EMB
ANNA ROSENBERG, PRACTICE LEADER
FOR SUB-SAHARAN AFRICA AT FRONTIER
STRATEGY GROUP
Putting a halt to the company’s entire Africa strategy and
exiting the region, without differentiating by market, would
indeed be a mistake.
Despite current economic troubles, the long-term drivers of
growth have not been derailed in sub-Saharan Africa. This
means that many African markets will continue to develop
and consumer demand will continue to expand alongside
population growth.
The continent’s potential, and the fact that sub-Saharan Africa
remains the second fastest-growing region in the world, are
the reasons why the company’s competitors are continuing to
invest and local businesses, as well as companies from other
emerging markets, are expanding.
The most common mistake made by Western multinationals is
to underestimate the time it will take for sub-Saharan Africa
to reach a level of economic development that will make its
middle-class comparable in size and purchasing habits to the
middle-class in developed markets.
It will take time, effort and plenty of financial resources to
really succeed in the region and create the scale, market share
and profitability that could make the region a large revenue
contributor for the company.
Rather than retrenching, the company needs to focus. The
company will have to re prioritize its most important markets
and revisit its strategy while also running more efficient
organizations in markets that are less important.
The executive must review the company’s market portfolio
to prioritize countries that are not only providing the largest
opportunity but that are also the most resilient to external
shocks resulting from the global environment. This will help
ensure that growth expectations and targets are aligned with
the realities on the ground.
In the high-opportunity and resilient markets, the company
will have to focus on building strong relationship with local
distributors. It will need to go deeper into these markets to
make up for subdued demand. Distributors would have to
widen their reach and cover both formal and informal markets,
and sell not merely in the largest cities, but also the smaller
ones and in rural areas.
The firm should also adapt its locally-manufactured products
to differences in tastes, and purchasing power to expand
its addressable market. It could partner with local players
THE EXECUTIVE MUST REVIEW THE
COMPANY’S MARKET PORTFOLIO
TO PRIORITIZE COUNTRIES THAT
ARE NOT ONLY PROVIDING THE
LARGEST OPPORTUNITY BUT THAT
ARE ALSO THE MOST RESILIENT TO
EXTERNAL SHOCKS.
or even acquire them to tap into their knowledge and offer
complementary brands. Changes to packaging, pricing and
product content should support this approach.
To fund these investments, the firm needs to cut back investment
in smaller markets with lower growth potential and consolidate
by managing them as a cluster, rather than focusing on each
market individually. For example, a Francophone West Africa
cluster could be managed out of Ivory Coast, and a cluster
based on historic ties combining Zambia, Zimbabwe and
Malawi, could be managed out of South Africa. While this would
allow the company to cut down on resources, as above, it would
be critical for the company to develop strong partnerships with
distributors to maintain close oversight of these markets.
All of the above require dedication and long-term commitment
to the region. If the company is prepared for this, then the
rewards over time could be well worth waiting for.
BHARAT THAKRAR, FOUNDER & CEO
WPP SCANGROUP
The company is not alone. Sadly, we have witnessed a number
of consumer companies scale down their operations in
Africa—and in some extreme cases, fold altogether—just a
few years after entry. Many have cited operational challenges
as well as ‘lack of adequate market’ for their products, with
doubts cast over the real growth of the middle-class and the
continent’s capacity to provide an adequate market for certain
consumer goods.
However, the fact is, there is a growing middle-class in Africa
with more disposable income than ever before and the trend
is likely to continue, with the IMF predicting economic growth
of five percent a year on average. It is also worth noting that
consumer spending in sub-Saharan Africa (SSA) is expected to
reach $1trillion by 2020, up from $600 billion in 2010, according
to research group, Euromonitor International.
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