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.
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 ...view middle of the document...
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.”
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. 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.”
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”.
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...