Performance Analysis of SOKOWATCH
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Transcript of Performance Analysis of SOKOWATCH
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UNIVERSITY OF ILL INOIS
CHICAGO
I N T E R N A T I O N A L
E N T R E P R E N E U R S H I P
RELI EF WATCH
PROJECT REP ORT
GOWTHAM SIVAKUMAR
IMRAN BAIG
JOSEPH L INDBERG
EVA KOWALINSKI
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CONTENTS
ReportNotebook
• "Africa's Testing Ground." The Economist . The
Economist Nespaper! # Aug. $%&. eb. %&Oct. $%(.
• )adesimi! Am*. "The Changing +ace Of ,usiness
-n Nigeria." Forbes. +orbes aga/ine! % a*$%(. eb. %& Oct. $%(.
• 0Nood1es in Nigeria.2 EuroMonitor International.
eb. %% Oct. $%(.
• "hat is Sokoatch." Sokowatch. Sokoatch!
n.d. eb. %& Oct. $%(.
• ",oko 3aram4 A ,1ood* Nigerian -nsurgenc* 5CNN.com." CNN. Cab1e Nes Netork! n.d. eb.%& Oct. $%(.
Tab %
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ABSTRACT
Daniel Yu and his team at Sokowatch are now looking to expand
abroad, with an emphasis on the consumer goods industry in
Nigeria. Relief Watches brother company, !Sokowatch" is well
suited for Nigeria for a #ariety of reasons. Not only is Nigeria
expanding its market si$e, but its %D& is also growing at a
steady pace. 'ccording to the (conomist, Nigerias annual %D&
growth is at ).*+, and the input from -% /ast -o#ing
onsumer %ood0 spending towards %D& has increased by 12.3+
/4'frica5s 6esting %round"0. 7n addition to the positi#e 8nancial
predictions, Nigerias population is set to double in the next )2
years. 'nother reason Sokowatch should grow in Nigeria is
because the economic sectors are changing with respect
consumer goods. 6here is a prediction of an annual increase of
9+ in consumer goods e#ery year to become the largest sector of
the economy, worth almost :1.) trillion by ;232
With a pro#en track record in the medical in#entory management
space, Daniel Yu and his team at Relief Watch are now switching
gears and tapping into the international consumer goods market.
7n this report, we will outline the focus of Sokowatch, the
potential of expansion into the Nigerian market and 8nally, we
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will identify the target market and potential companies
Sokowatch may want to partner with.
INTRODUCTION
Sokowatch is an in#entory management tracking system used for
the de#eloping world. 7t 8lls the gap that many third world
countries ha#e when it comes to ha#ing the right infrastructure in
place to e
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7n addition to the easy access which Sokowatch pro#ides, users
are not re@uired to download additional hardware and are not
8nancially responsible for co#ering the cost of the phone call.
Ance users report the amount of in#entory on hand by clicking
the digits on their phones, the data is automatically stored in
Sokowatch5s cloud system and companies are better able to
pro?ect future consumer demands and eliminate stock shortages.
MARKET ANALYSIS
While there are positi#e forecasts for the Nigerian market, there
are also signi8cant risks that need to be considered. &oor
infrastructure, as well as political and economic instability run
rampant throughout many parts of Nigeria. 'ccording to the
Buman De#elopment 7ndex, Nigeria ranks 1C2th out of 1
countries with the largest amount of po#erty. /&o#erty 7n
Nigeria0. 7n addition to the low income earned by much of its
population, Nigeria5s religious and ethnic tensions create an
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increasing likelihood of #olatility, especially in regards to
#iolence. Eoko Baram, an extremist 7slamic group acti#e in the
northeast region of Nigeria, desires to impose Sharia law at the
expense of many li#es. !6he militant group has bombed schools,
churches and mos@uesF kidnapped women and childrenF and
assassinated politicians and religious leaders alike" /NN0. 6he
#iolence and bloodshed resulting from the Eoko Baram militant
group could create a threatening e
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7n addition to the lack of transportation infrastructure, a shortage
of electricity hurts businesses as power cuts are fre@uent.
'ccording to the World Eanks !Doing Eusiness" sur#ey, Nigeria
is 19Gth out of 19* countries for easiness of getting electricity
/'frica5s 6esting %round0. Eecause of these risks, Sokowatch
needs to prioriti$e and help train store owners on how to best
anticipate the amount of stock they need.
Table 1: SWOT Analysis of Nigeria
rengths
H 'bundant supply of naturalresources
H Bigh economic growth factorsH Iargest 'frican (conomy
Weaknesses
H Bigh le#elsH DependanceH Iack of tran
portunities
H 7mpro#ed infrastructure
H Young labor forceH -ore ad#ancement in terms ofJ
K BealthcareK (ducationK 6echnology
Threats
H Disturbance
SecurityK Eoko Baram
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TARET MARKET
ontinuing to operate as a E;E /Eusiness to Eusiness0 company,
Sokowatch will introduce their e
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Figure 1: Nigeria FMCG trade Structure
6his lack of existing in#entory tracking systems in countries such
as Nigeria pro#ides an incredible opportunity for Sokowatch as
they stri#e to be the 8rst mo#ers in pro#iding su
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's we research the -% sector within Nigeria, we see
continuous growth. 'ccording to OA- 'frica, Nigeria has the
highest demand for fast mo#ing consumer goods in comparison to
any other african country /Pander ;0. 7n fact, in ?ust one decade
/;21;=;2;20, Nigerias -% sector grew by 12+ /Pander ; = see
image comparison below0.
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Figure 2:FMCG Country potential in Africa
's a result of this growth, key players like Nestle, Lnil#er,
&rocter %amble and S'E -iller ha#e each de#eloped strategies
for expansion into Nigeria. NestlQ plans to triple sales o#er the
next decade, &rocter %amble has ?ust completed a factory near
Iagos
and S'E-iller recently built an expensi#e brewery in Anitsha, a
de#eloping city in Nigeria. 's we see these large corporations
expand into the foreign market, we take a look at the potential
partnerships that Sokowatch can undertake. Autlined below are
se#eral companies in #arious -% sectors who we belie#e
would be #iable business partners for SokowatchJ
Soft DrinksJ Co!a"Co#a remains the dominant producer of
carbonates and bottled water in Nigeria due its long established
history in the country, strong distribution network, and
aggressi#e marketing techni@ues. 7ts price is generally cheap so
that it can be bought by e#en the lowest income earners. 7n
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addition to the increasing popularity of oca ola, the @uality of
tap water in 'frica is generally so bad that people will opt to buy
soft drinks when they can a
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Internationa# and &ro!ter * a+,#e. Ane important issue in
the personal care sector is the adaptation of Western products to
the speci8c needs of 'frican consumers. Some international
companies ha#e recogni$ed this, and ha#e either adapted their
global products to suit 'frican needs, or launched new product
ranges. Lnile#er recently de#eloped its -otions range of
shampoos and conditioners aimed speci8cally at ethnic hair. 7n
addition to introducing darker range make up shades, &rocter
%amble continues to position itself well through successful salesof its %illette products.
oodJ Nigeria has become an increasingly attracti#e frontier for
the consumer goods food industry. 6he most important
supermarkets in Nigeria are Artee roup-s &ark n Shop and
Shoprite. Shoprite entered the Nigerian market in ;22G/Shoprite0, and is currently in the process of adding 3 stores in
Nigeria which gi#es Sokowatch an ad#antageous opportunity. 7n
addition to the local grocers in Nigeria, Sokowatch may also wan
to consider a possible partnerships with De"Unite. /oo.s. 's
the noodles category continues to increase in Nigeria, De=Lnited
foods holds a 1+ market share. /(uro-onitor 7nternational0.
6heir 8rst mo#er status and constant introduction of new >a#ors
ha#e made them the go=to purchase for many of Nigerias locals.
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7n addition to partnering with existing corporations who
operate within Nigeria, Sokowatch should adopt a similar
strategy as they did with Reliefwatch, and should focus on
targeting storekiosk owners as they are the ones who will ha#e
direct
contact with the in#entory on hand. 6he storekiosk owners that
Sokowatch should target will be located in rural areas of 'frica athe less de#eloped areas ha#e a greater need for Sokowatchs
product and where access to cellphones is predominantly high
compared to the rest of sub=saharan africa TSee chart below =
SourceJ termolux.comU
Figure : T!e up"ard cur#e for $obile subscribers
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While many of these companies are seeing increasing pro8ts
when doing business in the de#eloping world, a closer look into
their in#entory tracking systems would likely re#eal inconsistent
results. With the help of Sokowatch, the companies mentioned
abo#e would see more consistency and would be able to better
run their international operations as a result of more detailed
in#entory information. 's with any business partnerships,
Sokowatch should aim to de#elop and build long lasting
relationships in Nigeria while being mindful of the legal andcultural factors that may take precedence.
COM&ETITION
urrently, there are no any direct competitors in Nigeria that
o
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own in#entory tracking system. 7f that is the case it is unlikely
that their supply chains will pro#e to be su
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ompanies can grow through identifying and selecting market
opportunities, and then de#elop strategies to capture these
identi8ed opportunities. -arket entries are a chance for
companies to grow by le#eraging their core business. (xpanding
into a new market and to de#elop a market entry strategy
in#ol#es a great deal of market research, a thorough analysis
and it takes an appropriate process to correctly assess the
potential of the growth opportunity. When considering entering a
tricky market like Nigeria, it is essential to do the researchcorrectly, since the success of such markets are dri#en partially
by factors outside of ones control. 7t is important to in#estigate
the appropriate le#el of resources in market analysis, selection
and entry method to create a foundation of success in the chosen
market.
Figure %: & contribution of ser#ices 'r$s to G()
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Ser$i!e 0r+s in an age o) g#o,a#i1ationJ 'ccording to World
Eank statistics, the global ser#ice industry occupied around G2+
of Nigerian %D&. 6his report re>ects the phenomenon that
ser#ice 8rms ha#e the most de#elopment potential in the future
trend of globali$ation in de#eloping countries.
'lthough entry strategies /say., D70 of multinational
enterprises could be applied to multinational ser#ice 8rms, it
must be done with extreme caution due to the distincti#echaracteristics of hard ser#ices such as in#entory management.
6herefore, it is necessary for us to consider the ser#ice
characteristics of supply chain management systems when
discussing entry strategies. ' number of factors that a
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Figure *: T!e gro"t! of ser#ice industries as )C+ increases
/a!tors a2e!ting Entr3 +o.e )or Soko4at!hJ %lobali$ation
means ser#ice 8rms like Sokowatch ha#e great opportunities to
conduct their business in foreign markets like Nigeria.
6herefore, the primary consideration and the most critical issue
in an international market entry strategy is the selection of anappropriate entry mode /6erpstra and Sarathy, 1**)0. (ntry
mode selection is interpreted to mean a suitable way for
enterprises to enter foreign markets so as to operate their
international businesses by exploiting their ad#antages /Root,
1**)0. 's to the entry strategy of Sokowatch, it could be
characteri$ed by considerable di#ersity which includesJ
i. Cultural factorsJ ultural distance /di
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selection as well as the moderating euence how they would like to operate their business in
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(xpansion and Aperations 'broad. 6he primary reason is that,
for high=tech industries, high=technology intensity and RD
expenditure make 8rms su
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standardi$ation are basic re@uirements for a supply chain
management 8rm, they should look for accompanying partners
with good discipline and high consistency.
So#ution5 Due to complexity and #ariety in the international
business en#ironment, Sokowatch should ha#e its own
circumstances to consider with regard to entering a foreign
market to its best ad#antage. 7n other words, each mode of entry
is taken into account by Sokowatch in light of their ownresources and capabilities in the changeable en#ironment and
>uctuating conditions of Nigeria. 7t has to stress the di
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adaptation and locali$ation, and they are more highly culture=
dri#en than tangible goods.
M(R)ETIN*
'roduct: 's discussed in &art 1 of our report, Sokowatch is a
consumer goods in#entory tracking system for de#eloping
countries. 6he Sokowatch system pro#ides in#entory
management to minimi$e shortages, increase transport euctuations. 6his ser#ice relies on
existing mobile phone distributors which ma?ority of the
de#eloping countries populations ha#e access to. Lsers are not
re@uired to download additional hardware and are not 8nancially
responsible for co#ering the cost of the calls, or the phone. Data
is automatically stored in Sokowatchs cloud system and
companies are better able to pro?ect future consumer demands
and eliminate stock shortages.
'romotion: 6o e
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'lace: Aur marketing strategy will focus on targeting
underde#eloped communities within Nigeria. 7n particular, we
belie#e the following area would be most #iable for entryJ
1. Ioko?a is a rural area in Nigeria showing continuing promise
for companies like Sokowatch who are looking to expand
operations o#erseas. Not only is the educational le#el of the
pro#ince rising continuously, but as is the si$e of each household
Tsee 8gure to the leftU. 6he increases in household si$es will likely
ha#e a direct a
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'ro+osed olutions: 7n regards to to con@uering the 8rst
challenge of promoting and reaching consumers in Nigeria it is
important to start in one area and follow by expanding into
additional territories and regions where it5s most suitable. With
regards to the #arious languages spoken within the Nigerian
market, connecting with a nati#e speaker who can act as a
translator is a #ital e
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IN(NCIN*
7n order to successfully expand o#erseas, Sokowatch will need to
consider #arious methods of 8nancing and consider potential
challenges that may arise. While Sokowatchs business model is
e#idently #aluable, 8nancing decisions are critical and if dealt
without care, can se#erely impact the success of the startup. 7n
order to 8nance their expansion into Nigeria, Sokowatch should
focus on two methods of 8nancingJ Eootstrapping and #enture
capital funding. Bootstrapping refers to the means in which a
startup supports itself 8nancially while maintaining a signi8cantstake of ownership in their company. 7n some cases, becoming a
self=sustaining business while holding onto the e@uity of the
company can be challenging. 7f this occurs, it might be wise to
raise capital through angel in#estors or family and friends in
return for a smaller sum of e@uity. 7n comparison, 6enture
Capita# /un.ing would re@uire Sokowatchs willingness to gi#e
up more e@uity in return for larger amount of capital /relati#e to
bootstrapping0. 7n addition to aligning the 8nancial structure with
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Sokowatchs capital needs, some of the more particular 8nancing
considerations includeJ
H 6he need for Sokowatchs ser#ices in NigeriaK 7s there a needX 7f so, how big is itXH 6he importance of maintaining control of the companyX
K What le#el of control and ownership are necessary
for the team to successfully implement their strategic #isionX
Bow much control is the team willing to gi#e upXH Scalability
K Bow important is it for Sokowatch to scale rapidlyX Since Sokowatch is the 8rst to the market in
Nigeria, they may want to consider consuming as much
!market territory" in the least amount of time in case
competitors enhance their e
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for their expansion. While selling shares may limit the amount of
control Sokowatch has, e@uity 8nancing can also pro#ide
signi8cant bene8ts as its comes with guidance from not only
wealthy, but also knowledgeable in#estors willing to help the
startup succeed.
While many 8nancing options exist, we belie#e that e@uity
8nancing has the most aggregate bene8t for Sokowatch. While it
risks gi#ing up larger amount of control, e@uity 8nancing
pro#ides substantial bene8ts as the board of directors and
business ad#isors pro#ide signi8cant input and do e#erything in
their power to better the business. Eefore making the ultimate
decision with regards to 8nancing, Sokowatch should carefully
consider the #arious options a#ailable and select the one that
best suits the company in both the short and long term.
T(IN*
's with many start=ups, human capital is a necessity. While
Sokowatchs in#entory tracking system allows store owners to be
self=su
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employees needing to be based in Nigeria. 'ccording to
7nternations.org, Nigerians place a higher #alue on facial
expressions than words, and tend to relate more closely with
indi#iduals from their own culture /Pimmer 10. Vnowing this,
Sokowatch should strongly consider hiring locals as they would
likely ha#e a better ad#antage in pursuing particular clients
compared to LS employees coming o#erseas. 7n addition to hiring
locals based on Nigerias cultural preferences, local employees
could also help train new store owners and respond @uicker toclient needs. 7f a certain client in Nigeria needs urgent help,
ha#ing LS employees walk through instructions o#er the phone
may not be the most e
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UTURE C0(11EN*E
Eefore Sokowatch commits its resources to Nigeria, it should
consider the potential challenges of expanding abroad. Iisted
below are six key challenges the company may face as they look
to expand operations o#erseasJ
89&re.i!ting Consu+er Nee.s
' key to success in business is o
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their client bases as reliance on one single client like oca ola
can pro#e incredibly risky. While oca ola may be a large
corporation, >uctuations in the soft drink industry may cause the
company to discontinue its product o
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business deals in a fairly @uick timeframe. When looking to enter
a foreign market like Nigeria, Sokowatch must consider the
countries speed of doing business. 'ccording to Eusinessweek,
Nigeria places hea#y emphasis on building relationships before
seriously considering a business deal /Ie#enthal ;0. Eased on this
information, Sokowatch may need to de#elop solid relationships
with potential clients before actually mo#ing forward with
business negotiations and as mentioned abo#e, the startup may
want to think about hiring locals to help fuel business acti#ities.Ba#ing a solid understanding of proper Nigerian business
eti@uette can contribute greatly to the success of many
international relationships Sokowatches hopes to form with
Nigerian clientele.
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di
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Sokowatch should le#erage its existing connections and 8nd local
sales reps to source suitable candidates capable of supporting the
company5s agenda.
>9Lega# * o$ern+enta# Barriers
's they plan to expand into new markets, Sokowatch will need to
consider legal and go#ernmental barriers. Eoth Iegal and
go#ernmental pro#isions can ha#e se#ere implications on how a
business can operate in a gi#en countryJ
a. -egal .arriers: Nigerias legislation may not be
conduci#e to the establishment of certain types of business
operations. 6ax laws and import restrictions may place a grea
deal of pressure on Sokowatch to perform and meet
expectations.b.Go#ern$ent barriers: Nigerias go#ernment may not
be recepti#e to foreign in#estment. Bigh tariuctuations may be the deciding factor for whether or not
Sokowatch decides to expand o#erseas.
?9 Ser$i!e intangi,i#it3
ompared to purchasing a physical product, customers encounte
and percei#e an extreme degree of risk and uncertainty when
purchasing a ser#ice. 6his #ery intangibility increases the
uncertainty that consumers may ha#e with regards to purchasing
Sokowatchs ser#ice. 's a result, this lack of con8dent purchasing
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power may result in growing challenges for the startup. 6o
remedy this potential challenge, Sokowatch will want to dri#e its
sales force to introduce local clients to the start ups ser#ice. 7n
addition, Sokowatch may want to consider working with an
external consulting company to better understand the needs of
nigerian store owners and better help acclimate them to the
Sokowatchs system.
@9 Re#ian!e on Weather
6he last challenge the startup may face is the inconsistency with
regards to weather. Seeing as Sokowatchs in#entory tracking
system is hea#ily reliant on technology, >uctuations in weather
forecasts can impact the speed at which the data arri#es to the
cloud or worse, can prohibit store owners from recei#ing
automated #oice calls.
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CONC1UION
6he market opportunity for a product that can ade@uately track
consumer goods in#entory in de#eloping countries has ne#er
been stronger. 6oday, many corporations aim to reach the
greatest amount of customers possible. ompanies like oca
ola, Bein$ and Lnile#er are expanding into some of the most
rural communities known to mankind, only to disco#er theimmense lack of reliable in#entory tracking systems a#ailable.
Bere lies an opportunity for a growing company like Sokowatch,
which aims to 8ll the gap and help consumer goods companies
better position themsel#es in foreign markets. With a pro#en
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track record in the domestic market, Sokowatch is now focusing
on expanding its operations globally. 7n particular, the startup is
focusing hea#ily on the Nigerian market as purchases of
consumer goods in #arious pro#inces within Nigeria are
continuously soaring. 7n the second part of this report, we will
outline suitable entry modes, sources of funding, and marketing
strategies = speci8cally focusing on the product, price, place and
promotion methodology. 6o conclude, we will highlight six key
challenges that Sokowatch will need to o#ercome in order toreplicate its pro#en success in the Nigerian -arket
6o mitigate risk and increase chances of succeeding abroad,
Sokowatch will need to consider the #arious challenges listed
abo#e and in addition, will need to implement a strategic mode of
entry to achie#e market dominance and form long lastingrelationships with Nigerian clientele. We hope the information
listed abo#e can contribute to Sokowatchs business operations.
or any @uestions, please do not hesitate to contact the authors
of this report.
&otential ontactsJ
A+anor Do.oo
Bead of onsumer markets
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Tab
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orks Cited
Citatio
ns4• Growth of the Service Sector . 8n.d.9. Retrie7ed $%(! from
or1d ,ank.
• 3ofstede. 8$%$9. Hofstede Cultural Dimensions. Retrie7ed
$%(! from http4::geert5hofstede.com:nigeria.htm1
• ;e7entha1. 8n.d.9. Nieria !laces heav" em!hasis on buildin
relationshi!s before seriousl" considerin a business deal.
Retrie7ed from -nternations4
http4::.internations.org:nigeria5e