In today’s dynamic and complex business environment, business growth should not just be a goal but a necessity. Regardless of their size, industry or geographical market, businesses continuously seek for growth to remain competitive and relevant in the market to satisfy stakeholders and ensure long-term sustainability. Depending on a business’s resources and strategic direction, it can employ two kinds of strategies to seek growth. These strategies can be characterised as inorganic and organic growth. Inorganic growth typically involves mergers and acquisitions, strategic network alliances and joint ventures, allowing a business to scale up its operations quickly. Organic growth involves a company seeking growth by expanding its existing operations through increased sales, new product development or geographical expansion.

Geographic expansion is an appealing strategy for businesses seeking organic growth as it allows them to replicate existing capabilities and offerings in an untapped market. Even though this seemingly presents businesses with an “easy to capture” opportunity, successful market expansion requires market investigation to ensure that the current product and service offerings are transferable to the new market.

Although tools such as PESTLE offer a framework that helps businesses analyse external market factors at a high level, businesses often underestimate the value of in-depth market research. This research unearths insights such as a country’s operating nuances, cultural norms, government sentiment towards foreign businesses, and understanding of local competitors. A lack of understanding of these nuances could challenge successful geographic expansion.

Due to the rapidly growing population, high rates of urbanisation and rising middle class, Africa has become a place of interest for international businesses seeking business growth. As the most advanced, industrialised, and diversified economy on the African continent, South Africa has become a prime entry point for businesses seeking to expand their operations into Africa. While many organisations have attempted to enter the South African market, their success has often been hampered by a lack of understanding of the dynamics of South Africa as an emerging economy in Africa, with unique social, economic, political and cultural nuances. Successful entries have demonstrated an in-depth understanding and adapted their market entry strategies and offerings accordingly.

This can be demonstrated by comparing the market entry of two foreign e-hailing businesses, Bolt¹ and DiDi², into the South African market. Although entering with a relatively similar value proposition, their differences in timing and ability to adapt to local nuances determined their success in the market.

Bolt (E-Hailing): 

A case study of an international business who successfully entered the South African Market:

Overview: Taxify, which was rebranded to Bolt, entered the South African market in 2016, competing with Uber, which entered the market in 2011. Bolt is currently one of the largest e-hailing operators in the world, with exposure in over 600 cities globally.

Market entry strategy: Bolt’s market-entry strategy was to price lower than Uber competitively, the only operator in the South African e-hailing market at the time. After entering the market, Bolt expanded their services to multiple urban cities across South Africa, including Gqeberha and Polokwane, which were previously underserved markets. Compared to Uber, which had positioned itself as a premium provider, Bolt scaled up its market presence by making it easier for drivers to sign up for their platform. Additionally, they introduced various service offerings that spoke to the financial needs of different customer segments. For example, Bolt Go primarily targeted budget-conscious riders who sought a more affordable option. Although Uber launched a similar product first, they were able to scale it by altering their vehicle requirements, allowing drivers to sign up for smaller, fuel-efficient vehicles compared to the standard Bolt vehicles.

Success factors: Despite facing several cases of public backlash regarding customer safety, in 2023, Bolt reported that it had facilitated over four hundred million trips in the South African market. This success positioned the e-hailing operator to expand its services to other African markets, including Ghana, Nigeria, Kenya, and most recently Egypt.

Didi (E-Hailing): 

A case study of an international business who experienced challenges when entering the South Africa Market:

Overview: The Chinese e-hailing operator, Didi, is the second largest e-hailing company in the world, with a market capitalisation of $17bn. The operator attempted to enter South Africa in 2021 but despite their global experience and available resources, their presence in the South African market was short-lived.

Market entry: Didi launched its South Africa services by piloting the platform in Gqeberha and soon after expanding to Cape Town. Didi’s market entry strategy was providing competitive pricing and advanced features on the application for both the drivers and passengers. When drivers initially signed up on the Didi platform, they were incentivised with zero service charges and participation bonuses. The application was built with safety features as a response to the rising safety concerns that customers were facing with e-hailing operators in the country. The operator adapted its application to the specific needs of its target market which included ride sharing options for riders and different payment options. Didi invested in extensive marketing campaigns, including promotional discounts on trips, community engagement to build and establish credibility with users and drivers and extensive PR campaigns.

Failure Factors: At the time that Didi entered the market, it was dominated by two major players, Uber and Bolt, who had established a strong presence. At the time that they entered the market, Uber had 71% and Bolt had 28% market share. The two operators had built a duopoly with extensive driver networks, which made it difficult for Didi to gain market share. Didi had to navigate multiple “changing” legal frameworks, at both provincial and national levels, which put them at a disadvantage in comparison to Uber and Bolt. While Didi introduced incentives to recruit and retain drivers on their platform, shifting the drivers loyalty from Uber and Bolt proved to be a major challenge. Didi also entered the market at a time when South Africa was experiencing its third COVID-19 wave, which resulted in another lockdown.

Lastly, Didi entered the South African market at a time when there were rising tensions around local legislation for foreign-owned e-hailing businesses which led to a series of strikes and protests from drivers around the operating conditions, making it even more challenging for them to expand into the market.

Expanding successfully into a new geographic market is dependent on multiple factors. A businesses experience and success in one market does not necessarily mean it can be easily replicated in another market.

In the case of Didi, their model that enabled their global success could not be replicated in the South African market, mainly owing to the external market conditions. The lesson we can draw from Didi’s experience is the importance of timing and understanding the operating environment when attempting to enter a new market.

In the case of Bolt, they demonstrated that tailoring strategies to local conditions can lead to substantial business growth.

In summary, foreign businesses seeking to expand their geographic operations need to build a set of expansion techniques:

• Allocate time and capital in researching how to adapt their business and product models to the customer needs of the target market.
• Invest in human resources and business leaders who are seasoned practitioners in the target market.
• Build strategic relationships with local partners as a mechanism for navigating the uncertainties of a new market.

¹Bolt is an Estonian ride-hailing service available in Europe and Africa.

²DiDi is a Chinese ride-hailing firm operating in 15 global markets.