South African Food Retail Industry
South African Food Retail Industry
Globalization is a complex process. (Shumate et al, 2005) An organization needs to have thorough analysis of global market while expanding its services beyond its regional border. (Doole, Lowe, 2005) However, the process becomes more complicated when it becomes expansion of services within a specific region. This thing is ample difficult and needs conducting market research in order to gain complete information about that relevant market and assume strategic plan accordingly. (Percy, 2012)
This report also throws light upon different aspects which should be taken under consideration while expanding business beyond the borders. This feasibility report gives not only general overview of South African food retail industry, but also scrutinizes the opportunities which this organization would have while expanding its services from UK to SA. The first part of this report will give overview of the African markets from different perspective. The second part throws light upon two management issues and the third part suggest a strategic plan along with few recommendations that can be implemented in order to get successful position in South African market.
Expansion opportunities for the company:
Contemporary markets are considered ample competitive and an organization can achieve high level of success only through gaining competitive advantages. (Dabbah, 2010) Global expansion makes this competition factors ample diverse and intricate. So, before expanding the organization to South African food retail industry, it is mandatory for the organization management to scrutinize each factor that can contribute in achieving competitive advantages.
Basically, competitive advantage is referred to the advantage that is gained through having strong competition with rival company and overpowers it through adopting an appropriate strategic plan. (Rolstadås, 1995) However, in this regard, strategic plan plays a major role but there are additional factors that should be taken under consideration while making an appropriate strategy for South African business expansion and these factors can be analyzed using Porter’s National Diamond Model. Each aspect of PND would be scrutinized from the perspective of South African retail food industry and source of competitive advantages would be pointed out.
The first factor promulgated by Porter indicates the demand condition of the product or service. However, before applying this analytical aspect, it is mandatory to scrutinize the actual meaning of this competitive analytical tool.
Basically demand condition enables the organizations to comprehend the demand of the customers and determine whether the product is demanded by the customer or not. (Peng, 2008) For this purpose, the product analysis is done in domestic market instead of foreign market since local companies pay more attention towards developing and sustaining the product instead of foreign firms which gives competitive advantage to local firms and they bean to export that demanded product. This thing cause trend setting and further predicts global success. (Traill, Pitts, 1991) In this way, the organizations can not only gain advantage on national level but also international level as well.
As far as South African retail food industry is concerned, this is a tourist favorite region and most of its parts are holiday places which is the positive factors for an organization already established in UK that is also tourist favorite area. For such multi-cultural people, provision of different type of food products, that makes it competitive for the regional organizations to satisfy them. Expansion to South African food industry is expected to be in the favor of the organization and it will gain competitive advantages in the form of recognition at regional level.
Second aspect of Porter’s diamond model is factor endowment according to which, there is several factors that contribute in gaining competitive advantages. While making strategic plan and going beyond borders, the organization should take all these basic and advanced factors under consideration.
If this factor is scrutinized, it would reveal that the management of organization would also have to focus on basic and advanced factors for its expansion in South African retail food industry. For this purpose, it has to consider basic significant factors like climate change, environmental and cultural factors, natural resources, demographic aspects, locations etc. hence, these basic factors usually give initial advantages but for advanced level competitive advantage, this organization would have to pay attention towards maintaining advanced level competitive factors as well. (Peng, 2010)
As far as advances level factors are concerned, South African expansion of this organization would give competitive advantage only if the resources and strategies would be ample effective. The factors like communication infrastructure involvement of IT resources, Human resources and prowess of employers are some of the important elements that would play major role in global expansion and anticipate ultimate success in relevant market.
Related and Supporting Industries:
Third important aspect of Porter’s National Diamond Model is supporting industry and their role in gaining competitive advantages. When the regional organizations within an industry are competitive, the international companies can easily tackle the market using power of cost effectiveness. (Paul, 2008) Hence, affiliation with some regional company proves not only positive but also effective for making strong market position.
South African food retail industry is also ample competitive at local level and this organization can easily enjoy innovative and cost effective inputs through having affiliation with one of them. Since the contemporary position of this multi-national organization is strong in UK as well, this effect over market competition would be severer and the result would appear in the form of competitive advantage. Hence, this collaboration would might be risky because of supply chain management issue yet the competitive advantage would be exceptional in the case it would get succeeded.
Firm Strategy, Structure, and Rivalry:
Fourth major aspect of Porter’s diamond model throws light upon firm’s strategic plan, structure and affect of rival force over the organization. In the case when the organization develops strategic plan, it has to focus on long term vision and goal. (Ball, 2008) However, strategy should be adopted keeping the local conditions and competition ratio under consideration. it has been identified by Porter that low rivalry ratio makes industry ample attractive yet this thing snatches novelty and innovative factors from the organization. (Kazmi, 2008) Rivalry allows the organizations to have improved form of product.
If the analysis of South African food retail industry is done, it would appear that this industry has very less rivals at local level but there are ample competitors on international level. For expansion within SA industry, this organization would have to pay attention towards sustaining its position through producing novel and innovative products so that if there would be threat of any new rival, it can beat it conveniently using its long term vision and mission statement and strategic plan.
Government and chance:
The extended model of Porter also possesses two additional factors including government involvement and chance. According to Meersman (2002), chance allows the organizations to gain competitive advantage though using innovative techniques. If this organization would produce quality products and market them appropriately, there are big chances for this organization of having successful position in South African food retail markets.
Similarly, governmental factor like political backup or problems might cause sever loss on the part of the organization and ultimately it will get severe loss. (Yap, 2010) However, if the organization would come up with the basic legislative and political requirements, it can easily gain national competitive advantages.
After doing thorough analysis of south African food retail industry and assessing the scope of marketing products for multi-national company, the next part of the paper would give brief overview of two major management issues which this organization would have to confront while expanding its service within South African region.
Contemporary Management Issues:
International market is not only competitive but complicated to manage as well. While going beyond the borders, there are several management issues that should be taken under consideration since without coping with these management issues, no organization can successfully market its products to international consumers. Cultural diversity management and supply chain management are two of the issues which are contemplated beforehand while expanding business activities on global level. Keeping this thing under consideration, this report will also demonstrate the factors that can affect the working performance of this organization in African Food retail industry.
Cultural diversity is one of the major issues confronted by not only retail industry but all the major industries on global level. South African food retail industry is not separate from the issue of cultural diversity and any organization which intends to go beyond the limitation of its native region, has to implement appropriate strategy in order to manage cultural discrimination issue. (Imbruce, 2006)
Anthropological point of view defined culture as an implemented system that is based of several factors including language, tradition, religion, social habits and similar other factors. (Wierzbicka, 1999) Every region has its specific culture and it directly influence business activities of an organization. Basically cultural diversity stands for diversity or difference in cultures. Since every culture has its own characteristics, it always differentiates from the other culture and this difference is referred to cultural diversity.
If the analysis of this cultural diversity is done in the context of South African food retail industry, it would appear that this industry has ample influence of its culture since social norms, traditions and food stuff is different from other regions. This cultural diversity is the major issue while expanding business overseas since South African culture has its own restrictions for eating different type of food stuff.
Expansion to South African retail food industry and supplying food products in its markets is risky as well as profitable. However, for this purpose, the organization management has to scrutinize different factors of South African culture such as eating habits, people’s interest in food stuff etc. Cultural diversity management would be possible if the organization would involve native sellers and industries for promulgating its products and services because involvement of native South African people would make cultural diversity a bit less which would enable the organization to comprehend market requirements and supply food stuff accordingly. Hence, there are several other ways that can be utilized in order to manage this issue of cultural diversity.
Supply chain management:
Supply chain management is another issue which the management of the organization has to contemplate in order to make the process smoother. For expansion to South African industries, the management has to take advantages from intermediately resources because they will allow the organization to have a smoother supply of food products to the South African markets. However, management of this supply chain is ample complicated because there are a lot of elements and factors involved in the supply chain network and require sophisticated planning in order to conduct the entire process smoother.
Supply chain is a process in which every business component is interconnected with each other in order to deliver the product or service to the end of the chain. (Wisner, 2011) A smoother supply chain means smoother international business. While going global, an organization needs to pay attention towards supply chain management because there are several intricate issues which are clung to the activities involved in delivering a particular product.
Expansion to South African retail food industry needs special attention as far as supply chain is concerned and the main reason behind this fact is the contemporary climate of south Africa that compel food retailing businesses to remain extreme cautious. Operating directly is far better as compared to expanding businesses with supply chain if the climatic change issue is concerned because it is not compatible with the food products and the food products cannot be sustained for a very long time until special actions are not taken. (Arisaig, 2012)
However, the benefit can be taken through integrating emerging regional business in the core supply chain of the organization and for this purpose; the management has to pay attention towards not only cultural diversity management but also supply chain management. This is an opportunity for the organization to use the sources of small and medium enterprises but it is risky at the same time. One the one hand, it might reduce cost but on the other hand, it might ruin the entire process of South African expansion.
Hence, there are two major issues which should be contemplated before hand while expanding to South African retail food industry because internal and external factors play major role in success of a business and cultural diversity and supply chain are two significant parts of these aspects.
After doing a thorough analysis, the next part of the paper would propose an initial strategic plan to enter in the market. However, while making this part, these two issues along with other issues are taken under consideration and the strategy has been proposed after doing thorough internal and external analysis.
Market entry strategy:
For the success of an organization, not only industry analysis but the strategic plan also plays a major role and in order to enter in some new market, the organization management has to contemplate all major factors. This part of the paper would give overview of the strategic plan that can be developed keeping above mentioned factors under consideration, along with recommendations that can be utilized for bettering the services.
Direct export/aggressive export path:
Basically, direct export is referred to as the source of international expansion in which the organizations used to utilize the services of some intermediate company or representative, distributor or seller. (Fao Corporate Document Repository, 1997) Sometimes, the organizations usually contact with the customer directly and propose the best service or product in order to gain competitive advantage.
In order to enter In South African food retail industry, this organization would have to adopt direct export or aggressive export path and there are several reasons behind choosing this method. (Carter, 1997) First, food products need extreme caution. For distributing food products and trading them from UK to South Africa, major risks are involved. So, direct method would enable this organization to do business in SA without loosing its capital.
Secondly, this expansion would enable the organization to choose its partner company or representative company without any external interruption. The information of the target market would also be ample authentic and lucrative as well. Similarly, this source would also enable the organization to promulgate its own trademark without any shared ownership. Lastly, this source is justifiable for the organization because it can generate maximum sales and delivery would be possible within short timeframe since there will be not intermediate network. However, for having initiative, this organization would require to invest heavily and research a lot in order to obtain maximum information about South African market.
Strategic alliance with regional company:
For international market expansion, the organizations also have to have strategic alliance with regional companies. This organization would also have to establish strong relation with some regional company because it would enable it to comprehend the requirements of regional people.
Cultural diversity is a big issue and without direct involvement of the regional and native people, it is not possible to get acquaintance about what the customer requires or demands. (Underhill, 1996) This organization can also have strategic alliance with a South African food retail company in order to enter in the market.
For expansion to South African market, there are several steps which this organization can take in order to get successful results.
•Cultural diversity can be stemmed out through having affiliation with regional people and for this purpose; the organization can hire native people in its regional office for conducting different works.
•In order to comprehend the requirements of regional market, the organization can also get the research done via native researchers who can see and feel the cultural diversity living in that respective society.
•The global expansion is risky, so before having strategic alliance with some small or medium enterprise, the organization management should also keep its track reconds, caliber of its representatives and potential under consideration.
•Supply chain management can be bettered through involving UK regional people in the South African supply chain end.
•Market penetration should be done time and again in order to comprehend the dynamic requirements of the South African market.
Through assuming these steps, this organization can take a good initiative in expanding its services in South African region.
To conclude, it can be stated that South African market has ample scope for new entrants as far as food industry is concerned, though there are several strategic plans that can be employed for entering in new market yet the best source for entering is export via strategic alliance since it will be ample lucrative yet costly for the company.
However, the analysis also indicates that global expansion needs sophisticated research as well. The organization would also have to pay attention towards all major management and marketing factors that contribute in getting global recognition. Hence, only through having complete information about a particular market, this organization can expand its services and market its products In South African market successfully.
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Subject: South Africa,
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 2 December 2016
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