Exporting_Frikandel_to_Nigeria

1. Exporting to Nigeria: 1.1. Consumer market: Nigerian consumers have one of the lowest incomes per capita in the world, new government policies are attempting to improve the situation. Purchasing power has been steadily growing as jobs are created and the economy diversifies. Inflation pressures are resulting from increased consumption and demand for products. Similar to many nations around the world, consumers in Nigeria are adapting to western tastes, and have a liking for the western way of life; this is mainly a result of Nigeria's youthful population, and a massive rural to urban migration. Western style eateries and restaurants are especially popular with younger consumers. Prepared foods and snacks are also popular with urban consumers. The food expenditures are approximately US $ 235 per capita annually. Also, consumers are very price sensitive. Prices are not fixed and are often negotiated when purchased in traditional market settings. 1.2. Consumption Trends: Nigerian diets are generally high in carbohydrates, although consumers are starting to demand low-fat, and sugar-free foods and beverages. Traditional foodstuffs consumed in Nigeria include corn, sorghum, tubers and seafood. Seafood consumption is growing due to its affordability. There is increasing demand for potato chips, sauces, seasonings, pastry mixes, seafood, canned foods, wine and ice cream. Consumers desire small sized products that are prepared and packaged for affordable one time use. Nigerians are shifting interest towards lighter meals and fresh produce without preservatives. Middle and higher income consumers are increasingly concerned about food safety and dietary quality. This is growing demand for nutritious foods and hygiene products. Poultry consumption has decreased since bird flu was detected in 2006. 1.3. Retail Sector: The retail food sector in Nigeria had sales of approximately US$14.5 billion in 2005; US$290 million of which was imported high value products. Traditional markets account for approximately 66% of food sales, convenience stores for 33% and supermarkets only 1%. Convenience stores include small grocery stores and supermarkets, gas marts, kiosks, and roadside stalls. Due to irregular electricity supply, convenience stores generally do not sell frozen foods. The restaurant industry is growing at a quick 12% annually, and was valued at US$3 billion in 2004. Quick service outlets are growing faster than other store formats. Restaurant sector growth is resulting from an increasing eat out culture, and a large number of professionals who meet business contacts in a restaurant setting. 1.4. Competitors: Despite the United States being Nigeria's single largest import source, the majority of Nigeria's imports originate from the EU, Asia and countries in Southern Africa. Lower transportation costs from these regions make their products more competitive in the Nigerian market. Suppliers located in these regions have shown great interest in the Nigerian market, and have been quick to learn the import requirements in this growing market. Nigerian importers have found it easier to register and import from exporters in the EU, Asia and other African countries. 1.5. More statistical data: Food Production and Trade Food Consumption 2. PESTEL Analysis 2.1. Political analysis: Nigeria is a federal republic in which the president acts as both the head of the state and the head of government. The emergence of democracy in Nigeria in February 1999 brought an end to 16 consecutive years of military rule in the country. A country ridden with economic stagnation deteriorated democratic institutions, dysfunctional bureaucracy, collapsed infrastructure and a military that wanted a reward for pulling back from the corridors of power. The political situation now in Nigeria is more than stable. For the last 10 years the People’s Democratic Party (PDP) has a great support from the voting power. Nigerians have seen a marked improvement in human rights and democratic practices under the authority of the last two presidents. Today, the press and media enjoy greater freedom than they had under previous military governments. The last government realized that for Nigeria to become more relevant in global affairs, it would need to build a strong economic base and instill political stability in the country, as well as enhance its military capability. Nigeria currently maintains cordial relationships with many nations and international organizations. As a conclusion we can say that there is a high degree government’s intervention in Nigerian economy. 2.2. Economic analysis: The Nigerian economy depends heavily upon the oil sector, which contributes 95% of export revenues, 76% of government revenues and about a third of GDP. The major challenges before the government include reducing the economy's dependence on oil and diversifying the economy towards the sectors where the country has a core competency. Nigeria has the third largest number of poor people in the world after China and India. The income generated by the oil economy is not passed on to the masses, but is accumulated in the hands of a few people, leading to unrest and societal polarization. Oil revenues have also led to a growth in inflation. The overvaluation in the currency due to oil export earnings is proving detrimental to other sectors, especially agriculture, which provides employment for the poor. Between 1999 and 2004, 50% of the GDP came from the industrial sector, which is high for an African country. Before the establishment of democracy in 1999, the country was governed by military generals, under whose rule Nigeria's economic performance had taken a beating for 16 years. Economic growth throughout the 1990’s was slow due to the absence of prudent economic policies but since 2000, economic growth has picked up, with a CAGR (Compound Annual Growth Rate) of 6.8% over 2001–08. The government’s reform and growth programs seem to be working well for the country’s economy. Nigeria has enjoyed greater integration with the world economy as a result of easing restrictions in international commerce, a reduction in transportation costs, and improvisation in communication technology. Recently external trade has seen a marked increase. • Trading Partners: China is Nigeria's largest import trading partner and accounts for 10.7% of the country's total imports, followed by the US, which accounts for 8.4% and the Netherlands, which accounts for 6.2%. The last leads to the conclusion that would be not that difficult to do business with Nigerian partners when they already have an experience with Dutch companies. • Prospects: The Nigerian economy was expected to grow by 7% during 2008. With growth forecast to exceed 7% in 2009 as well. The Nigerian government is focusing on efforts to ensure that there is ample availability of power in the country, so as to sustain and feed the growth in Nigeria's economic activity. Foreign currency reserves have exceeded $41 billion, with oil revenues resulting in a budget surplus of over $10 billion. Nigeria is in a strong fiscal position due to solid export earnings and, as a result, the government’s ability to invest in infrastructure projects. The inflation rate, which fell from 10.3% in 2005 to 6.5% in 2006, the lowest rate in over a decade, brings greater stability to the currency. The prospects for Nigeria’s economic growth look good. Nigeria's real GDP growth rate will remain high on the basis of high oil output. The non-oil sector is also expected to grow and this would boost economic reforms in the country. However, inflation would remain high (at almost 7%–8%) on account of excess liquidity and increasing government spending. 2.3. Socio-cultural analysis: Nigeria is Africa’s most populous country with close to 132 million people, approximately 55% of whom live on less than a dollar a day. Composed of more than 250 ethnic groups, Nigeria is extremely culturally diverse. The population is also very young, with over 42% of the population under 15 years of age Nigerian labour force that is unemployed (%), 2001-2007 • Labor: Due to the fact that the poverty is a huge problem in Nigeria the labor is really cheap and the people are willing to work everything. • Unemployment: High rate but still relatively low for African country. • Major Religions: Half of the Nigerian population is Muslim, while 40% are Christian. The remaining 10% comprises of people from various other indigenous groups. This would lead us to the point that we should adapt our product to the Nigerian market, because the Muslim religion forbids the consumption of pork meat. • Language: English is the official language in Nigeria, although Hausa, Yoruba, Igbo and Fulani are also spoken. The fact that the English is the official language would guarantee us that we would not face the language barrier which is often met problem when doing business in Africa. 2.4. Technological analysis: The mission of the government is to chart the course of Scientific and Technological development of the Nigerian Nation through planned and guided Research and Development (R&D) in all areas of Science and Technology with particular emphasis on areas where the country has clearly defined comparative advantages in human as well as material resources. Also, keeping abreast with latest progress in Research and Development (R&D) in Science and Technology among the industrial and educational communities within the country, the sub-region and overseas and guiding the course of the aggregate domestic R&D output of Science and Technology (S&T) to ensure that Nigeria makes maximum benefit of S&T trends within and outside its shores. Linkage of researchers and their establishments with entrepreneurs for commercialization of successful research results. Promotion of projects that are strategic to the cause of aggregate national development through direct intervention with relevant public or private bodies and organizations; and implementing policies to facilitate the contribution of S&T to socio-economic progress and security of the nation. The focal vision of the government is to make Nigeria, in the nearest future, an acknowledged member of the fast developing Scientific and Technologically progressive nations of the world and to be Africa’s Leader in Scientific and Technological development. 2.5. Environment analysis: • Climate: Nigeria is generally hot all year round, with little variation between winter and summer. Seasons are defined as wet and dry. For the dry season are typical the dry and dusty northeast winds and the wet season is particularly noticeable on the southeastern coast where annual rainfall reaches between 300 and 340cm. • Pollution problems: Generally speaking, environmental regulation in Africa remains relatively weak while there is insufficient institutional capacity to deal with industrial pollution problems. However, Nigeria appears to be an exception to the general African situation. In 1988, the government of Nigeria established a Federal Environmental Protection Agency to oversee and manage environmental regulatory processes in Nigeria. As typical of countries in the early stages of industrial development, resource-based manufacturing activities are an important feature of the Nigerian economy. Data on the structure of the Nigerian manufacturing indicates that the food processing sector contribute 17.3% of the total manufacturing output. Manufacturing activity is concentrated in several big cities and its pollution effects are the subject of much concern, particularly to the city dweller. The food-processing sector consumes high volumes of water and has significant water-pollution potential associated with its activities. 2.6. Legal analysis: The import policies are becoming less stringent; Nigeria has traditionally kept a relatively protective stance when it comes to the import of food products. High tariffs and import bans have been characteristic of the Nigerian market. Policies tend to change often so it is advised that exporters keep a watchful eye on trade policy changes. The National Agency for Food, Drug Administration and Control (NAFDAC) is responsible for registration of all products imported and sold in Nigeria. Foreign manufacturers must be represented in Nigeria by a registered company or individual who is able to recall the product if deemed necessary. Also, exporters are advised to exercise caution when considering any kind of business transaction connected to Nigeria, and to seek legal advice when drawing up contracts. Regular visits to Nigeria should be made to gain an appreciation and understanding of market conditions and trends. 3. Hofstede analysis of Nigeria Hofstede’s Dimension of Culture Scales Country Nigeria Power Distance 77 Individualism 20 Uncertainty Avoidance 46 Masculinity 54 Long term orientation 16 • Power distance – PD estimates the degree of inequality that occurs or is accepted among people with or without power in a society. A high PD score indicates that society accepts an unequal distribution of power and people understand "their place" in the system. If you need to start business in a country with a high PD, like Nigeria, you have to acknowledge the leader power and to respect someone who is higher than you in the hierarchy. • Individualism - is the degree to which individuals are inte-grated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family. By the data we found, we understood that Nigerians are the exact opposite. They are collectivists. On the collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in exchange for unquestioning loyalty. If you enter in such a society you need to always show respect to age and wisdom and never underestimated the power of traditions and family in this society. • Uncertainty avoidance - deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative, and not expected by their environment to express emotions. In this case Nigerians are somewhere in the middle. • Masculinity - refers to the distribution of roles between the genders which is another fundamental issue for any society to which a range of solutions are found. Nigerians are more or less moderate, however the masculinity is still in higher number than femininity. This means that in such a society there is a well defined distinction between men’s work and women’s work. In such case you have to be aware that people may expect male and female roles to be distinct. • Long term orientation - was found in a study among students in 23 countries around the world, using a questionnaire designed by Chinese scholars It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one's 'face'. Nigeria is a country with low LTO, which means that society enjoys novel events and values differences. There are very few rules and people are encouraged to discover their own truth. Being among such people you have to minimize your emotional response by being calm and contemplating situations before speaking, express curiosity when you discover differences and never impose rules or structure unnecessarily.