Tablets in Africa : an assessment of the options for market entry for AOC.

Tablets in

Africa: an

assessment of

the options for

market entry

for AOC

Final project, Master

of Business

Administration,

part-time, year 2

Michelle Donovan

Student number: 10429859

Supervisor: Prof. John Cullen

Submission date: 11th

Executive summary

An issue which is being increasingly considered and discussed in the context of MNEs today is whether and how to enter the African market. Africa’s economies are growing fast along with the spending power of its consumers, however doing business in Africa can be perceived as challenging due to many factors which can create uncertainty. Africa consists of over fifty different nations who all have their own characteristics. Should a company wish to enter the African market, some important issues to consider are the mode of entry and the potential modification of products to suit the African consumer.

This paper concerns the decisions to be made and steps to be taken to enter the African market for tablet computers using a case study of AOC. The paper reviews some existing academic literature about assessment of (country) risk and opportunity, market entry strategies, and selling to the bottom of the pyramid, as well as reviewing some of the latest data and reports about Africa produced by management consultants.

The decision about how AOC enters the market is of crucial importance and needs to be taken quickly, since most competitors are already ahead of AOC.

In the following report I seek to address the questions of whether AOC should set up production facilities in Africa, in which country, and how (greenfield investment, acquisition, or joint venture); which countries to target for export if AOC chooses to remain simply an exporter to Africa; and whether the product be redesigned for all or some countries in Africa.

Using the theoretical frameworks and the latest data and advice from management consultants, an analysis of risk and opportunities is performed and several recommendations are suggested to AOC about entry modes and the best countries to target, as well as possible product redesign.

Table of contents

I. Introduction... 3

II. Framing: useful concepts in analysis... 4

A. Ansoff’s market penetration grid ... 4

B. Opportunity/risk matrix ... 6

C. Market entry strategies and evaluations of these ... 8

i. Classifying countries into categories... 8

ii. The “Four Keys to Success“ ... 9

iii. Market entry strategies... 10

D. Global Market Opportunity Assessment... 13

E. Selling to the bottom of the pyramid... 14

III. Case Description: AOC... 17

A. Organizational overview... 17

B. AOC Tablet Products... 17

C. TPV’s entry modes into foreign markets to date ... 19

D. AOC in South Africa ... 21

E. Case question ... 22

IV. Results ... 24

A. Exporting ... 24

B. FDI... 25

C. Selling to the bottom of the pyramid... 28

D. Ansoff’s matrix... 29

E. Opportunity/risk matrix ... 29

F. The OLI Paradigm and the FSA/CSA matrix ... 30

G. Global Market Opportunity Assessment... 31

V. Conclusion ... 33

VI. References... 35

VII. Annexes ... 39

A. Tables... 39

I. Introduction

Multinational enterprises are increasingly turning to emerging markets and the developing world as a source of new markets (London & Hart, 2004). Since 2000, when a cover story in The Economist described Africa as “The hopeless continent”, over the last fourteen years Africa has changed considerably. “Africa is the fastest growing region in the world after Asia” (Peters 2011 p.44). GDP in Africa has grown more than five per cent in the last ten years and at four per cent during the most recent economic crisis, when most of the developed world was in recession (Kirby, 2013). Increased urbanization, a decrease in military conflict, and healthier national economies have led to increased wealth among African consumers. “There is a sizeable middle class [population] on the continent” (Chrirongra et al, 2011) which is increasing, and has an increasing amount of discretionary income to spend. The population is young and growing. “Competition [in Africa] is less intense and few foreign companies have a presence there, and pent-up consumer demand is strong. Companies that desire revenues and profits…can no longer ignore Africa” (ibid.) “Africa’s consumer based industries are also expanding three times faster than OECD countries….While more than half the continent’s population of 900 million live on a $1 or less per day, a significant portion do not and are eager for gaining access to new products and services that are not available locally” (Peters 2011 p.46). “Companies must think carefully about the approaches they adopt, but it will be worthwhile. Above all, first movers will have the opportunity to forge strong local partnerships and capture market share before everyone wakes up to the buzz around the Bright Continent” (Chrirongra et al, 2011 p. 122).

So what is preventing multinational enterprises from entering the African market now? There is still considerable uncertainty to be managed when doing business in Africa. Africa consists of over fifty nations which each have their own laws, markets, risks and opportunities. There are numerous barriers to trade such as tariffs, duties and currency exchange rates and “non-market” factors to consider such as poverty, famine, disease, political instability, corruption, war, and a lack of infrastructure and talent. “Scant attention is shown by western firms to the region, largely on account of continued negative perceptions [of] high political volatility…No doubt that a sizeable portion of such negative

stereotypes coincide with harsh realities in a number of Sub-Saharan countries, taking into account that 34 out of the 53 countries in the region are regarded as among the least underdeveloped in the world (sic)” (Peters 2011 p.44-5). However, the “point being made by Africa specialists such as John Luiz, in his new book, Managing Business in Africa, is that the perceived risk is often times much greater than the real risk” (Peters 2011 p.46).

It is not always possible to sell the same kind of products in the developing world as in the developed world, mainly due to the lower spending power in developing nations requiring lower prices, but also due to different preferences, local conditions such as climate, etc. I will explore these factors.

II. Framing: useful concepts in analysis

There are several concepts which come to mind which could be useful to the organization for evaluating and determining its next steps. I will review the key concepts, frameworks and models that will be used to address the case question for AOC. These are Ansoff’s market penetration grid, the opportunity/risk matrix, market entry strategies, global market opportunity assessment, and selling to the bottom of the pyramid. I will also consult the latest literature and news articles.

A. Ansoff’s market penetration grid

Although it is decades old (it was first published in Harvard Business Review in 1957), the product/market grid of Igor Ansoff is still a useful tool to determine business growth opportunities and strategy. The product/market grid has two dimensions, products and markets, and shows current and new products and markets. Therefore, four growth strategies can be determined (see table I).

Market penetration (current products, current markets) involves selling existing products to existing customers. In order to do this more successfully and thus increase revenues, a company will try to turn incidental customers into regular customers and encourage regular customers to purchase more and more frequently. Some ways to do this include loyalty

cards, volume discounts, and more promotion of the products, particularly repositioning products with regard to competitors.

Market development (current products, new markets) means increasing sales by launching existing products in new markets. This is usually done through entering foreign markets, e.g. through export.

Product development (new products, current markets) means increasing sales by creating new or modified products to sell to existing customers. These could be newer and/or different versions of the product (size, style, etc.), accessories, add-ons or completely new products. Usually these products are sold to the existing customers through existing distribution channels.

Diversification (new products and new markets) means introducing new products for new customers. This is the most risky quadrant of the matrix because it may involve products and markets outside the core competences of the firm, leading to great uncertainty, and it therefore may be difficult to justify this to stakeholders. However, it can represent a good choice if the high risk also involves a chance of a high rate of return. For a large corporation, it may also represent a way to spread risks of focusing on several markets, and an opportunity to gain a foothold in an attractive market. The diversification quadrant can be further split up into four types:

Horizontal diversification: Adding products which are unrelated to the current ones, but which potentially will still appeal to the same kind of customer base; or adding products which are at the same stage of the value chain, e.g. Avon added jewellery to its product range when previously it only sold cosmetics. The risk with this type of diversification is that it usually does not spread risk, so if there is a recession and people have less money to spend, they are likely to spend less on cosmetics and jewellery, so Avon could still suffer from lost sales in both divisions.

Vertical diversification: When a company acquires a supplier or customer, or decides to enter the business of its supplier or customer, so it is acquiring more of the value chain. This can ensure a regular and reliable supply of materials of acceptable price and quality.

Concentric diversification: Adding products which are produced in a technologically similar way to some existing ones, allowing the company to leverage its existing know-how to gain an advantage.

Conglomerate diversification: The company adds new products or services that have no technological or commercial synergies with current products but that may appeal to new (groups of) customers. The new products have very little relationship with the firm's current ones. The rationale for adopting such a strategy is, firstly to improve the profitability and the flexibility of the company, and secondly to reduce the cost of capital on the capital markets as the company gets bigger. Though this strategy is very risky, it could also, if successful, provide increased growth and profitability and a way to spread risk, especially risks of adverse circumstances.

Later I will explore what kind of growth strategies regarding Africa are available to the organization.

B. Opportunity/risk matrix

An opportunity/risk matrix is a graphical representation of the opportunities and risks in different markets. (See figure 1 for an example.) Risk is plotted on the horizontal axis from high to low and opportunity on the vertical axis from low to high. Markets or countries are represented as bubbles with the size of the bubble representing the size of the market or economy. In order to create such a matrix, there are several sources to consult when assessing risks and opportunities in Africa.

The Market Potential Index (http://globaledge.msu.edu/mpi) ranks countries according to various dimensions with different weights, such as market size and growth rate, infrastructure, and country risk. It is US-focused but the insights can still be useful for companies located elsewhere. It does not include every country in the world; it includes only countries which are in the top 100 performers in terms of total GDP, have a population of one million or more and for which reliable data is available, and the US is excluded, so this makes 87 countries in 2014. Only five African countries appear in the 2014 list: Morocco in 61st_{place, Egypt in 62, South Africa in 70, Algeria in 79 and Nigeria in 85.}

The Economist’s Risk Briefing site shows ratings (A/B/C etc) and scores for countries, updated quarterly, calculated based on a number of criteria such as labour market risk, infrastructure risk, macroeconomic risk and government effectiveness.

The FTSE Quality of Markets Assessment Matrix assesses countries based on various criteria: GNI per capita rating, credit worthiness, market and regulatory environment, custody and settlement, dealing landscape, derivatives and size of market. The countries assessed, in descending order of attractiveness, are South Africa, Egypt, Morocco, Botswana, Ivory Coast, Ghana, Kenya, Mauritius, Nigeria and Tunisia.

What characteristics of a country influence its risk and opportunity ratings? Risk

A number of factors can increase the risk of doing business in a country.

Political factors: the amount of corruption, political stability, the effectiveness of government, quality of governance, policies related to taxes, legal affairs and the labour market all have an effect on the perceived and actual risk of doing business with or in a country. For example, “the longer a single political party remains in power, the lower are firm productivity and sales growth rates” (Harrison at al 2014 p.60). Security risks (such as war, terrorist attacks) should also be considered, as well as the risks associated with currency (exchange, liquidity, and inflation/deflation).

Geographical factors: There are risks associated with the location of a country. “Africa has more landlocked countries, which heightens the need for coordination with neighbouring countries. Given the significantly higher trade costs associated with borders, being landlocked necessarily impedes international trade” (Harrison at al 2014 p.61). Population also matters, and Africa is sparsely populated (ibid). Of course the risk of natural disasters such as drought or earthquake affecting business should also be considered. If a country lacks infrastructure it is much more difficult and expensive to do business there.

Ernst & Young’s 2012 report, “Growing Beyond. Africa by numbers. Assessing market attractiveness in Africa” offers some “broad pointers toward growth potential and opportunity:

 Population size

 Population size in largest city

 The size of the economy (current GDP)

 GDP growth trends (historical and forward-looking)

 Gross capital formation trends (as an indicator of investment in physical assets in the economy)” (p.12)

Clearly, any company considering entering a new market needs to find a balance between the risks and the potential rewards. Ernst & Young’s 2013 report, “Growing Beyond. Doing Business in Africa. From strategy to execution”, points out that “too much emphasis on “risk management” approaches can overshadow “opportunity awareness”, narrowing the scope for taking advantage of the overall favourable and attractive settings that Africa’s various markets represent” (p.3).

C. Market entry strategies and evaluations of these i. Classifying countries into categories

One way of classifying economies throughout the world is to describe them as developed, emerging, or frontier economies. The specific definitions of each are not universally accepted, and some countries can be defined in one category by one entity (such as FTSE) and in another by another entity (such as MSCI). Developed markets are the easiest to recognize and are not relevant here. “An emerging market is, in short, a country in the process of rapid growth and development with lower per capita incomes and less mature capital markets than developed countries” ( http://emergingmoney.com/bric/what-is-the-difference-between-a-developed-emerging-and-frontier-market-anyway/). Frontier markets are a smaller group of countries within the emerging markets category. “Specifically, a frontier market is one with little market liquidity, marginally developed capital markets and lower per capita incomes vis à vis the more developed emerging markets….the potential for

(ibid.) Developed markets are considered safer than emerging markets and frontier markets rank even lower in terms of safety. Ernst & Young in turn call “emerging” markets “RGMs” or “rapid-growth markets”.

Chrironga et al (2011 p.119) attempt to categorize African countries according to the type of opportunities they (re)present by grouping them according to “their economic diversification and level of exports”. Countries which have a higher level of exports are likely to have a higher GDP and be able to import more. “Successful companies use filters to decide which countries to enter and tailor their entry strategies to specific sectors. They focus their efforts on key markets, but those that think broadly benefit from greater scale and diversified risks” (Chrironga et al 2011 p.119). The four groups are:

Diversified economies; such as Egypt, Morocco, South Africa and Tunisia. These are the largest consumer markets in Africa and have higher incomes per capita and more stable GDP growth.

Oil exporters; such as Algeria, Libya and Nigeria. These have the highest per capita income and growing consumer markets but their economies are the least diversified.

Transition economies; such as Kenya, Tanzania and Uganda. These have lower incomes per capita but are growing fast and this could be an opportunity. They are more and more engaged in export to other African countries. “Companies targeting these markets must tailor products to poorer customers. Still, early entrants will find less compeition here, and the rapid growth is expected to continue” (Chrironga et al 2011 p.120).

Pretransition economies; such as Ethiopia, Mali and Sierra Leone, which are still poor and lack infrastrucutre and stability. “Mulitnational companies must track these economies, but only those that can handle the risks should enter them” (Chrironga et al 2011 p.120).

So AOC needs to evaluate which countries to target based on its short- and long-term strategy.

Apart from innovation and a good understanding of the way business is done in the target country, Chrironga et al (who are all consultants at McKinsey) go on to explain the most important elements for doing business successfully in Africa in their view. These are:

Pick the right entry strategy. There are many ways to enter a country market, such as organic growth, acquisition of small regional firms or purchasing a stake in a big African firm. “The answer will depend on the industry” (Chrironga et al 2011 p.120), but clearly the decision should not be taken lightly.

Get – and get to – customers. A company trying to enter the African market will need to understand the preferences of its potential (mainly low-income) customers and be able to adapt its products and the way it sells them accordingly. Furthermore flexibility is required in terms of logistics due to the poor quality of infrastructure.

Fill the skills gap. There is a lack of middle managers in Africa, so companies should consider investing in training programmes, bringing in expats, rotating talent between Africa and other countries, and acquisitions which will allow them to inherit experienced managers. Manage risks. Ways to mitigate risks include diversification, and building partnerships and relationships with influential local people.

iii. Market entry strategies

When MNEs (multinational enterprises) do business abroad they may face additional costs because of their unfamiliarity with the environment. Differences in the cultural, political and economic environment may increase costs due to the requirement of co-ordination. This is called the “liability of foreignness” (Zaheer 1995).

There are many ways to start doing business in other countries, such as exporting, licensing, FDI and joint venture. Why would a company choose one over another? The choice of entry mode into a new foreign market could have an enormous impact on the success of a new venture. Three frameworks which attempt to explain and aid in decision making are the OLI paradigm, the FSA/CSA framework, and the Uppsala model.

Dunning (2000)’s “eclectic” theory of internationalization, aka the OLI paradigm, is a rational, a-contextual explanation for FDI, which states that firms will internationalize if “OLI” advantages exist. “O” stands for Ownership and refers to firm-level sources of competitive advantage that help to overcome the liability of foreignness. These are defined as scarce, tacit firm-specific assets or resources like a strong brand or proprietary technology, the ability of managers to identify and exploit resources and coordinate, monopoly power due to size, and geographically dispersed operations as a “strategic hedge”. “L” represents Location advantages, attractive, country-specific resources that are “location-bound”, e.g. market – a large or growing population or segments that is attractive for your goods; (natural) resources; innovations – knowledge, technology, skills, best practices and new approaches which you wish to tap into; and efficiency – since wages and other costs are not equal around the globe, companies can exploit these differences to reduce costs. Finally “I” represents internalization advantages e.g. internal markets which arise where contracts fail, and internal markets for transferring tacit knowledge (when knowledge intensity is important), and asset specificity (other parties cannot use your technology, or do you not want them to). According to this framework, companies should only engage in foreign direct investment (FDI) when all three OLI advantages are present. If O or I are not present, companies should outsource and trade. If L is not present, companies should not engage in FDI in that location.

The FSA/CSA matrix

Internalization theory states that firms are unique bundles of resources and MNEs are efficient at transferring knowledge within the MNE (across borders). Consequently, the bundle of resources specific to the MNE will determine whether that knowledge will be transferred internally. Rugman (2011) combined internalization theory with Dunning’s eclectic paradigm to form the FSA/CSA matrix. A firm-specific advantage (FSA) is defined as “intangible, knowledge-based” (Rugman 2011 p.3) and can be “efficiency-based”, “brand advantage, skills in management, and organizational capabilities” (ibid.) Country specific advantages (CSAs) can be present in the home country and/or the host country, such as “the labor force, natural resources, market size, and other environmental factors, including culture” (Rugman 2011 p.6). So based on the firm’s unique characteristics and those of the potential host country, the matrix can be used to decide whether to engage in FDI or not.

“Dunning’s four motives for FDI are…natural resource-seeking, market-seeking, efficiency-seeking and strategic asset-efficiency-seeking” (Rugman 2011 p.7).

In cell 1, (high country-specific advantages, low firm-specific advantages, top left) resource-seeking FDI is when the home country MNE wants to exploit natural resources, cheap labour, etc in the host country. Market-seeking FDI is when the home country MNE wishes to access the (presumably large and/or with plenty of disposable income) consumer base in the host country.

If country-specific advantages are low, there will be no FDI (cells 2 and 4).

“In cell 3, [high country-specific advantages, high firm-specific advantages, top right] we have asset-seeking FDI. Here, home country MNEs (today mainly from emerging economies) go to a host country in the hope of acquiring knowledge-related assets” (Rugman 2011 p.7), however, Rugman doubts if this kind of FDI really exists or is successful.

The Uppsala model

A more behavioural, path-dependent explanation for FDI was proposed by Johanson and Vahlne (1997), known as the Uppsala Internationalisation Model. They propose that internationalisation can and should be done in stages, starting with trading in the home market only, followed by indirect exporting, then direct exporting and the foreign production. Establishing overseas operations can be complex due to many factors such as regulations and cultural differences, and managers face uncertainty due to lack of local market knowledge and international experience and the perception of risk in dealing with foreign business partners. Their stages model sees expansion as a process of organizational learning, taking incremental steps because managers are risk-averse, but they are learning as they go.

Entry mode strategy

Entry mode strategy can often be predicted from the existing company structure, which reflects its overall strategy. Harzing (2000) identifies three types of multinational corporations with different characteristics: global, multidomestic and transnational. If we can identify what kind of organization TPV and AOC are, we may then be able to identify

who will actually make the decision about entry into Africa and what kind of entry mode would suit it best.

Global companies follow a low-cost strategy by building economies of scale. Competition takes place on a global level. “The organizational structure of the Global company is centralized and globally scaled, and the main role of subsidiaries is to implement parent company strategies – that is, mainly to act as pipelines of products and strategies” (Harzing 2000 p.108). Flows of products, people and information go mainly from headquarters to subsidiaries.

Multidomestic companies try to respond to national differences and compete on a domestic level. The company structure is decentralized. Subsidiaries are highly independent. There is not a great flow of products, people and information between headquarters and subsidiaries.

Transnational firms try to combine both approaches by competing globally and responding to national differences. They function interdependently and subsidiaries can function as centres of excellence; flows of products, people and information mainly go between subsidiaries.

Later in the paper we will discover which of these kinds of companies AOC and TPV are and what this means for decision making and entry modes.

D. Global Market Opportunity Assessment

Cavusgil et al describe the process for assessing global market opportunities as follows (Cavusgil et al 2013 p.159-60):

1. Analyse the readiness of the organization to internationalize, by examining company strengths and weaknesses in areas such as skills and (financial) resources.

2. Assess how suitable the company’s products are for international customers, and identify anything which may need to be adapted for any possible target market, for example due to differences in consumer preferences, legal aspects and competitors’ offerings.

3. Reduce the potential target markets to five or six based on size or growth rate, market intensity (customer buying power), consumption capacity (size and growth rate of the middle class), infrastructure and country risk.

4. Assess industry market potential, i.e. develop sales forecasts by analysing aspects such as trade barriers (tariff and nontariff), industry trends, standards and regulations.

5. Decide on foreign business partners. First, decide what value-adding activities need to be performed by foreign business partners, then decide the most important characteristics of these partners, then assess and select potential partners.

6. Estimate the potential to sell the product in each target market based on pricing and financing, partner capabilities, intensity of competition, and any other factors which will influence this potential.

Later I will apply these steps to AOC tablets. E. Selling to the bottom of the pyramid

Prahalad and Hart (2002) state that there is an enormous opportunity for multinational corporations to sell to the poorest people in the world, and that this opportunity has been largely ignored or dismissed by multinational corporations (MNCs). They define these consumers as “Tier 4”, meaning those with the lowest incomes, less than $1500 a year. Although these consumers have the lowest incomes, there were four billion of them in 2002 and their numbers are rising rapidly. “The bottom of the pyramid is waiting for high-tech businesses such as financial services, cellular communications and low-end computers. In fact, for many emerging disruptive technologies…the bottom of the pyramid may prove to be the most attractive early market”. Although margins on individual products sold to this group many be very low, with volume, considerable profits can still be made. This requires radical innovation “MNCs cannot exploit these new opportunities without radically rethinking how they go to market” (Prahalad and Hart 2002 p.5). Their suggestions which could be used by AOC include using renewable energy to produce or power the products, developing new or modified products with a lower price which are also robust, and innovation in manufacturing and distribution. R&D focused on the poor should be conducted and cost structures need to be dramatically reinvented. Perhaps the existing product needs

to be redesigned so it can be charged by solar power or winding up, due to the lack of mains electrcity in many regions of Africa. There are also large parts of Africa without internet access, so perhaps the tablets should be preloaded with offline apps so they are still useful wherever the user is.

Launched in 2006, a $150 laptop is being distributed in some developing countries, manufactured in Taiwan at a profit, and it may be useful for AOC to consider some of the features which make it both cheaper and more suitable for developing world users. The screen is small at 7.5 inches. The manufacturer “found a way to modify conventional laptop displays, cutting the screen’s manufacturing cost to $40 while reducing its power consumption by more than 80 percent. As a bonus, the display is clearly visible in sunlight” (Markoff, New York Times, Nov 30, 2006). Wireless capability is included and “when students take their computers home after school, each machine will stay connected wirelessly to its neighbors in a self-assembling “mesh” at ranges up to a third of a mile. In the process each computer can potentially become an Internet repeater, allowing the Internet to flow out into communities that have not previously had access to it” (ibid). Each laptop has a “simple mechanism for recharging itself when a standard power outlet is not available. The designers experimented with a crank, but eventually discarded that idea because it seemed too fragile. Now they have settled on several alternatives, including a foot pedal as well as a hand-pulled device that works like a salad spinner….The display, which removes most of the color filters but can operate in either color or monochrome modes, has made it possible to build a computer that consumes just 2 watts of power, compared with the 25 to 45 watts consumed by a conventional laptop. The ultra-low-power operation is possible because of the lack of a hard drive (the laptop uses solid-state memory, which has no moving parts and has fallen sharply in cost) and because the… microprocessor shuts down whenever the computer is not processing information” (ibid.).

In India, there is already an inexpensive tablet computer available, which costs around $37 to make and is sold for around $40. The price is so low “by using Google’s free Android operating system and cheap semiconductors found in low-end cellphones. In addition...[the company] figured out how to make its own touch panel to fit behind the liquid crystal display

screen. The LCD is still manufactured by an outside company” (Hardy, New York Times, Oct 19, 2012).

Could AOC follow the examples of other manufacturers, rethinking the product design and components of its tablets in order to sell them in Africa? If so, they will need to make a decision and act on it very quickly.

III. Case Description: AOC

A. Organizational overview

AOC is a daughter company of the world’s biggest computer monitor manufacturer, TPV. TPV is a Taiwanese company with factories in China, Poland, Russia, Mexico and Brazil. One in three computer monitors across the world is made by TPV, and TPV also manufactures TVs and large format screens for public signage. It is the world’s fourth-biggest flat TV producer and recently acquired Philips’ TV division. As well as OBM monitors and Philips-brand monitors, TPV produces its own Philips-brand monitors, and one of its monitor Philips-brands is called AOC. The regional headquarters of AOC for Europe, Middle East and Africa are located in Amsterdam.

Company specific information for this project was obtained from interviews with key figures in the EMEA organization in the areas of product management, operations management and sales.

Globally, desktop computer sales are declining and monitor sales are expected to follow suit. Desktop sales have been affected by laptop sales, and monitor sales have been affected by both laptop and tablet sales ( http://www.pcworld.com/article/2031479/big-monitor-demand-grows-as-overall-display-market-shrinks.html). Clearly, TPV and AOC have noticed the trend and are looking for other products to develop and market in order to offset the coming decline in demand for monitors. This is why AOC has started to enter the tablet and smartphone markets.

B. AOC Tablet Products

In 2011 AOC launched its first tablet, and AOC tablets are being sold in Asia and North and South America. AOC is considering whether Africa should be its next target market for tablets, and if so, which countries it should target first and how to enter them. Which countries have the biggest market? Which are easier to export to?

A tablet computer, or simply tablet, is a portable computer which is smaller than a laptop and bigger than a smartphone. Tablets are 7 inches (18cm) or larger, measured diagonally,

and the display, circuitry and battery are in one unit (wikipedia.org). The tablet computer market exploded from a mere 2 million sold worldwide in 2009 to 20 million in 2010 (Encyclopaedia Britannica). The growth in the worldwide tablet market declined in the first quarter of 2014, but continued to rise in Africa. “The IDC [a market intelligence provider] reported that growth in the MEA region at 77.3%, reaching four million units by the end of March this year” ( http://www.fin24.com/Tech/Featured/Tablet-growth-spikes-in-Africa-20140602).

AOC currently offers about thirty different models of tablet in different sizes (from 7 to 13.3 inches) and with different specifications (with and without accessories, Android or Windows 8 operating system, different cameras, batteries, etc.) and of course price points differ accordingly.

There is a three-tier market for tablets. The first tier has an average selling price of around 350 Euros and is dominated by Apple and Samsung. The second tier sells at around 200 Euros and the main players are Microsoft, Amazon, Asus, Sony and Dell. The third tier retails at around 70 Euros and consists of Lenovo, Acer and local brands. AOC wants to enter the third-tier market in Africa, become the best of the third-tier brand and in the future become a second-tier brand (internal source).

African consumers are already technology-savvy and most households have at least one mobile phone (www.oafrica.com). In the last three years several companies, established brand names and newcomers, have attempted to enter the tablets market in Africa, and others have distributed tablets for free as part of educational projects or offered discounted models.

AOC has purchased market research data about the South African market and discovered that the landed cost of tablets manufactured in China exceeds the required price point in South Africa, so if AOC were to sell its current tablets in South Africa, this would mean making a loss (internal source).

According to internal sources at AOC, the line between smartphone and tablet has now become very thin. AOC believes that due to the lack of a fixed telephone network in many parts of Africa, mobile phones proliferate amongst African consumers and many African

consumers will “leapfrog” straight to smartphones. This is supported by a Guardian article from 2012: “Mobiles overcome some of the endemic problems that have stifled progress on the continent: poor infrastructure (both in transport and power transmission), sparsely populated rural areas and widespread poverty. The basic feature phones that are still the most popular are vital for this environment. With small non-touchscreens, they have long battery life, though people find innovative ways to recharge, for example from car batteries. Most have an FM radio, still the greatest communications medium in the developing world. And many have a small torch” ( http://www.theguardian.com/world/2012/oct/30/africa-digital-revolution-mobile-phones). Although “feature phones” (i.e. phones which can make voice calls and send texts, but cannot access the internet, a.k.a. “dumbphones”) are more common in Africa at the moment, the smartphone market is expected to grow enormously, according to experts. “Smartphones are still expensive? Not for long. According to Alex [Dadson of Qualcomm], smartphones and feature phones have reached price parity…and prices will keep going south, to the point where a smartphones will be within reach of every Nigerian. Tecno’s P3 just hit the shelves, at just under the magic $100 mark. Alex predicts that the same phone will cost no more than $50, come next year. “You’re gonna get to a point where you walk into a store, and the feature phones and smartphones cost the same. Which one will you pick?”“ ( http://techcabal.com/2013/05/20/feature-phones-versus-smartphones-which-way-africa/). AOC intends to enter the African smartphone market in 2016. There would certainly be some brand, channel and production synergies with tablets. If customers will leapfrog straight to smartphones, they may also leapfrog straight to tablets.

C. TPV’s entry modes into foreign markets to date

TPV has entered foreign markets in different ways until now. Greenfield FDI was used in Mexico, Poland and Russia, but in Brazil a joint venture was established. In the EMEA region, there are sales offices in Amsterdam, Prague and Dubai, but all monitors for this region are produced in China and Taiwan and exported to EMEA.

TPV chooses to locate its production facilities in densely populated regions (where there is a sufficient labour force) and with good transport links to harbours (internal source). Another requirement is a stable political situation. It selects countries and regions who offer incentives to build factories there. Incentives may include investment grants, preferential

land deals, tariff exemptions, and tax exemptions or holidays. The factory in Gorzow, Poland is a special economic zone which offered such incentives in return for job creation (internal source). The same applies to the factory in Brazil: “The company carries out its operations in the Manaus duty free zone, an industrial district in the capital of Amazonas state which provides tax benefits….AOC has been in Brazil since 1997, but in its first seven years opted to order production from third parties, and in 2004 decided to set up its own factory in Manaus. The company said it had opted for the northern Brazilian state due to several incentives and advantages that it offered, and has invested over US$30 million over the last 10 years” (http://www.macauhub.com.mo/en/2007/04/17/2872/)

In China, constructing production plants in certain locations also brings incentives. TPV’s most recently opened factory is located in Beihai, Guangxi, China. It was built there due to Chinese government incentives to “go west” (internal source). The following information about incentives for FDI in Beihai can be found on the internet: “Beihai can provide incentives through a favourable tax policy, cheap land, abundant supply of power and labor to outside investors. As a city located in China’s Great Western Development Program, Beihai can provide both domestic and foreign investors income tax waiver treatment granted by the Central Goverment. It can also use incentives as part of the Beibu Wan Development Area” (http://www.wikileaks.org/plusd/cables/06GUANGZOU5870_a.html). TPV’s majority shareholder is the government of the People’s Republic of China. According to internal sources, Chinese diplomats tasked with seeking overseas FDI opportunities report back to their government about attractive opportunities which include excellent incentives, and the government may sometimes ask TPV, and companies like it, to prepare a business case for a factory in that country or region. This will then be a trigger to consider engaging in FDI there.

TPV is clearly aware of the need to build and utilise relationships with government when doing business abroad.

For example, “Xi [Jingping, China’s president since 2012]…is close to Jason Hsuan, the chairman of Taiwan’s TPV Technology, calling him a “long-time friend”” (Gilley 2013, p.149). TPV is the anchor investor in a development zone on Pingtan Island off the coast of Fujian, China. (Gilley 2013, p.150).

When TPV decided to expand its Mexican production facility, this was announced during a promotional tour of Asia by Jose Guadalupe Osuna Millan, Baja California Governor, who met with Charles Chen, the company’s CEO, who made the announcement (

http://www.maquilaportal.com/index.php/blog/show/TPV-will-increase-production-capacity-in-BC.html)

TPV is clearly a global company (according to Harzing (2000)’s typology) because all production and R&D for its subsidiary AOC in EMEA is not done locally. All products produced are treated as intra-company sales. This means that any decision about constructing or acquiring production facilities in Africa is likely to be made by headquarters, not the EMEA subsidiary. However, decisions about which countries in Africa to export to can likely be made in Amsterdam. Headquarters will only be involved in sales forecasts and targets, and any modification of the product if needed.

D. AOC in South Africa

AOC exports monitors to South Africa and has a sales manager based there. Monitors are imported from China to South Africa in two ways; as finished goods (up to 21” screen size) and as CKDs (completely knocked down units, over 21”) for final assembly in South Africa (internal source). This is because screens below 21 inches can be imported duty free whereas those over 21 inches would incur a duty of 34.8% as finished goods. Some monitors are then exported from South Africa to Mozambique, Namibia, Zimbabwe, Angola, Nigeria, Botswana, Malawi and Zambia. Philips-brand and AOC-brand monitors are sold in South Africa as well as AOC co-branded monitors, which have the customer logo on the front and the AOC logo on the back, and both logos on the box.

The South African tablet market is around 1.2 million units per year in 2014 and is expected to grow 50% to 1.8 million in 2015 (internal source). No AOC tablets have been sold to date. AOC has provided samples of its tablets to potential customers (resellers) in August 2014 and received feedback that “AOC is coming in very, very late into the tablet market and for the market you are trying to target we think it’s already quite well populated by stronger brands”. The resellers say consumers would prefer tablets with Windows 8.1 and 3G enabled. 3G is the market standard now but the AOC tablets’ CPU is not powerful enough for

3G. AOC thinks consumers prefer Android OS as it has more apps. The AOC tablets are prices about $10 higher than their close equivalents. The resellers say that people will start to move more towards business-type tablets, which are the ones running Windows; currently consumers are using Android tablets for mails, social media and multimedia.

Perhaps the most obvious way to go about selling tablets in Africa would be to follow the existing model for monitors. However, tablets have a 0% import duty anyway into South Africa so there is no need to import CKDs and do local assembly. So the options could be exporting to South Africa from China (or elsewhere, but currently production is only done in China) or manufacturing tablets in Africa.

Regarding potentially building a factory in Africa, the local sales manager was enthusiastic about South Africa as the best location in southern Africa for a factory, because South Africa has two major ports (Durban and Cape Town), major airports, a stable economy and a well-trained labour force. He added that if TPV or AOC would prefer to target northern Africa for building a factory, then they should probably choose Egypt or Nigeria, but is not as familiar with northern African countries.

E. Case question

Should TPV (or AOC) set up production facilities for tablets in Africa? If so, where (in which country or countries)? Through greenfield investment, acquisition, or joint venture?

If AOC chooses to remain simply an exporter to Africa which countries should it target first? Should the product be redesigned for all or some countries in Africa?

The decision about how AOC enters the market is crucial and should be taken as soon as possible, since, as the South African potential customer pointed out, AOC is already “very, very late”. It has already become difficult for AOC to make their mark against their competitors, who are no doubt also considering entering Africa, or have already done so. Also doing business in Africa requires time, patience, perseverance and tenacity, so they should start as soon as possible. It is imperative that AOC decides if they will make their presence as exporters and or having their own factory in the country/countries of choice. The quicker this is decided, then the easier the choice of country/countries will become,

I will use all the theoretical frameworks described in section II to come up with recommendations for AOC.

IV. Results

Where should one start with assessing the risk and opportunity profile of over fifty African countries? I decided to follow the example of the professionals: “Given that perceptions of Africa as a high risk, difficult and sometimes dangerous place to do business are still very real, it makes sense to begin with a relative country risk comparison” (“Growing Beyond. Africa by numbers. Assessing market attractiveness in Africa”, Ernst & Young, 2012, p.10). I began by ranking 51 African countries by their risk ratings from the Economist’s Risk Briefing.

A. Exporting

For exporting, the most important risk is the foreign trade and payments risk, because the most important consideration is ultimately to get paid for the goods. In order to find out which countries AOC should focus on first for export tablets, I decided firstly to find the top ten countries in Africa with the lowest risk in this category. Because some countries were rated as equally risky, in fact I ended up with a top 14. Then I added the population and whether the country is landlocked or not (from wikipedia) (see table III). I then eliminated the countries which are landlocked, as these will be more difficult to deliver the goods to, and/or the countries with a population of under ten million, so as to focus on the largest nations first. I was then left with five countries; South Africa, Benin, Cote d’Ivoire, Mozambique and Senegal. Are all five good options for exporting AOC tablets?

South Africa is the only one of these which appears in the Market Potential Index and is the obvious choice for exporting, both in general because it is the most developed and largest economy in Africa, and also for AOC because are already exporting monitors there and have a local sales manager in place.

Mozambique is a neighbour of South Africa and a member of the same free trade zone (SADC). As both levy 0% duty on tablets there would be no obvious advantage to adding Mozambique to the list of countries to export to, as it would add unnecessary complexity. Potential business with Mozambique could be done via South Africa.

Benin seems a very attractive country to start to export to. There is no duty on tablets and it is a gateway to landlocked countries such as Burkina Faso, Niger, Mali and Chad, who have

for goods to be re-exported from Benin to Nigeria, which is a huge market. So this could be a way to enter the more risky Nigerian market which mitigates that risk somewhat.

Cote d’Ivoire and Senegal and Benin all belong to the same customs union, ECOWAS. The duty on tablets is 5%. There would be no obvious advantage to exporting to Senegal and Cote d’Ivoire if Benin is already being targeted, as it would add unnecessary complexity, and Benin has the added advantage of its proximity to Nigeria. Potential business with other ECOWAS countries could be done via Benin.

Therefore the first two countries to I recommend AOC focus on exporting tablets to are South Africa and Benin.

B. FDI

For FDI, be it a joint venture, greenfield or acquisition, all the areas of risk measured by the Economist are important. These areas are political stability risk, government effectiveness risk, legal & regulatory risk, macroeconomic risk, foreign trade & payments risk, financial risk, tax policy risk, labour market risk, infrastructure risk and security risk; however, The Economist has helpfully combined them into an overall risk rating. I decided firstly to find the top ten countries in Africa with the lowest risk overall. Then I added the population and whether the country is landlocked or not (from Wikipedia) (see table IV). I again eliminated the countries which have a population under ten million, so as to focus on the largest nations first. I was then left with only three countries: South Africa, Tunisia and Senegal. South Africa is the only one of these which appears in the Market Potential Index. South Africa and Tunisia both appear in the FTSE Quality of Markets Assessment Matrix but South Africa rates more highly. South Africa and Tunisia are classified as diversified economies, or “Africa’s growth engines” by McKinsey (“Lions on the move…”p.4). However TPV will need to pay attention to labour costs, as these are higher in these economies than in China (see figure 2).

South Africa is a member of an African free trade zone of 26 countries (see figure 3). According to Ernst & Young’s country profile – FDI outlook, South Africa is Africa’s largest economy and leading FDI destination, with a large population. “It has a sizable domestic

market with growing levels of disposable income, a comparatively well-educated labor force, and an institutional environment conducive towards business” (“Africa by numbers…”, p.57). Tunisia has free trade agreements with the European Union, Morocco, Egypt, Jordan, Turkey, Libya and Algeria ( http://ec.europa.eu/trade/policy/countries-and-regions/countries/tunisia/) which could make it an excellent base for exporting to those countries as well as supplying the home market. According to Ernst & Young’s country profile – FDI outlook, Tunisia has “one of the largest middle class populations in the region” (“Africa by numbers…”, p.63) so the number of potential customers for AOC tablets is relatively high. “A potentially attractive resource at the country’s disposal is its highly skilled labor, especially when it is coupled with Tunisia’s proximity to the EU market. And although the domestic market is small, the country’s well-established infrastructure network, good economic governance and business environment conducive to business make it an attractive location for multinationals” (“Africa by numbers…”, p.63).

A pan-African free trade zone is supposed to be in operation in 2017 or 2018 (http://news.xinhuanet.com/english/world/2012-05/26/c_123195304.htm), which would increase the number of countries and potential consumers AOC could reach without having to pay duties if its manufacturing is done in Africa.

Senegal does not feature in the FTSE Quality of Markets Assessment Matrix and is designated a transition economy by McKinsey (“Lions on the move…”p.32). “Factories in these countries are as productive as those in China or India, but the Africans’ overall costs are higher because of poor regulation and infrastructure – problems that could be addressed over time with the right policy reforms and increased infrastructure investment” (“Lions on the move…”p.32). Senegal is a member of The Economic Community of West African States (ECOWAS), which has fourteen other members and could serve as a base for trading with those countries. According to Ernst & Young’s country profile, “Senegal is a model democracy in Africa and has one of the region’s most stable economies…the growing service sector is making Senegal an attractive option as a hub for doing business more widely” (“Africa by numbers…”, p.52). Although some weaknesses are the low levels of education, high levels of bureaucracy, and corruption, overall the outlook for FDI is improving.

Out of the three countries surveyed, South Africa seems the best option according to the numbers and facts mentioned, and also according to the opinion of the EMEA organization of AOC.

How risk tolerant is TPV in terms of engaging in FDI? Due to the company structure, (Global, according to the typology of Harzing) this information is unlikely to be shared by headquarters with the EMEA subsidiary. We can however draw some conclusions based on TPV’s historical behaviour. We know that there are factories in China, Poland, Russia and Mexico which were greenfield investments, and in Brazil there is a joint venture. As Ernst & Young’s report points out, many African countries are now less risky for doing business than other RGMs (see table V – African countries are in grey). The least risky African countries are now considered less risky or about as risky as the countries TPV already has factories in. Therefore, risk should not be an objection for TPV.

Furthermore, TPV has also been through a learning process as outlined in the Uppsala model, by expanding from Taiwan first to China and then to Europe and the Americas. As we know TPV is also good at cooperating with local governments to get their support for its business ventures. Therefore, if it can make use of its experience, TPV is already quite a considerable way along on the journey to doing FDI in Africa.

If TPV wants to start a joint venture with an African company, or acquire an existing African tablet manufacturer, there is a good candidate to explore. A company named VMK which is based in the Republic of Congo has launched what it calls the first African tablet and smartphone. “When 26-year-old Congolese entrepreneur Verone Mankou followed up the introduction of the first designed tablet with the announcement of the first African-designed smartphone, some within the local tech community looked on skeptically. This was Africa after all, and other tablets and smartphones claiming to be "African" were shown to be little more than Chinese designs with only superficial unique traits….The aim, says Mankou, is to get these products into African hands by making them easier to afford….There has been some negative reaction on local tech blogs, and much of it seems to come from a belief that these products are made by what is called an original equipment manufacturer, or OEM. A few years ago, Africa's "first" tablet was found out to be an OEM product available not only in Nigeria, but throughout the world sold under different names. Its claims of being African were shot down, and the company was regarded as just another merchant

pushing foreign products on local consumers. Mankou's VMK is adamant that this is not the case with its products, even devoting a page on its website to address the accusation….Like Apple, VMK has had to answer for manufacturing its products in China, a country with a higher per-capita GDP than the Congo…. Mankou told the AFP that VMK wanted to keep as much of the phone African as possible, but decided to manufacture it in China "for the simple reason that Congo has no factories and for price reasons" ( http://www.smartplanet.com/blog/global-observer/first-african-designed-smartphone-and-tablet-hit-market/). Perhaps AOC could work with VMK to build a factory in Africa. There would certainly be some synergies between their businesses and brands. Both companies would have to be careful about marketing the tablets (and smartphones) as African, because clearly some African consumers are sensitive about this, but if they are manufactured (or assembled) in Africa, this would make them more “African” than the existing ones.

The Republic of Congo, aka Congo Brazzaville, was among the top ten least risky countries for FDI but I had eliminated it earlier due to its smaller population. A joint venture or acquisition would reduce the risks further because it would allow AOC to benefit from local knowledge as well as specialized product knowledge. In this special case, the population of the country is less relevant. So AOC should certainly consider VMK as an option for acquisition or joint venture.

C. Selling to the bottom of the pyramid

For the category “selling to the bottom of the pyramid”, I decided to make a “wildcard” selection for AOC, which means targeting a poorer country, i.e. a pretransition economy, to build a production facility making super cheap, low-end tablets, which would involve a much higher risk but with a higher return. The examples of pretransition economies mentioned by Chrirongra et al are Mali, Sierra Leone, the Democratic Republic of Congo (DRC), and Ethiopia. As we already know, “Mulitnational companies must track these economies, but only those that can handle the risks should enter them” (Chrironga et al 2011 p.120). The Economist’s overall risk ratings of these are: Mali 54%, Sierra Leone 58%, Ethiopia 61% and DRC 74%.

“Ethiopia has the 2nd_{-largest population in Africa (and the 14}th_{largest in the world) [about 83} million], and has consistently been one of the fastest growing economies in the world for over a decade. Although the large majority of the population remain poor, the potential that exists in the market is attracting investor interest” (“Africa by numbers…”, p.33). Ernst & Young predict an improvement in the outlook for FDI.

DRC also has a large population, around 66 million, which is the fourth-largest in Africa, and “it [is] one of the markets with the highest potential in Africa. Although the business environment can be challenging, there are also high rewards on offer for those who are prepared to invest and stay the course” (“Africa by numbers…”, p.25). Although Ernst & Young predict an improvement in the outlook for FDI, the indicators for 2017 still look unattractive.

Therefore I would recommend Ethiopia for the location of the manufacturing plant if AOC wishes to pursue the “selling to the bottom of the pyramid” route. There is no reason why this production plant could not also manufacture higher-end tablets, and/or smartphones, for the more developed economies in Africa or elsewhere.

D. Ansoff’s matrix

In table VI I have added the possible strategies for AOC tablets outlined above to the matrix to show what kind(s) of market development AOC will potentially be undertaking in Africa. There is no market penetration. Product development would mean selling existing tablets in countries where monitors are already sold, such as Europe and South Africa. Market development could be exporting existing tablets to the rest of Africa or producing existing tablets in Africa for sale in the rest of Africa. Finally diversification would mean creating new tablets for sale in Africa.

E. Opportunity/risk matrix

In figure 4 is an opportunity/risk matrix created by Ernst & Young for selected African countries.

South Africa and Tunisia are represented by large bubbles in the top right quadrant, with lower risk, higher reward, and this is in line with the reasons I have outlined earlier to select

them over other countries for FDI (and export, for South Africa). Ethiopia and Senegal can be found in the top left quadrant representing higher risk and higher reward, again in line with my assessments of them as higher risk countries which may be worth the risk. The Republic of Congo and Benin do not appear, presumably because Ernst & Young considered them too small and/or too risky. However, theirs is a general assessment. Numbers do not give us the whole picture. If AOC considers Benin as a gateway to so many other countries, and the Republic of Congo as a location for a potentially lucrative acquisition or joint venture, AOC has a different perspective from companies in other industries. If its rivals are using this matrix to select target countries too, then AOC may have an advantage by targeting two countries not shown and therefore probably not even considered by others. Ernst & Young also could not take into account the relationship building (to be) undertaken by TPV.

F. The OLI Paradigm and the FSA/CSA matrix

Would AOC benefit from “O”, “L” and “I” advantages if it were to engage in FDI in Africa? It needs all three, according Dunning, before it should engage in FDI.

Ownership advantages it would gain would be the possibility of “made in Africa” branding and a strategic hedge: Africa continues to grow rapidly while most of the rest of the world is in, or recovering from, recession.

Location advantages it would gain could be government incentives to build a factory, and proximity to a large and growing market, access to African free trade zones, as well as labour costs and risk ratings comparable to the countries it already manufactures in.

Internalization advantages it has are the ability to organize production and the labour force as well as build relationships. Licensing or outsourcing in Africa might not be as successful as a TPV-owned manufacturing plant because, as Chrironga et al pointed out, there is a lack of experienced managerial talent in Africa (Chrironga et al 2011 p.120). TPV seems to be excellent at using its connections with governments to make a success of its factories worldwide, starting of course with the selection of the right location. Locals in Africa may not be able to get government incentives to build factories and may also lack access to capital markets. TPV will have good access to capital and its foreignness may even be an advantage

TPV has O, L and I advantages so according to Dunning, it should go ahead with FDI in Africa (not just exporting to Africa).

AOC’s FDI in Africa would be described as “market-seeking” and/or “resource-seeking” in Rugman’s FSA/CSA matrix; market seeking due to the new consumers it could reach, and resource-seeking for the potential incentives and strategic hedge.

The next step for AOC and TPV, should they wish to go ahead, would be to make it known to the Chinese government that it wishes to work with them to investigate if any of the preferred countries has incentives for engaging in FDI and what the requirements are to benefit from them.

G. Global Market Opportunity Assessment

Now I return to the six key steps in the process of Global Market Opportunity Assessment and apply them to the case of AOC (Cavusgil et al 2013 p.159-60), to examine how far along they are in this process, and what the potential of the African market is:

1. Analyse the readiness of the organization to internationalize: For AOC, this step has already been taken. Given the fact that the company has offices and factories in several locations around the world, there are unlikely to be any deficiencies which hinder further internationalization.

2. Assess how suitable the company’s products are for international customers: AOC has established their product internationally, since they have experience with monitors globally and they have experience with tablets in Asia and the Americas. With regards modifying their product for bottom of the pyramid, an approach AOC could take to redesigning the product has been discussed on pages 14-16, and a possible location for a factory has been identified on pages 30-31.

3. Reduce the potential target markets to five or six based on size or growth rate: The

reduction of target market was done by a process of elimination using the risk rating table. However, numbers do not always provide the whole picture and this is why I urge AOC to consider less obvious countries.

4. Assess industry market potential: According to AOC internal figures, the EMEA region

accounts for about 23% of worldwide tablet sales. In May 2014 IDC announced its forecast

for worldwide tablet sales for 2014: 245.4 million units

( http://9to5google.com/2014/05/29/idc-lowers-tablet-shipment-forecast-expects-phablets-to-cannibalize-tablet-sales/). Gartner predicts 316 million units in 2015 ( http://techcrunch.com/2014/07/06/gartner-device-shipments-break-2-4b-units-in-2014-tablets-to-overtake-pc-sales-in-2015/), so that would mean about 73 million in the EMEA region.

5. Decide on foreign business partners: Firstly the decision needs to be made about what

activities partners in Africa will need to carry out, for example, if AOC decides to build a factory, they will need partners to seek out a suitable location and carry out construction. In any case, logistics partners and customs brokers to arrange transportation of goods to and throughout (and possibly out of) Africa will be needed, as well as partners with knowledge of local retail channels. Because AOC already has some partners in the business of monitors, such as in South Africa, then they, at first glance, would be the first choice of partners for the tablet business, if they are interested. However, an important consideration has to be whether the current partners are specialized and experienced in both B2B and B2C environments. They may be specialized in local assembly of (monitor) CKDs but that is not currently relevant for tablets. Bearing in mind AOC’s plan to enter the smartphone market in the next couple of years, it might also be a good idea when choosing partners to consider their experience in that industry.

6. Estimate the potential to sell the product in each target market: AOC forecasts a 2.1%

market share in 2014 in tablets worldwide. If AOC’s market share grows in line with the tablet market, in 2015 AOC should sell 6.6 million tablets worldwide and 1.5 million of those in the EMEA region.

V. Conclusion

In my research, I have sought to identify some options for AOC for entering the tablet market in Africa. Based on assessments of risk, opportunity and practical factors as well as company-specific information I have come up with several recommendations.

At this point I will review the general recommendations for doing business in Africa outlined by Chrironga et al, which they called the “four keys to success”, see how they could apply to AOC, and whether they coincide with my advice.

Pick the right entry strategy. In this paper I have emphasized why the choice of entry mode is important and needs to be made as soon as possible. I have presented several options for AOC to consider.

Get – and get to – customers. I have explained which countries to target in order to have access to a very large potential customer base, and also how AOC could redesign its tablet products to appeal to more African consumers.

Fill the skills gap. The focus of this paper was assessing the best market entry strategies so advice about how to fill the skills gap was outside of its scope. However I have found a possible acquisition or joint venture target, through which AOC would inherit local talent. Other than this, it would be wise for AOC to follow the general advice: consider investing in training programmes, bringing in expats, and rotating talent between Africa and other countries.

Manage risks. I have explained how entering the African market could lead to diversification and a strategic hedge for TPV. I have also selected the least risky countries for FDI and argued that the least risky African countries are not more risky than the locations where TPV has already built factories. I have also shown that one of TPV’s strengths is in building relationships with government, another important way to manage risk.

A summary of my own recommendations for AOC to consider:

 The best place to build a factory is South Africa, followed by Tunisia and Senegal. If AOC is interested in a higher-risk, higher-return strategy, Ethiopia is the best location for a factory.

 AOC should consider a joint venture with, or acquisition of, VMK in DRC.

 AOC should consider a radical product redesign to target bottom of the pyramid consumers.

 AOC’s parent company TPV should now “put the word out” in China that it is considering FDI in Africa, the government may then have some suggestions for locations which include attractive incentives.

 If TPV decides not to engage in FDI, the first countries to target for export of tablets made in China are South Africa and Benin.

The recommendations may be specific to AOC, but the process I have gone through assessing different African countries, and the theoretical frameworks I have used as well as the latest reports by experts, could be used by any company considering whether, why, and how to enter the African market. I used AOC as an example to demonstrate how theories of international business can be linked to practice in the context of a MNC.

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