Du Firms Possibilities for Expansion Outside UAE

Introduction

Emirates Integrated Telecommunications Company is a vibrant and multiple award-winning telecommunication service in the United Arab Emirates, which is more commonly known as Du. It has more than 9 million customers providing mobile, fixed-line, broadband internet and Home services using LTE network (Company Overview). The company is the second largest telecom provider in the UAE, with Etisalat being its primary competitor. The company is owned primarily by the government with 50.12% belonging to the Emirates Investment Authority, 19.7% controlled to the Emirates International Telecommunications Company LLC, and 10.06% owned by the Mamoura Diversified Global Holding PJSC (Company Overview). In short, Du is a duopoly member in the UAE telecom market that aims at active development and technological enhancement of services.

Despite the outstanding performance of the company, it has some issues that need to be addressed in order to increase its revenues. According to Ameen and Willis, The present report aims at conducting an external and internal analysis of the company and evaluate its possibilities of expansion outside the UAE. The company was chosen as it made the first 5G video call in the Gulf region and can spread the technology to other countries (UAEs Du). Even though Du experiences strong competition from Etisalat, it has the possibility to expand to Saudi Arabia.

Company Strategy Analysis

Internal Analysis

The company has several evident strengths that it can utilize in order to increase its revenues. First, it offers a variety of flexible tariffs, which can be beneficial for customers in order to optimize their spending. Second, Du is known for effective management and governance system. Third, the company is known for its focus on constant innovation, and it started to use cutting-edge 5G technology, which is available free for all the Du clients. Fourth, the company is recognized with many awards and is well-known to people in the Middle East. In short, the company has clear internal strategic advantages if compared to Etisalat.

At the same time, Du has weaknesses that may hinder its further development. Du does not have a good coverage area in the UAE, which inclines many customers to choose Etisalat. The company has an insignificant presence outside the UAE, limiting the sources of income to only one country. Despite the flexible pricing policy, the cost of services is high if compared to other regions. In brief, Dus internal problems are rooted in the fact that it is a young company if compared to Etisalat.

External Analysis

Du can increase its revenues by realizing its opportunities and utilizing the external factors to support the companys growth. On the one hand, the company can expand to other middle-east countries. According to Ameen and Willis, the telecom sector in Arab countries shares essential characteristics, and therefore, Du can easily adapt to enter new markets in the region (2). On the other hand, the company experiences limited competition due to numerous government regulations. Therefore, it can experiment in various areas to improve its services without the fear of losing its customers to competitors. However, considerable government presence in the sector may also be thought of as a threat since other companies that can offer lower prices may enter the UAE telecom market if the government chooses to alter its policies. In short, the company should seek to increase its presence in the markets outside the UAE in order to increase its revenues since the development inside the country is limited.

Expansion Possibilities

Country Analysis

Since Du is an Arab company that has limited experience in expansion to other countries, it should choose the country that has similar characteristics of the telecom market. One of the most evident choices for development is Saudi Arabia since it is the closest to UAE telecommunication market in terms of pricing, government regulations, competition, and licensing according to Ameen and Willis (4). Additionally, Etisalat chose Saudi Arabia as the primary target for expansion and found limited success in the matter operating under the brand name Mobily. Du can use Etisalats experience and create an effective strategy to penetrate the telecom market in Saudi Arabia.

The Saudi telecommunication sector has three major players with an evident leader in performance. According to AlJazira Capital, Saudi Telecom Company (STC) dominates the industry while Mobily and Zain KSA experience significant issues in their financial performance (2). At the same time, the mobile market continues to grow, and Du can utilize the increasing demand to enter the market (AlJazira Capital 1). In brief, the Saudi telecom market seems to be the optimal choice for Du to improve its international presence.

Entry Mode Strategy

The easiest way to enter the Saudi telecom market seems to be through the direct purchase of a company. For instance, Du could buy the Mobily or Zain KSA to effectively expand to Saudi Arabia. However, the entry mode strategy may be inappropriate for Du, since the prices of the two companies are unaffordable. Direct exporting of services would also be not a suitable strategy due to increased regulations from the government in the country. Even though Etisalat has proven that entering the Saudi telecom is possible through creating an affiliated company, the success of Mobily is limited. Therefore, neither purchasing a company nor direct export is a viable option for Dus expansion to Saudi Arabia.

The most feasible entry strategy seems to be through partnering with Etisalat. First, the companies successfully coexist in the UAE market and can work together to improve the service provided by Mobily. Etisalat provides services in many countries, and may be struggling to manage all its divisions. Since Dus strengths identified by the present report are flexible tariffs and excellent management systems, it can collaborate with Etisalat to improve Mobilys quality of service and customer experience. Such a partnership may further evolve into a joint venture, which can effectively compete with STC.

Conclusion

The report concludes that the most efficient expansion strategy for Du is partnering with Etisalat to provide services in Saudi Arabia under the brand name Mobily. The expansion proposed by the present report has the potential to improve Dus financial performance since it utilizes the companys strengths and opportunities and addresses possible threats and weaknesses. First, the company will strengthen its competitive position since the company will depend less on the UAE government regulations. Second, partnership with Etisalat will enable the company to receive valuable insights on expansion to other countries. Du can later use the knowledge to start working in other countries outside the Middle East. Third, the company can become more financially sustainable since it will become more resistant to the fluctuations of the UAE telecom market.