Africa – Are European Companies Wasting Chances? Research paper shows how to be successful in Africa
Fast growing economies in Africa
Today Chinese and Indian companies are doing brisk business in Africa. The International Monetary Fund pointed out that six out of ten of the fastest growing economies in the world are located within Africa. Despite faltering markets at home and growth problems throughout Europe, Africa is still not associated with growth and opportunities, but with corruption and crises.
Moritz Stuetzel completed his master’s program in entrepreneurship in August 2014 with a highly acclaimed thesis on modes of market entry for German speaking SMEs to Africa. He focused on the Kenyan plant and machinery market and concluded that East African markets are attractive to German speaking SMEs if they are willing and able to adapt to the needs of the African markets and are sensitive to cultural needs. Michael Neubert, who has specialised in the fields of market entry, international and intercultural management, supervised the thesis.
Africa: Beautiful scenery, nothing else?
When one thinks of Kenya, fabulous landscapes and snow-covered mountains as well as the unique wildlife offering superb conditions for hunting safaris come into mind. However, taking a closer look at the country´s economy is well worth it: Kenya is one of the largest countries in East Africa and the country imports a remarkable amount of plant and machinery. So why not take the Kenyan market into consideration for economic expansion?
With an import volume of about 3.7 billion USD the Kenyan engineering market almost solely relies on imports. Typically for a developing country market, only 5-15% of imports count for state of the art products. Western manufacturers tend to solely target this market segment. 85-95% of sales volumes are made up of standard and low quality products; these segments in turn are dominated by Chinese and Indian suppliers. Currently, producers of economically prized, robust and easy to use machinery are growing the fastest and not (yet) producers of state of the art products. This means that many Western suppliers will have to rethink and most likely adjust their range of products. Often machinery well-proven for years suits those markets the best. Rising loans and an emerging middle-class do point towards a future increase in demand, also needed for a broader economic growth, however, the county is not there yet. Consequently there is a prevailing lack of variety in goods but needs for high quality products in many sub-sectors do already exist.
How to succeed
African markets are often characterized by political risks, unrests, a lack of infrastructure and in some cases by escalating corruption. Due to this very different environment, a market entry to an African country needs thorough and in-depth preparation. This includes the sourcing of market data, which is typically not available in the quality desired, the building of a network of contacts, and the identification of niches allowing for growth. Market entry should be done step by step, ideally starting with exports to an experienced Kenyan importer. Another critical success factor is using a structured and professional framework for the market entry like the company2newmarket process. This process enables organizations to successfully enter new markets in less time, with fewer resources and at lower risk by facilitating four predefined steps. Thereby market entries become more foreseeable and robust.
Besides being proactive, endurance, persistence and realistic sales expectancies are of the biggest importance for successful market cultivation. More opportunities arise once the entry to the Kenyan market is successfully accomplished: Besides the attractiveness of the home market, Kenya is also member to two regional trade areas, the East African Community (EAC) and the Common Markets for Eastern and Southern Africa (COMESA). The EAC membership alone provides Kenya with access to more than 130 Million people. Bordering markets can be entered with less effort, time and money, or one can even relocate parts of the value chain like construction, services or storage, to other countries.
Go for it
Kenya can be seen as a typical example for developing countries. Challenging political and macroeconomic circumstances are contrasted with robust business opportunities. However, only those who are well and early placed in the market can benefit from the arising opportunities.
Published by M & BD Consulting
Copyright © C2NM LLC, Michael Neubert – All rights reserved
About the Authors
- Michael Neubert is CEO of C2NM LLC and university lecturer of international and intercultural management.
- Moritz Stuetzel completed a master’s degree at the University of Liechtenstein in August 2014. He graduated with a thesis focusing on market entry modes of SMEs to the Kenyan plant and machinery market. Moritz has worked with SMEs as well as globally operating firms and gained experience in product management and business development.
About the Book
Global Market Strategies
HOW TO TURN YOUR COMPANY INTO A SUCCESSFUL INTERNATIONAL ENTERPRISE
Good international trade relations are a must for any modern enterprise, regardless of its size. But without a sound global market strategy, entry onto the international scene is risky and can at worst lead to a company’s demise. In this book, Michael Neubert, a renowned expert in global business strategy, outlines the principles that underlie a successful international venture: development of a custom-fit internationalization strategy; selection of foreign markets and structured market entry processes; design of market growth strategies; intercultural management and international corporate management; and the carrying out of market exits. Supplemented with case studies, the tools and solutions in Global Market Strategies provide international managers with the requisite know-how for success in all markets and industries.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
C2NM is a leading consulting, training, publication and IT development firm specializing in the field of international and intercultural management. C2NM offers services from the development of international strategies and global market research to market entries, turnarounds and market exits as well as intercultural trainings and seminars. C2NM has clients from small and medium-sized enterprises, multi-nationals, non-governmental and non-profit-organisations to government agencies. C2NM supports your organization to acquire NEW customers in NEW foreign markets in LESS time, with FEWER resources, and at LOWER risk. C2NM and its partners have more than twenty years of experience in all major global markets and industries. Let internationalisation become your competitive advantage. We will succeed with you.