What to consider when setting up in foreign countryThursday March 30 2023
I was greatly inspired by a story of a young Kenyan entrepreneur, Kamau, who left Kenya and found his luck in the “land of a thousand hills.”
The young entrepreneur had started many businesses in Nairobi but failed thrice. He then decided to set his sights on Rwanda where he established a flourishing enterprise.
He has been there for 10 years and has turned his business into a multimillion-shilling venture.
It has become easier to globalise your business than it was years ago. This has been facilitated by increased technology and changes in the law.
In East Africa Community and Africa at large there are many regional and continental initiatives to make globalisation easier for member states.
In 2018, most African countries signed a continental treaty, the AFCFTA, with this main goal. The African nations agreed to make intra-continental trade easier by removing many trade barriers.
Trade barriers are often put up by governments to make it harder for non-citizens to do trade within the country.
The most common trade barrier is tax. Have you ever wondered why imported goods cost more than local goods?
It is because of a higher tax that is paid on imported goods to control demand. The consumers will go for the cheaper goods which are the local goods.
The East Africa Community is also doing much to open up trade within member states. An example is the beautiful new EAC passport which is supposed to lead to easier movement of people within the region.
Globalisation looks all nice and rosy, however as with all other businesses it is good to do it strategically.
Other people’s success stories should not be the only motivation to go global. Supposing you desire to go regional where do you start?
As always start with good research of your target countries. Understand the market well. This includes the political, cultural, language, consumer behaviour, competitors and demand for your products.
Aspects of research such as understanding culture may look simplistic but they play a major role in your strategy.
There is a global cosmetics giant that faced trouble in the Middle East over an advertisement that was deemed immoral.
This drove demand for its products downwards. This incident is a case study of mistakes to avoid when globalising.
You need to understand the legal environment to understand what it takes to operate the business legally. Will you need a work permit?
What are the compliances required? What are the general laws? Some people are behind jail bars in foreign countries because they did not comply with some mandatory laws.
In most countries, you need a work permit before you can start a business otherwise you will be given the status of “illegal immigrant”.
This is how many people find themselves in foreign jails. What a misadventure for the unwitting entrepreneur!
Once you decide to still set up in the target country, you will need to think of your market entry strategy.
Did you know that you can still access foreign markets without necessarily setting up a physical base there? I will be doing a series on this in the coming weeks.
Some market entry strategies include distributorship, licensing, franchising, and strategic alliances. I would encourage entrepreneurs to consider globalisation as a strategy.
The business environment has become warmer and friendlier to support regional and continental trade.
As with all things strategy, timing is crucial. Even as you choose the market entry strategy it is important to get the timing right. The most important thing to consider is the foreign country’s political environment.
Ms Mputhia is the founder of C Mputhia Advocates | [email protected]