ABSTRACT
The economic crises in Finland and a rise in global business, competition in information and communication technologies has necessitated the need for organizations to look for opportunities in foreign markets.
The aim of this thesis is to explore the Nigerian market and gain in-depth insight of the market outlook for the Vesi CRM/ERP platform before committing to a preferred strategy in getting into the market.
A number of theories on foreign market entry motives and factors influencing entry mode choices were applied to explain the entry mode decision for DIF. The research also draws on concepts from PESTLE and SWOT analyses. The theories and concepts applied in the thesis helped in answering the research questions.
The research is a qualitative method. The primary sources of information were interviews, personal knowledge, observation and meetings in the foreign market. Secondary sources include online database, books etc.
The result shows that Nigeria has opened up its economy and provided generous investment incentives in industrial, IT and communication sectors of the economy to attract foreign direct investment (FDI).
Furthermore, the economy of Nigeria is likely to be driven by growth in the information technology and telecommunications sectors of the economy, apart from its immense oil and gas deposits.
TABLE OF CONTENTS
1 INTRODUCTION
1.1 Definition of key terms
1.2 Statement of problem
1.3 Purpose of the study
1.4 Research questions
1.5 Thesis structure
2 Theoretical Framework
2.1 Introduction
2.2 Motives of foreign market entry
2.2.1 Proactive motive
2.2.2 Reactive motive
2.3 Factors influencing our choice of market entry mode
2.3.1 Internal factors
2.3.2 External factors
2.4 Types of entry modes
2.5 PESTLE theoretical description
2.5.1 PESTLE analysis applications
2.5.2 Pros and Cons of PESTLE analysis
2.6 SWOT theoretical description
2.6.1 SWOT analysis applications
2.6.2 Pros and Cons of SWOT analysis
2.7 Summary
3 Research Design and Methodology
3.1 Introduction
3.2 Research design
3.2.1Research approach
3.3 Research methodology
3.3.1Data collection strategies
3.3.2Reflections
3.4 Limitations of study
3.5 Data analysis and interpretation
3.6 Research ethics
4 Research Findings and Interpretation
4.1 Introduction
4.2 Motives for DIF to enter the Nigerian market (RQ1)
4.2.1 Uniqueness of the product
4.2.2 Economies of scale and profit making
4.2.3 Saturated domestic market
4.2.4 Government incentives
4.2.5 Conclusion
4.3 Factors affecting choice of market entry mode for DIF (RQ2)
4.3.1 Firm Specific Characteristics
4.3.2 Management Risk Attitude
4.3.3 Target Country Market Factors
4.3.4 Conclusion
4.4 Choice of market entry mode suitable for DIF (RQ3)
4.4.1 Internet
4.4.2 Exporting
4.4.3 Licensing
4.4.4 International agents/distributors
4.4.5 Strategic alliances and Joint venture
4.4.6 Greenfield/Overseas manufacture & International sales subsidiaries
4.4.7 Conclusion
4.5 PESTLE analysis of Nigeria (RQ4)
4.5.1 Political factor
4.5.2 Economic factor
4.5.3 Socio-Cultural factor
4.5.4 Technological factor
4.5.5 Legal factor
4.5.6 Environmental factor
4.5.7 Conclusion
4.6 What are the SWOT for DIF?
4.6.1 Strength
4.6.2 Weakness
4.6.3 Opportunity
4.6.4 Threat
4.6.5 Conclusion
5 Summary, Recommendations and Reflections
5.1 Introduction
5.2 Summary
5.3 Reflections
5.4 Recommendations for DIF future directions
References
CHAPTER ONE
1 INTRODUCTION
The increasing competition worldwide has resulted in that start-up companies and foreign investors search for new markets internationally. The competition and economic downturn currently experienced in Europe as well as the Asian continent has affected the business environment. Finland is not an exception and doing business is becoming more and more difficult.
A potential solution could be to look into other markets, e.g. the Nigerian market with more than one hundred million potential consumers, the largest market in Africa, a rising middle class with increasing disposable incomes, and a huge interest in foreign products.
According to the latest statistics published by the national statistics bureau of Nigeria, (2014) with a GDP for 2013 of 80.3 trillion Naira (£307.6bn: $509.9bn) Nigeria is now the biggest economy in the African continent, ahead of the South African economy. Nigeria is the most populated country in Africa with an estimated 170 million people; foreign companies see this country as an investment hub.
(MediaReach OMD, 2013) states that with strong economic growth over the past decade, and Nigeria’s huge population presents many business opportunities not just for small and medium size companies but businesses in general. The success of the Nigerian economy shows that despite challenges in Africa the continent is moving faster than as expected.
Small and medium-sized Enterprises (SMEs) are important drivers of growth in economies across Sub Saharan Africa, including Nigeria and they account for up to 90% of all businesses in these countries. Currently, small and medium-sized enterprises represent the majority of firms in most countries and, therefore, play an important role in the economic growth of their respective countries according to International Finance Corporation, World Bank Group, (2014).
In response to the lowering of the barriers to international trade, the number of small firms operating in international markets has been increasing over the years as stated by (Nummela, Loane and Bell, 2006). Firms that want to internationalize must decide on a suitable mode of entry into a foreign market in order to make the best use of their resources. Once an entry mode has been chosen, organizations limit their tactical flexibility by developing skills and knowledge to support the chosen arrangement.
According to Hill et. al., (1990) each mode has different implications, according to the degree of control that the firm can exert in the international operation, and the resources and risks that it must assume to expand in a foreign market. Therefore, the choice of an appropriate foreign entry mode, in a given context, is a difficult and complex task for the management.
There are many factors which affect a firm’s decision on market entry and these factors may be different in each case or similar, but the length at which it varies differs from one company to another. Small and Medium size businesses use different entry modes to adapt to specific situations in their international market entry process and as such internationalize by exporting, licensing, franchising, joint ventures, Green field and wholly owned subsidiaries, and each of these entry modes have their own pros and cons and should be thoroughly scrutinized before being chosen.
Every foreign market has its own problems and the Nigerian market is not different; despite its potentials many challenges remain. One of the issues is insecurity, notably in the north of the country. However, companies can take precautions to make sure they are aware of the potential risk and also mitigate the risk when entering into the market. A good local knowledge will go a long way helping to mitigate these risks.
This paper is a case study of the Vesi Customer relationship management / Enterprise resource planning platform on “How to enter the Nigerian market from a Finnish start-up company`s perspective.” The thesis is commissioned by the parent company Development Initiative Finland (DIF).
1.1 Definition of Key Terms
Vesi – It is a Finnish word that stands for “water”. In the Vesi Value platform the business data and transactions always find their route to wherever information is in need of replenishment.
DIF- Stands for Development Initiative Finland, which is the parent company and founder of Vesi CRM/ERP platforms.
DIF Team - The team consists of the researcher, the vice president of sales, the CRM/ERP system developers, the chief executive officer of development initiative Finland and local Nigerian business developers.
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