International management
International management
Introduction
Expansion to foreign markets is an important prerequisite for success of any modern business. Sustainable growth strategy serves a number of aims, such as supporting the growth of markets and products, expanding a business, improving margins, increasing revenue and reducing a time of a business cycle (Kumar, 2010, p.1). Furthermore, expansion to foreign markets is crucial for companies that manufacture products, targeted for the markets of developing countries, so that as many economies as possible can benefit from innovative solutions.
One of the crucial problems of African countries is water supply. Every day a lot of individuals (especially, women) suffer from sever spine injuries due to the fact that they carry significant amount of water in containers. Introducing specific cylindrical rolling vessels for water, Q Drum (located in South Africa) helps people in many areas of Africa (Mozambique, Democratic Republic of Congo, The Great Lakes and Horn of Africa etc.), as well as Mexico and the Philippines to simplify solving water supply-related issues (Q Drum, 2016). Furthermore, its products are helpful for solving a range of tasks in different spheres, such as agriculture, aid, mining and the military.
In view of the above, current study aims to assess the feasibility of Q Drum’s expansion to the actively developing market of Angola. As a Head of Strategic Management Department of Q Drum (where 4 employees tightly work together to elaborate the company’s growth strategy) I will focus on an analysis of Angolan business environment to determine whether Q Drum can currently rely on opportunities to expand to the market of this country. The consideration of business environment will include political, legal, economic, sociocultral and demographic factors.
Angola is chosen as a host country for a number of reasons. Firstly, Angola is currently emerging from a long-term civil conflict that led to significant challenges in the areas related to water and sanitation (AMCOW, 2015, pp.2-3). Thus, a lot of actions are being taken to ensure water supply in Angola, such as the rebuilding of damaged infrastructure; establishment of the relevant institutional structure; development of new policies and, most importantly, promotion of coordination at all the levels. A considerable attention to water and sanitation issues can help Q Drum obtain investments from various stakeholders (e.g, international organizations, NGOs and individual donors) to enter the market of Angola.
Secondly, as Angola is located near the Democratic Republic of Congo, where Q Drum has been successfully functioning for a number of years, it is suggested that it will be easy for the company to ensure quality timely supplies of its products to Angola. Finally, it is not worth forgetting that the market of Angola has large prospects for development, currently representing one of the world’s fastest growing economies.
Business environment
Political and legal aspects
As it stems from the research, conducted by the Foreign Commonwealth Office (2015), the government and business are tightly linked in Angola, and government tends to continuously interfere in different spheres of business. At the same time, the government currently seeks to launch privatization and deregulation initiatives in order to diminish the governmental influence on economy and promote foreign direct investment.
According to the information of the World Bank (2015), Angola has managed to maintain political stability since the end of the civil conflict in 2002. A presidential-parliamentary system was set by the Angolan Constitution of 2010. In 2012, the first democratic elections took place in Angola. Importantly, Angola has become an active player in African politics, especially with regard to promoting security and stability in the Great Lakes region.
Despite positive developments, Angola still faces multiple political and governance-related challenges. As it is stated by Transparency International (2015), the Corruption Perception Index in Angola is 163/168. Furthermore, according by the World Bank “Ease of Doing Business” Report, Angola possesses a 181th position out of 189. It also ranks low in terms of the Global Innovation Index (135 out of 143 in 2014) (U.S. Department of State, 2015). The major developmental challenges Angola faces within the political context include strengthening institutional capacity, combating corruption, implementing large-scale infrastructural projects, as well as developing an effective anti-poverty policy.
The 2013 Gross Domestic Product in Angola accounted for USD 121.7 billion, demonstrating a 7.4 percent increase by comparison with 2012 rates. Overall, the economy demonstrated an average double-digit increase since 1990, accompanied by the reduction of poverty. Angola benefits from a range of trade agreements for development and cooperation, such as the Community of Portuguese –Language Countries (CPLP) and the UN Conference on Trade and Development (The World Bank, 2015).
Angola is a party to Southern African Development Community that also includes Botswana, Malawi, the Democratic Republic of Congo, South Africa, Swaziland etc. Moreover, it has bilateral FTAs with China, the USA, Israel and Namibia. Since 1996 Angola has been a member to the WTO, and grants MFN treatment to its trading partners.
Despite the GDP growth in recent years, there are forecasts, predicting an economic decrease for this country due to the declining oil prices and a country’s current inability to attract foreign investors (resulting from good governance and corruption-related issues) (The World Bank, 2015).
Legal and ethical aspects
The legal system of Angola is rather fragmentary, and is based on the elements of Portuguese and customary law. In terms of the recent constitutional revision a modern labour and employment legislation has been introduced. The country also ratified all the fundamental conventions, developed by the ILO (International Labour Organization). However, there is still a lot of court cases, dealing with employment issues.Specific concerns related to human rights abuses, allegedly taking place in a range of provinces of Angola, such as Lunada Sul, Huambo and the Luanda Norte. The concerns relate to the observance of the range of basic human rights, such as housing, the right to protest and freedom of expression. A bad sign is that many NGOs (including international) have reported restrictions regarding their work in Angola (UK Trade and Investment, 2015).
Important law-related barriers to doing business in Angola are the prevalence of corruption and bribery, despite the formal adoption of anti-corruption legislation and weak intellectual property rights protection. The scope of organized crime and terrorist threat is limited. However, separatists in Cabinda can constitute a threat for doing business in case they launch protests.
Socio-cultural issues
According to the cultural dimensions theory by Geert Hofstede, Angola scores high with regard to power distance, uncertainty avoidance and indulgence. This means that people tend to accept that power is distributed unequally, avoid uncertainty and follow their impulses. At the same time, the culture is characterized by collectivism, femininity and short-term orientation (The Hofstede Centre, 2016).
The culture of South Africa is quite different. Major similarities deal with short-term orientation and a trend to indulgence. However, the inclinations to individualism, masculinity and not accepting the differences in power distributions are far more apparent in the culture of South Africa (The Hofstede Centre, 2016).
The application of the Seven Dimensions of Culture model by Trompenaar and Hampden-Turner also allows seeing considerable differences between the national cultures of host and destination states (MindTools, 2016). While Angolan culture is evidently collective, South Africans are more disposed to individualism. At the same time, Angolan culture is more particular and specific, than the culture of South Africa. The sequential culture is peculiar only to Eurocentrists in South Africa, so the majority of South Africans (as well as Angolans) are oriented to synchronous culture (Smit et al., 2007, p.260). The outer direction is more peculiar for South African culture, than for Angolan. However, both cultures may be considered to be more inclined to internal direction than the national cultures of the EU countries and the USA. Both cultures are also ascritpive by comparison with the modern European and the U.S. culture.
However, the European and American influence on the culture of South Africa is currently more considerable than on the one of Angola. Nevertheless, it is worth remembering that Angolans tend to manifest significant respect to European and American culture. Therefore, some European and American traditions can be used as a lowest common denominator to mitigate the differences between the Angolan and South African cultures.
Demographic environment
The population of Angola currently exceeds 24 million. The population is growing extremely fast. While almost a million people were born in 2015, only half a million died. It is projected that the population of Angola will grow by almost half a million in 2016, and will reach 25 million by the end of the year (The World Bank, 2015).
Female population only slightly outnumbers men. Importantly, children (below 15 years old) currently constitute more than 40 percent of the whole population of the country. At the same time, there is fifty four percent of individuals, aged between 15 and 65 years old. Only 2.7 percent of population is older than 65 years. The population is comprised by a range of different language groups, such Ovimbundu, Ambundu, Bakongo etc. The vast majority of Portuguese, staying in Abgola, left the country during the civil war. The most frequently spoken languages are Portuguese and indigenous languages. More than 100 Christian communities function across Angola (The World Bank, 2015).
Opportunities and challenges for doing business in Angola
As it was mentioned, a lot of attention is currently paid to building sustainable infrastructural system (including water supply) in Angola. A cooperation of multiple stakeholders, aimed at creating modern water supply system in Angola represents a significant business opportunity for Q Drum. In more general terms, the government of Angola currently seeks to attract FDI to the country. Countering poverty and designing functional infrastructure are of significant importance for reaching the above aim. So, it is suggested that the governmental support will be available for Q Drum.
Significant opportunities are related to the combination of rapid population and economic growth. Population growth meets ever growing demands for tape water. At the same time, economic growth means that there are more opportunities to secure the fulfillment of water-related needs. Importantly, both Angola and South Africa are the members to Southern African Development Community, and enjoy free trade regime.
Finally, it is worth emphasizing the role of Angola in promoting peace and stability in Africa. Provided that Angola continues to act as a key promoter of security and stability in the Great Lakes area, entering Angolan market can mean further expansion-related opportunities for Angola.
The key challenges for doing business in Angola stem from the complexity of doing business, outdated legal system, corruption, as well as cultural differences. However, Q Drum already has a significant expertise in doing business in African countries and countering the above difficulties. With regard to cultural differences, it is worth mentioning that Angola’s respect for European and American traditions may help Q Drum to elaborate on common frameworks for cooperation with Angolan partners.
Entry strategy
It is suggested that Q Drum looks for an international NGO, willing to implement a project, aimed at enhancing water supply opportunities in Angola. As Q Drum already partners with some of organizations and initiatives, conducting development projects in Africa (e.g, Invent for Humanity, I Need Fresh Water), it can attempt to get this organization inspired by the opportunity of working in Angola. Q Drum can also contact the Government of Angola to secure public procurement of its containers. Following the results of working in partnership with the international NGOs and the government, Q Drum can attempt to establish a small subsidiary in Angola to sell containers directly to customers.
Final decision
As there are a lot of business opportunities in Angola and the company has enough experience to face developmental challenges, the final decision is to start negotiating partnerships to enter the market. Critical success factors will encompass the availability of partners, support from Angolan government, active market penetration strategy, as well as the well-designed promotion strategy, allowing to emphasize both the development-related and commercial helpfulness of containers in Angola.
References
AMCOW (2015). Water supply and sanitation in Angola. Turning finance into services for 2015 and beyond. Retrieved 23 February 2016 from http://www.wsp.org/sites/wsp.org/files/publications/CSO-angola.pdf
Foreign & Commonwealth Office. (2015). Overseas Business Risk – Angola. Retrieved 23 February 2016 from https://www.gov.uk/government/publications/overseas-business-risk-angola/overseas-business-risk-angola
Kumar. D. (2010). Enterprise growth strategy: vision, planning and execution. FArnham: Gower Publishing Ltd
Mindtools (2016). The seven dimensions of culture. Understanding and managing cultural differences. Retrieved 23 February 2016 from https://www.mindtools.com/pages/article/seven-dimensions.htm
QDrum (2016). The rollable water container for developing countries. Retrieved 23 February 2016 from http://www.qdrum.co.za/
Smit, P.J., Gronje, G.J., Brevis, T., Vrba, M. (2007). Management principles: a contemporary edition for Africa. Wetton: Juta&Co
The Hofstede Centre (2016). Strategy, culture, change. Retrieved 23 February 2016 from http://geert-hofstede.com
The World Bank (2015). Angola overview. Retrieved 23 February 2016 from http://www.worldbank.org/en/country/angola/overview
UK Trade and Investment (2015). Doing business in Angola: Angola trade and export guide. Retrieved 23 February 2016 from https://www.gov.uk/government/publications/exporting-to-angola/doing-business-in-angola-angola-trade-and-export-guide
U.S. Department of State (2015). 2015 Investment Climate Statement –Angola. Retrieved 23 February 2016 from http://www.state.gov/e/eb/rls/othr/ics/2015/241457.htm
