Harvard Case - Larson in Nigeria
"Larson in Nigeria" Harvard business case study is written by Paul W. Beamish, Isaiah A. Litvak. It deals with the challenges in the field of General Management. The case study is 6 page(s) long and it was first published on : Apr 9, 2015
At Fern Fort University, we recommend Larson adopt a strategic approach to expanding into Nigeria, prioritizing a phased entry strategy focused on building a strong local presence, leveraging existing strengths, and adapting to the unique market dynamics. This strategy will involve a combination of organic growth through strategic partnerships, local manufacturing, and tailored marketing efforts, alongside potential acquisitions to accelerate market penetration.
2. Background
Larson, a US-based manufacturer of high-quality, affordable furniture, is considering expanding into Nigeria, a rapidly growing emerging market with a large and expanding middle class. The case study highlights the potential opportunities and challenges associated with this expansion, including:
- Opportunities: Large and growing market, favorable demographics, increasing demand for affordable furniture, potential for cost-effective manufacturing.
- Challenges: Political instability, complex regulatory environment, infrastructure limitations, competition from local and international players, cultural differences, and potential risks associated with entering a new market.
The main protagonists in the case are:
- Larson's CEO: Concerned about the potential for growth in Nigeria but cautious about the risks associated with entering a new market.
- Larson's International Business Development Manager: Advocates for a strategic entry into Nigeria, emphasizing the potential for significant growth and market share.
- Larson's Nigerian Partner: A local entrepreneur with extensive experience in the Nigerian market, offering insights and potential partnerships.
3. Analysis of the Case Study
To effectively analyze the case, we can utilize the following frameworks:
- SWOT Analysis: This framework helps assess Larson's internal strengths and weaknesses, as well as external opportunities and threats.
- Porter's Five Forces: This framework provides insights into the competitive landscape in the Nigerian furniture market, examining factors like competitive rivalry, threat of new entrants, bargaining power of buyers and suppliers, and threat of substitutes.
- Balanced Scorecard: This framework helps evaluate Larson's performance across various perspectives, including financial, customer, internal processes, and learning and growth.
Larson's Strengths:
- Strong brand reputation: Larson enjoys a strong brand reputation for quality and affordability in the US market.
- Efficient manufacturing processes: Larson has well-established manufacturing processes and a cost-effective supply chain.
- Experienced management team: Larson has a strong management team with experience in international business.
Larson's Weaknesses:
- Limited knowledge of the Nigerian market: Larson lacks in-depth understanding of the local market dynamics, consumer preferences, and cultural nuances.
- Lack of local partnerships: Larson has limited existing partnerships with local businesses in Nigeria.
- Potential for cultural clashes: Larson's corporate culture may not align with the Nigerian business environment.
Opportunities:
- Growing middle class: Nigeria has a rapidly growing middle class with increasing disposable income and demand for furniture.
- Favorable demographics: Nigeria has a young population with a high growth rate, creating a large potential customer base.
- Potential for cost-effective manufacturing: Nigeria offers opportunities for cost-effective manufacturing due to lower labor costs and access to raw materials.
Threats:
- Political instability: Nigeria faces political instability and corruption, which can create uncertainty for businesses.
- Complex regulatory environment: Nigeria has a complex regulatory environment with bureaucratic procedures and potential for corruption.
- Infrastructure limitations: Nigeria faces infrastructure challenges, including limited access to electricity and transportation networks.
- Competition: The Nigerian furniture market is competitive, with both local and international players.
Porter's Five Forces Analysis:
- Competitive rivalry: The Nigerian furniture market is highly competitive, with both local and international players vying for market share.
- Threat of new entrants: The threat of new entrants is moderate, as entry barriers include access to capital, manufacturing facilities, and distribution networks.
- Bargaining power of buyers: The bargaining power of buyers is moderate, as consumers have a wide range of choices and can switch between brands.
- Bargaining power of suppliers: The bargaining power of suppliers is moderate, as there are multiple suppliers of raw materials and components.
- Threat of substitutes: The threat of substitutes is moderate, as consumers can choose alternative furniture options, such as locally crafted furniture or second-hand furniture.
Balanced Scorecard:
- Financial: Larson needs to assess the financial viability of entering the Nigerian market, considering potential returns on investment, profitability, and market share.
- Customer: Larson must understand and cater to the unique needs and preferences of Nigerian consumers, building brand loyalty and customer satisfaction.
- Internal Processes: Larson needs to establish efficient manufacturing processes, distribution networks, and supply chains tailored to the Nigerian market.
- Learning and Growth: Larson must invest in developing local expertise, building relationships with key stakeholders, and adapting to the Nigerian business environment.
4. Recommendations
Larson should adopt a phased entry strategy into Nigeria, focusing on building a strong local presence, leveraging existing strengths, and adapting to the unique market dynamics. This strategy should include the following key elements:
Phase 1: Market Research and Partnership Development (12-18 months)
- Conduct thorough market research: Larson should conduct in-depth market research to understand the Nigerian furniture market, consumer preferences, cultural nuances, and competitive landscape. This research should be conducted in collaboration with local experts and partners.
- Develop strategic partnerships: Larson should identify and partner with local businesses, distributors, and retailers to gain access to the market, establish a local presence, and leverage their expertise.
- Establish a local office: Larson should establish a small local office in Nigeria to manage operations, build relationships, and gather market intelligence.
Phase 2: Product Development and Manufacturing (18-24 months)
- Develop products tailored to the Nigerian market: Larson should adapt its product offerings to meet the specific needs and preferences of Nigerian consumers, considering factors like price, design, and functionality.
- Consider local manufacturing: Larson should explore the possibility of establishing a local manufacturing facility in Nigeria to reduce costs, create local employment, and enhance responsiveness to local demands.
- Develop a sustainable sourcing strategy: Larson should prioritize sourcing raw materials and components locally to support local businesses and minimize environmental impact.
Phase 3: Marketing and Sales (24-36 months)
- Develop a targeted marketing strategy: Larson should develop a targeted marketing strategy that resonates with Nigerian consumers, utilizing a mix of traditional and digital channels.
- Build a strong local brand presence: Larson should invest in building a strong local brand presence in Nigeria, emphasizing its commitment to quality, affordability, and social responsibility.
- Establish a robust distribution network: Larson should establish a robust distribution network in Nigeria, ensuring efficient and timely delivery of products to customers.
Potential Acquisitions:
- Larson should consider potential acquisitions of local furniture manufacturers or retailers to accelerate market penetration and gain access to existing customer bases and distribution networks.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Larson's core competencies in furniture manufacturing and its mission to provide high-quality, affordable furniture to a wider audience.
- External customers and internal clients: The recommendations address the needs of both external customers (Nigerian consumers) and internal clients (Larson's employees and stakeholders).
- Competitors: The recommendations take into account the competitive landscape in the Nigerian furniture market, focusing on differentiation, value proposition, and building a strong local presence.
- Attractiveness: The recommendations are based on the potential for significant growth and profitability in the Nigerian furniture market, considering factors like market size, growth rate, and consumer demand.
- Assumptions: The recommendations are based on the assumption that Larson can successfully navigate the challenges associated with entering the Nigerian market, including political instability, regulatory complexities, and infrastructure limitations.
6. Conclusion
By adopting a phased entry strategy, prioritizing strategic partnerships, tailoring products to the Nigerian market, and building a strong local presence, Larson can successfully expand into Nigeria and capitalize on the significant growth potential of this emerging market. This strategy will require a commitment to understanding the local market dynamics, building strong relationships with key stakeholders, and adapting to the unique challenges and opportunities presented by the Nigerian business environment.
7. Discussion
Other alternatives not selected include:
- Direct entry: This approach would involve Larson setting up its own operations in Nigeria without any local partners. This approach is riskier as it requires significant investment and expertise in the Nigerian market.
- Joint venture: This approach would involve Larson partnering with a local company to share the risks and rewards of entering the Nigerian market. This approach can be beneficial in terms of access to local knowledge and resources, but it also requires careful partner selection and management.
Key assumptions of the recommendations include:
- Political stability: The recommendations assume that the political situation in Nigeria will stabilize and create a conducive environment for business growth.
- Regulatory environment: The recommendations assume that Larson can navigate the complex regulatory environment in Nigeria and obtain the necessary licenses and permits.
- Infrastructure improvements: The recommendations assume that there will be improvements in infrastructure, such as electricity and transportation networks, to support business operations.
8. Next Steps
- Develop a detailed implementation plan: Larson should develop a detailed implementation plan outlining the specific steps, timelines, and resources required for each phase of the expansion strategy.
- Secure funding: Larson should secure the necessary funding to support the expansion, including investments in market research, partnership development, product development, manufacturing, and marketing.
- Build a strong local team: Larson should recruit and develop a strong local team with expertise in the Nigerian market, including sales, marketing, operations, and finance.
- Monitor progress and adjust as needed: Larson should continuously monitor the progress of its expansion strategy and make adjustments as needed based on market conditions, competitor activities, and feedback from customers and stakeholders.
By taking these steps, Larson can successfully expand into Nigeria and achieve sustainable growth in this dynamic and promising market.
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Case Description
The vice-president of international operations must decide whether to continue to operate or abandon the company's Nigerian joint venture. Although the expatriate general manager of the Nigerian operation has delivered a very pessimistic report, Larson's own hunch was to stay in that country. Maintaining the operation was complicated by problems in staffing, a joint venture partner with divergent views, and increasing costs of doing business in Nigeria. If Larson decides to maintain the existing operation, the issues with its local partner and staffing problems (especially in terms of the joint venture general manager) have to be addressed.
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