MKT 505 – Entry Plan into International Market – Target Inc Entry Into Nigeria
Brief Company Overview
Founded in 1902 and headquartered in Minneapolis, MN, Target is an international company with 1,800 stores in 49 states in the United States. The company is a general merchandize retailer, with product portfolio that includes dry grocery, frozen items and dairy and all sorts of electronics (Target Inc., 2017). The company posted sales of over 69 billion dollars in the second quarter of 2017, owing to its vast brands such as Archer Farms, Sutton & Dodge, Threshold, Smith & Hawken, Gilligan & O’Malley and Cat & Jack among others. The majority of the company revenues are generated from the large United States market although it has expanded its operations to include Canada and other countries in Europe. Its competitors include Wall-Mart, Costco Wholesale Corp., Groger Co., and Home Depot Inc.
Expanding into Nigerian
Brief Profile of Nigeria
The Federal Republic of Nigeria has an estimated population of about 186 million (with 58 million constituting the labour market), with English as its official language. The country has had direct business investments from outside the country, with U.S being the leading foreign direct investor. U.S has often supplied the country with refined oil products, wheat, military equipment and parts and agricultural equipment among other products. However, foreign investment in the country is governed by the country’s laws, which sets the guidelines that foreign investors must abide before being allowed to operate. According to (Hamilton & Webster, 2015) doing business in the country can be complex owing to three distinct legal systems based on Sharia law, the English Common Law and the customary laws.
The country has become stable in the recent past owing to the 2015 democratic elections. The country has witnessed civil wars over the years owing to fight over the oil mineral reserves. The heightened political tensions made it hard for foreign companies to invest in the country. The return to democracy, the rapidly growing economy and the increasing population makes the country a good destination for investments. The country has a GDP of over 405 billion U.S dollars, and a rapidly growing ICT in Africa (The International Trade Administration, 2017). The population in Nigeria is growing fast towards middle class. Majority of the population consists of young adults aged 20-40 years.
The country has a well developed Information Communication Technology framework, which is among the leading in Africa. Majority of Nigerians use internet, with the country ranked as the 7th country in the world with largest internet usage (The International Trade Administration, 2017). There are many telecommunications countries offering the GSM and CMDA services. The mobile telecommunication services is set to expand due to increased use of smart phones and the data charges are set to drop as more users are projected to use internet.
The Possibility and Feasibility of Integrating Ecommerce into the Company’s Offering
The electronic commerce, popularly known as the e-commerce is the production, marketing, sale and/or the delivery of the goods/services through electronic means (Broome, 2016). Ecommerce has seen growth over recent years as one of the most viable business strategies. The growth in the telecommunication network coverage and the increase in bandwidth in Nigeria have opened more opportunities for companies that wish to expand to the region. The country has moved to cashless payment and many European companies that offer electronic payment systems such as visa have exploited these opportunities.
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The country has passed laws that govern online payment systems including protection against cyber crimes, domain use and electronic signatures. The capacity building in the online payment platform in the country has created good opportunity for foreign companies that wish to establish their brands in the country. Moreover, the country is a member of the regional economic bloc known as Economic Community of West African States, ECOWAS. The presence of such regional blocs is regarded as a catalyst for increased inter-regional trade (Seck, 2013). In addition, regional integration could lead to development of telecommunication infrastructure in member countries, which could further open up more market for Target in West Africa.
Nigeria is considered one of the most populous countries in the world; their average family size is 6, which offer a good market for countries wishing to invest in the country (The International Trade Administration, 2017). With many people utilizing the internet and the countries rapidly growing population, it is expected that the volume of trade would increase in the next decades. Moreover, majority of the country’s population is projected to be middle class, which would coincide with potential increase in consumption and volumes of trade.
The marketing mix relates to the price, product, promotion and place components (Baker, 2010). Having the right marketing mix is important for successful investment in the Nigerian market. Whereas it is easy to determine the product, promotion and place components, price has been cited as a major determinant of success especially when entering market where there are established companies. The importance of price as an entry strategy can be highlighted in the failure of Wal-Mart’s to establish itself in South Africa owing to lack of competitive prices compared of Shoprite, a major retail player in the market.
The Nigerian economy is small and the average earnings are well below that of the developed countries. The International Trade Administration, (2017) points that the Nigerian people have lower purchasing power and most goods face stiff competition from cheap alternatives from Asian and North African suppliers. Moreover, the presence of price controls that were implemented in 2015 is bound to impact on prices. However, there are many cities where stores can be located. The major vibrant city with a rapidly growing population is Lagos. In regards to product promotion, there are many strategies that can be employed. With many Nigerians in the cities having education and electronic devices like TVs, the mass media can be used with great success.
Nigeria was a British colony, and the country’s official language is English. However, with more than 250 tribes, the country has many languages. Moreover, the country has two major religions, Christianity and Muslim, with Islam being a popular religion among the 12 Northern States (Hamilton & Webster, 2015). The indigenous people have diverse cultural rituals, which are differ from tribe to tribe. The presence of different spoken dialect and religious faith creates a huge challenge in marketing operations for companies who wish to operate in the country.
Key Reasons Why Entering Market in Nigeria is Justified
The entry into the Nigerian market is justified because of the growing population, the developing information communication infrastructure and the presence of fewer developed retail outlets. The Nigerian market has a rapidly growing market, which offers potential for revenue growth now and in future. The country is growing towards a middles economy, which is likely to see a rise in disposable income among families that will increase the purchasing power of the population. The well developed infrastructure and laws that protect firms who wish to operate with online stores makes it a good destination for foreign expansion. In addition, Target is likely to face competition from Amazon.com and Jumia (a local startup) as major competitor since Wal-Mart is yet to establish its presence. Presence of less competition ensures the firm can establish its brand name before other international retail stores.
Potential Risks of Market Expansion into Nigeria using ecommerce
The move by Target Inc. to invest in Nigeria offers a number of potential risks. There are risks associated with tax controls, which are likely to make the company products expensive. The other risks include language barriers, which can be a challenge to reach the people that speak indigenous language. Also, there is a risk associated with presence of a number of laws, which could make business regulation a big challenge.
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In order to overcome the challenge of tax controls, the company can focus on products that are exclusively U.S owned, such as iPhones, computers and other consumables. This will allow the company to remain competitive since the taxation raises the costs of products, but supplying exclusively U.S based products creates a uniform playground for all companies. In other consumer products, the company can make acquisitions of local startups such as Jumia, which will allow it to offer the products that the U.S market cannot have a control. The language barrier can be overcome through the use of local workforce in the development and implementation of marketing strategies. The issue of many laws can be overcome by use of local business registration companies in liaison with the American embassy to facilitate the business registration process and ensure that all aspects of law are adhered.
Ways of Adapting Operational strategies
There is often a huge difference in the modes of business operations between countries. Companies who wish to invest in foreign destinations often face the prospect of local competition from local companies and the hiring challenges (Grünig & Morschett, 2016). In order to adapt Target operational strategies to fit the changing dynamics of Nigerian markets and foster its competitive advantage, there is need for a number of strategies to be implemented.
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The first strategy is to set prices that match that of competitors in the market. If the objective of Target is to increase sales, there is need for the company to reduce inventory, use local suppliers for products that can be sourced within Nigeria and determine the best market price that matches the capability of consumers. In doing so, the company is able to remain competitive and at the same time enjoy huge sales volumes. The other strategy is to design its products or services that meet the local consumer needs. For example, in design of the websites for the ecommerce, Target should use local themes that are popular among the Nigerians. This ensures the company stands against its competitors and its technical measures capture the consumer needs.Order Unique Answer Now