Applicability of Porter’s diamond Model in Myanmar Phone Industry
Discuss about the Competitive advantages of shadow banking industry.
According to the diamond model, the nature or characteristics of the domestic or home country plays a vital role in describing the organizations international competitiveness (Jinabo, Zige, & Yayun, 2015). The nation’s ability to accomplish and achieve its mission at a global level is affected by various factors besides its production factors. Porter’s Diamond model provides an effective way for the analysis of national competitiveness. Through the porter’s diamond model assessing the global success of the firm is possible on the basis of home country characteristics.
Myanmar is a less developed country with rich resources. Getting a clear idea of the home base for foreign competitors is vital in analyzing the mobile phone industry for Myanmar. The factors condition of Myanmar includes climate, natural resources and physical infrastructure (Kordalska & Olczyk, 2016). Myanmar is rich in human resources, areas and population. It is a resource rich nation but suffers from rural poverty. The country is still an agro based industry but has shown a rapid increase in telecom sector.
In Myanmar mobile possibilities are evolving more in relation with the internet. The number of mobile owner in Myanmar is growing continuously. The applications of mobile phones are becoming much cheaper which makes it accessible for each and everybody (Bhawsar & Chattopadhyay, 2015).Upcoming online business in Myanmar includes the App builders. Government of Myanmar stimulates rules and regulation for the mobile market. There always an interaction between the size, economies of scale and transportation cost relevant in Myanmar. Porter’s diamond models demand condition involves factors such as market growth, size, home demand and sophistication (Kerzner & Kerzner, 2017). These features help the firms in creating competitive advantages. Such as, the sophisticated mobile phone buyers generally pressure the firm to create latest advanced products and innovate faster than the competitors from the foreign countries. A products core or fundamental design in fact reflects the market needs of the home country. The requirements for the home market also shape the industry that is later affected by the global markets.
The IT workforce is growing and developing at a rapid rate. Government of Myanmar puts continuous and great efforts in the IT policies related to mobile industry (Kordalska & Olczyk, 2016).The climatic condition of Myanmar is also suitable for setting the infrastructure and knowledge resources. The foremost and first elements of porter diamond model are the factor conditions. This includes various kinds of resources that may not be easily available in the home country (Wonglimpiyarat, 2015). For instance, Myanmar’s physical resources, human resources, capital resources, knowledge resources and infrastructure. Level of Education for internet technology and mobile usage is generally high. Myanmar also has geographical IT advantages The basic factors further includes the home country natural resources like, minerals, climate and minerals, where the factors mobility is minimum. These factors generate ground for competitiveness in the international market. This basic factor can never really turn into real value creation without the support of advanced factors. The advanced factors on the other hand are highly sophisticated in nature, such as research capabilities and human resource skills.
Demand conditions
In the current scenario, India is leading in the upcoming microchip market. Myanmar and India are the trading partners and India facilitates various advantages to Myanmar. The government of Myanmar is trying and planning to invest in IT development and mobile research & development. Myanmar is also recently a leading company in all the IT and mobile related production. The success of the mobile industry depends mostly on its suppliers and the related industries within the region. The competitive suppliers in the mobile industry or mobile industry reinforce internationalization and innovation (Sölvell, 2015). Besides the suppliers in Myanmar’s mobile industry the related companies like Ooredoo and Telenor. If the organization is successful, it could be beneficial for both the supporting ad related companies. The mobile phone companies can be benefitted from the related industry know-how. This could be encouraged through producing complementary products. The supporting and related industries could generate inputs that are vital for internationalization and innovation. These industries facilitate cost-effective techniques and also help in the upgrading process. This further stimulates other firm in the similar segment to innovate. Moreover, the success of a firm is related with its current suppliers and supporting industries within the particular region. For example, the international competitiveness of the Myanmar mobile industry could be easily explained by the high focus of the mobile industry related to this segment.
Myanmar has competitive advantage in respect to its low labor costs and abundance of raw materials. Majority of foreign countries are now shifting their operations in Myanmar. The mobile phone industry of Myanmar ventures with high IT technology firms. It targets the niche market through improvement of mobile technology and continuous development. Through, porter’s diamond model an organization can identify all the factors that are required to build competition at national level. Hence, this model is often applied during internationalization efforts (Acs, Audretsch, Lehmann, & Licht, 2016). All the factors are significant for the competitiveness of the mobile industry in Myanmar with respect to its international competitors. An organization will be able to formulate its business strategic goal on considering these factors. The factor is related to the process in which organization is managed and organized. The country’s cultural aspects play a vital role in this element. This focuses on the market condition of mobile industry prevalent in the Myanmar’s market. The working condition, interactions and morale between the organizations are shaped differently in the various countries. Porter’s diamond model this element generally includes the ways in which a company manages and organizes itself. The company’s nature of rivalry and objectives in the home market. The techniques in which a firm set goals, establishes itself and is managed is crucial for its success in the international market. Though the presence of fierce competition in the market from the rival industries creates pressure. This forces the firms to innovate and create new products and services so that it can upgrade and maintain its competitiveness. Constant pressure due to the existing competition facilitates them in developing competitive products and offering them at flexible prices to stay competitive in overall market.
Factors Endowments
The government of Myanmar plays a vital role in encouraging and uplifting the development of companies and industries both at abroad and home. The government of Myanmar is promoting the mobile phone industry by launching new schemes and phone plans. Moreover, Myanmar’s government encourages the organization to use alternative environmental system or alternative energy that would create positive impact on production. The government of Myanmar also provides financial subsidies and granting subsidies. The government of Myanmar has recently approved FDI in single as well multiband on specified rules and regulations. This policy has thus ensured various foreign retailers to enter into Myanmar via direct investment routes. The government of a country strongly affects the firm’s international competitiveness. Moreover, it can affect the other five elements of the Porter Diamond model. Exports of the country is either promoted or hindered due to its government rules and regulations. It can create a major impact on the supply techniques or condition of their main production factors. Furthermore, it can shape the competition between various firms and shape the conditions for demand in the home market. These interventions can take place at local, domestic, national and even international level (Riasi, 2015).
The final and last element of the Porters diamond model includes chance. Chance is all those random events that are beyond the organizational control. It could prove to be very vital for the international competitiveness. In most market condition, chances play a vital role in the business environment (Byun, Lee, & Kim, 2016). This facilitates new opportunities for the companies to produce innovative products and services. Myanmar is recently known as the fourth most fastest growing mobile industry in the world. In the current scenario, millions of mobile subscriber is from Myanmar. Myanmar has currently known about 36 million cell phones subscribers and 5 million rises was just in last quarter. Myanmar is in the fourth position of mobile users just trailing behind its giant neighbors China and India. The United States is leading with the increment of 6 million subscribers last year. The discontinuities generated by chance can leads to be beneficial for some company on the same way can have disadvantages for other firms. Some companies may gain competitive advantages while other may lose.
Over the past two years Myanmar mobile industry has varied dramatically. The industry has enabled millions of people to stay connected and the nation’s mobile subscriber rate has skyrocketed. Earlier the mobile sector has been operated for several decades under monopoly controlled by the state-owned obligatory Myanmar Posts and Mobile industry’s (MPT). The current scenario is different; the mobile subscribers are now free to choose between three major firms for coverage. Since 2014, Telenor and Ooredoo Myanmar have switched their services. The sim cards are offered for K1500 each. In the Myanmar market, the prices of sim card have come down. This also created the prices of Smartphone’s to decrease creating huge demand (Fainshmidt, Smith, & Judge, 2016). The mobile industry has recently taken leap straight into the 3G services as well as advanced technologies are also used.
Supported and Related Industry
Myanmar Smartphone subscription rate has recently stood at around 350 million and the figure is set to be tripled to 850 million in the year 2021 as per the reports. The Ooredoo mobile corporations claim that the affordability, desirability and availability of mobile have rapidly increased. Especially the penetration of Smartphone’s in the Yangon region has surged (Stepanok, 2015). Smartphone’s usage is expected to takeover almost 80% of the overall mobile phone subscriptions by the year 2021. Moreover, penetration of Smartphone subscriptions in Myanmar is currently used around by 40% mobile subscribers, which would get double by the end of 2018. The local operators in the region have reported high levels of involvement with data.
Moreover most of the mobile users are subscribing for data monthly, as per the report disclosed by The Myanmar Times. Ooreedoo Myanmar has around 80% Smartphone’s on its network and its usage is beyond 650 megabytes each month on an average. On the other hand, its competitor, Telenor Myanmar mobile users are opting for 3G cell phones (Ooredoo.com.mm, 2018). Myanmar is yet to move to 4G technologies, Ooredoo is set to upgrade its technology to LTE/5G over the next six years. As mostly all the mobile potential customers present in Southeast Asia and Oceania region is already progressing towards the 5G technology. By the end of the year 2018, it has been predicted that Myanmar LTE subscriber base will rise from zero to single digit.
Foreign direct investment (FDI) is generally used to involve an organization in upgrading or building a factory in different country. In the current scenario, the FDI also includes the acquisition for managing or controlling interest in another business market (Weber, Alfred, & Staueb-Bisang, 2016). There are different ways in which the organization can directly invest in the foreign markets that are as follows:
- Greenfield investments, this includes investment in facilities or construction of facilities in an international market.
- Mergers and acquisitions
- Investment made in joint venture, which is located in foreign market.
Globalization has given rise to flows of inward investment between two countries and created required benefits for the recipient countries. FDI made in other nations is a way of increasing access to the business market that limited or closed by trade barriers, government regulations and procurement practices. The investment made is often used as a window into the business market (Schaltegger & Burritt, 2017). This helps in gathering intelligence and information on business market dynamics and the operations of the competitors that would not be available. The investments made help in enhancing the competitiveness.
The primary and foremost advantage of Greenfield investments is the high level of authority and direct control over the subsidiary enterprise in which the investment is made. An organization that usually gains entry through Greenfield investments into the foreign market has complete control over the enterprise products or services that is manufactured and sold. This includes full control over the rate of production, product quality and control of the rate in which the firm expand its business in the country (McBridie, et al., 2017)The firm has the option to start its business in small-scale and then it can gradually increase its business presence or can prepare in advance for the large-scale rollout of the organization’s product.
Firm’s Strategy and Production
Greenfield investments enable more effective and easier adaption to the international market. Both pricing and product can be adapted for the needs of local market. In addition to this, having full ownership of its subsidiary company allows an organization to extend its items to the target potential customers. This includes rebates, discounts and warranties as per the market condition. The firms on-site presence also make it more adept in marketing efforts and crafting advertizing with maximum effectiveness present within the particular market environment. This also provides the opportunity to develop partnership ability with the native businesses to increase its market penetration. Depending on Myanmar economic policies, the firm can also gain profit after receiving business tax incentives. Greenfields develops new businesses therefore direct positive impact on domestic value added and employment. This further increases competitive pressures on the domestic competitors therefore increasing their efficiency or are forced to exit the market.
Greenfield investment (GI) strategy is applied by the government in Myanmar mobile industry. A Greenfield industry is an investment done in cross-border ways. The main organization is built from the scratch and completely owns its subsidiary (Martin & Moser, 2016). This investment process further involves the value chain activities and transfer of competences. In the present condition of Myanmar mobile industry, Greenfield investment approach helps in the internalization advantages as it minimizes the transaction costs and increases efficiency. It minimizes the buyer uncertainty as both the buyer and seller are present within the firm compared to acquisition.
Greenfield investment has various advantages because of its pioneering positioning. Straight from the very initial phase, the firm making the investment has immense possibility to choose the best location. As per the management’s view the construction or building of facilities is made. According to the organizational culture, human resources are hired and directly trained as per the organizational culture of the firm. A Greenfield is easier to integrate in the industry, where technological skills are more relevant and significant (Lv & Spigarelli, 2015). The multinational corporations gains more competitive advantage through its differentiated products. The choice of investors for their mode of entry is influenced greatly by these industrial specific factors. The need for internalization and complete control advantages is beneficial for the foreign country to choose Greenfield investment (Kerzner & Kerzner, 2017).
Concerning firm specific factors, through Greenfield projector the investors are given the opportunity to develop an overall new organization. In the country like Myanmar, which is rich in the availability of resources, like its real estates, Greenfield investment will be more beneficial (Jiang, Peng, Yang, & Matlu, 2015). If huge amount of incentives are offered for developing the project, the investing firm can easily be allowed to access the raw materials. Therefore for export oriented and resource seeker Multinational Corporation it would probably be best to make FDI through Greenfield investment. Moreover, Myanmar being a resource rich country and the mobile industry rapid growth rate in the recent years provides a golden opportunity for all the transnational corporations making foreign direct investments.
Government
Location advantages are moreover created as it is completely to the parent company to select the location of the firm. For instance, foreign investor for choosing Myanmar for business is careful in picking up their investment sites. The site chosen by the organization is in Yangon, Myanmar to ensure docility of the labor forces (Anderson, 2015). Moreover, it is the capital city of the country and is away from the traditionally unionized regions. Greenfield investments are the entry made in the foreign economy directly. One of the most available options to the firms seeking opportunities to expand its business into the emerging mobile markets of Myanmar is Greenfield investment.
Despite the various advantages of Greenfield approach, most of the organization does not choose this strategy for investment. The high level of start-up costs as well as the high capital investment made in the initial phase makes the business more risky (Heizer, 2016). In addition to this, there are potential difficulties present with the adaption of product or services to customer needs. The uncertainties and knowledge about the market and existing demand trend should be properly ascertained before making the investment. Moreover, a Greenfield investor also has to conquest the market share (Harms & Meon, 2018). It is quiet a difficult process for maintain and building relationship with the distributors and suppliers. Market penetration is much likely to be slower through Greenfield investment approach. As high barriers to entry and high market concentration limits the probable growth of Greenfield investment.
Porter’s diamond model is used as a tool for analyzing the competitive advantage of Myanmar’s mobile industry. Through this model the nation’s empirical support and theoretical coherence is assessed (Fratocchi, Di Maurio, Barbieri, Nassimberi, & Zanoni, 2014). In order to obtain full potential of mobile industry in Myanmar, favorable operating environment and large-scale investment is crucial. The Government needs to resolve the foundation of strong mobile industry sector so that it can unleash the present economic benefits and can realize Myanmar’s growth potential. With the removal of Government sanctions, Myanmar is more likely to gain foreign investments in the mobile industry sector.
Government regulations are affecting the management productivity of Myanmar’s mobile segments. Government and firm’s practices and policies that bound under the free market are major issues for the international investment. The low wage rate and unfavorable exchange rate policy is a big problem for the management to the tackle to gain competitive advantages (Alfirevi?, 2015). Moreover the location and organizational culture also impacts the productivity rate in the home country. In small and medium sized company of Myanmar leading in mobile segment, the corporate governance, and decision making transparency is yet to achieve the optimal levels. The capital flows are generally made in the location, where higher productivity is achieved. The foreign- owned firms in Myanmar generally carries its operational activities like research and development in the similar manner as the domestic organization of the country. This approach therefore creates competitive advantage locally (Bai, Dhavale, & Sarkis, 2016). This does not make Myanmar internationally competitive just by the firm located or situated there are competitive internationally. In the region since the liberalization of Myanmar market, the mobile companies have made high investments in offering voice and deploying networks has given rise to mobile saturations (Ashraf, Herzer, & Nunnenkamp, 2016). The impact of Myanmar’s culture upon the sources of competitive advantage is also given very less attention in the porter’s model. The achievements of symbolic and visible organizational rewards, importance of performance and growth, accusation of money are the vital factors through which productivity is measured. The management cannot overlook all these vital factors to attain maximum efficiency. The need for vision, communication efforts and leadership qualities plays a vital role in evaluating the firm’s competitiveness that is not found in the porter’s diamond model.
Land rights are a sensitive issue existing in Myanmar due to the previous military government widespread approach “land grabs”. Determining the land ownership is becoming a challenge therefore is creating a huge challenge for the investors to locate a better site and construct its base and tower station (Dickmann, Brewster, & Sparrow, 2016). Greenfield investment is a form of foreign direct investment, where the parent company creates or develops its operational activities in the foreign country from the scratch. Seeking permission for setting up the business is quiet a slow process. Several instances of child labor are also reported recently from the contractors (Daft & Marcic, 2016). Multi generational challenges are found in the workplace. The major risk of Greenfield investment is that the firm can pull anytime from the investment, which can prove to be financially devastating. Moreover, setting up a technological mobile industry unit can proved to be quiet capital-intensive.
Adequate financing is required in each and every stage of production. The procedure for a foreign company to invest in a Myanmar entity could be slow and complicated. Royalty payments and Interoperate deposits by the parent foreign company to the Myanmar Company is also strongly regulated. Myanmar has various employment and labor laws which could be quiet confusing and challenging for the foreign countries to ascertain. Moreover the law varies depending on the state by which the firm is incorporated. The laws are generally strict compliance and pro-labor in form (Blattman, Green, Jamison, Lehman, & Annan, 2016). Moreover, in Myanmar labor conflicts and dispute resolution is a longer and expensive process could affect the business operations Moreover, the mobile sector industry as well as the government plays a little role in providing digital skills training and de-bunking the misconception about internet usage to the people of Myanmar (Bertrand & Capron, 2015). Digital literacy is still needed to be addressed for the growth of mobile industry in Myanmar. Lack of income is another reason of huge ownership gap.
Acs, J., Audretsch, D., Lehmann, E., & Licht, G. (2016). National systems of entrepreneurship. Small Business Economics (46(4),), 527-535.
Alfirevi?, N. (2015). Editorial to the special issue of Management-Journal of Contemporary Management Issues:” The life and work of Professor Emeritus Marin Buble”. journal of contemporary management issues , I-III (20(Special issue)).
Anderson, J. S. (2015). Entry mode and emerging market MNEs: An analysis of Chinese greenfield and acquisition FDI in the United States. Research in International Business and Finance (35), 88-103.
Ashraf, A., Herzer, D., & Nunnenkamp, P. (2016). The effects of Greenfield FDI and cross?border M&As on total factor productivity. The World Economy , 39 (11), 1728-1755.
Bai, C., Dhavale, D., & Sarkis, J. (2016). Complex investment decisions using rough set and fuzzy c-means: an example of investment in green supply chains. European journal of operational research , 248 (2), 507-521.
Bertrand, O., & Capron, L. (2015). Productivity enhancement at home via cross?border acquisitions: The roles of learning and contemporaneous domestic investments. Strategic Management Journal. , 36 (5), 640-658.
Bhawsar, P., & Chattopadhyay, U. (2015). Competitiveness: review, reflections and directions. Global Business Review , 16 (4), 665-679.
Blattman, C., Green, E., Jamison, J., Lehman, M., & Annan, J. (2016). The returns to microenterprise support among the Ultrapoor: A field experiment in Postwar Uganda. American Economic Journal: Applied Economics , 8 (2), 35-64.
Byun, J. W., Lee, S., & Kim, S. (2016). The convergence of IP and financial sectors: Analysis of the national competitiveness by using Diamond model approach. Journal of Digital Convergence , 14 (3), 227-234.
Conconi, P., Sapir, A., & Zanardi, A. (2016). The internationalization process of firms: From exports to FDI. Journal of International Economics , 99, 16-30.
Daft, R. L., & Marcic, D. (2016). Understanding management. Nelson Education.
Dickmann, M., Brewster, C., & Sparrow, P. (2016). International Human Resource Management: Contemporary HR Issues in Europe. Routledge.
Fainshmidt, S., Smith, A., & Judge, W. (2016). Global Strategy Journal , 6 (2), 81-104.
Fratocchi, L., Di Maurio, C., Barbieri, P., Nassimberi, P., & Zanoni, A. (2014). When manufacturing moves back: concepts and questions. Journal of Purchasing and Supply Management , 20 (1).
Harms, P., & Meon, P. (2018). Good and useless FDI: The growth effects of greenfield investment and mergers and acquisitions. Review of International Economics.
Heizer, J. (2016). Operations Management,. Pearson Education India.
Jiang, Y., Peng, M., Yang, X., & Matlu, C. (2015). Privatization, governance, and survival: MNE investments in private participation projects in emerging economies. Journal of World Business , 294-301.
Jinabo, H., Zige, D., & Yayun, R. (2015). Research on the Competitive Advantage of Big Data Industry in China——Based on Modified Diamond Model. Journal of Industrial Technological Economics , 6, 004.
Kerzner, A., & Kerzner, H. (2017). Project Management: A system approach to planning, scheduling, and controlling. John Wiley & Sons.
Kordalska, A., & Olczyk, M. (2016). Global Competitiveness and Economic Growth: A One-way or Two-Way Relationship? Equilibrium. Equilibrium. Quarterly Journal of Economics and Economic Policy , 11 (1), 121-142.
Lv, P., & Spigarelli, F. (2015). The integration of Chinese and European renewable energy markets: The role of Chinese foreign direct investments. Energy Policy (81), 14-26.
Martin, P. R., & Moser, D. (2016). Managers’ green investment disclosures and investors’ reaction. Journal of Accounting and Economics , 61 (1), 239-254.
McBridie, Sanchez-Triguerous, F., Carver, S., Carver, S., Watson, A., Stumpf, L., et al. (2017). Participatory geographic information systems as an organizational platform for the integration of traditional and scientific knowledge in contemporary fire and fuels management. Journal of Forestry , 115 (1), 43-50.
Ooredoo.com.mm. (2018). Retrieved January 26, 2018, from Mobile Services – Myanmar | Ooredoo For Business’: <https://www.ooredoo.com.mm/en/Business.aspx>
Riasi, A. (2015). Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy , 6 (2), 15-27.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.
Sölvell, Ö. (2015). The Competitive Advantage of Nations 25 years–opening up new perspectives on competitiveness. Competitiveness Review , 25 (5), 471-481.
Stepanok, I. (2015). Cross?border Mergers and Greenfield Foreign Direct Investment. Review of International Economics , 23 (1), 111-136.
Weber, B., Alfred, H., & Staueb-Bisang. (2016). Infrastructure as an asset class: investment strategy, sustainability, project finance and PPP. John wiley & sons.
Wonglimpiyarat, J. (2015). New economics of innovation: Strategies to support high-tech SMEs. The Journal of High Technology Management Research , 26 (2), 186-195.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
