With a GDP of $53.4 billion, Kenya, East Africa’s leading economy, is attracting the attention of international chain stores, private equity and retail investors. Penetration of formal retail in Kenya is between 25 and 30 percent, double that of Africa’s biggest economy Nigeria. In addition, the average value of a shopper’s basket has risen 67 percent in five years to $20.
New market entrants however face numerous entry barriers in addition to local completion. Local chains dominance together with resistance to foreign takeovers complicates mergers and acquisitions and makes it difficult for new entrants to establish a presence in Kenya. Wal-Mart’s bid to enter Kenya through an acquisition failed in 2013 due to a court case involving the owners of local retailer Naivas, which it sought to acquire through its South African business Massmart.
French retailer Carrefour is however set to launch its first Kenyan store this year through its Dubai-based franchisee Majid al Futtaim. Massmart will also open its first Game store in the country later this year.
For more information about the Kenya retail market http://www.reuters.com/article/2015/02/19/kenya-retail-idUSL4N0VR3SH20150219
Multinationals positioning themselves to take advantage of Africa’s growth outlook can often break into the market and establish a stronger presence by building partnerships with existing companies in their target markets. Finding the right partner and the right leaders to support this growth is critical. Conducting due diligence on the partner company can ultimately determine whether a company transitions successfully into the new market. Walmart’s failure to expand into Kenya in 2013 highlights the importance of choosing the right partner when entering an emerging market.AAG Perspective