The East African Market: Population Demographics and Economic Segments

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Table of Contents

Introduction
Overview of the East African Market
Segments
Demographics
Purchasing Approaches
Conclusion
References
Footnotes

Introduction

The East African market is one that continues to grow and attract both foreign and domestic businesses. Although ethnically the region is quite diverse, it is not as advanced economically and therefore can be divided into very basic market segments. The two main parameters that can best be used to segment that market are population demographics and economic segments. This report examines the variables in detail in relation to the region and how Teejays can use them to segment the market as it plots to make its initial entry into the market.

Overview of the East African Market

The East African market is one of the fastest growing markets on the continent. Africa, described by many economists as the future centre of economic power, is home to some of the fastest growing economies in the world. South Africa – Africa’s largest and most stable economy (BBC News, 2011) – was invited two years ago to become a member of BRIC, an economic union of the world’s fastest growing economies.

In April 2011, Jacob Zuma^[1] accepted the invitation and South Africa officially became a member of BRICS – Brazil, Russia, India, China and South Africa (Hervieu, 2011 ). Other African countries share the same potential that South Africa has. Nigeria and Egypt are some of the continent’s well developed economies, although they are yet to reach the level of western countries and other giant economies like China, India and Japan.

East Africa is one of Africa’s largest economic blocks. The region’s member states are Kenya, Uganda, Tanzania, Rwanda and Burundi, with the newly formed republic of Southern Sudan set to join the regional economic community within the next 12 months (Olal, 2011).

These states have all registered positive average economic growth in the last ten years, with Kenya leading the race to economic dominance in Africa. Uganda and Southern Sudan all have oil reserves that have not been fully utilized, with the region’s cities are predicted to become huge economic hubs within the next 100 years.

The expected growth of the region’s economic status means there is a huge demand for services that improve a company’s performance. One of the most needed services is customer care, particularly from firms that offer services to their customers. There are a number of companies in the region that offer vital services for both the business and public sector. These services include mobile phone services, computer services and public relations.

For all these companies to increase their profit margins and compete with other local and international firms battling to enter the market, they have to improve service delivery and other important business practices. In order to do this, one of the important sectors of their business they have to improve is customer care. Teejays^[2], a leading customer care training and consultancy firm based in the UK, has huge potential to become a key provider of this vital service.

Segments

Since Teejays is breaking into a relatively new market, it is important that we understand the region’s different structures. Teejays offers a service that best serves modern business organizations operating in urban centres. The analysis below is based upon the key variables used to divide an industrial market.

Demographics

The East African region, just like the neighbouring Middle East and North African (MENA) region has a low but extremely fast growing population. Most of the region’s population is comprised of young people. Kenya has the highest population in the region and gives a decent representation of the region’s general demographical data.

Over 97% Kenya’s population is under the age of 65, with the country’s median age approximated at 18.9 years (Index Mundi, 2011). Although the region has a relatively high population growth rate, a large percentage of the population still lives in rural areas. Kenya, which is the largest economy in the region, has only 22% of its population living in urban centres (Index Mundi, 2011).

Teejays must ensure that the training packages it develops will target companies seeking to tap into this young market. Local companies in the region have aggressively tried to enter the region’s young market. For example, mobile phone companies in the region often release mobile tariffs that are attractive and affordable to young people.

Safaricom^[3], the region’s largest mobile phone service provider in the region, has come under pressure recently to provide internet data bundles that are affordable by a majority of the population (Mtaa, 2011). If Teejays is to capture East Africa’s most profitable company, it must develop training modules that suit the company’s – and similar companies – business desire to appeal largely to a young market.

Purchasing Approaches

The East African region has most of its people living in rural villages, with a small portion living in small towns and a smaller portion living in cities. The region has seven major cities – Bujumbura (Burundi), Kigali (Rwanda), Kampala (Uganda), Dar-es-Salaam (Tanzania), Kisumu, Mombasa and Nairobi (Kenya).

Other important trade centres are Dodoma (Tanzania), Masaka and Jinja (Uganda) and Nyeri, Eldoret, Nakuru, Kericho, Thika and Garissa (Kenya) (Kimani, 2009). While the major cities in the region are home to companies that provide services, the towns are focused on producing goods and agricultural produce (Kipkorir, 2010).

Teejays must therefore understand that the best market for its services will come initially from the region’s major cities. As the region grows, other large towns will have developed more businesses that require Teejay’s customer care training and consultancy services. When the time comes, Teejays will have developed a rapport in the region and will therefore move into the new market with ease.

Conclusion

The East African market is not one that requires much segmentation like other markets. In the UK, for example, the market must be divided along social, economic, demographic and political lines, making the process of market segmentation extremely complex. This is not the case in East Africa, where only two main parameters really influence the segmentation process: demographics and economic segments.

In order to best tap into the region’s market, the most effective way for Teejays will be to target companies that operate in the service industry. Companies that provide goods but are more inclined to provide high quality customer care in order to appeal to their target markets exist though.

The East African Breweries Limited, the region’s largest producer of alcoholic beverages, faces increasing competition either from smaller companies like Nile Breweries and Keroche Breweries, or from larger companies like Heineken and Guinness (Frontier Markets, 2011). Companies like these require proper customer care training in order to remain competitive in such a growing market, and Teejays can also focus on such companies a lot more.

Finally, once the company has established a strong market share in large cities, it has to move into smaller markets before other competitors do so. Mombasa, Kenya, is the largest port city and one of the largest tourist destinations in the region (Bowden, 2007). Entering such markets will require Teejays to use the rapport it will have developed in major cities to spread their services.

Teejays must also develop a good understanding of the region’s local business culture. Local businesses in the region do not trust international companies, particularly with all of these nations gaining independence from European nations less than 50 years ago. Once Teejays establishes trust in the region, then this market can easily lead to exponential growth of the company.

References

Altman, A. & Stephey, M., 2009. Profile: Jacob Zuma, South Africa’s New President. Web.

BBC News, 2011. South Africa Country Profile. Web.

Bowden, R., 2007. Tourism. In Kenya. London: Evans Brothers. p.34.

Frontier Markets, 2011. East African Breweries: increased inflation, competition shouldn’t wholly wash out thesis. Web.

Hervieu, S., 2011. South Africa gains entry to Bric club. Web.

Index Mundi, 2011. Kenya Demographics Profile 2011. Web.

Karani, P. & Saki, W., 2010. Safaricom Beating them all. The Standard. p.23 and 25.

Kimani, P., 2009. A Look at Urban East Africa. Daily Nation. p.31.

Kipkorir, M. P., 2010. A growing service sector in Kenya. The People. p.7.

Mtaa, T., 2011. Safaricom To Announce Lower Data Bundle Rates Amid Pressure. Web.

Olal, J. A., 2011. South Sudan to join EAC. Web.

Footnotes

Jacob Zuma is the president of the Republic of South Africa. He was voted into office in 2009 as the third president of South Africa since independence in 1994, after Nelson Mandela and Thabo Mbeki (Altman & Stephey, 2009).
Since ‘Teejays’, a customer care training and consultancy firm is theoretical, the figures used in the SMART matrix strategy are also theoretical. The theoretical figures will be derived based on reasonable assumptions based on the facts that Teejays is a financially sound and stable company and the East African market is one hard to get into but with great growth potential. The purpose of this is to demonstrate an understanding of how the SMART matrix works.
Safaricom, started in Kenya but is now used by customers in Uganda, Tanzania, Burundi, Rwanda, Southern Sudan and the Democratic Republic of Congo (in central Africa) (Karani & Saki, 2010).

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