Challenges and Strategies of MTN: A Multinational Telecom Giant in Nigeria Case Study

Challenges and Strategies of MTN: A Multinational Telecom Giant in Nigeria

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Introduction: PMTN's Early Telecom Operations and Nigeria's Post-Sanctions Economic Growth

In this context it can be observed that MTN initiated its telecom operation process in 1994, Nigeria had only recently emerged from decades of segregation. Global trade sanctions have been lifted, allowing for increased economic activity and investment. MTN soon expanded to 24, encompassing some of the most dangerous places to be doing business. Presently, the South African environment, Nigeria, as well as Iran are such third biggest marketplaces, and broadening 5G assistance throughout Africa continues to remain a corporation priority. MTN currently serves 277 million mobile communications customers and therefore is expanding into the financial technology market, where it manages a huge mobile payment component with over 60 subscriber base. This report shows the resource-based view emphasizes the importance of resources to such an organization's performance. This resource can help the business establish and maintain a competitive advantage. This report also explain the Multinational firms use it as one of their foreign "equity expansion strategies". "FDI establishes a new operation" which can have a variety of connections here to the company's current operations. The study focused on MTN, a global company that operates in Nigeria, as well as the company's general performance and difficulties therein. how well the institutional system has affected it. Both the official as well as "informal institutional frameworks" have an impact on how a "multinational organisation is run". The formal including informal institutional frameworks will be the main topic of the report. It also explain the how would "culture, language, religion, and ethics, as well as political, economic, and legal systems", affect multinational organisations.

Literature Search

In this context it can understand that when MTN initiated its telecom operation process in 1994, Nigeria had only recently emerged from decades of segregation. Global trade sanctions have been lifted, allowing for increased economic activity and investment. MTN soon expanded to 24, encompassing some of the most dangerous places to be doing business. Presently, the South African environment, Nigeria, as well as Iran are such third biggest marketplaces, and broadening 5G assistance throughout Africa continues to remain a corporation priority (Allen-ILE and Olabiyi, 2021). MTN currently serves 277 million mobile communications customers and therefore is expanding into the financial technology market, where it manages a huge mobile payment component with over 60 subscriber base. MTN has become a more aware and agile organisation as a result of the new capabilities. Representatives have significantly more complete and contextualised data to weigh when making strategic choices. Due to the elevated data as well as mechanisation, they have had more sense of trust in any of those occurrences. Quality of the data continues to suffer from handbook errors, layout discrepancies, and inconstant promptness when large, international firms pull information from different systems for organising. And, because unless the business has expanded as rapidly as MTN has, it may be impossible to find every piece of data visitors require, let alone organise and standardise it.

MTN Group utilised the timeframe of its early admission into the Nigerian environment for gaining the opportunity of precious assets such as the distribution network and the significant market chance including its sequence of customers ' preferences, relying on synergies to maximise its market edge and experiencing filtered its existing capacity with the outer setting in Nigeria (Asiago, 2020). As a result, this same company became the initial And along in Nigeria to contribute to making a mobile calls throughout 2001. Within two years, it managed to reach 2.01 million cell phone subscriptions in Nigeria, and the country has stayed MTN's biggest market.

Formal and Informal Institutional Frameworks

The attractive institutional framework Nigeria supplied its shareholders at the time drew MTN Organization to the Nigerian commercial space throughout 2001. Through applying the PESTLE Framework, such a report would examine the success of applying this method in the following ways: Political Factor- Recently having surfaced from the brutal coup and transitioned to a representative democracy legislative system, this same Nigerian government set out to promote underlying economic growth throughout order to attract FDIs, as well as to establish federal agencies. Economy- Nigeria has a social democracy with large revenue from petroleum and gas, a minimal real exchange that drew international investors including MTN, Income per capita as well as GDP that was moderately higher than the prior year (Chukwu, Ngirika and Igani, 2020). Nigeria, which operates an economy, and productive sector to entice FDIs, entered into a trade deal with Southern Africa to facilitate investment inflows. These were a few of the attractions for MTN Band inside the Nigerian company environment.

Social-Following Hofstede's maleness cultural aspects, Nigeria's effective social value of wealth and privilege and acquisition of material possessions largely greatly helped MTN's achievement in Nigeria, as people quickly decided to embrace the society of cell devices, which was a fashion statement at the time. Lawfully - The existing laws throughout Nigeria weren't really rude and aggressive to stockholders due to the use of the Civil Procedure code. Environmental Factor- Nigeria is indeed not highly susceptible to natural catastrophes such as tidal waves, landslides, and maybe even forest fires, which is a plus for shareholders. In this portion, corporate sustainability is a major dimension for conducting processes in the domestic environment as well as for entering into different new markets.

Resource Appraisal

In this context, a technique called the resource-based view emphasises the importance of resources to such an organisation's performance. This resource can help the business establish and maintain a competitive advantage. This resource-based view, a dominant viewpoint mostly in the global business world, holds that firm-specific resources are the primary force behind the organisational performance. This concentrates on inner organisational factors that help management identify the most effective strategic decisions because management needs to understand internal organisational factors like which assets add benefits to the enterprise or even how to experience them (Ogunode and Salawu, 2021). This also seeks out the best methods for managing and developing resources to create value whilst safeguarding people from rivals. The VRIO framework, which focuses on "value (V), rarity (R), imitability (I), and organisation (O)", was used to conduct the analysis of the asset.

The fundamental tenet of such a resource-based perspective is whether a company is made up of a variety of productive assets which serve as the foundation for such an organisation's ability to gain a competitive edge in its markets and beat rivals. The resources allow the company to grow as well as expand including activities. One realises that there were many various types of resources, that may be divided into two categories: primary resources, which comprise an organization's productive assets, as well as capabilities, which represent the organization's abilities to use them.

Challenges trading internationally

The difficulties MTN encounters are caused by two main factors: institutions as well as resources-based

International and resource-related challenges

In Nigeria, MTN is subject to a number of restrictions that are not present in "South Africa". Because there were Islamic extremist groups “like Boko Haran, Nigerian culture” is distinct from South African culture, as well as government intervention is allowed in MTN Nigeria's business operations. The Nigerian government depends on money from businesses in the form of taxes or penalties (Chukwuma et al. 2022). MTN has been accused numerous times of being haughty, providing subpar service, as well as disobeying Nigerian labour regulations. It was suspected of unlawfully sending money returned to "South Africa" and of failing to register each of its clients, which led to a $5.2 billion penalty for failing to disconnect dormant SIM cards. The future of "MTN in Nigeria" is in danger due to the penalties as well as the alleged repatriation of monies to South Africa.

Nigeria has more political instability in addition to higher levels of corruption. Politicians' collaboration with "Boko haram", which constantly threatens citizens, and businesses, including services of such corporations, makes the nation vulnerable towards the political threat, as well as MTN is powerless to prevent these events from occurring. Nigerian consumers were inherently frugal since they are "socially low-income or unemployed" (Sanusi, 2021). Due to this, MTN's service fees in Nigeria were lower than those in South Africa. Although English is the "official language of Nigeria", it isn't frequently used, especially among the less educated and those who live in rural regions. Its campaign materials were in the "Hausa language" of the region, as well as they do additional activities there, "according to MTN Nigeria's 2019 report". MTN must hire Nigerians to operate in Nigeria due to the country's resource constraints. The majority of MTN's agents are from "northern Nigeria".

Challenge for managers of MNEs Trading international

To evaluate possibilities and obstacles, managers must be aware of such regions as well as global rules. Businesses should take advantage of their local market because they are frequently better equipped to compete locally rather than globally. Political debates must be understood by managers as well as may even be participated in since these debates will likely influence the company's future (Dada et al. 2018). The majority of MTN's assets go toward enhancing the organisation's long-term performance; management must not simply sit back and take advantage of these advantages. Positive management choices must be made to maximise the benefits that the company receives from its resources.

This company provides the very same services as some other "mobile telecommunications" providers, which means MTN must provide excellent customer service to maintain its "business in Nigeria" given the fierce competition. By providing less expensive goods and services than those in "South Africa", its business has been able to maintain its position in small towns as well as farms around the country (Oyewole, 2022). Even though the firm was established in South Africa and is well-known in "rural South Africa, like in Nigeria", the management must also think about ways to lower its "Data and Airtime" pricing in "South Africa". For example, the lack of "MTN network coverage" in the majority of "Limpopo villages" forces users to choose other network providers like Vodacom.

Foreign Direct Investment

Foreign direct investment is the term used to describe investments made in, control over, and management of value-added industries in other nations. Multinational firms use it as one of their foreign "equity expansion strategies". "FDI establishes a new operation" which can have a variety of connections here to the company's current operations. Organisations carry out value-adding tasks vertically, "stage by stage". Horizontal FDI implies that businesses establish operations overseas in a similar position there in the "value chain" as the business there in the home nation, according to Peng and Meyer (2019). MTN could carry out the exact same operation in Nigeria via horizontal FDI.

Consequently, experts refer to it as vertical FDI whenever a company advances "upstream or downstream" into "different value chain stages" in a host nation via FDI. For example, MTN has the option of choosing "South Africa" rather than Nigeria to build and maintain its “systems and software”.

MTN can profit from executing its FDI projects using a hybrid strategy that integrates both horizontal as well as vertical features. This would be advantageous to both the organization and the host nation in a variety of ways. resulting in earning favour in that nation. Among the advantages of "foreign direct investment" were the following:

stimulating economic growth

A "target country's economic development" can be boosted by FDI, which can also improve business conditions, attract investors, and boost the local economy as well as the community.

Ease global trade

Trading can be challenging because most nations impose their own tariffs on imports. To guarantee sales as well as goals were accomplished, several economic sectors typically need to be present in other countries markets (Elo et al. 2022). Every one of these facets of global trade is significantly simplified by FDI.

Employee as well as the economic boost

As investors establish new businesses abroad, FDI expands employment prospects. This may result in residents earning more money and having greater purchasing power, which will help the targeted economies grow more broadly.

Tax incentives

Regardless of the business they choose, foreign investors can benefit from tax incentives. Everyone enjoys taking tax deductions.

Resources development

"Human capital development" is a major benefit of FDI. Its workforce's increased skill set contributes to a nation's overall improvement in human capital including education. States that receive FDI gain from the development of their human resources whereas keeping ownership.

Resources transfer

Resource transfers as well as information, technology, and talent exchanges are made possible through "foreign direct investment".

Reduces cost

The gap between "revenues and costs" can be narrowed via FDI (Onyejekwe, 2018). By doing this, nations would be capable of ensuring their production costs are the same as well as that products may be marketed more easily.

Increase productivity

Its target nation's workforce can be more productive thanks here to facilities plus tools offered by international investors.

The rise in the region's income

This rise in income inside this target country seems to be another significant benefit of FDI. Its national income often rises with far more jobs plus greater pay, which fosters economic growth (Idowu, 2021). Big companies frequently offer salaries that are higher than those found there in the target country, which might increase income.

Exchange Rate

This rate where the 1 currency has been exchanged with another is referred to as the "exchange rate". This cost of 1 currency in some other currency has been known as the "exchange rate". These national currencies of the world are continually changing, and several of them have extremely volatile exchange rates. Every time, for a variety of reasons, the value of money might increase or decrease. Exchange rate fluctuations have a significant impact on an organisation's "operations and profitability" (Ogunode and Salawu, 2021). As was noted in such an introduction, MTN has a worldwide telecommunications company that has operations in "Africa and the Middle East". As a result, they were subject to exchange rate risk because they earn revenue in the native currency of the different nations where they have operations.

Assessment of Currency Exposure to risk: Projected Income as well as Expenses

Transactions involving foreign currencies are converted into "functional currency" by the use of the "exchange rates" in effect mostly on "transaction dates", as per "MTN Nigeria's 2021 audited financial statement". Currency conversion is done using the "exchange rates" in effect mostly on the "reporting date for monetary assets and liabilities denominated in foreign currencies" (Ojo et al. 2022). This settlement of certain transactions as well as the conversion of "monetary assets and liabilities denominated in foreign currencies" at such reporting date "exchange rates result in foreign exchange gains" and losses that are recorded in profit or loss. This net "currency exchange loss of N2 002 million" is also shown in the "financial statement". Several of "MTN Nigeria's licence fees are paid in US dollars", which has an effect on MTN's revenues because the US dollar has been a strong alternative.

Global, regional and bilateral economic integration

There were significant dangers and obstacles involved with running a business globally, particularly if there aren't institutions in place to regulate it. Nations needed to band together to create institutions that would regulate them as well as a "common market". Multinational organisations must play by the "rules of the game" within every territory, that are subject to "change over time", in order to function in various regions as well as nations. " Global and regional (multilateral) institutional frameworks" should be understood by multinational organisations, as well as they must be adapted (Okeakwalam, 2020). If organisations are to implement portions of such frameworks, companies must build as well as manage their resources including competencies to accomplish this. Due to MTN's status as a global organisation, certain such institutional frameworks are also applicable to it.

Socially responsible business

"Corporate and societal" interests must be balanced in "CSR strategies". MTN Nigeria really does have a primary objective to increase its client base as well as enhance community conditions. It is evident from "MTN Nigeria's 2019 sustainability report" that its strategy and CSR are compatible (Okoi et al. 2021). By supporting the community in numerous ways, MTN has a greater presence in the nation where they do business. Companies have deliberately established and put into effect standards in every nation they do business in, as well as developed projects with the goal to slow down climate change. People collaborate with various NGOs, as well as teach their employees how to "deal with CSR". It also cooperates with various NGOs. These same CSR activities have improved MTN's reputation in Nigeria.

Conclusions

It can be concluded that because of the numerous difficulties they encountered in Nigeria, MTN, a large company, has struggled to maintain its operations there. MTN must argue to have the fine lowered in order to continue operating due to it being too expensive. While the "corporate culture and code of ethics" aid the organisation in making the right choices, its language including the religion of such a foreign country may make it challenging for such an organisation to conduct business there. In the instance of MTN, "MTN Nigeria" must conform to the religious and cultural practices of Nigeria to blend in. Due to offering clients a high-quality service as well as consumer experience, as well as using technology to infiltrate the "rural, village, and farm" region markets, "MTN" has attracted a large number of consumers. Because of the "foreign direct investment" that MTN has been utilising over the past few years, it has gained and maintained a "competitive advantage". The fact that MTN Nigeria employs the naira, which is significantly weaker than the "ZAR or USD", has had an influence on the business. Nevertheless, the "MTN Group" has put hedging procedures in place to lessen such risks of exchange rates in addition to adhering to international as well as regional institutional frameworks. Nigeria has had a high level of poverty, so MTN has put in place a strategy that would enable them to assist the "Nigerian government and communities" through its CSR activities. Whenever it relates to trading overseas, MTN appears to be familiar with the game's regulations. Despite all obstacles, companies have managed to establish and maintain their "competitive advantage". They faced numerous difficulties when "operating in Nigeria", but despite everything, they were capable of gaining market share as well as developing a successful company.

Recommendation

It is hereby recommended that regulations are frequently and inconsistently changed. These were global, regional, or perhaps country-specific, and they frequently present difficulties for such an international business working across several geographies. MTN received the penalty in "Nigeria" for failing to follow the rules. MTN will require a plan for how to handle the "regulatory changes" of each nation. Companies must have representatives who participate in national political debates since that's where the majority of rules are considered before being authorised by the government of such a nation. There has been fierce competition mostly in the telecommunications sector, as more businesses were now selling fibres. To earn the trust of such locals and devoted customers, MTN should continue to be active as well as serve the community. To keep up with as well as stay one step ahead of its rivals, MTN needs to expand their "innovation department" as well as develop new products and "services as technology" advances.

References

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