International Business Strategy 1931v

Zain entering United Arab Emirates

Hawa Sankoh

Maham Taseer Qures Yixin JIANG (July)

Mohammad Mheisen Hao Chen (Kevin) Dan Luo

Structure

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Company Profile

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UAE Telecommunication Industry

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Porter’s Five Forces

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Internal and External Audit

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Entry Mode and Company Readiness

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Target Market Selection Processes

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Entry Strategy To UAE

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Marketing Plan

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Marketing Mix

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Distribution Strategy

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Pricing Strategy

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Financial Strategies

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Exit Strategies

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Conclusion and Recommendation

Company profile

Zain Group

Zain Group is a leading mobile telecommunication provider in the Middle East (Bahrain, Jordan, Kuwait, Iraq, Saudi Arabia, Sudan, South Sudan) and North Africa. Start from 1983 in Kuwait, as Mobile Telecommunications Company (MTC), the region's first mobile operator, Zain grew rapidly in both the Middle East and Africa through the acquisition of several mobile operators across the region. Company performance

Telecommunication Industry Profile

UAE Telecommunicatio n Industry

Telecommunication sector in UAE has always been dominated by Etisalat before the company Du enter this industry. Etisalat compete intense with Du. Until 2013, Etisalat had 52.6% market share, and Du had 47.4% in telecommunication industry. In past few years, UAE telecommunication industry developed successful with highest penetration level, and it contributes 5% of the total GDP for UAE. Industry performance

1. Threat of new entrants: Telecommunication industry has capital intensive nature which decreases the threat acting as a barrier for the new entrants. Zain telecom has established itself in different parts of Middle East which will result in high economies of scale for the company. The exit barriers to telecommunication industry in UAE are high because of the financial outlay and government regulations, this is one more reason that keeps new entrants from entering in the market. 2. Threat of substitutes:

Porter’s Five Forces

The competition in UAE is low with only two competitors, making it an attractive market for Zain group. Etisalat and Du will give a hard competition to Zain, as they have been in the market for a long time with both companies having a large customer base. However Zain group is a Middle Eastern company and is popular in some parts of UAE which will give the company a push to enter in the market. As the threat of substitutes is low, it leads to low competition and thus increase in demand and increase in profit potential. 3. Determinants of buyer power: As UAE have two companies in the market offering telecommunication services, the customers have a very low buying power. The market is thus controlled by the key players Etisalat and Du. It is a good opportunity for Zain telecom to enter in UAE market as it will give competition to the existing market players. Overall market will have a low bargaining buyer power as the market will have only three companies offering telecommunication services. 4. Determinants of competitive rivalry: Market share is dived by two major telecommunications which are Etisalat and DU . After Zain enter the UAE market the intensity of competition for both the existing firms will increase as one new firm will be their competitor now. Increase in competitive rivalry will increase the demand and thus decrease profitability potential.

Zain Group Internal Audit (SWOT Matrix)

Strengths  Zain introduced innovative packages and pricing;  Customer base increased to 46.1 million (8% average annual increase rate);  Advanced Data service has featured prominently in the operator's future offerings.  Zain has a very strong and well maintained technological position.  Zain group is regionally focused as it is mainly operating in the Middle East, thus the company has a deep understanding about the market and consumers within. Weakness  An extraordinary concentration in the single region may harm the company if the region faces any downturn;  Only one type of service as local competitors provide variety of services to their customers.

Zain Group External Audit (SWOT Matrix)

Opportunity  There is an increase in demand for cheaper telecommunication services in UAE;  The customers are aware of the company’s already established Goodwill as it is operating in different parts of the Middle East.  UAE has a high birth rate because of which its population is increasing exponentially.   Zain can cater to the needs that are not being fulfilled by the other two companies especially in of price. Threat  Etisalat and DU are major players of the market that have been in UAE since a long time;  Telecom industry being highly competitive can expect increase in the level of competition

Global Readiness

Entry Modes and Company Readiness

Macro Analysis

Target Market selecting process

Population ages, internet s and mobile cellular subscriptions are the most important factors that Zain focuses on.

Micro criteria Basically, the competition intensity is high in the UAE. Etisalat and DU are going to be main competitors for Zain. Furthermore, the people in UAE have a high living standards based on the high salaries they achieve.

Target Market Selecting Process Cont.

Market Accessibility analysis

Target Market Selecting Process Cont.

In accessibility criteria, communication system occupies 20% in total. Tariffs and location occupy 15% each, which are three most important criteria for accessing UAE market. Overall, the policies of license and government are favorable for companies to enter the telecommunication industry.

Market Potentials:

Profiling of Two Target Markets – South Korea and UAE

Total Market Potential (TMP)

Company Sales Potential (CSP)

UAE

457,580,160

77,788,627.2

South Korea

723,168,000

36,158,400

TMP =

Number of Potential Consumers* Frequency of Purchase * Selling Price of the product

CSF =

TMP * (Desired Market share/ 100)

Entry conditions of UAE and South Korea

Based on the entry conditions of UAE and South Korea, UAE is more suitable for Zain to enter. Such as the criterion like istrative barriers, licenses, and financial elements, which compared with each other. UAE has more easier policies to offer licenses to companies, also, UAE has better financial conditions for companies to enter.

The ideal entry mode strategy for Zain company is Corporate owned retail stores. Zain is the leading mobile service provider in the middle east in which they have retail branches in a competitive market. The chosen entry mode would enhance customer loyalty and satisfaction through the price plan of the service but also through the customer service delivered to customers.

Entry mode selection

 Consumer Service

Marketing Plan

 Market Segmentation Variables  Frequency of Purchase  Quality  Target Market  Middle to High Income

Goal

Marketing Goals and Objectives

To attain at least 5% market share

Objectives In order to build market presence within UAE

Time Frame

within the first year

To increase sales by In order to achieve 10% a net profit.

year upon year

To build a customer base by enhancing and building consumer relationship

by the second year

This will evoke repeat purchases thus increasing brand loyalty

 Service    

Marketing Mix

2000 local minutes 30 GB internet 500 local and international SMS Selling Price: 292.86AED (24 KWD)

Product/ communication standardization    •

Needs Satisfied – Same as Home Functions performed - same as home Conditions of use – Same as Home Government permission required for market entrance

Pricing Strategy : Penetration Pricing Promotion Mix  Radio  TV  WOM

Selective Distribution

Distribution Strategy

 Indirect Channels – Retailer  Direct Channel – Using Existing distribution Channels  E-Commerce – B2C

Pricing Strategies PLC

  Number of Units to be Sold Unit Price

Projected Profit and Loss

Year 1

Year 2

Year 3

79,441

91,357

103,273

24

24

24

Net sales in the Target Market

1906560

5719800

11439456

CGS

2,39,117

7,17,358

14,34,698

1,66,7443

5002,442

10,004,758

Gross Profit (loss) Operating Expenditure

33,95,308.3 37,34,839.1 4 74

Net profit (loss) -17,27,863 after taxes

12,67,603

42,95,065.05 57,09,693

Gross Profit

87.458

87.458

87.458

BEP Sales

(19756)

14494

65285

12000000 10000000

Break Even Point

8000000 6000000 4000000

Operatio nal Expenditu re

2000000 0 1 -2000000 -4000000

2

3

Exit Strategy

It would be best for the exit strategy to be acquisition. The reason being is that it would be a win-win situation. neither the employees will lose their jobs nor the company would be liquidated. This would also be a good option considering that acquisition of the company will allow the company to recover financially.

Conclusions and Recommendati ons

In future, the company wish to enter into the corporate sector as the company is currently B2C. The company aims to enter the new market segment which will be B2B; selling to companies. Price plans and packages can be customized based on the needs of each corporate individually.