CHAPTER 2 A REVIEW OF THEORY AND PRACTICE 53

The idea of a corporation as the property of the current holders of its shares is confusing because it
does not make clear where the power lies. As such, the notion is an affront to natural justice because
it gives inadequate recognition to the people who work in the corporation and who are, increas-
ingly, its principal assets. To talk of owning other people, as shareholders implicitly do, might be
considered immoral.

Essentially, shareholders matter, but so do other stakeholders such as employees. We return to this
issue in Chapter 6 when we examine the purpose of the organisation. We also explore the point that
the strategy of an organisation is not an end in itself. It is the means to deliver the purpose of the
organisation, which should in turn be shaped by ethical and social considerations.
To summarise, this text takes the view that the purpose of the organisation will be shaped by the
values of the organisation, the power of the stakeholders in the organisation – amongst whom will be
the shareholders – and the contribution that every organisation can make to the society within which
it exists. Such a contribution will be formed, at least in part, by its ethical values and its view of its
corporate social responsibilities. It will also concern itself with issues surrounding the sustainability
of its policies in the context of green strategy. Effective strategic management will seek ‘above-
average returns’ but these are not just the profits for the organisation’s shareholders.

KEY STRATEGIC PRINCIPLES

• In the past, strategy was considered to be primarily concerned with increasing the wealth of its
shareholders. This is now considered to be too simplistic a view because it does not clearly take
into account the other stakeholders in the organisation.
• By ethics and corporate social responsibility is meant the standards and conduct that an
organisation sets itself in its dealings within the organisation and outside with its environment. Such
issues will include green strategy. These policy issues will influence the strategy of the organisation.

CASE STUDY 2.4

Africa calling: mobile phones open up new opportunities

Africa’s leading nations have seen a dramatic growth in mobile telephone usage over the past ten years. This case
explains the main reasons and explores the key strategic questions – Will it continue? If so, how?

Mobile telephone growth in Africa
Africa is the world’s second largest continent with over 800
million people in over 50 countries. Unfortunately, it is also
the only area of the world that has experienced a real decline
in personal wealth over the past 30 years. Some of the reasons
have been well documented by the United Nations – war and
conflict, disease including AIDS/HIV and political upheaval.
Yet, after years of watching the rest of the world benefit from
new mobile telephone technology, African countries are now
beginning to catch up. For example, the number of mobile
telephones in Africa’s largest country, Nigeria, increased tenfold
between the years 2002 and 2007. Similarly, South African
growth has also been dramatic – more than doubling, albeit
from a higher base number, over the same period – see
Table 2.2 for the data. By 2013, African mobile telephone
growth was amongst the highest in the world – fuelled by
increasing wealth and well-proven technology.
Some leading African mobile telephone
companies
MSI Cellular becomes part of India’s Airtel
One of the earliest companies into the African continent was
MSI Cellular. It began back in 1998 with a Ugandan subsidiary
called Celtel. By 2001, it had operations in 11 countries. By
2006, the company had 8.5 million customers in 14 countries
and claimed to be market leader in ten of them. Apart from
its Sudanese operation, Celtel has chosen to own a majority

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 54 PART 1 INTRODUCTION

Table 2.2 Telephone usage in selected African countries of inter-country traffic.’ By 2007, Celtel coverage with its ‘One
Network’ was working across 13 African countries – Kenya,
Population Fixed Mobile Uganda, Tanzania, Gabon, Democratic Republic of Congo,
(millions) telephone telephones Congo, Malawi, Sudan, Zambia, Burkina Faso, Chad, Niger and
lines (thousands) Nigeria.
(thousands)
In 2007, MTC announced that it was re-branding its com-
2002 2007 2002 2007 pany name to Zain, which means ‘beautiful’ in Arabic. Zain
continued to manage and extend its African interests over the
Nigeria 135 700 1,200 1,200 22,000
next two years. However, these were then sold to the major
South Africa 44 4,800 4,800 14,000 33,000 Indian telecommunications company Bharti Airtel for around
$10.7 billion in 2010. The African networks of Zain were then
Tanzania 39 150 150 670 2,000
re-branded with the company’s Indian brand name ‘Airtel’ in
Kenya 37 300 300 1,300 6,500 2010.
Importantly, Bharti Airtel attempted to merge with the
Uganda 30 55 100 400 1,500
South African-based MTN Group in 2009 – see below. This was
Ghana 23 270 320 450 2,800 refused by the South African telecom authorities, who wanted
to retain some influence over the merged entity but were
Notes:
Fixed telephone lines: these are the fixed cables that connect homes, offices and prevented by the terms of the proposed merger. It was after
businesses to a telephone exchange. They are often old and have the reputation in this failed merger with MTN that Bharti Airtel then turned to
Africa of not being reliable.
the acquisition of Zain described above.
Mobile telephones: all these networks have been set up since 1998 and use
transmitters and GSM technology as in the rest of the world.
MTN Group
Source: author from various sources including the World Bank and the three leading
African companies on the web. Note that the World Bank figures include some Headquartered in South Africa, MTN claims to be the largest
inconsistencies and are therefore not entirely reliable.
mobile telephone operator in the African continent. Its most
profitable business lies in South Africa itself, but it also has
share in all its subsidiaries: ‘in principle, we like to control the substantial interests in 11 other African countries, including a
company,’ explained its chief executive Marten Pieters. ‘This profitable venture in Nigeria. In 2006, MTN extended its
supports our brand, our values, our strategy.’ mobile interests into the Middle East by acquiring a company
In 2005, the Kuwait telecommunications company MTC called Investcom for $5.5 billion. This extended its franchise
acquired 85 per cent of Celtel for $3.4 billion. Given that into five West African countries plus Sudan, Cyprus, Syria, Iran,
Celtel itself only had annual sales of $58 million in 2000, this Afghanistan and Yemen. As a result of the acquisition, MTN
shows how sales, profits and valuations have grown over the increased its total number of subscribers from 23 to 28 million
succeeding years. The founder of MSI, Dr Mohamed Ibrahim, – substantially ahead of the 19 million subscribers of its main
explained that the company has networks that achieve opera- South African competitor, Vodacom (described below). By 2013,
tional profits within six months and real profitability within MTN Group had a subscriber base of 180 million customers of
two years. Return on capital was in excess of 30 per cent per which nearly 57 million were in Nigeria.
year. ‘By any yardstick, these projects are more rewarding than A strong subscriber base is important for the profitability of
in Europe,’ he commented. any mobile telephone company: after its investment in networks
In the early years, MSI Cellular made its profits by acquiring and other infrastructure, increased profitability for a phone
government licences as each African country market opened company comes from greater usage of the network – achieved
up from government control. There was relatively little com- both by larger numbers of subscribers and also by increased
petition and the main aim for each operator was to set up a usage of the telephone.
basic country network in the main centres of population. One of the strategic problems for both of the leading
However, after the initial acquisition of licences, the company’s South African mobile companies is that South Africa, as a
follow-up strategy was to deepen its coverage across each country, has become a relatively mature mobile telephone
country and experiment with new services like higher quality market. According to World Bank data, mobile penetration
3G telephony. had reached around 72 per cent of the South African market
In addition, Celtel had sufficient coverage across the in 2005 – compared, for example, with only 13 per cent of
African continent in 2006 to launch a new service called ‘One the Nigerian market in the same year. MTN used its strong
Network’. This was claimed to be the first borderless net- position in the South African market as the basis for expansion
work across Africa, enabling subscribers in some countries to elsewhere: its position provided a useful cash flow and, more
roam free across neighbouring countries, scrapping roaming importantly, training and experience in the operation of a mobile
charges, making local calls and receiving incoming calls free of telephone business. The company then used this knowledge
charge. Pieters explained: ‘Africa’s borders are colonial. They as it expanded, sometimes by acquisition, and sometimes by
don’t reflect economic or language relations, so there is a lot setting up its own company in other African countries.

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African telephone services are changing rapidly from
public call boxes – in Cape Town, South Africa – to mobile
telephones across the continent.
The maintenance of growth was the main reason behind
MTN’s expansion into other parts of Africa and the Middle
East. Some of the new markets acquired by MTN had even
lower levels of mobile penetration than its existing operations.
According to MTN’s Chief Executive Mr Phuthuma Nhleko,
‘The combined companies’ countries had, on average, just
9 per cent mobile penetration, giving [MTN] very meaningful
potential for upside.’
Inevitably with its entry into some politically sensitive
Middle Eastern countries, there was criticism of MTN with
regard to political risk. Mr Nhleko commented: ‘Our job is to
be a mobile operator that delivers infrastructure, not to try
to second-guess the politicians. Political risk is a politically
loaded term. [But] there are countries where there are
certainly challenges.’
Vodacom
Also based in South Africa, this company was a 50:50 joint
venture between South Africa’s largest individual telephone
M02_LYNC4666_07_SE_C02.indd 55
CHAPTER 2 A REVIEW OF THEORY AND PRACTICE 55
company called Telkom and the British-based, international
mobile telephone company Vodafone until 2009. Telkom
was for many years the leading South African provider of
telephone services, particularly using fixed lines. It founded a
mobile company in 1993, with Vodafone taking a minority
share at that time. The British company then increased its stake
to 50 per cent in 2005 because it was attracted by the growth
potential of the African market. Vodafone then raised its share
of Vodacom to 65 per cent in 2009 at a price of $2 billion. The
British-based company was particularly interested because
many of its existing European mobile phone markets – such as
the UK – were highly mature and would no longer deliver its
growth objectives.
Behind this change in control, Vodafone identified
Vodacom as being its gateway into the fast-expanding
African telephone market. In addition to its major share of the
South African market, Vodacom also had mobile interests in
Tanzania, Lesotho, Mozambique and the Democratic Republic
of Congo. However, Vodacom had not expanded as rapidly as
its rival MTN because there was a legal agreement when
Vodacom was founded that it would not enter markets north
of the Equator. However, Vodacom also had a reputation born
out of its relationship with its South African parent, Telekom
– reputedly a quasi-public, unionised and more bureaucratic
organisation – that was also not conducive to growth.
Whatever the background, Vodacom came under the control
of the international mobile telephone company Vodafone
in 2009. By 2013, Vodafone had eight African subsidiaries with
ambitions to grow further.
Telkom
At the same time, the above move freed up the previous
joint partner, South Africa’s Telkom, to expand beyond its
business into mobile phones not only in South Africa but
elsewhere on the African continent. Importantly, the com-
pany is still effectively controlled by the South African state
and has a monopoly of fixed line provision and inter-
national calls originating in South Africa. Its dominance of
the domestic South African market is reflected in strong com-
plaints from both customers about high prices and from
competitors about network access. This dominance was
confirmed in June 2013 when Telkom accepted a fine of
200 million Rand (US$18 million) for abusing its domestic
market position.
In 2011, Telkom commented that it aimed to expand its
fixed line and mobile business into other telecommunications
areas and countries. Specifically, ‘our strategy is to differentiate
ourselves from competitors by moving from a provider of
basic voice and data connectivity to become Africa’s preferred
ICT [Information and Telecommunications Technology] service
provider, offering fully converged voice, data, video and Internet
services.’ This strategy – essentially based on new broadband
and 3G technology – has been successful: by 2013, Telkom was
involved in 38 African countries with regional hubs in Nigeria
and Kenya.
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 56 PART 1 INTRODUCTION
Other African mobile telephone companies
In individual African countries, there were also other major
telephone companies. For example, Safaricom was one of the
dominant companies in the Kenyan mobile market. It was
formed in 1997 as a wholly owned subsidiary of the government-
owned Kenyan supplier of telephone services – Telkom Kenya.
In 2000, the British company Vodafone acquired a 40 per cent
stake in Safaricom and provided its international experience
and coverage to its Kenyan associate.
For reasons of space, similar companies in other African
countries are not described here. The main characteristic of all
such companies is that they were all seeking to develop their
networks and usage substantially over the next few years. They
all believed that substantial growth was still possible.
Reasons behind the continued growth in
African mobile telephones
Beyond the obvious point that existing penetration of mobile
telephones remains low at 15–20 per cent of the population, it
is possible to identify at least three reasons for the rapid
growth in African mobile telephones:
1 Political will. African governments were willing to support
and encourage new forms of telecommunication. They
identified real benefits for their relatively poor populations
through the wider spread of information technology. They
accepted that the provision of fixed line telephone cables
was so expensive as to be virtually unachievable in rural
areas – better to have mobile than nothing at all.
2 Risk-taking companies. Companies like MSI Cellular and
MTN took significant risks in investing in the mobile
telephone infrastructure. For example, it was reported that
MTN had to overcome significant infrastructure problems
when it was building its Nigerian network in 2004 at a cost
of $900 million. Commenting on its early investment in
Africa, the Chairman of MSI Cellular, Dr Mohamed Ibrahim
said: ‘There is money willing to go to Africa as long as it is
backed by credible people. African telecoms is no place
for opportunists or amateurs. To survive requires a very
experienced management team, a successful record and
the ability to attract finance.’
3 Increased demand for communication. As the world has
become more integrated and – in that sense – global, the
demand for increased and instant communication has
grown in Africa both for individuals and for multinational
companies. Fixed line cables were incapable of providing
enough links and capacity. Both companies and individuals
needed more opportunities for contact. Two examples:
individual farmers were able to check prices using their
mobile phones and head for the best market; relatives were
able to use a new mobile telephone service to transfer
funds between families – it was no longer necessary to trek
two hours by minibus to the local bank.
M02_LYNC4666_07_SE_C02.indd 56
Importantly, these reasons suggested that there was still
substantial growth in African mobile telephones over the next
few years. But there would be some risks – political, economic
and social.
There was also one remaining structural problem associ-
ated with the small number of fixed line telephone services in
Africa. The growth of the internet and web relies, at present,
for technical reasons on fixed lines rather than mobile phones.
However, the new technologies associated with 3G and 4G
mobile networks were overcoming this problem as such net-
works became widely available in Africa. Moreover, new and
fast undersea cables had been laid that link Africa to regional
and world markets. There were still plenty of opportunities for
mobile telephone services in the African continent.
All four of the companies listed above have
extensive policies with regard to green
strategy according to their websites and
annual reports.
© Copyright Richard Lynch 2015. All rights reserved. This case was written
by Richard Lynch from public sources only.93
Case questions
1 Where would you place the strategies of MTN and other
African phone companies – prescriptive or emergent? And
within this, which strategic theory represents the most
appropriate explanation of the company’s development?
2 What are the risks and benefits of African companies
expanding beyond their home countries? What are the
dangers of having a competitive advantage that relies
largely on brand and geographical coverage?
3 Are there any more general lessons to be drawn for
companies from the approach to expansion from Africa’s
leading mobile telephone companies?
STRATEGIC PROJECT
African mobile telephone companies still have plenty of
opportunity for development. You might like to identify
some of the leading companies, particularly in your own
home markets. You might then consider how such com-
panies can continue to grow. Should they stand alone or
merge, for example? Is there any opportunity for co-
operating with one of the large European companies that
are currently not represented in Africa like Deutsche
Telekom and France Telecom? What are the benefits
and problems for both parties? How will they cope
with maturing markets, as has already happened in South
Africa? What should they do about growing demand for
the internet and web services?
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 CHAPTER 2 A REVIEW OF THEORY AND PRACTICE 57

CRITICAL REFLECTION
Is the distinction between prescriptive and emergent strategy processes too
simplistic to be useful?
This chapter has argued that there is a basic distinction to be made between prescriptive and emergent
theories of strategy. However, it explained – see the beginning of Section 2.3 – that this basic distinction
was simplistic. Many strategy theories rely on much more detailed insights than this simple difference
– for example, ‘game theory’ or ‘resource-based theory’. Examples of the specific theories are outlined
in Sections 2.3 and 2.4. This might suggest that the basic split between prescriptive and emergent strat-
egies is too simple and serves no useful purpose.
To explore this question, you might like to consider what precisely makes ‘good’ strategy. The topic
– ‘What makes effective strategy?’ – on the book’s open-access website linked to Chapter 1 – might give
you some ideas. You could then apply them to the basic distinction between prescriptive and emergent
strategy. You could also apply them to some of the more detailed prescriptive and emergent theories
outlined in this chapter.

SUMMARY
• Prescriptive and emergent strategies can be contrasted by adapting Mintzberg’s analogy:94
• Prescriptive strategy is Biblical in its approach : it appears at a point in time and is governed by a set
of rules, fully formulated and ready to implement.
• Emergent strategy is Darwinian in its approach : an emerging and changing strategy that survives by
adapting as the environment itself changes.
Given the need for an organisation to have a strategic management, much of this chapter has
really been about the process of achieving this strategy. As has been demonstrated, there is no
common agreement on the way this can be done.
• On the one hand, there is the prescriptive process, which involves a structured strategic planning
system. It is necessary to identify objectives, analyse the environment and the resources of the
organisation, develop strategy options and select among them. The selected process is then
implemented. However, there are writers who caution against having a system that is too rigid
and incapable of taking into account the people element in strategy.
• On the other hand, there is the emergent process, which does not identify a final objective with
specific strategies to achieve this. It relies on developing strategies whose final outcome may not
be known. Managers will rely more on trial and error and experimentation to achieve the optimal
process.
• In the early part of the twentieth century when industrialisation was proceeding fast, the prescrip-
tive process was the main recommended route. As organisations came to recognise the people
element and their importance to strategic development, emergent strategies were given greater
prominence during the middle part of the century. In recent years, emphasis has switched
between market-based routes and resource-based routes in the development of strategy. Social
and cultural issues have also become more important as markets and production have become
increasingly global in scale. New communications technologies like the internet have led to
new opportunities and the need for new strategic concepts. In addition, the collapse of some
companies through their lack of regard for the ethics of running a business has led to a new
emphasis on ethical issues in the development of strategic management.
• Within the prescriptive route, four main groups of strategic theory have been identified:
1 the industry and environment-based route – the market place is vital to profit delivery;
2 the resource-based route – the resources of the organisation are important in developing strategic
management;

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