So why do some companies fail when trying to enter a new market?<\/strong> We\u2019ve listed a few of the most common mistakes (and some real-life examples) so that you can avoid them!<\/p>\n <\/p>\n One of the main reasons that businesses face problems is that they rush into expanding abroad without planning ahead<\/strong>. Instead, it\u2019s important to analyze which markets to target, define clear goals, make a detailed action plan and have an accurate understanding of the related costs. International expansion can\u2019t be improvised and requires a thorough foundation before taking any action.<\/p>\n Ask yourself the following questions before taking any major steps:<\/p>\n <\/p>\n On top of planning your expansion, you need to ensure that you have a thorough understanding of your local market<\/strong>. Many companies skip this step (we\u2019ve mentioned a few already), thinking that all markets are the same as their home markets.<\/p>\n Get to know the following aspects about your target country:<\/p>\n <\/p>\n The coffee giant opened their first Australian store in 2000 and quickly grew to 84 stores across the country. Eight years later, Starbucks had to close 60 stores with losses of over 140 million dollars.<\/p>\n One of the main reasons for this disastrous outcome was Starbucks\u2019s inability to properly analyze their local competition<\/strong>: McDonald\u2019s (McCafe) and Gloria Jeans were already well-established and had a better price compared to Starbucks. They were also better adapted to consumer\u2019s coffee preferences.<\/p>\n > Learn more about Starbuck\u2019s case<\/a><\/p>\n <\/p>\n Many companies that don\u2019t bother to research foreign markets ahead of time often make crucial errors in their execution, ultimately leading to failed expansion. The most common mistake is to assume that your business model can be duplicated across international markets without adapting to local marketing channels, consumer behavior or product preferences<\/strong>.<\/p>\n <\/p>\n This was one of the major mistakes, among others, that Walmart made while trying to establish itself in South Korea. The company opened 16 stores in 1988 but closed all of them and completely abandoned their operations by 2006.<\/p>\n As it did in many other countries Walmart didn\u2019t try to understand the cultural differences<\/strong> between their home market in the US and in South Korea. They didn\u2019t adapt the height of the signage and shelving to local standards and sold prepackaged fish, whereas local consumers were used to seeing fish still swimming in the aquarium before buying it.<\/p>\n <\/p>\n No one said that you need to enter a new market alone. Working with a local partner<\/strong> who already knows the market can save a significant amount of time and money.<\/p>\n In some cases, it may be beneficial to acquire a well-established local business<\/strong>, allowing you to benefit from their existing client base and reputation.<\/p>\n Otherwise, it may be necessary to open an office in the new market with a local team that has a full understanding of business practices and consumer behavior.<\/p>\n Many companies, however, try to enter foreign markets as a lone wolf, thinking that they already have everything they need to establish themselves.<\/p>\n <\/p>\n In late 2009, only 4 months after opening their stores in Russia, Carrefour announced that they were closing operations in the country altogether. According to Carrefour, there were insufficient acquisition opportunities<\/strong>, which would prevent them from attaining a strong foothold in the market.<\/p>\n > Learn more about Carrefour in Russia<\/a><\/p>\n <\/p>\n International markets are a significant source of growth, but it\u2019s important to remember that it\u2019s a long term strategy<\/strong>. Expanding to new markets involves adapting to the new country, building new relationships and a reputation, as well as analyzing and understanding the dynamics of the local business environment. It\u2019s quite rare that a new market yields a return on investment within the first year or even several years.<\/p>\n That\u2019s why it is absolutely vital to allocate a sufficient amount of financing to enter a new market<\/strong>. Many companies underestimate the investment required, as unexpected costs will creep up often, including changes in regulations, new taxes, intellectual property issues, changes in economy, building costs, etc.<\/p>\n It\u2019s a good idea to estimate international expansion costs, but it\u2019s also very important to give yourself buffer room in case of unexpected expenses.<\/p>\n <\/p>\n Before launching their \u201cFresh & Easy\u201d stores in the US, Tesco researched the American market and consumer behavior. Unfortunately, a lack of suppliers meant that they had to build their own production center, with a cost of more than $100 million. This was quickly followed by the 2007 financial crisis, which had a strong negative impact on sales. Faced with these losses<\/strong>, Tesco was unable to open new stores and therefore couldn\u2019t recover the investment in the production center. Six years later, Tesco finally sold its 150 stores to Yucaipa and pulled out of the US with 1.4 billion euros in losses.<\/p>\nMistake 1: Not having a strategy or a plan<\/h2>\n
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<\/p>\nMistake 2: Not doing enough research on your target market<\/h2>\n
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Example: Starbucks in Australia<\/h3>\n
![\"5-mistakes-going-global-2\"](\"https:\/\/blog.textmaster.com\/wp-content\/uploads\/2017\/03\/5-mistakes-going-global-2.png\")
<\/p>\nMistake 3: Underestimating the importance of cultural differences<\/h2>\n
Example: Walmart in South Korea<\/h3>\n
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<\/p>\nMistake 4: Going at it alone (and ignoring key local players)<\/h2>\n
Example: Carrefour in Russia<\/h3>\n
Mistake 5: Expecting a return on investment too soon<\/h2>\n
Example: Tesco in the US<\/h3>\n
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