Executive watch: Why your business may collapse
SAMU is a self-made Ugandan businessman whose fortune sky-rocketed once the Indians were repatriated from Uganda in the 1970s. Business had been good. Customers would line up for hours at his shop waiting to be served. Money was flowing into his coffers. Life was good.
By Abdallah Amiri
SAMU is a self-made Ugandan businessman whose fortune sky-rocketed once the Indians were repatriated from Uganda in the 1970s. Business had been good. Customers would line up for hours at his shop waiting to be served. Money was flowing into his coffers. Life was good.
However, 20 years down the road, the ball game has changed for Samu’s once thriving business. This year has been very tough for the company. The once smiling bankers are no longer willing to extend any more credit to the company. The auctioneers are like hungry wolves waiting for a chance to sell off the highly-leveraged company’s assets at knock-down prices.
Samu cannot understand how things got to turn out this bad!However, Bhupesh is living his dream. In just 10 years since he arrived in Uganda as a mere foreman, he has been able to build an empire for himself and his family. He drives the latest German monster car, lives in the most posh area of town and takes his two children to the best international school.
His family has just returned from a three-week holiday in South Africa, where they got the opportunity of blowing the vuvuzela and watching the World Cup live.
Whenever he recalls the abject poverty that he had been living in New Delhi, he cannot help but be thankful for the amazing opportunities that his new motherland, Uganda, has provided to him. For him, 2010 is proving to be an even much more abundant year. Deals are flowing in and banks are all fighting to manage his company accounts.
Surely, what more can a man want?
The case of Bhupesh, a foreigner, and Samu, a local, is something that we see playing out in all the various businesses in the region.
To some, Bhupesh’s success and Samu’s impending doom, are blamed on the weak government policies that favour foreigners and leave the locals exposed.
People from this school of thought strongly argue that it is high time that the Government re-introduced protectionist policies. However, a deeper analysis of the policies shows that efforts are being made to assist the locals to improve their businesses and have better access to finance. This being the case, one then gets to ask questions like:
Why are African companies still failing, yet they understand the local market better than foreign ones?
How come it is hard for African companies to survive once the founders have passed away?
Why are foreign companies succeeding in areas where local firms thought there was no more market?
What magic is giving foreign companies the midas touch to turn almost every venture into ‘gold’?
The answers to the above all get back to the same thing: Strategy!
Unlike foreign firms that understand the essence of having resources dedicated to strategies, most African companies make decisions based on gut instinct and the ‘I-have-a-feeling’ perception.
This method of decision-making can only be effective when the company has no viable and aggressive competition.
However, in an environment where competition is cut-throat, it becomes a matter of time before such a company meets its demise.
With the opening up of the East African Community common market, and the arrival of the long-waited under- sea Internet cable, the whole business playing field in the region is bound to change.
The next few years are going to be exciting, challenging, interesting as well as frightening for business players in the region. Bankruptcies, mergers and acquisitions are going to be the order-of-the-day in the region.
It is going to be a story of survival for the fittest, and he who hath the best strategy will win the crown! In the coming strategy series we will discuss the various strategic challenges that businesses are faced with in their daily operations and advise on some pointers that can play an important role in the success or failure of any given business endeavour.
The writer is a senior consultant at Ernst & Young. The views expressed in this article are personal
Abdallah.Amiri@ug.ey.com
SAMU is a self-made Ugandan businessman whose fortune sky-rocketed once the Indians were repatriated from Uganda in the 1970s. Business had been good. Customers would line up for hours at his shop waiting to be served. Money was flowing into his coffers. Life was good.
However, 20 years down the road, the ball game has changed for Samu’s once thriving business. This year has been very tough for the company. The once smiling bankers are no longer willing to extend any more credit to the company. The auctioneers are like hungry wolves waiting for a chance to sell off the highly-leveraged company’s assets at knock-down prices.
Samu cannot understand how things got to turn out this bad!However, Bhupesh is living his dream. In just 10 years since he arrived in Uganda as a mere foreman, he has been able to build an empire for himself and his family. He drives the latest German monster car, lives in the most posh area of town and takes his two children to the best international school.
His family has just returned from a three-week holiday in South Africa, where they got the opportunity of blowing the vuvuzela and watching the World Cup live.
Whenever he recalls the abject poverty that he had been living in New Delhi, he cannot help but be thankful for the amazing opportunities that his new motherland, Uganda, has provided to him. For him, 2010 is proving to be an even much more abundant year. Deals are flowing in and banks are all fighting to manage his company accounts.
Surely, what more can a man want?
The case of Bhupesh, a foreigner, and Samu, a local, is something that we see playing out in all the various businesses in the region.
To some, Bhupesh’s success and Samu’s impending doom, are blamed on the weak government policies that favour foreigners and leave the locals exposed.
People from this school of thought strongly argue that it is high time that the Government re-introduced protectionist policies. However, a deeper analysis of the policies shows that efforts are being made to assist the locals to improve their businesses and have better access to finance. This being the case, one then gets to ask questions like:
Why are African companies still failing, yet they understand the local market better than foreign ones?
How come it is hard for African companies to survive once the founders have passed away?
Why are foreign companies succeeding in areas where local firms thought there was no more market?
What magic is giving foreign companies the midas touch to turn almost every venture into ‘gold’?
The answers to the above all get back to the same thing: Strategy!
Unlike foreign firms that understand the essence of having resources dedicated to strategies, most African companies make decisions based on gut instinct and the ‘I-have-a-feeling’ perception.
This method of decision-making can only be effective when the company has no viable and aggressive competition.
However, in an environment where competition is cut-throat, it becomes a matter of time before such a company meets its demise.
With the opening up of the East African Community common market, and the arrival of the long-waited under- sea Internet cable, the whole business playing field in the region is bound to change.
The next few years are going to be exciting, challenging, interesting as well as frightening for business players in the region. Bankruptcies, mergers and acquisitions are going to be the order-of-the-day in the region.
It is going to be a story of survival for the fittest, and he who hath the best strategy will win the crown! In the coming strategy series we will discuss the various strategic challenges that businesses are faced with in their daily operations and advise on some pointers that can play an important role in the success or failure of any given business endeavour.
The writer is a senior consultant at Ernst & Young. The views expressed in this article are personal
Abdallah.Amiri@ug.ey.com