ADVANTAGES OF ENTERING THE NIGERIAN MARKET
Some of the advantages McDonald’s stand to gain in setting up in Nigeria include:
- Trade Barrier and restrictions: Existing trade and import barriers or restrictions by government are minimal for the food service industry, as far as McDonald’s comply with the regulatory standard for health and business purpose.
- Tax incentives: Nigerian government grants tax holidays of 5 to 7 years to foreign organizations and even exempt all taxes from companies operating in Nigeria’s export processing zones including import and export duties.
- Language: Nigeria has a diverse language but with English as its national language which is in correlation with McDonald’s origin
- Product control: The trade marks registry of the federal ministry of commerce in Nigeria has put in place facilities to protect counterfeiting and imitation of products.
- Agriculture: There is an availability of endowed fertile savanna which would help McDonald’s explore agricultural products within and outside the region, thereby reducing the cost of raw materials and giving rise to economies of scale.
- Population: Nigeria has a large market stemming from its estimated 170 million citizens. The middle class is estimated at 25 Million; this means that McDonald’s has a large number of potential customers that can be won over by bringing in high quality products at a cheap price.
DISADVANTAGES OF ENTERING THE NIGERIAN MARKET
- Power Supply: Although improving after President Buhari took over government, Nigeria still does not have uninterrupted power supply like McDonald’s country of origin.
- Foreign Exchange: With the base of Mcdonald’s in United states of America, profit made in Nigeria would have to be remitted in the U.S. and then foreign exchange risk comes in because of the continuous depreciation of the Nigerian Currency.
- Traffic: Traffic is a constant challenge in Nigeria and this would disrupt the competitive advantage McDonald’s have in the speedy delivery of food.
In all, after weighing the advantages and disadvantages, I would recommend McDonald’s to enter the Nigerian Market. Their major competitor Yum brands! is already in Nigeria through its division – KFC. They entered into the market through foreign direct investments.
With the prevalent crisis in the Nigerian economy, fueled by lower oil prices (all pun intended…lol..), fall in the value of Naira, and scarcity of foreign exchange, Nigeria may no more be a profitable destination for Mcdonald’s. That’s Just my two cents though. What do you think guyz, should McDonald’s come to Nigeria or not? Be sure to leave your comments below.
Marc Cosentino., Case In Point: Complete Case Interview Preparation, 8th Edition
Micheal Shearn., The Investment Checklist: The Art of In-Depth Research