Copenhagen business school 1 Cand.Merc INTERNATIONAL MARKETING AND MANAGEMENT MASTERS` THESIS HOW AN MNC CAN ENTER PAKISTANI TELECOM MOBILE MARKET- Tailor MADING THE STRATEGIES Author: Nabeel ahmad advisor: Juliana Hsuan, Ph.D. Associate Professor Copenhagen Business School Dept. of Operations Management Date of hand-in: January. 5, 2009 Dept. of Management, Politic and Philosophy Copenhagen Business School 2 Acknowledgements It has been a great pleasure to write this Master´s Thesis. I have gained a lot of knowledge within area of my interest “ international business and marketing” and developed my skills in academic writing. I would like to thank all the individuals who helped me throughout the writing process, and provided continual support and assistance. I would like to extend special thanks to Pakistan telecommunication authority, which provided me tremendous information and statistical support. I would also like to express my gratitude to Sales and Marketing Managers of leading Pakistani cellular companies for giving me time for interviewing them, as they were my key data sources. I hope this thesis report will be interesting and helpful material for other students and researchers who are interested in same areas of research. Finally, I would like to whole heartedly thank my supervisor for thesis RESPECTABLE Juliana Hsuan, Ph.D.Associate Professor, Dept. of Operations Management, CBS For her constant guidance and encouragement. This paper would have not been possible without her keen knowledge and expertise. I am sincerely grateful to her. Copenhagen business school, December 2008 NABEEL AHMAD 3 Table of Contents Introduction .......................................................................................................................................1 1.1Background ....................................................................................................1 1.2 Research Problem…………………………………………………………… 2 1.3 objectives ..........................................................................................................3 1.4 Demarcations of study........................................................................................3 1.5 Outline of Thesis .................................................................................................3 Literature review……………………………………………………………………………………..…4 2.1problems of strategy research in developing economies…………………………4 2.2 concept definitions……………………………………………………………… 4 2.3 institutional theory………………………………………………………………..5 2.4 resource based view………………………………………………………………11 2.5 market analysis…………………………………………………………………...13 2.5.1 Consumer analysis…………..................14 2.5.2 competitor`s analysis…………………….16 2.6 competitor`s strength & weakness analysis………………………………………..18 2.7 market entry strategies……………………………………………………………...20 2.7.1 Firm specific variables……………………..21 2.7.2 Environment specific variables…………….23 4 2.8 summary……………………………………………………………………………..24 Methodology ........................................................................................................................................24 3.1 Research Approach....................................................................................................25 3.2 Research Strategy ......................................................................................................25 3.3 Data Collection methods ……………………………………………………………..27 3.4 Data Analysis .............................................................................................................29 3.5 standard of Research ...................................................................................................30 3.6 Errors in Research process ..........................................................................................32 3.7 summary of methodology……………………………………………………………...33 3.8 research model…………………………………………………………………………34 Empirical Study ...................................................................................................................................35 4.1 External Environment for telecom market.....................................................................35 4.1.1 Constitutional and legal environment………….35 4.1.2 Economic environment……………………..…36 4.1.3 Financial environment……………………………38 4.1.4 Technological environment……………………….39 How MNC can start business in Pakistan………………………………………………………………39 5.1 license requirement ………………………………………………………………….39 5.2 type s of business organizations……………………………………………………....40 5.3 listing of companies and securities……………………………………………...……40 5.4 foreign investor……………………………………………………………………….41 5.5 accounting an auditing…………………………………………………………..……41 5.6 closing a business……………………………………………………………………..42 Telecom market analysis……………………………………………………………………………….43 6.1 Overview of Pakistani telecom market………………………….43 6.2 introduction………………………………………………………44 6.3 deregulation and its impact on telecom………………………….44 5 6.4 growth of telecom market in Pakistan……………………………45 6.4.1 fixed line segment………………….45 6.4.2 Wireless local loop segment………..45 6.4.3 Mobile segment…………………….46 6.4.4 Payphone cards segment…………...46 6.4.5 Internet segment……………………..47 6.5 telecom imports…………………………………………………………….…….48 6.6 taxes on telecom market…………………………………………………….…….48 6.7 employments in telecom market…………………………………………………..49 6.8 mergers & acquisitions in telecom market……………………………….……….49 6.9 investment opportunities in telecom market………………………………………50 6.10 Empirical analysis of consumers……………………………….……………53 6.11 Empirical analysis of competitors…………………………………………...57 6.11.1 pakistan telecom company ltd……………….57 6.11.2 mobilink………………………………………60 6.11.3 warid telecom………………………………....62 6.11.4 zong Pakistan……………………………….…64 6.11.5 telenor……………………………………...….66 6.11.6 Tele card………………………………….…...68 7.1 key success factors……………………………………………………………….71 8.1 Theoretical conclusion…………………………………………………………....72 9.1 Empirical conclusion…………………………………………………………..….76 9.1.1 Joint ventures and alliances………………….76 9.1.2 Mergers and acquisitions.........................…...77 recommendations…………………………………………………..………………………79 6 INTROUCTION KEY WORS: MNC, developing economies, entry mode, institutions, telecom market ABRIVIATIONS ARPU- average revenue per user KSF- Key Success Factors MNC- Multinational Corporation GPRS -General Packet Radio Service EU- European Union PTA- Pakistan telecommunication authority WTO- World Trade Organization PTCL- Pakistan Telecom Company limited PTA- Pakistan telecommunication authority WLL- wireless local loop CDMA- Code Division Multiple Access LL- local loop ISP- internet service providers FDI- foreign direct investment GDP- gross domestic product LDI- long distance international 3G- 3 rd generation mobile communications GSM- global system for mobile communication VOIP- voice over internet protocol 1.1 BACKGROUND The motive behind writing this report is to unfold the strategies and findings, a MNC can exploit to initially enter and later on establishing itself on targeted telecommunication sector of Pakistan. In this era of hyper competition, national and multinational organizations continue to face challenges to succeed in a globally integrated world. In doing so these organizations uncover more challenging dimensions of their business models, which are necessary in order to stay competitive in developing economies like Pakistan. If we study the contemporary investment and strategic management, it is quite obvious that over past few decades developing economies are the most favorable destinations for MNCs to invest and establish operations as compared to saturated developed economies. But entering and competing in these developing economies like Pakistan is not a smooth sailing, it posses great threats along with the opportunities of abnormal profits. First steps towards entering these mass developing economies is to analyze the state of economy of targeted country (Pakistan). The analysis includes telecom market analysis and its two major 7 components customers and competitors. And this analysis is based on microeconomic, meso- economic and macroeconomic scenario. Microeconomic variables include the current situation within telecommunication sector. Where as meso and macro levels demonstrate the current situation in telecommunication sector, economic, political, and social and business environment of the host country. Among the prominent features of developing economies (Pakistan) are complex and very turbulent, instable and unreliable political and economic environment accompanied by poor legal system and totally different cultural taboos and norms. Despite all these passive variables, there are still lots of opportunities for MNCs in these markets because of size of these untapped markets and relaxations given by the governments of these developing economies to foreign investors. Furthermore, exploring into emerging economies can provide MNCs with access to a fast-growing population that is potentially the most exciting growth opportunity of the future (Hart and Christensen, 2002). But the important and crucial question is “when” and “how” to enter these markets and after successfully entering tailor making the strategies in order to compete and gain competitive advantage. This also addresses the main research problem of my report. 1.2 RESEARCH PROBLEM Keeping in view the above mentioned description for a MNC in order to enter a developing economy, we can chalk out our main research problem How a multinational company operating in the telecom industry can successfully