#3 US Retailers Abroad
What is it with US retailers? Did anybody notice how many retail companies headquartered in the US have failed in international markets over the past decades. After about 8 years of trying to get established, Wal-Mart left Germany in 2006, fashion retailer The Gap pulled out of Germany in 2004, and Pizza Hut defected from Austria after having failed to meet consumers’ taste there. Are these companies’ services and products a simple mismatch with local markets or are the companies too proud and too ignorant?
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January 9, 2011 @ 7:49 pm
In my oppinion, these companies had the problem that they did not think enough about cultural differences. They found their concepts perfect and also the products and started their business in the same way like in the US for example.
some aspects to think about:
When we talk about power distance in a country then we have to know beforehand how high or low is the power distance in my target market. High: food franchiser have to create a strategy exactly for one target group- exclusive -> people with a higher status, familiar-> people in lower positions.
Another point could be uncertainty avoidance. People like to insure themselves against all risks, in some countries. – high uncertainty avoidance. When we now talk about a country like Austria, we can see that people want to know everything about ingredients and where are they from, for example. This means that companies like Pizza Hut should try to talk about this topic (with ad´s …) and should try to certiefy them (AMA-> austrian meet)
The next thing I am thinking about is masculinity. High masculinity means that life is more traditional (e.g. women -> more likely to be housewives, men -> earn the money) When we have such a culture, then we should think about men who earn a lot of money and want to show that. So every shop or restaurant have to have something exclusive and articels or food should be a little bit expansive. The other side is a country with lower masculinity -> people like very friendly atmospheres and would like to spend theire time with the family (everyone should enjoy this time)
These are only few examples to think about before starting business in a new market. I think the most important thing is to know as much as possible about foreign countries and cultures to be successful in foreign business.
April 21, 2014 @ 12:31 pm
Every international operating company has to adapt to local requirements like law or culture in order to be successful. If a company is not following such local requirements when going international the expected success might not be achieved or in worst case the company even has to pull out of the country to avoid big losses like many famous examples show us.
The Wal Mart example shows that their main mistake was that they approached all foreign countries with the same business strategy. They did not make any regional differences when setting up their business strategies. Cultural or social differences didn’t exist in the Wal-Mart cosmos or had been simply ignored. That’s why they had to learn their lessons through trial and error which actually became kind of expensive for them.
For instance they overlooked the fact, that Germany and all the other central European countries are having a well-developed food shopping industry. Since this industry is very competitive and operating on very thin margins they had no chance to be successful even because they did not even employ local management which would have had knowledge about the local business behavior and culture.
The mistakes which Wal Mart actually made can happen to a small and internationally inexperienced company once but not even twice. That’s why it seems that the decisions taken by Wal Mart management somehow haven’t been fully worked out or even seem to be taken in a careless manner. But I think that’s typical for companies who are under big pressure to quickly increase revenue and profit. Due to this pressure from the shareholders rational thinking of managers in terms of long term success and sustainable growth of business is often ignored in order to achieve the claimed short term success. And after a while, when the short term success turned into a long term failure and the old managers are gone with high bonuses, the game starts over again with new characters.
By breaking that scenario down to the systematic international market entry process model, the big mistakes happened in the entry mode choice. That actually remembers me of a course in international business strategy during my previous study where the professor’s main statement on that topic was the following: Know and respect your market, customers and rivals! Unfortunately that’s what the companies in the main statement underestimated, only partly considered or even ignored.
But at the end it’s a vicious circle and all of the mentioned companies had to learn their lessons in the hard and expensive way.