Strategies engaged by a South African beverage organisation entering African markets

Africa is acknowledged as a vast, untapped market for consumer goods as trade barriers are coming down and economies are starting to develop. The need for consumer goods arises with economic activity. This poses the following question, which will be addressed by this research: How can potential African consumer markets be successfully unlocked by a South African beverage organisation, thereby reducing risk of failure and eliminating the cost of a hit-and-miss approach? The secondary study focused on evaluating the aspects involved with risks and the modes of entry into foreign markets. The macro-environmental factors affecting the expansion into foreign markets were investigated to determine what influence they had on the entry mode chosen for a specific country targeted for expansion. Finally the marketing factors influencing the entry mode were analysed. The significance of trade blocs together with the advantages thereof was included in the study. The primary study was based on the theory and principles of existing literature. The Coca-Cola Sabco organisation was taken as a case study. Four countries, namely Kenya, Uganda, Mozambique and Namibia, were investigated. Questionnaires containing a set of questions to satisfy the sub-problems were sent to the various country managers and their first layers of management. Likewise, interviews were conducted with Coca-Cola Sabco head office strategic management. The empirical results obtained, indicated a strong concurrence, with the theory of entry modes and the influences of macro-environmental factors. In certain aspects, however, some contradictions with the theory pertaining to the Coca-Cola Sabco organisation, were observed. The findings concurred with the theory in that risk were minimised by the acquisition of a going concern that already possessed the infrastructure and logistics such as raw material procurement, manufacturing staff skills, distribution networks and political contacts. The empirical results contradict theory with respect to location economies and scale economies, as the Coca-Cola Company’s franchise agreement excludes the exporting of beverage products. Furthermore, Coca-Cola Sabco becomes involved in expansion initiatives only in reaction to an invitation from the Coca-Cola Company and not of its own desire. Therefore, market surveys are conducted subsequent to an invitation from the Coca-Cola Company. South African organisations planning expansion initiatives into emerging African markets need to take the specific macro- environmental factors of the country in question into consideration in order to minimise risk. A franchise agreement restricting exporting as in the case of Coco-Cola Company or any other restrictive agreement, might cause a deviation from contemporary theory, for example, where markets will be assessed for purposes of location and scale economies. Deviations from contemporary theory could also occur where a franchise opportunity is offered in a specific country that may not be the preferred market choice, due to its lack of growth potential