This case presented describes the business model developed by African Communication Group (ACG) in, Tanzania, led by Monique Maddy (CEO) and Come Lague(COO) in the last mid-1990s. ACG tried to install a pay-phone system, well-priced card-operated phone service, in Dar es Salaam, based on the wireless radio technology, the most innovative concept among other competitors. They saw the most promising opportunity, a pay-phone network business, in the last major geographic market, Africa. Hereby, I would access ACG’s business model with the “Who”, “What”, and “How” tool, and see whether these choices are mutually reinforcing.
Assessment of ACG’s Business Model
Who (the target customers)
1)ACG geographically targeted the Tanzania’s largest city, Dar es Sallam, where about 71% of pay-phone users lived. They also had a plan to extend the network toward other Tanzanian cities by the end of 1998. 2)ACG focused on the business people in the city as their main consumer, because about 70% of telecommunication revenue was received from business subscribers. ACG also anticipated about 10,000 subscribers in case they launched paging and voice mailbox service. What (the product and service)
1)ACG offered a unique pay-phone system, with which customer would buy a pre-programmed card to enable them to activate their local, long-distance and international destinations calls. 2)ACG also added the paging and voice mailbox service, because they believed that these additional service could double pay-phone usages. How (the way of doing business)
Marketing and Sales
1)ACG Identified the most suitable 200 sites for locating its pay phones, and planned to maintain its quality and safety. 2)ACG planned a large multi-media campaign for the pay-phone launch. All promotional materials were developed in the US by professional marketing group. 3)ACG targeted price over the base rate of TTCL to meet the most competitive and also applied flexible price strategy to protect against Tanzanian inflation and foreign exchange loss. 4)ACG let the retailers who located closed to phone booths to sell the cards, motivating the consumers to buy the cards, easily with good visibility. Administration
ACG recruited a large-size of experienced expatriate team to oversee its projects based in Tanzania. Maddy and Lague coordinated the most main issues from Cambridge. Financing
1)ACG attracted 3.5M US dollars in debt and equity to fund working capital and equipment purchases. 2)ACG investment plans qualified for eight years of tax exemptions. All of ACG’s profits were fully convertible to US dollars.
With the assessment of ACG’s business model, I would argue that “Who” does NOT fit to “What”. I mean, the Tanzanian market (“Who”), relatively much low in technically, socially and politically, were not ready to accept the highly sophisticated and innovative product (“What”). The two young passionate just went straightforward overlooking the huge risks of the immature market. In addition to this discrepancy, its business process (“How”) was leaning toward (“What”), without enough consideration of “Who”. ACG approached the undeveloped market completely as a foreign investor. They only focused on how to sell their amazing products(“What”) to the low-leveled customers without respecting their social improvement (“Who”).
They developed the investment plan to the direction of not paying any tax to the country and all their profits would convert to foreign currencies. ACG had no mind to contribute to the Tanzania economically and socially. From the Tanzanian government point of view, they had no reason to allow ACG to do such business in their countries. They must have met the severe tackle from the Tanzanian governments. Additionally, the two main decision makers wanted to control all the major matters from Boston, which proves they were overlooking the complexity of their severe business. I am certain that their diverse organization must have faced with problems between local employees and other foreign expertise, which could not be handled in Boston. They should have considered how to localize their business not to extend their business toward other countries.
In conclusion, the two passionate were too inexperienced to have a global insight to approach such large scale of project. If I were with a position to advise my VC whether to invest in ACG, therefore, I would strongly be against the investment with their highhanded approach.