The Kenyan ICT Sector
The profound statistical research suggests that African countries have recorded huge growth rates in computer, mobile and internet data usage. Particularly in Kenya, the sector is bound to grow further in the three product categories: mobile phone production and distribution, computer distribution and Internet service provision. The number of mobile internet users has more than doubled since 2000. Thus, venturing into the digital market is a great business opportunity. The current project attempts to recommend the three top product categories by using economical and statistical data. Based on the available data, one of the products is strongly recommended as having the highest probability of success due its underlying subtle factors.
The Kenyan Information Communication Technology (ICT) Sector
Mobile Phone Production and Usage
The number of Kenyans using mobile phones has more than doubled for the first decade of the 21st century. The phenomenon is derived from ICT statistics from World Bank between the years 2004 and 2009 (“Development Global Trends” 217; “Developing Extending Reach” 230). The reports claim that the population had grown from 31 million to 38 million by 2007, while the number of installed telephone lines per 100 Kenyans had reduced from 0.9 to 0.7 (”Developing Extending Reach” 230). The number marks a decrease of about 20 telephone lines per 1000 Kenyans. The change saw a profound reduction in telephone landline usage, which was a major factor leading to the widespread mobile phone usage. Thus, the World Bank reported a mobile phone subscription growth of 29.8 per 100 Kenyans for the same period of seven years.
Although the gross national income (GNI) for mobile phone distributors in Kenya improved by 20$ per capita (generating revenues of up to 6.1% of the Gross Domestic Product), the performance of the telephone landline sector was bound to decrease over the same period. The mobile phones sector achieved the excellent growth because the government policy allowed privatization of the telecommunications sector under an independent regulator.
The number of Kenyans buying and gaining access to computers also increased over the same period of seven years as reported by World Bank. The number of personal computers grew from 0.5 per 100 Kenyans in 2000 to 1.4 per 100 Kenyans in 2007. Moreover, the integration of computers courses into local colleges and universities contributed to the computer popularity growth. Therefore, by the time the first generation of the first decade becomes mature to seek employment, most of them shall be computer literate or will have had an opportunity to interact and learn the basics of computer usage.
In the product category, Internet usage by Kenyans has grown by approximately 400% between 2000 and 2007 (from 0.1 per 100 Kenyans in 2000 to 0.5 by 2007). The ratio means that the Internet usage has more than doubled over the past decade in Kenya. More recent information, as reported by Kenya Communications Authority (KCA), shows that current Internet usage as of April 2015 is at 64.3% (IT News Africa). The growth is approximately 543% when compared to Internet usage in 2000. Moreover, it is even projected to grow faster, as more Kenyans in the rural areas get access to smartphones. However, with a population of approximately 41 million, only 9.7% are reported to be using the Internet (Internetworldstats.com). Furthermore, online companies such as Facebook are also seeking to tap into the potential in order to anchor them as they seek to expand into other countries in the East African region (Okuttah, n.p.).
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Form the statistics provided in the foregoing discussions, it is predictable that venturing into mobile phone and computer production and distribution is a lucrative strategy. As the Kenyan ICT sector continues to achieve more competition due to its privatization, the spread of Internet usage is expected to increase profoundly to cover the rural areas. The probability of the change happening is placed at 90.3% (100%-9.7%). However, the growth is possible if the current stable political atmosphere remains constant. Nevertheless, since big companies such as Facebook are introducing their Internet services in Kenya, it indicates that the country is more than likely to remain stable for the next years (Okuttah, n.p.).
Currently, most Kenyans prefer the use of smart phones to access the Internet. The best mobile phones to sell in the market should be at an affordable range of between $10 and $100 (approximately Ksh 1000 and Ksh 10000). The price strategy shall ensure that the phones are affordable to low income Kenyans that form the bulk of people not able to access the Internet today. Furthermore, computers such as laptops are too expensive (averaging from $400 to $1500 depending on the brand) to most average income Kenyans. Also, most citizens prefer to use Internet cafes to access the web. Thus, the distribution of cheap, trustworthy and warranted smart phones will easily gain ground and favor as more Kenyans seek a cheaper way to access the Internet.
However, the manufacture and distribution of computers may not be inhibited by the factor of affordability for long. As the GNI and GDP of Kenya continuous to grow, more Kenyans may be able to buy and use computers. Furthermore, the introduction of computer-related courses into local colleges and universities means that the workforce to be employed in the manufacturing of computers will increase, thus, lowering labor costs potentially. By bringing manufacturing into the Kenyan market, computers shall be close to where the demand is high. Thus, the strategy will lower their costs further to a price that can be compared to smart phones. Moreover, levied costs such as custom duties will not be incurred. The low costs are bound to improve overall industrial income and contribute to the market expansion and growth.
The Best Product Category
Of the three product categories chosen, the most recommended and profound one is the offering of Internet services to users of smart phones and computers. The supporting argument is that, even though margin limitations may decrease the investor’s ability to initiate all the three products simultaneously, starting from Internet provision services will increase the mobile and computer sectors. As investors diversify into the smart phone and computer sectors, the Internet service providers are bound to benefit from the growth of both sectors. Furthermore, the prospects of Internet provision are beneficial, since subscription comes in renewable data bundles. The subscriptions can be set at a standard range of daily, weekly or monthly update and shall ensure the constant generation of income. The option differs from the phone and computer sector, since their mode of sales does not include renewable subscriptions.
Finally, the demand for Internet services is bound to remain constant throughout time and its potential to generate revenue shall observe minimal fluctuations when compared to the other two product categories. The sale of computers and phones is a tangible business susceptible to breakups, recalls and theft. People do not buy the products on a daily, weekly or monthly basis. By using megabytes to quantify Internet data, Internet provision shall provide revenue throughout the month depending on the number of Internet subscribers. In the Kenyan scenario, the number is growing based on the increasing number of Kenyans beginning to use smart phones to access the Internet. For instance, an investor can consider pegging 1 megabyte to have a value of $0.011, which is the most affordable price and considered cheap according to low income households. If 9.7% of Kenyans shall subscribe to the service per day, revenues of up to $33, 000 can be generated in one day. The calculations translate to approximately $1 million in one month. Therefore, the product category is a very lucrative undertaking for any investor.
To recapitulate on the foregoing data, discussions and recommendations, the ICT sector in Kenya is indeed growing at a tremendous rate, tripling in less than a decade. The three most attractive product categories selected include: mobile phone manufacture and distribution, computer distribution and Internet service provision. Of the three, the most lucrative is the provision of Internet services, as the sector gives the investor an opportunity to tap into the growth of the other two product ventures, especially when their margin is limited. Furthermore, unlike the other two categories, Internet provision is likely to ensure the constant generation of revenue and profits throughout the month. The reason is that companies can use megabytes as data measurement units when users browse, download and upload data onto the Internet. Thus, the Kenyan culture is geared towards embracing modern technologies at a very fast rate.
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However, the other two products possess a future potential of growth. Since only about 9.7% of Kenyans can access the Internet, it simply means that the mobile and computer market’s potential has not been fully tapped. It has a potential to grow even further if cheaper smartphones and computers are manufactured and sold within the Kenyan market. By lowering the costs of laptops from the current market values of between $400 and $1000 to around $100 to $200 dollars, as in the case of mobile phones, more Kenyans can be able to buy the gadgets. Thus, their Internet usage potential shall increase profoundly.