AFRICA will soon be on the radar screen of the American and European retail
chains. They will pose both enormous challenges and threats to
decision-making individuals and the companies involved in the
multibillion-rand SA retail sector.
Prem Shamdasani, of the National University of Singapore, says the major
multinationals have successfully entered Indonesia, Thailand and India and
the Pacific Rim economies of Japan, Korea, China and Taiwan, and will focus
on new markets with Africa being one of them.
"Walmart and Carrefour of France have, through hard-won experience, honed
their entry procedures, structures, logistics and models for new markets,
and SA will be the route into the African market. The two international
retailing giants have both experience and money behind them and they will
move aggressively when they decide the time is right," he says.
Shamdasani feels local companies should use the time they have to entrench
themselves in the marketplace.
"It stands to reason they are going to poach local staff," he says. "Loyalty
of key staff must be addressed immediately, to get them to see a future with
you rather than with the multinationals. If you cannot appeal on the
rational side, given the enormous opportunities the multinationals will be
offering, you have to appeal to the emotional side."
The real challenge for domestic retailers, says Shamdasani, is to
re-evaluate their retail mix constantly, and to ensure a "we know the best"
feeling among their customers.
Foreign entrants will be turning to the outstanding management of local
retailers and consultants for their broad knowledge of best industry
practice.
"Local companies can defend their positions in a number of ways, apart from
looking carefully at maintaining key management. Cardinal to retailing is
store location. If the right locations are not available, this pretty much
rules out competitive entry. This counter was used effectively in Hong Kong
and Singapore," says Shamdasani.
The global multinationals also deliberately source goods from suppliers in
earmarked new markets before finally declaring their intention of going
there. Suppliers get hooked into attractive big volume deliveries, and are
then vulnerable when the multinational moves in. Using local suppliers in
advance also gives the global companies a valuable insight into supply
chains.
"Solid supplier relationships are therefore important for local companies,
and so are binding supply contracts to make certain your procurement network
is not disrupted by sudden large volume demands from multinationals with
lots of dollars.
Shamdasani says it is pointless questioning the manner in which global
companies go about their business. They generally have meticulous roll-out
plans in place by the time they decide to enter a market. Local firms could
consider "pre-emptive strikes" to gain the advantage.
Free trade and ultra-efficient models are being seen as benefiting the
consumer, who gets better quality products at lower prices, so to impede
their progress is not viewed favourably.
Dr Shamdasani presented a programme on strategic retail management at the
Gordon Institute of Business Science.

Publisher: Business Day
Source: Business Day