The International Business Environment: Glovo Africa Expansion Case Study

Referring to the case study “Glovo plans to double investment in Africa in next 12 months” distributed earlier and reproduced below, answer BOTH parts of the question below. Both parts of the questions carry equal marks. In answering, please make sure that you refer to lecture material and course readings where appropriate.

A. What are the key PESTLE (political, economic, socio- cultural, technological, legal and environmental) issues in the business environment that should be considered by Glovo in its expansion in Africa?
B. Based on your analysis of the business environment, what is your assessment of Glovo’s decision to invest in Africa?

Case Study

Glovo plans to double investment in Africa in next 12 months

BARCELONA, Sept 7 (Reuters) – Spanish delivery app Glovo is expanding its operations in Africa, its leading region for growth, and plans to double its existing investment there to 50 million euros ($59.3 million) over the next 12 months, its co-founder said. Glovo’s overall revenues have doubled in the past six months, said Sacha Michaud, who is also vice-president of public affairs.

“Africa is a massive opportunity, (and) is going to be a key part of Glovo’s business going forward,” Michaud said. “We have

been growing very well there and we believe we are in a position to lead the market.”

Glovo started operating in Nigeria around six weeks ago, in the business capital Lagos. It plans to enter Tunisia in October through a service in the capital Tunis, and last month expanded to a second city in Ghana, Tema. Nigeria, with a population of around 200 million, is the largest of the 23 countries in which the Barcelona-based company has a presence. Glovo is the market leader in 80% of the countries in which it operates, Michaud said.

Glovo plans to operate in around 30 countries within a year, with most new openings in Africa, where it is now to be found in six countries, he said, including Morocco, Uganda, Kenya and Ivory Coast. Michaud said revenue growth has been fuelled by a steady rise in orders, with its quick grocery service being its fastest-growing unit.

Challenges

The company is still making overall net losses, though it is operationally profitable in some markets, such as Southern Europe, he added.

Executives are still considering taking Glovo public within three years, he said, while stressing it wants to remain independent, and currently has a solid cash position after raising 450 million euros in April.

Michaud said he was not phased by weak infrastructure and the unpredictable regulatory environment in countries like Nigeria, insisting Glovo was in it for the long haul and that it hands autonomy to its local managers.

With food and drinks delivery service Jumia Foods – a unit of New York-listed e-commerce platform Jumia Technologies – as one of its main competitors in Africa, Michaud said he was confident Glovo could lead the market early on in Nigeria thanks to its multi-category approach.

Grocery sales account for half of its business in some African countries, he said.

Were the bet on Africa eventually to turn sour, the company would not rule out exiting the region as it did in Latin America last year, when it sold its operations to Delivery Hero – which owns a 37% stake in Glovo – for up to 230 million euros.
“If the market is not working or we don’t think it fits into the strategy, then we will make the right decision,” Michaud said. ($1 = 0.8425 euros)

Expert Answers on Above Case Study on Glovo Africa Expansion

PESTLE analysis evaluating Glovo’s expansion in Africa

The PESTLE analysis indicates that the political environment is highly uncertain and inconsistent and there are higher possibilities of changes to government policies on gig work and foreign investment. From an economic point of view, there is higher opportunity available because of high population growth and rising urbanisation. The social trend indicates that there is increasing demand for food delivery and groceries in urban centres while the rapid use of smartphone and mobile payment also increases the opportunities. However with respect to legal factors, the laws applicable to gig workers are unclear and poor road infrastructure and growing pressure for sustainable logistics signifies significant environmental challenges.

Assessment of Glovo’s investment decision

An analysis of the decision of Glovo to perform expansion into the African market is strategically good but it comes with a lot of risk. There are significant opportunities available because of increasing population size and low market saturation. The multi category model of Glovo provides it with additional advantages as compared to its competitors like Jumia foods. But there are challenges in the form of regulatory uncertainty, infrastructure challenges, and increasing risk because of the losses suffered by the company.

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