**6. The trend emerging**

Naspers acquired a stake in Konga.com, the largest Nigerian online marketplace, and in 2013

These massive expansions made Naspers the leading emerging market electronic communications company. The focus of Naspers shifted to electronic trade and communication and is the largest emerging market company with a market capitalisation exceeding US\$40 billion. Naspers is still listed on the JSE, from where it generates more than 70% of its revenue. Naspers occupies the 63rd position on the top 100 nonfinancial developing country companies, with a TNI of 35% [2]. Naspers owned innovative leadership, who engineered strategic business repositioning and e-commerce acquisitions. Naspers operates on all the continents of the world in e-commerce. The strong growth flows from the emerging markets in Asia,

The highest-ranked emerging market nonfinancial company is the Mobile Telephone Network (MTN). MTN is 72.1% owned by the Johannesburg Stock Exchange-listed company M-Cell, 23% by Transnet and 4.9% by black empowerment groupings. It runs a GSM 900 technology in its mobile telephone network and grew to a market share in South Africa of approximately 40% by 2001. By 2005, MTN was locked in a slow-growing South African cellular market with two competitors, Vodacom and Cell-C. The expansion strategy in Africa occurred through the use of local partners' branding. This reduced the recognition of the MTN brand and management embarked on a brand consolidation strategy to cut marketing costs and develop a global brand. To deliver a single quality global brand, a new logo was accepted as 'Y'ello'—the MTN logo on a bright yellow square. The single brand logo was negotiated with all stakeholders in each of the countries where MTN operated. A new marketing concept was developed: *glocalisation*. The meant regional communication focussed on local needs and culture but nevertheless still reflected the MTN global brand essence, the brand greeting, the brand personality and the band values ([76, 77], p. 306). The innovative brand marketing strategy proved highly successful, both as a marketing strategy as well as a management tool, since the South African management strengthened managerial

control and the working relationship with the local partners in the different countries.

into a single emerging market cellular phone giant.

Within only 10 years, MTN expanded operations to 28 countries in Africa and the Middle East. Its TNI is 31%, and its ranking on the top 100 nonfinancial companies in the developing world is 31—the highest of all South African companies in the ranking list in 2013. MTN market expansion was driven by FSA based on ownership advantages in exceptional management strategic vision, knowledge of the African market, the innovative application of brand marketing and the use of leading technology. The control of the company is in the hands of black South African businessmen, who integrated a loose network of single country operators

The health-care expansion of both the Mediclinic Group as well as Netcare was driven by the FSA of medical expertise, the advantage of proprietary knowledge, in seeking new markets. Serious shortages in medical services and the rise of the middle class in Africa alerted medical doctors to the opportunity to expand private health care outside South Africa. The entrepreneurial opportunity was observed, and both health-care groups, established in the early 1980s, established hospitals in Namibia, the Middle East and the UK. These health-care groups target the higher end of the market and have therefore also penetrated the UK and Middle East markets.

Central and Eastern Europe, India, the Middle East and Latin America.

redBus, the largest Indian bus ticket portal.

60 Globalization

In contrast to the internationalisation of the Asian Tigers described by Matthews, the internationalisation strategies from the African periphery were motivated primarily by market, asset and efficiency-seeking strategies and less by resource-seeking motives. The observation of the internationalisation of the leading corporations that have diversified operations significantly to gain revenue from operations outside the home country, as discussed in this paper, seem to display the following dominant trends , as will be discussed below.

Internationalisation of the first movers was motivated by **market and asset-seeking** considerations. The long period of international isolation resulted in 'pent-up' capacity at South African firms. The size of the domestic market is small—GDP growth has slumped from 5% to below 2% in the last few years and is not likely to improve any time soon as a result of domestic political constraints. Market-seeking strategies offered access to the new fast-growing markets in Africa, with competitive labour resources. The market-seeking strategies were coupled by the mining companies' asset and resource-seeking strategies. The diversification of mining operations from South Africa by BHP Billiton, AAC and Gold Fields was motivated by resource-seeking and efficiency-seeking considerations. Access to new mineral resources and new mining companies outside South Africa assisted in reducing the risks associated with empowerment policies, domestic labour market rigidities and associated cost pressures. New explorations uncovering mineral deposits outside South Africa offered potentially higher efficiency and links to emerging markets. The expansion of Sasol into Mozambican gas fields was both motivated by resourceseeking considerations as well as the proprietary technology advantage of its GTL technology.

The expansion of the retailer Shoprite and MTN into African markets was purely market-seeking but facilitated by strategic managerial capabilities and knowledge of the context and complexities of the African market. In this respect South African companies possess a competitive advantage over non-African multinationals aspiring to enter the fast-growing African markets. Knowledge of the African cultural diversity, the different languages and consumption patterns was key to the success in the consumer market but also in the mobile telephone market and money transfer market. Therefore Shoprite linked up with MTN, and later also Vodacom, in supplying access to mobile telephone services and money transfer facilities at the shop outlet.

The export-driven international operations of most African firms are market-seeking without exception. The exports by Sonatrach (Algeria) and Sonangol (Angola) are purely marketseeking. The large number of medium-sized African firms engaging in purely commodity exports described by Ibeh et al. [42] only represents the beginning of business globalisation. It is the beginning of revenue stream diversification through foreign sales, but not yet the expansion of operations outside the home market. This type of emerging internationalisation occurs in the exports of food, flowers, wood and textiles. An important observation in this category of emerging internationalisation is the tendency of foreign investment in local enterprise, which then results in export initiatives. This is particularly the case in the floriculture operations in East and Southern Africa, the coffee exports from Ethiopia and Mozambique and the textile exports from East Africa and Mauritius. In this category the so-called 'quota hopping' practice by foreign firms seeking to diversify the location of their operations to bypass US export quota restrictions resulted in Southeast Asian textile manufacturers establishing subsidiary operations in African countries in order to export from 'Africa' and not from their home markets ([42], p. 418). These collaborative efforts may well in the future build local enterprise and result in extensive internationalisation.

On the back of the trends identified, it is to be expected that **efficiency-seeking** motives will in the future become a stronger consideration for South African firms. The emerging diversified corporations from African countries will join those ranks as soon as professional management replaces or supplements family control and acquires a strong international orientation and develop alliances or networks outside the home country. As the bulk of private enterprise in Africa still falls within the category of SMMEs (up to 40% of Africa's GDP is still contributed by informal economic activity—[79, 80]), African enterprises are growing in size and capabilities to challenge competitors on the basis of cost and resource advantages. The strongest private African corporations expanding across African home borders are the Simba Group,

Latecomer Challenge: African Multinationals from the Periphery

http://dx.doi.org/10.5772/intechopen.81500

63

[1] UNCTAD. Internationalization of developing-country enterprises through outward foreign direct investment. In: Issues Note by UNCTAD Secretariat. Geneva: Trade and Development Board. Commission on Enterprise, Business Facilitation and Development Expert meeting on Enhancing the Productive Capacity of Developing Country Firms

[2] UNCTAD. World Investment Report. New York: United Nations Publications; 2014

Century. Oxford: Oxford University Press on Demand; 2005

Journal of Economic History. 1974;**34**(1):166-188

[3] Jones G. British Multinational Banking, 1830-1990. Oxford: Oxford University Press; 15 [4] Jones G. Multinationals and Global Capitalism: From the Nineteenth to the Twenty First

[5] Wilkins M. The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914, Vol. 34. Cambridge, Mass: Harvard University Press; 1970

[6] Wilkins M. The role of private business in the international diffusion of technology. The

[7] Wilkins M. The free-standing company, 1870-1914: An important type of British foreign

[8] UNCTAD. Report of the Expert Meeting on Enhancing Productive Capacity of Developing Country Firms through Internationalization. Geneva: Trade and Development Board.

direct investment. The Economic History Review. 1988;**41**(2):259-282

the Dangote Group and the Orascom Group.

Address all correspondence to: gverhoef@uj.ac.za

through Internationalization; 2005

University of Johannesburg, Johannesburg, South Africa

**Author details**

Grietjie Verhoef

**References**

The second trend is that market and asset-seeking initiatives were driven by the competitive advantage of FSAs, found in **proprietary knowledge and managerial capabilities.** The proprietary knowledge of the locally developed technologies, such as the world leading CTL and GTL technology developed by Sasol or the mining technology of the mining conglomerates AAC and Gold Fields or the mobile telephone technology MTN, is injected into the African and Middle East markets. The expansion of the health-care companies Netcare and Mediclinic is also representative of advanced health-care technology as a vehicle for internationalisation. These technologies provided a strategic tool to access new markets and simultaneously address the growing constraints in the domestic market.

Technological advantages were underpinned by **strategic managerial capabilities**. The managerial capabilities of South African corporations constitute a vital element of the successful globalisation of their operations. Strategic leadership and dynamic capabilities in change management placed them in an advantageous position with respect to expansion into global and neighbouring developing markets. The diversified conglomerates of pre-1990 South Africa were multidivisional firms, managed by professional managers and not only family members (as is still the case in most of the emerging African conglomerates in other African countries such as Uganda, Tanzania, Ethiopia and Kenya). These competitive advantages were enhanced through the international orientation of South African management. Local managers are well travelled, have extensive business network links outside the country, possess ability to manage operations under conditions of political instability and social turmoil—as persisted in South Africa during the 1980s and 1990s—and take and manage risk in such markets [42, 78]. The internationalisation of Sappi, the paper conglomerate, was both motivated by market-seeking considerations as well as the Asian Tigers type of learning and leveraging motives where Sappi acquired advanced fine paper production technology through the acquisition of the European and US paper corporations. The success of the sustained internationalisation operation was dependent on the management of the integration of the newly acquired technology into the existing knowledge base of the conglomerate. The opening up of markets offered strategic options conditioned by contextual constraints.

In this category of internationalisation, the fast-growing e-commerce and e-business markets are penetrated by innovation managerial activity [90]. The cases of the expansion of Naspers and MTN were engineered by strategic management vision. Innovative management proactively sought to leverage existing knowledge in the media and mobile telephone business to penetrate the e-commerce market. Naspers restructured the company and used organisational capabilities at firm level to refocus the media company to emerge as the largest emerging market conglomerate by 2013. Naspers' restructuring enabled the MTN expansion, and the electronic technology of the mobile company was leveraged by the retail company Shoprite, to offer electronic money transfer and payment services. Market-seeking strategies are strengthened by the international orientation of management.

On the back of the trends identified, it is to be expected that **efficiency-seeking** motives will in the future become a stronger consideration for South African firms. The emerging diversified corporations from African countries will join those ranks as soon as professional management replaces or supplements family control and acquires a strong international orientation and develop alliances or networks outside the home country. As the bulk of private enterprise in Africa still falls within the category of SMMEs (up to 40% of Africa's GDP is still contributed by informal economic activity—[79, 80]), African enterprises are growing in size and capabilities to challenge competitors on the basis of cost and resource advantages. The strongest private African corporations expanding across African home borders are the Simba Group, the Dangote Group and the Orascom Group.
