Advantages Of Target Market In Nigeria

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Selection of Target Markets: As Mahindra looks to grow in the tractor business it needs to select proper target markets where they can not only grow quickly but also be able to sustain that growth over a long period of time. They need to understand clearly where they can invest and upto what extent. They need to decide where the return on investment is going to be highest. The African countries are the best bets in this regard. Africa as a continent is showing tremendous potential. The continent as a whole is currently clocking impressive GDP growth rates of over 6% per annum which is much more than any other continent in the globe. Few countries like Angola are growing at an even faster pace than the “poster boy” of GDP growth China. Even…show more content…
Mahindra has already been exporting tractors to Nigeria since the year 2007. They manufacture the tractors in India and then they export it to Africa. There are few positives in this method. One is the low risk involved. Countries in Africa is generally perceived to be politically unstable and so this method is preferred by many companies having their business in Africa. High involvement methods may be disastrous for Mahindra if a regime change in Nigeria suddenly changes all the policies and expropriates all capital investments. There is also lesser risk of technology transfer to external parties as other partners are only provided the finished product. So to grow their business Mahindra can increase the amount of tractors exported to Nigeria. But there is a pressing issue with this kind of expansion. The import duty or tariff in Nigeria is very high. It is 10% and this reduces the margins for manufacturer and exporters like Mahindra considerably. This makes it imperative for the company to look at other methods of expansion and try to balance out the pros and cons of other strategies and try to determine the best method for increasing their…show more content…
In this system a foreign company provides a license to a local company to produce and distribute its product in the foreign country. The licensor on the other hand pay a certain amount of money to the licensee for the license. The advantage of this method of expansion is that the risk is divided among both the licensor and licensee. But there are few issues for companies like Mahindra which use technology for their business. There have been many examples where technology transfer has taken place among both the companies and that can be detrimental to Mahindra. The amount of profit generated from these type of strategies is generally not too high and we feel that this would not be a good idea for Mahindra to expand their business in this way. Currently they have a distribution contract with an African company known as SpringField Agro Ltd. Licensing them to manufacture tractors along with distribution could be one option with Mahindra but that would be too risky and the returns not enough to interest the people at Mahindra to go with such type of an expansion

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