While internationalising may be the fastest way to diversify a business, the process to grow globally raises many questions. How to operate a company that is not based where I am? How to incorporate a different culture into my product?
In the rush to make things work, many entrepreneurs end up not planning enough and committing mistakes that slow their international development. In some cases, it may decree their defeat. Even experienced conglomerates can fail to understand cultural differences. In 2006, Walmart sold its business in South Korea after concluding that the competitive landscape and the high expenses hampered the return on investment.
Victanis, a provider of strategic consulting for the development and execution of growth strategies across Europe, and a partner Beeleev, lists five of the most common mistakes when going global. The original article can be accessed here.
1- An opportunistic approach is no substitute for a strategic diagnosis
Unexpected opportunities that are grasped at on the fly and that result in instant success are very much the exception to the rule. Instead, a growth strategy built on mature reflection is much more likely to succeed.
Thinking things over, by diagnosing your internal and external strengths and weaknesses, carrying out market research, analysing the costs, return on investment (RoI), countries to target, and identifying preferred distribution channels, results in a set of objectively-analysed criteria to sketch the actual prospects for growth, ultimately resulting in a precisely-defined plan of action.
2- Underestimating the costs of investment
International expansion results in a higher cost-base, and underestimating the length of time and the budget required before your first commercial successes is, unfortunately, a very common mistake. Indeed, over the long term, opening up the business to international sales is undoubtedly a driver of growth.
3- Failing to establish a local presence
Some businesses also attempt to grow internationally from their home country, with no presence in their target countries. To minimise their costs and risks, some choose to rely exclusively on young ex-pats who enthusiastically volunteer for international experience, for their presence in the field. With no local network and no experience international expansion will quickly run into an insurmountable wall.
4- Offering an unsuitable product
One of the most common mistakes that absolutely must be avoided is failing to adapt your product or service to meet the expectations of local customers. Quite aside from any regulatory aspects that may apply, it is essential to respond to local needs for the product or service and to be familiar with local competition.
Thinking that a product will be successful anywhere, just because it has flourished in its home territory, can lead to far-reaching delusions. Refining your product or your value proposition, or even launching an entirely new brand, is an essential step in winning new markets.
5- Failing to account for cultural differences
Cultural differences may be slight or obvious, but there are always cultural differences between the home country and the target market. A strategic diagnosis that is worthy of the name enables these differences to be highlighted, and you can even obtain training on how to identify and address these cultural differences.