Thesis

Kaseem Damilare Ayanlola
Bachelor thesis
Fall 2009
Department of Economics
Author:
Bachelor thesis
Damilare Ayanlola
Kaseem
Supervisor:
Roger Bandick
Topic:
Mobile telecommunication in AfricaAn investment opportunity for
Telenor
Aarhus, Denmark
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Fall 2009
2009
Abstract
Mobile telecommunication in most developed countries has reached a saturated stage which
makes it highly competitive for the big companies in the industry. Many of these big
companies are now looking forward to the developing nations where the industry is still at its
growing stage.
Africa as a continent is one of those places where mobile telecommunication is still at its
growing stage. There are growing opportunities in the industry which can be evidence in the
amount of FDI of some international companies into the continent.
This thesis is aimed to evaluate the mobile telecommunication in Africa as an investment
opportunity for Telenor, the Norwegian telecommunication giant which has grown beyond
the Scandinavian border to Eastern Europe and to some part of Asia in recent years. This part
of the world (Africa) was chosen because there has been no telecommunication company in
Scandinavia that has been in Africa despite the growing opportunities.
Telenor group strategy is by 2011 to be one of the fastest growing mobile operators in the
world, with a strong broadband position in all markets, successfully developing new services
and adopting new and responsible business models. The company business strategy is to
explore new markets and technologies to make long-term investments. This could be
achieved if the company tries to expand it base to Africa. To achieve this aim, Nigeria was
chosen to be the target market due to its enormous opportunities. Also the country is the
regional leader and the front runner in issues concerning Africa and the rest of the world and
also tagged the most populous black nation in the world.
In investigating the opportunities for Telenor in this market, external as well as internal
analysis will be made. Since this market is completely new to the company, the market entry
mode will also be analyzed to see the cost/benefit for the company and a way forward.
Bachelor thesis
Fall 2009
Table of Contents
1. INTRODUCTION...............................................................................5
2. DELIMITATIONS...............................................................................6
3. THE HISTORY OF TELENOR..............................................................7
3.1 In the past................................................................................................. 7
3.2 The Present............................................................................................... 8
4. BUSINESS ENVIRONMENT IN NIGERIA...............................................9
4.1 PEST( The country).................................................................................... 9
4.1.1 Political factor...................................................................................... 9
4.1.2 Economic factors.................................................................................. 12
4.1.3 Social/Cultural factors..........................................................................16
4.1.4 Technological factor............................................................................. 19
4.2 Porters five forces (The market)..............................................................21
4.2.1: Threat of new entrants........................................................................21
4.2.2: Threat of intense Industry competitors...............................................22
4.2.3: Threat of substitutes...........................................................................22
4.2.4: Bargaining power of suppliers.............................................................22
4.2.5: Bargaining power of buyers................................................................22
5. EXPLORING NEW MARKET..............................................................23
5.1 The competitive advantage of Telenor....................................................25
5.1.1: Factor Endowments............................................................................ 26
5.1.2: Demand condition............................................................................... 26
5.1.3: Related and supporting industries......................................................26
5.1.4: Firm strategy, structure and rivalry.....................................................27
5.1.5: Government........................................................................................ 27
5.2 Can Telenor utilize their strength in Nigeria?..........................................27
5.2.1: Opportunities...................................................................................... 27
5.2.2: Threats................................................................................................ 28
6: INTERNAL ANALYSIS......................................................................29
6.1: Resource-based view of Sustainable Competitive Advantage................29
6.1.1 Prior or acquired resources..................................................................29
6.1.2 Innovative capability............................................................................ 30
6.1.3 Being truly competitive:.......................................................................32
6.1.4 Substitutability..................................................................................... 32
6.1.5 Appropriability...................................................................................... 33
6.1.6 Durability............................................................................................. 33
6.1.7 Imitability............................................................................................. 33
7. MARKET ENTRY STRATEGY.............................................................33
7.1 Exporting................................................................................................. 34
7.2 Contractual entry mode..........................................................................34
7.2.1 Licensing.............................................................................................. 34
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7.2.2 Franchising........................................................................................... 35
7.3 Investment entry modes.........................................................................35
7.3.1 Joint ventures....................................................................................... 36
7.3.2 Wholly-owned susidiaries.....................................................................36
8. DETERMINANTS OF CHOICE OF ENTRY MODE..................................37
8.1 External factors....................................................................................... 37
8.2 Internal factors........................................................................................ 37
9. CONCLUSION AND RECOMMENDATION............................................38
BIBLIOGRAPHY.................................................................................40
LIST OF ABBREVIATIONS IN USE.........................................................42
Bachelor thesis
Fall 2009
1. Introduction
There have been changes in the business and marketing activities around the world. This
could be evidence in changing technology, globalisation, deregulation in market places and
heightened competition for capital and resources (kotler and Keller, 2006, p. 12). There is
need for global companies to look beyond their borders in conducting business to achieve
much needed expansion and return on the investors capital. In regards to this, companies
should seek for more opportunities in current and emerging market while trying to minimise
cost.
In his 2005 annual report speech the President/CEO of Telenor, Jon Fredrik Baksaas, made it
clear the company mission and vision for the coming years. One of such is to build a unique
group of companies in mature and emerging markets with more than 100 million customers.
He expressed further the significance of mobile communication as a key driver to economic
growth especially in the financially constrained societies which can also contribute to
bridging cultural gaps.
This paper will give a thorough investigation of Nigerias telecom market in order to find out
the profitability of the market for an international company seeking a possible expansion in
an unknown business territory. The report will also expose the opportunities and the threats if
any, in this new market for Telenor based on the companys past and current strengths. More
so, the outcome from the report should be conclusive enough to determine if the companys
current strategy could work in the new market and to determine a suitable entry strategy.
For this reason, there are some basic issues that need consideration especially if the new
market is beyond the sphere of current operation. These basic issues will be addressed in
question forms like:
1.
2.
3.
4.
5.
6.
What are the political situations of the new market?

Is the economic situation favourable for business?
What social/cultural issues need to be considered in this market?
What is the level of technology in the host country?
How can the companys current position affect the new market?
And lastly, in which way can the company do business in this new market?
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Fall 2009
All the above mentioned issues will be main discussion points in this report and effort will be
made to give a comprehensive report and to make clear what might be ambiguous for the
company decision maker.
The choice of market is based on investment opportunities and the size of the market. In
2007, the population of Africa stood at 965 million and Nigeria at 148 million ( UN, 2008)
which makes the country 15.4 percent of African population. The choice of the company is
based on the companys international experience. TDC and TeliaSonera were considered but
as for TDC, the company has limited international experience with operation in four
countries. TeliaSonera is currently operating in 20 countries through WOFI and joint venture.
Telenor is currently operating in 13 countries and could expand to Africa which has not been
explored by other Nordic telecom companies to gain more market share.
Business environmental analysis will incorporate political, economical, social and cultural as
well as technological (PEST) factors in this target market. Following this will be the chosen
market competitive attractiveness and long-run profitability and with this Porter five forces
will be used for the analysis. This will be followed by the competitiveness of international
mobile telecommunication industry and with this Porters diamond theory will be used in
assessing the industry. More so, internal analysis will assess what the company is better at
doing to affect their position in the chosen market. The seven elements resource-based view
of competitive advantage will be used to analyse the companys sustainability in the chosen
market. Lastly, the choice of entry mode will be discussed. This section can considered the
engine that runs any organisation due to the significant impact it has on a company. Different
market entry mode will be considered before the right entry mode will be chosen for Telenor
Conclusively, after the thorough investigation of Nigeria telecommunication market and the
company capabilities, one can conclude that it will be a good idea for Telenor to expand their
business to Nigeria as both the country and the industry has a lot of potential to offer. Joint
venture is recommended as initial investment entry mode and after the company has gained a
certain foothold, wholly owned investment should follow.
2. Delimitations
The information that will be used in the external analysis will be from 1999-2008 due to the
economic turnaround that happened during this period in the chosen market. Also most of the
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information about the company background, facts and figures will only be obtained from the
company website as no effort is made to contact the company for this project. Due to the
company product varieties, only mobile phone and broadband will be discussed in this
project.
3. The history of Telenor

3.1 In the past
Telenor has a long history which goes back to 1855. The company started as Norwegian
Telegraph Administration and the first telegraph line was opened between Christiana and the
city of Drammen.1867 saw the connection between Norway and Denmark and two years later
the telegraph cable connection extended to Great Britain.
In 1870 the telegraphic connection reaches the far north of Norway thereby ensuring a
nationwide coverage. Seven years after in 1877 there was a public display of the first Bell
telephone in Norway. With this new development, telephone cables were connected across
the country and in 1881 the Norwegian government passes the Monopolies Act, which gives
the state exclusive rights to convey messages by means of telegraph lines and similar
installations.
The beginning of the 20th century saw the automatic telephone exchange and the connection
between Norway and the United States. In 1946, telex was introduced to the people and
between this period and 1970 the number of subscriber increased from 55 to 3531. The first
telephone satellite by Norway from the United States was received in 1965 which gave way
for more connectivity in the telecommunication industry and it is at this period that the direct
distance dialling was enabled in Norway.
The 70s and 80s could be viewed as the turning point in modern telephoning. The Norwegian
Telegraph Administration changed its name to Norwegian Telecommunication (Televerket)
with total employment of 17250 staff. There is also unique cooperation between Nordic
countries to create a common standard which results in Nordic Mobile Telephony. This period
also see improvement in the network coverage in Norway with 50 percent of the country
covered and partnerships set up to establish international standards for the telenetwork mobile
networks. The 1980s saw a period of cooperation with international partners in creating
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Fall 2009
technical solutions such as satellite services, the NMT 450 (Nordic Mobile Telephony) and
GSM (Global System for Mobile communications) mobile systems.
In the late 80s and the 90s, the market for telecommunications terminals was opened up to
competition and the Norwegian Telecom develops international business in accordance with
customer needs and this has been one of the companys strategies till date. Mobile phone was
introduced and there was a huge increase in its usage.1995 through 1999 had significant
impact in the company in many ways. International expansion became a proclaimed strategy
and the company brought its business into international market but these activities had started
long before the mid 90s. The company changed its name to Telenor, the company linked its
infrastructure to the internet and sms from mobile to mobile was enabled.
It was also this year that the company invested in joint ventures in Ireland, Austria, Russia,
Lithuania, Hungary, Bangladesh and Montenegro and a licence to develop GSM networks in
Montenegro and Bangladesh was awarded. The company together with partners was awarded
licences to develop the mobile network in both Greece and Austria. Entered a consortium to
build mobile networks in Ukraine and Germany and mobile networks was opened in Ireland
Figure 1: Telenor company logos and names
Source: Telenor.com
3.2 The Present
From 2000 till date the company has engaged in horizontal integration through merger and
acquisition and also wholly owned foreign investment with the aim to increase the market
share and to reduce the company cost of operating in foreign countries. There has been so
much expansion through merger and acquisition from the company in many parts of the
world and these are not limited to mobile phone but also to other parts of the companys core
activities. From 100 percent acquisition of Sonofon Denmark in 2003, acquisition of both
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broadband suppliers Cybercity in Denmark and Bredbandsbolaget in Sweden to acquisition

of Vodafone Group in Sweden and launching of Telenor in Pakistan in 2006.
At the moment, Telenor has its presence in all the Scandinavian countries, Hungary, Serbia,
Ukraine, Montenegro and Russia in Eastern Europe, Thailand, Pakistan, Bangladesh,
Malaysia and India in Asia. The company is dynamic and flexible in its business approach
and always trying to explore new markets and new technologies to make long term
investments. At the end of the second quarter of 2009 the mobile subscriber had reached
168million (see figure 8 below).
4. Business environment in Nigeria

The strategic thinking of an organisation starts when considering going abroad from the
external business environment analysis. These are factors which the company cannot affect in
any way but has to adapt to in the host country and they determine also the mode of entry for
a company and how the company should or will operate. For this, PEST analysis will be
made to describe the external business environment in the chosen market. In section 4.2,
Porter five forces will be used to analysis the market competitive environment.
4.1 PEST( The country)
4.1.1
Political factor
The administration of the country is divided into three tiers, which is the federal government,
the states governors and local government chairman. There are 36 states and the federal
capital, Abuja, and 774 local government areas in the country. The legal system is based on
English common law, Islamic law in 12 states and traditional law. The legislative branch
consists of National assembly and House of Representatives (CIA fact book, 2009). Nigeria
has been under one military rule to another since independence which has ruined the
economy of the country due to corruption and embezzlement of public funds by those
military leaders without any check and balances. After the death of the last tyrant (Sanni
Abacha) in 1998, this paves ways for a democratic election which may be regarded as a new
beginning for the country (OECD report, 2001).
After over 15 years of military rule, Olusegun Obasanjo was elected as the president in 1999.
After his inauguration, he implemented series of reform which include improved
macroeconomic management, financial sector reform, privatisation and deregulation,
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institutional reforms, and improvement of the infrastructure of the country (OECD report,
2004/2005; J.Harnischfeger, 2008).
The reform in the financial sector consolidated the banking system by stipulating a minimum
paid-up capital of $188 million. This resulted in mergers and acquisition of number of banks
from 89 in 2004 to 25 at the end of 2005. The aim of the government was due to the role the
banking sector plays in financial economic development of the country. The privatisation and
deregulation also saw an improvement with this new democracy and 45 public enterprises
have been privatised among which is the communication sector which improved access to
telecommunications services in the country. Downstream petroleum was also deregulated and
this was accompanied by reduction in government subsidies on petroleum products (OECD
report, 2004/2005).
Infrastructure is another reform in which the Obasanjo administration tried to bring back into
normalcy. Transport infrastructure services are inadequate and in deplorable condition in all
the sub-sectors which requires urgent rehabilitation. The Bureau of Public Enterprise (BPE)
was formed to address the transport sector reform. BPE reform agenda was centred on setting
up legal and regulatory framework for participation of private sectors in the transport sector.
To achieve this, National Transport Commission was formed in collaboration with the
Federal Ministry of Transport (OECD report, 2004/2005).
Nigeria is a member of different international organisations. Regional organisations like the
African Union (AU) and Economic Community of West African States (ECOWAS). The
country also is part of international trade, peace and health organisations to mention but few,
which give the country an international recognition (CIA fact book, 2009).
In an effort by the government to create an effective private driven economy, there have been
some incentives by the government to attract FDI which will promote innovation and
competition, employment generation, improve the countrys export profile, increased
domestic capital and transfer of technology. Some of these incentives cover all sectors while
target specific sectors (Baah & Jauch, 2009). The lists of incentives which are from the
Nigeria Investment Promotion Council are listed below:
Companies income tax: - The Companies Income Tax Act amended and potential and
existing investors and entrepreneurs pay 30 percent except for petroleum
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Pioneer Status: - This is a tax holiday granted to qualified industries. Also a seven years tax
holiday to industries located in economically disadvantaged local government area of the
country. The list of pioneer product includes installation of scientific instruments and
communication equipment, information and communication technology. ( More on the list
could be seen at NIPC.gov.ng)

Tax relief for research and development: - Up to 120 percent of expenses on R&D are tax
deductable if carried out in Nigeria. R&D on local raw materials carries 140 percent of the
expenses deductable. Long-term research will be considered as capital expenditure and will
be written off against profit.

Capital allowance: - 75 percent of assessable profits for manufacturing companies and 66
percent for others

In-Plant training: - 2 percent tax concession is granted for 5 years to industries that have
established in-plant training facilities.

Investment in infrastructure: - This incentive granted to industries that provide facilities
that ordinarily should have been provided by the government. 20 percent of the cost of
providing theses infrastructure is tax deductable.

Telecommunications: - Government provides non-fiscal incentives to private investors.
Taxes and duties do not exceed those charged on essential electrical goods
There are some political and economic challenges faced by the Nigerian government among
which are Niger Delta, corruption and religious crisis. Foreign oil firms are the target of the
militant group in Niger Delta and in some cases foreign employees are taking hostage.
Movement for the Emancipation of Niger Delta (MEND) has been responsible for most of the
violence in the region which include vessel attack and hostage taken. This development has
led to the formation of Ministry of Niger Delta by the government to see to the issues
concerning the region and to end violence (OECD report, 2007)
Corruption is another challenge which the government is doing so much to combat. The past
and the present government put enormous effort in combating corruption in the country.
Through the work of Independence Corruption Practices Commission (1CPC) and Economic
and Financial Crime Commission (EFCC), the fight against corruption has progressed in the
country for some years now (OECD report, 2004/2005). Governors are not given immunity
again and those who are found to be corrupt are arrested and brought to justice. Other past
and present senior officials that looted while in office were also arrested and brought to
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justice1. By 2008 Nigeria was ranked 121out of 181 by Transparency International in its
Corruption Perception Index.
Religious crisis is of great challenge for the government. With the introduction of Sharia law
in 12 states of the country, there has been a continuous unrest with loss of lives and property.
The Muslim extremists in the north who are being influenced by politicians fight non-Muslim
mostly from the southern part of the country which has been ongoing for some years now
(J.Harnischfeger, 2008). The lastest of which occurred September this year in Maiduguri
involves a religious sect known as Boko Haram (Western education is sacrilege) who wants
the abolition of western influences in their society (AP, September 2009). This led to loss of
lives of both civilians and some security men but in the end the government was able to
control the situation and the leader arrested and prosecuted.
4.1.2 Economic factors
Oil rich Nigeria is the second largest oil producer in Africa following Angola, but the country
has been crippled by political instability, inadequate infrastructure, corruption and poor
macroeconomic management. For almost 10 years now after the transfer of democracy back
to the people, there has been a series of economic reform to change the country into a market
oriented economy as proposed by IMF (CIA fact book, 2009).
There has been considerable growth in the countrys GDP (see figure 2 below) over the years
which could be attributed to the increase in global oil prices and also the reliance of the
economy on oil which is accounted for 95 percent of foreign exchange earnings and 80
percent of budgetary revenues (CIA fact book, 2009).
Figure 2: Real GDP growth
12
10
8
6
4
2
0
Source: CIA, World Bank, AEO
1 More on the list of current prosecution could be found on http://efccnigeria.org

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Non oil sector like telecommunication, manufacturing, commerce and agriculture

performance has been very encouraging with growth of 8.6 percent in 2005, 9.4 percent in
2006 and 9.8 percent in 2007. Agriculture grew by 7.7 percent making it 39.4 percent of the
GDP increased to 42 percent in 2008 (OECD report, 2008;WorldBank, 2009). Manufacturing
in 2007 grew by 9.9 percent though it constitutes only about 4 percent of the GDP (OECD
report, 2008). This lower increase in manufacturing sector could be attributed to poor
infrastructural facilities like electricity which has forced some industries to either close down
their operation or move their operations to another stable country like Ghana and those who
remain to operate are doing so at a below capacity.
The Nigeria Communication Commission was established in 1992 and was mandated to
promote an environment that will facilitate the participation of private sector to increase and
expand the existing telecommunication sector. This had not been successful until 1999, when
the past president (Obasanjo administration) issued a new policy framework and set some
target which includes increase in telecom growth rate by 13.5 percent minimum annually,
ensuring that telephones are within 5km of walking distance throughout the country
(Sheriffdeen A, et al, 2007).
Telecommunication in Nigeria received a boost in 2001 with the deregulation of the sector
which allows for private GSM service providers to come into the country to support the
existing national operator NITEL. Two private companies MTN of South Africa and
ECONET of Zimbabwe were licensed by NCC to operate GSM in addition to NITEL the
country owned telecom company. These two companies alone increased the mobile telephone
line from 300,000 in 2001 to 1,660,000 in 2002. In 2003 another private provider,
GLOBACOM, entered the market with its mobile service Glo-mobile (OECD report,
2003/2004)
Table 1: Growth in the telecommunication sector of Nigeria
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009(June
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)
Pop
in
Million
120
120
120
120
120
130
140
140
150
151
553,37 600,32
Fixed line
Mobile(GSM
)
702,000 888,534 1,027,519 1,223,258 1,673,161 1,579,664 1,307,625 1,435,279
266,46 1,569,05 3,149,47

35,000 1
18,295,89 32,184,86 40,011,29 56,935,98

9,174,209 6
59,194,972
588,37 866,78 2,271,05 4,038,00 10,201,72 19,519,15 33,858,02 41,590,96 58,243,61

Total
60,630,251
Source: Adapted from Nigeria Communication Commission
The growth in both fixed and GSM mobile line could be attributed to more licenses given to
private providers as seen in Table 1 above. There has been other licenses given to private
provider since 2003 and the share of the market of each of these providers as can be seen
figure 3 below, shows that there is room for many players in the telecom sector of the
economy.
Figure 3: Market share of mobile operators
Source: Nigerian Communication Commission
Total investment in terms of FDI in Nigeria has shown some improvement since the return to
democracy. As can be seen in Fig 4 below, there has been an upward trend in the FDI inflow.
In early 2000 shortly after the return to democracy there has been a slow pace of FDI in the
country but with more incentives by the government, FDI inflow increased from $22,477
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billion in 1999 to $62,791 billion in 2007 (UNCTAD, 2008). This has a projection of 12.2
percent and 7.2 percent growth in 2008 and 2009 respectively (OECD report, 2008).
Figure 4: FDI inflow from 1999-2007
70000
60000
50000
40000
FDI in millioin(US$) 30000
20000
10000
0
Source: UNCTAD statistics
The currency fluctuation in the country is another thing one need to look at (see table 2
below). Following the WorldBank directives, the government of Nigeria devalued its
currency in 2008 which brought a lot of criticism in the country.
Table 2: Nigerian currency rate per US dollar
Year
2000
End of 109.6
2001
113
2002
126.4
2003
136.5
2004
132.4
2005
129
2006
129
2007
126.8
2008
126.3
period
Avg
111.2
120.6
129.2
132.9
131.3
131.3
123.2
125
101.8
period
Source: Adapted from UNCTAD, World Investment Directory; Central Bank of Nigeria, Exchange rate
The devaluation will consequently increase the prices of goods and services and thereby
causing cost-push inflation in the country. The adverse effects of devaluation on the local
firms will be severe in two ways. It will increase the debts of local firms to their foreign
suppliers or creditors which in the long run will wipe out the company profit and in some
extreme cases forces the company to close down. Secondly, local firms will require high
working capital to maintain their normal scale of business (ThisDay, newspaper, Jan 2009).
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According to the ILO report 2008, economic active population was put at 50,130 million
which is one third of the countrys population (Table 3). The rate of economic active
population has been 31 percent in the year 2000, 34 percent in 2004 and 32 percent in 2007
which show a consistency of around one third of the countrys population over the years.
Table 3: Economic active population in thousands
Year
Men(15-
2000
2477
2001
2546
2002
2604
2003
2653
2004
2708
2005
2780
2006
2845
2007
2903
2008
2965
65)
Women(15
5
1281
6
1316
1
1364
0
1422
7
1476
7
1516
1
1566
6
1626
9
1687
-65)
Total
5
3759
5
3863
6
3968
7
4075
0
4184
5
4297
1
2
44112 4529
0
5013
Source: Adapted from International Labour Organisation (Laboursta)
The labour force by occupation was 70 percent agriculture, 10 percent for industry and 20
percent for services according to CIA report 1999 estimate. The country unemployment rate
was 4.9 percent in 2007 which put the country in number 60 according to CIA report on
world unemployment index. This low rate of unemployment shows how hard working the
people are in the country despite poor economic and structural issues the country is facing.
The inflation rate in consumer prices was estimated to be 5.5 percent and 11.6 percent in
2007 and 2008 respectively. This big change could be connected to the sudden rise in global
food prices and impact of the global financial crisis (WorldBank country report, 2009)
4.1.3 Social/Cultural factors
Education:
With the introduction of Universal basic education (UBE) in 1999, this was aimed to provide
free education to all pupils both in primary and junior secondary school, the government has
increased its spending towards this and a considerable achievement has been made. The gross
primary school enrolment has increased from 98 percent in year 2000 to 120 percent in 2005
while the secondary school enrolment increase also by 2 percent point at this period (OECD
report, 2008).
The percentage of adult illiteracy aged 15 and above is 29 percent while the literacy rate of
the same age gap is 71 percent of the population according to according to the Human
Development Index of 2006 (UNDP, 2008). Combined primary, secondary and tertiary gross
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enrolment ratio is 52.5 percent (2006). The education system consists of six years of primary
school, three years of junior secondary school, three years of senior secondary school, and
four years of university education leading to a bachelors degree (UNESCO, 2008).
Language:
There are more than 250 languages in Nigeria but 3 main languages are consider the majority
which are Yoruba, Igbo and Hausa and are spoken in the southern, eastern and northern part
of Nigeria respectively (CIA report, 2009). Even though most ethnic groups prefer to
communicate in their own languages, English, being the official language, is widely used for
education, business transaction, and media and for official purposes. The official language of
Nigeria, English, was chosen to facilitate the cultural and linguistic unity of the country. The
choice of English as the official language was partially related to the fact that a part of the
Nigerian population spoke English as a result of British colonization that ended in 1960
(UNESCO, 2008)
Religion
There are three main kind of religion in Nigeria. Muslims constitutes about 50 percent,
Christianity 40 percent and Indigenous beliefs 10 percent (CIA fact book, 2009). The
Northern part of the country is Muslim dominated with 12 states practising Sharia law while
about 85 percent of the Eastern part is dominated by Christians and for the Western part, it is
a mix of both dominant religions (J.Harnischfeger, 2008).
Demography
According to the July 2009 estimate by the CIA the population of the country stood at
149,230,000million people which put Nigeria as the largest populated black nation in the
world. The country is divided into 36 states and the Federal Capital Territory. These states are
further divided into 774 Local Government Areas (CIA fact book, 2009). The ethnic grouping
as shown in Figure 5 below represents the majority and there are still 12 percent of the
minority population that are not covered in the table.
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Figure 5: Major Ethnic tribes as percentage of the population
Population distribution
Hausa/Fulani
Yoruba
5%
11%
4% 3%
33%
Ibo
Ijaw
Kanuri
20%
Ibibio
24%
Tiv
Source: CIA country report (Ethnic groups of Nigeria)
Business culture
Privatisation remains critical to the governments reform agenda. The National Economic
Empowerment Development Strategy (NEEDS) programme launched by the government
aims at improving the business environment, strengthening the financial sector, promoting
private investment, and creating jobs. Recent developments in these areas include
accelerating the privatisation process, reforming the tax system, liberalising trade, improving
infrastructure, and fighting corruption which has been a major constraint for FDI (OECD
report, 2003/2004)
Nigeria is ranked 94th out of 134 countries in the World Economic Forum on global
competitiveness (Ease of doing business) for 2008/2009.
Cultural issue
According to Hofstede dimension on culture, he indentifies five major issues concerning
culture. In his analysis about Nigeria, he ranked Nigeria, Ghana and Sierra-Leone together
due to the similarities in these three countries. Comparisons will be made with the Asian
countries average as the company is already operating in five Asian countries.
Power distance: This is the extent to which the less powerful members of organizations and
institutions (like the family) accept and expect that power is distributed unequally. This
represents inequality (more versus less), but defined from below, not from above. In his
analyses he gave Nigeria 74 compare to the Asian average of 69.
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Masculine/Feminine: This refers to the distribution of roles between the genders which is
another fundamental issue for any society to which a range of solutions are found. He ranked
Nigeria 42 and the Asian average 49.

Individualism: This could be otherwise called collectivism, which is the degree to which
individuals are integrated into groups. On the individualist side we find societies in which the
ties between individuals are loose: everyone is expected to look after him/herself and his/her
immediate family. On the collectivist side, we find societies in which people from birth
onwards are integrated into strong, cohesive in-groups, often extended families (with uncles,
aunts and grandparents) which continue protecting them in exchange for unquestioning
loyalty. Nigeria was ranked 15 and the Asian average is 20

Uncertainty avoidance: This deals with a society's tolerance for uncertainty and ambiguity. It
indicates to what extent a culture programs its members to feel either uncomfortable or
comfortable in unstructured situations. Nigeria ranked 50 and the Asian average is 54.
Long vs. Short term orientation: Nigeria was ranked 11 and the figure for the Asian average
is 80.
Table 4: Summary of Hofstede cultural dimension
Country
Nigeria
Asia average
PDI
74
69
IDV
15
20
MAS
42
49
UAI
50
54
LTO
11
80
These cultural dimensions should be considered by any company trying to enter a new
geographical foreign market especially Telenor which is a western company.
4.1.4 Technological factor
Before the return to democracy in 1999, the nations infrastructure has been in a collapse
state. Poor and inadequate road network, telecommunication was considered for the super
rich, inadequate water supply and insufficient electricity supply. After the return to
democracy, the Obasanjo administration tried to revive the nations infrastructure and bring in
new much needed technology for development.
An example of recent government development in the transport sector is rehabilitation of
Nigeria rail systems. Railway sector is owned, managed and operated by the Federal
government. Most of the rail systems are those put in place during the colonial period and
needs rehabilitation and restructuring. China has signed an agreement with the Nigerian
government on the modernisation of Nigerias one track rail to standard gauge rail from
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Lagos to Kano via Abuja which has to be constructed in 5 segments over a period of 5 years
and the project worth $8.3 billion (Baah & Jauch, 2009).
Electricity generation in Nigeria is very poor and inadequate and has for many years fell
below the minimum government target of 6000MW/H (megawatts per hour). The current rate
of supply is 3850MW/H which is one third of what a population of 150million people needs.
Many production companies/factories have moved out of the country or closed down. Those
that are still in the country uses generating plant for production which are very expensive and
also make them produce below capacity due to the cost associated with using generating
plants. This has led the government to intensify its effort in rehabilitating the electricity sector
of the country. According to the Minister of Power, Dr. Lanre Babalola in an interview with
ThisDay newspaper March 2009, he said a total of $5.3 billion has been approved by
National Economic Commission for some of the project to tackle electricity problem in
Nigeria in which he is optimistic that by the end of 2009, the government would be able to
achieve its target of 6000MW/H.
The telecommunication sector since its privatisation and liberalisation in 2001 has received a
series of developments. In September 2003, Nigeria launched its first satellite (NigeriaSAT-1)
into space via Russia which cost $13million and the satellite was to monitor the countrys
water resources, soil erosion, deforestation, natural or man-made disasters and also to study
military facilities and the countrys crude oil pipelines and infrastructure (RedOrbit, 2003).
According to a BBC report, in May 2007, Nigeria launched its communication satellite
NIGCOMSAT-1, which is expected to offer broadcasting, phone and broadband internet
services for Nigeria and Africa. The contract for the launch was worth $311 million and was
won by China.
The government has issued some strategies regarding technology innovation and
development in the country. This includes tax relief of up to 120 percent that will be given to
any organisation that maintain locally based research. Also long-term research will be
considered as capital expenditure and will be written off against profit. Also important
national development will not be based on unproven foreign technologies (NIPC, 2009)
4.2 Porters five forces (The market)

According to Michael Porter, he identified five forces that determine the long-run
attractiveness of a market. These five competitive forces are industry competitors, potential
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entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers

(Kotler and Keller, 2006). These forces should be considered as external factors into which
the company operates.
Figure 6: Porter five forces
Source: Marketing Managemment,KotlerKeller, 2009
4.2.1: Threat of new entrants
The entry and exit barrier in an industry will determine the attractiveness of the market. A
market in which the entry barriers are high and exit barriers are low is considered to be
attractive. In this situation, only a few companies will enter the industry and the poor
performing ones already in the market could be bought out by the successful ones or could
exit the market. In the case of when both entry and exit barriers are high, the profit potential
will be high but this could pose more threats to all the companies in that industry as poorperforming companies stay in and fight it out (Kotler and Keller, 2006).
In the case of a telecommunication industry, the threat of new entrant largely depends on the
entry barrier. Government policies and capital or investment requirements for the startup
make the threat really low which gives the market to few companies that can meet these
requirements. Although Nigerian governments policies towards FDI is investment friendly
(see PEST above), entry to the industry is still a problem due to the capital and infrastructural
requirements.
4.2.2: Threat of intense Industry competitors
The telecommunication situation in Nigeria since its privatisation in 2001 is that it still has
only five mobile phone operators (See Fig 3 above). The fixed costs are high and exit barrier
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high which makes the competitors stay in the market and thus makes the segment
unattractive. Rivalry is considered to be less since the industry has a clear market leader
(MTN, see Fig 3 above) but most of the players are pursuing aggressive marketing strategy to
have more market share.
Each of the players in mobile telecommunication in Nigeria has a market share but some with
less than a million users (EMTS and M-TEL) still remain in the market to grab the most they
can milk. This could be due to the high cost of exiting the market. With more and more
intense competition it is just a matter of time before the industry giants acquire the weaker
rivals.
4.2.3: Threat of substitutes
As of the time of this report, there is not a direct substitute to the mobile telephone. With the
introduction of internet telephone like Skype, this poses no threat to mobile telephone as it
requires a computer, mobile broadband and a headset.
4.2.4: Bargaining power of suppliers
In the telecommunication industry, the suppliers mainly consist of mobile phone makers and
supported industries for technologies. There are numerous suppliers of these supported
technologies which make the bargaining power to be very low. Also there are quite a large
number of mobile phone makers with reputable names and good quality which makes it easy
for mobile telecommunication companies to have a good bargaining power. Most of these
mobile phone makers are in alliance with mobile operators for the marketing and sales of
their product. This also makes the suppliers bargaining power to be weak/low.
4.2.5: Bargaining power of buyers
The bargaining power of buyers in the mobile telecommunication is very high because of the
low switching cost to different providers of the same service. Also some of the products like
the mobile phone are undifferentiated from all the market players and thus make it easy for
the buyers/customers to switch. The only factor in such a situation is the services provided
and the network coverage of some of these providers as is the case in many developing
countries where there are few providers with full network coverage.
The following (table 5 below) is the summary of the Porter five forces where the threats will
be assessed from very low (1), low (2), moderate(3), high (4) and very high (5). The marks
given are intended to see the competitiveness of the market.
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Table 5: Summary of Porter five forces
The five forces
Strength
New entrants
Low(2)
Intense competitors
High(4)
Substitutes
Very low(1)
Power of suppliers
Moderate(3)
Power of buyers
High(4)
Average total
14/5=2.8
With a total average of 2.8, it shows that the threats that could affect performance in the
market is very low and the market potentials is worth engaging into.
5. Exploring new market

There has been an improvement in telecommunication service around the world, which can
be evident from the increase in world telephone user rate; West Africa is not an exemption
(Table 6 below). This increase comes not only in the traditional fixed line but also in mobile
phone line, thanks to GSM mobile lines which are not only becoming cheaper everyday but
are also accessible in remote parts of the world.
Table 6: Telephone subscribers of selected African countries in thousand
Source: Adapted from International Telecommunication Union statistics
The ITU in its World Telecom summit 2009 has predicted that mobile subscriptions are
expected to reach 4.6 billion at the end of 2009 which will be up by 15 percent as compared
to 2008. They argued that despite the global financial crises that hindered consumer demand,
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growth comes from the demand in broadband services which could be link to the
infrastructure stimulus packages around the world (Wall Street Journal, October 2009).
Table 7: Telephone subscribers of selected Asian countries in thousand
Source: Adapted from International Telecommunication Union statistics
Telenor has shown a remarkable international presence by going outside the national border
to participate in the international telecommunication market. Currently operating through
merger and acquisitions and wholly owned foreign investment in 13 countries, five of which
are in Asia2 (Table 7 above). With mobile subscriptions of 164 million in 2008 (Fig 8 below),
Telenor has captured 4.02 percent of the world mobile customers which put the company as a
front runner in the telecommunication market.
Figure 7: Telenor mobile subscription growth
Source: Telenor.com
2 India subscription figure is not available as at the time of this report

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5.1 The competitive advantage of Telenor

The decision of any organisation to go abroad is influenced by the macro-economic and
external environment. In his book The Competitive Advantage of Nation Michael Porter
explained why a nation/industry succeeds and others fail in international competition. He
proposes four attributes which he called the `diamond that promote or impede competitive
advantage. He argues that a firm is more likely to succeed in industries where the diamond is
most favourable (J.Gionea, 2005, p. 62).
Figure 8: Determinants of competitive advantage (Diamond theory)
ce
n
a
Ch
Source: International Trade and Investment (John Gionea, 2005)
5.1.1: Factor Endowments
The factor endowment comes in two forms according to Porter. This could be basic like
natural resources, climate and location or advanced like skilled labour, infrastructure, and
technological know-how. These two forms are important depending on the industry we are
looking at but the advance factors are more likely to lead to competitive advantage (J.Gionea,
2005, p. 63). Telenor could utilise the company long history in the telecommunication
industry and its technological know-how to gain competitive advantage in any market it
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chose to operate. The company also has a long history of positive financial balance which
could be used for expansion and for technological improvement.
5.1.2: Demand condition
From the inception, the demand for telecommunication services in Norway has been high
which has led the company to constantly connect the various cities and town. This high
demand for the service has brought the interconnection that occurred during the early days of
telecommunication between cities in Europe.
Globally, the mobile subscription rate has reached 4 billion in 2008 (see Table 6&7 above).
The mobile penetration rate has reached 97 percent in the developed world, 45 percent in
developing countries and the world penetration rate stood at 50 percent in 2007. By 2008 the
world penetration rate has increased to 59.4 percent. Africa has shown a progressive growth
in its mobile user rate of more than 50 percent per year (ITU data, 2009). Nigeria is the
continent and the worlds largest subscription growth rate which has propelled from 1.56
million mobile users in 2002 to 60 million subscribers in the second quarter of 2009 (Table 1
above). This high demand has led to more telecommunication firms since deregulation in
2001 operating in the country.
This high demand has led many companies in the telecommunication industry to invest
heavily in research and infrastructural development to meet current demand. Telenor Group
in 2008 spent NOK 1.1 billion (approx. $190 million) on research, development and
innovation to secure the Group competitive strength in present and future markets (Telenor
Annual report 2008).
5.1.3: Related and supporting industries
Mobile communication has affected many people and firms in many ways. Many of the small
scale businesses who cannot afford fixed telephone are now using mobile phone for their
business which in no doubt will increase sales. Telenor from the beginning was not only
interested in the telephone alone but also in radio and television broadcasting. The Norwegian
government tries to strengthened the productivity in the telecommunication industry by taken
over of privately owned telephone company in 1974.
Telenor Company in close collaboration with Norwegian industry developed a satellite
service which are utilized by offshore oil industry, shipping industry and in the polar region.
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Also the satellite connections provide services for those in the countrys mainland to the oil
installation in the North Sea.
5.1.4: Firm strategy, structure and rivalry
The strategy and structure of the firm affects the competitiveness of the firm. In the
telecommunication industry which has reached its maturity stage in the developed countries,
a firm should design its chosen strategy to attract rival customers through numerous offers
and aggressive campaign. The subscription rate is at a growing stage in the developing
countries and firms should use the first mover advantage to capture the market of some of
these countries.
5.1.5: Government
Government intervention plays a bigger role in the competitive business environment and can
contribute to changes in the quantity and quality of those factors mention above. In many
Africa countries, Nigeria in particular, the government has implemented series of reform
which are geared towards foreign investment and has in the years yielded a positive result.
The FDI inflow (see Fig 4 above) has increased from $22.5 billion in 1999 to over $62.8
billion in 2007 and the average projection for 2008/2009 is 9.2 percent.
5.2 Can Telenor utilize their strength in Nigeria?
After analysing the external business environment, one needs to explore the opportunities and
threats in which the company faces in the new market. This will be done by using some of the
guidelines provided by Richard Lynch in his book on corporate strategy (page 465, 2003
edition)
5.2.1: Opportunities
Telenor strategy is growth and expansion through merger, acquisition and wholly owned
foreign investment (WOFI). The company has grown and expanded to some Asia countries
and still keeping an eye on expanding to new markets. The expansion has given the company
an international growth which could be seen in the mobile subscription rate (see Fig 8 above)
and has placed the company in a worldwide recognition with a 4.02 percent of the world
mobile subscription in 2008.
International growth:- Nigeria could be seen as a growth opportunities for Telenor

because of the market potential. The country has over 67 million mobile subscribers
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in the second quarter of 2009 and mobile phone user is expected to grow 8 percent
yearly. Also the internet user is growing.

Demographic and social change:- As could be seen in the Hofstede cultural
dimension analysed in part 2 of this report, the decision to go to Nigeria an entirely
different part of the world could be seen as a new social and demographic change for
the company because of the cultural and perception differences.

New markets and segment:- As it is for Telenor when entering the Asian market,
Nigeria is also a new market with different strategic challenges that the company will
face. The market is different from the Scandinavian one experience by the company
and thus the entry mode, market penetration and positioning strategy should be those
that will give the company a desired result.

Change in political/economic environment:- In the past many of the western
companies considered Nigeria not safe for business but thanks to the return of
democracy it has seen an upward trend in FDI in the country. Though the last election
in 2007 was considered not fair and free, there has been a continuation in the previous
government policies( e.g. NEEDS) which will see not only growth in the country but
also keep the country on right part to development.
5.2.2: Threats
Low market growth:- As a new entrant in the market, initially there could be a low
growth but with much presence and good service the growth will change. Telenor also
could start with the acquisition of market challengers like M-TEL and EMTS which
has less than 1 percent of the market share.

Change in political/economic environment:- African countries which are known for
military take over and policy change possess a threat to foreign investors. The
political and economic situation in Nigeria seems stable for the past eight years but
one cannot hundred percent trust the situation for a FDI involving millions of dollars.
Technological threat:- With the current poor state of infrastructure and technology in
Nigeria this could pose a threat to telecommunication companies that needs so much
technology to function effectively.

Increased competition:- As explained in Porter five forces above, competition is a
threat as each player provides an undifferentiated product which could lead to price
war.
6: Internal analysis
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The strategic analysis of a company could not be complete without considering the internal
factors affecting the companys competitiveness. These are resources by which organisation
generates value and also distinguishes one organisation from another. More so, distinguishing
ones organisation through the resources generate advantages and delivers sustainable
competitive advantage over their competitors. For a company to be sustainable, competitive
advantage needs to be more deeply embedded in the organisations resources, skills, culture
and investment over time (Richard Lynch, 2003, p. 125). The three resources of the
organisation are human, financial and operation (Richard Lynch, 2003, p. 197).
In this section the seven elements of the resource based view will be used to understand the
resources of Telenor that deliver the sustainable competitive advantage to the company.
Resource-based view is a strategy development which represents a substantial shift in
emphasis towards the individual resources of the organisation and away from market-based.
6.1: Resource-based view of Sustainable Competitive Advantage
The resource-based view consists of seven elements which focus on the individual resources
of the organisation rather than the general strategy that are common to all companies in an
industry (Richard Lynch 2003:228). These seven main elements will be discussed in relation
to Telenor.
6.1.1 Prior or acquired resources
Creating value is more likely to achieve the desired result if it is built on the strength that is
already available to the organisation rather than starting from something unfamiliar. This
existing strength will promote any real uniqueness that has been built as a result of the
organisation history and investment over the years (Richard Lynch 2003:228). The
companys long history in the telecommunication industry coupled with strong financial and
technological development is of great advantage.
Table 8: Telenor operating profit
Year
Amount
2003
in 7.56
2004
2005
2006
2007
2008
7.4
11.9
17.6
15
15.2
billion(NOK
)
Source: Adapted from Annual reports of Telenor
The long record of huge financial success (see table 8 above) could play a bigger role in
sustainable competitive advantage over the competitors as this gives the company the chance
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to embark on many activities that could improve their market share. Through merger and
acquisition, Telenor has gained worldwide recognition and has expanded its market offering
beyond mobile phone and broadband services and also incorporating new corporate cultures
to suit the new markets. For instance the launch of Grameenphone in 1997, this was the first
Telenor joint venture (62 percent share) in the Asian telecom market and providing mobile
services in Bangladesh. Telenor and its partners have boosted network capacity and extended
coverage to new and often remote areas. Another instance could be seen from DTAC of
Thailand which Telenor has a 65.5 percent stake in and in 2007 DTAC put up close to 1000
new based stations mostly located in the remote areas where network coverage is limited.
Economies of scale could come from the companys satellite service which has been in place
since 1975 and has been updated to meet the new challenges. Also this could come from
those tested and proven core services which has been in existence in the company and just
been introduce in the new market.
6.1.2 Innovative capability
Organisations differs in innovating new things and some are better at doing this than other. If
this done properly it could deliver a competitive advantage that could be difficult for others in
the industry to match certainly for some time at least. With Telenor innovation comes in
different ways and has to do with the market in which it operates. Some examples of recent
innovation from the company will be discussed below:
1. Mobile fun: This comprises of mobile sports, music, TV and communities.
Mobile sports give the customers the chance to watch a live sport matches on their
mobile phone. This service is available in Norway, Sweden, Pakistan, Thailand,
Bangladesh and Malaysia.
Mobile music gives the customer the right to download over one million songs to
their mobile phone and this music could be shared by friends and family or
transferred to mobile phone, mp3 player and to the computer. The service is
available in Sweden, Norway, Serbia, Pakistan and Malaysia.
Mobile TV can give you access to live TV channel on the move. With it you can
watch any of your favourite TV shows anytime, anywhere. News, sports,
entertainment and many more could be watched on your mobile. The service is
available in Malaysia, Norway, Sweden and Pakistan.
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With mobile communities, you can go online to window live MSN and Facebook
on your mobile and keep close to your friends and families anywhere, anytime.
The service is only available as at the time of this report in Norway and Sweden.
2. Mobile interaction: There are nine product and services under this. Mobile health
line provides 24/7 access to medical assistance for all Grameenphone mobile
phone users in Bangladesh. TeleDoctor is another form of health assistance
launched in Pakistan.
ApnaPco is another product launched in Pakistan in 2007. This is a mobile sharing
service to the people in the remote areas who cannot afford a mobile phone of
their own.
Mobile in flight uses AeroMobile secure mobile communication technology which
gives you access to call anywhere during the flight.
Mobile marketing give customers in Sweden and Norway the access to register
their phone number with any of their favourite shops and services and they will
receive sms on latest events and offers.
Child internet protection is a security shield technology that protects children from
accessing sites that are not suitable for them. Children in Norway and Sweden
have their login with a protected desktop controlled by their parents.
3. Mobile commerce: This comprises of mobile banking, remittance and CellBazaar.
Easypaisa is banking services that allow Pakistanis to pay their bills and transfer
money on their mobile phone without the need to go to the bank. DiGiREMIT is
another similar service in Malaysia where people can transfer money using their
mobile phone.
CellBazaar is introduced in Bangladesh and it is used for trading basic goods from
mobile phone and given the opportunities of information exchange and
community networking in remote part of the country
ATM SIM enables customers to conduct money transaction through their mobile
phone. Bank balance, transfers and payments could be made through mobile
phone in Thailand.
6.1.3 Being truly competitive:
Market competitiveness could be seen from the growth rate in the market which a company
operate. The company has gained a substantial market share in all the country it operates in
(see Table 8 below).
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Table 9: Telenor market share3
Country
Norway
Denmark
Sweden
Hungary
Serbia
Montenegro
Ukraine
Russia
Pakistan
Bangladesh
Thailand
Malaysia
Share (%)
54
27
18
33.9
39
38.2
42.2
25.4
20.5
47
32
25.3
Sources: Adapted from the company website (Global presence)
6.1.4 Substitutability
As explained in the company past and current history, Telenor has built its technological
foundation that cannot easily be substituted by rival companies. For instance, the launches of
its communication satellites, Thor 1 in 1992, Thor 2 in 1997, Thor 5 in February 2008 and
Thor 6 in October 2009. This is one kind of resources that cannot be substituted with any
alternative as it gives the company a competitive edge in providing better network coverage.
Also not all the telephone providers could afford to launch communication satellites; many
are in alliance with other telecom companies.
6.1.5 Appropriability
In all indications, Telenor uses its resources effectively and wisely. This could be seen from
numerous acquisitions made by the company in all the markets it operates in. The acquisition
of Cybercity in Denmark and that of Vodafone Group in Sweden are examples of how the
company is using its positive operating profit (see Table 8 above) to expand its business
around the world. Introduction of different innovation as explained in 6.1.2 above also has
proven to be appropriate and the companys increasing subscription rate could be attributed to
this.
3 Note: The table above shows Telenor WOFI and joint ventures market rate. Information
for Finland and India is not available as at the time of writing this report
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6.1.6 Durability
Many of the resources possessed by Telenor has been acquired through the years. For many
years the company has been able to maintain a positive financial balance which has helped in
international expansion. Also the company has a personal feedback and guidance
performance program called Telenor Development Process (TDP) where each of the
employees ambitions and talents could be reviewed and supported by the company. Though
the company has changed name in the past, this does not alter its reputation as a good
telecommunication provider. Its name is recognised worldwide as one of the best in the
industry.
6.1.7 Imitability
Because of the huge financial investment involved in the telecommunication industry, the
problem of imitation is minimal on installation and technological level. On the other hand,
the services provided are vulnerable to imitation as they are easy to imitate by rival
companies.
7. Market Entry Strategy

The mode of entry into an international market will depend largely on the amount of control
management desire, the company experience in a market and the potential size of the market.
Entry modes is the institutional arrangement by which a firm gets its products, technologies,
human skills or other resources into a market (J.J Wild et al, 2010, p. 380). There are three
types of entry mode which are Exporting, Contractual entry mode and Investment modes (J.J
Wild et al, 2010, p. 380).
7.1 Exporting
Most companies export their product when the international market offers opportunities to
increase sales. Exporting permits companies to diversify sales and to gain experience in the
international market because of low cost and low risk involved (J.J Wild et al, 2010). There
are two basic form of exporting and they are direct and indirect exporting.
Direct exporting happens when a company sells its product directly to buyers in a target
market. Selling the product directly to the buyers does not mean the company selling to the
final consumers but sells through sales representatives and distributors in that particular
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market. The sales representatives are hired and paid by the company to promote the product.
On the other hand, the distributor takes ownership of the products when it enters the country
and accepts all the risk associated with generating sales. In most cases they do not sell
competing products (J.J Wild et al, 2010 p.382).
Indirect exporting occurs when a company sells its product to intermediaries who then resell
to buyers in a target market. The choice of intermediary in indirect exporting could depend
largely on the company available resources and the rate of growth in the target market. (J.J
Wild et al, 2010 p.382).
The advantage of exporting is that it is less expensive and less risky when compared to other
market entry modes. It gives the company the required knowledge about the consumers
requirements and develops a relationship between the distributors and consumers. Starting to
distribute abroad through exporting can also give an international recognition to the particular
product brand (J.Gionea, 2005 p.289).
Some drawbacks of exporting include the high transportation cost which could make it
uneconomical especially for bulky products. The local agent used can have divided loyalties
by carrying several other products which can hinder the future growth of the foreign
product(J.Gionea, 2005 p.290).
7.2 Contractual entry mode
Some companies products cannot be traded in an open market because they are intangibles
and as such offers their products through contracts like licensing and franchising.
7.2.1 Licensing
Licensing contractual agreement allows a company (the licensor) grants right to intangible
property like manufacturing process, trademark, patent and trade secret to another company(
the licensee) for a specified period. Licensor normally receive a royalty from the licensee
which could be based on the percentage of sales revenue (J.Gionea, 2005 p.291; J.J Wild et
al, 2010 p.389
There are some advantages associated with this type of contractual distribution entry. One
advantage is that the risk is low and the investment cost is minimal. Secondly, licensee gain
production expertise for a well known product or brand name (J.Gionea, 2005, p. 292; Kotler
and Keller, 2009, p. 647). Some of the disavantages of licensing is the lack of management
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control over the licensee over sales and production. The license issued may be difficult to
renew after expiry (J.Gionea, 2005, p. 292).
7.2.2 Franchising
Similar to licensing but involved much longer-term commitment than licensing. Also
franching gives a company greater control over the sale of its product in a target market.. The
franchisee normally agrees to strict rules as to how the business is done(J.J Wild et al, 2010,
p.390; J.Gionea, 2005, p.292).
Franchising like licensing has its own advantages and disadvantages. Advantages could be
seen from the publicly accepted business approach and product which could allow for rapid
geographical expansion. Also the franchisor assistance with initial and continuing managerial
training. The franchiser could benefit from the cultural knowledge and know-how of the local
manager to gain a competitive advantage in the new market (J.Gionea, 2005, p.292; J.J Wild
et al, 2010, p.392 ).
The major problem with franchising is quality control due to the large number of franchises
in a variety of national markets. Another problem could be the cost of maintaining and
continuing managerial and training assistance. Both of these major problems could be solved
if well specified in the contract agreement between the franchisor and the franchisee
(J.Gionea, 2005, p.293).
7.3 Investment entry modes
Direct investment is a form of entering a new market that involve the direct ownership of
foreign- based assembly or manufacturing facilities. The company can buy part as in joint
ventures or set up a wholly owned company.
7.3.1 Joint ventures
A joint venture is a legal entity jointly owned by two or more legally distinct organisations
which share in the joint venture decision-making activities (J.Gionea, 2005, p. 294). Each
parties in a joint venture may contribute things like marketing expertise, managerial talent,
market access, production technologies, financial capital and R&D knowledge (J.J Wild,
2010 et al, p. 396). Joint venture may be necessary for political and economic reasons.
Political in the sense of government restriction and trade barriers. Economic reasons for a
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joint venture could come from the cost involved in greenfield investment and also the market
size.
One of the advantages of joint venture investment mode is that the risks are shared between
the local partner especially if there is a political or social instability in the target market . The
foreign firm could also benefit from the local partners knowledge on the competitive
conditions, cultural, political systems and the business systems of the host country (J.Gionea,
2005, p. 295).
The drawback this kind of investment mode has is that joint venture can result in conflict
between partners because none of the partners has a final say on decision making. The firm
investing in a foreign country will risk control over its technology to its partner in the joint
venture. The parties involved in joint venture can reduce the possibilities of conflict and
indecision by one of the parties holding the majority ownership in the venture and thus has
more voting rights over decisions (J.Gionea, 2005, p. 296; J.J Wild et al, 2010, p. 398).
7.3.2 Wholly-owned susidiaries
Wholly-owned subsidiary is a facilities entirely owned and controlled by a single parent

company. This can be established in two ways. One is the investing firm setting up a
completely new operation in form of a greenfield investment. The other can come in the form
of acquisition of an established company in this new market (J.J Wild et al, 2010, p.395; J.
Gionea, 2005, p.296).
The major advantage of wholly-owned subsidiary is the total management control of the dayto-day operation and profit in the target market. Also, a known technology could be
transferred to the new market. The main disadvantage of this mode of market entry is the
hugh cost involved and long lead time before the operation could start. The firm could also be
exposed to political and economic risk in the new market.(J.J Wild et al, 2010, p.395; J.
Gionea, 2005, p.296).
8. Determinants of choice of entry mode

The different market entry strategies as explained in section seven above need some other
considerations. This section will look at the variables that determine the best choice of entry
for a company and this will be classified into external and internal factors to the firm.
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Fall 2009
8.1 External factors

From the findings in the PEST analysis, it is pretty clear that the government is encouraging
FDI with series of incentives especially in the telecommunication sector. Some of the
incentives are; Good tariff structure, which ensures investors recover their investment over a
reasonable period of time. Import duty on all telecom equipment reduced from 25 percent to
5 percent. Measures on speedy clearance of goods at the ports. Exclusivity period for licenses
for example 5 years for the GSM licenses and 3 years for long distance international gateway
operators (NIPC, 2009).
The size and attractiveness of the market as shown in table 1 above gives a clearer picture of
how the market is growing over the years. The market share as shown in figure 3 above
shows that the competition type is oligopoly as the huge market has been shared by 3
companies.
As could be seen in the rate of FDI inflow in Nigeria(see figure 4 above), it shows that the
condition of the economy is improving. The real GDP has been stable for over 5 years now
with an average of 5.5 percent(see figure 2 above).
Even though Nigeria is considered as high risk market, the government since the return to
democracy has been doing a lot to bring back the good image of the country.
8.2 Internal factors
Telenor has a varieties of standard products which has given the company a huge market
share in all its operating areas. Telecommunication is a technology intensive sector and the
company could matches any challenges that may arise in the area of technology.
For many years, the companys operating profit has been positive(see table 8 above) which is
an advantage to the company to choice an entry mode that its find suitable for different
markets. The choice of company as explained in the introduction was based on the companys
current operation in some of the countries in Asia. This international experience will reduces
the uncertainty of serving a market and the company can commit its resources to foreign
market like Nigeria (S.Hollensen, 2001, p. 237).
9. Conclusion and recommendation
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This section will give summary of the report and the conclusion will be drawn based on the
analysis made in the report. Also some recommendation will be stated for the company.
The analysis made from the business environment shows some improving and attractive
conditions in the chosen market. From table 10 below4, the average score for the business
envoronmennt is 3.5 which shows the market attractiveness in terms of external factors which
the company cannot affect in any way but has to adapt to if invested in this market. The
political situation has been stable over the years and the country experienced the transition of
power from one democratically elected president to another in 2007 which show a big
progress.
Table 10: Summary of business environment analysis
Factor
Grade
Politica
l
3
Economi
c
4
Social/Cultura
l
4
Technolo
gy
Avg.
Total
14/4=3.
5
The economic condition has a major boost since 2001 and the current president continues
with the same trend as the past adminintration. This continuity has led to the recent
improvement in macro economic apsect of the country. The social cultural apsect also receive
some improvement since the transition to democracy. The introduction of UBE in 1999 and
the rise in school enrolment from 98 percent in 2000 to 120 percent in 2005. The only
stumbling block is the issue of Sharia law in the Northern part of the country and Telenor can
employ the locals to handle the operation in this region while having the headquarter in other
part of the country. The analysis made with Hofstede cultural dimension shows some
similarities between Nigeria and the Asian average which will surely be an advantage for
Telenor in dealing with the cultural diversity in the country.
Technology development in the country has recieve some considerable improvement. For
instance the launching of Nigeria communication satellite in 2007 and also numerous
incentives offered by the government for industry that develop their technology in the
country. The $5.3 billion electricity project awarded by the government earlier this year will
also contribute to the improvement of the countrys technlogical development. Millions of
4 The scale is ranked from poor(1),weak(2), attractive(3), very attractive(4) and

excellent(5)
38
Bachelor thesis
Fall 2009
dollar contract has been awarded to Chinese contractors for the constrcution and repair of the
countrys rail system.
The market shows high opportunities with the Porters five forces having threats average total
of 2.8 which is between low and moderate scale. If one look at each of the five forces of
Porter as explained in relation to Nigeria, one would see that the market is attractive for new
entrance and has a huge business potentials.
From the above discussion, one can see that Nigeria telecom market has a lot of potentials to
offer. The customer demnd for telecom products is very high due to high growth rate of the
market. In Nigeria there is a high number of rural communities which is about 84 percent of
the population (NIPC, 2009). This part of the market is still untapped and a new company
like Telenor could exploit this opportunity as the company did in rural areas of India.
Telenor has gained international experiences in five Asian cuontries which has some cultural
similarities with Nigeria according to the conclusion in the Hofstede cultural analysis. Also
the Asian countries are all developing economy like Nigeria which is an added advantage.
From all the factors analysed above, it has been clear that this new market favours
Investment entry mode and the two types of investment entry mode could be used.
First, Telenor could start in partnership with two of the companies that have the lowest
market share (EMTS- 1.7% and M-Tel-0.44%) and with Telenor long year of experience in
the industry could acquire these two companies. On the other hand, Telenor could also go into
partnership or joint venture with Celtel, the third place competitor in the market, which has a
market share of 24.74 percent. Again with the company experience in this kind of joint
venture, Telenor can gain the majority share of the joint venture and invariably giving the
company a total dominance in management control over decision making process.
Secondly, suggestion will also be made for the company to consider WOFI in the form of
greenfield investment. Telenor has been in operation over 100 years and has gained
international recognition through investing in other countries. Since the market has a lot of
potentials and still at a growing stage, it will be a good idea for Telenor to start its operation
in form of greenfield so as to benefit totally form this new market opportunities and
incentives.
The answer to those questions in the introduction has been solved and Telenor management
should start thinking of when to enter this new market.
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Bachelor thesis
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Bibliography
Published sources
Gionea, J. (2005). International trade and investment. North Ryde: McGraw-Hill
Australia Pty.
Harnischfeger, J. (2008). Democratization and Islamic law:The Sharia conflict in
Nigeria. Campus Verlag.
Hollensen, S. (2001). Global Marketing: A market-responsive approach. Pearson
Education Limited
J.J Wild, K. W. (2010). International Business. New Jersey: Pearson Education.
Kotler, a. K. (2006). Marketing Management. New Jersey: Pearson Hall.
Lynch, R. (2003). Corporate Strategy. London: Pearson Education.
Reports:
OECD. (2003/2004). African Economic Outlook. France: Organisation for
Economic Cooperation and Development.
OECD. (2001). African Economic Outlook(Nigeria). France: Organisation for
OECD. (2004/2005). African Economic Outlook(Nigeria). France: Organisation for
Economic Cooperation adn Development.
OECD. (2007). African Economic Outlook(Nigeria). Frnce: Organisation for
OECD. (2008). African Economic Outlook(Nigeria). France: Organisation for
Telenor. (2005). Annual report 2005. Oslo, norway: Telenor group.
Telenor. (2007). Annual report. Oslo, Norway: Telenor group.
Telenor. (2008). Annual report. Oslo, Norway: Telenor group.
Tella, S. A., Amaghionyeodiwe, L. A., & Adesoye, B. A. (2007). Telecommunication
Infrastructure and Economic Development: Evidence from Nigeria. Sector-led
Growth in Africa and implications for Development (pp. 1-23). Dakar, Senegal:
UN-IDEP & AFEA.
UNCTAD. (2008). World Investment Report. Geneva: United Nation Conference on
Trade and Development.
Baah, A. Y., & Jauch, H. (2009). Chinese Investment in Africa: A labour
perspective. Accra& Windhoek: African Labour Research Network
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Bachelor thesis
Fall 2009
Website:
UN. (2008). Dept of Economic and Social Affair, Population division. Retrieved
November 18, 2009, from United Nation Web site:
http://www.un.org/esa/population/unpop.htm
Central Bank. (2006). Central Bank of Nigeria. Retrieved September 18, 2009,
from Central Bank of Nigeria website: http://www.cenbank.org/
CIA. (2009, July 2). Central Intelligent Agency. Retrieved September 15, 2009,
from CIA.gov: https://www.cia.gov/library/publications/the-worldfactbook/geos/ni.html
ITU. (2009, July 30). ITU. Retrieved October 20, 2009, from International
Telecommunication Union: http://www.itu.int/ITUD/ict/publications/world/world.html
NIPC. (2009). Nigerian Investment Promotion Commission. Retrieved October 20,
2009, from NIPC website: http://nipc.gov.ng/index.html
RedOrbit. (2003, May). RedOrbit Incorporation. Retrieved October 13, 2009, from
RedOrbit web site:
UNESCO. (2008). UNESCO,International Institute for Educational Planning.
Retrieved Novemeber 20, 2009, from UNESCO Website:
http://planipolis.iiep.unesco.org/format_liste1_en.php
WorldBank. (2009). The World Bank Group. Retrieved September 25, 2009, from
World Bank:
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/NIGERIAEXT
N/
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Fall 2009
List of abbreviations in use

PEST- Political, Economic, Social and Technology
GSM- Global System for Mobile communications
NMT- Nordic Mobile Telephony
CIA- Central Intelligence Agency
AEO- African Economic Outlook
CEO- Chief Executive Officer
BPE- Bureau of Public Enterprise
FDI- Foreign Direct Investment
ALRN- African Labour Research Network
NIPC- Nigerian Investment Promotion Council
MEND- Movement for the Emancipation of Niger Delta
ICPC- Independence Corruption Practise Commission
EFCC- Economic and Financial Crime Commission
AP- Associate Press
IMF- International Monetary Fund
NITEL- Nigeria Telecommunication
MTN- Mobile Telephone Networks
NCC- Nigerian Communications Commission
WIR- World Investment Report
OECD- Organisation for Economic Cooperation and Development
ITU- International Telecommunication Union
NOK- Norwegian Kroner
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WOFI- Wholly Owned Foreign Investment

ILO- International Labour Organisation
UNDP- United Nation Development Programme
UBE- Universal Basic Education
NEEDS- National Economic Empowerment Development Strategy
UNCTAD- United Nation Conference on Trade and Development
DTAC- Dental Technologist Association Council
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Kaseem Damilare Ayanlola

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What are the political situations of the new market?

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3. The history of Telenor

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3.2 The Present

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broadband suppliers Cybercity in Denmark and Bredbandsbolaget in Sweden to acquisition

4. Business environment in Nigeria

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could be seen at NIPC.gov.ng)

be written off against profit.

percent for others

established in-plant training facilities.

providing theses infrastructure is tax deductable.

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Source: CIA, World Bank, AEO

1 More on the list of current prosecution could be found on http://efccnigeria.org

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Non oil sector like telecommunication, manufacturing, commerce and agriculture

Table 1: Growth in the telecommunication sector of Nigeria

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702,000 888,534 1,027,519 1,223,258 1,673,161 1,579,664 1,307,625 1,435,279

266,46 1,569,05 3,149,47

18,295,89 32,184,86 40,011,29 56,935,98

588,37 866,78 2,271,05 4,038,00 10,201,72 19,519,15 33,858,02 41,590,96 58,243,61

Source: Adapted from Nigeria Communication Commission

Source: Nigerian Communication Commission

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Figure 4: FDI inflow from 1999-2007

Source: UNCTAD statistics

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Source: Adapted from International Labour Organisation (Laboursta)

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Figure 5: Major Ethnic tribes as percentage of the population

Source: CIA country report (Ethnic groups of Nigeria)

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Nigeria 42 and the Asian average 49.

loyalty. Nigeria was ranked 15 and the Asian average is 20

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4.2 Porters five forces (The market)

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entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers

Source: Marketing Managemment,KotlerKeller, 2009

4.2.1: Threat of new entrants

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Table 5: Summary of Porter five forces

The five forces

5. Exploring new market

Source: Adapted from International Telecommunication Union statistics

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Source: Adapted from International Telecommunication Union statistics

2 India subscription figure is not available as at the time of this report

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5.1 The competitive advantage of Telenor

Source: International Trade and Investment (John Gionea, 2005)