AIRTEL GLOBAL EXPANSION IN

MYANMAR
Submitted to: Prof. Kshitij Awasthi

Group 5
1 WMP09063 Akhilesh Shukla
2 WMP10056 Anubhav Jain
3 WMP11072 Mangal Dev Singh
Contents
Introduction .................................................................................................................................................. 2
Country Analysis - Macroeconomic .............................................................................................................. 2
Growth Performance ................................................................................................................................ 2
Inflation and Unemployment.................................................................................................................... 3
Monetary Indicators - Interest Rate, Broad Money & Exchange rate ...................................................... 4
Myanmar Trade and Global connect ........................................................................................................ 4
PESTEL Analysis ............................................................................................................................................. 5
Political Environment ................................................................................................................................ 5
Economic Environment ............................................................................................................................. 5
Social and Cultural Environment............................................................................................................... 6
Technological Environment ...................................................................................................................... 6
AAA Framework Analysis .............................................................................................................................. 7
AAA framework explained ........................................................................................................................ 7
Apply AAA Framework .............................................................................................................................. 7
CAGE Framework Analysis ............................................................................................................................ 8
Recommendation.......................................................................................................................................... 9
References .................................................................................................................................................. 10
Introduction
For every company, building and maintaining a local customer base is one of the first steps on the road to
success. Once they have achieved this goal, they are ready to take on the next step: expanding
internationally. Becoming a global company is an impressive feat, and not every business that sets out to
do it accomplishes the goal. To successfully convert your business from domestic to international, you'll
need to consider a new set of factors that might not necessarily affect being a domestic only company.
Creating a strong international presence is rarely as simple as telling your customers you ship overseas
and then waiting for the sales to roll in. There are numerous things to think about when selling and
marketing in another country, and these factors must be considered carefully.

In this project report we will be analyzing whether Airtel should expand internationally in Myanmar. We
will try applying learnings from class and will be formulating international expansion strategy for Airtel in
Myanmar. We begin with PESTEL analysis understanding the business environment, next apply CAGE
framework to understand distances among the business. At last we close the project report by applying
AAA framework.

Country Analysis - Macroeconomic

As part of Myanmars macroeconomics performance analysis, GDP, Inflation numbers, unemployment,

Exchange rate and industrial production indices have been analyzed to establish long term economic
potential of Myanmar.

Growth Performance
The GDP at constant prices for FY16 stands at 44,915 billion kyats1. This corresponds to 6.30% growth over
FY15 (Base 2000). It is projected that the GDP will continue to grow at a rate of 6.8% to 7.1% for the next
5 years1. Though these numbers are too good to be true compared that Myanmars strong neighbors like
China & India are struggling to provide similar GDP growths, however low baseline number to start with
will make these numbers sound reasonable. GDP growth is coupled with high Current account deficit of
avg. 4.5% for the next 5 years (Fig. 1). Gross Debt as % of GDP has shown a declining trend and is expected
to stabilize at 42 -43% which is reasonable compared to 62.3% in 2007. Also promising is that it is expected
that the growth in the central government revenue which has seen a significant jump in 2012 will be
maintained at this level for the coming years. Consistent increase in Investment has been able to offset
increasing difference in net imports and exports and has helped in maintaining almost constant GDP
growth rates (Fig 2). 20132016 forecasted numbers are as published by IMF1.
 Fig 1. % GDP change (constant price)
vs. CAB% change1

Fig 2. % GDP change (constant

price), Total Investment (%of GDP),
Government Revenue (%of GDP)
and Gross Debt %of GDP) 1

Inflation and Unemployment

Myanmar had encountered hyperinflation during period of FY2003 (inflation 58%) and FY2007 (inflation-
30.9%) which had moderated over the period and was reported at 2.8% in FY12 and is expected to stay
between 5-6.3% for the next 5 years. Last reported inflation in Nov 2013 was at 7.33% which is a reason
of concern considering that the low FY2012 inflation number, this increase in inflation has been attributed
to increase strength of Kyat against dollar which has appreciated by almost 10% since 2012. FY 2003
corresponds to major banking crisis faced by Myanmar which resulted in almost complete failure of
Myanmar economy. The published unemployment % has been remarkably low considering periods of high
inflation in 2007. Unofficial unemployment % has been reported much higher and the sanctity of some of
these numbers reported by Myanmar statistical organization is questionable. Unemployment numbers
from 2007 -2012 are from CIA handbook, while projections are as per IMF (Fig. 3).
 Fig 3. % GDP change (constant
price) Vs. % Inflation &
Unemployment rate1,6

Monetary Indicators - Interest Rate, Broad Money & Exchange rate

Myanmar banking system has been undergoing a major transformation since 2011, when the first
democratically elected government came into power. Prior to April 2012, Myanmar was following a non-
floating exchange rate and exchange rates was fixed to the International Monetary Fund's drawing rights
at 6.4 kyat per dollar, a rate only available to state-owned companies. In reality the exchange rate in the
black market was running close to 800-820 kyat to a $. It was in April 2012, where the CBM went ahead
with the floating of kyat, this was followed by complete independence for Central bank in July 2013, to
set up key monetary policy without any interference from government. CBM uses the interest rates as
one of the main monetary policy instrument and have been working to bring down overall high interest
regime (peak interest rate of 17%) over a period of time. The current lending rates are around 13%, with
savings rates at 8% which are planned to be brought down further in the coming years to 6% and then
4%. As one can see from the Fig. 6, CBM has been very active in trying to stabilize Kyat in the forex market
so as to avoid negative impact of currency depreciation on Imports and Current account deficit. Also CBM
has been able to limit the funding for Government over the last few years and have been able to add that
credit to the economy as well as helped in increase of Broad money in the economy. Private sector credit
and broad money are growing rapidly at 48 and 58% (YOY) respectively.

Myanmar Trade and Global connect

Myanmar has been classified as one of the least developed country because of its GDP per capita being
below $1035, by World Bank. Agriculture sector remains the main contributor to GDP, however the same
is not true when it comes to export share. At one time Myanmar was the largest exporter of rice to the
world, but that is not the case anymore. Being one of the countries with large Natural Gas reserve,
Myanmar has become a major exporter of Natural gas (a large share of government revenue is directly or
indirectly related to natural gas- export share of around 46%), and this has helped country to bring in the
most needed US dollars. Also with Democratic reforms starting 2011 and floating of kyat in April 2012,
there has been an increased inflow of FDI investment into the country since 2011 such that the current
account deficit is largely financed by FDI inflows. Relaxation of sanctions against Myanmar has helped in
both increase in Export and Imports (Machinery, transport equipment and Crude oil) into Myanmar, with
China being the largest import partner (37%) and Thailand as largest export partner (40.7%).
PESTEL Analysis
Political Environment
Myanmar has been ruled by a military backed Government for more than 50 years than 50 years, resulting
in a very complex political structure. 2015 elections marked a great step in the history of Myanmar, as it
moved from decades of military rule towards democracy.

Political Background

Even the current form of democracy has 25% seat reserved for military, which still provides a strong
influence on the overall decision making. Move by Myanmar towards Democracy and better Human rights
have helped it to become part of Global community (part of ASEAN), as well has prompted US, EU and
Australia to remove sanctions against the country. The country is also marred from ethnic uncertainty and
riots/insurgencies at the border. This is again a political area that needs to be resolved to achieve a long
term solution and stability needed for future business growth across the country.

Economic Environment
Myanmar (Burma) was the center of WWII war between UK and Japan, which lead not only to widespread
destruction of Burma, but also completely destroyed Burmas economic engine. Myanmar did well post
WWII to rebound back from the destruction, even in with all insurgencies. They established a close ties
and working relationship with their neighbors and played dominant role in UN during this period. 1962,
was a turning point not only from political point of view but also the economic point of view, where
Myanmar moved from a federal structure to a socialist structure which resulted in nationalization of all
national assets and a move towards a close economy.
 Economic Environment

It reached the lowest point when UN declared Myanmar as a least developed country in 1987. During this
period Myanmar witnessed hyperinflation (~30% avg.) and with steep currency devaluation which was caused
by the closed economy during Juntas 50-year rule. With reforms in place since 2007 onwards, things have
started to look up, with FDI inflows, strengthening of kyat and opening of banking and investment policy. GDP
growth of 6-7% is expected in the years to follow. Myanmars current GDP is mostly derived from agriculture,
forestry, fisheries and livestock, but Myanmars GDP can be jump started with the help of labor-intensive
manufacturing.

Social and Cultural Environment

Myanmar is located between India and China as well as other key South Asian countries; hence Myanmar
can play a very important role in the multilateral trade in this region. Also with its 60 million population it
provides a strong consumer base which is now available to foreign companies with the opening up of the
economy. With its strong agriculture sector, abundant Natural Gas, Gemstone mines and long cost with
fisheries industry, Myanmar has all the potential to be an economically successful nation. For most of its
independent years, the country has been seen rampant ethnic strife and a countless Burma's ethnic
groups have been involved in one of the world's longest-running unresolved civil wars, resolution to the
same will be important to provide sustainable and inclusive development across Myanmar. Also due to long
term neglect of its people, Myanmar will be required to invest heavily in social and development
infrastructure, education to skill its young population on modern technology. Road, port and railway
infrastructure will require significant investment to attract more FDI.

Technological Environment
The technological environment is comparatively poorer in comparison to other Asian countries. The
internet is censored and there is very less autonomy to access and post internet blogs or any other
material. The countrys focus towards technological advancement is improving and will improve in years
to come. There are 101 universities and total of 146 higher education institutes in Myanmar.

Myanmar government is fulfilling its technological necessities by importing products from China, India,
Russia and Ukraine. There is huge investment from Indian companies in the area of oil and gas exploration,
IT, hydro-power, and construction of ports and buildings which has benefited the country enormously.
The country is also building a nuclear power reactor with help of Russia to fulfill its current & future energy
needs.

AAA Framework Analysis

AAA framework explained
AAA framework is used extensively for formulating global strategies. It comprises of aggregation, as
provided by domestic production; adaptation, or the localization of products for local markets; and
arbitrage, which leverages distance.

The horizontal axis balances adaptation and aggregation. Adaptation refers to the localization of products
and services provided to a domestic market that reflects the needs of that market. Aggregation refers to
providing standardized global products for common needs in varying overseas markets. Both adaptation
and aggregation are parameters determined by global market characteristics; as the level of adaptation
increases, a product will be more accepted by local markets, but will result in an increase in development
costs, consequently, nullifying economies of scale for global markets. Companies must find the ideal
balance in terms of national and regional market differences as well as in the size of local markets.
Arbitrage is presented as the vertical axis. Adaptation and aggregation form the dimension that
determines the extent to which distances in global businesses can be diminished, while arbitrage derives
the value out of these distances. Typical arbitrage strategy within global businesses can be seen in local
production that exploits wage differences.

Apply AAA Framework

Telecommunications and Internet access are expected to become more widespread within Myanmar as
the government seeks to develop its information and communications infrastructure. The country has a
low mobile penetration rate of just 1.5% (around 800,000 subscribers), and an Internet penetration rate
 of 0.2%14. The Ministry of Communications, Post & Telegraphs has indicated plans to release more
telecommunications licenses for both domestic and foreign investors. AAA Analysis

Aggregation Both India and Myanmar provide the firm to achieve economies of scale by acting
as an Asia hub to serve large market.
Adaptation Basic mobile communication calling and Internet/Data services are standard and
will not require adaptation. Although, Value Added Services (VAS) must be highly localized
otherwise customer will not find them useful.
Arbitrage Indian and Myanmar both have access to cheap labor but in terms of technical
excellence needed, India will have a better skill set, thus arbitrage possibility seems less possible.

CAGE Framework Analysis

The cultural, administrative, geographic and economic (CAGE) distance framework helps managers
identify and assess the impact of distance on various industries. It also helps to understand the pattern
of trade, capital, information and people flows.

Geographic
Cultural Distance Administrative Distance Economic Distance
Distance

Language issues Both countries were Countries share Developing

English is not fully ruled by British, so huge border area country
accepted administrative of 1600 km Differences in cost
Buddhism is followed, structures are similar Differences in or quality of
which originated in ASEAN- India free time zones is natural resources,
Attributes India and is widely trade area (AIFTA) is minimal (1 hr. financial
creating followed free trade area difference) resources, human
distance
Lack of trust between countries Differences in resources,
Different ethnicities; Lack of common climates / disease infrastructure,
India - information or
lack of connective currency environments is
Myanmar knowledge is High
ethnic or social Myanmar has been very low
networks under military rule and
Similarity in values as generally govt. is
religion is followed hostile towards its
widely in both countries citizens
Low - medium low Government Different signal Demand for tele
linguistic content involvement is high and spectrum players is
Industry Very low effect of and networks are frequencies make expected to grow
censored it impossible carry as economy is
or Product cultural or national
High investment is the same growing
affected identity
by required for setting products Economic of scale
Product feature remains network infrastructure Investment in and
distance
similar with exception of services is high, standardization is
rentals as local required
 supervision is Distribution of
required business and
Weak requirement would
transportation or be similar
communication
links is high

Recommendation

Based on analysis from above frameworks, our group recommendation for Airtel is that it should expand
in Myanmar as market potential is very high. To being with it should start with basic communication
services as that will enable Airtel put a foot in the door and then as they better understand the market
start offering localized VAS products.
References
1. Going Global: How to Expand Your Business Internationally -
http://www.businessnewsdaily.com/8211-expand-business-internationally.html accessed on 30
May 2017.
2. Management Strategies for Global Businesses -
https://link.springer.com/chapter/10.1007/978-4-431-55468-4_2/fulltext.html accessed on 30
May 2017
3. http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/weoselgr.aspx accessed on 30
May 2017
4. http://www.economywatch.com/economic-statistics/country/Myanmar/ accessed on 30 May
2017

5. http://www.xe.com/currencycharts/?from=USD&to=MMK&view=2Y accessed on 30 May 2017

6. http://www.worldbank.org/content/dam/Worldbank/document/EAP/Myanmar/Myanmar_Eco
nomic_Monitor_October_2013.pdf accessed on 30 May 2017
7. https://www.cia.gov/library/publications/the-world-
factbook/geos/print/country/countrypdf_bm.pdf accessed on 30 May 2017