Please read the following document and identify the barriers to entry, andHave to hand the list of barriers to entryCarefully read each paragraphMake notes, listing the number and the appropriate barriers to entryNote whether they are defensive or protectiveIdentify if the barriers are Hi, Med, or LowSuggest ways to reduce those barriersBe ready to pitch findings to the classThe barriers to entry comprise the acronym CRIMSON BLADE:C- channelsR- regulationI – intellectual property M- moneyS- switchingO- overheadN- networkB- brand equityL- learning curveA- aggressive legal reaction D- differentiationE- economiesBarriers to entry discussion document
Document based on the work of Dr O K Mbura, of Mzumbe University, Dar Es
Please read the following document and identify the barriers to entry, and
1. Have to hand the list of barriers to entry
2. Carefully read each paragraph
3. Make notes, listing the number and the appropriate barriers to entry
4. Note whether they are defensive or protective
5. Identify if the barriers are Hi, Med, or Low
6. Suggest ways to reduce those barriers
7. Be ready to pitch findings to the class
The barriers to entry comprise the acronym CRIMSON BLADE:
I – intellectual property
B- brand equity
L- learning curve
A- aggressive legal reaction
Introduction to Smart Telecom and Tanzania
1. SMART TELECOM is a telecommunications company owned by Industrial Promotion Services
(IPS), the Kenyan infrastructure and industrial development arm of the Aga Khan Fund for
Economic Development (AKFED). Smart has announced the launch of a SMART Tanzania
mobile network operating subsidiary in Tanzania.1
2. National borders and distance are no longer obstacles for business. In Understanding Media
(1964), Marshall McLuhan described this shrunken unconstrained world as a ‘global village’,
as there are few secrets from its inhabitants and firms pursue profitable growth in many
national and product markets, where their tactics are to win the hearts and payments of
3. Competition is therefore fierce, as consumer pains, rivals and offerings may change in
particular national and product markets, and therefore, firms are continuously reviewing
their rationale for entering, remaining and exiting markets. One consideration is so called
barriers to entry which may obstruct a new entrant, or protect an incumbent.
4. Barriers may be liberally defined by Franklin M. Fisher as ‘’anything that prevents entry
when entry is socially beneficial’’. This implies that barriers affect firms, industries, and
markets, mature and developing nations.
5. Tanzania is a south west African nation with a landmass is circa 1m km2, population of 55m
and a GDP of circa 55bn. As with all developing nations, telecommunications is largely
facilitated by mobile networks, and the incumbent service provider firms obviously seek to
protect their national market, customers, revenues and profits from new entrants.
6. Furthermore, the incumbents have diversified to provide additional services such as mobile
money transaction services which have not only attracted more customers but also
reinforced relations with existing customers.
7. The incumbents include Tigo Tanzania, Airtel Tanzania, Zantel, Vodacom, all regional, and
international giant service providers with the scale of revenues and services to offer further
services. In addition to facilitating telecommunication between Tanzanian corporate and
private consumers, the activities of the incumbents are also a barrier to new entrants
attracted by the current and future profitability of telecommunication services in Tanzania.
8. New entrants include Sasatel and Smart. This document considers SMART Tanzania
discusses barriers to entry specifically when entering the Tanzanian market.
9. Barriers to entry are the existence of high start up costs or other obstacles that prevent new
competitors from easily entering an industry or area of business. Barriers to entry benefit
incumbents already operating in an industry because they protect an established company’s revenues and
profits from being whittled away by new entrants
10. For a new entrant to succeed in a market, it needs resources of capital, land, and labour,
and competences of specific knowledge and general know how of a customer, a technology,
an industry, a national market and the various disciplines of business that comprise a firm.
The greater the amount of R&C needed, the greater the cost, risk and time needed to win
the hearts and payments of customers.
11. The greater number of customers won, the greater the amount of revenue earnt to pay
head office overhead and invest in promotion to win the hearts and payments of
customers. Unlike the entrant, the incumbents already have those revenues and therein the
confidence to tactically reduce prices, and strategically invest to further secure their market
12. In Tanzania, customers buy subscription cards which allow them to gain a fixed amount of
telephone usage for a specific up front payment. The incumbents give increasing discounts
not just for usage, but more importantly for the amount of time the customer has used a
particular incumbent’s services. In this way, there are switching costs for all customers who
wish to change to another service provider as the customer would then lose its established
13. New entrant Smart may experience barriers from e.g. Tigo, Voda and Zantel. These
incumbents have established relations with the regulators, customers, and also with the
skilled staff necessary to individually and collectively provide a mobile telecommunications
service. Initially, with a high head office overhead per customer and therefore potentially
higher prices, a low brand recognition by customers, unproven systems and technologies to
deliver a good service comparable to the incumbents, how can Smart differentiate from the
incumbents and distinguish itself!
14. Having analysed the incumbents’ offerings, and researching Tanzanian customer needs,
Smart planned to add value to the Tanzanian customer by applying some of its creative
tactical know how earlier gained in its home Kenyan market. Customers buy a sim card for
1,000TZS, talk for free for 30 days, and receive a bundle of services e.g. unlimited internet.
The incumbents capped their customers’ internet usage. For example:
Table 1 : Bundle combinations from different Operators
15. SMART Tanzania added services were also planned to include, information, credit transfers, call
me back, credit loan, on net, build your own bundle, and also market itself on social media with
facebook, Gmail, twitter and Instagram. Smart also planned innovative distribution of mobile
phone devices, and also promotion campaigns that trials suggest are more creative than the
incumbents, and therefore attractive to many customers in Tanzania. Meantime, Smart is
considering the strategic considerations of entering the Tanzanian market.
16. In Tanzania several of the incumbents have exclusive deals with mobile phone manufacturers.
For instance, Microsoft sells a $25 smartphone, while Mozilla offer a $33 phone. Smartphones
are important to the incumbents, because research shows that the mobile content that can
only run on smart phones is what drives consumer interaction, adoption and loyalty.
17. Marco Veremis, CEO of Upstream, a global content provider, says that consumers in Brazil,
India, China, Nigeria and Vietnam are amongst the world’s top 10 content markets and prefer
certain kind of mobile content. For instance, content and apps for networking (82%), music
(81%), news (78%), gaming (65%), lifestyle (54%), books (53%), business or financial services
(46%), health services (33%) and educational services (41%). He says that ‘By aligning these app
types with culture-specific factors such as language, brands increase their chances of not only
targeting consumers, but retaining them’.
18. In this regard, .Tigo, Voda and Zantel. Have already developed local content, and some of
which is identified by names and images and other intellectual properties specifically
developed in Tanzania, and subject to trademarks and copyrights. These properties are
increasingly the basis of the incumbents’ differentiation.
19. To enter the market, Smart would also need to invest in similar properties which over a
period of time will have to be maintained, promoted, by Smart and eventually adopted and
used by customers.
20. In Tanzania, land is owned by individuals under government supervision. SMART Tanzania
as a new entrant Smart must apply capital to acquire land not only to build a head office,
but and also build or rent local offices to support its customers in the particular cities and
towns of Tanzania.
21. Many of the best land sites have already been bought or rented by the incumbents of the
telecommunications industry and by firms in other industries. Further, the incumbents have
relations with local politicians and may seek to obstruct Smart from making such
acquisitions and deprive them of access to important business locations and consumer
shopping areas. Some politicians may need payment!
22. The incumbents also have relations with the local business community and the ten leading
Tanzanian retail brands, to distribute their sim cards. All the incumbents have established
contracts with TIGO, ARTEL, ZANTEL. Reputedly Sasatel recently tried to sign contracts with
these retail brands, and the incumbents collectively worked together, even though they are
competitors, to stop the retailers contracting with Sasatel
23. Calls from one city to another city are transported by the government’s
telecommunications underground network infrastructure. Further, Internet usage is
growing fast and therefore surplus network bandwidth which is traded by the government
is reducing, and prices are therefore rising for all providers- particularly the smaller
incumbents, and therefore market entrants
24. Alternatively, Smart could build its own network. Meanwhile, several of the incumbents, in
conjunction with the government established Consortium Fiber, a joint venture between
TIGO, ARTEL, ZANTEL. Entry to the consortium would require time and payment of a permit.
25. Consortium fibre does not only connect one part of the country with another, but also uses
a different and new technology than the government’s old infrastructure. There is limited
interoperability between the new technology and the old infrastructure, which means that
some telecoms services may not be available in some cities of Tanzania, and that service
providers need to run two competing technologies.
26. This new technology is exclusively distributed in parts of Africa by Telecomex, an
infrastructural service provider with operations throughout Africa. Recently, and in another
country, a new entrant using the technology in another market, tried to import the
technology into a country in which Telecomex operated- Telecomex used all its resources to
employ the best and most expensive legal advisors to block the importation. Telecomex is
known to be legally aggressive.
27. Calls within urban areas are transmitted by airwaves, for which a service provider needs a
terms of Business and Frequency license. Frequencies are managed and allocated by the
Tanzanian Communications Agency, i.e. TCA, a government organisation, and almost all
frequencies are already allocated to the incumbents, who are also applying for further
28. Smart has knowledge of telecoms, of telecoms in Africa, and of telecoms for Swahili
speaking users, i.e. the language of East Africa. But it has no know how of Tanzania
geography, of connections in Tanzanian government, of connection in Tanzanian business.
Nor does it have a team of people in Tanzania who are used to collectively working on
Tanzanian telecoms technologies, or delivering services to Tanzanians. In short, it has to
gain this knowledge to first compete.
29. According to Consider Fred Reichheld of Bain Consulting, customer loyalty is manifested in
loyalty to a brand, and is the primary aim of a business (Leahy T, 2012). Loyal customers will not
only consistently purchase products from their preferred brands, often regardless of the price,
but also willingly suffer momentary reduced service levels not otherwise accepted by the
customer from new service providers.
30. The incumbents already have viable Tanzanian businesses, serving the most economically and
high spending people. Such loyalty to e.g. the Tigo, Artel and Vodacom brands is reinforced by
consistent and familiar advertising.
For reference, below please find the proposed market entry budget of Smart Tanzania
Table 2: Vodacom CSR Impact to the Market
Monthly Investment Vs Subscribers
Reporter, T. G. (2013). Tanzanian firms leading in East African CSR shortlist.
Smart Telecom enters crowded Tanzanian mobile market. (n.d.). Retrieved from
Tanzania Telecom Market Statistics. (n.d.). Retrieved from
TCRA. (n.d.). Retrieved from https://www.tcra.go.tz/index.php/licensing/licensed-operators/2-tcra/39network-services-licences
Vodacom CSR Activities. (n.d.). Retrieved from http://www.itnewsafrica.com/2012/06/vodacomtanzania-to-invest-77-million-for-upgrades/
First, go to the Ethics link, and submit the participation and the risks
Use this handout to analyse the case study. Each paragraph of the case study is numbered. Write the number in the left hand column, the name of the
barrier in the second column, describe it from the case in the third, identify if the barrier is high, medium or low, i.e. difficult to solve, or relatively easy, and
finally write the solution
Complete your ethics
Go to the Ethics tile in Moodle
Identify the risks handout- complete and submit to the assignment link
Identify the participation handout- complete and submit to the
assignment link in Ethics
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