Lessons for Econet from Starbucks

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By Hillary M Chindodo on July 26, 2013. No Comments

Econet-WirelessTHE war which has erupted between Zimbabwe’s leading mobile phone operators Econet Wireless and Telecel over the former’s move to disconnect the latter because it is “unlicensed” thus legally obliged to do so has split opinion in the country.

In a statement released on Thursday, Econet cited a case going back to 1996 where a High Court judge ruled that Telecel’s licence was invalid. A subsequent appeal to the Supreme Court by Telecel was never pursued. This, according to Econet, means that Telecel have been operating without a licence and their own licence, renewed on 10 July 2013, makes it illegal for them to be connected to an unlicensed operator.

Legally, Econet may have a solid argument which could stand the test of any court in any land. The matter however from a business perspective will not be judged by customers based on legal facts but rather on ethical and moral grounds. Corporate ethical behaviour and morality have in recent years climbed up the ladder of key issues that make a business successful as consumers continue to raise their service delivery expectations and become more aware of their rights.

In recent months, global corporate entities like Starbucks and Google have found themselves in a spot of bother after discoveries that they had “legally” paid less tax or none in the United Kingdom. Starbucks used elaborate vertically integrated supply chain relationships with subsidiaries that made it possible for them to legally pay little or no corporate tax in the UK.

The news of Starbucks’ tax position sparked anger among UK citizens which led to consumers abandoning the United States coffee chain in their numbers. The greatest beneficiary of this consumer flight was Starbucks’ rival Costa Coffee whose sales jumped 7% immediately.

There are lessons that Econet could draw from the Starbucks consumer backlash. One of those lessons is that in the present age of social media and rapid communication, emotions can easily be virally spread against a business at such a speed that no resources deployed will be able to counter the negative vibe created. In their debacle against Telecel, Econet might soon find out that consumers are not concerned about the legal matters surrounding their rival more than their ability to contact their loved ones.

Zimbabwe is a nation of on-the-go informal traders whose livelihoods depend on their ability to communicate through mobile phones. A lot of business in the informal sector happens on the mobile phone and the move by Econet, whatever the merits, will be extremely disruptive, with huge knock-on effects on the economy.

As Starbucks found out, consumers are more concerned with the morality of a business’s actions than what it is legally allowed to do. Econet carries a lot of sympathy from the days its founder fought a determined government to acquire an operating licence. That goodwill will however wane should the consumer feel that their sympathy is being taken for granted. Econet owes it to its customers to do what is morally right.