Application Of Ansoff's Growth Strategies By Internet .

1y ago
8 Views
2 Downloads
2.05 MB
72 Pages
Last View : 22d ago
Last Download : 2m ago
Upload by : Julia Hutchens
Transcription

Vld5APPLICATION OF ANSOFF’S GROWTH STRATEGIES BYINTERNET SERVICE PROVIDERS IN KENYABYJACKLINE BITUTU WANYANDE'jw rem m r of NArmrOfamiKABfcTELIBHJU*A M ANAGEM ENT RESEARCH PROJECT SUBMITTED IN PARTIALFULFILLMENT OF THE REQUIREMENTS FOR AWARD OF MASTER OFBUSINESS ADMINISTRATION DEGREE, SCHOOL OF BUSINESS,UNIVERSITY OF NAIROBI.University of N A IR O B I LibraryOCTOBER, 2006

DECLARATIONThis research project paper is my original work and has not been submitted for adegree in this or any other university.Signed:JACKLINE BITUTU WANYANDED61/P/8508/99Date:m l l o This research project has been submitted for examination with my approval asUniversity supervisor.Signed:MARGARET O.MBOKLecturer, Department Of Business Administration, SchoolO f Business, University of NairobiDate: 11 " Q iO O bu

DEDICATIONIn memory o f my late father Hezekiel Obino for his wisdom and love for knowledge thathas always inspired me in my pursuit for education and knowledgeURUnBreJTY 01 N A M fe*meb kabete uaRim

ACKNOWLEDGEMENTThanks to my supervisor Margaret Ombok for her special guidance, advise, intellectualsupport that helped to shape the direction of this study.1 m also deeply indebted to my beloved mother for her encouragement. I’m grateful tomy son Adala Wanyande and my daughter Banda Wanyande for their patience andconstant source o f joy and pride. My special thanks are to my husband Bryan Wanyandefor his encouragement, understanding, patience and moral support during the entireperiod.Lastly I would like to appreciate the assistance given by the Internet Service Providersand their staff, especially the staff that took an extra mile in completing the longquestionnaire to make this study complete. Above all I acknowledge God’s providence.tv

TA B LE OF CONTENTSD eclaratio n . iiDedication.iiiA cknowledgm ent. ivTable of contents . vList of T a b le s . viiA b b rev iatio n s. viiiA b s tra c t.ixC H A PTER ONE: IN TRO D U C TIO N1.1 Background. 11.2 Statement o f the Problem.41.3 Objective o f the S tu d y . 51.4 Importance o f the Study. 5CH APTER TW O : L IT E R A T U R E REVIEW2.1 The Concept o f Strategies.62.2 Growth Strategies. 92.3 A nsoff s Growth Strategies. 102.4 Summary o f Literature R eview .21CHAPTER T H R E E : R E SE A R C H M ETHODOLOGY3.1 Research D esign.223.2 Population.223.3 Data Collection M ethods. 223.4 Data Analysis Techniques. 28v

CHAPTER FOUR: DATA ANALYSIS AND FINDINGS4.1 Introduction.244.2 Profile o f firms.244.3 Types o f Internet services provided. 254.4 Extent o f application o f A nsoff s Growth Strategies . 274.6 Challenges in the application o f AnsofFs Growth Strategies.35CHAPTER FIVE: DISCUSSIONS, CONCLUSIONS & RECOMMENDATIONS5.1 Introduction. 385.2 D iscussions. 385.3 Conclusions. 395.4 Recommendations. 395.5Limitations o f study.405.6 Suggestions for Further research . 40REFERENCES. 41APPENDICESAppendix I Introduction letter.45Appendix II Q uestionnaire. 46Appendix III List of Internet Service Providers in Kenya as at September 2006 . 57Appendix IV Operational Dimensions o f Identifying issues o f strategy.58vi

LIST OF TABLESTable 2.1 AnsofFs Growth Strategy. 10Table 3.1 Operation dimension required in identifying issues of strategy . 58Table 4.1 Profile of firm s .25Table 4.2 Types of internet services offered .26Table 4.3 Specific internet services provided. 27Table 4.4 Market penetration stra teg y . 29Table 4.5 Market development strategy.30Table 4.6 Product development strategy .32Table 4.7 Diversification strategy. 33Table 4.8 summary o f the extent o f the application o f AnsofFs growth strategy . 34Table 4.9 challenges in the application of Ansoffs’ growth strategies. 35VII

ABBREVIATIONSADSLAsymmetric Digital Subscriber LineCCKCommunications Commission o f KenyaCDMACode Division Multiple AccessCOMESACommon Market for Eastern and South AfricaGOKGovernment of KenyaGPRS - EDGEGeneral Pocket Radio ServiceI-BURSTInternet Burst (wide area broadband)ICTInformation Communication TechnologyISDNIntegrated Services Digital NetworkISPInternet Service ProviderITInformation TeclmologyVOIPVoice over Internet ProtocolVPNVirtual Private NetworkVS ATVery Small Aperture Terminalvm

ABSTRACTThe purpose o f this study was to establish the extent to which A nsoffs Growth Strategyhas been applied by Internet Service Providers and the challenges they faced in itsapplication. In this context the study examined the four A nsoffs growth nt,productdevelopmentanddiversification strategies.The study was descriptive in nature. The population o f interest consisted o f all InternetService providingfirms inKenya which according to a listobtainedfromCommunications Commission o f Kenya as at July 2006 numbered 28 firms. Given thesmall number o f firms a census study was conducted. Primary data was collected using asemi-structured questionnaire. The questionnaire was administered to the respondentsthrough drop and pick later method. However in most instances the researcher wasavailable to clarify on issues, not well understood by respondents.Primary data was collected using a semi-structured questionnaire and only 16 firmsresponded out o f the 28 firms. Data was analyzed using frequencies, percentages, meanscores and standard deviation.Results showed that most firms applied Ansoff GrowthStrategy with market penetration being the most widely used by Internet ServiceProviders. Respondent firms applied A nsoffs growth strategies o f market penetration toa very large extent, market development to large extent, product development to amoderate extent and diversification to a small extent. The respondents stated challengeso f its application to include IT piracy, perception o f growth strategy, infrastructure andlegal framework and lack o f organizational IT policy.It was recommended that internet service providing firms utilize A nsoffs growth strategyo f diversification as a means o f achieving growth within a rapidly growing andcompetitive sector. One limitation of the study was that the study included Internetservice providers w'ho were multi-nationally based but set up subsidiary firms in Kenyahence making the study not to be representative of Internet Service Providers in Kenya.IX

Another limitation is the continuous merging of the Internet Service Providers, wherebythey appeared as independent Internet Service Providers on the list generated by theCommunication Commission o f Kenya and in essence they were merged entities. Only57.1 response rate was achieved, had all the Internet service providers responded thefindings would have been different.It is recommended that a similar study be done on purely public sector Internet serviceproviders because this study was based on current Internet Service Providers with 96% ofthe firms set up as private enterprises. This study recommends a further study of theapplication o f other growth and success strategies such as operational efficiency andknowledge management on Internet Service Providers. Further more a study can be donepurely on acquisition as a form o f diversification within Internet Service Providers.X

CHAPTER ONEINTRODUCTION1.1 BackgroundStrategic management is a managerial approach whose basic concern is the future o f thefirm and how the firm anticipates this future (Mbaya, 2001). It considers the future eventsagainst every business decision, and apparently, how skillfully business activities arecarried out determines the eventual long - term success or failure of the firm (Campbell,Stonehouse and Houston, 2002). As a result o f the turbulent and the competitive businessenvironment, any firms’ top management has no option but to engage strategy in theiroperations. Prahalad and Hammel (1990) stressed the need for any firm’s topmanagement to think beyond the current operations so as to develop a strategic intentwhich, they argued, shapes the organizations’ future strategy and development, stretchingit beyond its past and present achievements.The benefits o f strategic management to organizations are abounding in nature (David,1991; Robinson, 1997). Nevertheless, in order to realize the benefits, a firm mustundertake highly formalized planning processes and set clear objectives. Such objectivescan be translated into targets against which performance can be measured and monitored.Lastly, resources can be allocated to specific objectives and efficiency judged thereafter.The liberalization of the telecommunication sector has brought numerous challenges tofirms whereby they are left with minimal options o f either adopting new strategies orbeing pushed out o f business as a result o f stiff competition. Likewise, individualcustomers expect quality services, which meet their expectations and will always buyrequired services from those suppliers who offer the best products at premium rates.However, the development and implementation o f effective strategies is not the end initself. There is need to undertake an evaluation since there are often major discrepanciesbetween planned and realized strategy. Evaluation also enables the firm to develop thenecessary response strategy. Rigid planning in a dynamic and turbulent business1ofKMinot EB JOBEffi Usman

environment can be unproductive whereas rigid adherence to plans may translate intomissed business opportunities (Thomson and Strickland, 2000).1.1.1Growth strategiesGrowth strategies can be traced to a publication in the Harvard business review in 1957by Igor A nsoff where they were represented in form o f a strategic grid matrix. Accordingto Kotler (2000) growth strategies are a game plan o f determining the possible strategicdirections that an organization can follow. Growth strategies focus resources on seizingopportunities for profitable growth (Johnson and Scholes, 2002). They alter a company'sgoals and business processes to challenge conventional wisdom, identify emergingtrends, and build business. In some cases these strategies involve redefining the corecompetences (Charan et al, 1998). The strategics are therefore necessary in steering theorganizations through the turbulent phases and to counter the numerous challenges.The adaptation and application o f growth strategies is of great essence to firms; theyassist managers to redefine the future, success and growth of organizations. According toMbaya (2001), top management decisions must focus on the future o f the firm amidstcompetition and environmental turbulence. The benefits o f growth strategies toorganizations are abounding in the literature (Kotler, 2000; Johnson and Scholes, 2002).A nsoff s strategy matrix shows that growth strategies can help firms identify their futurestrategic direction, assist them in planning for growth, assist them in formulating astrategy and knowing which markets and respective products to se n e in the market forsuccess and growth.According to Mbaya (2001), any organization needs a strategy because it defines thefuture success and sustained growth. Firms are threatened unless they adapt growthstrategies to help them strengthen their competitive positions, furthermore they need togrow, expand into new market segments and introduce new products/services that meetcustomer needs more effectively.2

1.1.2 Internet Service ProvidersInternet service providers (Internet Service Providers) are business or organizations thatoffer users access to the Internet and related services. They offer a range o f products andservices that are tailored to always meet the ever-changing diversity o f market demand.Products which Internet Service Providers offer to allow Internet accessibility includedial-up access, leased line and integrated services data network (ISDN). Other productsinclude design service, hosting services, domain registration services and networkingservices. There are about 52 licensed Internet Service Providers operating in Kenya with50 o f them located in Nairobi.According to the Communications Commission o f Kenya (2005), the subscriber profileconsists o f an estimated one million Internet users with considerable monthly growth.This shows that access to the internet is no longer a luxury for many Kenyans but rather itis a necessity that serves as a foundation for education and life long learning initiativesaccess to knowledge, health care, government services, financial activity, entertainmentand communication (Obuong’, 2005).The ISP industry is faced with a number o f problems. Since the liberalization o f thecommunication industry and subsequent formation o f the Communication Commission ofKenya (CCK) as the industry's regulator, the policies pursued and the role o f the state hascontinued to draw mixed concerns. The government has maintained a conservative stancewhen it comes to licensing more landline and mobile telephone companies. This hasproved to be an impediment as Internet Service Providers are forced to get broadbandconnection from a limited number o f companies at high cost.Another key issue in the industry is unfair competition from unscrupulous dealers. Thereare many potential consumers who do not rely on legitimate carriers but on illegal serviceproviders. Such providers are poised to offer calls (through VOIP) but at a considerablylower cost thus denying legitimate Internet Service Providers potential business thusforcing Internet Service Providers to create services with low profit margins but of highquality in order to attract and retain customers.3

1.2 Statement of the ProblemThe Internet is a powerful tool o f communication whose vitality in any economy cannotbe overlooked, mainly because it enables data to be transmitted worldwide through apublicly accessible system o f interconnected computer networks. Internet ServiceProviders play an important role in the communication industry by facilitating Internetaccessibility to both individual and corporate subscribers who can then interact, as theyso desire with the outside world.The liberalization of the telecommunication sector and subsequent shift o f governments’role from that o f provider of ICT services to a more regulatory one has seen tremendousgrowth o f Internet Service Providers in Kenya (Opiyo, 2003). Due to the upsurge innumbers, Internet Service Providers have found themselves in a situation whereby theyare confronted by a myriad o f challenges such as fierce competition for clients anderoded market share for individual firms.Mbaya (2001) notes that in the Internetbusiness, six months plans are obsolete, therefore future success and sustained growth formany of these firms is threatened unless their management adapts strategic managementto help in formulation and implementation o f strategies that strengthen their competitivepositions.Internet service providing firms in Kenya need to grow in terms o f market share and thiswill require the adoption of growth strategies. It is however not known whether theypursue any growth strategies (Ansoff, 1990). A starting point was to conduct a study todetermine the strategies they had adopted in pursuit o f growth.Similar studies have been done to determine the extent o f application o f A nsoff s growthstrategy (Njoroge, 2003; Kiilu, 2004) these studies were mainly industry specific. On astudy on the application o f the diversification strategy on the Nation Media Group(Njoroge, 2003) the results indicated a related form o f diversification as a widely appliedstrategy. Kiilu (2004) found out that the extent of application of A nsoff s growth strategyin the public sector was still too low' and sited challenges of its application to include;lack of understanding, beauracratic systems, procedures and strategy implementation.4

In recognizing the role o f these studies, we noted that they might not be applicable in thetelecommunication sector as the findings were industry-specific and no research had beenconducted on the application o f Ansoffs growth strategies by Internet service providers inKenya. This study sought to determine the extent o f the use of A nsoffs growth strategiesand challenges o f its application.1.3 Objectives of the study(i)To establish the extent to which A nsoffs Growth Strategy model had beenemployed by Internet Service Providers.(ii)To establish the challenges the Internet service providers faced in theapplication o f the A n so ffs Growth strategies if any.1.4 Importance of the studyThe result o f this study may be o f use to the following:(i)Internet service providers. Internet Service Providers management will get toknow the crucial matters they need to work on, thereby providing a startingpoint to focus on areas o f service and quality improvements.(ii)Other scholars and researchers may use the outcome o f the study as areference point and basis for further research.(iii)Ministry o f Communication. The use o f ICTs in Kenya has increased eventhough there is no comprehensive policy framework.In the 9th NationalDevelopment Plan (GOK, 2002) the government intends to develop a policyon ICTs. This study is timely as it would give insights on issues that can beadopted by the ministry.(iv)The industry regulator CCK. Help in evaluating the quality o f services offeredby Internet Service Providers as well as enhance level o f the playing field.5

CHAPTER TWOLITERATURE REVIEW2.1 The Concept of StrategyAnsoff (1990) asserts that the concept of strategy entered business vocabulary in the1950s, when response to environmental discontinuities became important. Strategies arefrequently not made explicit; they are either a private concept shared only by the keymanagement, or diffusely understood but seldom-verbalized sense o f common purposethroughout the firm (Buzell, 1987). According to Grundy (2003), strategy is a systemconcept, which gives coherence and direction to growth of a complex organization.McDonnel (1999) defines strategy as a set of decision-making rules for guidance oforganizational behavior. The four distinct types o f such rule include yardsticks(objectives) by which the present and future performance of the firm is measured; rulesfor developing the firm’s relationship with its external environment; rules for establishingthe internal relations and process within the organization and the firm ’s operationalpolicies.The process o f strategy formulation results in no immediate action, rather, it sets thegeneral directions in which the firm 's position will grow' and develop. Therefore, strategymust next be used to generate strategic projects through a search process (Page, 2001).The role o f strategy in search is first to focus on areas defined by the strategy, and,second to filter out and uncover possibilities, which are inconsistent w ith the strategy.Thus strategy becomes unnecessary whenever the historical dynamics o f an organizationtakes it where it wants to go. At the time o f strategy formulation it is not possible toenumerate all projected possibilities, which will be uncovered.Therefore strategyformulation must be based on highly aggregated, incomplete and uncertain informationabout classes or alternatives (Campbell, 2002).When search uncovers specificalternative the more precise, less aggregated information, which becomes available maycast doubts on the wisdom of the original strategy.requires feedback.6Thus, successful use o f strategy

A strategy, which is varied under one set o f objectives, may loose its validity when theobjectives o f the organization are changed.Strategy and objectives o f a firm areinterchangeable. Therefore some attributes o f performance (such as market share) can bean objective o f the firm at one time and its strategy at another. Further, as objectives andstrategy are elaborated throughout an organization, a typical hierarchical relationshipresults: elements of strategy at a higher managerial level become objectives at a lowerone. A strategy, therefore, is an elusive and somewhat abstract concept (Page 2001). Itsformulation typically produces no immediate productive action in the firm. About all, itis an expensive process both in terms of money and managerial time.Since management is a pragmatic results oriented activity, it remains important to askwhether an abstract concept, such as strategy, can usefully contribute to a firm'sperformances.Ansoff (1990) notes that the history o f business abounds with clearexamples o f deliberate and successful use o f strategy. A keen business observer canalways discern a unique strategy in a majority o f successful firms. Strategy is apotentially very powerful tool for coping with the conclusions o f change which surroundthe firm today: but it is complex, costly to introduce, and costly to use. Nevertheless,there is evidence that it more than pays for itself.Strategy is a tool which offerssignificant help for coping with turbulence confronted by firms whether for profit (Njogu, 2004; Nyakiore, 2004; Kokw'aro, 2004) and not for profit (Ratemo, 2004); as wellas government organizations (Njoya. 2004) and a broad spectrum o f social organizations(Ansoff, 1990). Therefore, strategy merits serious attention as a managerial that can helpsteer an organization during moments o f turbulence.It is important to know when recourse to an explicit strategy becomes important. Pearce(2001) and Robinson (2002) have argued that is necessary to formulate strategy whenrapid and discontinuous changes occur in the environment of the firm.This may becaused by saturation o f traditional markets, technological discoveries inside or outside thefirm, and/or a sudden influx o f new competitors. Under the conditions, establishedorganizational traditions and experience no longer suffice for coping with the newopportunities and new threats.7

W ithout the benefit of a unifying strategy, the chances are high that different profits ofthe organization will develop different, contradictory and ineffective responses.Marketing will continue struggling to receive historical demand; production will makeinvestment in absolute lines, while Research & Development will innovate new productsbased on absolute technology. Conflicts will result, and reorientation o f the firm will beprolonged turbulent and inefficient. In some cases the reorientation will may come toolate to guarantee survival.When a firm is confronted with discontinuities, strategy becomes an essential and badlyneeded managerial tool.An explicit new strategy also becomes necessary when theobjectives o f an organization change drastically as a result of new demands imposed onthe organization by the society or market (Cole, 2005).This is precisely what ishappening today in many businesses such as Internet Service Providers. There are anumber o f difficulties encountered in implanting strategy formulation.In mostorganizations, the pre-strategy decision making processes are heavily political in nature(David, 2001). Strategy introduces elements of rationality, which are disruptive to thehistorical culture of the firm.In this case, a natural organizational reaction is to fightagainst the disruption o f the historical culture and power structure, rather than confrontthe challenges passed by the environment.Also, introduction of strategic planning triggers conflicts between previous profit-makingactivities and new innovative activities (Pearce, 2002). Organizations typically do nothave the capability, the capacity or the motivational system to think and act strategicallythereby calling for the use of consultants (O buong\ 2005). Lastly, organizations lackinformation about themselves and their environment, which is needed for effectivestrategic planning; not do they have the managerial talents capable of formulating andimplementing strategy (Ansoff, 1990).8

2.2 Growth strategiesG row th strategies focus resources on seizing opportunities for profitable growth.According to Brian (1996), evidence suggests that their profits grow through increasingrevenues, which can boost stock price between 25 to 100 percent higher than profitgrow th by reducing costs. Growth strategies assert that profitable growth is the result ofm ore than good luck - it can be actively targeted and managed. Growth strategies alter acom pany’s goals and business processes to challenge conventional wisdom, identifyem erging trends, and build are business.In some cases these strategies involveredefining the core.According to Charan et al (1998), growth can be achieved through different methods.Deciding how to develop the chosen strategy is the next step in strategic choice. Growthstrategies include: internal development, acquisitions and joint development. Internaldevelopment means developing the strategy by the firm themselves for example, if thefirm 's strategic direction is market development into another region, this would meanraising finance, setting up another operation base, marketing and selling in the newregion and building up the organizations reputation and market share from zero base.W hen the long-term strategy o f a firm is based on growth through acquisition of one orm ore similar businesses operating at the same stage o f the production for example,marketing chain, its grand strategy is called horizontal integration.When the grandstrategy o f a firm involves the acquisition o f businesses that either supply the firm withinputs or serve as a customer for the firm’s outputs, vertical integration is involved(Johnson and Scholes, 2002).Acquisition is the most popular means of diversifying into another industry. Not only isi

by Igor Ansoff where they were represented in form of a strategic grid matrix. According to Kotler (2000) growth strategies are a game plan of determining the possible strategic directions that an organization can follow. Growth strategies focus resources on seizing opportunities for profitable growth (Johnson and Scholes, 2002).

Related Documents:

The Concept of Ansoff Growth Matrix Strategy In this study, the most appropriate strategy which is applied to PT. Yakin Bersama Jaya in order to penetrate the international market based on Ansoff growth matrix strategy concept is the third strategy, namely market development. The strategy is that PT.

3.The Ansoff Matrix - Theory and Methodology The Ansoff Matrix, created by the American planning expert Igor Ansoff, ia a strategic planning tool that links an organisation's marketing strategy with its general strategic direction. It presents four alternative growth strategies in the form of a 2x2 table or matrix. One dimension of

Igor Ansoff to help companies allocate funds among growth initiatives. Ansoff's matrix clarified the no-tion that tactics should differ according to whether a firm was launching a new product, entering a new market, or both. Our version replaces Ansoff's binary choices of product and market (old versus new) with a range of values.

Igor Ansoff is the father of strategic management. Henry Mintzberg Truly the godfather of corporate strategy. Gary Hamel Igor Ansoff was the father of modern strategic thinking. Tim Hindle In 1965 came the ible of strategic planning, H. Igor Ansoff's monumental orporate Strategy. Richard Koch Turbulence Visibility Familiarity Speed

Ansoff's Matrix has been examined a number of times since this unit began and that is because it is a key decision-making tool. Whereas previous questions on Ansoff have been in more depth, this one was for four marks and required a more focused approach from candidates. The question required candidates to use Ansoff's matrix. In other words

Decision Matrix Analysis to weigh up the different factors in each option, and make the best choice. Using a Nine-Box Ansoff Matrix Some marketers use a nine-box grid for a more sophisticated analysis. This puts "modified" products between existing and new ones (for example, a different flavor of

Matriz de Ansoff En el área de Marketing, una herramienta muy difundida es la Matriz de Producto-Mercado creada por Igor Ansoff en la década de los cincuenta. La simpleza en su estructura -ya que está conformada por sólo dos filas y columnas- permite según Hoang (2011) evaluar la capacidad de aprovechar oportunidades en el mercado.

of general rough paths. However, in this paper, we will focus on the case where the driving signal is of bounded variation. Following [6] we interpret the whole collection of iterated integrals as a single algebraic object, known as the signature, living in the algebra of formal tensor series. This representation exposes the natural algebraic structure on the signatures of paths induced by the .