Mistakes To Avoid When Expanding Into Africa

Estimated read time 8 min read

Expanding into Africa – Expanding your business ventures into new territories such as Africa can be a scary task. Many companies are often apprehensive in taking the leap in fear of the unknown. As a service provider that has been assisting foreign companies with entering African markets for the past 20 years, we would like to share a few tips with you that will ensure easy market entry and a pathway to success.

While we understand that running a company or expanding into new territories might not be a new concept for many reading this article. But it’s worth stepping back to make sure you avoid some common mistakes that plague many multinational companies when expanding into Africa. It is essential that you make the right moves in the beginning which can help you avoid headaches later.

InterGest South Africa has identified the 9 common mistakes that newcomers make. We would like to share a few tips that we recommend companies consider:

  1. Neglecting to customise a business plan for the African market

If you’re a multinational company, there’s no better place to invest than in Africa. If you think of the continent today, it’s young, it’s fast-growing, and it’s urbanising. Half of Africans are under the age of 19, so if you’re taking a long-term10-, 20-, or 30-year view, where else do you want to be?

But, in order to be successful, companies need to approach the African market with a plan. You need to understand that the way of doing business in, for example, Europe, is not necessarily the way business gets done in Africa.

Factors worth considering are the business language and culture, demand for your products, pricing of your products in accordance with competitors that are already operating in the market, access to skilled labour and if upskilling/training will be required.

The business plan doesn’t need to be especially long or detailed. But taking the time to map out a business plan and identify possible barriers will ensure that you are prepared. It will also help you to focus your efforts and serve as a rallying point for your team and give milestones to measure your progress in the new market.

  1. Inadequate financial preparation and resources

Expanding your business ventures into a new market requires big capital investments. It is therefore imperative that you do it right the first time. While we are aware that seeking professional support can be costly. Our experience shows that companies with the highest return are companies that did not rush their market entry project but instead took their time to fully understand the realities of the local markets.

Expanding into Africa – When venturing into African markets, it is beneficial to source the services of local experts that will guide you through the financial and business landscape.

As a newcomer, you will need the following support if you are serious about your export venture:

A financial service provider to assist with the incorporation of a subsidiary, opening of bank accounts, registering at the relevant authorities, and running of day-to-day accounts.
A lawyer to help you deal with tax and regulatory issues related to your business
A local business developer to help you establish a local network and a strong footing
Market researcher for verifying your assumptions and conducting research on the current market situation
A recruiter to assist with identifying skilled labour
The above-listed services can conveniently be rendered by InterGest South Africa. This is beneficial as you will only have to deal with one point of contact.

  1. Failing to monitor progress and adjust

We have often experienced that foreign companies start business ventures with their business plan and financial projections clearly defined. The unfortunate part is that once the company actively starts doing business in Africa, they become distracted and forget to reflect on their business plans.

It’s important that companies continuously monitor and reflect on the progress to ensure that they remain on track with their plan and projections once actively doing business in Africa. A business venture in a new country is a constant process of making adjustments and responding to changes. If companies aren’t constantly scanning the environment and responding to it with assumptions, tests, and pivots, your company will either get left behind going in the wrong direction or will make investments without knowing if it will be successful or profitable.

  1. Not Testing before rolling out

For a company to determine potential success in a new market, requires testing the waters first. Companies expanding are recommended to make assumptions about the market, and then test it first. If the company’s assumptions are disproved, companies should re-examine their strategy. If the assumptions are proved, it is an indication that it is safe to proceed.

The idea is to sell directly to the market in the country that you are expanding into. Selling your product directly to the market can be a tricky exercise if there is no brand recognition amongst the consumers. A strategy that you can try is to partner with a reliable local distributor or agent as they have direct access and trustworthy relationships with local contacts that could be interested in purchasing your products. Partnering doesn’t need to be a long-term strategy. It can be used as a steppingstone and opportunity to develop your network.

InterGest South Africa’s services include partner and agency search. The project duration ranges from 6-8 weeks and will assist you in identifying the best-suited portfolio of potential partners for your business and the industry you are operating in. An alternative strategy to the aforementioned is our Go2Africa solution whereby companies can enjoy a local presence without having to incorporate a company in the short term. Read more here.

  1. Setting the wrong price

Don’t make the mistake of setting your prices based solely on what the competition charges. It’s important to research your costs in detail for each of your products when deciding what to charge. Also, monitor actual costs as you go to make any needed adjustments. Factors to consider is whether you will be manufacturing your products locally in the African country of your choice or whether you will be importing the final product from your headquarters abroad. Another cost factor to consider is warehousing fees and what effect it will have on the profitability ratio of your products.

  1. Ignoring or neglecting online marketing

With the ever-evolving business landscape, it is important not to ignore the latest trends in technology and online marketing. To ensure the best chances of success, companies entering new markets should consider how technology could be used to improve growth, brand recognition and loyalty, efficiency, and profitability. In short, be sure to consider ways to harness the marketing potential of the Internet.

For example, there is a rising trend in B2B eCommerce across the globe this is because it is both a cost-effective and easy way to target specific market segments with minimal effort. Enlisting your products on a B2B eCommerce platform such as Enterprise Africa means that your products will be displayed on social media platforms while targeting the prospective buyers identified by your company.

  1. Failing to learn

As you start your new business venture in Africa, learn from your initial missteps and use them to guide your eventual success. Remember that you always have access to experts that have experience in assisting multinationals with expanding into Africa who are available to assist with advice and guidance.

  1. Not using the right resources to identify skilled labour

To ensure you employ the right candidate in any new market, make sure that you use a reputable recruitment agency that has access to skilled workers, who can conduct background searches to confirm education courses and references. The good news is that recruitment forms a part of the suite of services that InterGest South Africa renders.

In addition to sourcing skilled labour, it is also recommended that a company offers additional training. While it may lead to additional overhead costs, sending new candidates on training or courses will increase the candidate’s productivity and return on investment.

  1. Giving up too early

Irrespective of where in the world you decide to expand your business activities to, expansion is often coupled with barriers and learning curves. Entering a new market comes with its ups and downs and requires endurance and belief in its employees and service providers. While some businesses take off right away, others take some extra time to gain traction. If you give up too early, you may be missing out on the one that takes just a little while longer.

Credit – Taken from – https://intergest.co.za/expanding-into-africa-9-common-mistakes-to-avoid/

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