The Sharing Economy reaches Africa

Uber. Lyft. Airbnb. Ebay. These companies using cutting edge technology have transformed the way the transportation and hospitality industries operate. Dubbed as pioneers of the sharing economy, the emergence of information technology and online marketplaces have allowed for the optimization of resources or the sharing of excess goods and services. That is the core premise of these businesses.

There are now 17 multi-billion dollar companies in the sharing economy around the world with 60,000 employees and $15 billion in funding in the sharing economy. 12 of them including Lyft, Airbnb, and Uber are based in the United States. 1 is based in Europe and 4 are based in Asia and Australia. Of these companies, 46% are involved in the money and transportation industries while another 36% are in the goods and space sector.

Now, the agriculture sector has joined the bandwagon. Hello Tractor, the brainchild of Jehiel Oliver is an Anacostia-based U.S. company that follows an Uber business model in lending tractors to farmers in Nigeria. Oliver devised a business model where farmers send a text message to Hello Tractor’s U.S.-based dispatchers who then located the nearest GPS-embedded Smart Tractor and alert the service provider. The tractors typically arrive within three days. Farmers can conveniently prepay for the services through SMS messaging and mobile money. Payment is only released once the service is completed.

“Nigeria has one of the largest inventories of uncultivated rain-fed farmland. But much crops are lost because of labor shortages and lack of mechanization,” Oliver said. The “Smart Tractor” that his business provides to farmers comes with attachments that produces in one day what Nigerian farmers do manually in 40 days. While the tractors benefit the farmers by cutting their labor costs by two-thirds, the service providers get additional revenue as well. For a $75 daily fee, tractor owners could earn five times the average wage.

When Oliver was working in investment banking, he visited developing countries and saw microfinance models in play. “I wanted to serve the base of the pyramid – to support the people who simply needed tools to enable them to be self-sufficient,” Oliver said. “Despite all the negative news you read about the Boko Haram or Ebola, you can’t ignore Africa.” Sharing is big business that goes beyond borders.

 

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China, Philippines, and Kenya top list for 2015 fastest growing economies

BloombergBusiness reports on the world’s 20 fastest growing economies for 2015. While overall global growth is projected to be 3.2 percent this year, emerging markets in Asia and Africa will grow exceptionally for the next two years.

According to a survey conducted by Bloomberg, China, the Philippines, Kenya, and Indonesia together will make up 16 percent of the global gross domestic product. They are all expected to grow more than 5 percent in 2015.

By comparison, the US and UK which combined make up about 25 percent of global GDP will grow 3.1 and 2.6 percent respectively.

2015 Global Economy

Read the full report here: http://www.bloomberg.com/news/articles/2015-02-25/the-20-fastest-growing-economies-this-year

 

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2014-15 Global Competitiveness Ranking

The Global Competitiveness Report that is published by the World Economic Forum looks at the competitive landscape of 144 economies in terms of the institutions, policies, and factors that determine the productivity and long-term growth of a country. Sectors such as a country’s infrastructure, macroeconomic environment, health, education, job market, financial development, and technological readiness are all considered.

Key Findings:

  • Switzerland and Singapore retain their position as first and second respectively. The United States moves to third from fifth place last year.
  • Those countries in Europe such as Spain, Portugal, and Greece are effectively implementing reforms and remain highly competitive. Whereas, the other half of Europe is lagging behind including France and Italy.
  • Most improved region belongs to Southeast Asia where Malaysia (20th), Thailand (31st), Indonesia (34th), Philippines and Vietnam (68th) have all progressed in their rankings. The Philippines is the most improved economy since 2010 jumping from 85 to 52.
  • Emerging market economies such as Brazil (from 57 to 56) and India (from 60 to 71) lost their competitiveness. But Russia (from 64 to 53) and China (from 29 to 28) climbed in global rankings.
  • Most Latin American economies need to address their productivity challenges in order to keep the momentum of their growth in the past years.
  • Due to geopolitical instability in the Middle East and North Africa, the region depicts a mixed picture. United Arab Emirates takes the lead in 12th place. Sub-Saharan Africa continues to pose impressive growth rates of 5 percent.

Global Rank2Are the rankings useful to you? Any surprises? Tell us what you think.

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Innovation in Developing Economies

by Michael Czinkota and Ilkka Ronkainen

Innovation in developing economies is evolving rapidly, but still can improve in terms of marketing. Businesses in emerging economies can make profits and can positively affect the livelihoods of people. In the next generation, multinational corporations can expand to vast un- and underserved consumer groups in developing countries. Executives need to redefine their roles and relationships across companies and radically depart from traditional business models through new partnerships and structures.

Research

Businesses need to understand the needs, aspirations, and habits of target populations. For most emerging-market consumers, price is not the determining factor, but the total purchase cost (including transportation cost, time, the burden of carrying purchases, and storage availability). Large U.S. chocolate companies established only a marginal presence in Latin America with their standard American large chocolate bars. In contrast, Arcor and Nacional de Chocolates have grown their businesses by selling more affordable bite-sized chocolates that are available in remote rural stores.

Digital Technology

Due to the economic and physical isolation of poor communities, businesses that provide access to digital technology have the potential to thrive. Cisco partners with a range of global and local partners to sell, lease, or donate $300 million worth of computer products and services to markets worldwide. In Bangladesh, where the average annual income is $200, GrameenPhone Ltd. leases access to wireless phones to villagers. Every phone is used by an average of 100 people and generates $90 in revenue per month—two or three times the revenue generated by wealthier users who own a phone in urban areas. This program has been replicated in other countries, including Uganda and Rwanda.

Financial Services

Microfinance programs have allowed consumers to borrow sums averaging $100 to make purchases without using collateral. The mission of microfinance is to let the poor access financial services and improve their living standards. For example, Te Creemos developed a complete electronic payment solution in Mexico by partnering with MasterCard, which affords small and medium-sized enterprises a micro-business card and a low cost payment method.

Local Solutions

Many emerging consumers do not shop at supermarkets. Nestlé employs local residents with pushcarts who take small quantities of merchandise to kiosks. Unilever is rolling out similar strategies in Kenya, Indonesia, Vietnam and other countries offering five-peso “starter packs” in the Philippines. Others reach out to beachcombers via bicycles. Innovations can start in developing countries first, and disseminate via a trickle up approach.. Pepsi snacks like Kurkure and Aliva from India have attracted attention from the United Kingdom and the United States.

Distribution

In the past, underdeveloped and monopolistic distributing networks of developing countries saw their primary jobs as distributing sales literature, cutting through red tape, and charging invariably high fees. Today, outside competition has forced distributors to add value to what they do. If local conditions do not measure up, companies are willing to use outside captive distribution systems or to appoint their own people in place. Eveready has an extensive network of associates and 15 distributors who support its business in East.

Multinational Commitments

Businesses, governments, and civil societies can join together in a common cause to help the aspiring poor to join the world economy. Lifting billions of people from poverty may help avert social decay, political chaos, terrorism, and environmental deterioration. For example, Procter & Gamble has a Safe Drinking Water program in Kenya through their water-purifying brand PUR that improves access to safe drinking water.  Coca-Cola funds “Slingshot”, a water purification system for communities in need.  Multinational companies can envision a world empowered by equal access to life’s basic needs.

Challenge to Existing Business

Marketers need to convert innovation opportunities in developing countries. Historically, what worked for a peasant in rural Kenya or Colombia had little interest for a sophisticated urban consumer in the West. Now, these opportunities may provide new platforms for growth even in post-industrialized markets. Africa’s prospects have proved alluring to Wal-Mart, which has agreed to pay roughly $2.4 billion to buy 51% of South Africa’s Massmart Holdings, with plans to use the discount retailer for continental expansion. Yum Brands recently said it wants to double its KFC outlets in emerging countries over the next few years to 1,200. Rising consumption will increase the demand for local products, and, given proper support, will trigger domestic growth and lift developing countries and their consumers up to greater economic opportunity and a better life.

Ilkka A. Ronkainen Georgetown School of Business faculty.