By Kaitlin Junod
By Kaitlin Junod
Rabat – Multinational companies in Africa are growing, but are losing market share due to competition with local businesses. A new report by Boston Consulting Group, revealed at the international headquarters of the Casablanca City Finance Authority, outlines the many factors that allow smaller, local companies to compete with larger multinational corporations.
The report uses the term African Lions to describe many African-based companies “from Cape to Cairo” standing in the way of multinational corporations (MNCs). Examples include the South African-based mobile telecommunications company MTN and cosmetics company Biopharma Laboratories.
The “lions’” advantages are broken down into four main categories: focus, field, flexibility and facts. Unlike international companies, local businesses consider Africa their core market and use their resources accordingly (focus). They are also able to draw on long-term relationships with suppliers and partners that multinationals lack (field). In terms of flexibility, lions are able to adapt their strategies to the local environment, and they source their information locally with effective market intelligence (facts).
MNCs are looking towards Africa as an attractive market for many reasons. Population growth and higher household incomes have help lift Africa’s GDP more than five present each year on average for the past 15 years, according to the BCG report. It also offers a large working-age population, which is more educated and connected to the rest of the world than before as the use of mobile phones and Internet grows rapidly.
However, if MNCs are to stand a chance against local competitors, BCG advised that they revise their tactics along the lines or persistence, partnerships, predictability and platforms.
According to the report, it is essential for MNCs to allocate appropriate financial and human resources and develop models specifically for their African markets (persistence). And though it is impossible for MNCs to match African companies’ field presence, they must make an effort to forge partnerships. Similarly, MNCs cannot have the same kind of market intelligence lions have, but they should still try to acquire and develop local talent (platforms). Finally, international players should become more flexible, yet at the same time offer predictability and efficiency.
Though it is impossible for MNCs to replicate the successful methods and systems of local lions, BCG has outlined the framework for more effectively pursuing African markets.