An analysis of multinational enterprises' modes of entry for base of the pyramid markets in sub-Saharan Africa

Abstract

The main research question of this study is: What influences the choice of entry modes for the BoP markets in Sub-Saharan Africa? A literature review was conducted which assisted in developing a case study research design, involving three South African Multinational Enterprises (MNEs) within the Fast Moving Consumer Goods (FMCG) industry, serving both the wealthy consumers and the BoP markets. Only MNEs who have been operating in other sub-Saharan Africa countries for more than 10 years were selected. Content analysis was used to code and analyse the qualitative data collected through semi structured in-depth interviews conducted with three heads of the Sub-Saharan Africa within these FMCGs that have already expanded into the BoP markets of Sub-Saharan Africa. The study found that in order to choose modes of entry that works, the MNEs must first identify the characteristics of the BoP market they want to enter, then choose the positioning strategy in line with these characterises. Both the characteristics of the BoP market within the chosen country, and the positioning strategy chosen influences the MNE’s choice of modes of entry. This study found that positioning strategies linked to BoP characteristics ensures that MNEs’ product offering are acceptable in the BoP markets, thus ensuring that the companies’ products are acceptable, affordable and accessible to BoP consumers. The study also found the modes of entry which are applicable for the affluent markets do not always work for the BoP markets. As a result, four modes of entry which were found to be working for the BoP markets in sub-Saharan Africa were joint venture, franchise, partnership and direct export. Direct export was found to working where distribution networks are available to reach rural consumers. The study concludes by presenting a conceptual framework that can be used by MNEs when choosing modes of entry for the BoP markets in Sub-Saharan Africa.