Once companies succeed in their country, they often look at ways to go overseas. But it is not an easy task, and there are multiple challenges that need to be overcome in order to go international. Throughout the years, many big companies, have tried but failed to do this, usually because they were not prepared enough.
The combination of naïveté, arrogance, and lack of understanding of the market is often the reason why the companies were unable to internationalize. Because it is always important to remember that the consumers in different countries may not like products, foods, services, and strategies that didn’t suit their cultural taste. So it is often better for companies to take their time in order to understand the market they want to conquer because as I am going to show in these examples, the consequences of a failed internalization strategy can be costly.
The first example is when the target tried to internationalize from the USA to Canada, they had to stop their operations after two years in the country. One of the main reasons people believe that target failed was that they did not adapt their stores to the Canadian market, trying to use the same products and sales tactics as the US. On top of that, the expanded too fast, which created problems in their supply chain, which led to stock problems in many stores. Target admits that they try too much too fast, which is a reason why they had to close 133 stores and layoff 17,000 employees which also cost them billions of dollars.
Walmart has already been able to expand in Canada, but they had their failures too. Especially when they tried to expand to Europe, more specifically in Germany. They failed to understand the nuance in culture between the US and Germany, like the difference in personal space. Walmart opens its first shop in Germany in 1997 and had up to 85 shops in total, but they had to stop operation in 2006, and it cost them a billion dollars to pull out. There are many reasons why Walmart might have failed, for example, the intricate labor laws and business hours, on top of that, they did not adapt their product line very well, and set their shops outside of cities, but the Germans are less willing to drive to stores, even for cheaper products. The icing on the cake – customers were freaked out by Walmart greeters and their need to bag customers groceries for them, both unusual practices in Germany. Walmart’s experience in Germany helped them to realize that they had to change the way they had to internationalize. The international spokeswoman for Wal-Mart, Beth Keck, explained that “It is a good, important lesson, a turning point [...] Germany was a good example of that naïvete.”. Now they care less about Walmart’s name, and now 70% of international sales come from “outlets with names like Asda in Britain, Seiyu in Japan or Bompreço in Brazil.” and have been trying to learn from the mistakes they have made in Germany.
Sometimes, it is not all about culture, it can also be linked to timing and other poor decisions. Tesco is a grocery chain based in Britain that failed to internationalize in the US. This grocery store is based on offering “fresh and easy” products that were a bit pricier but also healthier. They thought that this would be enough to attract customers, but they were unlucky with the timing, as they tried to launch in 2007, “just as consumer spending and taste for adventure went into sharp decline”. Five years later, Tesco left the US, closing 200 stores and with a net loss of almost 2 billion dollars. Tesco may not have done any huge mistakes, but they did try to grow too fast, with many challenges in their home market, where they were “assailed by competitors, they've visibly lost the plot, with poorly stocked stores, lavish but meaningless advertising and an absence of new ideas” they had no choice than to leave the US and concentrate on the UK.
Best Buy did the opposite, they failed to succeed in the UK and Europe, as they tried to expand too quickly, while not adapting to the British consumers. they failed to notice that European consumers preferred smaller stores, closer to city centers, compared to huge Best Buy stores in the US. They entered the market in 2010, buying 50% stakes in the UK company Carphone Warehouse for $1.3 billion. The goal was to open 200 stores, which was reduced to 100, but by 2011, Best Buy closed the 11 stores it had managed to open. This costs Best Buy around 320 million dollars. Best buy also had to close its stores in Turkey and China as it “failed to differentiate its product lines from local retailers and for not adapting to local consumers’ shopping preferences, such as preferring smaller, more conveniently located retailers.”
China is one of the hardest markets for US and European companies to expand in, this is because the cultural differences are huge. For example, when Mattel, tried to open a Barbie-themed shop in Shanghai, which was only open for 2 years. In 2009, they opened a giant 36,000 square feet (3345 square meters) with 6 floors, a staircase lined up with 857 barbies, 900 display cases and a barbie themed bar. But Mattel did not study the market enough, the Chinese culture “stresses skill-building and educational toys, Barbie was seen as a bit of a distraction.” The company has now been working tirelessly to make a come back in China, but this time knowing that they will have to adapt to succeed.
Avoiding failure when going international is hard, but many companies have managed to do it, especially when they have taken the time to learn the market they want to expand in. These successful companies understood that they had to adapt their products and services in order to fit new markets.
Powerling helps companies to go global. We go beyond a direct translation to make sure your work delivers the proper impact in the target market. Your content can either be adapted or completely rewritten in the local language to reflect the original message. The result is often a mix of this, including new content, adapted content and imagery, and direct translation.