Introduction
Expanding business to global operations is a complex and challenging procedure. It is vital to consider all aspects of business and economic environment, including influential factors such as culture, politics, and regulations. The agricultural sector in which the chosen company of Kimango Farms Enterprises conducts business is particularly volatile, requiring a careful assessment of risk. For this scenario, the selected country for expansion is Tanzania, which will be thoroughly analyzed from the perspectives of cultural and business viability for expansion.
Company Background and Expansion
Kimango Farm Enterprises Ltd. consists of two farms located in the Morogoro region. The farms were established by Kim and Simone Axmann, German immigrants to Tanzania. The company began its origins in 1992, building its infrastructure from scratch. The farms grow a variety of crops including avocado, zucchini, mango, and lime. However, its most recognized output is tea that includes ingredients such as hibiscus and lemongrass in the product line.
Over 40% of the farm area is dedicated to an ecological reserve with planted trees and cottages, allowing to offer rustic eco-tourism options. Furthermore, the farms are organically certified by the Institute of Market Ecology in Switzerland. The primary motivation and purpose of the company is to grow healthy and organic foods through sustainable farming techniques and to offer the world a piece of Tanzania (Kimango Farms, n.d.).
The company should expand as it has built a viable and strong business in the area. It has existed for more than 25 years and has built successful relationships, trading networks, and critically understands the business. Therefore, driven by its economic prosperity and ideology which is becoming relevant in the global context, the company has the tools to expand its operations.
Economic Background
Tanzania is a rapidly developing country that is experiencing a 6-7% annual GDP growth (approximately 44.5 billion USD) and infrastructural development. Its fastest growing sectors are agriculture, petroleum production, and banking. The priority sector is industrialization which includes large infrastructure, transportation, and energy projects. Currently, 75% of the population depends on agriculture for employment and livelihood as it compromises 31% of the GDP (Netherlands Enterprise Agency, 2018). The recent government policy has continued to improve the country’s economic state. Inflation has been reduced to single digits on par with most developing nations, and the trade deficit is decreasing. The net inflow of foreign direct investment has increased by 13% to over 2 billion USD (TanzaniaInvest, 2018).
Customs
Tanzania is a conservative and traditional country, with many customs applicable to business etiquette. Tanzanians value trust and respect, and usually conduct business dealings with only individuals they know on a friendly level. Therefore, it is expected to attend social and family functions with your co-workers and business partners. Also, Tanzanians do not like to decline or say no. Instead, they reply with the word for “tomorrow.”
Proper respect for elders and power is vital in Tanzania. Therefore, greetings and overall communication should be done in accordance with the hierarchical order of a family or organization. Direct confrontation and public criticism of someone is strongly discouraged due to the risk of insulting or hurting their reputation. Tanzanians are also much slower at decision-making, choosing to evaluate every option and avoid irrational situations (Ravindran, n.d.).
Education and Income
Tanzania has experienced a poor education level amongst its population similar to many African nations. The educational sector faces numerous challenges in the country including underfunding, large student to teacher ratios, lack of professionals and resources. Basic education is low as only 8% of students can read at grade-level comprehension (USAID, 2017). The Tanzanian government realizes the problem and has dedicated significant policy tools and resources to education. This includes lowering barriers to education for rural and female students. Education is a primary sustainable goal for the country.
Despite poor education, the country maintains a large labor force. However, there is a persistence shortage of skilled labor and specialists which commonly require post-secondary education. Wages in Tanzania vary according to the industry. The majority of the population works in agriculture, receiving an average of 100,000 Tanzanian shillings per month which is equal to $45. Other industries such as mining offer higher salaries of 400,000 Tanzanian shillings which is approximately $180 per month (State Department’s Office of Investment Affairs, 2016).
Hofstede’s Factors
Tanzania has a high score (75) on the power distance dimension, indicating that there is an acceptance of hierarchy in business and organization. Centralization and subordination are common with an autocratic management style. Tanzania scored 25 for individualism, which demonstrates the country is strongly committed to collectivism. In this society, loyalty and adherence to social rules are prevalent which strong fosters relationships. Surprisingly, Tanzania scored 40 on the masculinity indicator which shows it is a more feminine society. The is also an indicator of equality and solidarity, with an increased quality of life being a primary desire. Conflicts are resolved through negotiation and compromise (Hofstede Insights, n.d.).
Tanzania is neutral in uncertainty avoidance according to the Hofstede’s Factors, but historically, the society is strongly conservative and does not support rapid change, believing it endangers their livelihood. This leads into the next dimension of long-term orientation where Tanzania scores 34, indicating that it is a culture focusing on short-term objectives. There is also significant respect for traditions, but also causing impatience and lack of incentive to save. Finally, the indulgence indicator is scored a 38 that demonstrates restraint. These societies can control instant gratification and do not focus as much on leisure. However, there are tendencies towards cynicism and pessimism as well (Hofstede Insights, n.d.).
Justification
Tanzania is a viable location for expansion in the East African region. The country values agriculture, as a primary sector of growth and large amounts of land available for cultivation. It offers economic incentives and an affordable workforce to sustain farms. The country’s primary exports are similar to the products which Kimango Farms grows and specializes in. Tanzania maintains a very business friendly and supporting culture with communities valuing loyalty and collective approach which can be vital for working in agricultural and aligns with Kimango Farms as a family-owned enterprise.
The country is socially and economically table and provides a significant opportunity for economic development. The population, government, and business sector are well-versed in agriculture and foster an environment that is welcoming for investors. The country maintains good relationships with global trade partners and is a member of various international organizations that could be beneficial to developing networks for organic farming and tourism (Netherlands Enterprise Agency, 2018).
Conclusion
Kimango Farms Enterprises is a successful and rapidly growing organic farming and eco-tourism company. Cultural and economic factors support their expansion through Tanzania. With the population that is mostly employed in agriculture, numerous specialists, and relatively low cost of operations, Tanzania is an ideal location for the company. Hofstede Factors indicate that the local society is collective, loyal, hard-working, and non-indulgent which fits well with the profile of the company is a family-owned farm.
References
Hofstede Insights. (n.d.). What about Tanzania? Web.
Kimango Farms. (n.d.). About us. Web.
Netherlands Enterprise Agency. (2018). Doing business in Tanzania. Web.
Ravindran, N. (n.d.). The role of culture in doing business in Africa. Web.
State Department’s Office of Investment Affairs. (2016). Tanzania – Labor.Web.
TanzaniaInvest. (2018). Tanzania economy. Web.
USAID. (2017). Education Tanzania. Web.