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EMP Africa

EMP Africa

Team: Gbolade Arinoso ’08, Alonzo Dority ’07, Brad Fusco ’07, Justin Mandel ’08, Mark Pedersen ’07 and Jindrich Zitek ’08
Areas: energy, marketing strategy, management, private equity and development.

EMP Africa (part of Emerging Capital Partners) is a leading private equity fund manager targeting Africa with over a billion dollars under management. Their goal is to achieve superior returns by investing in successful companies operating throughout the African continent. The Columbia MBA team was asked to focus on a portfolio company in Cameroon that wants to grow its market share and become a major player in the region. This company is a new entrant that sells cooking gas and a safer type of cylinder for storage. This market is highly competitive and heavily regulated in Cameroon. EMP Africa’s long-term strategy in this sector is to ensure that it is well-positioned to invest in companies connected to the growing supply of natural gas in West Africa over the next 10 years. Moreover, they would like to encourage consumers to switch from firewood to cooking gas, a fuel source which is both more efficient and environmentally-friendly.

Marketing and switching costs

After extensive background research the Columbia MBA team traveled to Cameroon during the spring to interview gas distributors, retailers, customers, and other industry stakeholders as well as company management. The team discovered that in many ways the project raised a classic marketing issue: while the product was clearly superior, the issue was how to effectively market the product, especially given the significant switching costs and that gas cylinders are currently considered a commodity product.

The company’s senior managers originally believed that the technical advantages of their product—their cylinders are safer, lighter, and always correctly filled, unlike their competitors’ products—meant that the product would essentially sell itself. Moreover, the team realized the company needed to make a number of internal changes in order to transition from a start-up trying to get a toe-hold in the market to a firm that could grow its market share and respond to changing market conditions. The final report detailed these findings as well as provided specific steps for resolving them. For example, the company originally requested help to develop a detailed marketing strategy. However one of the team’s recommendations was that they first hire non-engineering staff with consumer marketing experience to help develop this plan in-house. Moreover, the team showed how their existing marketing campaigns were inconsistent with each other, and likely to cause confusion with customers.

Business and Emerging Markets

Energy is a critical sector for the future development of Africa. This project provided a valuable perspective for the students on business challenges in emerging markets and addressed issues including the supply chain, marketing and even corruption.

“Cameroon is certainly a difficult place to do business but the opportunity to provide cooking gas in an economically-sustainable way is huge,” said Mark Pedersen ’07. “The public policy aspects of this project are especially interesting. Not only is this sector heavily regulated, but right now the economics for ‘bottom-of-the-pyramid’ customers aren’t compelling. So to grow the market and convince people to use cooking gas instead of firewood, EMP Africa will have to work closely with other stakeholders and the government.”

The project also provided an important lesson on management: you need the right people before developing processes or making decisions such as how to spend a marketing budget. “It was exactly as Professor Feiner says in his High Performance Leadership course: you need to spend most of your time on people and giving them the tools they need to be successful,” says Mark.

The team’s travel costs were supported by EMP Africa and the Social Enterprise Program through its International Development Consulting Project Travel Fund.

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