Africa's homegrown companies come into their own

The start of the World Cup in South Africa this month promises to shine a new light on Africa's increasing economic dynamism, which is often overshadowed by the flashier growth of markets like China and India. It is not just the continent's consumer base that is expanding; homegrown African companies are also spreading their wings and challenging foreign multinationals in areas such as retailing, financial services and mobile communications. These firms are taking advantage of reduced barriers to intra-African trade and their knowledge of African consumer tastes to grow beyond their home countries and gain the scale they need to compete with companies from outside the region. The rapid growth of forty of the best

African firms have even led The Boston Consulting Group to christen them the "African Challengers". The growth of local "champions" signals a new maturity in African markets. In these countries, as well as other emerging markets, the emergence of competitive local companies usually follows a period in which foreign investors have taken advantage of political stability, low-cost labor and favorable incentives to produce goods and services for both local and export markets. Skills and knowledge transferred by these firms to local workers, as well as increased economic activity, then fuel the growth of native firms. An increasing number of African countries, in particular South Africa, Botswana and Kenya, now have the conditions in place to produce enterprises that can compete with multinational corporations (MNCs).

The growth of these companies poses a challenge to Western firms, but it also presents an opportunity to learn from the strategies and innovations of businesses that have their finger on the pulse of local customer segments. When entering new geographies, MNCs would do well to "go native" by understanding local, competitive dynamics. Thorough competitive intelligence and analysis of emerging-market competitors can be a critical part of MNC success on a global scale, especially when these new, local entrants threaten to upset the status quo.

Brand Name Power

Sales fell 19% last quarter for the top three local PC brands in South Africa including Sahara and Mustek's Mecer. Strong global brands such as Dell and HP recently decreased their prices to levels that are comparable to local brands. Distributors have found that when local and global brands are priced competitively, consumers chose the well-known globally-branded PCs over local hero PCs.

Global brands have traditionally struggled to compete with local companies, which often sell at lower prices. With savings in labor and distribution, local companies can maintain thin margins and pass on those savings to the consumer. However, with value chain efficiencies and falling PC prices, larger global brands such as Lenovo, Dell, HP and Sony have begun to reach a similar price-point to local brands. While competitive pricing may not assure the premiums that multinational corporations are accustomed to, they do lead to a greater market share. Success in emerging markets has kept the PC industry healthy in spite of a weakening economy in the US and Europe. Companies that have previously invested heavily in building their global brand are beginning to reap the rewards in these growing markets.

Strong growth in emerging markets is quickly becoming essential to a global technology company’s health. With global brands becoming viable competitors to local hero brands, multinational corporations would do well to expand their marketing and build brand awareness among a wider and more diversified customer base in emerging markets. As costs come down for consumer electronics and global brands become more competitive, brand awareness and perceived quality could tip the scales.

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• Samsung bets on solid-state drives for low-cost PCs