Full Name: Uzma Zahid Chaudhry
Student Reference Number: 170006295
Module Code: C368
Assignment: TMA01
Word Count: 2500
Introduction
Post-World War II, international markets have been explored rigorously by firms to gain better
market share, revenues, profits, and cashflows. There has been ample evidence reported about
multinational organizations penetrating develop countries first and then moving towards
developing countries location, operations, and resource advantages (Filippaios & Rama, 2008;
Yujuico & Gelb, 2010). This shift from ‘developed’ to ‘developing’ countries was seen in the mid–
1970s when factors such as unbalanced world trade, ever-increasing competition, and high market
saturation resulted in new market entrants (Bonsu & Polsa, 2011; Chikweche & Fletcher, 2012).
At present, most international firms are attaining their overall business objectives through sales
from international operations. The rapid growth by these international firms in developing
countries such China, India, Middles East, South East Asia a few parts of Africa has eased barriers
to entry making the market much saturated than before (Al-Kwifi, et al., 2019). International firms,
in the past, has been hesitant to invest in Africa due to various characteristics such as institutional
voids, high uncertainty, and low aggregate growth (Owusu & Habiyakare, 2011). In addition to
this, there has been political, administrative, and economic barriers involved in doing business in
Africa. With high political instability, social turbulence, restrictive government regulations and
economic uncertainty, foreign investors are discouraged in investing in this continent
(Chrysostome & Lupton, 2011).
Despite all these pertaining concerns, recent market developments in Sub-Saharan Africa (SSA)
has been observed. Developed countries are showing greater interest in setting up business in SSA
due to its improved economic growth rate, political stability, and enhance businesses environment.
Many large multinational corporations (MNCs) along with small firms are attracted to the SSA
Bottom of the pyramid (BOP) market. In 2019, SSA reported a gross domestic growth rate of 3.07
percent which has been incrementing since 2015. By the year 2050, the continents population is
expected to grow by 2.3 billion according to world bank. Since 2010, developed nations have been
investing in the region through Foreign Direct Investment (FDI) which accounted to about $1.2
trillion. Such investments bring in not only cash flow, but also resources, technology, training,
human development, and access to international markets (Donaubauer, et al., 2019). The
telecommunication, finance, and manufacturing sector were the first to penetrate the market. This
was done by big brands such as Unilever, Standard chartered, and MTN (Al-Kwifi, et al., 2019).
Yet, it is crucial for firms to understand that entering into SSA market and sustaining there is
difficult due to considerable institutional differences between firms. MNCs are usually criticized
for reaping.
Many global firms have opted for different strategies when entering into SSA market. Despite this,
a thorough screening and evaluation is required by firms before entering into such uncertain
markets (Gekonge, 2014). Thus, this report examines various entry modes in context of SSA and
the challenges it imposes on firms. Further, the report will also discuss strategies for specific
market entry and competitive strategies for sustaining a business in Africa.
Entry Modes Analysis in SSA
As stated earlier in the report, globalization has redefined organizations goals and objectives and
these are majorly met by sales and revenues of foreign establishments by the firms. A market entry
mode is an institutional arrangement via which firms gain their resources (human, technological,
products and services, and talent) introduced in the new market. There are a variety of options
available to firms after they have evaluated efforts, screened the market, and developed a
marketing plan. The entry modes available to firms differ from one another based on cost, timing,
risk, product characteristics, and the degree of control that can be exercised by the firm. Firms
choose the option that best matches their resources, marketing experience, and the size of the
market they wish to penetrate. According to Han et al., (2008) there are three main strategies opted
by firms when entering foreign market:
• Exports and imports are considered as the lowest level of entry into foreign markets and
holds limited control on the entry process
• Contractual entry strategies such as management contracts, franchising, licensing, and
turnkey projects are selected by firms when they wish to have moderate control on its
operations. Not all contractual agreements provide this merit.
• Investment entry strategies which includes join ventures, acquisitions, strategic alliances,
mergers etc. are considered most complex and riskiest.
Various Entry Modes
