Celtel Nigeria: Towards Serving the Rural Poor

Case details
About the authors

Jamie Anderson, Adjunct Professor of Strategic Management, TiasNimbas Business School, Netherlands and Dr Martin Kupp, Faculty Professional, European School of Management and Technology, Berlin, Germany describe the development of their case Celtel Nigeria: Towards Serving the Rural Poor.

Jamie Anderson & Martin Kupp

Why Celtel Nigeria?

Martin Kupp: In developing countries, the distribution of households by income level is heavily skewed toward the bottom rungs of the economy, and the purpose of this case is to discuss issues related to serving rural customers at the 'bottom of the pyramid' (BOP). There are some good cases on these issues, but most are now quite dated and few examine Africa. We also wanted to explore what we define as 'complex' operating environments: not simply underdeveloped rural markets, but markets with challenges such as criminality and conflict.

Jamie Anderson: We met Lars Stork, the case protagonist, in 2007 at an industry conference in London, when he was Chief Operating Officer of Celtel Nigeria. We immediately realised that we had a wonderful potential case. Celtel was the second largest mobile telecommunications company in Nigeria with a 28% market share and a subscriber base of approximately eight million. It had experienced considerable success in serving Nigeria's cities and larger towns, but had only recently shifted its attention to serving poorer consumers in rural areas, a massive but untapped market. This had not been easy and although some 50% of Nigeria's population lives in rural regions, the challenges of reaching them sometimes seemed overwhelming.

The absence of a reliable national electricity grid meant that Celtel's rural telecommunications towers had to be run on diesel generators, resulting in high maintenance and fuel costs. Theft and vandalism of equipment had emerged as a major problem, resulting in the need to employ full-time security guards on most base station sites outside urban areas. The distribution and marketing of products and services was also a challenge, with almost no existing distributor networks across the countryside. There was demand but most consumers in rural areas still saw mobile telephony as an expensive necessity, with affordability a very real issue.

Researching the case

In 2007 and 2008, we made four visits to Nigeria and conducted a series of interviews with Lars Stork and his management team. We also visited some of Celtel's rural markets to talk to customers and witness first-hand the company's operational challenges.

Martin Kupp: Nigeria is a very complex country and the security situation is sometimes unstable. There is a permanent threat of criminality and violence so we were given a constant security escort during our visits, something we had never before experienced in our academic careers. In one incident, a Celtel market researcher was kidnapped by villagers, before being released after a 'contribution' was made to the local community. 

Jamie Anderson: We were closely involved in the development of the Rural Acquisition Initiative (RAI), a micro-franchising model involving partnerships with local entrepreneurs and while we were researching the case we acted in an advisory capacity to Lars Stork and his team. This gave us excellent insights into the day- to-day challenges of strategy implementation in Nigeria.

Why a case series?

We believe that a great case is based on a simple framework. There must be a real business situation that management is grappling with and it must have complications, otherwise it is difficult to create a dynamic classroom debate. Emerging from this situation and complication must be a question: what should we do? Or, if there are specific strategic choices, which of these options should we pursue? Finally, if the company is exploring possible solutions, these can be discussed in the classroom. Are they appropriate responses? What should the company do next?

The Celtel Nigeria case provides an excellent story through which to explore this situation-complication-question-solution model. The (A) case covers the situation and complication, and concludes with Lars Stork pondering the key question: how can Celtel address the challenges of bringing the benefits of mobile telecommunications to Nigeria's rural poor, and do so profitably? This sets the scene for analysis by students as they suggest potential approaches. The (B) case demonstrates how Celtel was able to implement a highly innovative marketing strategy to serve low-income rural customers with the RAI at its heart.

Teaching objectives

The case sets out to show that to profitably serve low-income, BOP customer segments in developing countries, companies can neither view them through the lens of the dominant industry business model, nor simply try to graft business models from developed markets onto developing ones. Rather, they must acknowledge the challenges and adapt their approaches accordingly. While the case demonstrates these points perfectly, it has also provided excellent primary research that we have published in a number of academic and practitioner oriented publications.1 It complements our research in other complex operating environments, such as the urban slums of India and conflict zones such as Iraq.

Martin Kupp: Teaching the case we found that students wanted to get closer to the 'real' environment so we have made a video of interviews with Lars Stork and footage of villages. We have taught the case on degree and executive education programmes at TiasNimbas Business School, the European School of Management and Technology, IMD, London Business School and the Indian School of Business. It can be used on undergraduate or MBA marketing courses, or as part of a core business strategy programme. It has also been used with senior managers from mobile network operators in Africa and India, and a telecommunications equipment vendor based in Finland.

Any advice?

We believe that there are three key criteria for a successful case: sponsorship of a senior executive within the subject organisation, a compelling story that provides a fascinating situation-complication-question- solution framework, and access to sufficient data to underpin a rich classroom discussion. All of these ingredients were in place with the Celtel Nigeria case.

1 "Lessons from the Developing World" MIT Sloan Management Review August 2009 (sloanreview.mit.edu/business-insight)

Case details

Click on the case title to view further details and, where available, an inspection copy.

Celtel Nigeria: Towards Serving the Rural Poor (A)
Ref ESMT-309-0096-1
Celtel Nigeria: Towards Serving the Rural Poor (B)

Ref ESMT-309-0097-1
Teaching note

Ref ESMT-309-0096-8
Teaching note supplement software

Ref ESMT-309-0096-9
Video on CD-ROM

Ref ESMT-309-0096-3

The case won the African Business Cases category of the 2008 EFMD case writing competition.

About the authors

Professor Jamie Anderson is Adjunct Professor of Strategic Management at TiasNimbas Business School, Netherlands.
e j.anderson@tiasnimbas.edu

Dr Martin Kupp is a Faculty Professional at the European School of Management and Technology, Berlin, Germany.
e martin.kupp@esmt.org
 

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