Business Strategy Development in Zain Group: A Case Study

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@ 2016 AYAT A. SALEH, submitted as a part of the 'Business Strategy and Strategic Management' course in the University of Warwick, United Kingdom

Business Strategy Development in Zain Group: A Case Study

A company's failure is not necessary attributed to a bad management. Instead, it is

related to the absence of a management system that articulates a business strategy,

implements it, and finally evaluates that effectiveness of it (Norton & Robert 2008).

Strategic management is viewed as three stages and defined as "the art and science

of formulating, implementing and evaluating cross-functional decisions that enable an

organization to achieve its objectives" (David 2013, p.35).

The overall purpose of this case study is to evaluate the above three stages in Zain

Group. Zain is the Arabic translation for the word 'Good' or 'Wonderful'. Zain Group

is a major player in the telecommunication industry for more than 30 years across the

Middle East and North Africa (MENA) (Zain Company 2014). The detailed

framework for this case study is shown in figure 1.

Figure 1 Framework for the Case Study

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1. Telecommunication Industry in MENA Region

The British author, C. S. Lewis, once said "isn't it funny how day by day, nothing

changes, but when you look back, everything is different?" our life is changing

radically due to the revolution of science and technology. In fact, the

telecommunication industry has been one of the most growing sectors in the last ten

years, and is expected to grow further in the next five years (Ernst & Young 2015,

p.7). This dynamic environment includes many players interacting together to bring

continuously innovation solutions for the end users. Examples for these players are

shown in figure 2.

Figure 2 Telecommunication Sectors' Major Players

(Source: Ernst & Young 2015, p.16)

This diversity shapes the attractiveness of this market which will be examined here

using Porter Five- Force Model. Porter Five- Forces Model is a tool used to reveal

the competitiveness of an industry by analysing five forces, namely: "threats of new

entry, buyers power, suppliers power, threats of substitutes and competitive rivalry"

(David 2013, p.105).

Table 1 shows a summarized Porter Five Force Analysis and the detailed one is

available in Appendix A.

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Table 1 Porter's Five Forces Analysis for the Telecommunication Industry

Threats of New

Entry Buyers Power Suppliers Power

Threats of

Substitutes

Competitive

Rivalry

Low High Moderate High High

(Source: please refer to Appendix A)

The scope of this case study is the MENA region where Zain Group operates. In

order to understand the external factors in this region, PESTEL analysis will be used.

PESTEL is a tool used to understand the external environment and how it affects the

organization in terms of the political, economic, sociological, technological, ecological

and legal) (Campbell & Craig 2005, p.501). A summarized PESTEL analysis is

shown in table 2 and the detailed one is available in Appendix B.

Table 2 PESTEL Analysis for the Telecommunication Industry

Political Economical

Political conflict and unstable situations in

different parts in the MENA region

especially Iraq and Sudan.

Low economic growth in MEAN region.

High unemployment rate in the

telecommunication-related jobs.

Fluctuating currency exchange rate.

Sociological Technological

Growing number of youth.

Changes in customers habits due to the

use of new technology.

Increase in the number of refugees.

Declining customers' confidence level in

certain topics such as data privacy and

security.

Growing sector with new technology

advancement every day.

MENA region got low ranking in the

global innovation indicators.

Ecological Legal

MENA reign is water-stressed area.

Increase the awareness about the

importance of adapting energy efficiency

practices and reducing the CO2

emissions.

Telecommunication sector is well-

regulated one with too many local

regulations varying from one country to

another.

Lack of uncertainty.

(Source: please refer to Appendix B)

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As a conclusion, the telecommunication industry is a highly competitive environment

with different alternative products and services, combined with a high pressure from

the end users. Operating in the MENA region with all the external factors that were

addressed in the previous PESTEL analysis creates more challenges for any

company in that sector.

The next section will analyse the strategic management in one of these companies;

Zain Group.

2. Zain Group: A Wonderful Journey

The strong commitment to reap every singly opportunity, supported by a diverse

leadership team and a passion to create a "wonderful digital life", Zain has

succeeded in building a solid name as a telecommunication provider in MENA region

(Zain Company 2014, p.8).

2.1 History

Initially, the company was founded in Kuwait in 1983 as Mobile Telecommunications

Company (MTC). Ten years later, it was the first telecom operator to introduce the

commercial Global System for Mobiles (GSM) service in the Middle East in 1994

(Zain Company 2014, p.28). In 2007, MTC was rebranded into Zain. The journey

from Kuwait to eight countries in MENA region incorporated different strategies.

Normally, one of the strategies an organization can use to increase their profits and

expand their business is by performing integrative growth; backward integration,

forward integration and horizontal integration such as merge and alliance (M&A)

(Kotler & Keller 2012, p.43).

Zain Group adapted horizontal integration strategy where they managed several

successful acquisitions and mergers in the region such as:

Full acquisition for Fastlink in Jordan and Madacom in Madagascar.

Partial acquisition for V-mobile in Nigeria and Westel in Ghana.

Merged with MTC Atheer and Iraqna and rebranded them to Zain

In addition, they acquired and then sold Africa BV "Zain Africa" to Bharti Airtel Limited

in 2010 to have more focus on the MENA region.

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In essence, the M&A strategy is considered as one of the main expansion options in

the telecommunication sector (Ernst & Young 2015, p.14). Table 3 summarizes the

current group's subsidiaries and associates.

Table 2 Zain Groups' Subsidiaries and Associates

(Source: Zain Company 2014, p.82)

2.2 Core Competences

In a journey of 30 years, Zain Groups sustained a strong market position due to

different core competences. The core competency is a concept that was introduced

by Prahalad and Hamel to describe the collective skills, knowledge and capacities in

an organization that it used to create its products and services and deliver value to

customers (Prahalad & Hamel 1990; Dole 2013). The core competencies of Zain

Group are shown in figure 3.

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Figure 1 Zain Groups' Core Competencies

(Source: please refer to SWOT Analysis in Appendix E)

2.3 Key Competences

According to the analysis provided in section 1, the telecommunication sector in

MENA region is a very competitive and challenging one. A key difficulty comes from

the competitive rivalry in this market. Despite of all the challenges, Zain Group

managed to sustain a strong market share in most of its markets as shown in table 4.

Table 3 Zain Group's Key Competitors

Country Company and

Market Share

Competitor and Market

Share

Competitor and

Market Share

Kuwait 33% Viva 35% Zain 32% Ooredoo

Iraq 39% Asiacell 42% Zain 19% Korek

Sudan 31% MTN 42% Zain 27% Sudani

Jordan 31% Orange 40% Zain 29% Umniah

Saudi Arabia 45% STC 17% Zain 38% Mobiley

Lebanon 47% Alfa 53% Touch*

(Source: adapted from Zain Company 2014, pp.28–44)

The complete group's profile is shown in Appendix C.

After this overview about Zain's journey, the next section will start the evaluation

process of the three stages of strategic management; formulation, implementation

and evaluation.

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3. Zain Group: Strategy Formulation

Serving more than 44 million customers and maintaining a strong market share is not

an easy job. How could Zain do that for 30 years? The answer is quite short; they

have envisioned a future and work on it. The purpose of this section is to provide an

understanding for the business strategy formulation in Zain Group.

3.1 Mission

Zain Group formulated a mission statement to provide a direction for the future as

shown in figure 4.

Figure 1 Zain Groups' Mission Statement


3.2 Strategic Commitments

Next to that mission, Zain formulated a strategy statement which is "transformation of

Zain into innovative, integrated telecommunications company serving consumers and

enterprises with a rich digital lifestyle experience" (Zain Company 2014, p.47). This

includes sustaining the current core business in terms of mobile voice and mobile

data services, and also fostering their presence in the enterprise and digital space.

In order to achieve that, Zain identified 6 transformational initiatives as shown in

figure 5.

Figure 2 Zain Groups' Strategic Transformational Initiatives


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Zain translated the mission and this strategy into five major commitments which are

illustrated in figure 6.

Figure 3 Zain Groups' Commitments

(Source: adapted from Zain Group website, available on the WWW at:

http://www.zain.com/en/social-responsibility/our-commitments/ [Last accessed 21st

Feb, 2016])

3.3 Strategic Position: Ansoff's Matrix

What growth strategies Zain has adapted in the last 30 years? Ansoff's matrix, which

is a model used to generate alternative product-growth strategies for the company

based on two dimensions, will be used to answer that question. Ansoff's matrix

shows four growth alternatives based on 'market growth' and 'product growth'. The

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result could be one of four options; "market penetration", "market development",

"product development" and "diversification" (Pleshko & Heiens 2008).

Zain Company grew by multiple acquisitions across MENA region. In addition, they

managed to adapt the four Ansoff’s growth strategies during the last 30 years as

shown in figure 7. The detailed Ansoff’s matrix is in Appendix D.

Service Growth

Ma

rket G

row

th

Existing Service New Service

Exis

tin

g M

ark

et

Market Penetration

Providing basic services

(message, voice, and

pre-paid) to eight

countries

Product Development

High speed mobile internet,

and mobile data and

broadband in the eight

countries

3G service in Jordan in 2003

4G LTE service in MEAN

region in 2014

Ne

w M

ark

et

Market Development

Operating in 15 African

countries in 2005

Diversification

Enterprise mobility solutions

such as; M2M, Direct Billing

Operators and Cloud Solutions

Figure 4 Zain Groups' Ansoff's Matrix

(Source: please refer to Appendix D)

3.4 SWOT Analysis

The final tool that will be used to understand stagey formulation in Zain is SWOT

analysis. SWOT analysis is a tool used to understand the internal strengths and

weakness of an organization, at the same time, understanding the external threats

and opportunities that could affect that organization (Dyson 2004). A summarized

SWOT analysis for Zain Group is shown in table 5 and the detailed one is available in

Appendix E.

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Table 5 SWOT Analysis for Zain Group

Strength Weaknesses

Strong and reliable network.

Strong brand name.

Leader in bringing new technology and

innovation to MENA market.

Highly capable and skilled team.

Weak financial performance.

Decrease in the number of customers.

Lack of key performance indicators

related to innovation.

Increase in the financial risk as shown

in the increase in the Gearing Ratio.

Opportunities Threats

Growing market in Saudi Arabia, Bahrain,

Kuwait and Jordan.

Positive trends in the demand of digital

services.

Increase in youth percentage in MENA

region.

Increase in the popularity of LTE services in

Kuwait and Saudi Arabia.

Fluctuation in the local currency

exchange rate.

Changes to local regulations related to

SIM cards and active customers'

registration.

Declining in customers' confidence in

telecom companies due to changes to

data privacy regulations.

Changes in the competition forms due

to the rapid increase in OTT and

MVNOs.

(Source: please refer to Appendix E)

This SWOT analysis will be used later to generate Internal Factors Evaluation (IFE)

and External Factors Evaluation (EFE) in order to construct Internal- External (IE)

Matrix in strategy evaluation.

After discussing the strategy formulation in Zain group, the next section will address

the second stage of strategy development which is strategy implementation.

4. Zain Group: Strategy Implementation

Business Strategy implementation in Zain Group will be examined by reviewing the

products and services that Zain provides, the human resources and the last financial

results in 2014.

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4.1 Products and Services' Portfolio

Zain works continuously to fulfill its goal, ''towards a wonderful digital world'', by

providing a wide products and services portfolio as shown in figure 8.

Figure 1 Zain Group's Products and Services Portfolio

(Source: adapted from Zain Company 2014, p.55)

4.2 Human Resources

Zain Group has continuously been selected as "Employer of Choice" in the countries

where it operates (Zain Company 2011, p.40). This comes as the fruit of their

leadership team and the careful human resources (HR) procedures that they

adapted. In fact, the HR strategic goals were designed to support the overall group's

strategic (Zain Company 2014, p.84). The four HR pillars are shown in figure 9.

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Figure 2 Zain Groups' Human Resources' Pillars


The company has a board of directors and board committees as the following (Zain

Company 2014, p.65):

"Corporate Governance Committee";

"Audit Committee";

"Executive Committee";

"Legal Committee"; and

"Investment Committee".

4.3 Financial Results

Zain plays a key role in all the communities they operate in, yet, on the financial side,

the company did not achieve a strong financial performance as shown in the

numbers in table 6. The external factors that were addressed in PESTEL analysis in

table 2 impacted the group negatively, especially when it comes to the economic

factors (i.e. the fluctuating local currency exchange rate) and the legal one (i.e.

changes in the way that the number of active customers in calculated) (Zain

Company 2014, p.8).

As a result, the key financial performance indicators were lower than 2013. In

addition to that, two financial ratios which are important to reflect the financial

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structure and the profitability of the company were not good. Firstly, the Gearing

Ratio which is a financial structure ratio represents how much a company's funds are

coming from borrowings (Walker 2009, p.191), and secondly, ROCE (Return on

Capital Investment) which is a profitability ratio reflects how much the company is

capable to generate profit as a percentage of the capital that it employed (Walker

2009, p.154).

Unfortunately, Zain did not manage to reduce its Gearing Ratio which means its

financial risk increased, and did not manage to increase ROCE ratio which means it

was not successful in managing their capital employed efficiently.

Table 1 Final Year 2014 Key Performance Indicators

Comments Final Year 2014 Performance Indicator

4% reduction Year on Year 44.3 million by end of 2014 Total Managed Active Customers

2% down from 2013 USD 4.3 Billion Consolidated Revenues

6% down from 2013 USD 1.8 Billion Consolidated EBITDA*

41.8% EBITDA Margin

10% down from 2013 USD 685 Million Consolidated Net Income

12% down from 2013 USD 0.18 EPS**

17.6% higher than 2013 20% Gearing Ratio

7.5% down from 2013 14.97% ROCE ***

* EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization

** EPS: Earnings Per Share

*** ROCE: Retune on Capital Employed

(Source: adapted from Zain Company 2014, p.102 and the calculations for Gearing

Ratio and ROCE are shown in Appendix C)

The detailed products and services portfolio, executive management team, financial

results and the performance per country are available in Appendix C.

In conclusion, this section aimed at exploring how Zain translated its strategy into

products and services using different resources. In the next section, two tools will be

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used to evaluate these strategies and provide recommendations for future

adjustment.

5. Zain Group: Strategy Evaluation

The final step of strategic management process is evaluating the outcomes versus

the strategies that were initially formulated, and then act on the difference. The

evaluation process will take place using Internal- External (IE) Matrix as shown

below.

Internal- External (IE) Matrix

IE Matrix is a tool that was developed by General Electric Company and is used to

position the organization in a nine- cell grid based on two dimensions; the total IFE

weighted scores on the x-axis and the total EFE total weighted scores on the y-axis.

As a result, three alternative strategies are identified which are: "grow and build",

"hold and maintain" and finally "harvest or divest" (David 2013, p.216).

IE matrix for Zain Group is shown in figure 10 and the detailed calculations are

shown in Appendix F.

Figure 1 Zain Groups' IE Matrix

(Source: please refer to Appendix F)

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Zain got 3.5 in the IEF and 2.75 in the EEF, accordingly it has the below options for

future strategies:

"Backward, forward or horizontal integration"

"Market penetration"

"Market development"

"Product development"

The final results and conclusion will be formulated in the next section.

6. Conclusion and Recommendations

The purpose of this case study was to explore the strategic management in Zain

Group. As shown in the previous discussion, the strategic position is affected by

different internal and external factors. The final recommendations that can Zain

company implements to for the future are summarized in TWOS matrix.

TWOS is a tool used to improve the internal weaknesses by using the external

opportunities, avoid the external threats by using the internal strengths, reduce

weaknesses by avoiding the external threats and finally using the internal strength to

grab the external opportunities (David 2013, p.206).

Zain Group TWOS matrix is shown in figure 11 and the detailed one is available in

Appendix G.

As a final recommendation to improve this research, the quality of the input data

could be enhanced by combing the literature reviewed about Zain Group with other

data collection tools, e.g. interview senior managers from the company, questioners

or even group interviews. Adapting that approach will give more insights about the

company's strategic thinking and future directions (Biggam 2011, p.83).

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SO Strategies WO Strategies

Act a hub to develop the ITC

capabilities in job seekers since the

market lacks these skills.

Acquire more companies especially in

stable markets.

Seek partnerships with other telecom

companies and enter related societies

in order to be part of a larger

framework. This will help in sharing

knowledge and gaining a larger power

especially when they want to negotiate

for new legislations for example.

Task force a dedicated team to

investigate the decrease in number of

customers.

Develop performance indicators to

measure innovation and bench mark

against other companies in the same

filed.

Follow the recommended strategy as

per IE matrix which was "Grow and

Build". Zain has four options: here:

Backward, forward or horizontal

integration. Market penetration, Market

development and finally Product

development

ST Strategies WT Strategies

Seek legal support to identity the

potential trends related to new

legalisation.

Utilize their strong brand to promote

concepts such as customers’ data

privacy.

Develop partnership with OTT to gain

the benefits from the new trends.

Seek financial support to cover the

financial risks associated with currency

fluctuation.

Figure 1 Zain TOWS Matrix

(Source: please refer to Appendix G)

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References

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Handbook 2nd ed., Maidenhead: Open University Press.

Campbell, D. & Craig, T., 2005. Organisations and the Business Environment 2nd

ed., Amsterdam: Elsevier Butterworth-Heinemann.

David, F., 2013. Strategic Management Concepts and Cases: a Competitive

Advantage Approach 14th ed., Harlow: Pearson.

Dole, W. V., 2013. What’s all this I hear about core competencies for library planning

and assessment? Journal of Library Administration, 53(7/8), pp.472–481.

Dyson, R.G., 2004. Strategic Development and SWOT Analysis at the University of

Warwick. European Journal of Operational Research, 152(3), pp.631–640.

Ernst & Young, 2015. Global Telecommunications Study: Navigating the Road to

2020, Available at: http://www.ey.com/Publication/vwLUAssets/ey-global-

telecommunications-study-navigating-the-road-to-2020/$FILE/ey-global-

telecommunications-study-navigating-the-road-to-2020.pdf.

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_Top_10_risks_in_telecommunications_2014/$FILE/EY-top-10-risks-in-

telecommunications-2014.pdf.

Kotler, P. & Keller, K.L., 2012. Marketing Management 14th ed., Harlow: Pearson

Education.

Norton, D.P. & Robert, K., 2008. Mastering the management system. Harvard

Business Review, 86(1), pp.62–77.

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and the link to market orientation and profitability. Journal of Targeting,

Measurement and Analysis for Marketing, 16(2), pp.108–114.

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Harvard Business Review.

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London : Elsevie.

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http://www.zain.com/media/uploads/news/Zain_Thought_LeadershipReport-

2016.pdf.

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Zain Company & PWC Company, 2014. The Socio-Economic Impact of Mobile

Telecommunication in the MENA Region, Available at:

http://www.zain.com/media/images/resumes/Zain_PWC_Report_2014.pdf.

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Appendix A- Telecommunication Industry: Porter Five Forces Analysis

Table A.1 shows Porter Five-Forces analysis for the telecommunication industry. The

rationales behind these results are illustrated below.

Table 0.1 Porter's Five Forces Analysis for the Telecommunication Industry

Threats of New

Entry Buyers Power Suppliers Power

Threats of

Substitutes

Competitive

Rivalry

Low High Moderate High High

First Force: Threats of New Entry

Telecommunication industry is very expensive due to the need for high capital

investment in networks, cables, servers, software or even the license fees which vary

between countries (Ernst & Young 2015, p.7). In addition to that, there are high

operational expense for upgrading and maintaining those equipment (Zain Company

2014, p.16). Accordingly, the threat of new entry to this market is low.

Second Force: Buyers Power

The basic services that are provided by telecommunication companies are almost the

same (messages, voice and data). Adding to that, the switching cost is usually low. A

report by Ernest & Young in 2014 analysed the top 10 risks in this industry. One of

them is the "failure to understand what customers value" because they are always

looking for more innovative solutions (Ernst & Young 2014, p.23). This risk increases

the buyers power so according to Porter's Five Forces model, it is high.

Third Force: Suppliers Power

A company in telecommunication sector such as Zain Group deals with a big number

of suppliers for software, servers, equipment, cables … etc. There are a lot of

vendors for such items, however one of the top 10 risks in this industry as identified

by Ernst & Young Company is that telecommunication companies should have more

agility when dealing with their customers, partners and suppliers and to provide new

channels when dealing with them (Ernst & Young 2014, p.17). Accordingly, the

suppliers' power here is moderate.

Fourth Force: Threats of Substitutes

There are multiple players in the telecommunication sector such as cable companies,

TV and satellite operators, web developers to name but a few. Those players could

create substitute services especially for the non- traditional services that the

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telecommunication companies usually provide (such as short messages and voice)

(Ernst & Young 2015, p.13). As a result, the threat of substitute in this industry is

high.

Fifth Force: Competitive Rivalry

Telecommunication sector is very competitive one either from traditional

telecommunication companies or even from the "disruptive competitors" such as

mobile application developers. In addition to that, the local regulations usually

creates a competitive atmosphere to prevent the monopoly that could ruin the market

(Zain Company 2014, p.44). As a result, the competitive rivalry is high.

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Appendix B- Telecommunication Industry: PESTEL Analysis

Telecommunication Industry: PESTEL Analysis

Table B.1 shows PESTEL analysis for the telecommunication industry and the details

explanations are shown below.

Table B.1 PESTEL Analysis for the Telecommunication Industry

Political Economical

Political conflict and unstable situations in

different parts in the MENA region

especially Iraq and Sudan.

Low economic growth in MEAN region.

High unemployment rate in the

telecommunication-related jobs.

Fluctuating currency exchange rate.

Sociological Technological

Growing number of youth.

Changes in customers habits due to the

use of new technology.

Increase in the number of refugees.

Declining customers' confidence level in

certain topics such as data privacy and

security.

Growing sector with new technology

advancement every day.

MENA region got low ranking in the

global innovation indicators.

Ecological Legal

MENA reign is water-stressed area.

Increase the awareness about the

importance of adapting energy efficiency

practices and reducing the CO2

emissions.

Telecommunication sector is well-

regulated one with too many local

regulations varying from one country to

another.

Lack of uncertainty.

First: Political

MENA region is not a political stable area. Different civil wars and political conflicts in

different countries where Zain operates such as Iraq and Sudan (Zain Company

2014, pp.8–9).

Second: Economical

MEAN region achieved 4% as economic growth rate between 2000 and 2009 which

is very far from the developing countries in the same period (7.2%) as per Word Bank

statistics (Zain Company 2016, p.4).

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There is a gap between the required skills and competencies needed for the

telecommunication industries versus the ones that are available in the job market.

This creates a burden and high unemployment rate in the MENA region in general


The currency exchange rate in MENA region is fluctuating due to the unstable

political situation (Zain Company 2014, p.9).

Third: Sociological

Growing number in youth where 63% of the population is in the working age (Zain

Company 2016, p.4).

The new technology changed the way people do their daily transactions when using

smart phones such as using the mobile payment applications (Zain Company 2014,

p.15).

The political unrest creates many refugees across MEAN region especially in Syria,

Iraq, Palestine and Sudan. This situation creates burden for the host countries as

well as for their original countries (Zain Company 2014, p.14).

Customers' trust level is declining due to different changes in the privacy regulations

as imposed by the regulators (Ernst & Young 2014, p.15).

Fourth: Technological

The telecommunication sector is entitled with growing technological advancement

every day such as the use of smart devices and the mobile applications (Zain

Company 2014, p.8).

Most countries in MEAN region got low marks in the global innovation indicators. This

reflects the differences between MENA region and the developing countries in terms

of: the low spending for research and development (R&D) in these areas, the low

quality of education in telecommunication fields provided in most MENA region and

the local regulations that could promote the entrepreneurship spirit in the region (Zain

Company 2016, p.5).

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Fifth: Ecological

Some countries in the MENA region are one of the most water-scarce in the world.

This creates high desertification and reduction in the agricultural crops. In addition to

that, this affected the income of framers and the availability of many corps and food


There is an increase in the environmental awareness in the world which creates

pressure to reduce the CO2 emissions from the industry, and to adapt more energy

efficient practices in day to day operations (Zain Company 2016, p.53).

Sixth: Legal

The telecommunication industry is an intense one where there are a lot of

regulations. The below ones are expected to be changed within 2-3 years (Ernst &

Young 2015, p.17):

"Spectrum release and auction frameworks";

"Data privacy and retention";

"Net neutrality";

"Wholesale access pricing"; and

"Mobile roaming and termination rates".

In addition to that, there is lack of uncertainty in terms of the regulations in some

market which affected some of the acquisition contracts (Ernst & Young 2015, p.13).

Examples for such changes in regulations were (Zain Company 2014, p.14):

Change in the way the active customers are calculated in Iraq.

Change in the Subscriber Identity Module (SIM) card registration policy in

Sudan.

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Appendix C- Zain Group: Company's Profile

Zain Group is a market leader in the telecommunication industry in MENA region.

The main aspects of the group are summarized as the following (Zain Company

2014, p.11):

More than 7000 employees.

USD 1.8 Billion in EBITDA.

USD 4.3 Billion in Revenues.

815 TB of Daily Data Usage.

47 Million Daily Total SMS.

Moreover, it is the largest 4G LET Network provide in different parts of the region (in

Saudi Arabia, Kuwait, Bahrain and Lebanon).

First: Key Milestones

Table 0.1 Zain Group's Key Milestones

Year Event

1983 Established Mobile Telecommunications Company (MTC) in Kuwait

1999 Zain was the first to introduce prepaid services*

2003 Acquired Fastlink in Jordan

Awarded 2nd GSM license in Bahrain

Awarded GSM license in Iraq

The first operators to launch 3G*

2004 Awarded management agreement in Lebanon

2005 Acquired Celtel in 13 African nations

Acquired Madacom in Madagascar

2006 Acquired the remaining 61% of Mobitel in Sudan

Acquired 65% of V-mobile in Nigeria

Launched One Network, "the first ever-borderless mobile network in

the world, allowing customers to move freely across geographic

borders without incurring expensive international roaming call

surcharges" *.

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Table 0.1 Zain Group's Key Milestones

Year Event

2007 Won bid for 3rd GSM license in KSA

Rebranded to Zain in 4 markets

Acquired a 15-year nationwide license in Iraq

Acquired 75% of Westel Ghana

Acquired Iraqna in Iraq

2008 Merged MTC Atheer and Iraqna, and rebranded to Zain

Rebranded from Celtel to Zain in all African operations

Commenced operations in KSA

Commenced operations in Ghana

2009 Invested in 15.5% of Moroccan operator Inwi

Launched Zap, "one of the most comprehensive mobile banking

services in Africa, which led to the award of the Best Mobile Money for

the Unbanked Service to Zain by the GSM Association in 2010" *.

2010 Sold mobile operations in 15 African countries (excluding Sudan and

Morocco) to Bharti Airtel for $10.7 billion

2011 Separated operations between Sudan and South Sudan

The first operators to launch 4G LTE in the region, offering

unparalleled high-speed Internet access*

2012 Zain KSA raised $1.6 billion in rights issue and Group increased stake

in the operation to 37%

Increased stake in Zain Iraq to 76%

2013 Zain celebrates its 30th Anniversary

Zain joined a GCC telecoms consortium – Middle East- Europe

Terrestrial System (MEETS) – "to build a pan-regional high-bandwidth

transmission cable system for the region" *.

2014 Listed Zain Bahrain on Bahrain Bourse

Source: (Zain Company 2014, p.12)

* (Zain Company & PWC Company 2014, pp.9–10)

26


Second: Human Resource

Table 0.2 Zain Group's Executive Management Team

Name Position Name Position

Board of Directors

Mr. Asa'ad Al Banwan

Chairman

Chairman Mr. Abdul Aziz Al

Nafisi

Board Member

Mr. Bader Nasser Al-

Kharafi

Vice Chairman Ms. Shaikha Khaled

Al Bahar

Board Member

Mr. Abdul Mohsen Al Faris Board Member Mr. Jamal Shaker Al

Kazemi

Board Member

Mr. Jamal Al Kandary Board Member Mr. Waleed Abdullah

Mishary Al Roudan

Board Member

Executive Management

Mr. Scott Gegenheimer Chief Executive

Officer of Zain Group

Mr. Venkatesh

Jandhyala

Chief Internal

Auditor of Zain

Group

Mr. Ossama Matta Chief Financial


Mr. Henri Kassab Managing

Director,

International,

Wholesale &

Roaming of Zain

Group

Mr. Emre Gurkan Chief Strategy &

Business

Development Officer

of Zain Group

Mr. Adlai Shalabi Head of Legal of

Zain Group

Mr. Hisham Allam Chief Technology


Mr. Omar Al Omar Senior Advisor to

Zain Group CEO

Mr. Mohammad Abdal Chief

Communications


Mr. Wael Ghanayem Advisor to the

Zain Iraq Board

Mr. Duncan Howard Chief Commercial


Abdul Ghaffar

Setareh

Chief Risk

Officer Of Zain

Group

Middle East and North Africa Management

27


Table 0.2 Zain Group's Executive Management Team

Name Position Name Position

Mrs. Eaman Al Roudhan Chief Executive

Officer of Zain

Kuwait

Mr. Ahmad Al

Hanandeh

Chief Executive

Officer of Zain

Jordan

Mr. Elfatih M. Erwa Chief Executive

Officer & MD of Zain

Sudan

Mr. Mohammed

Zainalabedin

General

Manager of Zain

Bahrain

Mr. Mohammed Al

Charchafchi

Chairman and Chief

Executive Officer of

Zain Iraq

Mr. Basel Manasrah Chief Executive

Officer of Zain

South Sudan

Mr. Hassan Kabbani Chief Executive

Officer of Zain Saudi

Arabia

Mr. Peter

Kaliaropoulos

CEO of Zain in

Lebanon & Vice-

Chairman and

GM of 'touch'

Lebanon

(Source: Zain Group website, available on the WWW at:

http://www.zain.com/en/about-us/zain-management/ [Last accessed 21st Feb, 2016])

Third: Products and Services Portfolios

Below are the main products and services that Zain Group provides (Zain Company

2014, pp.55, 56)

1- Voice and messages.

2- High speed mobile- internet.

3- Mobile data and mobile broadband.

4- WI-FI roaming and enterprise solutions.

5- Direct operator billing through the partnership with SLA Mobile. The benefit of

this partnership is to "enable Zain’s customers to pay for digital goods from a

third-party content or service provider by charging the transaction to their

mobile phone monthly bill or using their prepaid credit".

6- Mobile commerce such as the "partnership with eServGlobal, [where] Zain

[will] to offer life-enhancing Mobile Financial Services and solidify its position

as an innovative market leader in the mobile money arena across its

footprint".

7- M2M initiatives (Machine to Machine) which "connects ‘things’ to the Internet,

transforming them into intelligent devices that exchange real-time information

28


and opens up a range of possibilities on how businesses are run, how lives

are enhanced, and how customers are satisfied".

8- Cloud Solutions where "Zain Group announced the launch of ‘Microsoft Office

365’ services in the Kingdom of Saudi Arabia, which was a first in the GCC.

The offering is a software service providing cutting-edge productivity

applications and communication services to Enterprises and SMEs, enabling

them to enhance productivity, increase efficiency, and reduce costs".

Fourth: Financial Results

Table C.3 below shows detailed financial ratios for ROCE (return on Capital

Employed) and Gearing Ratio where (Walker 2009, p.154,191):

ROCE (Return on capital employed) = Operating Profit / Capital Employed

Gearing Ratio = Capital Employed / Net Debt

Table 0.3 Zain Groups' Key Finanicla Results

In Thousands Kuwait Dinar 2014 2013

Total borrowings 788,261 755,721

Less: Cash and bank balances (343,570) (399,242)

Net debt 444,691 356,479

Total equity 1,793,969 1,763,202

Total capital 2,238,660 2,119,681

Gearing Ratio 20% 17%

Operating profit 335,066 343,255

Return on Capital Employed (ROCE) 14.97% 16.19%

(Source: adapted from Zain Company 2014, p.70,102)

Fourth: Performance per Country

Four key performance indicators are analysed per each country as shown in figure

C.1. The performance indicators are (Zain Company 2014, p.55):

Number of customers per country;

Revenues per country;

EBDTA per country;

Net Income per country

29


Figure 0.1 Zain Groups' Performance per Each Country

(Source: adapted from Zain Company 2014, p.55)

30


Appendix D- Zain Group: Ansoff's Matrix

Zain managed to grow according to the below table and analysis (Zain Company

2014, p.12) and (Zain Company & PWC Company 2014, pp.9–10):

Table 0.1 Zain Group Ansoff's Matrix

Service Growth

Ma

rket G

row

th

Existing Service New Service

Exis

tin

g M

ark

et

Market Penetration

Providing basic services

(message, voice, and pre-

paid) to eight countries

Product Development

High speed mobile internet,

and mobile data and

broadband in the eight

countries

3G service in Jordan in 2003

4G LTE service in MEAN

region in 2014

Ne

w M

ark

et

Market Development

Operating in 15 African

countries in 2005

Diversification

Enterprise mobility solutions

such as; M2M, Direct Billing

Operators and Cloud

Solutions

1- As a Market Development strategy, Zain Company started in Kuwait in 1983

and then they managed to develop new markets where they introduced the

same set of products and services (messages, voice and pre-paid services) in

Jordan in 2003, Lebanon in 2004, Sudan in 2006, Iraq in 2007, Saudi Arabia

in 2008 and Bahrain in 2014.

2- Zain started to introduce new products and services in the eight markets

sequentially as a Product Development strategy. For example: high speed

mobile internet, and mobile data and broadband. In addition to that, they

started 3G in Jordan in 2003, 4G LTE in 2011 to be the first in the region and

mobile e-commerce in 2014.

31


3- As a Market Developed strategy, Zain acquired Celtel in 15 African nations

and acquired Madacom in Madagascar in 2005, in addition they acquired

75% of Westel Ghana in 2007. Later they old Africa part in 2010.

4- As a Diversification strategy, Zain recently lunched new products and

services targeting the enterprise segment such as M2M, Direct Billing

Operators, Cloud Solutions.

Appendix E- Zain Group: SWOT Analysis

Table E.1 shows a summarised SWOT analysis for Zain group and the details are

illustrated below.

Table 0.1 SWOT Analysis for Zain Group

Strength Weaknesses


Strong brand name.






Lack of key performance indicators

related to innovation.

Increase the financial risk as shown in

the increase in the Gearing Ratio.

Opportunities Threats

Growing market in Saudi Arabia, Bahrain,

Kuwait and Jordan.

Positive trends in the demand of digital

services.

Increase in youth percentage in MENA

region.

Increase in the popularity of LTE services in

Kuwait and Saudi Arabia

Fluctuating local currency exchange

rate.

Changes to local regulations related to

SIM cards and active customers'

registration.

Declining in customers' confidence in

telecom companies due to changes to


Changes in the competition forms due

to the rapid increase in OTT and

MVNOs.

Strengths

Zain has a strong and reliable network due to its commitment to adapt high

technology and services and continuously upgrading and expanding its network. In

addition to that, it invests in new infrastructure every year, for example: 17% of

32


revenues in 2014 were invested in innovation and new services (Zain Company

2014, p.8). As a result, Zain received different rewards as "Best Customer Provider"

in Saudi Arabia , Kuwait and Jordan several times (Zain Company 2014, p.21). Zain

also created Zain Digital Frontier and Innovation (ZDFI) business unit to support its

innovation agenda (Zain Company 2014, p.16).

Zain has a strong brand name where they served 44.3 million customers by end of

2014. Its brand valuation was more than USD 1 Billion according to "Brand Finance"

(Zain Company 2014, pp.8, 48).

Zain has strong strategic partnership with key technological companies, e.g. Apple,

Samsung, Microsoft and SAP. That helped them to be the leader in bringing new

technological solutions in MENA market (Zain Company & PWC Company 2014,

p.10).

Zain has a strong CSR agenda that covers all the countries in MENA region (Zain

Company 2014, p.10).

Zain is well- known for being an "Employer of Choice" for which it developed a four-

pillar HR strategy. The four pillars are: "efficiency", "customer centric", "right talent"

and "community" (Zain Company 2014, p.48). As a result, Zain has a strong and

capable team.

Weaknesses

Zain was impacted negatively by the different political and economic factors in MENA

region. Financial results in 2014 were lower than 2013 (2% decrease in revenues,

6% decrease in EBIDTA and 10% decrease in Net Income) (Zain Company 2014,

p.8).

Another weakness is related to the lack of key performance indicators to reflect the

innovation that they do. For example: one key performance indicator might be

"Innovation Products as a Percentage of Revenues" (Ernst & Young 2014, p.21).

In addition to that, there was a decrease in the number of customers for the last two

years. One reason is related to changes in regulations, but also Zain has to further

investigate the other reasons (Zain Company 2014, p.8).

33


Finally, Gearing Ratio was increased which means the financial risks of getting the

funds from borrowing rather than form equity was increased (Zain Company 2014,

p.102).

Opportunities

There is a positive growing market trend in Saudi Arabia, Kuwait, Bahrain and Jordan

(Zain Company 2014, p.8,9,10). The expected market growth rate is projected to be

between 35% to 40% (Zain Company 2014, p.44).

In addition to that, there is increase in the demand for digital services in all fields

(Zain Company 2014, p.16). Services such as wirelesses broad band, smart phones

and tablets are expected to increase by 69% (Zain Company 2014, p.54). Positively,

there is an increase in the number of people who use their smart phones for online

payment. This creates more opportunities in the telecom industry (Zain Company

2014, p.51).

There is an increase in the number of youth in MEAN region. Some statistics

revealed that 63% are already in the working age (Zain Company 2016, p.4).

Finally, there is positive trends in the popularity of LTE (Long Term Evolution)

services in Saudi Arabia and Kuwait (Zain Company 2014, p.8).

Threats

The fluctuation in the local currency exchange rate is a major threat for Zain where it

is already impacted by that negatively in 2014. The cost for that was 88 million USD

especially in Iraq and Sudan (Zain Company 2014, p.9).

Another major threat comes from the changes that may happen to the legal

regulations. For example; the method that is used to calculate the number of active

customers was changed in Iraq, resulted in decreasing the number of customers by

end of 2014. In another example, Sudan changed the policy related to SIM card

registration. Both examples resulted in removing 3 million customers from Zain's data

base (Zain Company 2014, p.14).

34


Some countries keep changing their regulations in terms of data privacy and sharing

customers' information. As a result, there is a decline in customers' confidence in the

telecommunication companies (Ernst & Young 2014, p.15).

Finally, there is a continuous threat from new competitors such as OTT (Over the

Top) players like Facebook, Viber, WhatsApp and MNVOS (Mobile Virtual Network

Operator) (Zain Company & PWC Company 2014, p.10).

35


Appendix F- Zain Group: Internal- External (IE) Matrix

IE Matrix will be constructed using Internal Environmental Factors (IEF) and External

Environmental Factors (EEF) (David 2013, p.216).

First: Internal Environmental Factors

The weight is a number used to reflect the relative importance of the factor for the

firm's success and it is a number from 0 (not important) to 1 (very important) (David

2013, p.125). The rating is a number that reflects the strength of the factors as the

following (David 2013, p.125):

1: Weakness

2: Minor weakness

3: Minor strength

4: Major strength

Table 0.1 IEF Matrix for Zain Group

No. Weight Rating Weighted

Score

Strengths

1 Strong and reliable network. 0.3 4 1.2

2 Strong brand name. 0.1 4 0.4

3 Leader in bringing new technology and


0.05 3 0.15

4 Highly capable and skilled team. 0.1 3 0.3

Weaknesses

5 Weak financial performance. 0.2 4 0.8

6 Decrease in the number of customers. 0.05 2 0.1

7 Lack of key performance indicators related to

innovation.

0.05 2 0.1

8 Increase the financial risk as shown in the

increase in the Gearing Ratio.

0.15 3 0.45

Total 1.0 3.5

Second: External Environmental Factors (EEF)

Again, the weight here is used to reflect the relative importance of the factor for the

firm's success and it is a number from 0 (not important) to 1 (very important) (David

2013, p.111).

36


The rate is a number between 1 and 4 that reflects how effectively the company is

responding to that factor as the following (David 2013, p.111):

4: Response is superior

3: Response is above average

2: Response is average

1: Response is poor

Table 0.2 EEF Matrix for Zain Group

No. Weight Rating Weighted

Score

Opportunities

1 Growing market in Saudi Arabia, Bahrain,

Kuwait and Jordan.

0.15 4 0.6

2 Positive trends in the demand of digital

services.

0.1 4 0.4

3 Increase in youth percentage in MENA region. 0.05 2 0.1

4 Increase in the popularity of LTE services in

Kuwait and Saudi Arabia

0.1 3 0.3

Threats

5 Fluctuating local currency exchange rate. 0.25 3 0.75

6 Changes to local regulations related to SMI

cards and active customers' registration.

0.20 2 0.4

7 Declining in customers' confidence in telecom

companies due to changes to data privacy

regulations.

0.05 2 0.1

8 Changes in the competition forms due to the

rapid increase in OTT and MVNOs.

0.1 1 0.1

Total 1.0 2.75

Note: The numbers here are given based on the best judgement of the writer

however in real business life, the number should be based on a more accurate data

collection tools

37


Third: IE Matrix

The total weighted score in the IEF is placed on the x-axis and the total weighted

score in the EEF is placed on the y-axis (David 2013, p.218).

The result is Zain lies in the Grow and Build region. It has the below options:

"Backward, forward or horizontal integration"

"Market penetration"

"Market development"

"Product development"

Figure 0.1 Zain Groups' IE Matrix

(Source: adapted from David 2013, p.217)

38


Appendix G- Zain Group: TWOS Matrix

Table 4.3.1 Zain TOWS Matrix

Strengths Weaknesses


Strong brand name.






Lack of key performance indicators related

to innovation.

Increase the financial risk as shown in the


Opportunities SO Strategies WO Strategies

Growing market in Saudi

Arabia, Bahrain, Kuwait and

Jordan.

Positive trends in the

demand of digital services.

Increase in youth

percentage in MENA region.

Increase in the popularity of

LTE services in Kuwait and

Saudi Arabia

Act a hub to develop the ITC capabilities in

job seekers since the market lacks these

skills.

Acquire more companies especially in

stable markets.

Seek partnerships with other telecom

companies and enter related societies in

order to be part of a larger framework. This

will help in sharing knowledge and gaining a

larger power especially when they want to

negotiate for new legislations for example.

Task force a dedicated team to investigate

the decrease in number of customers.

Develop performance indicators to

measure Innovation and bench mark

against other companies in the same filed.

Follow the recommended strategy as per

IE matrix which was "Grow and Build". Zain

has four options: here: Backward, forward

or horizontal integration. Market

penetration, Market development and

finally Product development

39


Table 4.3.1 Zain TOWS Matrix

Strengths Weaknesses


Strong brand name.






Lack of key performance indicators related

to innovation.

Increase the financial risk as shown in the


Threats ST Strategies WT Strategies

Fluctuation in the local

currency exchange rate.

Changes to local regulations

related to SMI cards and active

customers' registration.

Declining in customers'

confidence in telecom

companies due to changes to


Changes in the competition

forms due to the rapid increase

in OTT and MVNOs.

Seek legal support to identity the potential

trends related to new legalisation.

Utilize their strong brand to promote

concepts such as customers’ data privacy.

Develop partnership with OTT to gain the

benefits from the new trends.

Seek financial support to cover the

financial risks associated with currency

fluctuation.