties, which led to a meeting in 2001 where the CEO, Sir Alan Rugged was asked for a sum of $50,000 to each member who had simply come to the meeting, and on top of that was required to pay more for a favorable decision for Celt. Faced with bribery and being committed to its anti-corruption stance, Celt used local partners to try and push negotiations forward. After much internal debate, Celt abandoned Guiana, but did not publicly blow the whistle on Guiana, and would use it as an example of how far it was willing to go to keep its dealings above board. Civil War
In 1 999 it purchased an operating license in Congo-Brazzaville. City of Brazzaville was ravaged by war, filled with military checkpoints, including child soldiers, looted and blown apart. Immediately distributed twenty phones to government officials then opened a sole Celt store in the city. Sales were astronomical. Key strategies: Government relationship Answering the demand In 2000, arrived in the Democratic Republic of Congo to negotiate a mobile operating license. Spent weeks negotiating with government, pointing to its track record of operating networks in neighboring nations and that it remised a better network with handsets of $100, as opposed to $1000 on an antiquated network.
This led to the company winning a series of tax and duty exemptions from the DRY government Key strategy: Again the importance of the government relationship 6. Why was Celt successful where Daddies ultimately was not? Overall, what lessens do you draw about undertaking successful entrepreneurship in these countries. Why was Celt successful Started as a subsidiary of the mobile telecoms consultancy Mobile Systems International. This subsidiary initially gained experience operating networks tit partners in countries such as Uganda before it spun off in 1998 to focus solely on building and operating its own wireless networks Unlike Daddies, Celt was formed at the end of the asses, when mobile technology was improving and getting cheaper.
Focused its business on selling mobile subscriptions directly to individuals who already owned mobile handsets. According to Rhodes; ‘The World Bank has a lot of clout… Would they intervene on your behalf? No, that might upset the apple cart and they wouldn’t want to get involved in a commercial dispute’ completely different approach to Daddies. Adapting to market: Sensing huge, unfulfilled demand but with little capitalization, Celt would first need to target countries with free or very cheap mobile licenses Shook convention of post pay plans and moved to a prepay concept-customer purchasing scratch cards for several dollars of local phones.
Not only effectively eliminated consumer credit risk but also helped to increase up- front revenue Entered countries with free licenses, due to lack of infrastructure-pushed Celt into power generation business for their base stations, and developed relations with locals.