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Market Entry & Growth Strategies for Africa: Factors for Consideration

Eugene Nizeyimana COO, 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 info@s-scg.com


Key Issues 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 info@s-scg.com


Africa Economy at a Glance: Market Context, Characteristics, Opportunities and Risks

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Market Attractiveness: Investment Opportunities in Africa +1.2 Billions +$1.8 Trillion +100 Billions

Population

Africa’s collective GDP in 2013

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

Source: World Bank 2012

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Economic Growth and Market Characteristics •

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 info@s-scg.com


Market Entry & Growth Strategies: Strengthening Organisation Corporate Landscape, Operations, Customer Base and Capital Position in Africa

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Strategizing for New Market Penetration and Growth: Core Factors for Considerations • • • • • • •

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 info@s-scg.com


Market Selection: Key Factors for Consideration • • • • • • • • • • • •

Market size - exposure to a broader range of large and small markets. Barriers to entry Political stability and security Economic stability and GDP Growthgrowth 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

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?

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Boosting Market, Customer Base and Capital Position: Key to Business Success 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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Selecting a Business Partners: Optimizing Local Operations & Footprint 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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Benefits for establishing local foot print and operations

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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Establishing Strategic Alliances (SA) & JVs: Unlocking New Value 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.

________________________________________________________________________________________________________________________ @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 info@s-scg.com


A/Disadvantages of JV & SA 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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Shared Services: Driving Growth and Performance 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 info@s-scg.com


Merger & Acquisition (M&A) Acquisition or takeover of a local business Consolidation/Merger - Combining with a local company to form a new enterprise altogether

Benefits: • Strategic restructuring • Rapid market growth • Enhanced operation and capital position • De-risking operations • Mitigate entry barriers

Disadvantages: Differentiation: Cash, stock and financing options

• Increased financial risks • Poor or slow post-merger integration Types of M&A by functional roles in • Overly optimistic appraisal of synergies market: horizontal, vertical and • Overestimation of market potential Conglomerate M&A • Inadequate due diligence • Incompatible corporate cultures ________________________________________________________________________________________________________________________ @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 info@s-scg.com


Franchising and Licensing Determining the Type of Licensing and franchising Model •

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 info@s-scg.com


Outsourcing and Contracting • 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.

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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


Key Success Factors: KPIs & R.O.I Evaluation 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, social values

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

________________________________________________________________________________________________________________________ @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 info@s-scg.com


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 info@s-scg.com


How SSCG Services and Resources Can Help Your Organisation?

________________________________________________________________________________________________________________________ @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 info@s-scg.com


How Can We Help You? • • • • • • • • •

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 info@s-scg.com


Conclusion 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 info@s-scg.com


Contact Us About SSCG • • • •

• •

A global network of management and advisory firms. Provide innovative and market beating solutions, insights, enterprise growth solutions, advisory and consultancy services. Support organisations and individuals seeking to explore and engage in business activities in Africa. We have build a strong footprint across Sub-Saharan Africa. We have built and sustain our reputation as the best firm to work with by ensuring that our people, our clients and our communities achieve their full potential. We operate as a global integrated firm, with one methodology across all our geographical areas. We have structured our business to ensure and enable us to mobilize our people quickly, and allocate them to projects in the right place, at the right time.

Stay Connected

@SSCGCorporation @SSCGSAfrica For further information or to discuss your organisation tailored needs, contact our advisory team at:

Facebook/sscg

E: Info@s-scg.com W: www.s-scg.com Linkedin/sscg

________________________________________________________________________________________________________________________ @2014 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 info@s-scg.com

Market Entry & Growth Strategies for Africa: Factors for Consideration  

Helping you to Strengthen Organisation Corporate Landscape, Operations, Customer Base and Capital Position in Africa

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