mktg nigeria (1)

AN ANALYSIS OF MCDONLD’S INVESTMENT OPPORTUNITY ASSESSMENT

ACTIVITY IN NIGERIA: TO EXPAND OR NOT TO EXPAND?

By Tana Chinenye Ekeocha, Maggie Lyles and Ryan Dunn

Submitted to Dr. Jack Wei

International Business Strategy Section E01 Spring Semester 2015

University of West Georgia

Ekeocha, Lyles & Dunn 2015

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Executive Summary

This report was commissioned to analyze and weigh our options in expanding into

Nigeria. McDonald’s risks and threats, opportunities, strengths and weaknesses will all be

analyzed as well as the five forces we may face in the country. The fast food industry in Nigeria

is booming and has remained at its peak for years now and we believe it can only get better.

Many foreign fast food chains have seen the perks in expanding into the country and have taken

advantage of it. While there may be political regulations, corruption, location and language

barrier, McDonald’s is confident in its brand awareness and loyal customer base. Nigeria is the

largest population in Africa which signals more customers to have and hold. We have seen

tremendous sales volume of our products in other countries like India that we have expanded to

and believe that Nigeria will produce more.


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Environmental Factors

1.1 Basic Data

Nigeria is the most populous country in Africa; the population is 170 million and

continues to grow. Approximately half of the population lives in rural areas. Nigeria’s official

name is the Federal Republic of Nigeria. Nigeria is located on the western coast of Africa. The

Niger is to the north of Nigeria, Chad and Cameroon are to the east, the Gulf of Guinea is to the

south, and Benin is on the west. Nigeria is approximately two times the size of California.

The largest city in Nigeria is Lagos, formerly the capital. Lagos has an estimated

population of 11 million. Lagos is a sophisticated city made up of islands and main lands. Lagos

is the country’s leading commercial and industrial city. In December of 1991, the capital was

move from Lagos to Abuja. The current capital Abuja is centrally located within the Federal

Capital Territory. Abuja is the tenth most populated city in Nigeria. Nigeria consists of 36 states

and the Federal Capital Territory, Abuja. Prior to independence the country was divided into

three regions, Northern, Eastern, and Western.

1.2 Culture/History/Language/Religion

Civilization in Nigeria dated back to the Nok, 500 B.C. – A.D. 200. The Nok culture

made the tradition to the Iron Age. The Nok people planted crops and raised cattle. Their

artifacts suggest they placed an emphasis on personal adornment, particularly of the hair. Nok art

has unique characteristics that can be traced to later developments in Nigerian art. In the late

1400s, Portuguese became the first Europeans to reach Nigeria. In 1851, Britain seized control of

Lagos. The British formed the Colony and Protectorate of Nigeria in 1914. Nigeria did not

become independent until 1960. The current Nigerian flag was adopted in 1960. The Nigerian

flag has two colors, green and white. It has three vertical, equal bans, two green and one white.

The green stripes represent fertility of the land and agriculture. In 1963, the country adopted a

republican constitution and elected to remain a member of the Commonwealth. The First

Republic replaced the military in 1966. Civil war broke out in 1967 when the eastern region

declared itself independent, calling itself Biafra, the war was between Biafra and the rest of

Nigeria. In 1970, Biafra surrendered and the civil war ended. Civilian rule was restored to

Nigeria in 1979. Military leaders took control of Nigeria’s government and in 1999 Nigeria

returned to civil rule.

Nigeria has a history of labor movements and unions. During military rule the unions

were heavily restricted. The democratic elections in 1999 opened the platform for labor

movements to express concerns and go on strikes; there were many strikes during the late 20th

century and early 21st century.

The birth and mortality rates are greater in Nigeria than the world average; this is

common in developing countries. In the mid-20th

century, the infant mortality rate began to

decline and there was an increase in life expectancy. Consequently, population growth was rapid.

Three-fourths of Nigeria’s population at the turn of the 21st century was made up of people under


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the age of thirty. Malaria is a leading cause of death in Nigeria. AIDS cases have steadily

increased since the beginning of the 21st century.

During the colonial period, little promotion of education was done by Great Britain. Until

the 1950s most schools where operated by Christian missionary bodies, where western style

education was taught. However, in the north, primarily Muslim, Islamic education was taught. In

modern Nigeria, primary education is free from the age’s six to twelve. A secondary education is

available in the form of trade centers, technical institutes, and teacher-training colleges, are

established by religious groups, local governments, and other organizations. Also available are

colleges of education and technology, which are controlled by state governments. The modern

Nigerian education still reflects educational and artistic traditions of West Africa.

The country has over 300 ethnic groups. It is considered a complex linguistic, social, and

cultural mosaic. Nigeria’s distinct characteristic is its people. The Hausa and Fulani of the north,

the Yoruba of the southwest, and the Igbo of the southeast make up for more than half of

Nigeria’s population and are the major ethnic groups in Nigeria. Other main ethnic groups in

Nigeria are Edo, Ijaw, Ibibio, Nupe, Tiv, and Kanuri, which are located in different areas of the

country. The languages of the Hausa, Yoruba, and Igbo are the three most widely used

languages; however, English is the official language of Nigeria. There are hundreds of languages

spoken in Nigeria. Approximately half of the people in Nigeria live in rural areas; heavily

populated areas are located on the coast.

Nigeria’s heritage is rich and diverse because of the assortment of ethnic groups with

Arabic and Western European influences. The country merges traditional culture and

international urbanity. It is the oral traditions which many Nigerians still depend on as well

historical influences from other countries. Nigeria has a rich literary heritage and a tradition of

plastic arts. Nigeria references a rich artistic heritage in its art forms, both traditional and

contemporary. Music and dance are an essential part of Nigerian culture; each ethnic group has

their own specialty. Family is the foremost tradition; they gather to celebrate births, weddings,

and funerals. Nigeria’s culture incorporates aspects of old traditions and imported ones from

other cultures. Businesses who serve alcoholic beverages are not present in places prohibited by

Islamic laws. Hotels and nightclubs are very common is large cities, like Lagos. Indian and

American films are popular in urban areas and middle and low income groups. Radio, television,

and other forms of home entertainment are growing in popularity in areas where electricity is

available.

Food is a part of each integral part of the life of a Nigerian. Their primary sources of

protein come from seafood, beef, poultry, and goats, they have a very high supply of labor

mainly because the rural residents do more agriculture than manufacturing. The foods differ from

cultures, regions, and ethnic groups. In the south, soups are made with a base of tomatoes,

onions, red peppers, and palm oil with vegetables and meat or seafood. In the north, grains like

millet and wheat are a substantial amount of their diet. Rice, beans, and root vegetables are

widely eaten throughout the country. Onions, palm oil, and chilies are commonly used for

flavoring.

The constitution of Nigeria secures religious freedom. All religions are able to live and

work together, although some conflict does occur. There is some conflict between Muslim and

Christians and Muslims and Christians and the traditional religions. In the northern states is the

greatest concentration of Muslims, three-fourths of the northern population classify themselves


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as Muslim. In several southern states Muslim is the prevailing faith. In eastern states, Christian is

the dominant religion making up three-fourths of the population. The Christian groups that are

established in Nigeria are Roman Catholics, Methodists, Anglicans, and Baptists.

A majority of Nigerians participated in traditional religions, at the beginning of the 20th

century. This was dismayed by British colonial policies therefore by 1960 a majority of

Nigerians were categorized as a Muslim or Christian. By the beginning of the 21st century, more

than two-fifths of the population was Muslim. Christians were slightly less than the Muslims,

and one-tenth participated in traditional religions.

On Hofstede’s five dimensions of culture for power distance Nigeria scored 80, which

means the people of Nigeria accept a hierarchical order in which everybody has a place, no

questions asked. Nigeria scored a 30 for one dimension industrialism. It is considered a

collectivistic society. In collectivist societies a masculine society is driven by competition,

achievement and success, success being defined as winner. Uncertainty avoidance which is

defined by how a country deals with the fact the future is unknown. Nigeria’s score is 55 on ones

dimension; this score reflects an unclear preference in regards to this dimension. Scoring low,

13, on the long term orientation dimension Nigeria is categorized as a normative society. A

normative society prefers traditional norms over social change. Indulgence, the extent which

people try to control their desires and impulses, Nigeria scored of 84. A high score in this

dimension says that Nigerians have a willingness to realize their impulses and desires with

regards to life. They valued their leisure time and spend money doing the thing they enjoy.

1.3 Politics and the Political System

Nigeria is a federal republic. The Federal Republic of Nigeria is made up of 36 states and

one federal capital territory. It has a mixed legal system. It is a mixture of English common law,

Islamic law (twelve northern states), and traditional law. The government is divided into three

branches: executive, legislative, and judicial. The President is elected by a popular vote and

serves four years but many times presidents are reelected. The president is the head of the

government and the chief of state. The president has a council of advisors known as the Federal

Executive Council. The legislative branch is the National Assembly. The National Assembly

consists of the Senate and the House of Representatives, 109 seats in the Senate and 360 seats in

the House of Representatives. The members of the National Assembly are elected by popular

vote, to serve four year terms. The judicial branch is the Supreme Court, made up of the chief

justice and fifteen justices.

The Constitution of the Federal Republic of Nigeria recognizes three tiers of government:

federal, state, and local. The state and local government are below the federal level. Rivalry and

suspicion have plagued the Nigerian political scene since its independence in 1960. It has been

between the north, the traditional, Muslims, the Hausa, and the Fulani, and the south, the Yoruba

and the Igbo.

In the late 20th

century, Nigeria’s government privatized many state ran enterprises, like

communications, power, and transportation. This was done as a way to enhance the quality of

service and reduce government dependence. By the 21st century, most enterprises are private,

little are still in government hands.


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Nigeria has only 25 registered political parties, the major ones are: People’s Democratic

Party that ruled the country for over 13 years. It maintained 223 seats in the House and 76 in the

Senate. All Progressive Congress is the main opponent of PDP that just took over this year and

has won many political seats: presidency to governor, etc. It maintained 96 House seats and 27 in

the Senate as recently as last year but during the past election had many PDP members defect to

them.

Nigeria’s political candidates bribe the people of Nigeria by giving them food, water, oil

blocs etc. this is just to buy their votes. In the last election, Oyo’s State PDP candidate, Senator

Teslim Folarin, running for Oyo State gubernatorial election, allegedly gave his state a

transformer so that they can vote for him, but when he did not win, he took it back. He denied it

but many believe he was just a sore-loser.

However, the country has a political strategy called Ochedonism, a new form of political

administration derived from aspects of traditional Nigeria; the vision of it is to rebuild, reform,

and have restitution; rebuilding the state and laying solid foundations for posterity.

1.4 Laws and Regulation

Nigeria combines her traditional laws, Islamic law and the British Law also known as common

law. She has labor laws which consist of Trade Union Act, 2005, Labor Act, National Minimum

Wage Wage (Amendment) Act, 2000 etc. There is also Land Use Act, Taxes and Levies Decree,

Coastal and Inland Shipping (Cabotage Act) 2003, Ports Act 2003, Merchant Shipping Act,

Customs Service Conditions of Service, Investments and Securities Decree No. 45 of 1999,

Insurance Act 2003, Communications Act etc. All these policies are laws we have to look out for

and adhere to so that we avoid any filed legal suits against us. These regulations were set up to

protect the local businesses as well as create a civil means of doing business.

1.5 Trade Policies

Domestic trade is between the north states, south states, and major urban areas in the

southeast and southwest. Plantains, cassava, kola nuts, and fruits are provided by the south states

to the north states. The north states provide beans, onions, and livestock to the south states.

Nigeria does little trade with other African countries. Crude oil, cocoa beans, and rubber

are Nigeria’s main exports. Ninety percent on Nigeria’s export earnings are from the sale of

crude petroleum and other petroleum products. Nigeria trades mostly with the United States and

the countries of the European Union (EU). Nigeria imports from the European Union (EU),

China and the United States. They import machinery, manufactured goods, transport equipment,

chemicals, and food. Nigeria’s oil is preferred by American and European consumers because of

the low amount of sulfur causes less air pollution. Tin, columbite, coal, limestone, iron ore, lead,

and zinc are all mined in Nigeria.

The entry barriers international businesses thinking of expanding into Nigeria mainly

face in Nigeria are high corruption level and rigid government regulations. She follows a strict

policy set by World Trade Organization. Another barrier is Poor Infrastructures. Nigeria is a


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developing country and in truth more developed than her other fellow countries however they

lack in good infrastructures and amenities. Because they do not have this set up, many businesses

add up more costs to provide it themselves or risk it by working without it.

Nigeria receives the largest amount of Foreign Direct Investment in Africa. She has seen

rapid growth in FDI where in 2001 she had USD1.14 billion and currently is more than USD 15

billion, 2014. She has an external debt of USD 9,711.45 million dollars. Her balance of trade is

at about NGN 1.1 million.

1.6 Investment Policies

The oil industry dominates the FDI in Nigeria. Prior to their independence the country’s

FDI was more diverse. Later, policies shortened the scope for FDI and political issues, economic

problems and corruption decreased Nigeria’s ability to attract and acquit FDI. In 1999, the return

to democracy created opportunities to widen the FDI and renew the economy. The government

received from FDI but in order to do so they had to improve the investment climate. The changes

have been successful and if continued they will create a country more available to private

investment and attract FDI to Nigeria.

1.7 Other Factors

The climate ranges from arid to humid equatorial. The coast has an equatorial maritime

air influence, which is high humidity and heavy rainfall. The north, dusty winds from the Sahara

are brought by a tropical continental air mass. The amount of rainfall is less in the south than the

rest of the country. Temperatures vary depending on the season.

The miles of coastal beaches, wildlife, diverse cultures, and museums are reasons why

many tourists travel to Nigeria. However, Nigeria was under military control for an extended

amount of time and there has been period of ethnic violence. These are reasons why tourists are

persuaded not to visit Nigeria. Nevertheless, more than two million tourists visit Nigeria every

year.

Nigeria landscape is low plateaus but by rivers, the Niger and the Benue. The landscape

is suitable to agriculture. However, in the southeast in densely populated areas there is a shortage

of farmland. Nigeria’s major economic resources are petroleum and natural gas deposits. Solar

power is the most underutilized renewable resource in Nigeria.

Nigeria is a country with a vast geography. It can be divided into distinct geographical regions.

There are many differences between north and south Nigeria. The differences are marked not

only by the physical landscape, climate, and vegetation but by social organization, religion,

literacy, and agricultural practices too. The differences listed are the foundation for the division

of Nigeria to geographical regions. The regions are the south, Guinea coastlands; the central

regions; and the north, Nigerian Sudan. Nigeria’s rivers and lakes provide a majority of the

country’s annual fish needed, and the rest comes from the Gulf of Guinea. Nigeria is mostly

forests.


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Nigeria is Africa’s largest economy. The economy is primarily based on the petroleum

industry. The country possesses an abundance of natural resources, mostly large deposits of

petroleum and natural gas. The title of Africa’s largest economy did belong to South Africa

however in recent year Nigeria took the title. Nigeria is a growing investment target because of

the size of its consumer market and expanding capital markets. Although Nigeria’s economy has

bigger economy than South Africa, it is behind South Africa’s basic infrastructure, power and

roads. Traditionally Nigeria has been an agricultural country. At its independence in 1960 the

country was able to provide a majority of its own food. However, by the 1970s petroleum had

surpassed cash crops. Petroleum has become a major source of foreign exchange. The population

was exploding in growth the Nigeria was no longer able to provide the food needed, therefore, it

became a net importer of food. Nigeria is the eighth largest exported of oil.

Nigeria’s gross domestic product (GDP) increased annually from 1965-1980 by nine

percent. Oil revenues were wasted because of mismanagement and corruption. Political

instability, inadequate infrastructure, and heavy foreign debt were all problems. The economy

remained stagnate in the 1980s to early 1990s, petroleum revenue decreased, population

continued to rise, inflation was at twenty percent, and the country’s foreign debt tripled. When in

oil prices began to rise in the 2000s, Nigeria benefited, economic reform began and the GDP

began to revive. Early 2000s, the government began to modernize the banking system, restrict

inflation, privatize oil refineries, and set in motion programs to boast the country’s economy.

Nigeria received approval for a debt relief package in 2005.

The Central Bank of Nigeria oversees banking and currency. The bank began in 1958. It

issues the naira, the national currency. The bank has offices in all state capitals. It sets rules for

commercial and merchant banks in Nigeria. European and American banks are present in

Nigeria; however, all banks operating in Nigeria are required to be 60 percent owned by a

Nigerian.

Sixty percent of Nigeria’s labor force is made up of agriculture. The agricultural goods

are mostly produced on small family farms and minimal amount of large plantations.

Agricultural goods mostly produced are maize, rice, yams, legumes, and tomatoes. Along with

livestock such as: cattle, poultry, goats, and sheep. In the early 19th

century, palm oil was

exported to Europe. Cacao and peanuts were the leading exports in the 1950s and 1960s but were

undervalued during the oil boom in the 1970s. By the early 20th

century cotton was grown for

domestic use. Only two percent of the workforce is employed by the manufacturing sector.

Traditional industries are carried out in homes or make shift work shops. Open air markets, small

neighborhood stops, and on the street is where food items and manufactured goods are sold.

Lagos, Onitsha, and other large cities have modern department stores. Lagos has the largest

amount of large factories in Nigeria. In the state capitals in each of the states are a number of

large manufacturing industries. Major industries are located in remote areas and workers are

from surrounding areas, such as paper mills or steel mills. The women of South Nigeria and

Lagos perform a substantial amount of the agricultural labor. In the north, women’s activities are

restricted, especially Muslim women. There are no restrictions on women when it comes to

attending universities or taking up a profession.

Nigerians mainly depend on the network of roads as transportation, although few own an

automobile. Buses and taxis operate on the main roads and are typically over crowded. Four-

fifths of all Nigerians use the roadways as their main form of transportation. Most of the roads in

Nigeria are unpaved and rugged. Roads are mainly used for passengers and freight traffic.


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In the late 1970s, highways were built to link Lagos, Ibadan, and Benin City. The road

system is deteriorating because it has not been maintained. It is increasingly dangerous. The

safety standards are poor, accident rate is high, and most automobiles are deemed unsafe to

drive. Lagos, the most populous city, is known for traffic problems. Car pooling is common and

recommended. Road traffic is the highest the cacao belt in southwestern Nigeria, the peanut and

cotton belt in the Kano-Katsina region, the Jos Plateau tin fields, and the palm belt in

southeastern Nigeria. The quality of the roads in these places are better than others, they have all-

weather roads. Areas which are unproductive and sparsely settled have tenuous roads. Prior the

development of the roadways, railroad were the dominant mode of transportation. The road

systems led to the decline in use of the railroad. Nigeria is served by air transport. Lagos, Kano,

and Abuja are where the international traffic takes place.

Cellular phone service have exploded in Nigeria compared the land telephone service.

Land lines have existed in major cities since the 1970s. Land lines where considered to be costly

and unreliable. In the late 20th

century the use of cell phones rapidly grew and has continues to

grow. Like cellular phone service, internet service has been rapidly growing throughout Nigeria.

The huge population of people in cities has created major problems, improper sewage

disposal, water shortages, and poor drainage. Garbage lines the streets creating health concerns

and traffic delays. The garbage has often caused floods in Lagos and other major cities, during

the rainy season. Slums and shantytown suburbs have developed in major cities because of

overcrowding. Houses are built by individuals and families because banks do not typically lend

money for home construction. Individuals and families rely on their own savings for house

funding.

Nigeria’s first newspaper was established in 1830, in Lagos. There is a large number of

Sunday and weekly newspapers produced each week in Nigeria. Most of the newspapers are

produced in English however some are produced in native languages. The Nigerian Television

Authority was established by the government in 1976 to control all television stations. Private

television broadcasting was authorized in 1993. Federal Radio Corporation of Nigeria was

established in 1957, owned by the government and operates a chain of radio stations.

1.8 Major Risks & Opportunities Identified

Nigeria has risks that a potential investor, like McDonald’s should consider. A majority

of people who live in Nigeria live in poverty; they live off of less than one dollar a day. This

should be considered by an investor like McDonald’s because it could affect the amount of

potential customer who would be able to purchase their products. Also, the poor roadways are a

potential risk. The roadways are heavily congested. The actual roads are in poor shape which is a

haven for accidents and unpredictable traveling conditions. This is risk because the roadways are

the most common form of transportation used in Nigeria, shipments needed to business would be

affected which could be costly for businesses like McDonald’s. Another risk that a potential

investor should consider is the obstacles of opening a business. There are numerous tariffs,

quotas, and agencies to register with before being able to do business in Nigeria.

With many risks also come opportunities, the biggest opportunity for potential investors

in Nigeria come by way of their population. Nigeria has the largest population in Africa which


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means it has a large potential market for investors like McDonald’s. If a business does business

in Nigeria it may open doors to opening businesses in other Africa countries. Nigeria has the

largest population in Africa and could influence the other countries to be more accepting of

investors if they see the results of the businesses operations in Nigeria.

TABLE ONE

Environmental Factors (Nigeria)

(country name)

Nigeria

Key information:

Figures/Description

Positive/Negative/

Neutral/Uncertain?

Impact on business

Short Reference

Basic Data

Population 177,155,154. Pop. Growth:

2.47%

Positive Galileo Article

Demographics Largest African population

Median Age: 18.2 years

male: 18.1 years

female: 18.3 years

Major cities – population: Lagos

15.113 million; Kano 3.375

million; Ibadan 2.949 million;

ABUJA (capital) 4.183 million;

Port Harcourt 1.984 million;

Kaduna 1.524 million

43% between the ages of 0-14,

19.3 % between the ages of 15-

24,

30.5% between the ages of 25-

54; 49.6 live in urban areas

Positive CIA Website

Index Mundi website

Ethnic Groups Over 300 ethnic group including

Hausa and Fulani 29%, Yoruba

21%, Igbo (Ibo) 18%, Ijaw 10%,

Kanuri 4%, Ibibio 3.5%, Tiv

2.5%

Uncertain as

different languages

may become a

barrier

Worldometer Website

Location/Geography West Africa; River Niger on the

North enters the country in the

northwest and flows southward

through tropical rain forests and

swamps to its delta in the Gulf of

Guinea, Chad and Cameroon on

the East, Gulf of Guinea on the

South and Benin on the West;

mostly low plateau cut by rivers

Neutral Geography.about.com


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Natural resources Massive petroleum and natural

gas deposits, tin, ore, iron, coal,

limestone, niobium, lead, zinc

and arable land

Neutral OPEC website

Climate Tropical. Rainy and dry seasons:

Two climates zones; North has

high humidity and heavy rainfall

and South has dry, dusty winds.

Savanna climate, with marked

wet and dry seasons, prevails in

the north and west, while a

steppe climate with little

precipitation is found in the far

north.

Positive Britannica website

Environment Major drainage area; Poor quality

soil; Plateau and savannah

regions with forests and

grasslands

Regions: Savanna, tropical

forests, and coastal wetlands.

Rich soil quality, Not natural

disaster prone, Uncontrolled

grazing and livestock migration,

poaching and settlement within

protected areas, brushfires,

increasing demand for fuelwood

and timber, road expansion, and

oil extraction activities.

Also known for richness in forest

and wildlife

Uncertain Galileo Article

Naturvernforbundet

website

Culture

Culture Rich and Varied cultural

heritage; The county Comines

traditional culture with

international urban sophistication

Festivals, Respectful to elders,

High entrepreneurial drive,

Hardworking, traditional attire,

female cleanliness, weddings,

Naming ceremony, etc.


Our Africa website

Education Western style education;

majority of adults can read and

write.

Education in Nigeria is managed

by the state.


Maps of World

website


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There are 27 federal and state-

owned polytechnics in Nigeria

The present literacy rate is

estimated at 72%.

The first 6 years of primary

education are mandatory in

Nigeria.

The formal education system in

Nigeria includes:

6 years of primary schooling

3 years of junior secondary

schooling

3 years of senior secondary

schooling, and

4 years of university education,

finally directing toward a

bachelor's level degree in the

majority of the subjects.

The annual term of school in

Nigeria is ten months, and is

sectioned into three ten- to

twelve-week periods, each at the

pre-primary, primary, junior and

senior secondary stages

Arts A rich artistic heritage both

traditional and contemporary art

forms. Very big in traditional art.

Familiar types of art: stone

carvings, potteries, different

forms of glass work and wood

carvings.


123 Independence

Day website

History Evidence of Neolithic (c. 800bc-

ad 200) discovered; 1400’s

Portuguese were the first

Europeans to reach Nigeria.

British colonial rule 1900 - 1960.

Independence and secession

1960 – 1970. Large migration.

Neutral Galileo Article

Historyworld.net

Language Official language is English,

widely spoken. Pidgin, hausa,

igbo and yoruba and over 250

tribal languages are also used.


Every Culture

website

Religion 50% are Muslim, 40 % Christian,

10% Other;

Neutral Galileo Article

Every Culture


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website

Politics

Political system Democracy is practiced.

Major parties are Peoples

Democratic Party, All People’s

Congress, and Action Congress.

Positive CIA Website

Political strategy Ochendoism; is a new form of

political administration derived

from aspects of traditional

Nigeria; the vision of it is to

rebuild, reform, and have

restitution; rebuilding the state

and laying solid foundations for

posterity.

Positive AllAfrica Website

Law

Legal system Mixed legal system; English

common law, Islamic law (in

12 northern states), and

traditional law

Uncertain CIA Website

Index Mundi website

Trade policies Follows a strict policy set by the

government and World Trade

Organization

Trades mostly with Brazil,

China, France, Germany, India,

and United States; Sales of crude

petroleum and other petroleum

products is more than 90% of

Nigeria’s export earnings; FDI is

dominated by the oil industry.


WTO website

Investment policies Currency and banking supervised

by Central Bank of Nigeria;

Some European and America

banks; Nigeria requires 60%

ownership in all operating banks

Receptive towards investment

opportunities in the country.

Recognizes the private sector as

the engine of growth and creator

of wealth and creates conducive

environment for the prosperity of

investments in that sector.


Nigerian Embassy,

USA website

Infrastructure, etc. Roads are the most important

mean od transportation;

extremely crowded and

Negative Galileo

Article/Online


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damaged; Air and railroad are

present; Cell phones and internet

are widely spread; Huge deficit

of electricity supply and poor

sanitation. Lack of quality and

suitable infrastructure such as

material for building

Newspaper

Policy Research

Working Paper

Major Risks and

Opportunities

Risks: Lack of transportation and

utilities, short life span, and

mixed legal system. Political

risks, religious crisis, youth

strikes and riots, expensive cost

due to lack of infrastructure,

corruption, poor electricity etc.

Opportunities: Large population

– large market share, ethnically

diverse, growing political and

economic systems, urbanized,

and western influenced, easier

penetration to other African

countries, weakened local

competition, highly skilled,

cheap labor force (that speak

english and willing to work for

less), strong affinity for

American brands (they believe it

is quality)

Negative and

Positive

Galileo Article

National Bureau of

Statistics

Economic Performance & Trends

2.1 General Economy

For general overall economic comparison to regional countries and the globe, I used the

Heritage Foundation’s economic freedom score as the led indicator. Economic freedom in the

contexts of their scoring system is the right for every human to control their own property and

labor. An economically free society allows individuals to work, produce, consume, and invest

freely and the government allows labor, capital, and goods to move freely (Heritage). The

economic freedom score uses a number of indicators focused on rule of law, limited government,

regulatory efficiency, and open markets to come up with a number out of 100 to measure how

much economic freedom is available in the country and can be used to accurately gauge a

market.

The current economic freedom score given to Nigeria is 55.6 out of 100. Regionally it is

ranked 22 out of 46. Compared to the globe it is rank 120 (Heritage). In the past year it has been

making improvements in labor freedom, corruption, and government spending but it still

considered below the world average. The country has had some trouble in the rule of law

category, property rights. According to Heritage, Nigeria has one of the world’s least efficient


15 | P a g e

property registration systems weakening property rights further. Corruption is still a problem

even though it is improving. Lack of infrastructure in some areas continues to block further

development.

Based off the economic freedom score there are some major risks. The level of

corruption needs to thoroughly be understood. Unless the level of corruption is understood entry

into the market could be very risky. Not knowing the rules of the game would hinder potential

growth or provide an advantage if they are understood better than competitors. Along with

corruption, property rights do add another demission of risk to entering this market. If the

property rights for the stores and also copyrights cannot be guaranteed then any infrastructure

built could be lost in the long run and brand identity could be lost as a result of copyright

infringement making the market inherently riskier. General infrastructure, roads, creates

problems too. Supplying stores and setting up distribution channels could be difficult but could

be done with some modifications to distribution channels.

2.2 Economic Development & Performance on Growth

Nigeria has a gross domestic product (GDP) of 523 billion USD (economywatch). South

Africa maintained the largest economy on the continent until it was surpassed by Nigeria

recently and is the closest economy currently near the size of Nigeria’s. Average GDP growth is

6.3%. The general conscience indicates continued growth into the future. GDP per capita is

$2,831. Unemployment hovers around 7.5% but in reality could be lower because of how

unemployment ratios are calculated. There is a large and growing agriculture sector employing

many people through informal means which distorts unemployment projections.

Overall, Nigeria’s current economic development and performance is positive. The

numbers reassure Nigeria has potential to be an emerging market in the future. If continued

growth is expected then this country would be in a good position to afford the products offered

by McDonald’s. Even if McDonald’s enters the market too early it would still pay off to entrench

before competitors, even at the cost of potential losses for a number of years. With such high

GDP growth it is unlikely other competitors in the industry have not taken notice. There is a high

risk of competitors trying to enter the market so being a first mover or a fast follower could make

or break the decision. Although Nigeria’s economy is expected to keep growing there is still risk

in the projections. Nigeria is an exporter of oil making its’ economy highly correlated to the

world economy. If the world economy experiences a downturn then expect Nigeria to experience

slower growth if any at all.

2.3 Structural Change

The country is growing but the majority of wealth and prosperity accompanying

economic growth is not sufficiently reaching the lower class. Since the majority of the wealth in

the country is very concentrated in the upper classes, 70% of Nigeria’s population is under or at

the poverty level. The government’s focus is on reducing poverty by stimulating job creation.

Although the oil and gas industry has given Nigeria’s economy a significant boost it is

also limiting their economy. Continued concentration on oil further expands the gaps in social


16 | P a g e

classes. The government is aware continued growth must be the result of diversification away

from the oil and gas industry. Industries in agriculture, information and communication

technology, trade, and services could reduce their economy’s dependence on oil. Attempts to

steer Nigeria’s economy away from oil and gas have not been successful. Their economy is still

fixated on oil and gas production.

If Nigeria is serious about diversification away from oil and bringing the majority of its’

citizens above poverty then this market should be taken very serious. Structural change could

change their economy into a new emerging market and provide new revenue streams for

McDonalds. Failure to enter a new emerging market could leave the door open for competitors to

become first movers and entrench in the market making it more difficult to enter later. If

structural change does not take place then Nigeria will not be as an attractive market to enter

because the majority of the population will continue to live in poverty.

2.4 Fiscal Evaluation

Fiscal, Monetary, Exchange Rate Policy

Inflation is hovering around 8.5%. The central bank has raised interest rates to current

levels of 13% to combat inflation. If the central bank is aware and taking steps to keep inflation

in check then this is a positive indicator economic growth will be present in the future. If the

central bank does not take steps to maintain a stable currency then this market would be in

danger of economic collapse and not suitable for entry due to high levels of financial risk.

Fiscal policy can be viewed as neutral. Taxes on corporations are 30%. Imports are taxed

with an average tariff of 10.6%. A value added tax of 5% is in place. The taxes on corporations

are not nearly as high as other countries which does give this country an advantage over other

potential markets. An average tariff of 10.6% affects imports. The tariff could hinder and

discourage foreign investment by reducing profitability of conducting business in the country.

The value added tax also creates some problems. The tax is not like a sales tax so it requires

better detail in accounting which adds costs. The taxes do present clear problems but are not so

harsh to shut off the market completely.

2.5 Financial Market Place

The financial market place outlook is positive. Nigeria has 24 commercial banks. The

Nigerian Stock Exchange has 200 companies and is growing. With financial institutions already

in place, current and new businesses can raise capital efficiently. Being able to raise capital starts

a mutually beneficial cycle that contributes to GDP growth making the market that much more

attractive.

2.6 Foreign Direct Investment (FDI)

The legal and regulatory bureaucracies are discouraging foreign direct investment but is

still flowing in at 5.6 billion per year. If the legal and regulatory problems are solved then more


17 | P a g e

investment should find its’ way into the country unless some other limiting factors come into

play. Even with limiting factors on investment, 5.6 billion is still a considerable amount and

should be considered a positive sign from the world economy signaling Nigeria is a suitable

investment.

2.7 Balance of Payments

There is a current positive balance of payments of $16.6 billion. The balance of payments

is the difference of their imports of 55.98 billion and exports of 93.55 billion. As more money

flows into Nigeria, the value of their currency should appreciate over time as more countries

demand their currency to pay for natural resources. Demand to pay for their oil reserve isn’t

going anywhere fast so the balance of payments should remain positive. Such a high balance of

payments presents some risk that financing entry into this market may not always be as

affordable so early entry is preferred. The balance of payments could start to decrease in the

future as developed nations start to use less oil. It is important to keep monitor the balance of

payments into the future for the development of foreign exchange problems that could arise.

Below is the current account of Nigeria from 2006 – 2014.


18 | P a g e

TABLE TWO

Economic Performance & Trends (Nigeria)

(Country name) Key information: Figures/Description Positive/Negative/

Neutral/Uncertain

Impact on

business

Reference Information

Emerging

markets/instituti

ons in transition

Main economic

indicators GDP: 523 Billion USD. Annual Growth Rate%= 6.3% Unemployment 7.5%, CPI 8.5%, Exchange rate NGN/USD: 199

Per Capita $2,831

GDP Per Capita (PPP), US Dollars for Nigeria in year 2014 is US$ 6,081.67 Interest Rate: 13%

Positive and Negative on Interest rate

http://www.heritage.org http://www.economywatch.

com

Economic policy

& strategy Seven-Point Agenda for Food Security and Poverty Alleviation: Strategic plan for poverty reduction National Economic Empowerment and Development Strategy (NEEDS): Promote economic growth -Creating jobs and making growth more inclusive -Reduce poverty and unemployment -Increase non-oil growth

Positive http://www.ruralpovertyportal.org

http://www.africaneconomicoutlook.org/en/countries/

west-africa/nigeria/

Comparison with

region

Africa’s Largest Economy Africa’s Most populous Nation Positive

Positive https://www.cia.gov

Trade and

investment

fundamentals

Must register with: Nigerian Investment Promotion Commission (NIPC) or Corporate Affairs Commision (CAC) Nigerian Export Processing Zones Authority (NEPZA) Incentives available: Debt Conversion Programme Loan eligibility for small and medium-scale industries Raw Material Research and Development Council

Positive http://www.nigeriahc.org.uk

Comparative

advantage Oil and gas Vast Mineral Resources, gemstones, Open country, Cheap Human Capital, oil, Bilateral Trade Agreements, agriculture: cocoa and leather products

Positive http://www.vanguardngr.com

http://africantransformation.org

Balance of

payments

$16.6 Billion (rank 19)

Account Balance: US$ 21.8 Billion

% of GDP: 3.668 %.

Positive http://knoema.com https://www.cia.gov

Balance of Trade Imports-55.98 Billion

Exports-93.55 Billion

Positive https://www.cia.gov

http://www.heritage.org/

http://www.economywatch.com/


http://www.ruralpovertyportal.org/

http://www.ruralpovertyportal.org/

http://www.africaneconomicoutlook.org/en/countries/west-africa/nigeria/



https://www.cia.gov/

http://www.nigeriahc.org.uk/

http://www.vanguardngr.com/

http://www.vanguardngr.com/

http://africantransformation.org/

http://africantransformation.org/

http://knoema.com/

https://www.cia.gov/library/publications/the-world-factbook/geos/ni.htmlCurrent



19 | P a g e

Savings and

investment levels

and flows

FDI Inflow: $20.75bn. FDI Outflow: N482.91bn as of 2013 Investment %%: 14.988% Gross National Savings (% of GDP) 18.656 %

Positive http://www.punchng.com http://investadvocate.com.

ng

Trade and foreign

investment levels

and flows

(2010): 20.6 Bn. USD Positive http://www.tradingeconomics.com

Foreign debt

levels

$9.38bn (2014) 40% rise from $6.7bn (2013)

Uncertain http://www.punchng.com

Financial

markets

Sectors: Banks: Central Bank financia, charter bankl and merchant, Credit Unions, OTC, Insurance,Hedge Funds, MicroFinance etc. Finacial Markets Nigeria Stock Exchange Federal Government of Nigeria Bond National Association of Securities Dealers

Positive http://www.nse.com.ng/ http://www.cenbank.org http://www.nasdng.com/

Domestic banking

system & health Access Bank Plc, Guaranty Trust Bank Plc, Ecobank Transnational Incorporated, Diamond Bank Plc, First Bank of Nigeria Limited and Skye Bank Plc.etc. Requirements: report Basel II/III ratios for the first time with their financial year Regulations: capitalisation ratios, net open position limits, cash reserve ratios and liquidity ratios

Positive http://tribune.com.ng

Taxation

Corporate Tax = 30% Value Added Tax-5% Average Tariff-10.6% Personal Income Tax: 24% Sales Tax Rate: 5%

Slightly Negative http://www.tradingeconomics.com

http://www.heritage.org

Budget balances

& domestic debt

levels,

Capital

Spending

2014 = N4.69 trillion Government Budget % of GDP: -1.80% Government % Debt 11.00 Planned capital spending: 634 billion naira ($3.2 billion)

Negative http://www.tradingeconomics.com

http://www.bloomberg.com

Foreign exchange

system &

currency issues

Currently $0.0050 = US$1 Severe currency depreciation due to oil price drop, election, boko haram, etc

Negative https://www.google.com

Economic

integration: EU &

globalization

Part of Economic Community of West African States, Organization of the Petroluem Exporting Countries Major partners:China, USA, Japan, India, Brazil, Spain, France, Netherlands,India, South Africa, Germany, Italy, Portugal

Positive http://nigeria.opendataforafrica.org

https://www.cia.gov

Other factors, if

relevant

Implied PPP Conversion Rate (2014) is 87.195 General government revenue (National Currency) for Nigeria in year 2014 is

Positive www.tradingeconomics.com/nigeria

http://www.economywatch.com

http://www.punchng.com/

http://investadvocate.com.ng/

http://investadvocate.com.ng/

http://www.tradingeconomics.com/


http://www.punchng.com/

http://www.nse.com.ng/

http://www.cenbank.org/

http://www.nasdng.com/

http://tribune.com.ng/






http://www.bloomberg.com/

https://www.google.com/

http://nigeria.opendataforafrica.org/

http://nigeria.opendataforafrica.org/


http://www.tradingeconomics.com/nigeria

http://www.tradingeconomics.com/nigeria




20 | P a g e

NGN 9,787.76 Billions Import Volume of All Items Including Goods and Services (Percent Change) for Nigeria in year 2014 is 5.599 %. Fiscal Year Gross Domestic Product, Current Prices for Nigeria in year 2014 is NGN 92,237.62 Billions

Major risks &

opportunities

identified

Opportunities

Cheap Labor

Affordable start-up cost

Low sunk cot

Africa’s largest economy

Risks

Absence of a food processing

industry

High Real Estate Cost

Health Unions

Positive, and Negative

http://www.heritage.org

Economic Performance & Trends

Assessment of Markets & Products

3.1 Basic Situation of the Fast Food Industry

This industry is fast food/casual dining. With the growing purchasing power Nigeria had

and an increased private equity investments, the Nigerian fast food industry encountered sharp

growth in 2013, grossing a total of N230 billion in turnover up from the N200 billion in 2012.

This trend continued into the next year where there was a rise of N20bn making it worth

N250bn. The growth is expected to continue and has been seen as the fastest growing industry

after the petroleum industry. This impressive growth is driven by many factors, including

increase in average disposal income of families, close gap between the cost of dining out and

eating at home and hectic and tight schedule in lifestyle, making it absolutely inconveniencing to

cook at home. Other reasons include the inclination to relax and enjoy the ambience restaurants

provide, and the strong longing to eat in a clean and hygienic environment, etc.

Nigeria relies greatly on imported goods and supplies of these food items in Nigeria are

hindered by government ban on certain product imports as well as high tariffs/duties on others in

a bid to develop her local markets. This has caused the high prices for these raw materials; but

with these obstacles, the industry remains strong with operational efficiency and service delivery

as drivers to the fast food restaurants’ ability to produce revenue in a highly competitive

business.

3.2 Evaluations of Market Industry

The fast food market is still at its early stage of development in Nigeria and consequently

there is a growing trend and a projected additional growth. These outlets are a major sub section

of the Hospitality and Tourism Property Market and a concentrated form of business. This



21 | P a g e

industry has grown more than 10 percent a year in the last ten years, even with the chicken

imports ban, unreliable power supply etc. Recently, there has been a major rise in this industry

due to the emergence of franchising. Even with no substantial precise record of the numbers of

fast food joints in Nigeria a considerable number of people are actively and beneficially occupied

with this industry.

In looking at the value of this industry we would consider the management skills,

franchise, building/size/seating/parking lot, consumer attitudes and trends, effects of competition

and location links.

Good Management in fast food operations requires quality control, high levels of

teamwork, workmanship and management strategies. These increase the average spending of

customers. In Nigeria, a typical good fast-food manager has quality control over both food

quality and the operation of the whole business. In order to have an easy and tranquil restaurant

operation, the manager knows the secret to picking good subordinates that can reach set

organizational goals and also able to work in groups. Many of these managers have studied

business management abroad and are aware that their specialized skills in business marketing

and promotion, as well as financial and human resource management are the drivers to a

successful business.

Fast-food Franchise – determinant of value, has become a significant, loud uproar in

the country. For example, Franchisers recreate each other so that there is uniformity between

them; they do this by setting operating standards through procedural guidelines. This is critical as

consumers, especially the frequently travelers are reassured that no matter where they go the

food, taste and quality in that restaurant is the same in all locations as their local stores –

consistency. This familiarity improves sales, profits and revenues. We have seen in the country a

huge number of restaurants franchising their stores, this gives Nigerians the opportunity to feel a

part of these stores as well as increase employment. Mr. Biggs, one of Nigeria’s chains of fast

food restaurants, saw quick expansion after becoming one of the first Nigerian companies to sell

franchises to investors.

Buildings have graduated from building for comfort to building for aesthetics. The

beauty of the building attracts more people in as it shows affluence and status – two things

Nigerians love to be associated with. Many restaurants now a days bank on their appearance,

making it valuable. The more seats a building accommodate, the higher the customer turnover,

and this is especially important in a country like Nigeria that has a dine-in culture. The ambience

created and décor in the area encourages hunger as well as relaxation. Size of the parking lot is

very crucial as customers get discouraged when there is no parking, losing customers as well as

sales.

Consumer Attitudes and Trends are constantly revolving and mostly affected by age,

income, lifestyle, household composition etc. In recent years, health factors have become an

increasingly important factor which has unfortunately daunted the brand and image of certain

restaurants. In the United States, there have been claims of McDonald’s burger causing cancer,

and steroid injected chicken sold at restaurants. These ridiculous tales affect the business because

of the change in consumer attitude towards restaurants that still sell those items. In Nigeria, the

government banned the importation of noodles. This single act cost Chinese restaurants all over

the country to fall, some even running into bankruptcy and eventually closing down. There was


22 | P a g e

also a ban of chicken imports to support its nascent poultry industry which refocused consumers

to consume ones locally bred.

Location Visibility is a vital influence in value. For casual dining/fast food restaurants

located at major traffic arteries; in dense urban areas; at highway interchanges; within major

malls and shopping centers; in University areas; hotel resort areas, hospitals etc. have more client

base as well as recognition than ones in rural areas, isolated areas, etc.

We will be located in large port cities like Port-harcourt, Apapa, Calabar etc. this would

be are main distribution location because it is closest to the port and also are our target market.

Consumer Culture: To accommodate and entertain our customers and their cultures, we

will tweak our recipes and menu. Muslims make up about 57% of the country and because of

their religion, do not eat pork, so in the Northern areas, where most of them reside, our

McDonald’s restaurants will have a “non-pork burg” menu, something close to what we did in

India. For those who are vegetarians, we will offer “McVeggies”. Nigerians also love their local

snacks so we would incorporate the most demanded ones: puff-puff, buns, meat pie, donuts,

scotch eggs, fish pie, bread and moi-moi, sharwama, suya, boli, etc. Including these snacks will

bring in more customers. A challenging aspect of the Nigerian culture is with their older citizens

who do not believe in dining out because of fear of unhygienic meals as result of the

carelessness/selfishness of chefs who may not care about sanitation since they are not the ones

consuming the meal. We have to regain their trust by having an open kitchen where they can

watch their meals prepared in a clean and safe environment, this creates the belief that the meals

cooked as fresh as well as clean. They will also participate in the cooking of their foods by

picking what they want and what quantity they require. Nigerians who are very health conscious

will also have the nutrition facts of their meal on their menu.

Ethnicity and Customs will not have a grave impact on us but language, climate and

religion may. Christians do not eat meat so during the fasting season so we abide by not offering

meat. For language we will hire local residents to attend to the customers. And for climate,

Nigeria has dry season and rainy season – this will be beneficial to us as it will never be too cold

to have customers stop by or workers not show up to work. However, we have to prepare for

flooding and property destruction during the rainy season as there are severe occurrence of hails

and flood, thus it is very critical to protect our infrastructures and equipment by investing in a

very secure insurance. We will also plan ahead of time to store them in warehouses before these

disasters. Unfortunately we have to be very alert as the weather forecasting in Nigeria is neither

accurate nor reliable.

3.3 Major Domestic & Foreign Competitors

Effect of Competition: The more restaurants that enter this industry, the lower the

market share. Both the new competitors and the new products being produced by competitors

directly affect the value of fast food restaurants. This is because Nigerians have a strong affinity

for foreign brands especially Americans’. Many local restaurants like Mr. Biggs, Kilimanjaro

and the likes, are seriously affected. Interest rates, inflation, low exchange rates, unemployment

etc. are other economic factors that indirectly affect this industry.


23 | P a g e

Major Competitors are Kentucky Fried Chicken with 22% market share, Southern Fried

Chicken with 20% market share, Chicken Licken with 17% market share, Mr. Biggs with 47%

etc. These restaurants have already settled and are customer favorites – entering now, we have to

catch up with these rivals. They have a huge market share and it will be challenging gaining their

customers since they have more experience, knowledge and years than us in the country. We will

be competing with both foreign restaurants (KFC, SFC) and local (Chicken Licken, Mr. Bigg’s).

The price of a meal for all fast food restaurants in the Nigeria ranges from NGN 1,900 to

NGN2,050, while a snack or drink ranges from NGN NGN 4500 to NGN 650.

To succeed entering the industry, we will be operating on a low cost pricing. Similar

complaints consumers have according to Trip Advisor a disappointed customer stated “Why is

Mr Bigg's even listed?! Terrible service, tasteless food, unsanitary surroundings, mannerless

staff... the list goes on. Back in the days when we did not have much of a choice, maybe. Not

ever again!” We will have a different reception to Nigerians; this will be obvious in our

ambience, our organization and our outstanding customer service will be some of our core

competencies. We will also have an additional segment in the industry (which at the moment is

currently focused on local foods and pastries). From our study of the fast food industry in

Nigeria we see a major strength that we will have which is in the burger, this segment is a very

good opportunity for us to appear and attack other competitors.

There are no specialized restaurants selling burgers, this is not because Nigerians do not

eat or enjoy burger but no fast food joint has established themselves as the major burger makers

in the market. We will also open new business channels such as catering, delivering, drive thru,

“all day breakfast”, kiosks and online ordering services, lastly, we will promote the family dine-

in experience. Nigerians unlike Americans prefer dining in than ordering to go, providing this

amenity for them will boost our client base. These are all services that other restaurants have not

introduced to the country. We believe these subtle strategies will bring in more curious

customers. We will advertise using billboards, campaigns, celebrity endorsement, mascot figure,

packaging, limited time offers, radio: Cool fm and Ray Power, Promotions via text – free kids

meal, lotteries: win a car, win N50,000, and lots more.

Fortunately, there are no exporters for the products sold in this industry so we would not

have to worry about foreign competitors outside the country, only those in the country.

3.4 Best Strategy

We would use the Internalization Theory which shows how firms expand overseas. It is a

behavioral theory that suggests that firms should reduce the uncertainty associated with going

abroad by taking it one step at a time; this is the major reason why we have not moved into

Nigeria yet because we recognize how large and volatile the economy and country can be. We

would start off with little commitment, such as exporting, and only increasing our involvement in

regions markets where we have seen success.


24 | P a g e

3.5 Major Risks and Opportunities Identified – SWOT Analysis, Comparative

Advantage and Porter’s Five Forces

Risks:

• Absence of a food processing industry in Nigeria. The country suffers from

insufficient finance, infrastructure, multiple taxation (from different agencies of government),

and complications in finding adequate fast food processing machines and equipment. This is a

huge concern to us because we will have to source the processing of our foods to other countries,

preferably a country close by, which will not only be an additional cost, a threat to the freshness

of the meats but also the risk of having our imports seized or banned when bringing it back into

Nigeria.

• High Real Estate Cost since Nigerians prefer dining in to ordering to go (known

as Quick Service Restaurant), the cost of providing this dining space becomes a problem.

• Health Unions fighting for more home-cooked organic meals to processed ones.

This has been an ongoing fight we have faced in the United States and other countries. Many

prefer home-cooked organic meals and beef, chicken and pork that are farm raised. We have to

be transparent and have our customers know that we only use natural nutrients. A popular health

union in Nigeria is the Medical and Health Workers Union of Nigeria.

• Utilizing Less Energy: This is of immediate concern to us since energy efficient

equipment are cost efficient and increases sales, unfortunately, good energy efficient machines at

very good prices are rarely available and also Nigeria does not provide energy efficient machines

since the country faces power outage, causing the need for these machines irrelevant. Lastly, the

cost of using generators to keep the electricity on and the free Wi-Fi in a nation fraught with

blackouts is a huge risk we have to consider.

SWOT ANALYSIS

Opportunities

• Nigeria has one of the best protein sources in Africa so our supply chain will source

about 86% of its products from within the country.

• There is peaked interest by the tourism and hospitality industry giving us more interested

investors.

• Cheaper labor is another plus we will enjoy basically because of the value of a dollar

(USD) to naira (NGN). The minimum wage in Nigeria being 8,000 NGN per month ($40)

• Nigeria is the largest economy of Africa

• There are not many corporate taxes, giving us the opportunity to save

• The start-up capital is affordable, compared to other industries in the country.

• Fastest population growth as well as most populous African nation

• Expanding into neighboring countries – it becomes easier to enter neighboring country

once you have been established in Nigeria as the country is the benchmark of success


25 | P a g e

• Home Meal Delivery

Weaknesses

• Negative Publicity: Negative publicity has always been a weakness McDonald’s always

had. This is going to be a weakness we may have.

• Perceived Unhealthy Food Menu: The foods on our menu are not necessarily ethically

made food. We can strengthen this weakness by also serving some of the favorite Nigerian

dishes but this may also be a weakness because we would still have more American foods than

Nigerian ones.

• High Employee Turnover: We have also experienced high employee turnover in many of

our locations. One of the major reasons for this is the employees feeling like they are overexerted

or not paid what they deserve.

• Bureaucracy: McDonald’s is a large Corporation with numerous matrix tiers, decisions

have to be run up to senior management. The problem with this is that we may not be nimble

enough to react to changes in a timely manner since business decisions would have to be

approved by senior management. To solve this we have to push for more decision making

autonomy for managers operating in Nigeria.

• Low Differentiation: McDonald’s is no longer able to considerably differentiate itself

from other fast food restaurants – at least not enough to gain more market share in Nigeria and

choose to compete by price rather than by differentiation.

Strengths

• Diversified Income: We do not depend on just one major source of income, our revenues

range from various countries, regions and products that we offer and do, unlike our competitors.

• Partnership with Best Brands: We only associate and offer products from top brand

names like Coca Cola, Dannon Yogurt, Heinz ketchup, Nestles, Minute Maid Juice. etc.

• Children Targeting: Children make up to 47% of the nation, with birth rate of

38.03/1000. We successfully target very young children by offering playgrounds, toys with its

meals and advertisements.

• Investments: We invest more than $1 billion annually in training our staff, and every

year more than 250,000 employees graduate from McDonald’s training facility, Hamburger

University.

Threats

• Lawsuits against McDonald’s

• Currency Fluctuations: The poor exchange rate in Nigeria will hurt us since 1 USD is 200

NGN and to make profit we have to charge slightly higher than the American standard, meaning

charging higher. To curb this issue an option will be to have more of our meals on the dollar

menu, cutting tremendously the price to about N200.


26 | P a g e

• Saturated Fast Food Market: Nigeria is already filled with many fast food businesses

because of how easy the exit and entry is, minimum government regulation, low sunk cost and

start-up capital requirements, etc.

• Contamination of food

• Recession or Economic Down turn

Porter’s Five Forces for McDonald’s

Competitors: (Saturated) As earlier discussed, we are in a very competitive industry.

Entrants: High. The fast food industry is an easy access market and penetration. We all

are fighting for the same customers so there are limited customers. This would mean working

harder to grab and keep our market share. The need to differentiate ourselves is an important key.

The fast food industry is already a low cost industry stressing our lowest price would not

emphasize our presence as a differentiation strategy would.

Substitutes: Moderate. Many of our rivals are offering similar products but we are

unique in our food presentation and services offered.

Suppliers: Our suppliers bargaining power is low since we bring awareness to them in

our advertisements. We also have many suppliers just in case one decides to pull out.

Buyers: Our buyers have high bargaining power since they can decide to cook their own

meals. In such a situation we would not only be competing with our rivals but our buyers too

who can decide to displace us by doing what we can do.

Primary Suppliers:

• Beef sellers – Kanjikanji in Katsina

• Tomato and rice – Tejiosho in Katsina state

• Coffee production – a small scale rural peasant farmer in Kaduna state

• Potato – Local farmer in Plateau state

• Chicken – Local poultry in Imo state

• Water – Eva Spring Water in Imo State

• General Electrics – Electricity supply, Natural gas for vehicles

Promotions

• Sponsor the country’s soccer team (because soccer is Nigeria’s favorite sport)

• Support schools, universities and other institutions in their programs by giving

scholarships and internships

• Create more jobs


27 | P a g e

Risk Scenarios and Analysis

4.1 Ranking of Risks

1. Political Risk and Regulatory Risk: The biggest risk to beginning foreign direct

investment (FDI) in Nigeria is political and regulatory risk. Political and regulatory

risk could essentially shut down business or squeeze out all profitability in this

market, hence why it is ranked number one. Nigeria’s political structure is very

different from U.S.’s own and has a steep learning curve due to the amount of

foreignness Nigeria will associate with McDonald’s. The amount of foreignness will

make it difficult for McDonald’s to persuade legislation in its favor and also gain

political favoritism. The level of corruption in varying stages of government presents

additional problems when trying to grasp the complexity of entering this foreign

market. To succeed, we have to understand how to grease the right wheels in

government business activities. We have to pay particular attention to bribery and

corruption and plan strategic ways to deal with it as this is a major obstacle we are

most likely going to face.

Managing Risk: In order to manage political and regulatory risk McDonald’s needs to

employ a variety of tactics. McDonald’s needs to overcome foreignness stigma by hiring and

training Nigerian citizens to oversee operations in the country. By hiring Nigerian citizens, the

general population will welcome McDonald’s as a local chain. Domestic lobbying firms need to

also be hired to increase the likelihood of encouraging favorable legislation and blocking

harmful legislation. Lobbying firms can also help point the right way of bribing corrupt officials

which is crucial to continued operations in Nigeria.

2. Cultural Risk : Cultural risk is ranked number two because of the immense

complexity associated with Nigeria’s culture. When mentioning culture, the definition

being used is the collective programing of the mind that distinguishes the members of

Nigeria from the US. Depending on the culture of Nigeria, McDonald’s products

could be welcomed or met with strong opposition. There is a level of uncertainty in

sales depending on culture, however we have to be educated on how culture oriented

Nigerians are and will be very accommodating and flexible where necessary to

increase our sales as well as market share.

Managing Risk: To better gauge how products will be viewed small test groups of

Nigerian citizens need to be employed to try our products. The test groups will give insight to

how our product will be accepted or rejected. If many products are met with strong opposition

then a new menu might have to be introduced which requires new channels of distribution

among other things that could add cost.

3. Economic Risk: Economic risk is the chance of economic slowdowns that would

directly harm profits. Economic risk could change the outlook for entering the

market. Since Nigeria’s economy is heavily dependent on their oil and gas reserves,

decreases in the prices and also demand of these commodities could cause less money

enter the country’s economy. Decreases in the amount of money in the economy

would eventually mean fewer sales for McDonalds. Currently, the country is facing

economic challenge because of the global oil price drop which has also been a major


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contributor to the depreciation of their currency, the naira. With more money spent on

fewer goods, customers may be discouraged in spending as much anymore.

Managing Risk

Economic risk is simply a price of doing business in Nigeria. In the long run this type of

risk will likely not be present if Nigeria starts to push its economy away from oil and gas

dependence, but in the meantime, we have to either consider limiting our food menu or cutting

our prices, either way we are making more room for more customer in-flock as well as lower

cost of production.

4.2 Three Risk Scenarios with Probabilities & Company Responses

1. Health Risk – Hygiene and Quality: A disguised TV reporter of NTA News, the

most popular news channel in Nigeria records one of our major meat suppliers

being very unhygienic while preparing their meats. He had heard of this supplier’s

nonchalant attitude towards providing quality and healthy meats and his meats

allegedly having carcinogens, and decided to inspect the meat process. During his

filming, one of the staff was seen using rusted machines to process the meat,

another was seen picking up raw beef from a dirty floor and using it instead of

discarding it; another was caught mixing fresh and expired meat together. This

risk is one we should not take likely as Nigerians are known for their organic

eating and hygienic lifestyle. Upon hearing this scandal, we will immediate

dissociate ourselves from this supplier. We would reiterate our values and

reputation; thankfully we have a very strong brand and most of our clients who

have patronized us while they travelled to other countries with our restaurants

there will not link us or severely punish us for this supplier’s behavior.

Our competitors like Mr. Biggs and Kilimanjaro may bank on this scandal

by stating why they do not sell burgers but chicken and why local customers

should patronize their local restaurants rather than foreign ones because at least

they know what they are eating. It is expected that at this time they will be

scouting many of our consumers who are a little skeptical about our authenticity.

We have to show our clients how transparent we are. A way we can do this is to

emphasize our many years of experience and how we have never had such a

scandal before. We would also apologize to Nigerians for any inconvenience this

supplier may have caused. We will encourage our employees to look very decent

and clean this we believe will help refocus our clients on our products, hygiene

and pride in selling to them good, quality meals.

Managing Risk: Unfortunately, probability of this scenario actually happening is high as

this is a trend we have seen many companies experience. But because we already see the

probability of this occurring we are making the efforts in using a supplier from South Africa who

is known for the freshness of his processed beef as well as quality and is a major supplier to most

Nigerian businesses.

2. Political Risk – Strikes: We may also run into a risk of employees going on

strikes or protesting for higher pay. We have seen this happen in New York and

few other states in America. Our employees may go on news outlet to claim that


29 | P a g e

do not pay them the minimum wage and make them work longer hours and this

may even attract Human Right Activists and other labor unions. Unfortunately,

their plea may be very emotion provoking as many Nigerians already know what

it feels like to be treated unfairly at work. Another reason strike is likely to

happen: it is a usual and recurrent event. We have to be cautious and

conscientious. We will urge our employees to take surveys on ways to help the

situation and also enact some of their suggestions. We will make sure our staff

feel content and will occasionally encourage bonuses, raises and promotions.

Managing Risk: We expect our rivals to follow suit and may even go further to cut work

hours and add more vacation times. We can counter this act by having our employees bring in

someone that means a lot to them to the restaurant to have free lunch on us. To wipe out the

scandal off of the minds of our customers we will urge our staff to be more positive in their

approach to customers and also learn to be optimistic.

3. Social Risk – Child Obesity: We have heard organizations and individuals

accuse us of increasing the rate of child obesity, even the first lady, Michelle

Obama is combating this stigma and encouraging more homes to cook less junk

meals. In Nigeria, we fear that the fear of obesity may staunch our expansion into

this market. That is why we will alter our menu to the Nigerian feeding culture

and lifestyle. We will have more health-conscious meals; lean burgers, veggie

burgers, no fat burgers etc. We will also have Nigerians know that these burgers

still have the same deliciousness as the regular burgers.

Managing Risk: Our rivals will have a hard one trying to reap off this scandal as many

of them are also linked to this obesity epidemic. We can bring in more customers by selling

original local meals too in addition to the snacks. We will incorporate famous Nigerian chefs

known for their lean cooking and healthy lifestyle choices. These chefs will represent us and act

as a buffer.

4.3 Overall Evaluation: Go or No?

Nigeria is the largest economy in Africa. Nigeria is also recognized as one of the fastest

growing economies. In fact Nigeria is ranked by Price Waterhouse Coopers, to be in the top ten

economies in 2050, displacing England and possibly Japan. She is also the house to many

industries and start up points for many foreign businesses. With all these perks, we cannot afford

to lose this opportunity. We believe if we are successful in Nigeria, the rest of Africa will be

easier to penetrate. McDonald’s should start to do business in Nigeria. While there are risks as

stated in prior sections, the reward outweighs the risk. McDonald’s should open restaurants in

the heavily populated areas, like Lagos, Calabar, Delta. Lagos, the previous capital of Nigeria, a

sophisticated metropolis which is considered the country’s leader in commercial and industrial

industries, would be the ideal location for McDonald’s initial restaurants and headquarters. The

restaurants should be accessible by roadways and highways, since this is the preferred form of

transportation. McDonald’s should open restaurants with drive-thru operations. We should offer

food options with traditional Nigerian influences. McDonald’s currently operates in over 100

countries which will assist us in adapting faster to the Nigerian cultural expectations and

challenges since we already have experience in entering foreign markets. McDonald’s should

consider opening restaurants location in Nigeria, within the next year – as Nigeria pushes her


30 | P a g e

economy to be more innovative and futuristic, and as they are softening to the fast food lifestyle,

this will be the best time for us to have our mover’s advantage.


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https://www.cia.gov/library/publications/the-world-factbook/geos/ni.html

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