[kictanet] Orange and yu exit: Market Failure or Creative Destruction (Capitalism Style)?

Wed Mar 26 10:31:50 EAT 2014

+1, yes "innovative" will be the solution...

On Wed, Mar 26, 2014 at 10:14 AM, Dennis Kioko <dmbuvi at gmail.com> wrote:

> A similar problem arose in the US, but the regulator refused to let AT&T
> (the leading operator) buy off T-Mobile(the fourth operator).
>
> What happened is that T-Mobile got a bit more creative in its offers (
> http://www.nytimes.com/2014/02/27/technology/personaltech/t-mobile-turns-an-industry-on-its-ear-in-a-fight-for-its-life.html?_r=0)
> .
>
> I also think that Kenya is suffering from the same, especially seeing that
> we import the C level suite of most telcos to bring in "experienced people."
>
> Perhaps, telcos need more of innovative people and less of experienced
> people - there isn't that much to lose anyway, or is there?
>
>
> On Wednesday, 26 March 2014, Ali Hussein <ali at hussein.me.ke> wrote:
>
>> Listers
>>
>> Jaindi Kisero's article on the imminent departure (demise?) of two telcos
>> in Kenya make compelling reading.
>>
>>
>> http://www.nation.co.ke/oped/Opinion/mobile-phone-firm-pullout-market-failure/-/440808/2257472/-/2crh39/-/index.html
>>
>> The article basically explores the possibility that market failure is
>> what we are experiencing in Kenya.
>>
>> According to Wikipedia Market Failure is a concept within economic
>> theory describing when the allocation of goods and services by a free
>> market <http://en.wikipedia.org/wiki/Free_market> is not efficient<http://en.wikipedia.org/wiki/Economic_efficiency>.
>> That is, there exists another conceivable outcome where a market
>> participant may be made better-off without making someone else worse-off.
>> (The outcome is not Pareto optimal<http://en.wikipedia.org/wiki/Pareto_efficiency>.)
>> Market failures can be viewed as scenarios where individuals' pursuit of
>> pure self-interest leads to results that are not efficient - that can be
>> improved upon from the societal point-of-view.[1]<http://en.wikipedia.org/wiki/Market_failure#cite_note-1>
>> [2] <http://en.wikipedia.org/wiki/Market_failure#cite_note-krugman-2> The
>> first known use of the term by economists was in 1958,[3]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Bator-3>
>>  but the concept has been traced back to the Victorian philosopher Henry
>> Sidgwick <http://en.wikipedia.org/wiki/Henry_Sidgwick>.[4]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Medema-4>
>>
>> Market failures are often associated with time-inconsistent preferences<http://en.wikipedia.org/w/index.php?title=Time-inconsistent_preferences&action=edit&redlink=1>
>> ,[5] <http://en.wikipedia.org/wiki/Market_failure#cite_note-5> information
>> asymmetries <http://en.wikipedia.org/wiki/Information_asymmetry>,[6]<http://en.wikipedia.org/wiki/Market_failure#cite_note-6>
>>  non-competitive markets <http://en.wikipedia.org/wiki/Market_structure>,principal-agent
>> problems <http://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem>,
>> externalities <http://en.wikipedia.org/wiki/Externalities>,[7]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Laffont-7>
>>  or public goods <http://en.wikipedia.org/wiki/Public_goods>.[8]<http://en.wikipedia.org/wiki/Market_failure#cite_note-8> The
>> existence of a market failure is often the reason for government
>> intervention in a particular market <http://en.wikipedia.org/wiki/Market>
>> .[9] <http://en.wikipedia.org/wiki/Market_failure#cite_note-9>[10]<http://en.wikipedia.org/wiki/Market_failure#cite_note-rees-10> Economists,
>> especially microeconomists <http://en.wikipedia.org/wiki/Microeconomics>,
>> are often concerned with the causes of market failure and possible means of
>> correction.[11]<http://en.wikipedia.org/wiki/Market_failure#cite_note-mankiw-11> Such
>> analysis plays an important role in many types of public policy<http://en.wikipedia.org/wiki/Public_policy_(law)> decisions
>> and studies. However, some types of government policy interventions, such
>> as taxes, subsidies, bailouts <http://en.wikipedia.org/wiki/Bailout>,
>> wage and price controls, and regulations, including attempts to correct
>> market failure, may also lead to an inefficient allocation of resources,
>> sometimes called government failure<http://en.wikipedia.org/wiki/Government_failure>
>> .[12]<http://en.wikipedia.org/wiki/Market_failure#cite_note-weimervining-12> Thus,
>> there is sometimes a choice between imperfect outcomes, i.e. imperfect
>> market outcomes with or without government interventions. But either way,
>> if a market failure exists the outcome is not Pareto efficient<http://en.wikipedia.org/wiki/Pareto_efficiency>.
>> Mainstream neoclassical and Keynesian economists believe that it may be
>> possible for a government to improve the inefficient market outcome, while
>> several heterodox <http://en.wikipedia.org/wiki/Heterodox_economics> schools
>> of thought disagree with this.[13]<http://en.wikipedia.org/wiki/Market_failure#cite_note-n._gregory_mankiw-13>
>>
>>
>> While Creative Destruction alludes to free-market economics as a
>> description of processes such as downsizing in order to increase the
>> efficiency and dynamism of a company or economy.
>>
>>
>> The case of Orange and yu in my humble opinion is the stuff of Business
>> School studies at Strathmore and others for years to come.
>>
>>
>> The questions that the country now needs to ask include:-
>>
>>
>> 1. How will the demise of two major multinationals in Kenya going to
>> affect the country's FDI outlook? Kenya is quickly gaining a reputation as
>> a graveyard for MNCs who come here without appreciating the GLOCAL
>> Principle.
>>
>> 2. What are the market dynamics that are going to be unleashed by a a
>> defacto duopoly that now exists?
>>
>> 3. What impact will it have going forward on the attractiveness of Kenya
>> as a destination for tech giants and Startups alike?
>>
>> 4. Is the regulatory environment being optimally executed to protect both
>> investors and consumers alike?
>>
>> 5. Lastly - the more things change the more they remain the same?
>> Seriously. The way this is going I won't be surprised if Airtel also throws
>> in the towel seeing as they haven't turned a profit since their entry into
>> the country.
>>
>>
>> *Ali Hussein*
>>
>> +254 0770 906375 / 0713 601113
>>
>> Twitter: @AliHKassim
>>
>> Skype: abu-jomo
>>
>> LinkedIn: http://ke.linkedin.com/in/alihkassim<http://ke.linkedin.com/in/alihkassim>
>>
>> Blog: www.alyhussein.com
>>
>> "I fear the day technology will surpass human interaction. The world will
>> have a generation of idiots".  ~ Albert Einstein
>>
>> Sent from my iPad
>>
>
>
> --
> with Regards:
>
> blog.denniskioko.com <http://www.denniskioko.com/>
>
>
>
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-- 
Regards

Philip Adar
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