Strategic Management - ARTS' Motivation to Enter Rwanda - Case Study Example

Strategic Management Student’s name Affiliation Date Strategic Management Overview of Rwanda Rwanda is one of the smallest landlocked countries in East Africa. It borders Democratic Republic of Congo commonly known as DRC towards the west. It borders Tanzania towards the east, Uganda to the north, and Burundi towards the south. World Bank data indicates that the country has approximately 11.61 million and 52% of them are women (Behuria 2017, p.56). Massive support of World Bank and international monetary fund, the bank has been able to make progressive steps towards economic emancipation. However, following the atrocities of the 1994 genocide, the government has undertaken serious steps in an attempt to ensure that such disaster will not happen again. Among the great milestones that the government has undertaken involve structural and economic reforms that ensure the country runs with minimal or no corruption and hefty accountability (Behuria 2017, p.56). PESTEL analysis of Rwanda in relation to attention country POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL ENVIRONMENTAL LEGAL Rwanda has experienced political stability since 1994.Notable parliamentary elections were held in 2013 and 64% of all seats were held by women. The current president Kagame has served the country well and his term will end on august 2017 when general elections will take place. However, amendments of the constitution have allowed him to go a third election, which he might win. His good track of leadership makes him a suitable candidate to lead the country (Hamilton 2015,p.67). Rwanda has clearly defined its developmental goals through formulation of vision 2020. The vision seeks to transform the country from having agricultural based economy to become knowledge based with at least becomes middle-income country status. In pursuit of realization this goals, the government has sought medium-term strategy which seeks to accelerate growth and eradicate poverty. The strategy seeks to develop the rural areas, employment of the youth, accountable governance and economic transformation. The strategy seeks to raise GDP to $1,000 and ensure that 73% are above poverty line (Hamilton2015, p.68). The strategy is workable because from 2001-2015 the GDP has grown with approximately 8% per annum. By the end 2015, Rwanda had realized most of its millennium development goals proving its efficiency and clarity. Massive economic growth characterized improved standards of living and this attests the 2/3 reduction in child mortality rate. Similarly, they have managed to provide universal primary education and that becomes great milestone towards development. in the same breath, home grown policies have contributed to improved and elaborate access to services as per human development indicators. This has translated to significant poverty reduction from44% in 2011 to 39% in 2014(Mann&Berry2016, p.78). Rwanda has significant development in termselectricity, roads and ICT.Most of Rwanda’s electricity emanates from water.Lake Burera and Ruhondo provide 90% of total electricity. In addition, Rwandan government has managed to provide free education to the state-run schools. Similarly, the government has embraced technological advancement in provision of healthcare services. Rwandese can access specialized health services while still in the country. For instance, in year 2008, the government spent approximately 9.7% of its national expenditure on healthcare issues as compared to 3.2% back in 1996(McMahon2015,p.90).Moreover, it has set up training institutes such as Kigali Health Institute (KHI) with ultimate aim of training health professionals. In terms of health security, it is mandatory for all individuals to acquire it and by the end 2010; almost 90% had acquired the requirement. Rwanda has one of the best environment for investment. It has strategic location within the tropics making it suitable for business throughout the year. Having many sources of water, it is able to produce hydroelectric power conveniently reducing the cost of production that could emanate from importing electricity. In the same breath, the country good land for agricultural making it possible for agricultural based industries to thrive. In addition, the agricultural based economy makes sure that the country to buy any technological knowledge that will transform their country according vision 2020.This means that Rwanda becomes source of market for technological goods and services (Mukama 2016, p.56). The legal aspect has enabled Rwanda to liberalize economy so that it can boost its economic growth. She seeks to ensure that she benefits economic liberation to ensure that she recovers that hit the country in 1994. Welcoming and accepting international investors means that the country has ability and willingness to succeed economically. The legal aspects that allows liberalization have enabled the country to embark sustainable growth practices. International trade and liberalization of economy means that the country will benefit directly and indirectly (Mukama 2016, p.90). Description of the incentives to enter the Rwandan Special Economic Zone Special Economic Zone (SEZ) normally refers to specific physical and geographical regions under seclusion by a single body for giving specific incentives that include simplified and liberal regulations pertaining business in pursuit of efficient business environment. The SEZ program has a specific design to address domestic problems that investors may incur in the process making investments. The common problems that Rwandan SEZ solves include availability of commercial and industrial land, energy costs, and transport systems, source of market and reduced bureaucracies linked to investment. Therefore, the SEZ will provide land in small scale and large scale as well as other services with minimal disturbance from the local administration and bureaucracies. In 2010, the government went a mile ahead and developed the ‘Economic Zones of Rwanda Law’ that stipulated the requirements and needs of the system for clarity and efficiency of the program (Farmer 2014, p.372). SEZ has a national and independent regulatory authority that seeks to plan and designate land to respective investors. It has to liaise with licensing and permitting agencies to ensure that investors get land as a whole package with minimal disturbance. The main SEZ regulator as per now is the Rwanda Development Board also known as RDB. All these activities has one ultimate aim; they want to create a conducive and favorable environment where all investors will get all requirements in one basket. The approach attracts local and foreign investors and in the end boosting economic development (Farmer 2014, p.372). Current foreign investment in Rwanda Over the last few years, foreign direct investment has considerably increased due to political stability of the country. However, political instability in the neighboring countries such as DRC Congo and Burundi has adversely affected the FDI. The country’s low level of human resource, landlocked nature, poor infrastructure and high operational costs makes it hard for many investors to find it ideal for investment (Wagner 2014, p.373). On the other hand, Rwanda has numerous assets and huge reserves for methane gas that is yet unexploited increasing its chances. In addition, it is among the countries that have low levels of corruption as compared to other African countries. In the same breath, the government has formulated liberal policies to make sure that investors find it worthwhile to invest in Kenya. For instance, the government has faced out bureaucratic procedures that are essential to operate a new company in Rwanda. However, with only a few administrative regulations, the company can start running in Rwanda taking approximately three days (Wagner 2014, p.373). The liberality has pleased World Bank and it states that within a few days a foreign company is able to run in Rwanda making it one of the economically viable countries for investment in Africa. In fact according to World Bank classification 2016, Rwanda 62nd position out of 189 economies. Such classification is awesome considering the challenges and setbacks that the country has experienced. Although the position is a drop, it becomes second after Mauritius in the Sub-Saharan region. In 2015, Rwanda embarked on a new investment code where it attracted foreign direct investors in energy, technology and tourism. ARTS' motivation to enter Rwanda The chronic ARTS desire to enter Rwandese market goes hand in hand with goods it offers and what its competitor offers in the country. The main competitor of ARTS is ‘Positivo BGH’. The two companies fall under management of schoolmates and they feel that they can outdo each other. For instance, the CEO of ARTS asserts that Positivo BGH stole the design and idea from ARTS and therefore whatever he gives the Rwandan market is a creativity of ARTS. Following this conviction, he feels that he can enter the market and provide the same product at a subsidized price. In the same breath, the foreign investment program for Rwanda allows foreign investors to invest and this gives ART an upper hand in the process (Bruce 2016, p.67). It is possible for ART to produce the same goods produce Positivo BGH at the same price and still make profit owing the fact that they have the same technology. Moreover, the country has a ready market technological product because the vision 2020 asserts that it has to move from agricultural based economy to acknowledge-based economy and this becomes a good investment ground for ART. Collaborating with stakeholders of education will also prove effective and that can outdo PositivoBGH in the market (Gagliardone 2016, p.78). Five forces for analysis for ARTS POWER OF SUPPLIER POWER OF BUYER RIVALRY COMPETITION THREAT SUBSISTITUION NEW ENTRY THREAT ARTS has to consider the number of suppliers in the market and their ability to alter prices. Altering prices by suppliers directly affects ARTS entry in the business. The power of buyers is an issue ARTS has to take into account. Who are the buyers, is it the government, learning institutions or individuals buyers. Strong and few buyers will dictate your price while many buyers will create variety of prices. Knowing the strength of your rivalry helps one to make informed decision. Positivo BGH is main rivalry and therefore ARTS should know their best and produce better and thus overcoming them in the market. ARTS existence comes because of a threat that clients cannot offer. The product of ART should be in such a case it can solve problems beyond what the clients can do. They should a product that will solve problem better than that of Positivo BGH. It is crucial for ARTS to consider whether other competitors other than Positivo BGH may enter the market and eventually destroy the market finally. Comparing and contrasting the product of ARTS and Positivo BGH ARTS Product Positivo BGH Product Main product is GT80S Titan Main product is Positivo BGH laptops for all schools and government offices Built specifically for western Market Built specifically Rwandese market They lack local taste flavor for Rwanda They have a local flavor for Rwanda considering they are in Rwanda. They apply aesthetics of the country Numerical Return Table Product Average price Possible profit margin GT80S Titan for ARTS (Rwandan Franc3000012.82 nil Positivo BGH Rwandan Francv200, 000. 40% Considering the retailing price for GT80S and that of Positivo BGH, it is clear that Titan cannot survive in the Rwandese Market because their products are quite high and the profit is negligible as compared to the main competitor. Therefore, international market is ideal for Titan because it cannot survive the Rwandese market bearing in mind that Positivo BGH produces the same product at a cheaper price. References Behuria, P., 2017. The political economy of import substitution in the 21st century: the challenge of recapturing the domestic market in Rwanda. Binagwaho, A., Farmer, P.E., Nsanzimana, S., Karema, C., Gasana, M., de Dieu Ngirabega, J., Ngabo, F., Wagner, C.M., Nutt, C.T., Nyatanyi, T. and Gatera, M., 2014. Rwanda 20 years on: investing in life. The Lancet, 384(9940), pp.371-375. Bruce, J.W. and Migot-Adholia, S.E., 2016. Searching for land tenure security in Africa. Dubuque, Iowa: Kendall/Hunt Publishing Company Gagliardone, I. and Golooba-Mutebi, F., 2016. The Evolution of the Internet in Ethiopia and Rwanda: Towards a “Developmental” Model?. Stability: International Journal of Security and Development, 5(1). Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA. Mann, L. and Berry, M., 2016. Understanding the political motivations that shape Rwanda's emergent developmental state. New Political Economy, 21(1), pp.119-144. McMahon, R., 2015, September. The Challenges of Information and Communications Technology Education in Sub-Saharan Africa. In Proceedings of the 16th Annual Conference on Information Technology Education (pp. 89-94). ACM. Mukama, E., 2016. Baseline Study on the Status of Open and Distance Learning in Rwanda. Read More