THE INTERNET: A FORCE OF COMPETITIVEADVANTAGE.

1. INTRODUCTION Internet is the physical network that links computers across the globe. Chaffey (2007) The Internet has had different effects on different industries; some were almost destroyed and has badly threatened more. On the other hand it has also created new markets and formed the basis for thousands of new businesses. As agued by Porter (2001), the internet offers avenues of competition to existing companies and opportunities for start ups. Now businesses can enter the market on-line with few barriers to entry. (Bakos 1998) suggested that Internet changes the basis of competition by radically altering product/service offerings and the cost structure of firms. The Internet also changes the balance of power in relationships with buyers and suppliers. The Internet makes price comparison easy for customers, and thus increases price competition. The Internet creates new substitution threats by enabling new approaches to meeting customer needs and performing business functions (Porter 2001). The Internet also facilitates an electronic integration of the supply chain activities, achieving efficient distribution and delivery. It also facilitates partnerships or strategic alliances by networking partners or allies. Laudon, KC, Laudon, (2006) states that businesses are rapidly rebuilding some of their key business processes based on Internet technology and making this technology a key component of their IT infrastructures. In this paper I will analyze how Airtel Malawi has used Internet to enter new markets and how it has combated some of the five forces it faced, using internet in relation to the competitive forces. The paper will include the following on Airtel: 1 2 3 4 5 Competitive forces it faced. How internet was used to overcome these forces. The competitive strategies used. The plan adopted in implementing the competitive strategy. Evidence of the degree of success of the selected strategy.

2. ORGANISATION BACKGROUND Airtel (then Celtel) was the second mobile telecommunication company to be unveiled in Malawi. It started its operations in Malawi in 1999, in 2008 it changed its brand name to Zain, before rebranding to Airtel in 2010 Airtel is an Indian communications company with operations in 19 countries that are around Asia and Africa and they have over 200 million customers. AIRTEL MALAWI

It is Malawi 's most innovative mobile phone operator which has introduced many firsts such as: . . . . . . . M-commerce Prepaid plans. International roaming. Local and international text messages. 24-hour customer care centre. 3G Internet connections. Email services.

Airtel also offers a valuable range of extras that come as a standard part of their mobile phone plans. Airtels customer base has grown tremendously -so has the coverage -and service quality is unsurpassed in the market. Their aim is to keep number-one place in the market by offering better services and care for its customers. It has customers right across the social spectrum -from civil servants, business executives and artisans to housewives and students. Airtel (2010) 3. OVERVIEW OF PORTERS FIVE FORCES This is a framework that is used to analyze the environment in which the industry is doing business. The five forces influence the firms competitive position in the industry it is in. The framework is shown in Figure 1.

Figure 1.

According to Porter (1980, 1985) by reacting to the five forces: a firm develops its business strategies in order to obtain competitive advantage (i.e., increase profits) over its competitors.

Porter (1980) described the five forces as shown below: 4.1. The threat of new entrants: How easy is it for new companies to enter the industry? New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. Prices can be bid down or incumbents' costs inflated as a result, reducing profitability. Rivalry among existing firms within an industry: This describes the intensity of competition between existing firms in an industry. That is the completion for top position in the market; these can be battles on price, advertising, product introductions, and increased customer service. The threat of substitute products/services: What is the likelihood that someone will switch to a competitive product or service? As Argued by Porter (1980) all firms in an industry are competing, in a broad sense, with industries producing substitute products. Substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably The bargaining power of suppliers: This is how much pressure suppliers can place on a business. Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services. The bargaining power of buyers: This is how much pressure customers can place on a business. Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other-all at the expense of industry profitability.

4.2.

4.3.

4.4.

4.5.

A company assesses these five competitive forces in a given industry, then tries to develop the market at those points where the forces are weak (Porter 1979). 4. COMPETITIVE FORCES ORIGINALLY FACED 5.1. Threat of new entrants: there was a concern from government that the mobile phone companies were charging too much for their low standard services to customers. The government claimed that this was so because there was not enough competition in the industry, by then there was only Airtel and TNM. In Malawi it was not easy for new market entrants in the Telecommunication industry, That is to say there were barriers to

entry, and this was so because of the governments restrictive policies. The licensing board MACRA was very strict in issuing licenses. Because of the governments concern MACRA softens its regulations giving room to other mobile phone companies. Most of the companies that showed interest are those that are doing good in terms of performance in other countries close to Malawi, for example Vodacom and Cell C. 5.2. Threat of substitute products or services: Just like traditional mail services are not common as they used to be with the emergence of phones, voice communication was also being substituted with data communication. With the improvements made in the internet infrastructure, ISPs were facing stiff competition from international companies, which made them reduce their prices and improve their services performances, this attracted many people to start using data transfer methods (e.g. e-mail) instead of voice calls since e-mails have proved to be cheaper than phone calls, especially when destined for long distances. Competitive rivalry: Since there were only two prevailing firms in the telecommunication industry in Malawi, hence the rivalry was intense. With TNM (government owned mobile phone company) already in the industry, Airtel faced stiff competition from this competitor for it to settle in the industry, This forced it to lower down its price in order to attract new customers and even those from TNM. In so doing it reduced its profit. The battle between these two was on Price on services, but by then TNM had better services than Airtel.

5.3.

1 Supplier power: When Airtel signed a contract with Huwaei for the provision of the affordable phones, the sales of the first consignment were very encouraging, then Huwaei so the potential of a good market and decided to sell the phones directly to Airtel customers, (forward integrate). Airtel decided to start buying the phones at a higher price; this reduced the companies profits as compared to that made during the first consignment. 5. HOW INTERNET AIDED AIRTEL With the introduction of Internet, Airtel has used the technologies that came with it to either enter a new market or overcome some of the threats which it previously faced. These internet technologies which will be further explained are: . . . . 5.1. Mobile internet. E-Procurement E-CRM E-marketing MOBILE INTERNET

As argued by Porter 2001, internet creates new substitution threats. Airtel started as a mobile telecommunication company which focused only on Voice communication, but with the threat of data communication as a substitute means of communication for its customers, it resulted into integrating horizontally, (development into activities which are complementary to the present activities. Johnson & Scholes). This was achieved when it started providing mobile internet services to its customers.

To reduce the threat of substitute Airtel introduced the 3G internet technology. Airtel attracted many customers mostly youths, who wanted to be part of the growing socio networking sites like face book, MySpace, etc. Turban & Volonino(2010) defined mobile socio networking as where individuals with similar interests connect with one another using mobile devices, phone usually. 5.2. E-PROCUREMENT

Purchasing by using electronic support. Turban & Volonino(2010) Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give suppliers access to more customers. Airtel has an online supplier registration process that uses a registration form made available to prospective suppliers to submit their registration requests to Airtel, making the process of identifying suppliers easy. With e-procurement, the company purchases at a reduced price, there by protecting its profits.

5.3. E-CRM According to Turban & Volonino(2010) this is the use of web browsers and other electronic touch points to manage customer relationship. The introduction of internet made customer service for companies using e-CRM more effective and efficient. With e-CRM, access to customer information is created, this information is used by other functional departments for example sales, for analysis and make further improvements to its services if need be, in order to satisfy its customers. Airtel improves its business intelligence with the system; this helps the company in retaining existing customers as well as selling more to these existing customers and winning new customers. This has improved the connection between Airtel and its customers, there by increasing the switching cost. 5.4. E-MARKETING The Internet technology is used by Airtel for marketing research to find out customers needs and wants. This helps Airtel to get Up-to-date and timely information about the industry, markets, new technology, competitors and customers for it to make its competitive strategies. The Internet is also used for Market penetration that is selling more existing products into existing markets. This is accomplished by using online product promotion to increase awareness of products and the profile of a company amongst potential customers in an existing market. Some of Internet technologies used are Airtel website that has links to other sites and the companies face book account.

6. COMPETITIVE STRATEGIES USED According to Porter (1980). Competitive Strategy examines the way in which a firm can compete more effectively to strengthen its market position. Here is a detailed explanation of some of the strategies which were used by Airtel: 6.1. OVERALL COST LEADERSHIP. A low-cost position defends the firm against powerful buyers because buyers can exert power only to drive down prices to the level of the next most efficient competitor. Low cost provides a defense against powerful suppliers by providing more flexibility to cope with input cost increases. 6.1.1. Avoiding marginal customers by the introduction of the prepaid billing system. When the post paid billing system was the sole billing system to all its customers, payments from customers were very slow sometimes not being settled yet. Customers would use the card and apply for a new card if the other card has been disconnected. 6.1.2. As one of Airtels competitive strategies the company used a market penetration strategy. This strategy was used to gain customers (both competitors customers and non-users) by convincing them to use more of the companys services. To support this strategy Airtel, then Celtel, introduced the prepaid billing system which was affordable to most Malawians. This system allowed the use of scratch cards to top up mobile phones as compared to the postpaid billing system which was the billing system used in the country then. Almost 80 percent of Malawians live in the rural areas and 65 percent live below the poverty line of one dollar per day. This increased the market share of the company. 6.1.3. The introduction of internet created other cheap and fast forms of distribution channels, (web) this minimized the cost incurred by the company in distribution. 6.2. PRODUCT BUNDLING.

Product bundling promotes the benefits of the whole package, thus keeping buyers from comparing individual items. (Sinha 2000). 6.2.1. Airtel started selling Smart phones (Blackberries) with airtel sim-cards and internet connection available with Airtel as the provider. The customers were sold card, phone and they pay for internet. This raises the customer switching cost and undermines rivalry with TNM. 6.3. DIFFERENTIATION

This is the position a company has acquired in the market. It is difficult to enter a market where there are well-established companies whose names are almost synonymous with the product itself. 6.3.1. In Malawi Airtel as a brand is easily identified, this is so because of its advertising means that it uses, Airtel is one of the most advertised brand in Malawi. 6.3.2. Airtel as a brand is also easily identified because of the socio activities is does, most of which are targeted to the Education and the Health sectors.

6.3.3. Airtel has loyalty programs for its Customers which are managed by its information systems. With loyal customers to the brand, Airtel is isolated from competitive rivalry, it also raise margins and reduces buyer power since they have no comparable options to the company. 6.3.4. With its web based CRM, it gathers more information from different people which is then analyzed in order to perform services that meet customer needs. Satisfying customer needs make them to be loyal to the brand. 6.4. FOCUS

This counteracts the threat of product substitutes, new entrants into the market, and competition among existing firms. 6.4.1. Low income earners, those that would hardly afford a handset, this was achieved by the introduction of the affordable branded phones, Ultra Low Cost Handset (ULCH/Huawei). As low income earners would hardly afford e-mail services which is a substitute threat to voice calls. It targeted customers who can not easily switch to substitute. This increased the number of its subscribers. 6.4.2. Introduced the smart phones to target working class or business people to be connected always, Smart phones defined by Turban & Volonino (2010) as internet enabled cell phones that can support mobile applications. The customized BlackBerry it introduced allows easy wireless access to email, phone, calendar, web, multimedia and other mobile business and lifestyle applications. 6.4.3. In 2009 Airtel started hotspot service that offers wireless internet to enable its customers access the service where there is network coverage. The service is part of the GPRS allowed its customers to send and receive data across a mobile network. Introduced the 3G technology, Airtel offered its customers a Modem with which they use on their laptops or desktop computers in accessing internet. 6.4.4. Launched M-commerce, a phone banking system, giving an opportunity to the unbanked Malawians, which according to a research in 2010, by the bankers association it was almost 80%. This allows its customers to make financial services using phones (e.g. Send and receive money to their bank accounts). M-commerce services are only available within the Airtel network; this can attract customers from its competitors. 7. SUMMARY Even though Airtel Malawi was the second cellular phone company in Malawi, in August 2007 it overtook its competitor (TNM) to become the market leader, a position it still currently holds. Airtel Malawi's customer base increased astronomically from 376,000 subscribers to 500,000, representing a market share of 68%.r. in July 2008, Airtel achieved a subscriber base of over 1 Million Customers, a first in the Malawi Telecommunications Industry. In brief Airtel is the market leader with 71 percent of the customer base, with Telecom Networks Malawi (TNM) taking the remainder.

8. CONCLUSSION Basing on the competitive forces, Internet has affected Airtel both positively (reduced the power of suppliers) and negatively (creating substitutes). To counteract the forces faced, it has used internet technologies like E-procurement to reduce supplier power, mobile internet to reduce the threat of substitute which is data communication, e-CRM and E-marketing to counter threat of new entrants and competitive rivalry. It also used competitive strategies like Overall cost leadership, focus, product bundling and differentiation, this has helped Airtel to have a market share of almost 70%, raising is revenues tremendously.