Africas Blue Ocean Strategy Potential
Despite the high perceived investment risks of Africa
, African companies are gaining momentum as the most profitable and fastest growing in the world. Africas negative reputation as the worlds poorest and underdeveloped continent may be subsidizing due to great interest from the global economy.The Private Investment Corporation OPIC and the UN traded agency UNCTAD reports Africa as offering the highest return on direct foreign investment in the world. Even Chinas efforts of late to gain superpower status have included high investment in Africa. In 2009, China doubled its aid by delivering three billion dollars in soft loans. Their investments largely stem from their need of Zambian copper, oil from Nigeria, Platinum from S.A and Tanzanian timber. But their pure economic self-interest has paid off as trade between China and Africa increased 40% last year totaling $55.5 billion.
Most often petroleum products are the driving force behind Africas return on investment, but other sectors offer impressive growth opportunities. Lets consider some of Africas countries that have experienced impressive growth rates. Nigerias growth domestic product has averaged a 7.3% annual increase from 2003 to 2006 (more than doubled previous). In addition, foreign exchange oil reserves are approaching $50 billion. Mobile phone penetration in Nigeria is at 8% and quickly on the rise. Sub-Saharan Africa has grown on average by 6% and forecasters suggest Africas poverty rate will be cut in half by 2015. Kenya has implemented pragmatic government policies putting their focus on tourism making it one of Africas fastest growing economies despite not having commodities. In 2009 the stock market in Kenya jumped 46%, Moroccan equities were up 75%, 69% in Uganda, and 55% in Botswana. The Nigerian stock market has doubled over the 12 months and is up to $45 billion.
One of the fastest growing areas is the telecommunications industry. From 1999 to 2004 the annual rate of growth for cell phone usage in Africa was 58% - the next highest rate was only 35% in Asia. More than half of the mobile telephone market subscribers (expected to rise to 67 million by 2011 up from 30 million in 2006) are in Kenya, Tanzania and the Democratic Republic of Congo. Moreover, Africa is expected to soon be the leading provider of petroleum to the United States surpassing the Middle East, and Angola is one of the top oil suppliers along with China.
Over the past 10 years Africas efforts of prosperity, security and democracy have taken steps forward, up-ending the worlds conventional view as a bad investment. Unfortunately, the market in Africa has become saturated with too many like-businesses and similar marketing strategies. Many of Africas countries struggles involve business and government battling with socio-economic issues. The reliance on foreign and/or failed business strategy models creates issue as they lack innovative thinking.
As the perceived investment risks in Africa are still high and organizations need to move from conventional thinking in which operational context defines strategy to formulating strategy that instead defines the environment. Blue Ocean Strategy has great relevance to companies conducting business in Africa.
Blue Ocean Strategy refers to the business strategy developed by INSEAD professors W. Chan Kim and Renee Mauborgne in 2005. Blue Ocean Strategy is the proven system for making competition irrelevant by creating new market spaces through the simultaneous achievement of differentiation and low cost. Instead of being locked in red oceans of fierce, bloody competition, companies can apply Blue Ocean Strategy to move to clear, uncontested market space.
Africa, in a landscape covered with failed strategies at a time of the ever changing, globalized business world and blue ocean potential for foreign investment, needs new perspectives on how strategy is originated and designed. Companies like Celtel, which operates in over fifteen African countries, Vodacom Tanzania, have experienced incremental profits in vast numbers with the great potential of future customers. But, with over 1 billion people spanning across 61 territories, half of which whom are not living in poverty and have strong desire for products and services, there is great blue ocean potential highly profitable growth.
Brendan Murphy is the Marketing and Business Development Manager for Strategize Blue http://www.strategizeblue.com, a Blue Ocean Strategy training and Consulting Firm based in San Diego, California. He works directly under Dr. Zunaira Munir, the internationally acclaimed expert on Blue Ocean Strategy.
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