If you are an Africa connoisseur (or if you have followed this blog), you will know that Africa is not a single entity. And neither are African regions: not all countries in one region are the same. This is more obvious in Western Africa where the anglophone/francophone distinction is immediate. It may be less obvious in Eastern Africa where English is predominant. Managers from companies aiming at internationalizing in East Africa need to bear this in mind, and be ready to cope with the challenges.
One Kenyan bank decided to expand to Uganda: it’s a neighboring country., and you can get there in one hour. Before becoming a Pan-African bank, it made sense for them to become an Eastern African one. The bank enjoyed momentum in Kenya, and the management team took for granted that the brand would be embraced by Ugandans with the same enthusiasm as by Kenyans. They acquired a bank in Uganda, taking over 26 branches and opening 18 more in the first year. The new branches were hosted in 3- or 4-floor office buildings.
It turned out they didn’t have the success they had expected. What did they learn from the Uganda experience?:
- the regulatory framework for the banking industry in Uganda was very different from that of Kenya: Uganda’s regulations are very strict;
- local connections (with the regulators, the Central Bank, etc.) are of paramount importance: the local team of the acquired bank was very well connected, but as they felt threatened those connections backfired for the Kenyan bank;
- anything coming from Kenya is seen as an imposition in other Eastern African countries: you need to be careful and introduce yourself as a local brand.
They learned these lessons and took a different approach to enter Tanzania: they studied the regulatory framework extensively; they were aware not to create a divide between Kenyans and Tanzanians in the team; the ‘face’ of the bank is formed by locals, and with local networks. Overall, they took a more cautious approach to expansion. opening only five branches, in low-rise offices. As a result, the Tanzanian operation was the first international subsidiary to break even in one year.
Have you had any related experiences with international expansion?