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  • Direct Sales Team Vs Distributor – Which is Better For an International Market?

    Direct Sales Team Vs Distributor – Which is Better For an International Market?

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    If you’re looking to expand your sales to new markets, then there’s one big question you must ask: do I build a direct sales presence or use a distributor? Each method has its benefits and drawbacks, but we’re going to make a strong case to use one method over the other in almost every instance.

    What’s the difference between direct sales and distributors?

    A direct sales presence means that your company establishes, manages, and pays a sales team of one or more people in the target market.

    An outside agent is any entity that will sell your product in exchange for a service fee. One example is a sales rep, who sells your product in exchange for a percent of the sale. A distributor is similar to a rep, except they would buy product from your company and sell it directly to the end customer.

    Is Direct Sales Better?

    For most businesses expanding into new markets, especially international markets, hiring a distributor is a better decision-at least until there is enough return from the market to justify building a direct sales presence.

    Sure, there is one major advantage to having a direct sales presence-control. Control over the day to day activities of your sales personnel is appealing to most business owners. But this control comes at a heavy price. To start, you’ll need to spend the time to hire someone in that market, then train them, then equip them with sales material and management, if not office space and equipment. These costs are prohibitive for most small businesses looking to expand internationally.

    And there are even more costs that we haven’t mentioned yet. Each market has it’s own unique laws, cultures and customs that are essential to master if your company wants to establish a successful sales presence. Japan is a classic example of a marketplace with unique legal structures and business customs that, if not followed, guarantee the failure of any sales efforts. It’s hard to pin down an exact monetary value to this learning, but ask yourself this: Can you afford to establish, manage, and pay a sales force in a foreign country for at least a year while they learn the ropes and generate no revenue?

    What about a Distributor? Is a Distributor better for new markets?

    Distributors are a cost effective means to enter a new marketplace successfully. Here are just a few of the reasons:

    • No Overhead:
      Unlike running your own sales team, a distributor will take care of the hiring, managing, payment, and optimization of its channel. You’re just borrowing their distribution, while they handle the maintenance.
    • Established Channel with Local Knowledge:
      A good distributor will already know all the laws and customs of the market you’re entering. You don’t need to reinvent the wheel-you can use someone who already has valuable local knowledge.
    • Understand Pricing and Purchasing Power of Market:
      Along with knowledge of the laws and customs comes knowledge about the most successful ways to price and market your product locally.
    • Cost Effective:
      Since you won’t be paying for the above items, distributor relationships are much more within reach of a small business trying to enter a new market.

    Using a distributor has some downsides as well, but they can be minimized by building a good relationship with a distributor.

    • Not your own people:
      You won’t be able to directly manage every step of the process. While it may make you nervous to lose some control over the sales process, you can manage the risk by building a transparent relationship with your distributor with constant updates and feedback from both ends.
    • Distributor has many products to represent:
      You may not be the distributor’s top priority at any given time, and you want to be sure your product is not getting shuffled to the back of the line. Once again, a well-established relationship with constant contact will ensure that your product is getting the attention it deserves.
    • Not a “turn key” solution:
      You can’t just give the distributor your products and expect success. You’ll have to manage the relationship. This takes time, but it’s still less costly than trying to install a direct sales team from scratch.

    So what do I do next?

    If you aren’t convinced that a distributor would be better for your organization than establishing a direct sales team, seek help from a consultant who has experience establishing a presence in new markets. A consultant can use his or her experience to analyze your opportunity and recommend the best course of action.

    Before you choose a distributor, you need to know….

    Choosing the wrong distributor will set you up for failure. The wrong distributor simply won’t generate sales, and you’ll have wasted at least a year finding and setting up an unprofitable relationship.

    There are certain things to look for in a distributor, and they are different for every market. The best thing to do is to find a professional, one with experience in distributor relationships, and hire that professional to help you search for and identify the right distributor.

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    Source by J. P. Williams

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  • Is There Insurance That Protects a Business Owner From a Strike?

    Is There Insurance That Protects a Business Owner From a Strike?

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    Even if you are only a little tiny-bit news savvy, you are probably aware of the breaking news about how politics is affecting a business. When an online company won a contract with the government to supply detention centers in Texas with bedding furnishing, no one would have imagined the upheaval?

    Employees of the online furniture business voiced their disapproval via a thoroughly disruptive strike.

    Notwithstanding that the decision to do business with the detention center was based on the commercial advantage of gaining profit and that in place of sleeping on the floor, the children at the centers would get actual mattresses and beds, the company’s employees determined that the transaction would make a statement of approval for detaining those illegals that were unlawfully attempting to cross the border.

    The result of the walkout is in no shape or form good for business and as the refusal of employees to return to work continues it only gets worse and worse.

    But while worker strikes occur within many industries – from teachers, hotel staffers and garbage collectors to nurses, hospital and aging home workers and other business employees – there is one common thread connected to the broad diversity.

    It can bring extensive financial loss to the boss and his or her corporation.

    And while there are a slew of insurance products that actually protect the business owner, there is only a specialty type of coverage that can shield a company from the devastation related to a workers’ strike.

    It’s called Strike Insurance.

    A strike insurance policy can only be bought separate of a business owners policy because it is considered specialty coverage.

    It is best to sit down with an insurance specialist to determine if your business would actually benefit from this type of coverage.

    As far as protection is concerned, the policy would cover the financial losses related to a continuous strike. Should your business suffer the effects of an employee strike, you would be compensated for day-to-day loss of income and monetary damages related to the walkout. Be aware, though, that policy limits apply and a strike that sees no end would also not be subject to an infinite duration of coverage protection.

    For more on this type of special coverage, contact an experienced insurance agent that has the know-how and network of leading insurance companies to locate the right fit for your business situation – at the best quote.

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    Source by M Wyzanski

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  • 4 Little Known Secrets to Becoming a Profitable Affiliate Marketer

    4 Little Known Secrets to Becoming a Profitable Affiliate Marketer

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    Affiliate marketing business has gotten a lot of buzz in recent times due to advances in internet technologies and upsurge of social media channels like Facebook, Twitter, LinkedIn etc.

    However, some affiliate marketers especially beginners struggle to earn profitably because they do not thoroughly understand the business.

    WHAT REALLY IS AFFILIATE MARKETING?

    Affiliate Marketing is the process of earning online commissions by promoting products and services. Your commissions are earned each time you get a lead (Potential customer) or sell products online.The interesting aspect of affiliate marketing business is that you can make a ton of money with a little monetary investment.

    Furthermore, you can start the business without products or services of your own, work from home and earn passive income even while sleeping if you have an effective system in place.

    HOW DOES AFFILIATE MARKETING WORK

    Register under the affiliate program of reputable companies that have valuable products and services.

    Decide on the niche products to focus on.

    Get your custom affiliate tracking link for each product you decide to promote online.

    Select the right traffic source to use in promoting the product.

    Decide on the marketing strategy to use i.e Blogging, video or social media marketing.

    4 MAJOR WINNING STRATEGIES TO INCREASE YOUR PROFITS ONLINE

    Focus on a single niche at a time

    You should choose a niche that you are both knowledgeable and passionate about. For example, Weight loss, Supplements, Nutrition, Pet training etc. This enables you to easily persuade your customers to buy your products. Also, this will allow you to learn and acquire new selling strategies that will increase your sales and multiply your profits.

    Select traffic sources

    It is recommended to focus on 2 traffic sources at a time. I will recommend focusing on one search engine and one social media traffic at a time. This enables you to properly track and optimize campaigns launched on each platform thereby maximizing your profits per product.The secret of super affiliates is their ability to focus on a traffic source, testing and tracking campaigns optimally.

    Test marketing strategy to use

    You can never know if either blogging, social media or video marketing will be most profitable until you test marketing strategies such as:

    Blogging: You can write a blog post using well research keywords for search engine optimization. This attracts your clients to your blog and causes them to make a decision.

    Video marketing; You can make a video describing the features of the product then you upload it on YouTube for people to watch.

    Social Media Marketing: This is the commonest and the easiest method especially for beginners. Facebook is a very good platform because it has lots of groups/forums where you can find people who are interested in your product and service. You can easily send them a friend request and pitch your products to them.

    Track the data/results gotten from each of the methods then you focus on the method that produces the greatest profit.

    Select the traffic type

    The traffic type can either be free or paid traffic.

    Free traffic involves search engine optimization, social media groups, and article marketing. The drawback of this method is that it does not allow you to target your client based on their interests and demographics.

    Paid traffic involves using Pay per click or Pay per view advertising on search engine and social media platforms. This method is faster, associated with increased conversion and profits because it allows you to target your clients specifically based on interests and other features.

    Finally, affiliate marketing business is very lucrative and you can start becoming profitable today once you implement the strategies above.

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    Source by Christopher Ugo Oseh

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  • Entrepreneurial Mind Frame

    Entrepreneurial Mind Frame

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    Entrepreneurs make up only about 15% of the working population in the US. Far fewer actually succeed than those who attempt to become self employed business people and venture out on their own. So what makes people decide to take the entrepreneurial path, when so few actually make it a reality?

    Is the American dream a possibility for anyone, or, does it take more than most to become a successful entrepreneur?

    The success of an entrepreneur does depend on their mindset. A large percentage of business owners will quit in their first five years in business. What is needed is the fortitude and belief that goes with attaining success.

    Entrepreneurs are risk takers and dreamers. The difference between the dreamer and the entrepreneur though, is that the entrepreneur takes actions based on their dreams. They persist through the hardships and never give up! Many entrepreneurs start with an idea. Their success is determined by their belief that they can create something greater than simple monetary success. Often, it is about creating something which will benefit the world.

    James Dyson, for example, came up with the idea of the bagless vacuum cleaner. Despite multiple set backs, over 5000 prototypes and not being able to get any manufacturers or distributors to accept his idea, he persevered. It was over a decade after his initial idea when his concept came to fruition. Even then, it was after a lot of difficulties and hardship due to the vacuum replacement bag industry, which was worth £100 million in the UK.

    In Simon Sinek’s book ‘Start With Why’, he suggests that the biggest companies in the world are so because of their “why?” – their reasons for building a business in the first place. In all cases, it wasn’t just to make money, or make technology better, or some whimsical ideology.

    The Wright Brothers, for example, became known as the pioneers of the first manned flight. But their competition was much better funded and well connected – Samuel Pierpont Langley had worked at Harvard, had a number of powerful connections, including Andrew Carnegie and Alexander Graham Bell. The War Department funded his project with a $50k grant, a seemingly massive advantage to the unconnected Wright Brothers who had no money or influence. However, their passion and devotion to change the world with this new technology drove them to attain the first flight in history in 1903.

    Desire for material things and monetary wealth can only carry someone so far. Unless you have a goal or passion which is bigger than that, you may lose the momentum and fail to maintain your enthusiasm for any length of time.

    The entrepreneurial mindset is one which taps into your purpose. Without a purpose driven goal or aim, it can’t take long before disillusionment kicks in. With a mindset which takes into account a larger purpose, entrepreneurs can build huge businesses because they ‘saw’ a vision of what they wanted to create. If the purpose is greater than the obstacles which lie in the path of attaining it, no amount of setbacks will stop you from achieving your goal.

    On the other hand, if you set out to do something and something gets in the way and stops you, your initial reason, (your “why?”), may not have been strong enough to endure all the battles along the way.

    Entrepreneurial mind frame (or mindset) therefore, must be aligned with both your vision, your values and your purpose. If your values are not in alignment with your purpose and vision, you’ll come up against road blocks which will stop you from achieving your goal.

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    Source by Tim Halloran

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  • Why You Might Not Be Right For Affiliate Marketing

    Why You Might Not Be Right For Affiliate Marketing

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    Affiliate marketing is a business model which rewards ‘affiliates’ for the promotion of other people’s products on the internet. By sending website traffic to various products and services, affiliate marketers can earn a living from the sale of goods and services on the internet.

    But not everyone is cut out for this kind of work. It involves working by yourself for quite a bit of time. There’s various technical skills you’ll need to learn such as website building, running adverts and connecting various software together to make your online business work.

    Even though there’s been huge leaps in technology lately, meaning there’s less technical hassle involved, some people just won’t have the patience for this. Even if you find a community of help and support, there’s still a lot to learn and it isn’t for everyone.

    Expect to work between 6 months and a year before you see any results at all, too. This is pretty tough, especially if you don’t fully believe in what you’re doing. There’s a fair amount of trial and error with affiliate marketing. Most people will give up too early and never see the fruits of their efforts.

    For those who stick, there are great rewards to be earned. But they are earned. Not in the conventional way of earning money by trading your time for it, but in overcoming barriers to success. You need to have a fair amount of tenacity and patience. It’s not like a job where you get paid every month initially. So, if you’re used to trading time for money and getting paid every month, don’t give up the day job just yet!

    Affiliate marketing is a business and not an employment. You need to drop any entitlement attitude which may be buried in your mind. You can’t expect any reward unless you actually have had it! If something isn’t working, you need to take stock and change your habits. It took me years before I saw any tangible results from affiliate marketing. I just refused to quit!

    There are of course faster ways to benefit from affiliate marketing. Getting the right training and education from the start can make the most difference. If you’re going the wrong way, no amount of hard work will matter. I spent quite a bit of time here, being a busy fool; not knowing that what I was doing wouldn’t yield any results at all. I did many online training courses before I found the right one.

    There’s a lot of mental challenges too, when it comes to making an internet business work. Some people are in a better place to face these than others. If you’ve already run a business, for example, you’ll have a better understanding of an online business. For years I thought I could just concentrate on the activities which I enjoyed. I later realised that this was what held me back. You need to learn and grow with your business; otherwise the glass ceiling of your business will always be you.

    Who do you hang around with? There’s a saying that your income can be determined by the average of your 10 closest friends. Again, this can have massive implications on whether your internet business is successful or not. Who do you listen to and ask advice from? Is it business leaders who are making 6 figures? Or, more likely it is someone doing a regular job who is massively sceptical of anything different.

    How do you perceive yourself? Self image has a lot to do with success too, whatever area of life you want to be successful in.

    Affiliate marketing is a great business model. But not everyone will see this. If your circle of influence is sceptical of it, chances are this will rub off. It’s very difficult building a business if part of your mind doesn’t believe in it, or in yourself.

    Then there’s the obvious monetary barriers to entry. When I started looking at affiliate marketing I was in a lot of financial trouble. I had a very deeply ingrained poverty consciousness, and real financial hardship. So a lot of affiliate business courses and software were out of reach for me. I started with the cheaper ones and as a result made slow progress. I wasn’t able to use paid marketing strategies, so I had to use content marketing. This takes a long time and results are never guaranteed.

    If you’re trying to build a business and simultaneously fighting with a massive poverty consciousness and are terrified about spending even a tiny portion of what you have, I wouldn’t recommend affiliate marketing.

    There’s a saying in the trading world “Scared money is lost money”. The same can be said of affiliate marketing. If you’re using money for your business which you’re terrified of losing, you’re much more likely to lose it.

    On the other hand, if you can afford to spend some money each month on your business, and grow it slowly, your chances of success are far greater. Starting with an income already is really a necessity with an online business. It’s hard building stability in a business on shifting sand.

    When I started affiliate marketing, I didn’t have regular work. As a result, I concentrated on the activities which were free to do. This is a very slow tactic. Although I eventually made progress, it was much slower than the affiliates who use paid marketing and start in employment. It’s not impossible, but very slow.

    Saying that, I also think that if you’ve got time, and little money, then affiliate marketing is a good thing to focus on. You just need to find strategies which match your own specific situation and circumstance.

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    Source by Tim Halloran

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  • How To Be Cautious And Successful In Affiliate Marketing

    Affiliate Marketing is a great program. It provides those who want it with the means to set up their own home business. As an affiliate, you do work for another but you are rewarded for your work. The money you make is based on your individual performance not an hourly or yearly salary. Affiliate marketing provides many incentives to work harder and more efficiently. The harder and better you work, the more monetary success you are likely to see. Affiliate marketing also reduces the amount of risk. The main company handles the advertising and creation of the product allowing you to move the product in what ever way you think best.

    One does need to be cautious in the field of affiliate marketing. For every great, legitimate opportunity out there, there are more ready to con. The internet has made it quite easy for these con artists to operate and even thrive.

    Before you Plunge head first into the field on affiliate marketing you should do some checking. A general rule of thumb is to never do business with anyone that doesn’t have a fixed address and telephone number. If all they have to offer is an email address then look for another company. Doing business only by email is very dangerous. It makes it far too easy for these con artists to slip away and never be heard from again. Unfortunately, when they slip away it is likely with your money or earnings.

    If you find a company that you are interested in then check the start up costs. These should be minimal if any at all. Ask is there is a way to pay back the start up costs through your sales commission. Most are willing to do this. However, if there seems to be a lot of initial money that needs to be paid by you then find something else. The chances are good that they will take your money and run, leaving you with worthless product.

    Finally, ask what support you will receive if you agree to become part of their affiliate marketing plan. There should be someone there to guide you through the process and answer any questions that you have. They should also offer you advice on how best to market their product. It is up to you in the ends but they should offer you some stat up ideas. If their legitimate company they should want to help you all they can. They more you are able to sell the greater benefit for them as well.

    You should keep in mind that affiliate marketing takes a of work. It is like any other business except that the risk to you is much lower. Ignore companies that promise huge salaries with little effort, it just won’t happen. Many people make great successes with affiliate marketing programs. However, they do work incredibly hard. However the rewards come when the hard work pays off. You’re the one that will reap the rewards, not your boss.

    Affiliate marketing is a great way to start working for yourself. With lots of hard work and creativity you could be well on your way to great earnings doing something that you enjoy. It won’t be easy and in the beginning you’ll have to work harder then you ever did in a full-time job. But if you’re driven it will all be worth it in the end.

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  • Mergers and Acquisition – A Case Study and Analysis of HP-Compaq Merger

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    Brief Description

    The following is a brief description of the two companies:

    HP

    It all began in the year 1938 when two electrical engineering graduates from Stanford University called William Hewlett and David Packard started their business in a garage in Palo Alto. In a year’s time, the partnership called Hewlett-Packard was made and by the year 1947, HP was incorporated. The company has been prospering ever since as its profits grew from five and half million dollars in 1951 to about 3 billion dollars in 1981. The pace of growth knew no bounds as HP’s net revenue went up to 42 billion dollars in 1997. Starting with manufacturing audio oscillators, the company made its first computer in the year 1966 and it was by 1972 that it introduced the concept of personal computing by a calculator first which was further advanced into a personal computer in the year 1980. The company is also known for the laser-printer which it introduced in the year 1985.

    Compaq

    The company is better known as Compaq Computer Corporation. This was company that started itself as a personal computer company in the year 1982. It had the charm of being called the largest manufacturers of personal computing devices worldwide. The company was formed by two senior managers at Texas Instruments. The name of the company had come from-“Compatibility and Quality”. The company introduced its first computer in the year 1983 after at a price of 2995 dollars. In spite of being portable, the problem with the computer was that it seemed to be a suitcase. Nevertheless, there were huge commercial benefits from the computer as it sold more than 53,000 units in the first year with a revenue generation of 111 million dollars.

    Reasons for the Merger

    A very simple question that arises here is that, if HP was progressing at such a tremendous pace, what was the reason that the company had to merge with Compaq? Carly Fiorina, who became the CEO of HP in the year 1999, had a key role to play in the merger that took place in 2001. She was the first woman to have taken over as CEO of such a big company and the first outsider too. She worked very efficiently as she travelled more than 250,000 miles in the first year as a CEO. Her basic aim was to modernize the culture of operation of HP. She laid great emphasis on the profitable sides of the business. This shows that she was very extravagant in her approach as a CEO. In spite of the growth in the market value of HP’s share from 54.43 to 74.48 dollars, the company was still inefficient. This was because it could not meet the targets due to a failure of both company and industry. HP was forced to cut down on jobs and also be eluded from the privilege of having Price Water House Cooper’s to take care of its audit. So, even the job of Fiorina was under threat. This meant that improvement in the internal strategies of the company was not going to be sufficient for the company’s success. Ultimately, the company had to certainly plan out something different. So, it was decided that the company would be acquiring Compaq in a stock transaction whose net worth was 25 billion dollars. Initially, this merger was not planned. It started with a telephonic conversation between CEO HP, Fiorina and Chairman and CEO Compaq, Capellas. The idea behind the conversation was to discuss on a licensing agreement but it continued as a discussion on competitive strategy and finally a merger. It took two months for further studies and by September, 2001, the boards of the two companies approved of the merger. In spite of the decision coming from the CEO of HP, the merger was strongly opposed in the company. The two CEOs believed that the only way to fight the growing competition in terms of prices was to have a merger. But the investors and the other stakeholders thought that the company would never be able to have the loyalty of the Compaq customers, if products are sold with an HP logo on it. Other than this, there were questions on the synchronization of the organization’s members with each other. This was because of the change in the organization culture as well. Even though these were supposed to serious problems with respect to the merger, the CEO of HP, Fiorina justified the same with the fact that the merger would remove one serious competitor in the over-supplied PC market of those days. She said that the market share of the company is bound to increase with the merger and also the working unit would double. (Hoopes, 2001)

    Advantages of the Merger

    Even though it seemed to be advantageous to very few people in the beginning, it was the strong determination of Fiorina that she was able to stand by her decision. Wall Street and all her investors had gone against the company lampooning her ideas with the saying that she has made 1+1=1.5 by her extravagant ways of expansion. Fiorina had put it this way that after the company’s merger, not only would it have a larger share in the market but also the units of production would double. This would mean that the company would grow tremendously in volume. Her dream of competing with the giants in the field, IBM would also come true. She was of the view that much of the redundancy in the two companies would decrease as the internal costs on promotion, marketing and shipping would come down with the merger. This would produce the slightest harm to the collection of revenue. She used the ideas of competitive positioning to justify her plans of the merger. She said that the merger is based on the ideologies of consolidation and not on diversification. She could also defend allegations against the change in the HP was. She was of the view that the HP has always encouraged changes as it is about innovating and taking bold steps. She said that the company requires being consistent with creativity, improvement and modification. This merger had the capability of providing exactly the same. (Mergers and Acquisitions, 2010)

    Advantages to the Shareholders

    The following are the ways in which the company can be advantageous to its shareholders:

    Unique Opportunity: The position of the enterprise is bound to better with the merger. The reason for the same was that now the value creation would be fresh, leadership qualities would improve, capabilities would improve and so would the sales and also the company’s strategic differentiation would be better than the existing competitors. Other than this, one can also access the capabilities of Compaq directly hence reducing the cost structure in becoming the largest in the industry. Finally, one could also see an opportunity in reinvesting.

    Stronger Company: The profitability is bound to increase in the enterprise, access and services sectors in high degrees. The company can also see a better opportunity in its research and development. The financial conditions of the company with respect to its EBIT and net cash are also on the incremental side.

    Compelling Economics: The expected accumulation in IIP gains would be 13% in the first financial year. The company could also conduct a better segmentation of the market to forecast its revenues generation. This would go to as much as 2 and a half billion dollars of annual synergy.

    Ability to Execute: As there would be integration in the planning procedures of the company, the chances of value creation would also be huge. Along with that the experience of leading a diversified employee structure would also be there. (HP to buy Compaq, 2001)

    Opposition to the Merger

    In fact, it was only CEO Fiorina who was in favor of going with the merger. This is a practical application of Agency problem that arises because of change in financial strategies of the company owners and the management. Fiorina was certain to lose her job if the merger didn’t take effect. The reason was that HP was not able to meet the demand targets under her leadership. But the owners were against the merger due to the following beliefs of the owners:

    The new portfolio would be less preferable: The position of the company as a larger supplier of PCs would certainly increase the amount of risk and involve a lot of investment as well. Another important reason in this context is that HP’s prime interest in Imaging and Printing would not exist anymore as a result diluting the interest of the stockholders. In fact the company owners also feel that there would be a lower margin and ROI (return on investment).

    Strategic Problems would remain Unsolved: The market position in high-end servers and services would still remain in spite of the merger. The price of the PCS would not come down to be affordable by all. The requisite change in material for imaging and printing also would not exist. This merger would have no effect on the low end servers as Dell would be there in the lead and high-end servers either where IBM and Sun would have the lead. The company would also be eluded from the advantages of outsourcing because of the surplus labor it would have. So, the quality is not guaranteed to improve. Finally, the merger would not equal IBM under any condition as thought by Fiorina.

    Huge Integrated Risks: There have been no examples of success with such huge mergers. Generally when the market doesn’t support such mergers, don’t do well as is the case here. When HP could not manage its organization properly, integration would only add on to the difficulties. It would be even more difficult under the conditions because of the existing competitions between HP and Compaq. Being prone to such risky conditions, the company would also have to vary its costs causing greater trouble for the owner. The biggest factor of all is that to integrate the culture existing in the two companies would be a very difficult job.

    Financial Impact: This is mostly because the market reactions are negative. On the other hand, the position of Compaq was totally different from HP. As the company would have a greater contribution to the revenue and HP being diluted at the same time, the problems are bound to develop. This would mean that drawing money from the equity market would also be difficult for HP. In fact this might not seem to be a very profitable merger for Compaq as well in the future.

    The basic problem that the owners of the company had with this merger was that it would hamper the core values of HP. They felt that it is better to preserve wealth rather than to risk it with extravagant risk taking. This high risk profile of Fiorina was a little unacceptable for the owners of the company in light of its prospects.

    So, as far as this merger between HP and Compaq is concerned, on side there was this strong determination of the CEO, Fiorina and on the other side was the strong opposition from the company owners. This opposition continued from the market including all the investors of the company. So, this practical Agency problem was very famous considering the fact that it contained two of the most powerful hardware companies in the world. There were a number of options like Change Management, Economic wise Management, and Organizational Management which could be considered to analyze the issue. But this case study can be solved best by a strategy wise analysis. (HP-Compaq merger faces stiff opposition from shareholders stock prices fall again, 2001)

    Strategic Analysis of the Case

    Positive Aspects

    A CEO will always consider such a merger to be an occasion to take a competitive advantage over its rivals like IBM as in this case and also be of some interest to the shareholders as well. The following are the strategies that are related to this merger between HP and Compaq:

    * Having an eye over shareholders’ value: If one sees this merger from the eyes of Fiorina, it would be certain that the shareholders have a lot to gain from it. The reason for the same is the increment in the control of the market. So, even of the conditions were not suitable from the financial perspective, this truth would certainly make a lot of profits for the company in the future.

    * Development of Markets: Two organizations get involved in mergers as they want to expand their market both on the domestic and the international level. Integration with a domestic company doesn’t need much effort but when a company merges internationally as in this case, a challenging task is on head. A thorough situation scanning is significant before putting your feet in International arena. Here, the competitor for HP was Compaq to a large degree, so this merger certainly required a lot of thinking. Organizations merge with the international companies in order to set up their brands first and let people know about what they are capable of and also what they eye in the future. This is the reason that after this merger the products of Compaq would also have the logo of HP. Once the market is well-known, then HP would not have to suffer the branding created by Compaq. They would be able to draw all the customers of Compaq as well.

    * Propagated Efficiencies: Any company by acquiring another or by merging makes an attempt to add to its efficiencies by increasing the operations and also having control over it to the maximum extent. We can see that HP would now have an increased set of employees. The only factor is that they would have to be controlled properly as they are of different organizational cultures. (Benefits of Mergers:, 2010)

    * Allowances to use more resources: An improvised organization of monetary resources, intellectual capital and raw materials offers a competitive advantage to the companies. When such companies merge, many of the intellects come together and work towards a common mission to excel with financial profits to the company. Here, one can’t deny the fact that even the top brains of Compaq would be taking part in forming the strategies of the company in the future.

    * Management of risks: If we particularly take an example of this case, HP and Compaq entering into this merger can decrease the risk level they would have diversified business opportunities. The options for making choice of the supply chain also increase. Now even though HP is a pioneer in inkjet orienting, it would not have to use the Product based Facility layout which is more expensive. It can manage the risk of taking process based facility layout and make things cheaper. Manufacturing and Processing can now be done in various nations according to the cost viability as the major issue.

    * Listing potential: Even though Wall Street and all the investors of the company are against the merger, when IPOs are offered, a development will definitely be there because of the flourishing earnings and turnover value which HP would be making with this merger.

    * Necessary political regulations: When organizations take a leap into other nations, they need to consider the different regulations in that country which administer the policies of the place. As HP is already a pioneer in all the countries that Compaq used to do its business, this would not be of much difficulty for the company. The company would only need to make certain minor regulations with the political parties of some countries where Compaq was flourishing more than HP.

    * Better Opportunities: When companies merge with another company, later they can put up for sale as per as the needs of the company. This could also be done partially. If HP feels that it would not need much of warehouse space it can sell the same at increased profits. It depends on whether the company would now be regarded a s a make to stock or a make to order company.

    * Extra products, services, and facilities: Services get copyrights which enhances the level of trade. Additional Warehouse services and distribution channels offer business values. Here HP can use all such values integrated with Compaq so as to increase its prospects. (Berry, 2010)

    Negative Aspects

    There are a number of mergers and acquisitions that fail before they actually start to function. In the critical phase of implementation itself, the companies come to know that it would not be beneficial if they continue as a merger. This can occur in this merger between HP and Compaq due to the following reasons.

    Conversations are not implemented: Because of unlike cultures, ambitions and risk profiles; many of the deals are cancelled. As per as the reactions of the owners of HP, this seems to be extremely likely. So, motivation amongst the employees is an extremely important consideration in this case. This requires an extra effort by the CEO, Fiorina. This could also help her maintain her position in the company.

    Legal Contemplations: Anti-competitive deals are often limited by the rules presiding over the competition rules in a country. This leads to out of order functioning of one company and they try to separate from each other. A lot of unnecessary marketing failures get attached to these conditions. If this happens in this case, then all that money which went in publicizing the venture would go to be a waste. Moreover, even more would be required to re-promote as a single entity. Even the packaging where the entire inventory from Compaq had the logo of HP would have to be re-done, thus hampering the finance even further. (Broc Romanek, 2002)

    Compatibility problems: Every company runs on different platforms and ideas. Compatibility problems often occur because of synchronization issues. In IT companies such as HP and Compaq, many problems can take place because both the companies have worked on different strategies in the past. Now, it might not seem necessary for the HP management to make changes as per as those from Compaq. Thus such problems have become of greatest concern these days.

    Fiscal catastrophes: Both the companies after signing an agreement hope to have some return on the money they have put in to make this merger happen and also desire profitability and turnovers. If due to any reason, they are not able to attain that position, then they develop a abhorrence sense towards each other and also start charging each other for the failure.

    Human Resource Differences: Problems as a result of cultural dissimilarities, hospitality and hostility issues, and also other behavior related issues can take apart the origin of the merger.

    Lack of Determination: When organizations involve, they have plans in their minds, they have a vision set; but because of a variety of problems as mentioned above, development of the combined company to accomplish its mission is delayed. Merged companies set the goal and when the goal is not accomplished due to some faults of any of the two; then both of them develop a certain degree of hatred for each other. Also clashes can occur because of bias reactions. (William, 2008)

    Risk management failure: Companies that are involved in mergers and acquisitions, become over confident that they are going to make a profit out of this decision. This can be seen as with Fiorina. In fact she can fight the whole world for that. When their self-confidence turns out into over-confidence then they fail. Adequate risk management methods should be adopted which would take care of the effects if the decision takes a downturn. These risk policies should rule fiscal, productions, marketing, manufacturing, and inventory and HR risks associated with the merger.

    Strategic Sharing

    Marketing

    Hp and Compaq would now have common channels as far as their buying is concerned. So, the benefits in this concern is that even for those materials which were initially of high cost for HP would now be available at a cheaper price. The end users are also likely to increase. Now, the company can re frame its competitive strategy where the greatest concern can be given to all time rivals IBM. The advantages of this merger in the field of marketing can be seen in the case of shared branding, sales and service. Even the distribution procedure is likely to be enhanced with Compaq playing its part. Now, the company can look forward to cross selling, subsidization and also a reduced cost.

    Operations

    The foremost advantage in this area is that in the location of raw material. Even the processing style would be same making the products and services synchronized with the ideas and also in making a decent operational strategy. As the philosophical and mechanical control would also be in common, the operational strategy would now be to become the top most in the market. In this respect, the two companies would now have co-production, design and also location of staff. So, the operational strategy of HP would now be to use the process based facility layout and function with the mentioned shared values.

    Technology

    The technical strategy of the company can also be designed in common now. There is a disadvantage from the perspective of the differentiation that HP had in the field of inkjet printers but the advantages are also plentiful. With a common product and process technology, the technological strategy of the merged company would promote highly economical functioning. This can be done through a common research and development and designing team.

    Buying

    The buying strategy of the company would also follow a common mechanism. Here, the raw materials, machinery, and power would be common hence decreasing the cost once again. This can be done through a centralized mechanism with a lead purchaser keeping common policies in mind. Now Hp would have to think with a similar attitude for both inkjet printers as well as personal computers. This is because the parameters for manufacturing would also run on equal grounds.

    Infrastructure

    This is the most important part of the strategies that would be made after the merger. The companies would have common shareholders for providing the requisite infrastructure. The capital source, management style, and legislation would also be in common. So, the infrastructure strategies would have to take these things into account. This can be done by having a common accounting system. HP does have an option to have a separate accounting system for the products that it manufactures but that would only arouse an internal competition. So, the infrastructural benefits can be made through a common accounting, legal and human resource system. This would ensure that the investment relations of the company would improve. None of the Compaq investors would hesitate in making an investment if HP follows a common strategy.

    HP would now have to ensure another fact that with this merger they would be able to prove competitors to the present target and those of competitors like IBM as well. Even the operations and the output market needs to be above what exists at present. The company needs to ensure that the corporate strategy that it uses is efficient enough to help such a future. The degree of diversification needs to be managed thoroughly as well. This is because; the products from the two companies have performed exceptionally well in the past. So, the most optimum degree of diversification is required under the context so that the company is able to meet the demands of the customers. This has been challenged by the owners of HP but needs to be carried by the CEO Fiorina. (Bhattacharya, 2010)

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    Source by Rohit Agrawal

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  • Nigeria Monetary policy committee meets for the first time this year

    Nigeria Monetary policy committee meets for the first time this year

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  • Africa: A Case of Flogging Dead Horses?

    On pure economic indicators and all other indicators of development Africa is a dismal picture. Life expectancy has declined; mortality rates increase; heavily indebted, with over half the countries having debt that exceeds their GNP; GDP growth fallen; GDP per capita fallen as population growth gets out of control; health care is collapsing and so and so on. What has gone wrong with what after all is continent rich in mineral and material resources?

    Too much medicine

    There are several factors. First and probably most simple is that Africa after independence was not allowed to chart its own course. With good or bad intentions too many ” aid ” agencies have prescribed,subscribed and proscribed all sorts of panacea for Africa’s ” that they destroyed any capacity for that continent to solve its own ills. Africa has simply become a vegetable or as some say a huge experimental waste ground. This is really not far from the truth.

    Another factor is that African governments after independence failed to formulate clear mission and objectives that could be translated into sound economic policies. Corruption and mismanagement took hold of almost every strata of society. This was further assisted by the aid agencies. Marginal benefits were put as further evidence for aid while government excesses on grand scale were overlooked.

    For political reasons, Western governments supported dictatorships and turned a blind eye to corruption and mismanagement. Cold war politics meant that the major powers had to have a balance not only in armaments but also in allies. The drive to prevent communist influence in Africa meant keeping regimes in power that supported Western interests.

    All too often these regimes were despots and perpetrators of the most sadist human rights abuses. Moreover aid agencies ignored every basic economic or social criteria for development assistance in favor of this higher political goal. This problem was further complicated by the fact that often the aid agencies will differ with their own governments. Thus vast sums were squandered on irrelevant constructions, large sums made their way into private accounts without so much as a whisper. What I call the “guilt” factor came in handy when others dare to complain of such corruption.

    The “guilt” factor argument is” oh well, we are giving and that is the most important thing. Whatever, the President choose to do with it is his business. After all they are an independent and sovereign nation”.

    The result is that today despite several billions poured, Africa is still underdeveloped and conditions are even worse than when they were at independence. My argument seems to point to the thesis that aid can work. Yes, I believe aid can work to alleviate poverty or change the society overnight. However, it cannot bring about economic development.

    Rather it should be used to ease the pain of the unpleasant side effects of harsh monetary and fiscal policy which is precisely what was needed at this point. For example due to the cyclical nature of the markets that face Africa main exports, there often severe variations in earnings. These can be very damaging especially given the fact that some countries depend on just one commodity. What aid should do is to bridge the gap between these shortfalls in earnings.

    Poverty can never be eradicated in a country; the aim should be to distribute wealth in a manner that ensures that the gap between the rich and the poor does not create social tensions.

    Counter-productive

    What “Aid” did to Africa was to exacerbate and indeed encourage irresponsible fiscal and monetary policy on the part of governments. There was some positive aspects of aid, but these were at the margin and as far as the big picture is concerned, too insignificant to alter the present argument. Look at how much money Norway has pumped into Tanzania and what condition that country is in today!

    I seem to have pointed the blame at the aid agencies and the Africa politicians. My belief is that the development agencies had good intentions. The explanation for their failures stems from the fact that the Africans that they encountered were not educated enough to challenge their assumption. Thus very soon these agencies began to get the view that the African does not know what is good for them. In effect their mission was not simply to give aid, but to make decisions for them!

    Bad Governments

    To say that “people deserve the government they get” is a little too harsh on Africans. In many parts of Africa, after independence there were too few university graduates or technocrats to replace the white administrators. Political rhetoric and nationalism prevented any form of expatriates assistance from former colonial administrators. Those that saw themselves in power had got there on a platform of”we can do it ourselves”. Thus any notion of keeping the very people you have been fighting against was nonsensical. The truth was many nations could not” do it themselves”.

    Governments ministers and officials with half-baked educational background suddenly saw themselves in power. They had little in the way of program or policy document. What matters was the trappings that the office brought and the personal gains one could get out of the office. Of course there some educated people. However, these quickly fell out with the government or sacrificed their principles for survival. The result of course was gross mismanagement, incompetence, corruption, graft on a scale that saw millions of Africans reduced to the lowest stage of survival.

    Is it any wonder that if things have to change, we have to start with ensuring well educated take the reins of power. There is little doubt that part of the success of the Asian countries lies in pool of well educated politicians and planners in the 1960s. These individuals not only set a strategic orientation for their nations, but they continuously surveyed their environments to see new opportunities.

    Education became a central plank of development policy. Not so in Africa- resources geared for such efforts were not used- Bad economic planning could be partly explained by such poorly educated civil servants. Take the case of monetary policy. At independence, most African countries inherit a monetary system based on the English pound, the French Franc or the Portuguese escudo. However in time nationalistic pride got in the way of financial practicalities and one country after another cut itself from the backing European currency and began turning out a spectacular array of non-convertible currencies. As one commentator note ” If nothing else the President got a chance to put their picture on the note”. And in the early and late sixties, since Presidents were short- lived it was inevitable that the currencies were too.

    Many of these currencies were worthless and not even accepted in neighboring countries or in the international banking system for that matter. As the currency weakened, the general response was to print more money. In Nigeria, between 1975-1977 the money supply increased by 180%. And this was pretty much the case elsewhere.

    As money supplies rose, inflation soared and in time rates of over 100% were not uncommon. In early post independence period as the public discontent grew, the greater the social control that was exerted by leaders. The greater the national debt, the greater the reliance grew of foreign grants to keep regimes in power.

    Tribalism

    Tribalism has been put forward by many writers as the root of Africa’s problems. Tribalism was made to look exclusively African. Events in the former Yugoslavia have shown that tribalism and ethnicity are not African preserves. Colonialism brought ethnic groups(tribes if you refer to Africa) that had nothing to hold them together except force and a colonial policy of divide and rule.

    When people talk about tribal problems in Africa, I put the question on how they would feel, because of some historical error, you had to live with people that you have no desire to. The second World War in Europe created a Europe that fell into the East(Communist Bloc) and West(Capitalist Bloc). The countries of the East under Soviet hegemony manage to hold the different diverse groups found within these countries. As the Empire collapse, so has the desire for self government risen or some form of regional autonomy.

    Yugoslavia has even manage to coin a new vocabulary, -“Ethnic cleansing”. What is very African about Tribalism is the way Africans choose to solve the problem. But even these atrocities cannot match the systematic methods of say Hitler or present day”Hitler’s” in Bosnia and Croatia.

    More to the point, economically, tribalism in some countries has crippled the economy by diverting resources to unproductive efforts. It has also meant in some places governments did not capitalize on their best talents simply because they belong to the wrong group. Vast numbers of refugees have been created which has meant whole populations have been displaced, their economic productivity unrealized.

    The Future

    The collapse of the old order has created new economic partnerships, shift resources and emphasis, which has pushed Africa further into economic uncertainty and regression. The fall of Communism has opened up new areas in the world that are far more immediately attractive than Africa for investment purposes.

    Eastern Europe provide valuable investment opportunities that are fast attracting capital. One of the legacies of the Communist era are the large numbers of scientist. These are fast becoming partners with establish Western companies for research into new fields.

    Western Governments face constituencies that are increasingly frustrated with their governments wasting money on corrupt and hopeless leaders.

    This is combined with the fact that domestic social problems are getting acute. Today Europe faces difficult social problems. Unemployment, lack of growth and increasing refugee problems from Eastern Europe. Indeed many experts believe that unemployment will become a more structural problem. What this indicates is that social services budget will become bigger. These factors make it all the more difficult for governments in the West to hand over large sums as they had done in the past. Finally, we see a new economic phenomenon or to be more precise, trade phenomenon-trade blocs.

    lready in place is the European Community EC. The North Americans are working out with Mexico -NAFTA North American Free Trade Area. In South East Asia,we see increasing Japans activity in the region. This is made doubly so with the expanding Chinese economy. It is my belief that as Japan makes efforts to address her war past and apologize, this will clear the way for some kind of trade area.

    Given this new world order, what does the future hold for Africa. It is my belief that some parts may never move from the traditional society that describe earlier on. War, famine and disease are the main preoccupation that any notion of social investment is ridiculous. The leadership is some cases actually perpetuate the situation thus guaranteeing their hold on power. However, there are a few that have the potential for spectacular development. Most impressive is Botswana. Botswana apart from South Africa is the fastest growing economy in Black Africa. This economy is characterize by a work ethic, skilled and an industrious labor force.

    Namibia is also an impressive case. However that country has only been independent since 1990. Nevertheless its institutions and policies are on the right track.

    The other group is lead by Kenya, Ghana, Ivory Coast, Nigeria, Gabon and to some extent Senegal and Zaire. There is another group that have all the ingredients but have yet to make any social investments. Some of these are actually at the bottom of UN list of poor quality of life. This group is led by Sierra Leone, followed by Uganda and Angola.

    Multinational Corporations

    In an increasingly global economic environment the role of the Multinational Enterprise (MNE), more commonly known as Multinational Corporations (MNCs), in fostering economic development is going to become increasingly important. Capital that is needed for domestic investment in the poor countries will come largely from investment by these organisations.

    Western governments are going to find it increasingly hard to justify flows to African governments. In another respect there will be increasing demand in African countries that the private sector plays a more central role. These will need the resources and expertise of MNCs. This will be helped by the fact Aid agencies favor joint ventures between foreign firms and local companies as a viable path to development.

    MNEs have much to offer the region in terms of capital, technology, innovation, managerial expertise, and access to world markets. It is important that the investment by MNEs is direct and not portfolio, for direct investment brings more than just financial resources. Further, it is important that MNEs source most of the materials locally so as to develop local skills and enterprises.

    It has been suggested that the target sectors for encouragement of Foreign Direct Investment (FDI) are the

    (a) wood and paper products, (linked to forestry)

    (b) textiles and clothing, (linked to textile fibers) and

    c) metal products or food processing( linked to the extractive sector).

    The objectives for African governments is to both attract the downstream diversification of multinationals already in the relevant extractive sector, and new the investment of multinationals whose operations in the more develop countries are tending to move downstream and may wish to relocate what for them are now upstream activities.

    Dead Horses?

    Africa is not like flogging dead horses. African countries are on a life support machine or as the world bank puts it, its in a state of transition. It needs it own doctors and experts to bring her back to life. To cure the ills of Africa is to understand its environment and no one can better Africa except Africans. The bottom line is you can take the horse to the stream but it she does not want to drink there is not much you can do. In the meantime you have wasted time. Africa is rich in mineral resources and has the potential for development.

    It has the market potential to provide people in the industrialized countries with employment through its demand for unmet needs.

    The growth potentials of the developed world are limited but in Africa there is a huge demand for food, clothing, shelter and consumer goods. What is needed as Philip Kotler points out is that the west puts purchasing power in the hands of these consumers. If this is not done the west will be saddled with over capacity and slow growth. On the other hand, there is body of opinion that believes that modernization goes through stages and that Africa is going through the same process. As such trying to speed up the process by interfering with its dynamics, merely causes cross-cultural and domestic conflicts. Evidence from South East Asian countries however indicates that this process does not necessarily have to follow a linear path. With the right set of policies, governments can make rapid development or even a leap.

    What is urgently needed are several things. In the first place governments should try to recruit their well educated citizens who arc presently abroad. These individuals could be put in special ministries responsible for charting a future for the country. This stems from the fact that Africans that are capable of generating the kinds of ideas and policies that it would take to turn what Africa is today into a modern society or at least developing nations are all abroad. We must also encourage the African entrepreneur as in many parts of South East Asia.

    What is needed in Africa is a system that propels the right people to power. Leaders that could respond to the needs of their peoples. Africa needs leaders that have the foresight for long-term constructive economic and industrial policy. Above all its needs leaders that recognized the need for social economic investments, without them, no sound economic or industrial policy will yield positive results.

    Francis Stevens George

    December 1993

    Article Source: http://EzineArticles.com/8060638

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  • On Your Marks, Get Set, Africa!

    In the face of declining world markets and the lack of prospects in the West, Africa is looking more and more like a place to do business.

    Africa, with all its angst and chaotic history and struggle with social upheaval is showing a resilience and sense of survival at which we can marvel.

    The International Monetary Fund anticipates emerging economies in general and Africa in particular will expand by 4.5% this year and 4.8% in 2013. An interesting indicator has been residential property values, which, on average, rose by 8% in 2011. (AFDB Statistics) Economic growth is expected to continue despite recessionary trends in some parts of the world.

    Although income disparities exist across Africa an authentic middle class is evolving. It is estimated that sixty million African households have annual incomes greater than $3,000 at market exchange rates. By 2015, that number is expected to reach a hundred million.

    Urbanisation is pushing up demand for all kinds of real estate: office space, retail complexes and of course, housing. The growth of, and potential for, infrastructure projects abounds. This has the positive spins off for labour too.

    South African business, it could be said, is scrambling. Recently Resilient, known for its successful serial development of non-metropolitan shopping malls outside of the major urban nodes, expressed dissatisfaction with local red tape and revealed it would spend more than 1 billion rand building 10 shopping malls in Nigeria. The malls, 10,000 square meters and 15,000 square meters in size, will be built over the next three years in the capital, Abuja, and the city of Lagos respectively, the main commercial hubs. Shoprite, Africa’s largest food retailer, will be the major tenant.

    Wal-Mart-owned Massmart last month said it would invest in African growth and hoped to grow its food retail business from about R7bn to about R20bn over the next five years. But it’s South African food retailers Shoprite and Pick n’ Pay’s whose sites are firmly set on Africa. Pick n Pay has increased its African growth, using R1,4bn from the sale of Franklins in Australia.

    Shoprite, which has only about 123 stores in Africa compared to about 1730 locally, says another 174 stores will be added in Africa next year. Pick n’ Pay on the other hand is aiming to expand into Malawi and the DRC within the year. The food retailer has over 93 stores in Africa North of South Africa. Zambia and Zimbabwe are on the cards for expansion. Woolworth, not to be outdone has opened 14 stores through its Enterprise Development Programme in Nigeria, Uganda, Zambia, Kenya, Mauritius, Tanzania and Mozambique. Woolworths currently has a presence in 12 countries with nearly 60 stores across Africa, excluding South Africa.

    Further investment in the African playing field could come in the form of buy-outs of South African food retailers by the likes of Tesco, Carrefour and Metro. Wal-Mart’s consumption of Massmart has already been well publicised.

    On a slightly different tack, Don’t Waste Services (DWS), the largest on-site waste management company in South Africa, has publicized their intention to open affiliates in Botswana, Kenya, Zambia, Mauritius and Swaziland. The company – is active in the mining, retail, hospitality, healthcare and large industry markets and currently provides waste minimisation services to 300 corporate clients across their portfolios of sites. Having recently expanded into Mauritius, the company is keen to duplicate their successful model in other African countries.

    On the real estate front JHI Properties Zimbabwe has added another 15 properties to its portfolio of over 50 since it is to manage unlisted property investment fund, Ascendant Property Fund (APF). JHI has already expanded from its South African home base into Zambia, Ghana, Namibia, Botswana, Lesotho and Nigeria. This further expansion comes as Zimbabwe is experiencing exceptional growth in the retail market at a rate of some nine per cent plus year on year. APF CEO Kura Chihota anticipates actively pursuing growth in Zimbabwe. “With Zimbabwe’s anticipated economic growth rate of nine per cent per annum, prospects look promising.” said Chihota recently.

    JHI Properties was also appointed as the leasing agents for Joina City, a new upmarket ‘urban city’ in Harare incorporating four floors of retail with 18 floors of offices. Anchor tenants include big South Africa names Spar and Edgars.

    Bringing us to Bigan. Bigan, that brought us Mombela Stadium in Nelspruit, Olievehotbosch Ministerial housing projects, the Oliver Tambo International Pier Project and ESKOM Coal Hauleage Road Repair, is negotiating partnering with Ghanaian real estate companies to build affordable houses for the poor and middle income earners.

    Ghana’s housing deficit stands at about 1.5 million units. Bigan believes it has the capacity to deliver and help reduce Ghana’s housing deficit. Based on their experience in South Africa, Bigan’s Emmanuel Kere believes that the company can “support not only the (housing) sector in Ghana but infrastructure development in general.”

    Bigan claims to build 30 000 houses in South Africa annually and has a lot to offer Ghanaian companies. Chairman of Bigen Africa, Dr Iraj Abedian said that the company was attracted to Ghana because of the country’s stable political environment and friendly business atmosphere. Bigan makes no apology that it intends to use Ghana as a springboard to launch operations into Senegal, Liberia, Nigeria and Sierra Leone.

    The South African government is not exempt from taking an active role in the scramble for Africa either. The Public Investment Corporation (PIC), which manages over a trillion rand on behalf of civil servants, which accounts for 10% of SA’s JSE market capitalisation, is looking for potential private equity partners. 10% of the portfolio is to be invested outside South Africa, R50 billion is reserved for African investment. 60% of that, about R30 billion, will go to private equity according to PIC CEO Elias Masilela in an interview with Reuters. The PIC is likely to be a player in infrastructure investments as countries on the continent build and revamp their roads, dams, hospitals and power stations, he said.

    Standard bank which has a presence in 18 African countries weighs in on infrastructure. In an interview with Goldman Sachs’s Hugo Scott-Gall, Sim Tshabalala deputy CEO of the Standard Bank Group said: “in most of sub-Saharan Africa infrastructure has all but collapsed, or is limited. It has to be rebuilt, so there are massive opportunities in project finance. A lot of infrastructure will be refurbished, mainly with support from the Brazilians and the Chinese. The link we have with ICBC (Industrial and Commercial Bank of China) also helps us identify opportunities and execute on them. In our case, ICBC is a 20% shareholder.”

    Standard Bank, as a South African player in the African market has positioned itself well as a go between or conduit for other BRICs partners wanting to interface with the continent. Standard Bank has a cooperation agreement for example, to identify Chinese corporates and SOE (State owned enterprises) that are looking for opportunities on the continent.

    Standard Bank has its work cut out for it as Intermediaries for foreign capital since it is estimated that Africa needs about US$90 billion a year to deal with its infrastructure backlog and currently is raising about US$70 billion. This is coming from a combination of sources: taxes, the banking system, and a large amounts coming from outside – risk capital. The banking system in individual African countries does not have the capacity to fund all of the necessary infrastructure activities, so there will be a lot of reliance on international capital markets and the international banking system.

    Standard Bank is not alone in its growing presence in Africa, ABSA has received regulatory approval to start a greenfield insurance business in Zambia, bringing to four the number of sub-Saharan countries where the Barclays-owned bank will have insurance operations. First National Bank (FNB) has revealed plans to invest nearly R2bn over the next 12 months as SA’s third-largest bank by customer numbers, to expand its footprint in SA and Africa. It is believed to be considering an acquisition in Nigeria and has sent scouting missions to Ghana. The bank, which operates in eight countries in Africa including SA, has about 7 -million customers in SA and 1,1-million in Africa. FNB Tanzania was its most recent addition, while its Zambian unit has already announced plans to have a nationwide branch network by 2016.

    There’s no doubt that some South African companies are viewing Africa with a greater sense of urgency. The European Union’s financial troubles have revealed South Africa’s vulnerability to European troubles. More than 25% of South Africa’s bilateral trade is from the EU. If GDP in Europe declines that indicates fewer goods being shipped from Africa. This does not bode well for South Africa. Expansion and investment into Africa can broaden South Africa’s horizons not to mention its vulnerability.

    But in the words of Standard Bank’s Sim Tshabalala: “As a South African I would love to believe in the sustainability of the country’s national competitive advantage as an entry point to the African continent. Increasingly, people are able to go directly to Kenya and Nigeria, for example, without going through South Africa, because these countries are building the necessary hard infrastructure and the required financial and legal infrastructure.”

    So it seems that South Africa’s competitive advantage is diminishing as the rest of the continent develops. In the meantime many companies are seeing the gap and heading into the fray. It seems that the future really is now.

    I’m Matthew Campaigne-Scott. I spent 19 years working in Missions and Ministry. I’m currently enjoying the life of a freelance writer.

    I have written for periodicals and websites, composed speeches and sermons and prepared copy for web advertisements and research papers. I can tailor my work according to your needs. I love a challenge and enjoy building work relationships.

    Drop me a line to get connected and propose what I can do for you.
    Email me at hearonearth@gmail.com.
    Visit my blog to view other articles at http://hearonearth.wordpress.com

    Article Source: http://EzineArticles.com/expert/Matthew_Campaigne-Scott/1248437

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