performance analysis of sokowatch

8/15/2019 Performance Analysis of SOKOWATCH

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UNIVERSITY OF ILL INOIS

CHICAGO

I N T E R N A T I O N A L

E N T R E P R E N E U R S H I P

RELI EF WATCH

PROJECT REP ORT

GOWTHAM SIVAKUMAR

IMRAN BAIG

JOSEPH L INDBERG

EVA KOWALINSKI


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CONTENTS

ReportNotebook

• "Africa's Testing Ground." The Economist . The

Economist Nespaper! # Aug. $%&. eb. %&Oct. $%(.

• )adesimi! Am*. "The Changing +ace Of ,usiness

-n Nigeria." Forbes. +orbes aga/ine! % a*$%(. eb. %& Oct. $%(.

• 0Nood1es in Nigeria.2 EuroMonitor International.

eb. %% Oct. $%(.

• "hat is Sokoatch." Sokowatch. Sokoatch!

n.d. eb. %& Oct. $%(.

• ",oko 3aram4 A ,1ood* Nigerian -nsurgenc* 5CNN.com." CNN. Cab1e Nes Netork! n.d. eb.%& Oct. $%(.

Tab %


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ABSTRACT

Daniel Yu and his team at Sokowatch are now looking to expand

abroad, with an emphasis on the consumer goods industry in

Nigeria. Relief Watches brother company, !Sokowatch" is well

suited for Nigeria for a #ariety of reasons. Not only is Nigeria

expanding its market si$e, but its %D& is also growing at a

steady pace. 'ccording to the (conomist, Nigerias annual %D&

growth is at ).*+, and the input from -% /ast -o#ing

onsumer %ood0 spending towards %D& has increased by 12.3+

/4'frica5s 6esting %round"0. 7n addition to the positi#e 8nancial

predictions, Nigerias population is set to double in the next )2

years. 'nother reason Sokowatch should grow in Nigeria is

because the economic sectors are changing with respect

consumer goods. 6here is a prediction of an annual increase of

9+ in consumer goods e#ery year to become the largest sector of

the economy, worth almost :1.) trillion by ;232

With a pro#en track record in the medical in#entory management

space, Daniel Yu and his team at Relief Watch are now switching

gears and tapping into the international consumer goods market.

7n this report, we will outline the focus of Sokowatch, the

potential of expansion into the Nigerian market and 8nally, we


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will identify the target market and potential companies

Sokowatch may want to partner with.

INTRODUCTION

Sokowatch is an in#entory management tracking system used for

the de#eloping world. 7t 8lls the gap that many third world

countries ha#e when it comes to ha#ing the right infrastructure in

place to e


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7n addition to the easy access which Sokowatch pro#ides, users

are not re@uired to download additional hardware and are not

8nancially responsible for co#ering the cost of the phone call.

Ance users report the amount of in#entory on hand by clicking

the digits on their phones, the data is automatically stored in

Sokowatch5s cloud system and companies are better able to

pro?ect future consumer demands and eliminate stock shortages.

MARKET ANALYSIS

While there are positi#e forecasts for the Nigerian market, there

are also signi8cant risks that need to be considered. &oor

infrastructure, as well as political and economic instability run

rampant throughout many parts of Nigeria. 'ccording to the

Buman De#elopment 7ndex, Nigeria ranks 1C2th out of 1

countries with the largest amount of po#erty. /&o#erty 7n

Nigeria0. 7n addition to the low income earned by much of its

population, Nigeria5s religious and ethnic tensions create an


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increasing likelihood of #olatility, especially in regards to

#iolence. Eoko Baram, an extremist 7slamic group acti#e in the

northeast region of Nigeria, desires to impose Sharia law at the

expense of many li#es. !6he militant group has bombed schools,

churches and mos@uesF kidnapped women and childrenF and

assassinated politicians and religious leaders alike" /NN0. 6he

#iolence and bloodshed resulting from the Eoko Baram militant

group could create a threatening e


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7n addition to the lack of transportation infrastructure, a shortage

of electricity hurts businesses as power cuts are fre@uent.

'ccording to the World Eanks !Doing Eusiness" sur#ey, Nigeria

is 19Gth out of 19* countries for easiness of getting electricity

/'frica5s 6esting %round0. Eecause of these risks, Sokowatch

needs to prioriti$e and help train store owners on how to best

anticipate the amount of stock they need.

Table 1: SWOT Analysis of Nigeria

rengths

H 'bundant supply of naturalresources

H Bigh economic growth factorsH Iargest 'frican (conomy

Weaknesses

H Bigh le#elsH DependanceH Iack of tran

portunities

H 7mpro#ed infrastructure

H Young labor forceH -ore ad#ancement in terms ofJ

K BealthcareK (ducationK 6echnology

Threats

H Disturbance

SecurityK Eoko Baram


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TARET MARKET

ontinuing to operate as a E;E /Eusiness to Eusiness0 company,

Sokowatch will introduce their e


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Figure 1: Nigeria FMCG trade Structure

6his lack of existing in#entory tracking systems in countries such

as Nigeria pro#ides an incredible opportunity for Sokowatch as

they stri#e to be the 8rst mo#ers in pro#iding su


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's we research the -% sector within Nigeria, we see

continuous growth. 'ccording to OA- 'frica, Nigeria has the

highest demand for fast mo#ing consumer goods in comparison to

any other african country /Pander ;0. 7n fact, in ?ust one decade

/;21;=;2;20, Nigerias -% sector grew by 12+ /Pander ; = see

image comparison below0.


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Figure 2:FMCG Country potential in Africa

's a result of this growth, key players like Nestle, Lnil#er,

&rocter %amble and S'E -iller ha#e each de#eloped strategies

for expansion into Nigeria. NestlQ plans to triple sales o#er the

next decade, &rocter %amble has ?ust completed a factory near

Iagos

and S'E-iller recently built an expensi#e brewery in Anitsha, a

de#eloping city in Nigeria. 's we see these large corporations

expand into the foreign market, we take a look at the potential

partnerships that Sokowatch can undertake. Autlined below are

se#eral companies in #arious -% sectors who we belie#e

would be #iable business partners for SokowatchJ

Soft DrinksJ Co!a"Co#a remains the dominant producer of

carbonates and bottled water in Nigeria due its long established

history in the country, strong distribution network, and

aggressi#e marketing techni@ues. 7ts price is generally cheap so

that it can be bought by e#en the lowest income earners. 7n


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addition to the increasing popularity of oca ola, the @uality of

tap water in 'frica is generally so bad that people will opt to buy

soft drinks when they can a


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Internationa# and &ro!ter * a+,#e. Ane important issue in

the personal care sector is the adaptation of Western products to

the speci8c needs of 'frican consumers. Some international

companies ha#e recogni$ed this, and ha#e either adapted their

global products to suit 'frican needs, or launched new product

ranges. Lnile#er recently de#eloped its -otions range of

shampoos and conditioners aimed speci8cally at ethnic hair. 7n

addition to introducing darker range make up shades, &rocter

%amble continues to position itself well through successful salesof its %illette products.

oodJ Nigeria has become an increasingly attracti#e frontier for

the consumer goods food industry. 6he most important

supermarkets in Nigeria are Artee roup-s &ark n Shop and

Shoprite. Shoprite entered the Nigerian market in ;22G/Shoprite0, and is currently in the process of adding 3 stores in

Nigeria which gi#es Sokowatch an ad#antageous opportunity. 7n

addition to the local grocers in Nigeria, Sokowatch may also wan

to consider a possible partnerships with De"Unite. /oo.s. 's

the noodles category continues to increase in Nigeria, De=Lnited

foods holds a 1+ market share. /(uro-onitor 7nternational0.

6heir 8rst mo#er status and constant introduction of new >a#ors

ha#e made them the go=to purchase for many of Nigerias locals.


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7n addition to partnering with existing corporations who

operate within Nigeria, Sokowatch should adopt a similar

strategy as they did with Reliefwatch, and should focus on

targeting storekiosk owners as they are the ones who will ha#e

direct

contact with the in#entory on hand. 6he storekiosk owners that

Sokowatch should target will be located in rural areas of 'frica athe less de#eloped areas ha#e a greater need for Sokowatchs

product and where access to cellphones is predominantly high

compared to the rest of sub=saharan africa TSee chart below =

SourceJ termolux.comU

Figure : T!e up"ard cur#e for $obile subscribers


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While many of these companies are seeing increasing pro8ts

when doing business in the de#eloping world, a closer look into

their in#entory tracking systems would likely re#eal inconsistent

results. With the help of Sokowatch, the companies mentioned

abo#e would see more consistency and would be able to better

run their international operations as a result of more detailed

in#entory information. 's with any business partnerships,

Sokowatch should aim to de#elop and build long lasting

relationships in Nigeria while being mindful of the legal andcultural factors that may take precedence.

COM&ETITION

urrently, there are no any direct competitors in Nigeria that

o


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own in#entory tracking system. 7f that is the case it is unlikely

that their supply chains will pro#e to be su


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ompanies can grow through identifying and selecting market

opportunities, and then de#elop strategies to capture these

identi8ed opportunities. -arket entries are a chance for

companies to grow by le#eraging their core business. (xpanding

into a new market and to de#elop a market entry strategy

in#ol#es a great deal of market research, a thorough analysis

and it takes an appropriate process to correctly assess the

potential of the growth opportunity. When considering entering a

tricky market like Nigeria, it is essential to do the researchcorrectly, since the success of such markets are dri#en partially

by factors outside of ones control. 7t is important to in#estigate

the appropriate le#el of resources in market analysis, selection

and entry method to create a foundation of success in the chosen

market.

Figure %: & contribution of ser#ices 'r$s to G()


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Ser$i!e 0r+s in an age o) g#o,a#i1ationJ 'ccording to World

Eank statistics, the global ser#ice industry occupied around G2+

of Nigerian %D&. 6his report re>ects the phenomenon that

ser#ice 8rms ha#e the most de#elopment potential in the future

trend of globali$ation in de#eloping countries.

'lthough entry strategies /say., D70 of multinational

enterprises could be applied to multinational ser#ice 8rms, it

must be done with extreme caution due to the distincti#echaracteristics of hard ser#ices such as in#entory management.

6herefore, it is necessary for us to consider the ser#ice

characteristics of supply chain management systems when

discussing entry strategies. ' number of factors that a


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Figure *: T!e gro"t! of ser#ice industries as )C+ increases

/a!tors a2e!ting Entr3 +o.e )or Soko4at!hJ %lobali$ation

means ser#ice 8rms like Sokowatch ha#e great opportunities to

conduct their business in foreign markets like Nigeria.

6herefore, the primary consideration and the most critical issue

in an international market entry strategy is the selection of anappropriate entry mode /6erpstra and Sarathy, 1**)0. (ntry

mode selection is interpreted to mean a suitable way for

enterprises to enter foreign markets so as to operate their

international businesses by exploiting their ad#antages /Root,

1**)0. 's to the entry strategy of Sokowatch, it could be

characteri$ed by considerable di#ersity which includesJ

i. Cultural factorsJ ultural distance /di


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selection as well as the moderating euence how they would like to operate their business in


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(xpansion and Aperations 'broad. 6he primary reason is that,

for high=tech industries, high=technology intensity and RD

expenditure make 8rms su


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standardi$ation are basic re@uirements for a supply chain

management 8rm, they should look for accompanying partners

with good discipline and high consistency.

So#ution5 Due to complexity and #ariety in the international

business en#ironment, Sokowatch should ha#e its own

circumstances to consider with regard to entering a foreign

market to its best ad#antage. 7n other words, each mode of entry

is taken into account by Sokowatch in light of their ownresources and capabilities in the changeable en#ironment and

>uctuating conditions of Nigeria. 7t has to stress the di


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adaptation and locali$ation, and they are more highly culture=

dri#en than tangible goods.

M(R)ETIN*

'roduct: 's discussed in &art 1 of our report, Sokowatch is a

consumer goods in#entory tracking system for de#eloping

countries. 6he Sokowatch system pro#ides in#entory

management to minimi$e shortages, increase transport euctuations. 6his ser#ice relies on

existing mobile phone distributors which ma?ority of the

de#eloping countries populations ha#e access to. Lsers are not

re@uired to download additional hardware and are not 8nancially

responsible for co#ering the cost of the calls, or the phone. Data

is automatically stored in Sokowatchs cloud system and

companies are better able to pro?ect future consumer demands

and eliminate stock shortages.

'romotion: 6o e


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'lace: Aur marketing strategy will focus on targeting

underde#eloped communities within Nigeria. 7n particular, we

belie#e the following area would be most #iable for entryJ

1. Ioko?a is a rural area in Nigeria showing continuing promise

for companies like Sokowatch who are looking to expand

operations o#erseas. Not only is the educational le#el of the

pro#ince rising continuously, but as is the si$e of each household

Tsee 8gure to the leftU. 6he increases in household si$es will likely

ha#e a direct a


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'ro+osed olutions: 7n regards to to con@uering the 8rst

challenge of promoting and reaching consumers in Nigeria it is

important to start in one area and follow by expanding into

additional territories and regions where it5s most suitable. With

regards to the #arious languages spoken within the Nigerian

market, connecting with a nati#e speaker who can act as a

translator is a #ital e


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IN(NCIN*

7n order to successfully expand o#erseas, Sokowatch will need to

consider #arious methods of 8nancing and consider potential

challenges that may arise. While Sokowatchs business model is

e#idently #aluable, 8nancing decisions are critical and if dealt

without care, can se#erely impact the success of the startup. 7n

order to 8nance their expansion into Nigeria, Sokowatch should

focus on two methods of 8nancingJ Eootstrapping and #enture

capital funding. Bootstrapping refers to the means in which a

startup supports itself 8nancially while maintaining a signi8cantstake of ownership in their company. 7n some cases, becoming a

self=sustaining business while holding onto the e@uity of the

company can be challenging. 7f this occurs, it might be wise to

raise capital through angel in#estors or family and friends in

return for a smaller sum of e@uity. 7n comparison, 6enture

Capita# /un.ing would re@uire Sokowatchs willingness to gi#e

up more e@uity in return for larger amount of capital /relati#e to

bootstrapping0. 7n addition to aligning the 8nancial structure with


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Sokowatchs capital needs, some of the more particular 8nancing

considerations includeJ

H 6he need for Sokowatchs ser#ices in NigeriaK 7s there a needX 7f so, how big is itXH 6he importance of maintaining control of the companyX

K What le#el of control and ownership are necessary

for the team to successfully implement their strategic #isionX

Bow much control is the team willing to gi#e upXH Scalability

K Bow important is it for Sokowatch to scale rapidlyX Since Sokowatch is the 8rst to the market in

Nigeria, they may want to consider consuming as much

!market territory" in the least amount of time in case

competitors enhance their e


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for their expansion. While selling shares may limit the amount of

control Sokowatch has, e@uity 8nancing can also pro#ide

signi8cant bene8ts as its comes with guidance from not only

wealthy, but also knowledgeable in#estors willing to help the

startup succeed.

While many 8nancing options exist, we belie#e that e@uity

8nancing has the most aggregate bene8t for Sokowatch. While it

risks gi#ing up larger amount of control, e@uity 8nancing

pro#ides substantial bene8ts as the board of directors and

business ad#isors pro#ide signi8cant input and do e#erything in

their power to better the business. Eefore making the ultimate

decision with regards to 8nancing, Sokowatch should carefully

consider the #arious options a#ailable and select the one that

best suits the company in both the short and long term.

T(IN*

's with many start=ups, human capital is a necessity. While

Sokowatchs in#entory tracking system allows store owners to be

self=su


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employees needing to be based in Nigeria. 'ccording to

7nternations.org, Nigerians place a higher #alue on facial

expressions than words, and tend to relate more closely with

indi#iduals from their own culture /Pimmer 10. Vnowing this,

Sokowatch should strongly consider hiring locals as they would

likely ha#e a better ad#antage in pursuing particular clients

compared to LS employees coming o#erseas. 7n addition to hiring

locals based on Nigerias cultural preferences, local employees

could also help train new store owners and respond @uicker toclient needs. 7f a certain client in Nigeria needs urgent help,

ha#ing LS employees walk through instructions o#er the phone

may not be the most e


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UTURE C0(11EN*E

Eefore Sokowatch commits its resources to Nigeria, it should

consider the potential challenges of expanding abroad. Iisted

below are six key challenges the company may face as they look

to expand operations o#erseasJ

89&re.i!ting Consu+er Nee.s

' key to success in business is o


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their client bases as reliance on one single client like oca ola

can pro#e incredibly risky. While oca ola may be a large

corporation, >uctuations in the soft drink industry may cause the

company to discontinue its product o


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business deals in a fairly @uick timeframe. When looking to enter

a foreign market like Nigeria, Sokowatch must consider the

countries speed of doing business. 'ccording to Eusinessweek,

Nigeria places hea#y emphasis on building relationships before

seriously considering a business deal /Ie#enthal ;0. Eased on this

information, Sokowatch may need to de#elop solid relationships

with potential clients before actually mo#ing forward with

business negotiations and as mentioned abo#e, the startup may

want to think about hiring locals to help fuel business acti#ities.Ba#ing a solid understanding of proper Nigerian business

eti@uette can contribute greatly to the success of many

international relationships Sokowatches hopes to form with

Nigerian clientele.


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di


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Sokowatch should le#erage its existing connections and 8nd local

sales reps to source suitable candidates capable of supporting the

company5s agenda.

>9Lega# * o$ern+enta# Barriers

's they plan to expand into new markets, Sokowatch will need to

consider legal and go#ernmental barriers. Eoth Iegal and

go#ernmental pro#isions can ha#e se#ere implications on how a

business can operate in a gi#en countryJ

a. -egal .arriers: Nigerias legislation may not be

conduci#e to the establishment of certain types of business

operations. 6ax laws and import restrictions may place a grea

deal of pressure on Sokowatch to perform and meet

expectations.b.Go#ern$ent barriers: Nigerias go#ernment may not

be recepti#e to foreign in#estment. Bigh tariuctuations may be the deciding factor for whether or not

Sokowatch decides to expand o#erseas.

?9 Ser$i!e intangi,i#it3

ompared to purchasing a physical product, customers encounte

and percei#e an extreme degree of risk and uncertainty when

purchasing a ser#ice. 6his #ery intangibility increases the

uncertainty that consumers may ha#e with regards to purchasing

Sokowatchs ser#ice. 's a result, this lack of con8dent purchasing


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power may result in growing challenges for the startup. 6o

remedy this potential challenge, Sokowatch will want to dri#e its

sales force to introduce local clients to the start ups ser#ice. 7n

addition, Sokowatch may want to consider working with an

external consulting company to better understand the needs of

nigerian store owners and better help acclimate them to the

Sokowatchs system.

@9 Re#ian!e on Weather

6he last challenge the startup may face is the inconsistency with

regards to weather. Seeing as Sokowatchs in#entory tracking

system is hea#ily reliant on technology, >uctuations in weather

forecasts can impact the speed at which the data arri#es to the

cloud or worse, can prohibit store owners from recei#ing

automated #oice calls.


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CONC1UION

6he market opportunity for a product that can ade@uately track

consumer goods in#entory in de#eloping countries has ne#er

been stronger. 6oday, many corporations aim to reach the

greatest amount of customers possible. ompanies like oca

ola, Bein$ and Lnile#er are expanding into some of the most

rural communities known to mankind, only to disco#er theimmense lack of reliable in#entory tracking systems a#ailable.

Bere lies an opportunity for a growing company like Sokowatch,

which aims to 8ll the gap and help consumer goods companies

better position themsel#es in foreign markets. With a pro#en


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track record in the domestic market, Sokowatch is now focusing

on expanding its operations globally. 7n particular, the startup is

focusing hea#ily on the Nigerian market as purchases of

consumer goods in #arious pro#inces within Nigeria are

continuously soaring. 7n the second part of this report, we will

outline suitable entry modes, sources of funding, and marketing

strategies = speci8cally focusing on the product, price, place and

promotion methodology. 6o conclude, we will highlight six key

challenges that Sokowatch will need to o#ercome in order toreplicate its pro#en success in the Nigerian -arket

6o mitigate risk and increase chances of succeeding abroad,

Sokowatch will need to consider the #arious challenges listed

abo#e and in addition, will need to implement a strategic mode of

entry to achie#e market dominance and form long lastingrelationships with Nigerian clientele. We hope the information

listed abo#e can contribute to Sokowatchs business operations.

or any @uestions, please do not hesitate to contact the authors

of this report.

&otential ontactsJ

A+anor Do.oo

Bead of onsumer markets


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Tab


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orks Cited

Citatio

ns4• Growth of the Service Sector . 8n.d.9. Retrie7ed $%(! from

or1d ,ank.

• 3ofstede. 8$%$9. Hofstede Cultural Dimensions. Retrie7ed

$%(! from http4::geert5hofstede.com:nigeria.htm1

• ;e7entha1. 8n.d.9. Nieria !laces heav" em!hasis on buildin

relationshi!s before seriousl" considerin a business deal.

Retrie7ed from -nternations4

http4::.internations.org:nigeria5e

performance analysis of sokowatch

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