On Leadership, Culture and International Expansion

The day you decide to expand your business into a foreign market is one for the books.

It’s an exciting and impressive moment!

The Biggest Mistakes in International Expansion

You put in the work to prove your domestic worth, and now you’re ready to make it big across the pond. Through research and development, major investments, and daily learning, you finally understand what makes your customers tick.

So transitioning into a foreign market should be no problem, right?

Well, not quite. The No. 1 mistake company leaders make when transitioning overseas is thinking they can use a one-size-fits-all business model for their venture abroad and still see positive results. Think again. You still need to make adjustments to suit the new country’s culture and shopping style.

Why Companies Fail Overseas

Most companies fail overseas simply because they don’t understand the market, and even big-name American companies aren’t immune to this pitfall.

Take Walmart, for example. The retail powerhouse completely missed the mark in Germany. Rather than studying cultural nuances, Walmart stuck with its customer service standards (like smiling at customers) and disregarded Germany’s co-determination rules that allow employees to weigh in on corporate decisions affecting working conditions.

Walmart’s strategy didn’t work, and it was an all-around flop.

Formulating a Strategy

As a leader, it’s your job to gauge the market and local customs and formulate a business strategy that fits seamlessly. Here are three signs that you may have missed the mark on your foreign business strategy:

• You encounter open opposition to a policy or procedure. If employees aren’t on board with the way you do things, there’s a good chance your customers won’t be either.
• Nobody understands your business. You won’t connect with the locals if they don’t “get” your elevator pitch or see an attractive difference in your business operations.
• Conversion rates don’t meet expectations. If web visitors aren’t converting and callers aren’t signing up, it’s time to reconsider your move.

How to Salvage Your International Location

If you’ve already made the move and these signs seem familiar in hindsight, you need to make some fast changes to survive in your chosen market. Here are four steps you can take to get your business back on track:

1. Stop the train wreck before it gets ugly. Listen to phone calls, shop your own stores, and talk to customers about what they like and don’t like.
2. Find the underlying issue. Figure out the real reason consumers aren’t responding to your business. In the Walmart example, having employees smile at customers seemed like a no-brainer given the company’s success in the U.S., but German customers translate that interaction as a come-on. Identifying the real problem allows you to take swift and decisive action to mitigate your losses.
3. Enlist your staff’s help. Employees will appreciate that you’re working to resolve the issue and that you value their input. This can also generate positive word of mouth that may speed up recovery.
4. Appeal to the locals. Ask your staff for suggestions, and start something new that will resonate with the local culture. This shows you value your new customers, and it may earn their loyalty.

Think Like Starbucks

Although Starbucks struggled to break out in Europe, it nailed its international expansion in China.

To win over a market where tea ruled supreme, Starbucks didn’t copy and paste its American strategy in China. Instead, it created a need in the market by figuring out a way to complement the culture.

Starbucks appealed to the emerging middle class and younger generation with a taste for Western goods (without threatening the ancient tea-drinking culture). Additionally, it worked with Chinese partner companies to tailor its strategy to different regions of the country, ensuring it would appeal to local demographics.

Your business may not be a multinational coffee company, but the lessons still apply.

Once you’ve identified your ideal market, you need to get on the ground. You’re not simply looking at the competition. You’re feeling for the country’s pulse and learning how you can assimilate.

Preventing a Crisis

Here are a few ways to gauge the scene to prevent a crisis:

• Study the culture. Understand the society’s values and the nuances among generations. Learn the thread that runs through communities and what makes people tick. This will go a long way when you’re rolling out a marketing plan or trying to attract customers to your grand opening.
• Visit shops, restaurants, and potential competitors. Identifying which places are practically turning customers away and which are begging for them to come in will provide great insights for your own business strategy.
• Immerse yourself. Go for long walks and get a local’s view of the city where you’ll do business. Talk to people about how they live and shop. Ask yourself which parts of your domestic business model won’t work and which will be well received.

Becoming Better Equipped

Understanding the market is key to a successful foreign expansion.

The more intimately you know the country where you operate, the better equipped you are to conduct business there.

As a company leader, if you can’t immerse yourself, recruit key on-site employees or partner with local companies and consultants. Let your customers know you value and respect their culture, and you’ll be on solid ground to make your big move.

So what are you doing to make sure you are understanding your customers in new markets? How are you learning more about them? How are you conditioning your employees to make the transition to new markets most effective? I would love to hear your thoughts!

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Cris Burnam is the president and co-founder of StorageMart
Cris was named a 2014 Ernst & Young Entrepreneur of the Year
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