Tips to keep in mind if you are growing in the Middle East
Firas Marafie is the Senior Head of Partnerships at what3words
The Middle East: Quick Money, the Pot of Gold, or is it?
With the increase in venture capital investments over the past two years and with 2020 peaking with a record $ 654 million paid into startups, the Middle East and North Africa (MENA) ecosystem shows signs of promise.
And looking from a distance, the temptation to just “jump” is there, it is wise to do the right homework first.
For those looking to enter or expand into the Mena region, what are some things you want to consider when planning your market entry?
Banknote sizes in relation to volumes
Companies can make this mistake when planning their MENA strategy. Their interest is anchored in the general perception of the availability of wealth and “big deals”. And for this reason, the Mena newcomer could also expect a very active M&A market.
So what are some of the misconceptions that might crop up here? Many of these “big deals” may have been initiated by a disproportionate number of groups. Therefore, if you are not able to penetrate such networks, your Mena motivation may be wrong.
What any business will want to look for as a market entry strategy is a local base of users, businesses, and potential partners. The promising news is that we are seeing this emerging in larger volumes in markets such as Saudi Arabia and Egypt, and that it is expected to happen more, especially in North Africa, where populations are larger. important.
Time to settle down
A fundamental question to consider when entering a market is how to enter; more importantly, what’s the most efficient way to get in?
The basic questions you might ask yourself are:
What do I need to settle legally?
How long can I expect this to take?
In the time it takes to do so, would my market opportunity have changed? (Relevant for fast growing markets, where speed is an advantage).
How could you explore this? While the strict requirements for local property laws are easing in some markets, you might want to test the waters before you jump in. If you are a software company, you have the advantage of being able to deliver your product without the need for physical consultation or inventory.
Otherwise, you can seek to license your product or intellectual property. This opens up several forms of opportunities, such as a partnership with a local actor already connected to the sector and to the infrastructures. The local partner can benefit from your product or technology, allowing them to act as a distributor or facilitator.
For you, it’s a way to test the appetite for your product on a local trading platform, minimizing your risk and costs while enjoying faster setup speed and faster execution. . It’s also a quick way to learn and get local feedback on your product. While some complications can arise if sales and training aren’t adequate, it’s critical to have a partner who understands how to communicate and implement your product.
Where to enter
Going back to an earlier point, does your business need selected volumes or customers? This will have an impact on the countries in which you could start or continue.
If you are in business sales, your main goal might be to sell to governments and larger businesses. And therefore, with fewer prospects, trying to capture the exact market may not be as important as entering one to establish your position. This type of targeting is very different from a company offering a consumer product that requires volumes (large population) to be successful. For the latter, you can choose to specifically target Saudi Arabia or Egypt.
Along with that, you’ll also want to take into account the subcultures and behaviors that exist in each market. Mena is lumped into a single region with a common language, but technological knowledge, demographics, cultural behaviors, stages of market development, and even familiar language (due to dialect) can vary widely. Markets have their own peculiarities.
Finally, obtaining accurate and up-to-date information has always been a challenge in the region. Although this improves a lot as the nature of interactions and transactions shifts to digital and online products, making data more transparent and accessible. In addition, the emergence of platforms such as Wamda and MAGNiTT has helped to map the landscape of markets, investors and startups, bringing in details and insights that were not readily available before.
Approach your customer
If you’re a mainstream tech company, you have the luxury of testing receptivity overseas; the digital nature of marketing and product usage makes this simple. This can help you gather local and qualitative feedback that might not be apparent as you do your research and craft a standard business case.
As for your sales to larger businesses, they may take longer and require your physical presence, given the more traditional nature of customers in this industry.
For prospects, many companies can be branches or subsidiaries of foreign multinationals, which means that the decision-making doesn’t actually happen in Mena’s office. You will certainly want to know in advance if this is the case in your segment; do this research before you try to grow (and save a lot of time!).
Really understand the local customer; they may have different needs and expectations of your product. And if you don’t meet those needs, you won’t be successful.
It comes down to understanding your barriers to entry. A key lesson new entrants sometimes underestimate: What made you successful in other markets may not make you successful in Mena. That’s why it’s crucial to listen and adapt to the feedback you receive.
It is also important to know what forms of local substitutes exist for your product. It might not always be so easy to find out ahead of time, but qualitative research and surveys can help. These can be products and services that work as substitutes in the minds of the local consumer, or because of the local infrastructure. You have to try to understand how the local consumer thinks and is inclined to behave rather than trying to force your product on them.
What questions does a user ask when reviewing your solution, and what other interconnected issues your product might not solve?
Navigate the landscape
In a market where access and authority are still fairly centralized, it helps to know who you can partner with and who you compete with. For example, if you are competing with a government product, it can be risky as it can restrict your leads or prevent you from entering that space at all.
Although there is another side to this coin. Many governments run generous programs to attract companies and talent with innovative technologies and ideas, largely to develop a healthy ecosystem and competition. This presents connection opportunities: innovation mandates, acceleration programs and corporate partnerships.
Investing can also be part of your plan. While many spend a lot of time thinking and strategizing around sovereign wealth funds, there is an ecosystem of investors from development banks, innovation companies and family offices looking to deploy capital.
With gross domestic product (GDP) 60 percent contribution and 80 percent labor contribution, family offices can be great partners, especially if you are seen as a strategic partner for their operations.
The catch is that these opportunities and relationships take time to build. And that goes back to the important question of your commitment and your time horizon to be in the market; you will be tested about it from all angles.
The culture at Mena is very relationship-oriented. The approach to business is not transactional, and generally speaking, there is little urgency. People want to get to know you, and with so much growth and novelty in the market, there are plenty of options to choose from.
Survival and Continuity
Surviving means you have to be there for the long haul as things will take time. There may be a perception of false promise, but we believe this comes from a culture of “don’t say no”, and so the wise participant will develop a sense of which opportunities are real and which are not.
Finally: understand and locate. As mentioned, although it is in a geographic cluster, each market has its own peculiarities. And while this point may seem obvious, the key message is that success in one market does not guarantee success in another. For example, you might be successful in Dubai with a product that is not localized to Arabic; while you might not be able to do the same in Saudi Arabia, if you are planning to go to mass.
So, you are expanding in the Middle East, you say?