Diamond Model

Tanzania’s telecommunication industry diamond: 1996

African region
Governme surrounding
nt Tanzania
-Investment Act,
Tax waivers, Firm strategy -limitation in internal
-Bureaucratic
Structure market
Priority to
Structure
and of TTCL
Infrastructure --no funding of factor
-unfocusedRivalry
strategies
Development, conditions and related
Privatization -supply is not oriented supporting industries

-Bureaucracy, -international +legislation has forced

orientation market expansion and
Inefficiency,
Corruption Factor -Inefficient firms upgrade
Government owned Demand
Conditio
enterprises dominate Condition
ns
the market, few s
-few advance or foreign & joint
-Weak demand
specialized factor venture players.
condition
advantage
-unsophisticated
-product component -poor infrastructure
Relating
limit andto
firms ability consumers
relied on foreign
expand quality service
Supporting
manufacture -lower income
to consumer
Industries
segment account for
+technological and most of the country’s
-All major suppliers
innovative assistance household
outside African
comes from
Continent, most of
collaboration with them uninterested +firms are not tuned
foreign players into foreign needs
-Government owned
from beginning
- Low Capital TTCL inefficient,
Investment corrupt & mostly +the possibility of
unskilled workers growth because of the
- Poor Telecom +Supplier SR Telecom infancy of the market
Infrastructure has 50% global
market share in
Radio Wireless -Affordability
- Lack of Skilled Equipment
Professionals
 The diamond model shows that the advanced factor conditions are low as Tanzania has a

very low capital investment, poor telecommunication infrastructure and lack of skilled

professionals. Low advanced factor conditions do not constitute any competitive advantage.

Demand for service is very high considering availability of one line per hundred residents in the

capital city and one per two thousand in the rural areas and about 500,000 forecasted potential

subscribers by 1996. On the other hand, as telecommunication is considered a luxury rather than

a utility in Tanzania, along with low income level and high inflation rate, may have an adverse

affect on demand condition unless the service is affordable and stable. There is not enough

strong supporting and related telecommunication industries exist in Tanzania. Majority, if not all,

of the suppliers are located outside the African continent. The state owned enterprise TTCL, the

issuer of licenses, is bureaucratic, inefficient and corrupt. TTCL being a licensing authority as

well as a competitor does not constitute any competitive advantage for ACG.

Tanzania’s government role in improving the telecommunication sector is encouraging.

Government has implemented a reform called Economic and Social Action Program which

prioritize the infrastructure development with particular emphasis on telecommunications. It also

eased up on import restrictions, relaxed on producer prices and interest rates and reduced state

involvement in the industry. Although Tanzania made substantial progress in economic reform,

at the close of 1995 it remained one of Africa’s largest state economies. State run

telecommunication authority, TTCL, is still blemished with inefficiency, and corruption.

At the same time an Act was passed for investors to increase foreign investments into the

country. The increase of foreign private investments into the country such as ACG’s pay phones

began the restructuring to the telecommunications industry for nationalized agencies into private
businesses. It is unclear how long it will take to fully and appropriately implement Government

reform policies.

The holdups represented through the analysis of the Diamond Model in Tanzania’s

telecommunication industry, does not accomplish any competitive advantage for the

telecommunication companies is Tanzania. Too much governmental control and incompetent

state owned agencies like TTCL is the leading factor for these disadvantageous circumstances.

The primary holdup ACG faces from the supply chain keeps it from creating value in its service,

unless the holdup problems are resolved. TTCL is a significant hold up. As the supplier in the

value chain it has a direct effect on ACG because they can exert bargaining power over ACG

since they are the only phone network provided and ACG’s network depends on the reliability of

TTCL interconnection. SR Telecom is seen as another powerful supplier because they hold 50%

of the market share in the wireless radio equipment.

HOFFER MODEL

STAGES OF THE
% SALES
PRODUCT LIFE
CYCLE Strong Average Weak

100%

Introduction
75
%

Early Growth
Growth

Late Growth

Early Maturity

Maturity

Late Maturity

Early Decline

Decline

Late Decline
 The Tanzanian telecommunication industry is in the Growth stage. The Hoffer Model

illustrates that a successful ACG can capture at least 75% of the pay phone service and since

they will be first to introduce voice mail and paging service they have a great chance to capture

entire sector and attract more customers from their competitors who will have to decide between

cell phone which cost $40 per month plus phone by itself around $1800 or they can have a pager

and pay $5 per month which will be advantageous for this market. The propose initiative by the

Tanzanian government may result in remediation of the holdup pose by TTCL. Remediation of

the holdup, improvement in the economy and government actions can persuade the company to

expand into the cell phone sector.

LEGEND TO HOFFER MODEL:

Projected Sales made up of the following:

Pay Phone (75%)

Paging/Voice Mail (100%)

Cell phone (0%)

The BCG model illustrates that base on ACG’s propose business model the company will fall in

the star quadrant. That’s because the company propose entry with 200 pay-phones will result in
the company attaining significant market share. In addition in the short run the company intends

to utilize all cash earn for expansion into the market which is common with star company within

an industry. These conclusions of ACG’s business plan assume that the holdup of the country

economy, the link to TTCL and the training of skilled workers are addressed and solutions are

attained.

BCG Matrix- positions of ACG’s service in Tanzania communications industry 1994

Relativemarketshare
(CashGeneration)
High Low
Stars Question marks
High
Market GrowthRate
(CashUsage)

ACG Pay-phone
ACGPaging
Low

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