Celtel Nigeria: Towards serving the rural poor (A) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Celtel Nigeria: Towards serving the rural poor (A)

Background

The case Celtel Nigeria: Towards serving the rural poor (A), provides the overview of the mobile telecommunication sector in Nigeria for the period of mid-2007. The case basically describes the detailed socio-economic and demographic information of the industry. Celtel is the second largest mobile telecommunication company operating in Nigeria with a market share of 28% and a subscriber base of more than 8 million. Essentially the company Celtel Nigeria has been serving urban cities of Nigeria for a long period of time. Recently the company under the leadership of Lars Stork is looking to shift its focus from being a service provider for urban population to rural market. The company has seen great potential in the rural market of Nigeria which is un-tapped and has a massive population that can be catered once entered the area. Although the shift from urban perspective to rural perspective is not an easy one but it has great potential. The great potential and growth opportunity comes along with some issues regarding the movement in rural areas.

The biggest obstacle for any telecommunication sector entering the rural area is the absence of reliable national electricity grid. Without electric facilities in the area, telecommunication towers will be run on diesel generator which can lead to high-maintenance and fuel cost. Along with this, urban areas in comparison to rural areas have theft and vandalism issues with the theft of generators and other machinery involved in the activation of telecommunication services. To overcome the issue of theft, full-time security guards are required on each tower station which again increases the overall cost for the company, Celtel. The distribution and marketing network of Celtel is also a concern because the firm has focused on its urban customers and has not developed any marketing or distribution system in rural parts of Nigeria. Celtel at the moment is the third most recognized telecommunication company behind MTN and Globacom. This is again a sort of hindrance for the organization when entering the rural market of Nigeria. Another barrier while entering the rural market is that the demand for telecommunication services in the rural area is seen as a costly facility by people in general and they prefer not to purchase a mobile phone. With all issues Lars Stork is aware that the telecommunication industry in Nigerian rural market has immense potential therefore, he is pondering over ideas and opportunities to explore the un-tapped market of Nigeria’s rural regions.

The case fundamentally explains the idea of serving the low income customer segment through appropriate marketing strategies. To achieve this goal, the company must overcome prevailing internal and systemic hurdles. First, the distribution is inefficient; the few points-of-sale in the rural Nigeria are very spread out. Secondly, the unreliable power grid would require Celtel to invest in generators which usually are theft targets. Moreover, the Celtel brand is largely unknown and rural media isn’t too efficient due to vandalism and poor coverage. Finally, most rural people are poor; they have little access to phone devices and they demand lower prices.

Main Issues

PEST Analysis

Political:

The political condition of the country is unstable with the newly elected president Umaru Yar Aidua who is trying to settle in his role as the president of the country. The biggest challenge ahead for the president is to make sure that the supply of power is re-installed. As for now, all the major companies in Nigeria are hampered by the short fall of electricity in the country. Further, the level of income for people in both urban and rural area is very low. In rural areas where the income is less than the overall region, along with this the instability across the Delta region has also struck the economy in a negative manner. Different religious and tribal groups also influence the decision-making of people in the country.

Economic:

The country is highly dependent on oil reserves as the major income generating opportunity. The GDP growth rate of the country is approximately 5.5%. The average family income of the country is ($32) per month which indicates the low level standard of living. There are also significant economic disparities between rural and urban population. 65% rural and 35% urban population is defined as poor with earnings of $1 per day. The amount of saving is not more than 18% of the total income per month or $5.76. With such low levels of income, the ratio of corruption and crime is very high in most parts of the country especially the rural regions.

Social:

The population of Nigeria consists of a majority of Muslims which accounts for more than 50% population, whereas 40% population is Christians and the rest of the 10% accounts for diverse ethnic and religious groups. Three tribal groups represent almost 60% of the population Hausa 29%, Yoruba 21% and Lgbo 18%. Historical tension between religious groups frequently outbursts in to violence, the literacy rate are high with more than half of the population having the ability to read and write English.

Technological:

The limited resources of reliable infrastructure are a big hurdle in the telecommunication industry of Nigeria, specifically the electric power, roads and water infrastructure. Telecommunication structure is also rapidly rolled-out but network coverage is still absent or poor in many areas of Nigeria.

Porter Five Forces Model

Bargaining Power of Supplier: Low

The bargaining power of supplier is low for the telecommunication industry in Nigeria. With three to four major competitors competing in the industry, it makes the competition quite tough for everyone. They have to offer lower prices with promotions and different schemes to make sure their GSM is purchased......................

This two part case study, which deals with an innovative approach to serving Celtel Nigeria's rural poor. The housing contains an overview of the mobile market in Nigeria as of mid-2007, as well as detailed demographic and socio-economic information. At the time of the case, Celtel Nigeria is the second largest mobile phone company in the Nigerian market. The company has experienced significant success in the service of Nigerian cities and large towns, but only recently changed its focus on serving the poor consumers in rural areas - a massive, but still under tapped market. But this shift from urban to rural was not easy, and while about 50% of the Nigerian population in the rural areas the problem of achieving them sometimes seem overwhelming. The lack of reliable national power grid means that the rural telecom tower company have to work on diesel generators, resulting in high maintenance costs of diesel fuel. Theft and vandalism of expensive communications equipment and generators has become one of the main problems, which leads to the need to use a full-time security guards at almost every site base stations outside the urban areas. At the end of the case, Celtel Nigeria COO Lars Stork bites on issues involving benefits of mobile communications in Nigeria's rural poor, setting the stage for the analysis of potential students in the sentence-to-market approach for the company. Case B shows how Celtel managed to implement innovative marketing strategies to serve low-income rural consumers. At the heart of this marketing approach is what is called the Rural Initiative Acquisition (RAI), a micro-franchising model involving partnerships with local businesses. "Hide
by Jamie Anderson, Martin Kupp Source: ESMT - European School of Management and Technology 20 pages. Publication Date: March 27, 2009. Prod. #: ES0961-PDF-ENG