#213 Driscoll’s Blueberry Challenge in China
There is an often feared and yet frequently ignored challenge in international business: You enter an attractive foreign market with superior technology and know-how, help develop the market and eventually discover that you have also taught your future competitors how to compete with you.
US grower of berries Driscoll’s provides a particularly blue version of the story. As the Wall Street Journal recently reported, the California berry company entered China in 2013, bringing advanced cultivation technology for a crop that was largely unknown to the country – premium blueberries, along with decades of growing expertise. It helped demonstrate that high-quality blueberries could be produced in China at scale. By 2016 Driscoll’s had its blueberries on shelves throughout China. It worked. Perhaps too well.
Emulating Driscoll’s, Chinese entrepreneurs entered the industry, adopted sophisticated growing techniques, and dramatically expanded production. Driscoll’s also encountered unauthorized propagation of protected blueberry varieties and consequently had to pursue intellectual-property cases in Chinese courts. And where are we today? China eventually overtook the United States as the world’s largest blueberry producer.
The obvious lesson would be about protecting intellectual property in China. But there is a more interesting strategic lesson.
Companies often confuse the initial entry advantage with a sustainable competitive advantage.
Driscoll’s entered China knowing things its competitors didn’t know and possessing capabilities they didn’t have. But international expansion inevitably transfers knowledge: Employees learn, suppliers learn, retailers demand, and competitors emerge. That suggests a question every company should ask before entering a foreign market:
If our local competitors knew everything we know today, what would still make us better?
If the answer is “not much,” you don’t have a sustainable competitive advantage. You have a temporary – or transitional – advantage.
There is another twist. Companies tend to analyze the competitors already operating in a foreign market. But sometimes their most dangerous competitors don’t exist yet.
A successful foreign entrant proves that an opportunity exists, develops suppliers, trains employees, educates customers, and demonstrates the economics of the business. In effect, it leaves a trail of breadcrumbs for others to follow.
None of this means Driscoll’s was wrong to enter China. The company remains there, and the market still offers substantial growth potential. But it does suggest that managers contemplating international expansion should ask something more difficult than, “Can we succeed in this market?” They should also ask: What happens if we do?
The Deadly Sin in this case is that the competitive advantage that gets you into a foreign market will be not the same competitive advantage that keeps you there forever. Increasingly, companies need to set themselves up for transitional competitive advantages – always thinking two steps ahead and building new advantages as conditions in the foreign market change.
