How local brands can compete with international firms

Sanlam House on Kenyatta Avenue in Nairobi. FILE PHOTO | NMG
Sanlam House on Kenyatta Avenue in Nairobi. FILE PHOTO | NMG 

Sanlam Group, a South African financial services group, last week announced it had completed the $1 billion acquisition of SAHAM Finances, an insurance group headquartered in North Africa, as part of its plan to become a pan-African insurer.

The group’s pursuit of a pan-African position ties with studies showing that consumers prefer multinational brands to local ones because of perceived higher quality.

“The acquisition of the remaining 53 per cent of SAHAM Finances, which increases our shareholding to 100 per cent in the Group, is the next logical step for Sanlam and enables us to have an even more meaningful presence across sub-Saharan and North Africa, in line with our strategy,” said Mr Ian Kirk, Sanlam Group CEO in a statement.

The deal will give Sanlam access to SAHAM’s African business in 26 countries in North, West and East Africa, as well as the Middle East, through its 65 subsidiaries and 700 branches. SAHAM Finances predominantly writes personal lines general insurance, which exceeds 80 per cent of its portfolio.

“Given our presence in the market, the deal positions Sanlam as the financial services provider of choice for international business, financial advisers, banks, other distribution entities as well as a preferred network of partners for global insurers with no African presence,” said Kirk.

It was in similar fashion that Sanlam Group re-entered the Kenyan general insurance market in March 2015 after acquiring a majority shareholding in Gateway Insurance Company Limited. The deal entitled Sanlam to a 51 per cent stake in the firm, positioning it to tap into sectors such as the oil market.

According to a case study published in the Harvard Business Review on the strategies transnational companies employ to compete in a market, consumers tend to perceive international brands as of good quality, more than they do local brands.

“Consumers watch the fierce battles that international companies wage over quality and are impressed by the victors. A focus group participant in Russia told us that the more people buy a brand the better the quality is, while another consumer in Spain said that he likes international brands because they typically offer more quality and better assurances than other products,” reported the Harvard Business Review.

However, this is not an indication that transnational insurance companies such as Sanlam Group can completely dominate the market on the basis of their international status.

Local brands can still win consumers on the basis of enhanced brand awareness, which may overshadow the appeal and status of global brands.

Research by Curtin University in Australia on how a successful international brand may compete with a local brand, based on consumers’ perceived commercial value and quality, found that local brands enjoy more brand awareness that leads to brand loyalty.

“A strong local brand enjoys certain advantages in terms of brand loyalty and overall brand commercial value especially amongst the low status-seeking consumers.... Our findings also confirm that globalisation might not always be an appropriate strategy given the presence of strong local iconic brands,” reported Curtin University.

- African Laughter