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Exploring Retail Opportunities in Kenya: Doing Business in Africa 2016

  Jan 15, 2016
  General,

Africa’s vigorous economic growth continues to attract entrepreneurs and investors; a thirst-driven motivation, to grasp the continents influence to new opportunities.

Strathmore Business School’s Doing Business in Africa program, quenches this thirst. It is designed to provide executives with a unique exposure to the African continent by providing practical skills and knowledge required to successfully operate and grow a business on the African continent. The in-depth curriculum draws from SBS’ experience of the case study methodology, lectures, industry guests’ sessions and syndicate group discussions.

The program  this year attended by 53 Masters in Business Administration students from IESE Business School,  explored the retail market in Kenya (both online and offline retailers), transformative innovations which make Kenya the birth place of mobile money transfer and  market penetration channels in East Africa and the continent at large.

Giving a local feel of the retail market in Kenya, the team visited Kenyatta Market, and local vendor shops, a worthwhile exposure which introduced them to retailing strategies in Kenya. Prof. Alejandro Lago, one of the module facilitators from IESE Business School, explained the uniqueness of inventions in Africa unlike other contexts, mentioning that, “what make Africa unique are its solutions which have been built to address the shortcomings of access to proper infrastructure.”

The M-Pesa innovation, he explained, had to beat the test of infrastructural accessibility, as well as the innovation’s compatibility across all mobile phone devices. He went further to give a comparison of other mobile transfer platforms in Africa, for instance, Safaricom and Vodaphone in Tanzania.

He attributed Safaricom’s success to its grand marketing strategy which appealed to local people, especially, low income earners. The platform did not segment the market, but rather was a unifying platform, which gave everyone access to similar opportunities. This made mobile transfer an easy practice, which engaged everyone. Tanzanian Vodaphone however, in its marketing strategy, was packaged as a product for the elite, and high income earners, consequentially leading to poor brand loyalty from low income earners, who felt excluded.

 As part of the learning methodology, the participants studied the Distribution and Retail Channels in Africa, Gallina Blanca’s case (1970-2005). Gallina Blanca’s case focuses on a Family business in Spain, which penetrated the African retail market in the 70s. Prof. Lago referred to the business as the “courageous dwarf” which exemplifies a small-medium sized company, which takes the course of expanding its boundaries to a new market, which had a very different business orientation.

He took the class through the case, through the analysis of the CAGE (C-culture, A-administration, G-geography, and E-economy) model. Although the company faced various challenges such as cultural differences, language barrier, change in administrative regulations such as taxing, and colonial heritage, the company was also able to grab and make use of their competitive advantages. The company’s economic decision to add Vitamin A to the products ingredients increased its market share, a social and ethical consideration which boosted their brand loyalty as well. In Ivory Coast, (geographical location of the business) Jumbo (the product owned by Gallina Blanca) was perceived to be more African than it’s competitors, Nestle, which was considered to be more French than local. The company’s brand and product packaging were their important assets, which they capitalized on.

“Multinational companies have typically been the lower performers in the continent in terms of the market share, attributed to miss-understanding the African middle class,” remarked Prof. Lago.

Crowning it all, Ms. Parinaz Firozi, current Managing Director of Jumia Kenya and an MBA Alumna of IESE Business School gave a guest lecture on Online Retail Market in Kenya. Kenya’s consumer behaviours are experiencing rapidly-changing, trends which have been greatly shaped by drifts in lifestyle changes. This, Ms. Firozi explained has been the backbone of their success in e-commerce. “By understanding and adapting to the needs of Kenyan customers, we have been able to successfully penetrate the market, withstanding and victoriously breaking ground in a country where e-commerce was not as popular.”

Jumia Kenya’s success beats the odd, as several other multinational online retailers have not been able to sufficiently penetrate to Africa.  “When we entered the Kenyan market in 2013, we realized there were many hurdles we had to overcome. The Kenyan consumer was skeptical about shopping and transacting online. However, we have managed to gain our customer’s trust, through improving our customer service and vigorous marketing.”

Jumia Kenya has also provided an opportunity for shoppers to pay in cash upon delivery or via M-Pesa, making shopping easier.

Ms. Firozi credited the leapfrogging approach the country has been able to absorb in retail market. This, she credits to Africa’s ever growing internet penetration and tech-savvy middle-class.  She urged the participants to adhere to the region’s cultures as they strongly influence business operations and administration, to be keen on people management, and to conducting business through adherence to ethical practices.



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