Firms win by accumulating capabilities. From Google to Dangote Group, when companies accumulate capabilities, they operate in domains that generate higher value (usually upstream) compared with where typical firms operate (usually downstream). Dangote Group can deploy massive assets and technical know-how in cement production, making it harder for new entrants and rivals.
To rise to the level to extract Conglomerate Tax on nations and citizens, capabilities matter. Amazon taxes the digital economy through Amazon Web Services. Dangote Group taxes Nigeria because it solves problems which few can imagine. For solving those hard problems, the firm demands special treatments in different ways from the government. What it does is typical: Amazon, GE, and global conglomerate live on that.
It is not Dangote Group’s fault; it is simply Nigeria’s fault that it has only one true (industrialized) conglomerate in the 21st century.
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It was Oliver that once sang, “Agbara aka na azo ani, onye ji ihe ana e tinye na ani”. Loosely translated as, if people are dragging farmland empty-handed, anyone with farm implement and seeds will be farming first. That’s literally our case with Dangote, nature abhors vacuum, so while most of his compatriots are waiting for the government to make things right, so that they deploy capital, Dangote is already there with his hoe and seeds, farming relentlessly.
What is not possible is for the government to press pause button and then ask every business person to be ‘on your mark’, government is yet to even purchase the button, let alone pressing it.
We still have lots of challenges at the upstream, each requiring massive deployment capital, and in return you enjoy your own conglomerate tax. But if you expect the government to give out the money to entrepreneurs, or create a good environment first, the wait will be very long, because the government is equally broke and bereft of ideas too.
To enjoy special status or privilege, you must first put yourself forward, deploy the capital, and government will then know that you actually exist; you can be subsequently get invite to eat on the same table with Dangote.
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This point you just made was the highlight of my lecture to my marketing students yday. I told them that they must never join anyone to say Dangote is successful because of govt support as it is a statement without scientific evidence. Is Dangote the only business man that the “government supports”? Why are the other business men not succeeding despite government support? Let me tell you what Dangote is doing. He is using what we call COST LEADERSHIP. There are three ways you can gain competitive advantage. 1. COST LEADERSHIP 2. DIFFERENTIATION 3. FOCUS. COST LEADERSHIP is prevalent when you are selling a commodity (a product that can’t be distinguished from those of its competitors e.g. Steel, Wood, Water, etc). It is the ability to reduce your cost to the barest minimum and be able to charge the lowest price but with that, you are making the most margin because of your ability to reduce cost. That is the secret of his success in cement, sugar and salt. He will bring the same strategy into rice and he will crash the price of rice and he will be the one to determine the price of rice in the market the same way he does with cement. I’m sure attending Tekedia mini-MBA will give you more insights