With the business landscape constantly evolving at pace, executives must respond by developing strategies that mitigate risk and deliver tangible impacts. With almost endless options, a tried and tested strategy is expanding through international markets.

Serving leadership teams well in the past, executives have found new customers in China, lower costs in India and access to skills in Eastern Europe. Unfortunately, however, these markets no longer offer the same benefits. Competition has saturated markets, made labour expensive and increased complexity. While some have turned to other developing areas such as Southeast Asia as an alternative, the world’s fastest growing population has been overlooked. Africa could be the key to developing your successful international expansion strategy. It offers labour, affordable input costs and a location that is fighting to attract international business.

With labour, affordable input costs and a location that is fighting to attract international business, Africa could be the key to your successful international expansion strategy

Why expand internationally?

International expansion involves developing a strategy that uses an external location to enhance an organisation’s resilience to external shocks, all while improving operational efficiency and reducing costs. The objective is to utilise the location to benefit the organisation. Executives should identify countries that complement their strategic intent by considering the local business landscape, planning for challenges and identifying opportunities.

There are a plethora of ways that organisations can expand into Africa – and here are 3 key reasons why.

  1. New markets

Africa is a continent of 54 countries with a population of 1.3 billion people. It’s home to the world’s fastest-growing population, whose increasing wealth offers the potential for a large new customer base. Half of Africa’s population live in urban areas, benefiting from leapfrogging technologies in the insurance, health, fintech and agritech industries. Indeed, technological access across the continent has increased substantially – 5 new unicorns were minted in Africa in 2021 alone. Certainly, there are substantial opportunities for companies within technology and finance to utilise Africa’s 700 million smartphone users – a demographic almost double the size of the EU population. And, for companies in the manufacturing and logistics sector, the possibility to utilise the favourable costs of land and electricity. Leaving the competition behind, you have the potential to become a market leader with a loyal (and large) customer base by simply being among the first to market.

  1. Supply chains

As we all know too well, supply chains have been strained by the global pandemic, conflict in Ukraine and changing attitudes toward globalisation. Yet, executives can mitigate these risks by locating their operation in Africa. Organisations benefit from a large and affordable workforce, developed infrastructure and robust supply chain networks.

The trend of near-shoring, where organisations move significant parts of their production away from the Far East and locate them closer to home, is currently picking up. However, Africa, which consists of countries that have advanced manufacturing and IT sectors, is clearly a viable alternative. Sourcing suppliers of physical products and services has become more accessible and cost-effective as African countries develop. Executives can mitigate against rising labour costs and shortages in the Far East by sourcing from an African country. They benefit from favourable tariff agreements and attractive government incentives aimed at international companies while relocating their supply chains to countries that are not in trade disputes.

  1. Strategic locations

Organisations can benefit by locating operations in the many countries that have a free trade agreement with the EU, UK  or US. Locating your operations strategically on the continent may also result in reduced costs and increased efficiencies. Your organisation’s overall strategy will drive the location you select; you may benefit from an assembly plant in Kenya, which imports material from the Far East or a warehouse in Ghana, which distributes stock to Germany.

Developing the strategy

Organisations that venture into Africa often fail to consider the diversity of cultures, the nuances of local business and the vast landscape. Indeed, a continent that is in the early stages of development does come with challenges. Africa is not a straightforward place to conduct business. Most countries sit in the low branches of the Ease of Doing Business Index for a good reason. Red tape, intermittent services, undeveloped local infrastructure and developing political structures mean it can be a difficult place to do business, which is why you need a partner who understands and works in Africa to navigate the local landscape.

Leading the way

Walmart has successfully entered the African retail market by purchasing a controlling stake in Massmart, a retailer of consumer goods located in various African countries. They’ll be the first brand that over 1 billion people recognise as they grow up and move into the market as consumers themselves. A brand that will be recalled for generations in a similar way we do with legacy companies founded in the early 20th century.  Through this acquisition, Walmart has successfully launched its business in 13 African countries, offering a wide range of products from building materials to household electronics. They have recognised the power of the developing market and have made the investment to be among the first retailers to access it.

Several automotive manufacturers, including BMW and Toyota, have operated assembly plants across the continent for several years. Most vehicles are produced for export markets to the EU, UK, US and China. Morocco, the largest market for automotive manufacturing in Africa, exported over $10 billion worth of cars in 2018. The manufacturers surely have an eye on the local African market which accounts for 1% of global car sales. 15 years ago China also accounted for 1% – they now make up 17% of worldwide automotive sales, indicating a clear upward trajectory.

In the telecommunications space, take Carphone Warehouse, a leading UK company. In 2017 they successfully offshored their call and data centre operations and have grown them yearly to a group 1,000 strong. And the result? Besides a reduction in operating costs, they will have received a grant from the South African government of approximately £10,000 per employee.

Making your next big move

Africa’s population will rise to 2 billion by 2050. It offers a clear solution to businesses that are currently grappling with flux in world markets. And yet it’s misunderstood or simply not understood. Africa provides opportunities and rewards to those that venture into it. When determining your international expansion strategy, Africa certainly has the diversity to provide a solution.

As a global firm with long-standing relationships across Africa, we have a unique perspective on the challenges and opportunities companies face when dealing and operating in these countries. We’re committed to helping bold business leaders disrupt their industries. Connect with us today to help you change the game.