Why African businesses should focus on expanding local markets

As the global economy recovers from the downturn and consumer purchasing power in emerging markets soars, businesses have returned to focusing on domestic markets. In a reversal of the trend highlighted two years ago, businesses globally report that they are focusing more on domestic market expansion than foreign market growth, the latest Regus survey confirms. Africa, however, is doing the opposite, with 40 per cent of businesses expanding abroad compared to 36 per cent experiencing growth in their home markets. The research, which sought opinions of over 20,000 senior executives and business owners in 95 countries, found that after focusing heavily on foreign expansion, and following the growth trail around the globe two years ago, two fifths of companies globally (42 per cent) are now experiencing growth, thanks to expansion in new local markets. The report notes that emerging economy businesses are by far the most likely to report this trend, proving that they are experiencing expansion at home (51 per cent). This confirms that the effects of the exponential growth experienced in these countries in the past few years are finally trickling down to consumer level and nurturing stronger consumer demand for goods. A growing middle-class is increasing domestic demand and reducing reliance on exports, which in turn has a stabilising effect on the global economy. Nevertheless, a fifth or 17 per cent of businesses globally report that they are still experiencing growth through foreign expansion. Businesses in India (25 per cent), Canada (23 per cent) and Belgium (27 per cent) are particularly likely to be growing, thanks to their efforts abroad. In particular, Belgium and Canada have a strong history for exporting to their neighbours. As the economy in the US and EU improves, demand for their products and services can only increase. Exporting businesses, however, face a number of key challenges that enterprises experiencing growth domestically have only in part to deal with. When expanding abroad, African firms say they have more difficulties finding and recruiting top quality staff (86 per cent). This may be because they don’t have established relationships with good recruitment intermediaries in the new country, or because they are not established enough in their new location for would-be employees to actively seek them out. African businesses setting up abroad also lament lack of local knowledge and connections (78 per cent), which would support their efforts in recruiting, hiring and finding good suppliers, as well as new clients, for example. Lack of market information (74 per cent) is another concern linked to lack of intermediaries and of an existing network. Another huge problem for businesses that want to expand abroad is access to flexible office space, a challenge for 85 per cent of African firms. When entering a new market, especially with limited local knowledge and market information, it is vital for businesses to remain flexible so that they can respond to the market in a speedy fashion, the report advises. Being able to rapidly downscale if things go wrong or are slower than imagined without financial penalty, or to upscale in response to strong demand, can make all the difference to a company’s success. Finally, the fact that there has been such a rapid reversal with the majority of businesses choosing to focus on domestic rather than export markets over the past two years highlights how important it is for businesses to remain reactive to the markets at all times. Businesses need to be responsive to be sure that they can grasp opportunities where they present themselves; so being able to upscale or downscale rapidly is a key capability. Regardless of where businesses are expanding, their success depends on a series of key factors. Without access to reliable and up-to-date market information, networking opportunities and a number of options to choose from when considering the best location to set up, businesses will find it hard to expand both abroad and within new markets in their own country. The writer is the vice-president of Regus Africa