The launch of a new product on the Algerian market (Sagem mobile phones)

Résumé du document

This report mainly focuses on Algeria as an emerging market, mobile phone as a product and Sagem as a French company. This report includes a detailed study of the marketing strategy and the economic conditions in Algeria and also analysis of the product and the services that Sagem offers to Algerians.

Algeria offers excellent opportunities for this particular company to look for new customers in the market as this market has substantial potential for growth. A study that was conducted last year shows good reasons to enter this market.
These are the reasons wy managers of Sagem believe that this step is important for the future.

This document examines the French mobile company Sagem and the emerging markets in Algeria. It is an international French group involved in consumer electronics, communication systems and defence electronics. This high-technology group is the second largest group in the field of telecommunications and the third for electronics with respect to defence and security. Sagem exists in more than twenty countries like Europe, Asia, Latin America and so on.

The first reason to choose Algeria as an emerging market was because this French company has been existent in the Algerian history and the borders of modern Algeria was created by the French. The Evian accords of March 18, 1962 provided continuous economic, financial, technical and cultural relations along with interim administrative arrangements until a referendum on self-determination came into place.

Then, Algeria became independent on July 3, 1963.
Although Algeria's international image is unfortunately limited, for most, the country is known for its independence struggle from the French and more recently for the civil crisis of the 1990s.
Because of the political context, terrorism and high unemployment, Algeria does not seem to be an attractive country. However, Algeria is important with respect to the energy markets because it is a significant oil and gas producer and exporter.

And since two years, Algeria has seemed to be an attractive country for foreign investments and a country with potential to set up a business.
Algeria is a large country, the second largest in Africa and it has a good geographical location, with a lot of resources, both natural and human. Moreover, the country's infrastructure consists of many airports, ports and 100,000 km of roads.
Finally, the second reason to choose Algeria and mobile phones is because of the liberalization of the telecommunications sector.

There are only 100,000 mobile phone lines for a total of 30 million inhabitants in comparison to Morocco (1.2 million subscribers for a total of 29.8 million inhabitants) and Tunisia (380,300 subscribers for a total of 9.6 million inhabitants). Furthermore, there are only two competitors in Algeria: Ericsson and Thuraya.

Sagem hence has decided to establish a business in this place. The question is: "How to enter this emerging market?"

For this, we first have to know the economics and the culture of the country in order to develop an efficient strategy. We also have to make a financial analysis to check if our project is feasible.

Country selection:
We will now explain why we are targeting the Algerian market. First, the idea was to do business with an African country and in an emerging market as Sagem did not have any trade relation with Africa.
The two main decisive points with respect to the global selection were the knowledge of the country's culture and geographic proximity. This allowed us to select three countries: Algeria, Morocco and Tunisia.
Then, it was very important to estimate the balance between the eventual risks and the potential profits of each of these three countries.

Risks:
- Political instability
- Legal disadvantages
- Currency fluctuations
- Purchasing power fluctuations

Profits:
- Sales potential
- Demand trend
- Cost reduction

With sales of mobile phones, we want to develop new habits in Algeria and facilitate communication between people and culture. The main targets chosen were the students and the business people.

The main idea of this report is to propose four-product lines for the Algerian market which will satisfy the different needs of the people. This French group kept in mind the fact that every customer has different needs and consequently it would make no sense to propose only one or two different mobile phones. Considering the actual weakness and emergence of the Algerian mobile phone market, this group wanted to sell cheap, simple and good quality products.

Selling "cheap" products is essential and important if we look at the purchasing power in the particular country. Production and distribution of expensive products would make no sense with respect to Algeria because very less people have the ability to buy these mobile phones.

Selling good quality products is essential for Sagem as this group gives importance to consumer satisfaction. Also this group wants to gain popularity in the new markets.

The basics of a mobile phone includes, easy (new) number settings, call register, call divert, schedule page, calendar, profiles, alarm, calculator and games. SMS service is very much important. This group wants to develop "SMS culture" because, in Europe it has become a common service and people want SMS service included in the whole price. On the buttons, the user can see the common numbers and letters which are on every mobile phone with Arabic letters. These different Arabic signs help in sending SMS (short message service).

Products that are sold to the customers by this group are of different sizes. Phonebook can save upto hundred numbers and the customers can choose between fifteen fixed ring tones and seven variable tones. Customer can also see who has called, what time and from what number.

Extraits

[...] Every customer has a different needs, they can “built their own phone so that it answers to their needs. We must also offer services in Algeria. www-pages give opportunities to customers to get logos, signals and answers to the most common made questions. Customers can also find a link to get contact with sales person fast and easily. Presentation of the Products : Characteristics : ( Name: S 3000 ( Size (millimetres): ( Weight: Objectives: First mobile of the series, this mobile is the most simple, it allows meanwhile to call from everywhere in all the Algeria's network, and also to send SMS. [...]

[...] The climate of instability (political and security) is the principal cause of the lack of foreign investment. Foreign investment is the principal channel of technology transfer and reinforcement of competitiveness. Three factors propel the labour force growth in Algeria: rapid population growth rate; educational expansion; and the participation of women in the labour market. Education has expanded producing graduates that are poorly equipped with modern skills. Enrolment explosion, arabization disputes, poorly trained teachers, and lack of educational materials seriously weaken the educational system. [...]

[...] The FIS was banned and its members were either imprisoned or forced into exile or underground. The interruption of electoral process has resulted in endless conflict, killing over persons in 10 years. The population put their hopes in Bouteflika, who was carried to power by the army in 1999 to restore stability. The president pledged to restore peace, implement deep structural reforms and speed privatisation. In January 2000, the government concluded a "Concorde civil " agreement with the Islamists in order to put an end to hostilities. [...]

[...] Forced or compulsory labour has not been practiced in Algeria and is proscribed by the constitution. The minimum employment age is 16 years and inspectors can enforce the regulation. In practice, many children work part or full time in small private workshops, in family farms and in informal trade. The 1990 law on work relations defines the overall framework for acceptable conditions of work. The law mandates a 40-hour workweek. Employers pay an amount equal to 26 percent of salaries to the government for their workers' social security, workmen's compensation and unemployment disability insurance. [...]

[...] However, there are some inconvenient, like the lost of control on the market, and on the price's product. The firm is really dependent of the agent's performance. When the turnover increases, and when the management has a experience about the country, we can use another form of structure. For Algeria, we choice to settle a subsidiary: We want to create an Algerian society, subsidiary from Sagem France, which will be called Sagem Algeria, because the country's risk in politic is relatively high, and the Algerian laws would be used in case of arbitration. [...]