Porter’s National Diamond Analysis for Myanmar’s Mobile Industry

Telecommunication industry in Myanmar has been changed intensely within past two years and it has enabled millions of people to get connected and increased the subscriber rate. In the past quarter, the world included 87 million new mobile users, from which approximately 6% is from Myanmar that made this country fourth fastest developing mobile market in the world (Heijmans, 2014). There are some top players in Myanmar mobile industry, so there is tough competition in the industry. Thus, the Myanmar Mobile industry is very much profitable and it is attracting new players to enter in the industry and operate their business in the country. For operating business in this country, it is very important to understand the external factors and market situations in addition to industry’s attractiveness (Trautwein, 2015).

For evaluating these market conditions and trends, this report includes Porter’s National Diamond Analysis, which assists in analyzing the attractiveness of Myanmar mobile industry. It focuses on a profitable market entry strategy that can be used, while expanding business in this industry. The companies can use Foreign Direct Investment (FDI) for entering in this mobile industry. Furthermore, the report discusses limitations and benefits of FDI, if any company uses this strategy to enter in the country. In the third part of report, it emphasizes on different management issues, which can be confronted by any organization, while entering in Myanmar Mobile Industry for operating its business activities.

The Porter’s National Diamond model is strategic model that is given by Michael Porter. This model is also known as Porter’s Diamond Theory of National Advantage that was introduced to understand the competitive advantage that a country possesses because of some specific factors. Moreover, it helps to understand that how the government can perform its tasks as catalysts to enhance the strategic position of nation global competitive business environment. Porter’s National Diamond Analysis assists the organizations, which are operating business in industry, so that they can collect the information about its effective factors and market trends (Fainshmidt, Smith, & Judge, 2016). Regarding this model, it can be said that it is an economic model, which measures the competitive advantage that a nation or a particular region may have.

                      

Figure 1: Porter’s National Diamond Model

On the basis of characteristics of domestic country, it has been possible to analyze the global success of a firm.

There are six elements, which are used to assess the market for a company, are stated below;

• Demand conditions
• Factor conditions
• Government
• Factor Input Conditions
• Supporting and related industries
• Firm structure, strategy and competition

Market Entry Strategy for Myanmar’s Mobile Industry

To analyze the Myanmar mobile industry, some of these factors are applied and discussed below;

Demand Conditions

Demand condition is one of the most important dimensions of National Diamond Analysis, given by Porter. If a domestic market for a specific product or services is larger than an international market, response of a domestic company is to give more attention in capturing the foreign market share by delivering the products overseas. It leads to understand the competitive advantage for that country and domestic companies (Jaiswal, 2014). The domestic mobile industry of Myanmar is very demanding, because people are actively using social media and internet applications. It increased the demands for smart phones and other mobile phones. This country has a strong domestic market, which is considered as a first place for investment, because demand for consumer goods is increasing in Myanmar. Thus, the major reason for targeting Myanmar is to sustain the National Advantage. 

Factor conditions

Factor conditions are important aspects, like; technology base and skilled resources, which a country develops. Under this model, factors conditions are related to the product demands and characteristics of buyers towards the innovation and quality of products and services. After analyzing this component, it can be stated that Myanmar has sufficient low cost labor and natural resources. It has been evaluated that market of Myanmar is resourceful and people in the country have diversified choices according to the age and gender (Koutola, 2016).

In Myanmar mobile industry, there are several Chinese companies, like; Lenovo, Huawei, which are operating their business successfully. It indicates that there is intense competition among these companies and this makes Myanmar mobile sector strongest in terms of revenues and profits. As this country is considered as a developing country with comparatively small history, but there are so many experts, who consider the industry profitable. Currently, Telco’s MPT introduced its mobile phones in Myanmar industry. With the passage of time, more companies and brands are emerging in this sector. Although the customer behavior has shown that the industry is alleviated with the growth in mobile penetration.

 

Figure 2: Mobile Penetration in Myanmar

In Myanmar Mobile industry, there is a growth in the number of costumer oriented and more customized companies. After Service is one of the significant components for the mobile subscribers in Myanmar business environment (Myanmar Infrastructure Group, 2018).

Factor Input Conditions

In Myanmar country, the factor input conditions are moderate that indicates business conditions are not much favorable. The labor cost in the country is very low as it is hiring the less educated people. Other factors, such as; electricity charges, infrastructure, are not profitable in this country. Thus, it can be said that it is not easy to expand the business in this nation, because there is scarcity of the resources to assist the global business. Myanmar is the country that ranks at fourth position in the mobile market due to growth in the internet penetration. In today’s world, the use of smart phones and social media is increasing that has developed the mobile phone industry (Shen, & Puig, 2018). Most of the population in Myanmar is using smartphones and other mobile phones. Increase in the sales of lower priced smartphones from China is the major reason behind the growth in Myanmar’s mobile sector. In the future, this market will be saturated and demands and trends will be changed with the passage of time. 

Foreign Direct Investment in Myanmar’s Mobile Industry

Firm Structure, strategy and competition

These are some internal factors, which impact the growth and business of an industry or a company. Myanmar is a nation with a significant growth in the usage of internet, smart phones and social media. It is the major reason behind expanding the business in this industry. It has been evaluated that Myanmar’s customer market has experienced a significant growth and changes in demands of consumer products and services. In this country, increase in the demands of consumer products and development in the technology has been grown the mobile industry (Nitta, 2017). In 2013, the mobile penetration rate was 50% and 80% of the mobile subscribers are operating smart phones in this country. The management style of Asian countries is dominant and strong and it needs hard work and long working hours from its workforce.

This is the major reason that industries in Myanmar are growing with a great growth rate. According to a report, it can be stated that approximately 42.2% of the people are using phones of Huawai brand and the percentage for Sony and iPhone is 6.7% and 25.6% respectively. Now, the number of players in this industry is increasing with the introduction of Xiaomi, Lenovo and Oppo. These new entrants are increasing competition in Myanmar mobile industry. It indicates the structure and nature of industry in this country that the people generally prefer to purchase the mobile phones at affordable prices (Trautwein, 2015). Furthermore, it can be said that demands and preferences in this industry are changing according to the age groups and gender. From the analysis, it can be stated that rivalry in the Myanmar mobile industry is increasing, but it is still far from the competition level of developed nations.  

Supporting and related industry

It is an important dimension of National Diamond Analysis, which discusses about the supporting and related industries those assist the functions and processes of a specific industry. There is not any industry, which can be operated alone; they require assistance from some other sectors for materials and services. These raw materials and services are needed to perform the production and distribution processes. In Myanmar, telecommunication industry can be considered as a supporting and related industry to its mobile industry (Blonigen, & Piger, 2014). There are so many international players, who are operating their business in telecom industry, like; Huawei, Ericsson, Alcatel and ZTE. These telecommunications companies are operating their business in Myanmar and assisting the mobile sector of this nation. However, the level of supporting industry is not enough in Myanmar mobile industry. It requires some effective improvements, intense competition and more players.

Limitations and Advantages of Foreign Direct Investment in Myanmar’s Mobile Industry

From the Porter’s National Diamond Analysis, it can be analyzed that mobile industry in Myanmar is moderate for expanding business and gaining competitive advantage over existing competitors. Some of the factors are favorable for business expansion, but still there are some factors, which need improvement. 

When an organization plans to enter or expand its business in any other international market or country, first it needs to determine a marketing entry strategy. There are various strategies, which can be used for entering into market. This section of report includes the discussion about the Foreign Direct Investment (FDI) as market entry mode in Myanmar mobile phone industry (Shen, & Puig, 2018). The discussion above FDI is stated below;

Foreign Direct Investment (FDI)

The organization needs to make a decision on market entry mode very carefully after considering the external and environmental conditions. Foreign Direct Investment is considered as one of the significant modes for entering into international market. Foreign Direct Investment is an investment, which is made by an organization in one country for attaining business objectives. It can be in the form of expanding business operations or purchasing assets in another nation. This is an important mode, which helps the organization for enhancing the economic conditions of nation (Blonigen, & Piger, 2014). For Myanmar, it can be stated that the country’s government has been improving FDI since 1988. There may be several objectives behind expanding the business in Myanmar. These objectives are stated below;

• Finding new business opportunities in international mobile industry
• Adopting market oriented system in the nation for effective allocation of labour and resources
• Making foreign direct investment to developed economy for expanding the business
• Increasing private investment and business activities
• Increasing employment opportunities for the domestic population (Rath, & Samal, 2015)
• Technology up-gradation

Limitation of FDI

When any European company expands its business in Myanmar mobile industry, it may face some barriers, which can affect growth of business in this country. Foreign Direct Investment is a significant method for entering in global business environment (Chakrabarti, Subramanian, & Meka, 2017). In addition to its advantages, there are some limitations, which restrict the organization in expanding the business through this market entry mode. Some barriers to FDI are given below;

Policies

In this country, there are various factors, which need to be measured by the foreign investors before making investment in Myanmar mobile industry. The companies need to work as per the different policies and legislations of the country. There are some policies, like; monetary policy, fiscal policy and imposed taxes. These policies can restrict the business operations and pose threats on the business activities in Myanmar mobile industry. These require being advantageous for attracting the foreign investors in the nation (Fischer, 2016).

Management Issues in Myanmar’s Mobile Industry

Administrative Barriers

When a company expands its business under FDI, it may confront some administrative barriers, which need to be considered by the company. These barriers are concerned with the acceptance of investment proposal for a specific industry. As the Myanmar is less developing county, so it has long administrative procedure to take the approval on investment proposal. Thus, it is time consuming process to invest funds in the Myanmar mobile industry. It has to take the approval from telecommunication department and other departments. Government in the country tries to resolve these issues by developing one step approval, but it leads to increase extra steps as there is not obvious delegation of authority on foreign investment. This is one of the threatening barriers, which can deter the foreign investors from making investment decisions to make investment in Myanmar mobile industry (Ghezzi, Cortimiglia, & Frank, 2015).

Infrastructure

Infrastructure barriers can also restrict the organization by entering through FDI in Myanmar mobile industry. Poor infrastructure conditions also obstruct the investors to make investment in developing nations. If a company enters into Myanmar Mobile industry, then its poor infrastructure issues can lead to increased risks and costs of operating the business in the country. These issues can increase the costs for foreign investors as they have to deal with the infrastructure development costs, like; water resources, electricity rates and communication (Kyi, 2015). There may be the issues related to distribution of products due to complexities in transportation and communication. The government has to make improvement in the infrastructure of the country. In the telecommunication industry, the companies need to maintain the infrastructure, including manufacturing and distribution of mobile phones from one location to another location. The investments need to be made in the real estate industry, transportation, roads and water and electricity supply (Liargovas, & Apostolopoulos, 2014).

Advantages of Myanmar Mobile Industry

In Myanmar Mobile Industry, there are various facts, which can attract the business to make FDI. The key strength of this country is availability of raw material and other resources, which are used for manufacturing the mobile and smart phones and other related accessories. In terms of location, Myanmar is favorable for operating business as it is located at the crossroad among different countries, like; Thailand, India, Bangladesh, China etc. It offers huge potential to Myanmar country to operate the business (Odaka, 2015). There are so many industries and companies, which are directly contributing to the country’s economy. The country has several foreign embassies, which handle the foreign operations and issues. In Myanmar, the cost of labor is lower than other countries, so investment can assist the foreign nations to generate better profits and revenues.

Conclusion

Recommendations

It is hereby recommended that Myanmar has to attempt for enticing foreign direct investment from different developed countries, as it will be profitable for the country also. The policies and strategies related to FDI can only work in the situation, if it has obvious understanding about the competitive advantages of the country. There is an organization in Myanmar, i.e. DICA, which require considering some elements, through which the country can become more attractive to encourage the foreign companies to make FDI. The country should develop a culture that emphasizes on the customers and assist the global nations for managing the employees. To improve the position of mobile industry, it needs to focus on telecommunication and networking in the country. This will attract the foreign investors towards the business in Myanmar. It is very important to create a business friendly atmosphere in the country, so it can entice the FDI from developed foreign nations (Post, 2016). The government should invest on improving its infrastructure and other related facilities. In addition to this, it should improve the proposal submission procedures, so that it can take short duration. If the country considers these recommendations, then Myanmar will be able to make better relations with foreign countries and attract FDI from developed nations. 

Generally, all organizations face some issues, when it plans to expand the business internationally; it needs to consider the factors, which may affect its business operations and activities. For an organization, it is very essential that it conducts market research and plans for the growth and development of business. With the growth of business, it has to face some issues, related to its management, like; staffing issues, financial, resources, legal and suppliers. The business needs to consider the issues to gain sustainable growth. After analyzing the mobile phone industry, it can be stated that there are various issues, which a foreign nation may confront, while entering in Myanmar mobile industry (Singh, 2017). Here is the discussion about two major management issues, which may be confronted by the organizations in Myanmar Mobile industry. These issues are stated below;

Political Issues

Political issues are one of the major issues, which need to be considered by the organizations before starting operations in Myanmar Mobile industry. Political instability is the crucial issue that limits the businesses to make investment in this country. There are various parts of the country, specifically north, are dangerous for foreign countries. It is the major threat for the country to stabilize the political situations and establishing peace. These instabilities will reduce the business opportunities in the country. It is one of the major reasons that businesses do not want to make investment in the Myanmar mobile industry (Kingsbury, 2014). The companies are unable to operate business in these situations. In this country, there are various political and legal issues like; employment policies, child labor issue, workplace standards, employee education etc. These issues hinder the business management in this country. There are various laws and regulations, which are imposed on telecommunication and IT industry. These regulations may resist the entry of business in the Myanmar mobile industry. Government has different ideas and opinions for handling the telecommunication players and people have different ideas. Apart from this, the political decisions may impact the growth of industry (Tambunan, 2016). The country is experiencing corruption since many years that may force existing players to copy the patents and designs of other companies’ mobile phones. So, the companies may face the situation of willful infringement. To understand this, the example of Apple and Samsung can be considered. Furthermore, Nokia has decreased its market due to political rebellion in Libya and Egypt (Steinberg, 2015). Thus, it is very important to consider the political management issues before entering in Myanmar mobile industry. The government has implemented various reforms to deal with the issue of corruption in country, but they are not successful in the mobile industry.

Staffing and Cultural issues

Apart from political issues, cultural and staffing issues are other issues, which may confronted by the businesses, while entering in the Myanmar mobile industry. When it is about the culture, it can be said that the cultural aspects in Myanmar are very different and unique. Before initiating the operations in Myanmar industry, the organizations need to examine the possible effects on cultural life of operations. After considering the labor, it can be stated that cost of labor is lower than other Asian countries, but there is enough availability of labor in Myanmar manufacturing sector. When the companies will think about expanding business in this country, there may be issues related to culture, language and traditions (Moran, Abramson, & Moran, 2014). The human resources may face issues related to cultural differences

In Myanmar, most of the labor is unskilled, which may impact the mobile industries, as there is a need of technical knowledge and skills for manufacturing mobile phones and installing applications. If any organization makes investment in Myanmar for running its business, it needs to train its domestic employees and labor; otherwise it needs to outsource the labor from its neighboring countries. Eventually, it increases the management and administrative costs for company investing or entering in Myanmar. Thus, it has been stated that labor efficiency is lower than employment rate in Myanmar that weakens the per capita Gross Domestic Product (GDP) performance (Arnold, & Campbell, 2017).

In this way, the organizations, entering in Myanmar may confront two major management issues, i.e. political and cultural issues. From the above analysis, it can be stated that this country is not favorable to operate the business in its mobile phone industry. The country should focus on its labor and development of technology skills. However, government of country has already initiated the step for development of technology and infrastructure (Page, 2015). So, it may have future opportunities to attract the foreign investment and companies from foreign countries.

Conclusion 

From the above report, it can be concluded that Myanmar is an ASEAN country, which has experienced a significant growth and development in usage of smart phones, internet penetration and use of social media. The report analyzes that mobile industry in this country is growing with the increased use of smart phones and social media networking sites. There is discussion about Porter’s National Diamond Model that states that Myanmar’s market is flexible, as the demands and choices of people are changing according to the age and gender of population. There are various brands, like; Lenovo, Huawei, ZTE etc. which are posing competition for new entering brands. After considering FDI, it can be stated that FDI can be an effective entry mode for the organizations entering in Myanmar mobile industry.

However, there are some limitations and barriers, which may restrict thee companies to enter in the country, like; administrative barriers, infrastructure, policies etc. The government of the country should implement some initiatives for eliminating these barriers and attracting companies to invest in. Apart from these limitations, the companies may face some management issues in this industry, such as; political issues and cultural and staffing issues. One of the major issues is the unskilled labor, which may increase the cost of outsourcing the employees. This may resist the foreign companies to make investment in Myanmar mobile industry. Thus, the country should make efforts to improve its infrastructure and these condition 

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