Reference no: EM133167082

Case Solving:

Africa: Catching Up Fast

With only 10 percent of Africans online, the African advertising market is still dominated by billboards, television and the press. The country with the greatest access to the Internet is Nigeria, which is estimated to be around 22 percent. And yet Africa has six of the world's fastest-growing economies and is three times the size of China. It is also a young continent; of the billion or so individuals, 40 percent are under the age of 50. There has been a continued drift towards urbanization, and 40 percent live in cities, with 50 percent having a mobile phone.

Advertising in Africa

Until relatively recently, if a global brand wanted to work with one of the major highly rated advertising agencies, then the agency would look for a local partner to work in the territory. It is now more likely to be the case that the major global advertising agencies are either setting up their own offices across Africa, or they are acquiring local advertising agencies and using local talent. Some of the deals are joint ventures. There was a feeling that Africans themselves were not great marketers, but this myth has been exploded. But there is still an enormous learning curve, and each African country has its own specific makeup and mix of advertising opportunities.

Global Brands in Africa

Yum Brands, the owner of KFC, have over 650 outlets across Africa and it is their intention to have 2,100 by 2020. Nestle are building factories in Nigeria, the Congo, Mozambique, and Angola as part of its US $ 1 billion investment. Globally, Africa is worth 3 percent of Nestle's sales and in two years the business aims to double that figure. Meanwhile, in South Africa, Massmart, which has a presence in 13 African countries with 290 stores, has been bought by Walmart for US $ 2.5 billion. Elsewhere across the continent, global brands are moving in, from the milk and Yoghurt Company Danon to the Indian telecommunication giant Bharti Airtel. All of these business have worked with major front-line advertising agencies across the globe and will expect the same kind of service to market them in Africa.
Scangroup

Bharat Thakrar is a third-generation Kenyan with his roots in India. He is the CEO of Scangroup, which offers a broad range marketing, advertising, and communication services and is believed to have a 50 percent share of Kenya's market. Thakrar was nominated for the Africa Entrepreneur of the year award at the 2011. All Africa Business Leader Awards. He narrowly lost out to Aliko Dangote, the founder of the Dangote Group in Nigeria

Scangroup has offices in Kenya, Uganda, and Tanzania, but it also has operations in Ethiopia, Kwanda, Burundi, Zambia, Zimbabwe, Malawi, Mozambique, Gabon, Democratic Republic of Congo, Angola, and Mauritius. Recently it has entered into partnership with Ogilvy and Mather to set up a joint venture covering the Sub-Saharan African region. They have also agreed on terms with the same company to set up a similar partnership in Ghana.

Although Scangroup primarily covers East Africa from its Nairobi head office, it is also interested in other market in which it has not traditionally had a presence. To this end it has also entered into a joint venture with the Smollan Group of South Africa to service extra clients in Kenya, Uganda, Tanzania, Kwanda, and Barundi. In 2011, Scangroup had total billings of some US $ 142 million.

Multinational Contracts

With global brands moving into Africa in search of new markets to help them continue to grow, there are huge opportunities for businesses such as Scangroup. In forging relationship with Ogilvy they have gained access to new territories. In fact, Scangroup had acquired majority holdings in Ogilvy Africa BV and Ogilvy East Africa in 2010, which added access to eight new countries.

In 2011, Thakar admitted that even the big global advertising spenders were cutting back on their advertising budgets. In fact, in the telecommunications sector alone advertising had fallen by 3 percent in 2010 compared to levels in 2009. This was a trend that was expected to continue.

The major problem as global brands move into Africa is that the ones that had already established themselves had been able to consolidate in the face of competition only from local or at least regional businesses. Global brands bring global competition, and in the telecommunications sector, for example, instead of spending money on advertising the businesses had competed with one another on price. This, in turn, had reduced their income and consequently, the proportion of that income that they would allocate to advertising.

At the same time, however, the cost of advertising in most of the media had increased by around 3 percent. This was another reason why many of the bigger brands were moving out of conventional print advertising and looking for different ways of communicating with their audiences. Thakrar noted in late 2011 that an increasing amount of the agency's work was in looking at ways in which the brands could communicate in a far more cost-effective manner and the social media was becoming the preferred option.
Questions:
1. To what extent is it true that the primary function of advertising is selling? How does that fit in with the three advertising objectives of informing, persuading, and reminding?

2. The case states that Africa is a young continent in terms of age distribution. How might this factor affect the advertising approach by agencies?

3. If traditional forms of advertising are becoming less cost-effective, how might Scangroup continue to increase its billings?

4. Do you agree or disagree with the premise that the primary function of advertising is to sell? Give examples of ad campaigns to support your position.