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Exploring the Viability of Diversifying to Nigeria Essay

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Overview

The domestic growth curve in this company has flattened, and the competitors of the company, who have expanded into international markets, continue to witness growth. The company’s managers should look into the international markets and explore if diversifying to Nigeria is viable. In doing so, some factors have to be considered, such as drivers for global entry, the market profile of both countries, market considerations, and legal factors.

Drivers for Global Entry

There are many advantages that organizations that join the global markets enjoy. One of the most significant advantages of joining these markets is that global organizations gain access to new and broader markets (Kinicki & Williams, 2020). Apart from gaining new customers, global companies also get a larger pool of talent to bring to their company. Globalization enables the company to gain a competitive advantage over domestic organizations. Businesses that are diversified globally are less volatile and could enjoy various tax benefits if they employ effective tax policies.

When businesses go global, they should seek to ensure they solve some social issues in that region or at least not bring negative impacts. The business should seek to have minimal environmental impacts on that community. They should also seek to pay a minimum living wage and avoid using slave labor. Global businesses should seek to enhance local infrastructure as many U.S. global corporations have done in the past.

Recognizing the cultural environment in the region to which a business is expanding is essential because culture influences how business is done. For instance, a company that wants to venture into clothe making industry cannot produce clothes that are not popular in that region. Likewise, the organization cannot have its workers dress in a manner that the culture does not agree with. These influences go further beyond dress codes. Cultural preferences in many other facets, such as color, language, food, and communication, must be considered.

Market Profile

Cultural Profile

CategoryUnited StatesNigeria
Commonly Spoken LanguagesEnglish, SpanishEnglish, Hausa, Yoruba, Igbo
Commonly Practiced ReligionsChristianity, IslamChristianity, Islam, African traditional religions
Power Distance Index (PDI)4080
Individualism Versus Collectivism (IDV)9130
Masculinity Versus Femininity (MAS)6260
Uncertainty Avoidance Index (UAI)4655
Long-Term Orientation Versus Short-Term Normative Orientation (LTO)2630
Indulgence Versus Restraint (IVR)6884

Political and Economic Profile

CategoryUnited StatesNigeria
Political SystemDemocracyFederal Republic
Current LeadersJoe BidenMuhammadu Buhari
Economic Classification17 in the world26thin the world
Economic Blocs Impacting TradeNAFTAAfCFTA
Gross Domestic Product23 trillion USD440.8 billion USD
Purchasing Power Parity52061 LCU per international dollars152.6 LCU per international dollar
Gross Domestic Product Per Capita69027.54 USD2085.03 USD
Human Development Index0.9200.539
Human Poverty Index15.4%63%

The United States and Nigeria are very different in many aspects of life, as one would expect. The table indicates that the U.S. economy is very developed compared to Nigeria’s. The GDP in both countries indicates that Americans could have a lot of disposable income, meaning that different market entry techniques are needed for the two countries. As the table shows, the two countries have a stable political environment, with the U.S. being a democracy while Nigeria is a Federal Republic. The two countries belong to different economic blocks that impact their trade, where the US is a member of NAFTA while Nigeria belongs to AfCFTA (Labonté et al., 2019). The current leaders of the U.S. and Nigeria say they conform to democratic law. However, freedom in Nigeria is questionable due to its high-power distant index. The U.S. has a more level playing field regarding gender equality, with the equality index being significantly less in Nigeria. Both the U.S. and Nigeria are masculine countries meaning that the countries value strength, competition, and wealth acquisition, especially for men. Likewise, both nations demonstrate a long-term orientation where they prefer delayed gratifications for future benefits.

Market Considerations

Exchange Rates

CategoryThe U.S. DollarNigeria
Exchange Rate[1 USD.][1 USD = 443.79 NGN.]

There are as many differences as similarities in the legal and regulatory profiles of the U.S. and Nigeria. One of the legal differences is brought by the main trading block of the countries. Nigeria is not a member state of NAFTA; therefore, the company will not enjoy the exception of import tax, which is enjoyed when countries from the North American regions. Similarly, the US is not a member of the leading trading block of Nigeria AfCFTA; therefore, there will be no free flow of goods between business branches in the two regions. There are also likely to be transitionary legal issues caused by the transition from NAFTA to USMCA in the U.S. (Labonté et al., 2019). Concentration on transition could leave the U.S. unfocused on ensuring free, fair trade with other nations like Nigeria.

Market, Monetary, management, logistic, and entry considerations must be reflected upon before a company can go global. The market in Nigeria is comprised of people with low disposable income compared to the U.S. (Fashagba, 2021). This poverty results in people not being able to afford highly-priced products. The population in Nigeria is, however, high; therefore, the company should set low prices for a smooth business entry. Monetary considerations such as exchange rates and the currency used must be considered. The company should try to see how it can take advantage of the foreign exchange market. The best management technique in dealing with the Nigerian workforce would be having local employees be made answerable to a local middle manager in contrast to what most U.S. domestic operations are contacted. One of the best modes of entry into a global market is licensing. This entry method involves letting another organization perform operations on behalf of the global company. This method has the advantage of being cost-effective. However, it has a fair share of challenges, the biggest being that the licensed company could fail to meet the required performance standards.

References

Fashagba, M. O. (2021). The Effect of Income Distribution on the Insurance Market in Nigeria. Nigerian Academy of Management Journal, 16(2), 1-6.

Kinicki, A., & Williams, B. K. (2020). Management: A practical introduction (10th ed.). Hill Education.

Labonté, R., Crosbie, E., Gleeson, D., & McNamara, C. (2019). . Globalization and Health, 15(1). Web.

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IvyPanda. (2023, December 28). Exploring the Viability of Diversifying to Nigeria. https://ivypanda.com/essays/exploring-the-viability-of-diversifying-to-nigeria/

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"Exploring the Viability of Diversifying to Nigeria." IvyPanda, 28 Dec. 2023, ivypanda.com/essays/exploring-the-viability-of-diversifying-to-nigeria/.

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IvyPanda. (2023) 'Exploring the Viability of Diversifying to Nigeria'. 28 December.

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IvyPanda. 2023. "Exploring the Viability of Diversifying to Nigeria." December 28, 2023. https://ivypanda.com/essays/exploring-the-viability-of-diversifying-to-nigeria/.

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IvyPanda. "Exploring the Viability of Diversifying to Nigeria." December 28, 2023. https://ivypanda.com/essays/exploring-the-viability-of-diversifying-to-nigeria/.

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