Safaricom

Safaricom

Safaricom a Kenyan based telecommunication company, the largest telecommunication provider in Kenya and the most profitable company in the East and Central Africa. Safaricom began its operations as a department of the Kenya Posts and Telecommunications Corporations in 1993.  During this period, the Safaricom operations were based on the analogue ETACS network, and in 1966 the company upgraded its operations using GSM and received a licence award in 1999 to use the GSM network.  In 1997, was incorporated as a private limited liability company owned and as a fully owned subsidiary of the Telkom Kenya. In 2000, Vodafone Group PLC, which is a United Kingdom-based telecommunication company, acquired 40% of the Safaricom stake as well as management duties and responsibility of the company. The acquisition process led to the declaration of Safaricom as a public company with limited liabilities in May 2002.  The government of Kenya shares were held by a state corporation which was the Telkom Kenya Limited.   Following the virtue of the 60% shareholding owned by the government of Kenya, Safaricom was a considered a state corporation under the state corporate act chapter 446) of the Kenyan law.  In 2008, the government of Kenya offered and sold its  Safaricom ordinary shares of 10,000,000,000, which were equivalent to 25% of the total issued share capital. Hence, the government of Kenya lost its control over the Company.  The Safaricom day to day activities is greatly influenced by the regulations of the  Kenya Communications (Amendment) Act 2008.

Safaricom Limited is the largest, and the dominating mobile operator in Kenya market and the company have grown to include its services in  East  Africa. The Safaricom Company serves more than 23 million which comprises of more than two-thirds of the Kenyan population. The Company have experienced growth and development, which have seen the Company diversify its products ranging from mobile data to electronic products. Primarily, Safaricom mobile telecommunication services are provided under five major segments which include the simu ya jamii, prepaid, postpaid,  business and enterprise as well as international roaming and data services.  Importantly, Safaricom is well known for its M-pesa service, which is mobile-phone money transfer services which are offered in partnership with Vodafone.  Additional services and products offered by the Safaricom limited include customer electronics, e-commerce clouding computing, data, fibre options and also music streaming services which allows the customers to access a wide range of music for entertainment.  The day to day operations of the organization is shaped and influenced by the Safaricom goals and objectives.

Safaricom’s primary goal focuses on transforming lives through the process of providing unique products and services that meet the needs of its customers.  In this case, the company’s strategies are geared towards meeting the customer’s needs in an attempt to achieve customer satisfaction goals.  Further, the Company’s mission focuses on sustaining customers focus as well as a position for future growth development and success of the organization to sustain it in the number one position.  The company strategic approach focuses on the adaptation of technological developments and meeting the customers’ needs of the ever-changing telecommunication industry.

Environmental analysis

The daily operations of Safaricom company are influenced by both internal as well as external factors present in the environment.  The strategic plan, as well as the high technology utilized by the Safaricom company, provides the organization with a competitive advantage over other competing firms. The external environment also plays a role in shaping the success of the organization, some of the external factors include the demographic composition,  government policies, competition,  cultural diversity, among other factors. The PESTEL  framework provides the external and internal environmental analysis that influence the  Safaricom company’s operations and success.

In addition to the focus on the Safaricom political, economic, social, technological and legal aspects,  like other firms in the local and international market, Safaricom faces competition from other telecommunication company. For example, in the recent past, the Safaricom company have faced significant competition from airtel and Telcom on data and voice call rates. The airtel and Telcom company have data and voice call rates that customers consider more favourable than those offered by Safaricom. Porter’s 5 Forces Framework below provides an analysis of Safaricom company competing companies and the trends of competition between the firms.

Discussion

The buyers purchasing power increases with the increase in the number of suppliers for the same product. As a result, the customer can shift from one supplier to the other, especially for undifferentiated goods. Further, the buyers bargaining power increases when the products are offered in large qualities form one supplier. In this case, Safaricom buyers have a high purchasing power as they can purchase a variety of products and access various services from one supplier. Safaricom customers, for example, can access lipa na mpesa services, sending money, data buddle services, m-shwari services as well s accessibility of electronic devices such as mobile phones and decoders from Safaricom company.

The suppliers bargaining power occurs when the demand for the product is higher than the supply. Further, a senior supply bargaining power is characterized by relatively few suppliers in a specific industry which in turn leads to high demands.  The Safaricom suppliers are faced with stiff competition from other suppliers that offer the same products, hence increasing the rate of supplies which adversely impact on the demand.

In porter’s models, the availability and price of substitute influence the market industry of products that meet similar needs or perform similar roles.  The price of substitute products leads to a decline in demand for the product as customers shift to products with lower prices. The presence of other telecommunication companies offering similar services and products have significantly increased the substitute rate for Safaricom products and services.  For example, the shift in data and voice rate services from Safaricom to Telcom and Airtel, which have relatively low-cost data and voice call rates when compared to Safaricom.

The fourth force, according to Port’s model, is the potential entrants in an industry.  The nature of the market for a specific product either attracts or scares other potential investors. In this case, a  ready market attracts new investors into the market-leading to competition to capture market shares, the entry of new firms into a market crate a threat for the already existing firm. The potential entrants for the Safaricom company are low due to the high dominance rate for the already established firms such as Safaricom, Telcom and airtel.  Further, the ever-changing and development of new and strict regulation hinders the entry of new firms into the telecommunication industry.

The last force, according to porter’s model, is a rivalry which primarily focuses on the relationship between a company and other companies offering similar products and services. Safaricom faces stiff competition from two major companies which include telecom (orange) and airtel. Further, the equity bank has also ventured into the market through the use of equity lines.

Resources and Capabilities analysis – VRINE Framework

Over the years, the Safaricom company have been experiencing steady and progressive growth and development which have seen the Company gain dominance and control of the media market controlling more than half of the market.  Over the last three years, the Safaricom Company have recorded high sales in their various products and services.

Evaluation and recommendation

The Safaricom company have dominated the telecommunication industry in Kenya due to the various strategic approaches to its operations which continue to provide the Company with a   competitive advantage over other competing firms. A critical focus on the Company’s strategies using the diamond framework, reveals that the Company’s level of innovation and customer satisfaction are major contributing factors towards the Company’s success.  The graph below demonstrates the economic growth and development of the Safaricom company since  2015, in various products. The graph demonstrates  gradual growth and development in

Arena

The arena focuses on the region of focus in terms of geographical area, market segment,  product category as well as the core technology. The Safaricom company major technological focus is in innovation whereby the Company focuses on coming up with new product and services to solve existing societal problems. Innovation has been recorded as a major contributor to Safaricom success. Further, the Safaricom company have diversified its products which in turn increases the market size for its products. For example, the Safaricom company offers the mpesa services, education, data services,  electronics, m-pesa foundation academy and electronic. As a result, the Safaricom company have a diverse market for its diversified product. The second aspect of the diamond framework is the vehicle which focuses on how the organization intended to meet its set goals and objectives. Since its establishment, the Safaricom company have to focus on acquiring licenses that allow them to produce specific goods and services.

Differentiation is the third aspect of the diamond framework, and it focuses on how the organization will win.  Over the years, the Safaricom company have focused on building its brand, and therefore, the brand plays a major role in enhancing the organization’s image.  Safaricom is the dominating Company in Kenya in matters relating to telecommunication, as a result of its size and influence in the Kenyan economy, the Safaricom uses price techniques to gain a competitive advantage.   Safaricom company accounts for approximately 71.9% of the media market, which demonstrates its dominance and control of the market.  In addition to building the organization brand and image, the Safaricom company contribute to community growth and development through the provision of employment opportunities. In the recent past, The Safaricom company was listed as the best Company with good working conditions in Africa.

Further, Safaricom has built on reliability and customer satisfaction which in turn aids the Company to increase its sales when compared with other telecommunication companies.  Safaricom services and products are termed as the most reliable. For example, more than 90% of Kenyans rely on M-Pesa services to send money when compared to other mobile networks.  Last is the concept of staging, which focuses on the speed and sequence of activities that will aid the organization meet its revenue goals and objectives. The Safaricom company have numerous approaches to meeting its revenue goals and objectives. For example, Safaricom increases their sales through mega sales where products are offered at low cost to promote more sales as well as to eradicate dead stock.

Recommendation

Safaricom company is performing exemplary in the telecommunication industry, and the diversification of product has significantly contributed to the organization’s growth and expansion, including an increase in total revenue. It is, however, important to indicate that competing firms such as Telecom and Airtel are increasingly becoming popular and increased their customers for some services and products. For example, in the recent past, Safaricom recorded a decline in the number of customers using their data bundles and voice call services. The decline arises from the shift of customers from the Safaricom to Airtel and Telcom services which offers the services at a lower cost and with favourable terms and conditions. It is, therefore, essential for the Company to stabilize its data and voice call services in an attempt to win back the customers.  The Safaricom Company should also focus on effective management of e-waste, which is increasingly becoming a challenge in the Kenyan society. The ability of the Company to reuse the electronic devices will significantly aid in reducing the cost of production for some goods and also aid in solving the environmental challenge.