Porter’s National Diamond Analysis to South African Mobile Telecom Industry

This document discusses Porter’s National Diamond Analysis to South African Mobile Telecom Industry. It covers the factors conditions, demand conditions, related and supporting industries, firm strategy, structure and rivalry, government, and chance. It also talks about market entry strategy and contemporary management issues such as quality of work life of employees and corporate governance. The document is relevant for students studying Global and International Business Contexts (SM0269) at Northumbria University Newcastle.

Global and International
Business Contexts
(SM0269)
Northumbria University Newcastle
Name: Zhou Yuchun
ID: 18039145

Table of Contents
Part 1.....................................................................................................................................................2
Porter’s National diamond analysis to South African Mobile Telecom Industry:..............................2
Factor Conditions:.............................................................................................................................3
Demand Conditions:..........................................................................................................................4
Related and the Supporting industries:..............................................................................................4
Firm Strategy, Structure and Rivalry:................................................................................................7
Government:......................................................................................................................................7
Chance:..............................................................................................................................................9
Part 2...................................................................................................................................................10
Market Entry strategy:.....................................................................................................................10
Part 3...................................................................................................................................................12
Contemporary Management Issues:.................................................................................................12
Quality of the Work life of the Employees and Corporate Social Responsibility............................12
Corporate Governance:....................................................................................................................14
Conclusion:..........................................................................................................................................15
Reference:............................................................................................................................................17
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Part 1
Porter’s National diamond analysis to South African Mobile Telecom Industry:
Michael porter has developed the porter Diamond model. He has explained the
reasons as well as the factors behind the reason of becoming competitive in a specific market
setting, developed by the companies. This is the approach which has utilised the clusters of
the industries, for ensuring the competitiveness of a specific company is being compared in
the sector of performance with any other company (Castro, Espina, & Tinoco, 2017).
While an organization tries to shift and establish their position in the foreign country,
the Porter’s Diamond Model can be used as the main purpose is to ascertain the different
business-related opportunities along with generate competitiveness in comparison to the other
competitors which are present in the market. In the respective aspect, the Porter’s Diamond
Model will be appropriate for identifying and analysing the competitiveness of the telecom
industry in South African market as it will be suitable for assessing the different opportunities
which will be available for them in the South African market and gain competitiveness which
will be suitable for the overall success of the company in comparison to the other competitors
present in the respective market(Meschi, Phan, & Wassmer, 2016).The structure below is
displaying the major factors considering the diamond model.
Figure 1: Porter extended diamond model
(Source:(Herciu, 2013)
Factor Conditions:
In this case, factors are principally comprised of the certain resources like the physical
resources, capital resources, knowledge resources, infrastructure etc. There is the existence of
some special resources where an extremely influential role is being played in a specific
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industry for gaining competitive benefits. In the framework of the establishment of the
establishment of the industry regarding telecommunication, a significant role is to be played
by the below factors which assists the industry for the gaining of the competitive
advantage(Fang, Zhou, Wang, Ye, & Guo, 2018).
With the human resources, the created factor conditions include the different factors
which is inclusive of the skilled workforce, good infrastructure along with scientific
knowledge base which plays a crucial role in generating competitiveness. As commented by
Porter, the different created factor conditions need to be upgraded in the constant manner
with the help of the development of skills along with creation of the new knowledge(Naidoo,
Donovan, Milner, & Topple, 2016). In case of the respective telecom sector, which is shifting
their operations in South Africa, there can be issue related to the slowdown of the processes,
in such scenario, as the basic factors provide the initial advantage and these should be
supported by the different advanced factors as to maintain success(Hollender, Zapkau, &
Schwens, 2017). On the contrary, there should be proper advancement of the factor
conditions through development of skills which will be suitable for creating the specialized
factors and then continually work on them for upgrading the same (Wonglimpiyarat, 2018).
Demand Conditions:
According to this factor, the home country is required for playing a tremendously vital
role. A pivotal role is being played for understanding the desires as well as the requirements
of the customers. Therefore, the factors have proved to be helpful in a specific way for the
creation of the attributes (Gunarathne & Senaratne, 2018).
In the respective scenario, the demand conditions play a crucial role which enables the
better understanding of the needs along with desires of the different customers in a suitable
manner( Wan, Orzes, Sartor, & Di Mauro, 2019). Moreover, in case of the South African
Telecom Industry, the demand conditions will be suitable for shaping the attributes of the
domestically prepared products along with services which created pressure on quality and it
creates huge pressure for quality along with innovation that will be playing a successful role
in the overall growth of the company positively.
On the other hand, it can be seen that in the telecom industry, there are different
competitors present in the market which are constantly upgrading the technology to meet the
expectations of the customers and gain revenue. In the case of the respective telecom industry
in South African market, the innovation is the key element, else the company can face
tremendous challenges in competing with the other competitors. In the present scenario, the
different customers are more attracted towards the companies and products which are
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technologically advanced as they prefer to invest in the products which will be serving their
needs(De Villa, Rajwani, & Lawton, 2015).
Related and the Supporting industries:
With the help of the Related and Supporting Industries, it helps in providing the
overall foundation through which the focal industry will be able to excel in an appropriate
manner. In the respective aspect, the suppliers play a crucial role in enhancing he innovation
with the help of more efficient along with high quality inputs which will be suitable for the
growth of the telecom sector companies in a suitable manner. For making the company
competitive and help them in succeeding, through the suppliers who are supportive and it will
enhance their global competitiveness(Cappelli & Keller, 2014). For instance- In Silicon
Valley, the different tech-giants along with tech-start-ups are being clustered for sharing their
ideas along with stimulating the innovation which will be efficient in managing the overall
growth in a successful manner.
The further companies get motivated as well as stimulated in the same chain for the
undertaking of the innovations. In South Africa there is developing trend of the
telecommunication (Turban, King, Lee, Liang, & Turban, 2015). On the other hand, there
can be different kinds of issues which includes the fact that there can be lack of support from
the supporting industries present in the respective country which will be leading to the
ineffectiveness in the growth of the company in a negative manner. In case of telecom
industry, the other competitors might not provide the smooth and sound establishment for the
new telecom companies which will be leading to the ineffectiveness of the company in the
respective country(Griffin, 2013).
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Figure 2: Factors of Porter’s Diamond Model
Source:(Griffin, 2013)
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Firm Strategy, Structure and Rivalry:
In such scenarios, the long-term corporate vision is the major determinant for the
success and it assists in providing the ability to the companies to sustain and develop the
competitive advantage which requires the respective attribute. Moreover, the proper presence
of the domestic rivalry helps in improving the competitiveness of the company and it will be
suitable for the success of the company which will be delivering the appropriate results in the
future(Sbia, Shahbaz, & Hamdi, 2014). For developing the competitiveness in the market, the
domestic rivalry forces the company to develop the unique and sustainable strengths along
with capabilities which will be suitable for the success of the growth of the respective
company in South African market of telecommunication (Horwitz, 2017). .
In addition, on the contrary, the intensive pressure of the competitors which are
present in the market can create negative impact on the growth of the company. Moreover,
the local conditions of the company affect the strategy of the firms while they establish their
presence in the local market and it can be ineffective for the growth in a negative
manner(Holmes Jr,, Miller, Hitt, & Salma, 2013).
Government:
The government intervention can take place towards the local level, national level,
regional level, as well as supranational level. Ample opportunities are being provided by the
Government of the South Africa towards the foreign investors as well as the foreign investors
are encouraged for entering inside the market that contributes for the growth of the GDP of
the country(Konsolas, 2017). Additionally, the main role of the government is to encourage
the telecom companies to raise their performance through enforcing the strict standards of the
product. The government can be enforcing and stimulate the early demand for the different
products which are advanced in nature which will be suitable for the growth of the company
and it will be enhancing the overall effectiveness(Mathur & Singh, 2013).
Through the help of the government interventions, it will be showcasing the major
innovations which will be suitable for reshaping the structure of the entire industry. However,
on the contrary, the regulations of the government can alter the home demand conditions
which can be affecting national advantage negatively(Blonigen & Piger, 2014). From the
overall perspective, it can be analyzed that government can assist the overall development of
four aforementioned factors in the manner which will be proving to be advantageous for the
telecom industry in the South African market and it will be moving to the achievement of the
higher level of competitiveness(Herciu, 2013). It is to be ensured by the government about
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the competition which is active in the domestic market as well as the Trust Unfair situation is
required to be avoided. It is believed by Porter that the protection is regarded as an obstacle in
the formation of an industrial competitiveness(Wonglimpiyarat, 2018).
Chance:
This is the element which is regarded to be critical as discontinuities are discussed by
them that leads towards the success towards some of the companies as well as failures for the
further companies (Ismail & Aman, 2018). Moreover, there can be different kinds of external
factors such as war or natural disasters that can affect the growth of the telecom sector in
South African economy as it will negatively affect the country or industry. However, with the
discontinuities which will be created by chance can lead to the advantages for some and
disadvantages for the other companies which are present in the competitive business
environment which will be affecting the overall effectiveness negatively(Molendowski &
Żmuda, 2013). Some of the firms may gain the competitiveness and achieve the competitive
positions, while the others may lose. While the respective factors cannot be changed, they
should at least be monitored in a proper manner which can be suitable for making the
decisions as it is necessary to adopt to the market conditions which are changing in nature.
Therefore, the factors discussed above are required for providing due importance by
the companies for the gain of the advantage which is added over this factor. It is being
claimed by porter that there exist numerous possibilities for the growth of the opportunities
through the science as well as in the technologies, a breakthrough regarding the traditional
technology, the external factors which results the increment of the production cost, the
exchange rates that are floating, the substantial fluctuations of the finance market, surging of
the demand of the market, the policy of the government and so on. The opportunity become
standard in both the ways(Gunarathne & Senaratne, 2018).
Part 2
Market Entry strategy:
The Foreign Direct Investment is defined as the investment which is in the form of controlling
the overall ownership in the business which is being shifted from one country to the other country.
The FDI occurs when the individuals or the business entity owns the minimum of 10% capital in the
foreign organization. In the respective scenario of the South African Telecommunication Industry, it
can be seen that the FDI can be made into the business or the sector by the company from another
country. However, the same is different from the portfolio investment that is being made in a more
indirect manner in the economy of the other country by utilising the financial instruments which is
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inclusive of the bonds along with stocks. Moreover, it does provide the investors a voice of the
different policies along with procedures of the company through offering the opportunity to influence
the future decisions for the mutual benefit wherein everyone is involved in the respective process.
The companies which are in the plan for expanding the business for globalising the
operations are on the way to initiate developing a market entry strategy. An organization that
requirements to capitalize its wealth in further country so that business can be started in the
separate country has to visit through numerous research as well as examination(Hlatshwayo
& Saxegaard, 2016).
Advantages
With the incorporation of the Foreign Direct Investment, it can be identified that it
will be helpful for the economic development stimulation through proper creation of the
conducive environment for the investor along with the local industry of the telecom sector in
the respective industry(Chen, Cui, Li, & Rolfe, 2017). Moreover, the other main advantage of
the FDI for the telecom sector in the South African industry is the development of the human
capital resources which is considered to be the competence along with knowledge of the ones
who have the ability to perform labour which will be beneficial for the workforce.
Moreover, with the inclusion of the foreign direct investment, it will be helpful in
increasing the overall productivity of the company as the different facilities and equipment
which is being provided by foreign investors which will increase the workforce’s productivity
in the target country(Jinachai, Anantachoti, & Winit-Watjana, 2016). The increment in
income is the other advantage as it will be increasing the income of the target country
efficiently. In addition, through the incorporation of FDI, it helps in reducing the disparity
between the revenues and costs and South African Telecom sector will be making it sure that
the costs related to production will be the same and it can be sold in a positive
manner(Mboya & Kazungu, 2015).
Disadvantages
On the other hand, there are different kinds of disadvantages of the foreign direct
investment for the South African Telecom sector wherein there can be hindrance to the
domestic investment as it mainly focuses the resources elsewhere other than the home
country of investor. In addition, it has been noticed that due to the FDI, it can be affecting the
currency exchange rates as in the developing country with the struggling kind of currency
may see surge of popularity after the FDI. In such scenarios, the people and companies see
the investment as the sign of the stability and it helped in creating additional interest in the
market which is being examined in a positive manner(Ayden, Demirbag, & Tatoglu, 2017).
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From the analysis of the advantages and disadvantages of the Foreign Direct
Investment, it can be identified that there can be different other options which are suitable for
the telecom sector for shifting from one place to the other. The two other relevant market
entry modes which are suitable for the respective aspect are as follows:
Franchising is one of the suitable options as under the same, the independent
organization called the franchisee operates the business operations under the name of the
company known as franchisor. It is considered to be the form of licencing, however with the
incorporation of the franchising option, the franchisor needs to exercise more power and
control over franchisor(Riasi, 2015).
Exporting is the other aspect which can be adopted by the respective company as it
will be helpful for them in minimizing the risks and investment and the speed of entry is the
other aspect which should be managed by the company in a positive manner. Through the
utilisation of the same, there will be maximisation of the sales and it uses the existing
facilities in a suitable manner(Griffin, 2013).
From the overall analysis of the two other entry mode strategies, it can be
recommended that the most suitable foreign entry mode strategy is the franchising aspect as it
will be providing the telecom sector of the South African economy with high Rate of Interest
and it will be beneficial in circumventing the trade barriers suitably which will be leading to
the overall growth of the company in comparison to the other competitors which are present
in the market successfully.
Part 3
Contemporary Management Issues:
The rudimentary goal about utilising these methods by the company is about lowering
down costs as well as money is saved(Ndoro, Chirikure, & Deacon, 2017). In the respective
scenario, the main contemporary issues which should be considered include issues related to
employee dissatisfaction as well as no such inclusion of the corporate social responsibility
related factors. In the aspect of the South African telecom sector, it can be identified that the
management in the current era is difficult and there are different challenges which are being
faced by the management that affects the growth of the companies negatively(Hollender,
Zapkau, & Schwens, 2017). There remain many issues in the sector of the contemporary
management issues which is comprised of the Corporate Social Responsibility, Business
Ethics, Quality of Work Life as well as Quality Circles, Transparency and Corporate
Governance(Butler, 2017).
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Quality of the Work life of the Employees and Corporate Social Responsibility
In the respective aspect, the different workers are leaving the jobs as they are not satisfied
with the working life of the different individuals in a negative manner. While implementing the
different aspects such as the inclusion of the different policies and procedures in the companies, it is
required that the employees should be made aware relating to the same as it will help the employers in
making the employees feel that they are the vital asset of the company and it can improve the morale
of the employees while performing the work in a systematic manner as well.
Moreover, while working in the different country, there can be different kinds of issues
related to the cultural aspects that can affect the overall efficiency of the company and it affects the
effectiveness of the company negatively. In such scenario, the companies need to coordinate with the
workers which will be suitable for the overall effectiveness of the company that will be inappropriate
for the success of the company negatively. In such scenarios, the employees feel demotivated and it
leads to the attrition of the employees negatively(Holmes Jr,, Miller, Hitt, & Salma, 2013).
The concern which is visualised by the companies on the aspects of the social
environment is the Corporate Social Responsibility. As per this notion, it has become
extremely advantageous to the companies for giving considerations towards the societal
impact regarding the actions as well as the activities which is required to be undertaken by
them(Phillips & Moutinho, 2017). The issues are required to be combated for this aim.
Initiatives are being taken by the authorities of the government regarding the social programs
as well as the initiatives (Taylor, 2017).
Numerous foremost companies such as the Sony, Johnson and Johnson, etc. are taking
vigorous phases for the promotion of the CSR within South Africa. The elementary goal of
the companies is to display obligation to the society with the assistance of advanced programs
as well as initiatives that purpose at assisting the less industrialized countries in closuring
their area of expansion(M & Lucie, 2014). The companies have taken animportant influence
in the grounds of education as well as training, healthcare as well as social welfare of the
companies of South Africa. They purpose at linking the gap among the skills and recover the
socio economic, heath, as well as education standard of the country(Chauvey, Giordano-
Spring, Cho, & Patten, 2015).
Corporate Governance:
In order to create the opportunity for the companies which are telecom in South
African market, it is necessary for them to focus mainly on the different disadvantages which
will be suitable for the performance in the market of South Africa. In such scenario, the
companies will be remaining competitive and survive in new market of the South Africa
successfully(Griffin, 2013).
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In the South African context, there is the existence of the unique settings of the socio-
culture along with suitable leadership, issue regarding the corporate governance and
employee welfare considerations. It is very much significant regarding the organisations for
focusing on the categories of the management systems which is prevailing in South Africa.
The organisation has majorly focussed on serving the financial interest regarding the
shareholders and the profits are earned (Phillips & Moutinho, 2017)..
This is the way which is required by the company to be successful for the creation of
erecting in the new market along with the vibrant culture of the business as well as highly
satisfied and the stakeholders are valued (Clegg & Matos, 2017). The most significant thing
that is required to be considered is to trail the rules as well as the regulations in an effective
way as well as proper training are being provided to the staff as well as the top management
directors for complying with the obligation of the markets of the South Africa(Butler, 2017).
South Africa is regarded as the sole country for the survey within an important
proportion of acquisition. The acquisition is lower in the infrastructure. The entire acquisition
is being represented more within the affiliates of medium size while the partial acquisition is
general among the major firms. Joint ventures are common among the major parent groups.
Greenfield has become more prominent within the small affiliates.
Distribution of entry mode by sector:
Figure 2: FDI status
Source: (Fang et al., 2018)
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Conclusion:
Therefore, from the above, it can be concluded that with the help of the Porter’s
Diamond Model, the different factors such as factor and demand conditions along with
government along with the chance interventions have been analysed that helped the South
African Telecom Industry to gain more stability and growth in the competitive business
environment. Moreover, it has been noticed that the franchising is one of the most efficient
aspects which should be adopted by the company as it will be enhancing the growth of the
company in the competitive market and it has helped in the sustainable growth aspects of the
companies in the telecom industry in South Africa. On the other hand, there can be different
challenges faced by the company which includes the quality of the life of the employees
working in the company along with CSR related activities which needs to be managed
appropriately by the company for earning huge revenues and improve the financial wellbeing
of the company in a suitable manner.
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