As an international multimedia group with various business activities in Africa and in Greece, Cyprus, the Netherlands and Asia, Naspers was and still is exposed to a wide range of barriers to enter these markets. Thus, the decision to try and overcome these barriers to entry in the respective markets could have had very serious consequences for the group. However, the diversified nature of the group helps to spread the risk. The board is of the opinion that they would do whatever it takes to enter as many international markets as they could in order to increase the group’s market share.
I’ll discuss some of the barriers that Naspers faced in the past and at present, and certain strategies they used to overcome some of these barriers to market enrty. At present the following major barriers to entry are of great concern to Naspers: Geopolitical or economic instability There is an element of political risk and economic instability in most countries in which the group operates, some higher than others. This is a problem especially in the African countries, where high rates of political instability is at the order of the day.
Whilst this risk is beyond the control of Naspers, care is taken to assess this risk when entering a new market. In addition, the group operates in more than 50 countries across the globe, thereby spreading its exposure. Regulatory disruption The group’s pay-television, internet and other media operations are generally subject to government regulation in many of the countries in which they operate. Delays or failure in obtaining or renewing the necessary regulatory approvals could disrupt the group’s ability to offer its services.
To mitigate against this barrier, the group cooperates, discusses and consults on a continuous basis with the various regulators in the countries in which it operates and endeavours to comply with regulatory terms and conditions. Furthermore, the group actively participates in and contributes to the regulatory processes in the various territories. In addition, some businesses have been developed together with local partners, who are familiar with local market conditions. Epidemics Sars (severe acute respiratory syndrome) is starting to affect businesses in southeast Asia.
A number of counter-measures, which included, amongst others, establishing a remote back-up office to avoid a closedown in the case of the current building being quarantined, were taken. In China, business development has been disrupted as business is now conducted by e-mail, fax and telephone. Physical meetings are difficult to arrange. In some territories, the threat of Sars has significantly reduced the number of tourists visiting that country and as a result, hotel occupancy is extremely low, resulting in a significant number of hotels cancelling their subscriptions to pay-television offerings.
Whilst measures that Naspers has and still is are taking are not foolproof, they will go some way to reduce this risk. Satellite failure Many of the group’s pay-television services are delivered to subscribers via satellite transmission. Satellites are subject to the risk of damage or destruction, which may disrupt the transmission of our services. To reduce this risk, different solutions have been applied depending on the satellite and satellite suppliers. These range from pre-emptible and non-pre-emptible back-up capacity to built-in redundancy.
In the final analysis, it is a business decision weighing up the risk against the cost. Competition and technical innovations The group operates in competitive markets that are subject to rapid technological change that may wrongfoot some or all competitors in a market. To mitigate this market entry barrier, the group works at product innovation and analysing emerging trends, and invests significant resources in developing new products and services. Currency fluctuations
The group’s reporting currency is the South African rand, which has a history of volatility against the US dollar and the euro. The group has substantial input costs denominated in foreign currency. To overcome this barrier, the group has a policy to hedge major outstanding foreign currency denominated contracts by its South African entities. Currency fluctuations will also result in unrealised translation gains or losses arising when reporting the group’s financial results, which will distort financial results.