By Valerie Brown
Growth beyond U.S. borders is not a hill you want to die on. Yet the global business highway is littered with the remains of deep-pocketed companies with best-in-class talent who failed to successfully expand their businesses into international markets.
From consumer goods to the service sector, these death blows have hammered companies’ bottom lines with seven- and eight-figure losses, an inestimable loss of face, and reduction in brand equity. In most cases, the businesses made assumptions about the local culture, consumer preferences, business practices, pricing, the economy, product, or marketing strategy. What they failed to grasp during the planning process is you must cast aside all previous notions of how your business works and begin crafting your strategy by assuming nothing. You must start from scratch.
Surprisingly, many of the biggest failures have been Anglo-American—U.S. and UK businesses that thought a similar language implied a similar culture and marketplace. Though there are similarities, they are not the same. The size of the U.S. market and regional differences create a further need to cast aside assumptions.
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We learned the hard way when Hard Rock Café launched in Europe. As global head of brand, I believe we got the marketing right; but product, service, and location were more challenging. We misjudged food preferences, portion size, and the dining experience. Fortunately, we were quick studies and a small enough organization to be nimble and adapt quickly before too much damage was done.
Location was a thornier issue. As a marketer, my top choice was always a high-traffic tourist area. The operations people were more concerned about high rent and usually won the battle, sometimes taking us off the beaten path and in harder-to-market locations.
But our takeaway from all this was clear: we had made assumptions and some were wrong.
How can you “assume nothing”? Don’t rely on in-house talent only—you must work with local consultants from day one of the planning process. Whether natives or long-term expats, it is essential that you take advice from in-market professionals. They will help you avoid these rookie pitfalls:
New market risk assessment
Legal, banking, taxation, the economy, political climate, labor practices, and regulations can greatly impact your financial projections and may lead to a decision to stay out of a market.
It can be very expensive for a UK company to launch in the United States when the dollar is strong and British pound weak, or unwise for a U.S. company to switch its supply chain to a country where trade relations are shaky or unfavourable. Other markets can be high risk and physically dangerous due to terrorism or unstable leadership.
Market research and competitive analysis
A CEO dreaming of exciting business travel or a second home in Paris is not a reason to expand into a crowded or otherwise challenging marketplace. Can you compete on price, a unique feature or strong brand equity? If not, how will you differentiate your business, and do you have the significant funds necessary to introduce an entirely new and foreign brand?
Product and pricing
You may have an innovative product, but does the local population care? If you’re thinking, “I can’t believe someone hasn’t done this here yet!” there may be a reason why. Check it out—you must spend significant time in a market before pressing play, observing every aspect of a culture’s lifestyle and consumer habits.
Starbucks retrenched in Australia after an expensive realization that the Aussies did not want to pay more for coffee and preferred home-grown artisanal brands. They now operate primarily in tourist areas. Mattel discovered with their Barbie launch that Chinese parents prefer a doll with a purpose. “Coding Barbie” would have been more successful than a glam clothes horse. Both of these miscalculations were avoidable with the right research.
Get pricing right from opening day
The UK’s popular Boots drugstore’s No7 skincare brand is not cheap at home. But they did their research and ended up selling at a much lower price in the United States, where consumers don’t expect “drugstore brands” to be pricey. (This London/New York-based consumer noticed, and I pick up my No7 when in the U.S.)
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Sales and marketing
The internet has not made all marketing global. One Facebook account does not fit all. You need media and messaging across all platforms to be created for the local culture, in their language, including British or American English for across-the-pond expansion.
And beware of repurposing content from other markets with just a tweak. You may need to start anew with fresh imagery and copy that speaks to your new market.
Customer service
When Walmart opened in Germany, the Germans were not happy to have their groceries packed for them by (really) cheery American-style bag packers. As I learned when I moved to the UK, we pack our own bags over here. Get your service right from day one.
Your best strategy
“Assuming nothing” is your best strategy, and whenever possible, “open small.” Dip your toe in the market rather than take the high dive. This isn’t possible for every type of business, particularly where complex supply chains are involved or there is a need to grab market share quickly, but it mitigates risk and allows you to make relatively inexpensive adjustments for any miscalculations.
International expansion is not for the fainthearted, but the rewards can be great.
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