The assumption that good strategy travels is one of the most expensive mistakes multinational firms make in Africa.
There is a pattern that repeats itself with remarkable consistency across African markets. A multinational firm enters with a strategy that has worked in Europe, Asia, or Latin America. The product is sound. The team is capable. The market research is thorough. And yet, within two or three years, the investment is underperforming — not because the commercial strategy was wrong, but because the environment in which it was meant to operate behaved differently than expected.
This is not bad luck. It is a structural problem with how most firms think about strategy in emerging markets.
The core assumption that keeps failing
Most corporate strategy frameworks were developed in contexts where institutions are stable, regulations are predictable, and the rules of competition are enforced consistently. In these environments, strategy is primarily about market positioning, competitive differentiation, and operational efficiency.
In emerging markets, these assumptions break down — not occasionally, but routinely.
Governments change policy with limited notice. Regulatory decisions are shaped by political considerations that sit outside the formal framework. State-owned enterprises compete on terms that private firms cannot replicate. Infrastructure constraints impose costs that no amount of operational efficiency can fully offset. And the relationship between formal rules and actual practice is often loose enough to constitute a different operating environment entirely.
Firms that enter emerging markets with strategies built for stable institutional contexts are not simply facing more risk. They are operating with a fundamentally incomplete model of how value is created and destroyed in those environments.
What political economy analysis actually does
The term “political economy” is used loosely enough that it has lost some of its precision. What it means in practice, for a firm operating in an emerging market, is this: understanding how power, policy, and institutions interact to shape the environment in which commercial decisions are made.
This is different from political risk analysis, which tends to focus on discrete events — elections, regulatory changes, policy announcements — and their potential impact on existing positions. Political economy analysis goes deeper. It asks structural questions: Why does this regulatory framework exist? Who benefits from it? What interests would be disrupted by reform? How does the state actually function in this sector, as opposed to how it is formally structured?
These questions matter because they determine whether a strategy is viable — not just today, but over the investment horizon that actually matters.
A firm that understands the political economy of a market can anticipate regulatory shifts before they are announced, identify the real decision-makers in policy processes, assess which reforms are politically sustainable and which are not, and build relationships and positioning that are durable rather than contingent.
A firm that doesn’t is perpetually reactive — managing surprises rather than navigating known terrain.
The South African case
South Africa offers a particularly instructive example of this dynamic, because it combines relatively sophisticated formal institutions with significant political and regulatory complexity.
The formal framework — property rights, contract enforcement, an independent judiciary, a functioning regulatory system — creates a reasonable basis for investment confidence. And for many years, that formal framework was the primary lens through which investors assessed the country.
What the formal framework does not capture is the degree to which policy outcomes in South Africa are shaped by a complex negotiation between the state, organised labour, and capital — a tripartite dynamic that has historically constrained the pace and direction of reform. It does not capture the institutional fragmentation that means a policy commitment at one level of government may not translate into consistent implementation at another. And it does not capture the extent to which transformation policy — legitimate in its objectives — introduces regulatory complexity that creates real costs for investors navigating compliance across multiple frameworks simultaneously.
None of these dynamics are invisible. But they require a different analytical toolkit to see clearly.
Three things firms consistently get wrong
Based on my experience advising organisations across African markets, there are three recurring errors in how firms approach strategy in these environments.
First, they treat regulatory risk as a discrete variable rather than a structural condition. Regulatory risk is not something that can be assessed once and then managed. In markets where the relationship between policy intent and implementation is loose, regulatory conditions are a continuous variable — one that requires ongoing monitoring and strategic adaptation.
Second, they underinvest in stakeholder intelligence. Understanding who the relevant actors are in a policy process — not just the formal ones, but the ones whose interests actually shape outcomes — is a core strategic capability in emerging markets. Firms that treat government relations as a compliance function rather than a strategic one consistently find themselves on the wrong side of policy shifts.
Third, they conflate market opportunity with investment viability. Emerging markets often present genuine commercial opportunity — growing consumer bases, underserved sectors, resource endowments, and demographic momentum. But opportunity and viability are not the same thing. A market can be large and growing while simultaneously being structurally hostile to the kind of investment required to serve it profitably.
What better strategy looks like
Firms that navigate emerging markets successfully tend to share a set of characteristics. They invest in understanding the political economy of their operating environment as seriously as they invest in understanding the market. They build regulatory and government relations capacity that is strategic rather than reactive. They design strategies with institutional variability explicitly built in — not as a risk mitigation afterthought, but as a core structural feature. And they take a longer view of stakeholder relationships than the immediate investment cycle requires.
None of this is exotic. It is simply the application of analytical rigour to a fuller model of how emerging markets actually work.
The bottom line
Corporate strategy does not fail in emerging markets because firms are unsophisticated. It fails because the frameworks most firms use were not designed for environments where political and institutional dynamics are primary determinants of commercial outcomes.
The correction is not to abandon rigorous strategy. It is to build strategy on a more complete understanding of the environment — one that treats political economy not as background noise, but as the terrain on which strategy is executed.
In African markets, that distinction is often the difference between an investment that performs and one that doesn’t.