An Examination of the Effects of Competitive Strategies on Customer Satisfaction in the Zambian Telecommunication Industry ()
1. Introduction and Background
In the ever-changing Zambian telecommunications industry, technological advancement and fierce competition are commonplace. For this reason, it is important to understand how competitive strategies impact customer satisfaction. Zambia’s telecommunications industry has experienced growth and change, characterized by various players entering the market and offering different products and services (Dotzedw, 2023; Zulu, 2023). In this competition, phone companies are forced to find ways to exploit it to keep customers happy. However, the effectiveness of such measures is unclear in many countries. This is the main reason for conducting competitive strategy research on customer satisfaction.
According to Zimba et al. (2021), after changes in 1994 that allowed new players into the Zambian Telecom market, the industry has had great growth and considerable expansion. Since the Zambian government liberalized the telecom sector in 1991, when only the state-owned ZAMTEL, formerly known as the Post and Telecommunications Company, participated, the telecom market in Zambia has grown very competitive (Mambwe, 2015). By 2004, the licensing of CELTEL, now known as AIRTEL, and TELECEL, now known as MTN, allowed different private sector rivals to enter Zambia’s telecom market (Zambia Invest, 2023). The liberalization of the international gateway, the 2009 adoption of the Information and Communications Act, and the partial privatization of the Zambia Telecommunications Company Limited (ZAMTEL) have all contributed to the Zambian telecom industry becoming a lucrative investment sector (Zambia Invest, 2023). As a result, there is fierce rivalry in the market for mobile phone services, and consumer knowledge of brands and service level agreements has improved. AIRTEL has a 47% market share in Zambia’s mobile telecommunications industry, followed by MTN (36%) and ZAMTEL (17%) (Dotzedw, 2023). It is obvious that competitive strategies of many companies are being used to grow market share and attract more consumers, such as SMS marketing, price reductions, discounts, etc. Emerging market countries including those in Africa have experienced very rapid growth in the use of mobile technology. ZICTA (2015) explained that there is an increase in the use of mobile services in Zambia. The report highlighted that MTN was used by 48%, Airtel was used by 37% and Zamtel was used by 15% of the mobile users in the country. In September this year, ZICTA fined three mobile providers (MTN, Airtel, and Zamtel) K5.4 million for failure to adhere to quality-of-service guidelines as a result of customer dissatisfaction (Lusaka Times, 2020). The term “competitive strategy” describes how a corporation competes in a certain industry (Mcgee & Sammut-Bonnici, 2014). How an operational unit inside the corporate body can compete in a certain market is the focus of business strategy. A competitive strategy is basically a plan or pattern that unifies the company’s primary objectives, rules, and operational procedures in order to achieve customer satisfaction.
2. Problem Statement
ZICTA reports indicate that customer complaints regarding service quality and reliability have been on the rise, with fines imposed on major telecom providers like MTN, Airtel, and Zamtel for failing to meet quality-of-service guidelines. Also, MTN was fined K1.2 million for poor service quality resulting from low levels of customer satisfaction. In September 2020, ZICTA fined three mobile providers (MTN, Airtel, and Zamtel) K5.4 million for failure to adhere to quality-of-service guidelines resulting in customer dissatisfaction (Lusaka Times, 2020). Wang & Liang (2020) found that the adoption of competitive strategies significantly improved customer satisfaction in the Chinese telecommunication industry. Similarly, Hasan et al. (2019) found that competitive pricing strategies significantly influence customer satisfaction in the Pakistani telecommunication industry. These studies highlight the need to assess the impact of competitive strategies on customer satisfaction in the Zambian telecommunication industry.
3. Literature Review and Hypotheses Development
The literature review was presented in line with the main concepts of the study.
3.1. The Effect of Market Focus Strategy on Customer Satisfaction
Kapto & Njeru (2014) investigated the strategies adopted by mobile phone companies in Kenya and observed the positive effects of cost leadership, differentiation, and focus strategies on customer satisfaction and competitiveness. The basis for competitive advantage in a focus strategy lies in either lower costs compared to competitors serving a specific market segment or the ability to offer something unique to niche members. A focus strategy centered on low cost relies on the existence of a buyer segment whose needs can be met at a lower cost compared to the broader market, considering their income levels. Conversely, a focus strategy based on differentiation relies on the presence of a buyer segment that seeks unique attributes in services and products. In a focus strategy, a company directs its efforts toward a specific segment of the market (Porter, 1998). Midsize and large companies may employ focus-based strategies, but usually in conjunction with differentiation or cost leadership generic strategies.
H1: There is a significant and positive relationship between market focus strategy and customer satisfaction in the telecommunication sector.
H01: There is no significant and positive relationship between market strategy focus and customer satisfaction in the telecommunication sector.
3.2. The Effect of Differentiation Strategy on Customer Satisfaction
Robinson (2015) reveals the importance of a successful differentiation strategy, which enables a business to offer a product or service perceived as having higher value to buyers at a “differentiation cost” below the “value premium” they are willing to pay. The differentiation strategy, in contrast, aims to develop a service that is perceived as unique and distinct from competitors (Jerab & Maroub, 2023). Successful telecommunication companies employing a differentiation strategy often have access to leading scientific research, highly skilled and creative services and product development teams, strong sales teams capable of effectively communicating the perceived strengths of their offerings, and a corporate reputation for quality and innovation (Dirisu et al., 2013). In contrast, with a differentiation strategy, the unique attributes, perceptions of uniqueness, and characteristics of a company’s services and products, other than cost, provide value to customers. A telecommunication company pursuing differentiation seeks to be unique within the industry along dimensions that are valued by customers.
H2: There is a significant and positive relationship between differentiation strategy and customer satisfaction in the telecommunication sector.
H02: There is no significant and positive relationship between differentiation strategy and customer satisfaction in the telecommunication sector.
3.3. The Effects of Low-Cost Leadership Strategy on Customer Satisfaction
This strategic approach may involve pricing products either at or below the industry average, aiming to secure a profit margin higher than competitors or to expand market share. Furthermore, Lynch (2015) emphasizes that being a cost leader does not invariably translate to offering products at lower prices; firms may opt to charge average prices while pursuing a low-cost leadership strategy, reinvesting surplus profits into the business for further growth. Success in this strategic approach can be achieved through various means, including targeting cost-conscious customers, standardizing service offerings, minimizing the personal aspect of service delivery, reducing network costs, and optimizing operational efficiency through segmentation of services (Köseoglu et al., 2013). Cost leadership, also known as the low-cost strategy, involves offering products or services to consumers at a relatively lower price compared to competitors, thus increasing sales and market share. The company’s size plays a significant role in reducing costs through economies of scale, cost control measures, operational efficiency, and network establishment (Ngugi & Murugi, 2022; Uchenna & Audu, 2022). The blue ocean strategy, which is rooted in cost leadership, emphasizes delivering high-value offerings to customers at a low price and meeting emerging needs through value innovation, ultimately reducing costs and increasing productivity (Naeem et al., 2022). Maulana et al. (2021) emphasized that the cost leadership strategy revolves around producing standardized products at a comparatively low cost for customers. As price-sensitive customers opt for lower-priced products, the organization’s market share increases.
4. Theoretical Framework
The theoretical framework comprised two main theories: the resource-based view and Porter’s Five Forces model.
4.1. Resource Based View Theory
Organizations possessing unique, non-imitable, valuable, and irreplaceable resources can leverage them to gain a distinctive advantage, rendering competition irrelevant through cost leadership. The Resource-Based View (RBV) theory emphasizes leveraging internal resources and capabilities to achieve sustainable competitive advantage. According to RBV, firms gain a competitive advantage by possessing valuable, rare, and difficult-to-imitate resources and capabilities (Kostopoulos et al., 2011). Figure 1 below shows the Resource Based view diagram for ease of understanding.
Figure 1. Resource Based View Diagram.
4.2. Porter’s Five Forces Model
Porter’s Generic Strategies, comprising Cost Leadership, Differentiation, and Focus strategies, provide a framework for firms to achieve competitive advantage within their industry (Kuratko, 2016). In the context of the Zambian telecommunication industry, telecom operators may adopt Cost Leadership by minimising operational costs and offering mobile phone services at competitive prices. Hereby, the Five Forces Model and Porter’s leadership strategies provide a useful framework for assessing the impact of competitive strategies on customer satisfaction in the Zambian telecommunication industry. Figure 2 below illustrates the Porters five forces Model.
Figure 2. Schematic diagrams for the Porters five forces Model.
5. Methodology
The research methodology presented the research design, approach, population, sampling design, methods of data analysis and ethical considerations.
5.1. Conceptual Framework
The conceptual framework of this study demonstrates the independent variables in this study are cost leadership, focus and differentiation strategies. The conceptual framework illustrating the relationships between variables is shown in Figure 3.
Figure 3. Conceptual framework model.
5.2. Research Design and Approach
The study adopted a descriptive research design with a quantitative approach. Saunders, Lewis, & Thornhill (2007) defines quantitative as any data collection technique (such as a questionnaire) or data analysis approach (such as graphs or statistics) that creates or utilizes numerical data, defining the nature of the research topic.
5.3. Population and Sampling Design
In attitude surveys, population validity is of extreme importance; therefore, great care should be taken to obtain a representative sample in order to prevent a biased result (Wellman & Kruger, 2005). The study population consisted of MTN, ZAMTEL and Airtel customers who are students of three public universities in Zambia, which are University of Zambia (UNZA), Copperbelt University (CBU) and Mulungushi University (MU). A simple random sampling was used for this study. For this investigation, simple random sampling was used because selection is completely free of bias and prejudice and is representative of the population. The sample size of the study was determined using Yamane (1967). The Yumane formula provides a straightforward method for estimating the appropriate sample size based on the size of the population and the desired level of confidence. It is particularly useful when conducting surveys or studies where the population size is relatively large and a representative sample is needed (Kothari, 2004). Thus,
n = N/(1 N e2), where, n is the sample size,
N is the population which is 54,900 and
e is the margin of error.
Therefore,
n= 54,900/(1 + 54,900*(0.052)) = 397 students.
To ensure the validity of the investigation, convenience sampling was used to identify respondents. Convenience sampling involves selecting participants based on their easy accessibility and availability to the researcher (Trochim & Donnelly, 2008). In the context of studying telecommunications customers, convenience sampling involved approaching individuals who are readily accessible by visiting the three universities.
5.4. Research Questions
The researcher used the following research questions:
1) What is the effect of market focus strategy on customer satisfaction of students with mobile money phone services?
2) What is the effect of differentiation strategy on customer satisfaction of students with mobile money phone services?
3) What is the effect of a low-cost strategy on student customer satisfaction with mobile money phone services?
4) What are the measures for improving customer satisfaction by using competitive strategies in the Zambian Telecommunication industry on mobile network services?
5.5. Data Collection and Analysis
The questionnaire design focused on creating questions that are valid and reliable, aligning with research objectives. As emphasized by Wegner (2010), a well-designed questionnaire ensures that research inquiries are accurately addressed, facilitating the collection of relevant data for statistical analysis.
Validity and Reliability of the Data Collection Instrument
To evaluate the internal consistency of the questionnaire’s factors, the Cronbach’s alpha test was utilized. This metric is widely recognized for assessing reliability within research instruments.
6. Data Analysis
Data analysis was conducted using the Statistical Package for Social Sciences (SPSS). The collected data underwent coding and entry into SPSS for analysis. Prior to analysis, preliminary tests including factor analysis and normality checks were performed. Overall, the findings indicated reliable data (Cronbach’s alpha values > 0.7) and a normal distribution. Analysis techniques encompassed descriptive, correlation, and regression analyses.
6.1. Results
The sample size was projected to be 397 respondents, however, a total of 223 replies.
The initial projection aimed for a sample size of 397 respondents, yet only 223 replies were obtained, resulting in a 56% response rate. This aligns with the acceptable response rate threshold of 50% outlined by Customer Thermometer (2024).
The descriptive analysis revealed skewness values ranging from −1.011 to −0.640 and Kurtosis values from -0.615 to 0.782, as illustrated in Table 1.
Table 1. Descriptive statistics.
|
Mean c |
Std. Dev |
Skewness |
Kurtosis |
Cost Leadership Strategy |
3.6626 |
1.03415 |
−0.640 |
−0.251 |
Differentiation Strategy |
3.9933 |
0.86600 |
−1.011 |
0.782 |
Focus Strategy |
3.8374 |
1.00600 |
−0.782 |
−0.399 |
Customer Satisfaction |
3.8307 |
1.02595 |
−0.703 |
−0.615 |
Valid N (listwise) |
|
|
|
|
6.1.1. Correlation Analysis
Cohen’s estimation of correlation coefficients, as referenced from Sullivan et al. (2012), denotes the magnitude of effect sizes, categorized as small, medium, and large.
In Table 2, Customer Satisfaction demonstrates positive and significant correlations with Cost Leadership Strategy (r = 0.628, p < 0.05), Differentiation Strategy (r = 0.355, p < 0.05), and Focus Strategy (r = 0.340, p < 0.05).
Table 2. Correlation analysis.
|
1 |
2 |
3 |
4 |
1. Customer Satisfaction |
1 |
|
|
|
2. Cost Leadership Strategy |
0.628** |
1 |
|
|
3. Differentiation Strategy |
0.355** |
0.324** |
1 |
|
4. Focus Strategy |
0.340** |
0.268** |
0.278** |
1 |
**. Correlation is significant at the 0.01 level (2-tailed).
6.1.2. Regression Analysis
The regression analysis in Table 3 indicates that all explanatory variables—Cost Leadership Strategy (B = 0.535, p < 0.05), Differentiation Strategy (B = 0.153, p < 0.05), and Focus Strategy (B = 0.166, p < 0.05)—positively and significantly influence customer satisfaction.
6.1.3. Summary of Hypotheses
Table 4 confirms the support for all formulated hypotheses regarding the significant effects of cost leadership, differentiation, and focus strategies on customer satisfaction.
Table 3. Regression analysis.
Model |
β Coefficients |
Std. Error |
t |
Sig. |
VIF |
2 |
(Constant) |
0.409 |
0.377 |
1.085 |
0.279 |
|
Cost Leadership Strategy |
0.535 |
0.054 |
9.993 |
0.000 |
1.174 |
Differentiation Strategy |
0.153 |
0.064 |
2.389 |
0.018 |
1.174 |
Focus Strategy |
0.166 |
0.054 |
3.066 |
0.002 |
1.134 |
Table 4. Hypotheses testing.
HYPOTHESES |
SUPPORTED <0.05 (YES/NO) |
H1: Cost leadership strategy has got a significant effect on customer satisfaction in the telecommunication industry. |
YES |
H2: Differentiation Strategy has got a significant effect on Customer satisfaction in the telecommunication industry. |
YES |
H3: Focus strategy has got a significant effect on Customer Satisfaction in the telecommunication industry. |
YES |
When companies effectively implement cost leadership strategies, customers perceive greater value in their purchases, leading to increased satisfaction. This study supports the efficacy of cost leadership in enhancing customer satisfaction and gaining a competitive advantage. Similarly, Differentiation Strategy positively impacts customer satisfaction by offering unique products or services, distinguishing a company from competitors. Investing in differentiation aligns with scholarly insights, indicating increased satisfaction levels.
The study’s findings correlate with Porter’s framework, demonstrating that differentiation strategy fosters higher customer satisfaction and competitive edge. By tailoring offerings to meet specific market segment needs, businesses ensure customer satisfaction and gain a competitive advantage. Additionally, focus strategies enhance customer satisfaction by aligning offerings with target customer preferences, making it challenging for competitors to replicate.
The study’s insights on focus strategy align with Kogo & Kimencu (2018)’s framework, emphasizing the creation of value propositions tailored to specific customer segments. Various theoretical perspectives in strategic management and marketing support these findings, providing frameworks for understanding how firms drive satisfaction and competitive advantage.
7. Conclusion
The study underscores the positive impact of implementing a market-focused strategy on the customer satisfaction of students using mobile money services. It suggests that targeting specific market segments, like students, effectively enhances customer satisfaction. Moreover, the research highlights the significant positive influence of differentiation strategy on student customer satisfaction with mobile money services. Additionally, the study identifies a notable positive effect of a low-cost strategy on student satisfaction with mobile money services. These findings emphasize the effectiveness of market focus, differentiation, and low-cost strategies in improving customer satisfaction among students using mobile money services.
8. Recommendations
Identify aspects of differentiation that align with student preferences and dedicate resources to research and development for creating innovative service features that meet their changing requirements. Clearly communicate the uniqueness of these offerings to ensure students understand their value. Continuously monitor competitors’ offerings to stay ahead in the market. Actively seek feedback from students to understand their perception of the differentiated features and improve satisfaction accordingly.
9. Areas of Future Research
i) The role of technology in competitive strategies: With the increasing adoption of technology in the telecommunication industry, it would be interesting to investigate the role of technology in competitive strategies. For instance, how can firms leverage technology to improve customer satisfaction, and how do different technology-driven strategies affect customer satisfaction?
ii) The impact of cultural differences on customer satisfaction: Zambia is a diverse country with various ethnic groups, and it would be interesting to investigate how cultural differences impact customer satisfaction in the telecommunication industry. For instance, how do different cultural groups perceive competitive strategies, and are there specific strategies that are more effective in different cultural contexts?
iii) The impact of customer engagement on customer satisfaction: Customer engagement is an important aspect of building customer loyalty and satisfaction. Therefore, it would be interesting to investigate how different competitive strategies impact customer engagement and how customer engagement, in turn, affects customer satisfaction.
In conclusion, further study in these areas would provide valuable insights into the complex relationship between competitive strategies and customer satisfaction in the Zambian telecommunication industry.
Acknowledgements
The author expresses gratitude to the University of Zambia, Graduate School of Business Studies Lecturers and staff for their support and guidance throughout the research journey.
The author further acknowledges support from research participants and Zamtel for the support rendered.