Introduction
Africa is a large diverse continent that is made of 53 countries at different stages of political and economic development. Currently, Africa is regarded as an ideal for business development and growth and ranked second to Asia as the fastest growing continent with huge market opportunity. It is the region of attraction for many of the investors and entrepreneurs interested in tapping the natural resources as raw materials to be used in the production of goods and services. Ideally, Africa is a continent that presents several business opportunities to many investors. Although there is a lot of business opportunity in the African market, entering and becoming successful in the region can be challenging and requires proper strategic planning. Besides, it is important for the firms interested in entering the market to assess the business environment of the particular countries in order to develop effective strategies and gain a competitive edge in the market. The report provides an analysis of the African business environment as well as presents the strategic considerations for the firms interested in entering the African market.
Assessment of the Business Environment in Africa
In order for companies to make informed investment decisions, it is important that they analyse the prevailing business environment to enable them to develop and implement appropriate business strategies that can ensure their success in the market (Chea, 2012). The assessment of the business environment in Africa considers various factors that have a significant influence on the business activities of organizations.
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Evidently, Africa presents a great business environment for many companies across different sectors. Many countries in Africa have huge business potential with Nigeria depicted as the fastest growing economy in the continent ( World Bank, 2011) . On the other hand, South Africa is regarded as a politically stable and revolutionized economy ( History Channel, 2013) . Ghana is portrayed as an economy with amazing culture, entrepreneurial and energetic population and has several business opportunities ( EPIC Global Media, 2012) .
Many investors consider South Africa as the favourite investment destination due to its political stability and economic progress ( History Channel, 2013) . In essence, South Africa is portrayed as a country that is politically and economically advanced. Kenya is also another country that plays a huge role in terms of economic development in the region and is considered as one of the attractive investment regions in the region. Ideally, Kenya is known as a land with a potential to achieve high economic growth ( World Bank, 2016) . Accordingly, the government of Kenya has designed various programs and initiatives to offer opportunities to the citizens of the country and improve their lives (Kenyatta, 2013).
The African countries have the best investment environment that can support many businesses. The ideal business environment in African is due to various factors that include the low rates of inflation, low interest rates, stable exchange rates and a regional growth rate of about 6 % (Kenyatta, 2013). These favourable economic conditions make the African continent to make considered a major investment hub for the majority of the investors both from the foreign and domestic markets.
Although the African regional growth rate of approximately 6 % is considered as high, it may not become sustainable for long period. In fact, there are many macro-environmental factors that can impact the long-term regional growth rate of Africa (Byanyima, 2016). The reported regional growth rate of Africa is only the macroeconomic statistics on one side of the business environment. However, there are several factors that constitute the business environment in Africa with negative consequences on the economic growth and development.
The other notable economic factor that can be used to describe the business environment in Africa is the gross domestic product. The continent enjoyed a robust growth in the level of gross domestic product between 1950 and 1970. However, the growth rate of the gross domestic product declined and has remained fairly stable after 1970. This has made many regions such as Asia to surpass Africa in terms of economic development. Notably, the countries within the African continent experience different trend in economic development with some having high growth prospect while other experiencing constant or low growth. In comparison to other continents around the globe, it is evident that Africa is doing poorly in terms of the per capita growth domestic product. Besides, it has a poor performance in education as compared to other regions with approximately 69 % primary completion rate (World Bank, 2016). The entrepreneurial and investment spirit in Africa is not encouraged as the case in Asia.
Africa is regarded as a high-cost region based on the level of income and its productivity. Majority of the population in Africa are poor and that poverty remains to be the biggest challenge to be addressed in the continent. Other regions such as Asia have managed to significantly reduce the level of poverty. For instance, between 1990 and 2012, East Asia significantly reduced its poverty from 61 % to 7 % while South Asia reduced poverty levels from 51 % to 19 % ( Africa.com, 2016) . However, the poverty level in Africa has remained fairly constant since 1990 and thus it remains to be a major problem that hinders its economic growth and development.
The foreign direct investment flows is another important factor that plays a significant role in achieving the economic development and progress in the African market. The region experiences a significant amount of foreign direct investment inflows. However, the foreign direct investment inflows are primarily concentrated in a few countries within the continent. In essence, a significant amount of the foreign direct investment is channelled to few countries with the natural resources as well as extractive industry sector. The regulatory business environment in Africa is poor as compared to other regions such as Asia and Europe. It takes more than double per capita income and capital to start a business in Africa as compared to Asia.
Another challenge that African countries are facing is the high level of corruption. The illicit and illegal financial flows remain to be a major issue in the region ( Uwimana, 2014) . It is estimated that the illicit financial flows in the continent grew by approximately 32 % from 2000 to 2009 and this surpasses outflows from the other regions in the world ( Uwimana, 2014). The regional corruption perception index is approximated at less than 50 % with 0 suggesting very corrupt and 100 indicating very clean ( Africa.com, 2016) . This shows that Africa has several cases of corruption as compared to other regions.
Strategic Consideration for the Firms in Africa
Based on the unique business environment that exists in Africa, it is important for the firms interested towards entering such markets to come up with appropriate investment strategies to enable them to prosper and achieve sustainable growth in the region ( Ogbechie, 2018) . The strategic considerations can make it possible for multinational corporations to adapt well to the prevailing domestic environment in the country thus become competitive in the market.
One major consideration that investors should make is the recruitment of the skilled employees. With the poor educational achievement in the region, it can prove difficult to find skilled employees. As a result, the firms that are interested in entering this market should come up with an appropriate recruitment and training program. Companies with the interest in the African market should ensure that they train their managers and other employees to enable them to possess the necessary skills and expertise required to achieve the objectives of the company.
Another notable consideration is to identify the appropriate business partner in the African region when entering the market. In Africa just like the Asian markets, businesses are motivated by the relationships ( Byanyima et al., 2016) . As a result, it is important for the managers to consider matching their organizational values and the prevailing business conditions in the region. Furthermore, it is critical for the new entrants to find an appropriate business partner with the basic knowledge and experience on the domestic market. This can ensure that it prospers in the local markets and gain a competitive edge.
Ethnicity is a critical consideration for the firms with interest in the region. The continent has several ethnic groups with a diverse cultural background. It is approximated that there are more than 3,000 ethnic groups in Africa with each having a distinct culture and language ( Sandada et al., 2014) . This makes it relatively difficult for organizations to develop their marketing strategies that can be appealing to the diverse population in the country. This is because the different ethnic groups have different interest and values thus making it challenging to come up with a common marketing campaign that serves the interest of all the targeted customers.
The infrastructural development can be a challenge to the firm entering the African market ( Kolk & Rivera-Santos, 2018) . In essence, transport and communication system within the region is not economical and advanced as compared to the Asian and Western countries. The cost incurred in making phone calls is high in many of the African countries and this has the potential to increase the cost of businesses.
The consumers in the African region are perceived as price sensitive. Besides, the switching cost from one product to the other is low in the region. The price sensitivity and low switching cost can increase the level of competition among firms in the region ( Tchamyou, 2017) . In addition, the bargaining power of the customers and suppliers in the region is high. Due to these conditions, the managers should make an appropriate decision or the best investment strategy to undertake to ensure success in the market. This can include the decision of whether to pursue a low-cost strategy or differentiation strategy.
Conclusion
African region presents numerous investment opportunities to both the domestic and foreign companies. It is one of the regions that are experiencing economic growth and development. Furthermore, Africa continent is composed of several countries with a huge population which can offer significant market to the products of the firms operating in the region. Although the continent offers various investment opportunities to entrepreneurs and investors, there are various challenges that can impact negatively on the companies operating in the region. However, with effective business strategies that are based on the strategic consideration, companies can become successful in this region.
References
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Uwimana, C. (2014). Sub-Saharan Africa: corruption still hurts daily lives. Retrieved May 20, 2016, from Transparency International: http://blog.transparency.org/2014/12/03/sub-saharan-africacorruption-still-hurts-daily-lives/ on October 2, 2018
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