Many organizations, driven by the allure of continuous growth, turn their sights to global expansion. The promise of untapped markets and accelerated growth can be irresistible. While this strategy can yield significant rewards, it’s crucial to approach it with a clear-eyed understanding of the challenges involved.
However, not all expansions are created equal. History is replete with cautionary tales of even the most formidable companies stumbling in their international ventures.
Are these companies global?
| Company | % Revenue from outside home country (US) | Revenue Growth (International vs. US) |
| Walmart | 21% | 14% vs. 5% |
| Starbucks | 22% | -2% vs. 2% |
| Mattel | 41% | 0.5% vs. -0.1% |
| Airbnb | 53% | 13% vs. 10% |
Most people would agree that they are global companies with a substantial portion of their revenue coming from outside the US.
However, even they have faced setbacks in their international ventures.
Which of the following is more similar to the US?
Most people would have picked Sydney, way over Beijing.
I would have gone with Tokyo, but I have an international audience arguing that Shanghai is not too different. Story for another time…
Walmart & Starbucks were both successful in China (as different from the US as it gets), until the broader market landscape changed. Some of the countries that they had to retreat from would be surprise, surprise…
- Walmart – Germany (exited after 9 years) & Japan (12 years), Korea (7 years)
- Starbucks – Australia (7 years) & Israel (2 years)
These are countries that one would stereotype as friendly, not hostile to the US culture. So what could have gone wrong here?
What could have gone wrong?
Let’s put us in their shoes – We succeeded in most of our expansions, some of which are very different from our home country (US). The discussions would probably be along these lines:
- We made it in country X/Y/Z, and
- Germany/Australia – similar to the US, developed country with high income, drive a lot…
- Japan/Korea/Israel – high affinity to the US, love US brands…
- So, we should be good there too. Let’s go
One common pitfall is the assumption that a successful formula in one market can be seamlessly replicated elsewhere. This oversimplification often neglects the nuances of local consumer preferences, regulatory environments, and competitive landscapes.
Vitamin Cs for a healthy global business
To navigate the intricacies of global expansion, it’s essential to consider these five critical factors:
- Consumers/Users:
- Understand their specific needs and preferences.
- Determine why they differ from the home market.
- Tailor your offerings to their ideal experience.
- Category:
- Analyze market segments and sizes for your product or service.
- Identify key stakeholders, such as suppliers and go-to-market partners.
- Country:
- Familiarize yourself with local regulations and policies.
- Assess the potential impact of political and economic factors.
- Competition:
- Evaluate direct and indirect competitors.
- Understand existing alternatives and their market positions.
- Capabilities:
- Identify core competencies required for success in foreign markets (Not just what you do brilliantly at home)
- Assess the need for additional resources and expertise.
Instead of asking “Should I expand into country X?”, companies should ask “What adjustments do we need to make to enter these countries?”
In the subsequent posts, I will dive deeper into the 5 drivers above and discuss the conscious effort we have to exert to overcome these biases.
Please reach out to me if you would like to discuss more about this.