Myanmar is at one of the leading positions in respect with the usage of mobile phones across the globe. The nation is experiencing huge competition in the mobile industry but on the other hand also fetching the attention of the foreign companies to have business investment. The mobile phone manufacturers are seeking opportunities to have successful business ventures in Myanmar as the market is booming and developing at a rapid rate. To perform business operations in Myanmar there is a need to develop understanding about the market conditions and the market situations (Ling, Parekh, Zainudeen and Galpaya, 2017). To perform analysis, one of the most effective factors is the diamond model of Porter which is be practiced in the report for analysing the market attractiveness of Myanmar’s mobile industry. The paper will also have a wide discussion of the modes of entry to perform business in Myanmar for the overseas organisations. There will also be discussed the demerits and the merits associated with the entry mode to be used by the companies to enter in Myanmar. The paper will sum up by focusing upon the management issues exoerienced by the organisation while entering into Myanmar and performing business.
The National Diamond model of Porter was developed by renowned theorist Michael Porter and is considered as one of the most effective economic model. It is an analytical tool which has been practiced for analysing the industrial competitive environment. The analysis performed support the business organisations in fetching the data regarding the market situations and conditions. It also helps in demonstrating the attractiveness of the market in a specific region. There are basically four factors which are analysed through the Porter’s Diamond model i.e. the firm strategy and the rivalry, the factor input conditions, the factor conditions and the related and supporting industries. Following is the analysis of the Myanmar’s mobile phone industry through the lenses of Porter’s National Diamond model:
There are strong growth and developments found in various areas of the Mobile industry of Myanmar such as the high use of internet, excess use of social media and increased use of mobile phones. All this has been resulted in offering business opportunities to the mobile phone companies. The mobile phone industry of Myanmar has experienced huge growth and now there is a need of change demanded by the consumers. There has been a strong digital shift which fluctuate the consumer market demand (Ling, et al., 2017). In 2013, there was fifty percent mobile penetration rate and eighty percent of the mobile phone users take maximum use of the smartphones (Ho and Chua, 2016). According to the data collected and as per the survey, it was found that there were 6-7 percent as the users of Sony, 25.6 percent as the users of iPhone and 42.2 percent as the users of Huawei. The data also revealed that the demand for the brands such as Xiaomi, Oppo and Lenovo are also increasing rapidly in Myanmar (Taguchi & Lar, 2015). It shows the market condition of Myanmar which means that the individuals are more concerned with the prices and prefer buying products which are comparatively cheaper or low in prices. In respect with consumer behaviour, it has been evaluated that the choice for the products are highly depended upon the factors such as age and gender of the individuals (Weisbrod, 2015). According to the current market trends, the mobile phone companies provide the customers with tailored products as per the demands and requirements of the individuals of the nation. From the evaluation, it can also conclude that there exists in-tense market competition and rivalry among the various Chinese mobile companies as there has been preferred the Chinese mobiles by the companies (Kumar, Shankar and Momaya, 2015).
It is the market condition which is in relation with the product demand and the buyers’ behaviour in respect with the quality and innovation of the products. The market of Myanmar is highly versatile and the consumers demand diverse types of products as per their age, lifestyle and gender (Ling, et al., 2015).The businesses of the various Chinese brands are successfully gaining extended market share in Myanmar and so the market competition is rising with a rapid rate. It has been analysed that the mobile market of Myanmar is one of the strongest market across the globe. The country is regarded as the last developing market which has a potential to grow, the market experts look Myanmar as one of the profitable markets in respect with business opportunities (Ling, et al., 2017). There are companies which are launching their mobile devices in the market of Myanmar (De and Raychaudhuri, 2017). With the change in the market condition, there has been analysed high availability of products and diverse brands in eth market. The mobile penetration is continuously increasing but with a stabilized customer base. There has been a sudden increase in the demand for the products which are customized as well as the after sales service is being one of the major aspects in the mobile phone industry of Myanmar (Min, Fife and Bohlin, 2014).
Related and Supporting Industries
The related and the supporting industries explain the role of the related industries which play a vital role in the growth and the functioning of a specific industry. Whether being an organisation or an industry, there is a need of external support for effective functioning (Weisbrod, 2015). There is a great role of the supporting industries in terms of offering raw materials, distribution, manufacturing, supply or any other activity. In respect with the related industries of the mobile phone industry of Myanmar, there is a significant role of the telecom industry (Ho and Chua, 2016). There are number of international companies in the telecom industry which supports the functioning of the mobile phone industry such as ZTE, Huawei, Alcatel and Ericsson. There are various other organisations too which significantly serves the development of the mobile industry of Myanmar. The existence of a number of players results in market development and high market competition which make the industry striking (Ling, et al., 2017).
Factor Input Conditions
The factor input conditions of Myanmar are not supporting and favorable and this is one of the, major drawbacks of the country for the business organisations. In respect with the cost of the labour, it is comparatively low but there are various other afctors which are not supporting. The factors such as the electricity rate and the infrastructure are the key issues which restrict the businesses and the industries to grow and develop (Ling, et al., 2015). Therefore, it has been evaluated that entering into Myanmar and performing business operations is a tough task for the companies as they will be restricted from taking use of resources for the success of the global ventures. With the continuous development of the market, there has been analyzed a sudden growth and improvement in the factors such as the use of social media, the usage of mobile phones and the internet diffusion (De and Raychaudhuri, 2017). By avoiding the various stages of development, the consumer market of the country has successfully entered the digital age with a potential mobile market offering business opportunities to the various mobile manufacturing companies. In the initial stage, approximately around eighty percent of the overall, population of the country was the consumer market for the mobile phones (Min, Fife and Bohlin, 2014). There has been followed the low cost strategy adopted by the mobile companies for fetching the attention of the customers. There were offered android smartphones at low and cheap prices to catch the market share. The mobile industry of Myanmar is analyzed to remain saturated in the coming time frame (Taguchi & Lar, 2015). It has also been forecasted that because of the dialect environment, there is a vital role of the product cycle of mobile phones in Myanmar. In recent years, there has been analyzed that the product life cycle of the smartphones has increased in number of overseas and technologically advanced nations. From the future perspective, the product life cycle of the mobile phones of Myanmar will also the same for extending the life cycle of the products (Kumar, Shankar and Momaya, 2015).
While entering into any international or overseas market, the companies are required to select an appropriate entry mode. It is essential to analyze the various entry modes and select the most suitable one which can be appropriate according to the market conditions and situation of the host country. The foreign direct investment is considered as one of the most significant and vital entry mode for the business organisations to have sustainable business operations in the international market (Raff, Ryan and Stähler, 2009). FDI or foreign direct investment is a vital entry mode that supports the economic development of the nations. The amount of investment made by any business organisation is the factor which shows the economic stability of the nation. In respect with Myanmar, it has been evaluated that there is a major role of the Myanmar’s government in the growth of the foreign direct investments in Myanmar since last two decades (Nielsen and Nielsen, 2011).
Out of the various FDIs the chosen FDI is Greenfield investment. The key objectives of having Greenfield foreign direct investment in Myanmar comprises of that it helps in accepting the market oriented system for allocation of the resources. The increased rate of foreign direct investments also encourages the business entrepreneurial activities as well as the private sector investment in Myanmar (Luo and Wang, 2012). One of the major objectives of Greenfield FDI in Myanmar is that it aims at high exposure of foreign investments to the nation’s economy for the expansion of the business. It also aims at achieving technological advancements in the business operations and the growth of the employment opportunities for the domestic individuals. The higher the rate of f Greenfield oreign direct investments would be, the more there will be business opportunities and a chance for the domestic people to have employment. Thus, from the overall perspective there will be economic development of the country (Wei, et al., 2014).
Limitations of Greenfield Foreign Direct Investment
While entering the global markets, Greenfield foreign direct investments are one of the most significant methods which have various advantages to the company as well as the country. But on the other hand, there are several limitations associated with the entry mode. There are number of barriers which came across while taking use of Greenfield FDI as the entry made such as follows:
The administrative barriers are the barriers which are in relation to the investment proposal and its submission in the host country. There has been analyzed that the less developed nations comprises of huge formalities and procedures regarding the submission and approval of the investment proposal. Therefore, it results into administrative barriers and exhaustion of time. And the process associated with the approval of the investment is also not transparent which creates a number of issues and thus is not approved by the authorities. There are many times issues involved such as corruption and bribes (Rasiah and Gammeltoft, 2009).
The policy barriers are those barriers which are required to be emphasized by the foreign investors before making investments in Myanmar. There are various policies which are required to be aware of such as the tax rates, the monetary policy, the fiscal policy, labour laws, etc. If all these policies and laws are favorable then it fetches the attention of the foreign investors for investing capital in the nation (Anukoonwattaka and Mikic, 2012).
The infrastructure barriers are also one of the major factors that have a direct impact on the Greenfield foreign direct investment of the nation. The increased infrastructure barriers impact the expenses of the foreign investors and also act as a barricade in the investments. The Myanmar’s Government is required to improve the country’s infrastructure in order to attract the foreign investments. In respect with the feasibility of the infrastructure, it has been analyzed that the infrastructure of Myanmar is not appropriate and thus it does not support the growth and development of the country (Walsh, 2010). Therefore, it is required that the government of the country must improve its infrastructure in order to have increased Greenfield FDIs in Myanmar. It is high time when investments must be made for the improvement of the infrastructure so that there can be attained an annual growth of at least eight to ten percent. Maximum of the investments are required to be done in sectors such as roads, real estate, power plants and water treatment so that the foreign companies can operate successfully in Myanmar (Sousa and Tan, 2015).
Advantages and attractiveness of Foreign Direct Investment in Myanmar
There are several afctors and aspects which are the key attractiveness of the country and can also be considered as the benefits gained through foreign direct investments in Myanmar. The primary strength of the nation is the huge availability of the precious stones, metals, oil and the natural gas. In respect with the location aspect, Myanmar is considerably privileged enough to be located at a location which is very eye-catching (Findlay, Park and Verbiest, 2016). Myanmar locates in between Laos, China, Thailand and India and therefore there are several business opportunities for the country. It has been analyzed that the economic development of Myanmar is highly supported by a number of countries. There are a number of foreign embassies who have been opened in Myanmar and have given access to have business operations in the country. The cost of labour in Myanmar is extremely low and which is one of the key attractive factor to fetch the attention of the foreign investors to perform business in the regions of Myanmar. Because of the low cist labour, the companies usually make high profits and it is one of the key benefits reaped by the foreign investors while performing business in Myanmar (Htay, 2016).
For attracting the Greenfield Foreign Direct Investments, Myanmar is required to make some additional efforts as it is necessary for the economic development of the nation. The Greenfield FDI strategy can only work once the company analyze and evaluate the market competition and the competitive strength of the host country. The Directorate of Investment and Company Administration, Myanmar is required to be considered for making the country highly attractive so that more number of Greenfield FDIs can take place, it is required that there must be develop a culture which can support the foreign companies to have effective workforce management and also to develop a customer focus approach. There is a vital role of business friendly environment for attaining the attention of the foreign companies so that they can invest in Myanmar and help in its development (Primrose and Wagstaff, 2014). The next key recommendation is that the country must have significant investment on its infrastructure as it is the most vital factor for convincing the foreign organisations to have investments in Myanmar and offer them an assurance their business will be successfully operate in the regions of Myanmar. The poor infrastructure of any nation leads to decrease in the foreign investment and also act as a barricade in the development of the country. There has also been identified that for successful registration of any foreign company in Myanmar there requires at least a period of six months which is highly time consuming for the companies. If the time period will be reduced then it may result in increased number of foreign direct investments in Myanmar.
At the time of investing the foreign nations, it is essential for the companies to first have effective analysis of the cultural of the foreign nation and also the various other aspects so that there can be effective development of the mode of entry and the management strategies. According to the evaluation of the mobile phone industry of Myanmar, there has been evaluated that there are a number of issues and problems which can be experienced by the companies while entering into Myanmar (Cheema, McNally and Popovski, n.d.) In respect with the business operations to be conducted in the country, it has been identified that the company must first understand the country’s environment. There are some management issues or problems which can be experienced by the company while performing business in Myanmar’s mobile phone industry:
Issue from Part1: Unskilled labour and cross-cultural management
In respect with the culture of Myanmar, it has been identified that Myanmar holds a unique culture. The nation scores very low in respect the power distance dimension which depicts that the companies are required to have high level of equality and there will not be tolerated any ,and of issues in respect with inequality. The organisational hierarchy is usually flat in nature and therefore it becomes essential for the business organisations to have equal distribution of the power and authority among the organisational workforce in the industries of Myanmar (Primrose and Wagstaff, 2014). Any foreign company who is planning to enter in the regions of Myanmar is required to manage the business activities and the operations in respect with the business environment and market conditions of the country. In consideration with the labour class of the country, it has been identified that there is easy availability of labour and they are also cheap but the issue is that they are only accessible in the Myanmar’s manufacturing sectors. In respect with the mobile phone industries of Myanmar, there is a need of adequate knowledge and technical know-how in order to manufacture the mobile phones but this type of labour is not easily available in the country (Fujita, Mieno and Okamoto, 2009). There are mostly unskilled labour and the companies entering Myanmar are required to first skill the labors or import labour from their country to manage the business activities. And thus it results in increased cost for the overseas companies. In respect with the labour productivity, kit has been analyzed that it is comparatively low and thus it resulted weak gross domestic product of the country. From the data collected, it has been analyzed that a total of fifty percent of the population works which is comparatively higher than other nations. There is a pressure on the households to have their involvement in the workforce whereas the maximum proportion of the overall population of the country is indulged in farming only. Therefore, the overall labour productivity is low in nature (Cheema, McNally and Popovski, n.d.).
Issue from Part2: Corruption and Political Instability
In Myanmar, there is high level of corruption as well as political instability which act as a barricade for the foreign companies to have investments in Myanmar. It becomes problematic for the companies to effectively manage the business operations because of increased level of corruption. In respect with the political environment of Myanmar, there are some key issues which not only restrict the development of the country but also the foreign companies to have investments in the nations. There are certain issues such as land grabbing, increased number of cases of child labour and inadequate employment standards. These issues are the biggest hurdle in the successful management of the business in the nation. There has been a lot of interference made by the Ministry of Defense of Myanmar in all the business activities (Primrose and Wagstaff, 2014). There is also huge involvement of the country’s military which abide the foreign companies to successfully run and manage their business function in Myanmar. Along with political instability, corruption also plays a major role in the decreased number of FDIs in Myanmar (Fujita, Mieno and Okamoto, 2009). Earlier there was huge involvement of the military when the country was ruled by the military only and thus it weakens the business affairs with foreign companies. This resulted in rise of a number of management issues such as poverty and increased level of corruption. For eradicating corruption from Myanmar and its industries, there has been taken use of several reforms but still there is no such result attained (Cheema, McNally and Popovski, n.d.). There has been found approximately a total of three thousand companies which have been involved in corruption and thus it resulted in huge barricades for the foreign organisations to enter the markets of Myanmar and perform business. From the past data, it has been found that maximum of the foreign companies who have entered Myanmar have bribed the officers and the respective authorities for their successful registration. But later all these activities were appeared as huge obstacles for the companies as then they have to give the brines again and again for conducting every business activity. Thus, the bribery process never ends (Fujita, Mieno and Okamoto, 2009).
From the overall discussion and analysis, it has been evaluated that Myanmar is not considered as a highly potential country or favorable nation for conducting business operations in respect with the mobile phone industry. But if there will be improvement in the technology, infrastructure and the political conditions then there can be increased foreign direct investments and the foreign companies can have sustainable business operations in the country.
From this report, it can be concluded that Myanmar is a nation with high use of internet, excess use of social media and increased use of mobile phones. All these aspects are the key factors behind the growth and development of the industries and increased business opportunities in the country. It has also been evaluated that the mobile phone industry of Myanmar has experienced huge growth and now there is a need of change demanded by the consumers. As per the analysis performed by the Diamond model of Porter, it has been concluded that the choice for the products are highly depended upon the factors such as age and gender of the individuals. From the overall analysis, it can also be stated that the demand for the brands such as Xiaomi, Oppo and Lenovo are also increasing rapidly in Myanmar and they are also performing vigorously. In respect with the mode of entry, it can be concluded that FDI is one of the best ways for entering in the foreign market and there are number of advantages associated with this mode of entry. There are also few issues that are required to be overcome for having successful business operations in Myanmar such as the various barriers comprising policy barriers and administrative barriers. Because of the political instability, unique culture and unskilled labour, there can be faced issues in the business operations. Therefore, it is recommended to have proper analysis of the host country before entering into the market.
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