market entry & expansion strategies for africa: factors for consideration - eugene nizeyimana
TRANSCRIPT
Market Entry & Growth Strategies for Africa: Factors for Consideration
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Eugene NizeyimanaCOO, Sub-Saharan Consulting Group (SSCG)
January 2013
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Key Issues
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1. Africa Market Attractiveness: Economic context, characteristics, opportunities and risks
2. Strategizing for New Market Penetration and Growth
3. Core drivers for market selection
4. Factors to consider when choosing local partners
5. Growth strategies and partnerships for consideration
6. How to boost organisation client base, operation and capital position
7. Key success factors for market entry
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Africa Economy at a Glance: Market Context, Characteristics, Opportunities and Risks
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Market Attractiveness: Investment Opportunities in Africa
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Source: World Bank 2012
+1.2 Billions Population
+$1.8 Trillion Africa’s collective GDP in 2013
+100 Billions Foreign inward direct investment in
Africa in 2013
6% Sub-Saharan African countries average GDP growth
+800 Millions Mobile subscribers and World's fastest
growing region in terms of M-banking.
54 Countries
Economic Growth and Market Characteristics
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• Opportunities and risks
• While the continent’s sheer size would merit
attention, Africa offers much more than
resources alone
• Since 2000, consumer spending growth of 4%
per year, to reach $1 trillion in 2020
• Home to 6 of the 10 fastest growing markets
• Economic growth prediction – between 5%and
8% in 2013 and coming years
• Millions of Africans are finding a path from
poverty to greater opportunities and prosperity.
• 1.2 billion people – cheap labour force
• Rapidly improving income levels, infrastructure,
and business environments
• Continued discovery of new resources
• Regulatory and policies changes
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Market Entry & Growth Strategies: Strengthening Organisation Corporate Landscape, Operations, Customer Base and Capital Position in Africa
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Strategizing for New Market Penetration and Growth: Core Factors for Considerations
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• New market role in the broader corporate strategy
• Strategic positioning – Capital and corporate
• Increase share and long term profitable growth
• Optimize product portfolio
• Enhance corporate capabilities
• Achieve operational effectiveness
• Improve customer base
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Market Selection: Key Factors for Consideration
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• Market size - exposure to a broader range of large and small markets.
• Barriers to entry
• Political stability and security
• Economic stability and GDP Growth-growth rates, incomes, costs, resources, interest rates and inflation
• Geographic borders - remoteness, size of country, population and climate
• Business infrastructure – Transport & IT
• Business ethics - language, ethnicity and culture
• Competitors and industry structure
• Fiscal policies and regulatory regimes
• Availability of local suppliers
• Labour market and costs
• Partners - Potential and credibility local
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Key Issues:
• Uniqueness of products or services• International experience and knowledge of
cultural issues• Barriers to entry• Scalability• Business and operation model• Local content laws• Cost of local and overseas outsourcing or to
export?• Is it better to license to infiltrate more
markets faster?• Insurance against non-payment?• Addressing legal issues or conflicts with
partners• The Effects Of Currency Fluctuations and
mitigation plan?
Boosting Market, Customer Base and Capital Position: Key to Business Success
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Critical factors for growth and operation improvement
Market data and consumer insights
Value proposition – consumer and market needs
Network and contacts – Governments, suppliers and customers
Devising a feasible market entry strategies
Developing effective supply chain and linkages
Optimizing marketing channels and technologies
Establishing local presence and footprint: shared services
Identifying and developing strong local partnership
Talent and skills
Selecting a Business Partners: Optimizing Local Operations & Footprint
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Factors for consideration when selecting and establishing business partners in Africa
• Complementary skills & experience
• Reputation risks – Political association and corruption
• Local content laws
• Cooperative cultures
• Compatible goals
• Commensurate risks
• Due diligence – careful selection
• Captive clients and contacts
Benefits for establishing local foot print and operations
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Physical presence Meet buyers
needs for local contact point
Access customers and improved service levels
Enable just-in-time delivery
Meet local content laws and
regulatory
Establish better relationships with suppliers, buyers
and end users
Gain access to local market data
and insights
Encourage diversity and innovation
Greater control of marketing and
distribution
Direct interaction with customers
Improved credibility and
loyalty in market place
Establishing Strategic Alliances (SA) & JVs: Unlocking New Value
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Strategic Alliances (SA)• Developing partnerships with a local or other global established organisations in the market
to form a new incorporated company.
• SA increases local credibility and trust as a new player in the market
• Both parties provide equity and resources to the venture and share in the management, profits and losses.
Joint Ventures (JVs)• Establishing partnership with highly established organisations or government institutions in
Africa is key to enhance local credibility.
• Strategic alliance partners can be identified through bankers, accountants, business consultants, industry associations and networks, meetings and government contacts.
A/Disadvantages of JV & SA
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Partnership working provide greater opportunities and advantages for organisations seeking to enhance operation, client and capital position in a new market.
Pro:
• Acquire competencies or skills not available in-house• Rapid growth and market penetration • Shared risks with more than one firm• Enable faster entry and payback• Government sharing or contract agreement• Avoid tariff barriers and satisfy local content requirements
Cons:• Partners do not have full control of management• May be impossible to recover capital invested• Disagreement on new export markets• Partners may have different views on expected benefits
Shared Services: Driving Growth and Performance
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Key strategic objectives of Shared Services (SS) in an organisation• Redefine the business model to better align with the changing business environment
• Innovate and expand scope of services to partner with the enterprise to achieve business outcomes
• Deliver insights and take actions based on the power of data and analytics
• Identify the right lead for the evolving organisation
Benefits• Enhanced corporate landscape
• Drive value: Customers, shareholders and employees
• Reduce costs of decentralization, to increase the quality and professionalism of support processes for the business,
• Increase cost flexibility for supporting services.
• Create a higher degree of strategic flexibility.
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Merger & Acquisition (M&A)
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Benefits:• Strategic restructuring
• Rapid market growth
• Enhanced operation and capital position
• De-risking operations
• Mitigate entry barriers
Disadvantages:
• Increased financial risks
• Poor or slow post-merger integration
• Overly optimistic appraisal of synergies
• Overestimation of market potential
• Inadequate due diligence
• Incompatible corporate cultures
Acquisition or takeover of a local business
Consolidation/Merger - Combining with a local company to form a new enterprise altogether
Differentiation: Cash, stock and financing options
Types of M&A by functional roles in market: horizontal, vertical and Conglomerate M&A
Franchising and Licensing
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• Developing on-going business relationship in the market where one party ('the franchisor') grants to another ('the franchisee') the right to distribute goods or services using the franchisor’s brand and system in exchange for a fee.
• More sophisticated franchise arrangements specify a precise business format under which the franchisee is expected to carry on business and ensuring a common customer experience throughout the network.
• Franchising and licensing foster rapid market expansion using the intellectual property of the franchisor, and the capital and enthusiasm of a network of owner operators.
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Determining the Type of Licensing and franchising Model
Outsourcing and Contracting
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• Market entry through licensing where (the licensor) agreeing to permit another organisation (the licensee) to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor for a fee.
• Organisations - contract services or suppliers of products in the target market.
• This will ensure products or services are tailored to the conditions and specific requirements of the local market.
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Drivers of Outsourcing and Contracting
• Reduce cost
• Leverage technology, expertise and resources
• Labour – cost and skills
• Lack of in-house resources
• Improve customer value
• Improve competitiveness advantage
• Increase flexibility
• Consolidate assets/resources
• Increase value: shareholders, customers and employees
Key Success Factors: KPIs & R.O.I Evaluation
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Long-term commitment Established and enhanced local footprint
Strong relationship development and management
Supplier, distributors, local government, partners
Patience and tenacity Slow administrative processes, decision making, culture, time management, infrastructure
Value proposition Uniqueness of products and services, socialvalues
Brand reputation and association Strong reputation, brand confidence, positioning
Prior international experience and local know how
Internationally experienced professionals, standards, local content laws
Supply chains and linkages Lean, effective and robust
Consumer analytics, market insights and data Effective decision making and positioning
Benefits for Foreign Companies Seeking to Invest Overseas: Africa
• Increased demand for home-sourced capital equipment and services
• Increased capital position: revenue, sales and profits
• Increased taxation income for Governments
• Improved profile and competitiveness of UK in the global marketplace especially Africa
• Capitalise untapped market opportunities
• Global positioning
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
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How SSCG Services and Resources Can Help Your Organisation?
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@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
How Can We Help You?
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• Market research – Data and insights
• Business Intelligence (BI)
• Consult on market entry strategic approaches and planning.
• Location advice - information on what to take into account when deciding where to locate your business.
• Devising market entry strategies for growth
• Research and consult on labour practices and costs. This includes identify local employment practices to cover both legal and cultural issues.
• Identify the incentives available both at the international, national, state, and/or city level.
• Referrals to local experts.
• Introductions to networks and partner searches - Introduce you to the relevant industry bodies , identify and verify appropriate people in the market such as agents or partners
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Conclusion
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As the African market and opportunities continue to grow more attractive, FDI inward flow increasing, companies needs to devise innovative ways to gather market intelligence and develop in-depth insights they need in order to device compelling consumer value proposition offering and delivery strategies that can both meet the needs of African consumers and generate sustainable robust revenue and profits.
Big data, analytics, experience and customer feedbacks indicates that current successful international organisations in Africa employ structured approaches to understand and do business in Africa. By focusing on the distinctive and niche needs, industries and preferences of consumer segments and by applying systematic approaches to market entry, promotion, strategic partnerships, firms can capture opportunities on their own terms, in the process ensuring sustainable long-term growth.
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
Questions & Further Enquiry
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For further information or to discuss your organisation tailored needs, contact our advisory team at:
W: www.s-scg.com
@2013 SSCG Copyright The information contained herein is of a general nature and subject to change. Applicability of the information to specific situations should be determined through consultation with our advisers. For more information visit www.s-scg.com or contact us at [email protected]
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