South Africa is currently the largest consumer electronics market in Africa and is among the top 20 electronic product markets in the world (Burton, & Scheepers, 2017). An added advantage is that South Africa acts as the hub for the growing sub-Saharan African market. Most of the world's information and technology players have their presence in South Africa. The electronics sector accounts for approximately 12.5% of South Africa's Gross Domestic Product (GDP) (Burton, & Scheepers, 2017). South Africa's consumer electronics spending is projected to grow at a compounded rate 7.3 percent to reach at least USD 10.9 billion by the end of 2018 (Burton, & Scheepers, 2017). The key drivers that are set to facilitate this growth include faster migration to digital TV, increased mobile and broadband penetration and decreased prices of flat-screen TV sets and notebooks.
The other drivers that are likely to increase consumer spending on electronic products in the country include the changing demographics, regional economic increase, rising incomes and urbanization (Burton, & Scheepers, 2017). Smartphone sales currently make the largest contribution to South Africa's consumer electronic sales, followed by domestic mobile handsets and PC sales. The demand for various product categories will be influenced by technologies and new releases.
Also, the increased demand for lower prices, mobility, and expansion of channels are likely to increase the demand for digital lifestyle products such as plasma TV sets, mobile handsets and LCD monitors among the South African population (Burton, & Scheepers, 2017). There is a promising indication of the growth of consumer electronics sector in the country. For instance, the users of consumer electronics are expected to increase constantly and hit 9.5 million by 2022 (Burton, & Scheepers, 2017). Currently, the average revenue per user of the consumer products in South Africa is US$ 105.60.
As of now, electronics and appliances specialists continue to dominate the sales of consumer electronics in South Africa. This is mainly due to the specialty nature of the outlet stores, their massive market penetration and their wide product portfolio (Pentz, Terblanche, & Boshoff, 2017). However, there are other non-traditional retail channels that also promote the distribution of consumer electronics in the country. These include financial institutions, department stores, and supermarkets. The retailers are directly contributing to the increasing levels of competition within the consumer electronics market in the country.
The other notable advantage of the South African market is that the taste of the consumers and their preferences for electronic products are in line with the global preferences for the same products (Pentz, Terblanche, & Boshoff, 2017). Therefore, the brands to be sold by Best Buy will be well supported in the existing market structure and this will occur across all consumer electronic products to be offered by the company. The current players continue to provide the market with wide product varieties through various retail channels and the ever-expanding online platforms.
The other critical element to note is that despite South Africans preference to the experiential and tactical shopping experience, which normally occur in store-based sales, the non-store retailing has consistently accounted for higher volume growth in the electronic sector sales (Pentz, Terblanche, & Boshoff, 2017). This will favorably impact Best Buy's activities since online platforms are one of the major channels it uses for distribution of its products to the end consumers. Nevertheless, store-based retailing is still the most popular channel that is used by the electronic industries in South Africa. Therefore, it is prudent for the company to consider both the online platforms and store-based retailing to fully penetrate the new market.
Additionally, despite the poor economic and medium-term political outlook the country had last year, consumer electronics is expected to still witness a positive volume growth in years to come. Also, despite the fact that consumers demand the major international brands, most of the consumers will still be able to experiment with new brands at mid-level and entry-level brands. This will work as an advantage to Best Buy since it will be providing new products as well as products from internationally recognized tech companies.
South Africa's Culture
Examining South Africa through the lens of Geert Hofstede's dimensions gives the overview of the drivers that shape its culture relative to other world economies.
This dimension considers the fact that all individual in a given society is not equal. It thus expresses the attitudes which the population has with regard to inequalities among them. Power distance is defined as the extent to which the less powerful members of the society and institutions within the country accepts and expects the power to be distributed unequally (Minkov et al., 2017). South Africa scores 49 on the power distance dimension indicating that South Africans to a larger extent, accept the application of hierarchical order (Minkov et al., 2017). Therefore, most South Africans agree that every person has a place which does not require further justification.
Since the population accepts the hierarchical order, centralization of activities is popular and the subordinates expect their bosses to control and tell them what to do most of the time. This culture exhibits the existing inequality in the nation. As such, the authority figures in the country are expected to be autocratic. The diversity of culture and races within South Africa tend to present a challenge to new managers with respect to interactions with subordinates. This high score in power distance exhibited by South Africans can be attributed to the lack of confidence among employees, preference to allow leaders to take most responsibilities and trouble demonstrating new initiatives (Minkov et al., 2017).
It is prudent for the company to consider the fact that the occurrence of Apartheid rule in South Africa brought about great racial disparities. Since the end of the rule, there has been a number of changes spearheaded to eliminate racial disparities among the country's population. However, much still needs to be done to make this policy a reality. Currently, Whites makeup ten percent of South Africa's population but still, their organizations control the country's economy. This is because the apartheid rule denied most Africans access to education and positions of power. Therefore, the Black and White population in the country may score differently on the dimension of Hofstede's power distance, with Whites expected to score lower (Minkov et al., 2017).
This dimension is mostly concerned with the degree of independence a given society maintains among its members. Mostly, it is related to whether the image of the population in the society is defined by me or Us. South Africa scores 65 in this dimension (Minkov et al., 2017). Therefore, the people of South Africa look after their direct families and themselves. This high score in individualism infers that collaborative work is adversely affected in the country. It also infers that most South Africans prefer face to face communication as opposed to group communications conducted via electronics. The only social structure that is preferred by most of the population is contractual agreements that are clearly defined and provides a mutual advantage. As such, the success of the workforce is based on merit and not social connections. It is thus prudent for Best Buy to conduct its businesses in an individualistic manner so as to boost its success in the new market.
South Africa scores sixty-three on this dimension. The country thus has a relatively masculine culture. This indicates that the market is driven by success, achievement, and competition (Minkov et al., 2017). The success in this context is considered in terms of the winner or the best player in the field. This system starts from school throughout the individual's work-life. Therefore, the ideal management style that the company should apply should be assertive but a fair one. Also, for the company to succeed, it has to make a compelling case in terms of product quality and pricing to penetrate the market.
South Africa scores forty-nine on Hofstede's uncertainty avoidance dimension. The dimension deals with the fact that the future will always remain unknown. Therefore, it determines if the population prefer to let the future be or if they will try to change it to better its outcome. Uncertainty avoidance refers to the extent to which the members of a given society feel threatened by the unknown situations and have thus created institutions and beliefs that try to handle the uncertainties (Mladenovic et al., 2017).
The high score in uncertainty avoidance indicates that South Africans prefer to avoid uncertainty. They thus have rigid behavioral norm and a strong belief in the established governance systems. As such, they prefer to live under the security that is provided by the rule of law. Therefore, hard work and discipline in the workplace are highly priced. The black community in South Africa is likely to show high uncertainty levels since they feel unwelcome in the set corporate environments. The high uncertainty level in good for Best Buy since it creates a culture of greater collaboration. In this respect, the uncertainty avoidance overrides individualist dimension.
South Africa scores thirty-four on Hofstede's long-term orientation dimension. The dimension is concerned with how the society has to maintain links with its past while dealing with the challenges that exist in the present and future. Since South Africa scored low in this dimension, it infers that the population prefers to maintain norms and traditions while viewing the upcoming changes with a lot of suspicions. To succeed in this market, Best Buy will have to provide the market with products that they are familiar with. South Africans exhibit respect for the existing traditions and as such, the company must familiarize itself with the country's traditions to have a competitive advantage in the market.
South Africa scores 63 in Hofstede's indulgence dimension (Mladenovic et al., 2017). Therefore, the population shows the willingness to achieve their desires and impulses with regard to the enjoyment of life. South Africans possess positive attitudes towards optimism with regard to lifestyle. They thus create a higher degree of importance to leisure by spending money as they wish. The company, therefore, has the opportunity to provide lifestyle products that meet the expectation of the population. This will be realized through the provision of diversified electronic products from internationally recognized corporations such as Apple. Putting into consideration the diverse nature of the South African market, Best Buy will provide the market with products ranging from premium to low priced ones to capture most of the market.
Burton, S. A., & Scheepers, C. (2017). Exploration into the Rise of Mobile Penetration in a Developing E-commerce Market and its Impact on a South African Company. Journal of Marketing and HR, 5(1), 259-283.
Minkov, M., Bond, M. H., Dutt, P., Schachner, M., Morales, O., Sanchez, C., ... & Mudd, B. (2017). A reconsideration of Hofstede's fifth dimension: new flexibility versus monumentalism data from 54 countries. Cross-Cultural Research, 1069397117727488.
Mladenovic, S. S., Mladenovic, I., Milovancevic, M., & Denic, N. (2017). Cross-cultural dimensions influence on business internationaliz...
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