Companies move into foreign markets for assorted grounds. In certain instances. it is towards accomplishing a needed gross revenues volume. In other cases. it might be a command to increase trade name consciousness. Other companies go into foreign markets to re-invigorate gross revenues after their merchandises have gone through their life rhythm – from origin to worsen – in place markets. Regardless of ground. traveling into a foreign market tends to bode great chances for companies. peculiarly if it entails functioning merchandises in an emerging economic system that has late become affluent plenty to afford such merchandises ; or selling a new but needful merchandise or service to a developed and affluent market. However. in foreign markets. challenges are every bit legion as chances. Some beginnings of challenges are discussed below.
a ) Socio-Cultural Differences
Companies tend to follow patterns that were successful in place markets without accommodating these theoretical accounts to suit the cultural dispositions of markets entered. When big cultural differences exist between the place state and that entered. such patterns may ensue in uneffective concern development and partnerships. An illustration is the now good known Chinese pattern of longer meetings in the command to go acquainted with possible spouses. compared to the Anglo-American pattern of brief to-the-point meetings.
Adopting either attack in a market more inclined to the other. will no uncertainty hinder concern development. Language differences are other illustrations of socio-cultural differences that postulate challenges to companies come ining a foreign market. Language differences make effectual and efficient communicating hard between companies and local stakeholders. A light illustration is the Chevrolet Nova which was selling far below outlook in Latin America. Executives of General Motors could non understand why this was so until it was brought to their attending that. in Spanish “no va” means “it doesn’t go” .
B ) Differences in Levels of Bureaucracy – Efficiency of Procedures and Processes Company enrollment. the gap of a bank history. acquiring import licenses. obtaining needed licences. etc. all reflect the easiness of making concern in a state every bit good as the degrees of bureaucratism that exist in that state. For companies used to comparatively low degrees of bureaucratism. come ining a market with significantly higher degrees of bureaucratism may ensue in unrealistic undertaking programs translated into unachieved execution. degree Celsius ) Differences in Availability of Skilled Human Resources Availability of a peculiar accomplishment in a company’s place market may ensue in givens about the handiness of the same accomplishment in the market entered.
4This occurred in Nigeria in 2001 when the first set of GSM licences were given to foreign companies – MTN and Econet ( both from South Africa ) . At the clip. neither entrant foresaw a famine of local skilled work force. This ended up bing both companies an unprecedented addition in wages and other disbursals associated with delivery in expatriate workers. The challenge of sourcing skilled labors in foreign markets is farther exacerbated when quotas exist on the figure expatriates allowed into the state entered despite the famine of local accomplishment.
vitamin D ) Differences in Infrastructure
Predominating substructure affects how companies operate. Predominating transit substructure impact how companies move goods and forces for service bringing ; market substructure impact how participants on a given value concatenation relate with one another ; and the degree of basic substructure such as power and H2O affect cost allotments and direction. For companies come ining a foreign market. failure to take into history the infrastructural base of the market entered may ensue in uneffective and or inefficient operating programs and procedures.
vitamin E ) Legislation Favouring Local Companies
Unsupportive statute law is another major beginning of challenges to companies come ining foreign markets. States tend to ordain Torahs intended to protect or enable local industries. These statute laws take many signifiers. They could be straight-out levies on foreign concerns ; or forbiddance of the activities or direction construction of foreign companies ; or may be through more indirect agencies such as needed licences or licenses to run ; cumbersome enrollment procedures or license processs. 4 David Ogah. “Expatriates. some semi-skilled. take over even humble occupations from Nigerians” . The Guardian Newspaper Nigeria. December 21 2011. hypertext transfer protocol: //www. ngrguardiannews. com/index. php? option=com_content & A ; view=article & A ; id=71436: expatriates-some-semi-skilled-take-over-even-menial-jobs-from-nigerians- & A ; catid=72: focal point & A ; Itemid=598. accessed August 2012.
3. NIGERIAN E-COMMERCE
E-commerce is the purchasing and merchandising of merchandises or services over electronic systems such as the Internet and other computing machine webs. E-commerce uses the World Wide Web at one point in the transaction’s life-cycle. although it may include a wider scope of engineerings such as electronic mail. nomadic devices and telephones. ————————————————-
The major clients of e-commerce concerns are persons populating in major urban Centres in Nigeria. notably Lagos. the commercial capital ; Abuja. the political capital ; and Port Harcourt. an oil rich metropolis in Southern Nigeria ; as these metropoliss tend to house the highest figure of cyberspace users in Nigeria. 5Nigeria has over 47 million cyberspace users. with a bulk of them populating in the urban metropoliss. In the mid 2000s. a twosome of e-commerce companies were launched in Nigeria. They hardly survived. The ground for their death. or in other instances. dead growing. was the trouble of acquiring clients to encompass the e-payment options available in Nigeria at that clip. This trouble was due to known instances of fraud that occurred over the insecurity of Interswitch. the lone e-payment platform available in Nigeria at that clip.
However. with the entryway of major card payment solutions like Master card and Visa card in 2006. coupled with the improved security characteristics of Interswitch. the industry experienced an addition in the figure of Nigerians put to deathing on-line payments. 6 ( on-line minutess grew by 25 % in 2011 ) Prior to the terminal of the first one-fourth of 2012. the Nigerian e-commerce scene had been slightly tepid as the lone vibrant participants were Dealdey. com and Wakanow. com. At the beginning of the 2nd one-fourth. the sector experienced an addition in the figure of e-commerce company in Nigeria. amongst which were Rocket Internet’s Sabunta. com and Kasuwa. com.
The long-run mentality for the e-commerce industry in Nigeria is positive. with analysts foretelling a important addition in new entrants. The execution of the usage of nomadic money in Nigeria by the Central Bank of Nigeria is expected to speed up the development of the e-commerce industry in Nigeria. as nomadic money allows a greater figure of persons engage in electronic minutess. Presently. the Nigerian e-commerce industry has somewhat over 70 companies. though the industry is yet to hold an estimated dollar value. Companies in the sector are categorized into:
a. Manner Retailers
These are on-line manner stores that chiefly sell places. apparels and other manner accoutrements. Major participants in this class are Sabunta. com. Kamdora. com. Taafoo. com and 3stitches. com. The clear leader among them is Sabunta. despite the fact that the platform was launched less than 3 months ago while most other participants have been in the scene for significantly longer. Sabunta offers a wider scope of international trade names and possesses a more incorporate logistic supply concatenation. This makes them more capable of functioning clients all around Nigeria than rivals.
B. Travel and Tourism
These are chiefly on-line companies that sell travel and circuit bundles. The clear market leader is Wakanow. com with a current turnover of 35 million naira ( N35 million ) per month. Other participants in this sector belong to private air hose operators e. g. World Wide Web. fly. arikair. com. World Wide Web. myairnigeria. com. etc
c. Electronic Gadgets and Books
These are companies that sell electronic appliances and books online. The major participants in this class are Kasuwa. com and Konga. com. It is nevertheless hard to state who the bigger participant is. Both participants are less than 3 months old. Apart from electronics. Konga. com besides retails babe and female makeup merchandises.
d. Broad Product Retailers
Players in this class include group-buying trade sites such as Dealdey. com. Buynownow. com and Buyright. game. The major participant with the largest market portion is Dealdey. com. It was launched in 2011 and possesses the most robust group-buying trade site in Nigeria.
2. SABUNTA. COM
Sabunta. com is a manner online retail merchant that offers a broad scope of International and Nigerian manner trade names for sale in Nigeria. Sabunta. com is an e-commerce company owned by Jolali Global Resources Limited. a in private held company in Nigeria. put up and owned by the German Company. Rocket Internet. Rocket’s central office is the vivacious Centre of Berlin. Europe’s Silicon Valley. place to a web of 25 international Rocket offices that cover the operations of the company’s subordinates in developed and emerging markets. Rocket Internet is the largest. fastest and the most successful international on-line venture builder. It presently has over 50 on-line ventures in 7 continents where they are all playing in the top sections of the market.
The primary focal point of Rocket is constructing proven. transaction-based concern theoretical accounts in the online and nomadic infinite. The company has been put to deathing this theoretical account since 2007 and have created over 100 market taking companies in over 40 ( 40 ) states. tonss of which have been exited successfully. The Rocket Internet Company is best known for cloning successful online concern in the US in other states where they play at the top of the market. In Europe. Rocket’s Zalando is presently the largest on-line manner retail merchant. Other good known companies owned and operated by Rocket include ; Wimdu in France. Zidora in Azerbaijan. Dafiti in Brazil. Mizado in Egypt. Locondo in Japan. The Iconic in Australia and Zando in South Africa.
Sabunta. com and Kasuwa. com are Rocket’s operations in Nigeria. Both operate from their central offices in Lagos. Nigerian’s commercial capital. place to over 10 % of the country’s $ 413 billion GDP. Sabunta. com and Kasuwa. com service clients around utilizing warehouses in major urban metropoliss. However. Kasuwa. com sells electronic appliances and books. while Sabunta. com sells manner points. Sabunta. com provides clients with flexible online platforms to shop for manner points from the convenience of their places. and delivers these points at the doorsills of shoppers. The company provides flexible payment options including bank sedimentations. on-line payment. and its advanced payment-on-delivery option. really foremost introduced in Nigeria by Sabunta. com.
Sabunta. com is immature. The company started operations on the 8th of June. 2012 and is presently merely three ( 3 ) months. Yet it has already become the largest and the fastest turning on-line manner retail merchant in Nigeria. with over a 100 orders per twenty-four hours. The company aims to keep its places as the largest and fastest turning in Nigeria. as is being achieved in other states by other Rocket Internet ventures worldwide. Sabunta. com presently has 71 staff. 24 % of whom are foreign subjects. The work force at Sabunta. com consists of alumnuss from Ivy conference universities in the US and Europe. every bit good as top endowment from Nigeria. Its direction squad consists of two foreign subjects and a Nigerian.
4. SABUNTA. COM TARGET MARKET
The mark market for Sabunta. com is Nigeria’s upper and emerging middle-class life in major urban metropoliss in Nigeria. The age bracket of the typical Sabunta. com client is between 18 and 65. This age scope constitutes persons who are capable of purchasing or doing purchasing determinations with respects to manner points. The company’s targeted clients are nevertheless less than 10 % of the mentioned age scope. as the company targets persons with an one-year income of non less than N2million ( $ 12. 500 ) .
Sabunta’s mark market constitutes of persons who live and work in major urban metropoliss of Nigeria such as Lagos. Abuja. Port Harcourt. Kano. Kaduna. Ibadan. Aba. Warri and Benin. These persons often utilize the cyberspace and assorted societal media platforms to interact with friends. household and co-workers. They are manner witting. voguish looking and want to show their personalities with the sort of outfits they wear. They besides recognize and wear popular international trade names and store for these trade names whenever they or friends and household travel abroad.
5. SABUNTA. COM STRATEGY
Having carefully studied the Nigerian e-commerce scene. Sabunta. com concluded that the major job impeding take-off of e-commerce in Nigeria is the doubting nature of Nigerians towards on-line payments. The company responded by presenting the cash-payment-on-delivery option for its clients. Though the company offers regular recognition card and on-line payment options for those who want to make so. the cash-payment-on-delivery option was an ice-breaker: it made doubting Nigerians participate in on-line shopping. This enlarged the market of on-line shoppers. with Sabunta. com being the lone company to bask the backing of this new rush in on-line manner shoppers. Good public presentation on the portion of Sabunta. com further helped to implement their laterality.
On clip bringing. even without holding received payment. helped to instil assurance in its mark market. To cut down jobs associated with fraudulence and larceny. normally by goons presenting as clients. Sabunta outsourced its bringing to Red Star Express. a taking Nigerian Franchisee of US planetary messenger trade name FEDEX – a major messenger company that has been in operations in Nigeria since 1992. known for its quality of service. Sabunta. com besides introduced assorted patterns that. though standard in mature e-commerce markets. were fresh and advanced in the turning Nigerian e-commerce market. These inventions include:
a. Free Delivery and Return Policy
Prior to Sabunta. com entry. no e-commerce company in Nigeria offered free bringing or allowed clients to return purchased goods. Sabunta. com entered the e-commerce scene offering a countrywide free bringing program every bit good as a return policy which allowed clients return goods bought within the first 14 yearss if they were non satisfied with the status in which it was delivered. To return goods. clients are allowed to drop the purchased points at any of the 158 Red Star Express offices situated in all the provinces in Nigeria at their convenience. This reduces the cost which clients incur during the return procedure. The ability to buy goods at no excess cost of bringing and to return these goods if dissatisfied at minimum costs make Sabunta. com a supplier of high quality at low costs – attributes that entreaty to the monetary value medium and yet choice sensitive Nigerian market.
B. International Product Offer
Sabunta. com recognizes that its mark market constitutes those familiar with and who wear International manner trade names. Consequently. the company spouses with sister manner companies around the universe. owned by the parent. Rocket Internet. to offer a big scope of international trade names – over 150 different trade names – to the Nigerian market. Sabunta. com enhances the show of international merchandises on its site. both those it has in stock every bit good as those in the stock of its sister companies around the universe. This allows the company function the diverse international gustatory sensations of the Nigerian market. and to react to swerve irrespective of its current stock.
For a company that has been in being for less than three months in a foreign market. Sabunta. com has been able to accomplish a batch of success and has been able to get the better of a important figure of envisaged challenges. Sabunta. com successes include:
a. Exceeding Projected Gross
Prior to come ining the Nigerian market. the direction of Sabunta projected gross of ˆ15. 000 from about 150 orders in the first one-fourth of concern. This projection was exceeded after the company’s first month of operations. The company found itself runing in a big market with a greater potency for online merchandises than it had envisaged or planned for. The consequence was a restructuring of its operations to run into the demand.
B. Obtaining Local Supplies
Bing an on-line manner shop. the ability to acquire local providers goes a long manner in finding the sum of net income made. Local supply eliminates the assorted cost associated with acquiring supplies from outside the state – [ The mean mark-up for goods sold on Sabunta. com is 50 % ] . The Sabunta. com squad was concerned about acquiring high quality local supplies for their concern as the figure and industry size of local manner providers were non gettable from official records or research archives.
However. the company was cheerily surprised at the big figure of local manner providers resident in Nigeria. The consequence has been high mark-ups on locally produced and sold merchandises. This has lead to profitableness in less clip than projected. [ Sabunta. com presently makes an mean gross net income of 40 % while their operating and net net incomes are still in the negative ] .
c. Finding Adequate Logistic Suppliers
To guarantee seasonably and accurate countrywide bringing. Sabunta. com required services from bringing houses who possess best patterns every bit good as offer cost-effectiveness as a value proposition. The house understood that a weak or inconsistent logistics arm ( for illustration due to different qualities of bringing by several logistic spouses ) will ensue in negative client perceptual experience. This challenge was overcome through a partnership with Red Star Express – a Franchisee of the US international messenger and logistics service supplier. FEDEX. that has been runing in Nigeria since 1992.
Red Star Express cognition of the country’s transit substructure AIDSs in its optimum logistics service bringing. Furthermore. Red Star Express provides support with more than merely bringing and return of goods. It besides collects hard currency from clients who chose to pay in hard currency upon bringing. and remits these financess to Sabunta. This saves the company costs associated with hard currency direction.
d. Recruitment of Required Personnel
Another envisaged challenge was handiness of skilled local labour. Give the hapless province of Nigeria’s I. T. substructure and edification. the company was unsure of the handiness of I. T related skill sets to transport out Rocket’s theoretical account as practiced in assorted other markets. The company was nevertheless relieved to happen competent local endowment. Sabunta. com operates with a 100 % local I. T squad. capable of transporting out maps required by the Rocket theoretical account.
Despite Sabunta. com successes. the company faces a myriad of challenges. most of which consequence from differences between Rocket’s states of operation and the Nigerian market. Some of these challenges include: a. Challenges Resulting from Socio-Cultural and Socio-Economic Differences
Unlike successes gained in recruiting and keeping local forces. Sabunta. com has non been able to keep its international staff. Over 70 per centum ( 70 % ) of Sabunta’s international staff who started out with the company left within two ( 2 ) months. The ground? Inability to acclimatise to the Nigerian environment with peculiar respects to the type of readily available nutrient every bit good as the deficiency of or the high costs of. basic comfortss such as nutrient. H2O. regular electricity supply. wellness services. cooking gas. transit. cyberspace connectivity. etc.
Other grounds for the going of international staff included wellness concerns. As at August 2012. over 90 per centum of international staff who resumed operations with the company ( in June 2012 ) were diagnosed with malaria. a tropical disease most had ne’er experienced. Unanticipated costs and clip associated with replacement and developing international staff continues to blight Sabunta. com. B. Challenges Resulting from Unavailability of Infrastructure. Bing an e-commerce company. Sabunta. com nucleus operations involve the usage of the cyberspace. Consequently. the company requires dependable and ( sooner ) inexpensive cyberspace connectivity and power.
Yet. neither internet connectivity nor power supply exists cheaply or faithfully in Nigeria. Nigeria generates and distributes less than 4. 000Megawatts – hardly plenty to function the nation’s power demands and ensuing in frequent power outages. Sabunta. com spends over N640. 000 ( ˆ3. 200 ) per month on Diesel to fuel their stand-by generators. and is invariably plagued with this high cost of power. The company besides has high cyberspace connectivity disbursals – N450. 000 ( ˆ2. 250 ) per month for a bandwidth size of 4/4Mbps. Even with such immense amounts spent on internet connexion. Sabunta. com continues to see less than optimum services from Nigerian cyberspace service suppliers.
c. Challenges Resulting from Legislation
A cardinal constituent of Sabunta’s scheme is offering a broad scope of international trade names in Nigeria. utilizing stock held by sister companies around the universe. Research and surveies of Nigerian importing Torahs suggested that importing of manner stock into Nigeria would be comparatively easy. This left the company vulnerable to the daze it received when the first set of drop-shipment was seized at the airdrome by the Nigerian Customs Service ( NCS ) . The NCS claimed that the goods contained points that were contraband in Nigeria. Sabunta responded by taking such points from their offerings – aroma and aromas. .
Notwithstanding its response. Sabunta continues to confront of all time present menaces associated with prohibitions on importing of manner related points including fabric. leather. vesture. and places. Nigerian history reveals frequent policy alterations and incompatibilities with regard importing of goods into the state. long identified as a major cause of failure of concerns in Nigeria. Another challenge faced by Sabunta from the Nigerian statute law is the limitation placed by the CBN on the sale of Foreign Exchange to companies and single except for particular intents like the importing and exportation of goods and services and besides the payment of services abroad. This meant that Sabunta had to purchase foreign exchange at a higher monetary value in the black market to settle all its international staff’s wage and other payments which were denominated in US dollars. ( Official rate is 1 $ =159Naira as against the black market rate of 1 $ =163Naira ) .
d. Challenges Resulting from Corrupt Practices.
Despite the absence of contraband. Sabunta’s direction continue to see holds in the release of their cargo by Nigerian Customs functionaries. Further enquiry revealed that the logistic company they employed ( FEDEX ) to manage importing of their goods did non hold a good relationship with the Customss functionaries due to the company’s enforced policy of non offering payoffs as is the order of the twenty-four hours. Sabunta’s direction continue to see and accordingly to stay watchful to the changeless menace of deceitful and corrupt patterns that plaque concern in Nigeria. The company continues to confront the challenge of local concern spouses who try to cut corners and deliver less. Prior to partnering with FEDEX. a Nigerian messenger company was chosen and partnered with for local bringing. Similar to FEDEX’s aggregation and remittal of hard currency. the messenger company collected payment from clients on bringing.
However. the company often fell short of its duties in footings of timing and sum of hard currency remitted. The messenger company besides failed to describe accurate figures collected from clients. and till day of the month. owe Sabunta over 40 % of payments collected. Sabunta was speedy to acknowledge this job and fleetly partnered with FEDEX for its logistics services. Nevertheless. other beginnings of corrupt patterns persist particularly from little independent service suppliers. This is peculiarly so with craftsman related services such as plumbing. equipment fixs and office care. and are frequent beginnings of lost financess or delayed services to Sabunta.
8. SABUNTA’S FUTURE: THE Amalgamation
Plans are presently being made for a amalgamation with Kasuwa. Rocket Internet’s other company in Nigeria. besides launched in June 2012. to organize Jumia. The amalgamation is expected to ensue in the biggest e-commerce retail merchant in Nigeria – a one-stop store for all merchandises related to manner and electronic points. The new web site. Jumia. com. will offer a wider assortment of international trade names. utilizing schemes presently employed by Sabunta. Jumia is intended to supply benefits associated with graduated table such as price reductions and dickering power ( in relation to providers ) . while turn toing current challenges faced by both companies. They include: a. Staffing: The amalgamation is expected to cut down the figure of needed staff.
This will ensue in the decrease of salary disbursals and will ensue in the demand for fewer international staff. In other words. international staff who have acclimatized to Nigeria from both companies may go on to supply required services to Jumia without the demand to enroll and retain new staff. B. Office Space: The amalgamation is expected to ensue in shared office infinite at a cost smaller than the combined cost of Sabunta and Kasuwa’s current office cost. c. Fueling and Power: Similar to the consequence on office infinite. the amalgamation is expected to ensue in fueling and power costs that will be smaller than the combined current cost of both companies current fueling and power demands.
d. Internet Connectivity: More than merely decrease in costs. the amalgamation is expected to ensue in Jumia’s ability to buy larger bandwith sizes straight from cyberspace suppliers in South Africa. Europe. and North America. This will turn to the undependability of internet connectivity presently faced by Sabunta and Kasuwa. e. Repair and Maintenance: It is expected that the larger Jumia will be able to spouse with big and dependable suppliers of office and equipment fixs therefore extinguishing little service suppliers who have corrupt or undependable patterns.
11Doing a proper market research and analysis
When come ining a foreign market. it is recommended that a house carry out proper market research and analysis on that market prior to entry. Exceed on the list is an environmental analysis that needs to be taken besides. There are unmanageable forces which are external forces upon which the direction has no direct control. and it can exercise an influence. There are besides Internal forces which are governable forces upon which the direction to accommodate to. 12Form Strategic Alliances
When come ining a foreign market. it is recommended that a steadfast forge strategic confederation to enable them acquire the undermentioned * Great synergism with the partnering local company. * Opportunity to entree assets that are non readily available in the market. * Access to larger market and engineering for little companies.
11 Jusuf Zekiri and Biljana Angelova. Factors that Influence Entry Mode Choice in Foreign Markets. European Journal of Social Sciences – Volume 22. Number 4 ( 2011 ) . hypertext transfer protocol: //www. eurojournals. com/EJSS_22_4_12. pdf. accesses August 2012. 12 Mihaela Belu. Schemes of Entering New Markets. The Rumanian Economic Journal. hypertext transfer protocol: //www. rejournal. eu/Portals/0/Arhiva/JE % 2027/JE % 2027 % 20- % 20Belu % 20Caragin. pdf. accessed August 2012. Appendix 1
Mobile Money In NigeriaMobile money as the name implies is the transportation of pecuniary value from one person’s Mobile phone to another. It has been made moving ridges and affected commercialism greatly in certain parts of eastern Africa where it was launched in 2009. In Nigeria. the CBN ( Central Bank of Nigeria ) . granted licence to 11 nomadic money operators in 2011. The CBN rolled out the Mobile money run in Lagos State. Nigeria commercial nervus centre in January 2012. and planned establishing it around the federation by 2013. The CBN besides put in topographic point some inducements for utilizing the Mobile money services. by puting charges for Bank hard currency minutess above 500. 000 for persons and 1million naira for companies. |
Economicss of Lagos StateLagos State is the commercial nervus Centre of Nigeria. Located in the western portion of Nigeria. it is home to over 18million people and has over 2. 000 industries. 65 % of the country’s commercial activities are carried out in the province. Two of the nation’s largest havens -Apapa and Tin-Can Ports are located in Lagos State. |
Income Distribution of the Nigeria Population in 2010
Nigeria Population in 2010-156. 051. 000 ( Beginning: International Monetary Fund – 2011 World Economic Outlook ) This study shows the distribution for seven groups within the Nigerian Population in 2010. Percentage of population in income bracket of 0-500 PPP Dollars –55. 68 % Percentage of population in income bracket of 500-1000 PPP Dollars-28. 22 % Percentage of population in income bracket of 1000-2500 PPP Dollars- 14. 61 % Percentage of population in income bracket of 2500-5000 PPP Dollars- 1. 17 % Percentage of population in income bracket of 5000-10000 PPP Dollars- 0. 17 % Percentage of population in income bracket of 10000-20000 PPP Dollars- 0. 05 % Percentage of population in income bracket of 20000+ PPP Dollars- 0. 1 % Source-Marketline analysis based on information from National Statistical Organization