MARKET PENETRATION STRATEGY AS A MEANS OF ENTERING THE NIGERIAN TELECOMMUNICATION (A STUDY OF MOBILE TELECOMMUNICATION NETWORK (MTN))

Abstract

The research work examined Market Penetration Strategies as Means of Entering the Nigerian telecommunication Market, a study of MTN Nigeria.

The study is designed to examine more critically issues where the business formulate its growth strategy, by focusing on selling existing product into existing market and the various objectives it seeks to achieve. The objectives range from securing dominance of growth markets, restructuring markets by driving out competitors through aggressive promotional campaign, pricing strategy and the introduction of loyalty schemes to increase customer usage/patronage.

The chapter one forms the introductory aspect of the project work. The study also reviews the various works of different writers on the subject matter. In the course of the research, various instruments were employed in collecting both primary and secondary data. Data collected were analyzed by the use of tables, simple percentages and chi-square. Data were subject to rigorous analysis in other to determine the research hypothesis objectives.

The last chapter contains the Summary, Conclusion and Recommendations. Overall study aims to show how the company should maintain or increase market share of current products, by a combination of competitive pricing strategy i.e. Penetration pricing, advertising, sales promotion and personal selling.

TABLE OF CONTENT

CHAPTER ONE

1.0       Introduction

Nigeria is often identified as the fastest moving economy and one of the most advanced I.C.T market sectors in Africa. It has the largest population in Africa and Nigeria market’s high level of sophistication markets it an exciting and attractive market in just four years, Nigeria has become the telecoms hotspot for both telecoms operators and equipment supplies. In 2004, Nigeria has about five million mobile lines and about one million five lines, compared with just about 450,000 lines a couple of years ago.

Neilson (2005) in his research on the Nigerian massive telecommunication opportunities observed that “Nigeria represents a telecommunication market of, as yet, almost untapped potential. His report tracks development and growth of the Nigeria telecoms sector from a scenario where the industry had been dogged by poor service and the lack of infrastructure and funds, with the incumbent network NITEL, the country’s only carrier since 1993. However, the arrival of GSM network operators in the evolution of communications in the country.

Neilson conclude that although the mobile market has received the most media attention, and certainly has the greatest potential, the fact is that the entire Nigerian telecommunication is set for further dramatic growth, and has probably achieved less than a quarter of its ultimate potential as at the end of 2007. in this regard, this work lookat the strategies a firm/company need when it embank on market penetration.

Market penetration (also known as market share) is a term that was developed to permit businesses to know what percentage of  all possible sales was represented by their actual sales. In common practice, one measure market penetration by measuring real sales of a given good for a given period and then comparing that total with the total of all sales of that specific good for that same period made by one owns company. Kobulricry and Stoffle (2004) observed “it is important to measure market because one’s own sales of a given period may go up, implying success, but actually not have increased as much as the total sales have increased. In this case one’s share of the market has fallen and one’s penetration has actually weakened”

Kotler (1991) describes “marketing as working with markets which means attempting to actualize potential exchanges for the purpose of satisfying human needs and wants” And in order to satisfy these needs and wants, certain things or activities must be carried out. Considering the day – to – day exchange process, which includes product planning, pricing, promotion and distribution?

One of the reasons behind the successful performance of telecommunication operators in Nigeria is the application of marketing strategies.

The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy. The Ansoff/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing product in new or existing markets. The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy.

This study will concentrate on a specific strategy; market penetration. According to the Ansoff matrix it is a name given to a growth strategy where the business focuses on selling existing products intro existing markets. Market penetration on its own seeks to achieve four main objectives:

-                 Maintain or increase the market share of current products, this can by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated 10 personal selling

-                 Secure dominance of growth markets

-                 Restructure a mature market by driving out competitors, this would require a much more aggressive promotional campaign, supported by pricing strategy designed to make the market unattractive for competitors.

-                 Increase usage by existing customer, for introducing loyalty schemes.

This research work would be looking at preparing and applying effective marketing penetration strategies and this would be concern on how a business competes successfully in particular market (telecoms) Also the strategic decision about the choice of product, meeting needs of customers, going advantage over competitors, exploiting or creating new opportunities, identifying competitors strategies, objectives, strengths, weaknesses and reaction pattern.

An attempt will be made to examine the various market penetration strategies used by telecommunication operators with MTN Nigeria as a case study, in maintaining or increasing the market share of its current products, how it use the strategies to secure its leadership or dominance of growth market; how these strategies restructure a mature market by driving out competitors and how they use customer loyalty schemes to increase usage by existing customers.

Overall a market penetration marketing strategies is very much about “business as usual”. The business is focusing on markets and products its knows well. It is likely to have good information on competitors and customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

This research, synonymously, aims at analyzing the use of market penetration marketing strategies in the Nigerian telecommunication industry/sector, by focusing on the growth strategies where the business focuses on selling existing product into existing markets. In other words, we will seek to determine whether these selected market Penetration strategies have a significant impact on the company’s effort to enter, and dominate a market.

In the second chapter of this research work, relevant literatures of market penetration definitions, concepts, and strategies, with regard to market- penetration marketing strategy would be reviewed.

Also the hypotheses would be tested on a population size highlighted in our methodology in chapter three. However recognizing that companies do not randomly choose one mode of strategy over another, though most are universally acceptable strategies thanks to the endogenous concept of marketing. Results would be presented confirming that effective strategies is relevant to a successful market – penetration strategy in the Nigerian telecoms market and invariably ensure an effective market entry, dominance and survival.

Finally, we shall discuss the results, point out limitations of the study and suggest avenues for improvement and research.

1.2       Statement Of The Problem

Telecom business is the fastest growing area in Nigeria. The growth of telecom in Nigeria has exceeded all estimates and forecasts. The question is not where the demand is, but instead, how to meet the demand. But doing profitable and sustainable telecom business in Nigeria is not an all comer’s affairs, it requires the right information and strategy.

Efficient and effective marketing strategy demands defining the business mission, analyzing the business’s external opportunities and threats, analyzing the business’s internal strengths and weaknesses, formulating goals, strategies, support programs, implementing the programs and gathering feedback and exercising control. These various dimensions concerns questions on the how, what, where, when, who, whom and why of those cognate issues which, if successfully implemented and achieved will help in organizational success, growth and development. In addition to the relevant questions being asked about the marketing process of analyzing market opportunities, developing marketing strategies, manning marketing programs, which enables choosing the marketing mix (the four P’s: Product, Price, Place and Promotion) and organizing and implementing and controlling the marketing effort.

Also important are those variables which are not under the control of marketing managers, but which substantially affect or determine organizational objective.

The main problem of this study is to access the market penetration strategies as a means of entering the telecoms markets. With four GSM networks, Nigeria is now the fourth largest mobile market in Africa and has experienced triple-digit growth rates every single year since 2000, white fixed lines and internet penetration are still low. The arrival of Globacom as a new entrant into the GSM space is expected to see MTN Nigeria communications and Econet (Now Vmobile) begin to sacrifice a small portion of their existing market share. Mtel, the mobile subsidiary of national network operator, NITEL is expected to grow its market share from 5% to 8% in the coming year and Globacoms, Glo mobile is expected to achieve a similar share of the market share.

However MTN despite of these adds remains the acknowledged market leader and this is because of its market oriented strategic planning. MTN also has the largest share in the relevant product market. It usually leads the other networks in price change and promotional intensity. It is the appreciation of the market penetration strategies used by MTN and other networks that informed the study on the subject matter.

The following research questions will also be used to determine the marketing strategies and its applicability, effectiveness, benefits, problems and constraint encountered in the formulation and implementation of market penetration strategies in entering the Nigeria telecoms market.

1.              To what extent is MTN Nigeria aware of the concept of marketing in formulating its marketing strategies, utilization, prospects and benefits?

2.              What are the strategies used and to what extent are these strategies relevant in entering and gaining market share in Nigeria?

3.              What are the roles of the strategies in achieving organizational values and objectives?

4.              How does the environment necessitate marketing strategies usage for operators irrespective of the organization.

5.              How does the applicability of marketing strategies ensure market penetration continuity and survival of companies as a going concern?

6.              What are the likely problems encountered by Nigeria telecom operators in the course of implementing these strategies?

1.3       Hypothesis Of The Study

The objective of this research is to determine whether the way in which companies with regard to telecom operators choose to enter, grow, consolidate and exit a market. Thus the research focuses on the concept and strategies of marketing, with reference to the various ways a leader, challenger, follower and Nicher can penetrate a market.

Hypothesis 1

Ho: Launching of new products at a low price and high promotional level does not bring about fast market penetration and large market share in the Nigerian telecommunication market.

H:   Launching of new products at a low price and high promotional level bring about fast market penetration and large market share in the Nigerian telecommunication market.

Hypothesis 2

Ho: Total quality management and customer satisfaction does not enhance mass-market penetration.

Ho: Total quality management and customer satisfaction does not enhance mass-market penetration.

1.4 Objective of the Study

1.              To examine the relevant marketing strategies in the overall performance of operators in Nigeria

2.              To determine the role of marketing strategies in entering the Nigerian telecom market

3.              To critically analyze the strategies used in market penetration

4.              To provide the basis for establishment of an effective strategy that will gain and consolidate market position in the telecom market.

5.              To establish problems which constraint managers in the application of marketing strategies in market penetration and to suggest recommendation on how these problems can be tackled.

1.5    Scope Of The Study

A lot will be discussed about marketing strategies and penetration strategies from the entry to the mature and declining stage. MTN’s level of involvement and market in the telecommunication industry, how it uses the different strategies at different times to rise in all types position in the market.

1.6    Significance Of The Study

As previously mentioned, ongoing liberalization of Nigeria’s telecom sector has led to a multi-operator environment and skyrocketing investment. Hence firms willing to be of much impact by penetrating the market must take tremendous steps in creating strategies as they arise and are fore seeable. A research of this nature could be significant for a number of reasons.

1.              It will create and reinforce the needed awareness of strategic management and formulating effective marketing strategies as a management concept that telecom operators should embrace in order to improve the quality of service

2.              It will highlight the roles of marketing strategies in penetrating the Nigerian market.

3.              It will help telecom operators’ identity marketing strategies as an important concept that can be applied for improve performance.

4.              It will help firms to forecast into the future and reduce uncertainly associated with the Nigerian business environment.

5.              It will help to establish industrial standards to measure performance of companies.

6.              It will contribute to the body of knowledge and create room for future work.

1.7       Limitation Of The Study

In the course of this research a number of constrains were encountered. First, the dearth of qualitative data to sift for formulation of problem and operational concept, testing the validity and reliability of the data, unwillingness of officials to release certain data.

The paucity of indigenous literature as regards marketing strategies under the Nigerian environment poses a problem to the researcher. Finally, a major limiting factor liesin in the apathy of telecom operators to release necessary information relevant to their strategic management suspicion which surrounded the researcher that he may be acting on behalf of their competitors complicates these findings and no doubt question the use of officials data obtained. Nevertheless it must be noted that this problem or issue of accuracy of research finding is or common problem.

Not withstanding all these limitations and difficulties, it has been possible to carry out a reasonably, pleasing and interesting research and that the findings of this research shall still remain valid.