When you’ve experienced rapid growth on home soil, the next logical, albeit ambitious step, is to expand internationally. Your customer needs are the same overseas, and the product translates, so what are you waiting for?
However, it’s not always that straightforward. A Harvard Business Review analysis of 20,000 companies in 30 countries found that those selling abroad had an average Return on Assets (ROA) of minus 1% as long as five years after their move. The study found it takes 10 years to reach a modest +1%, and only 40% of companies turn in more than 3%.
While it sounds like an impossible task, companies that experience success after expanding internationally share a common theme - they adapted to the local culture. Why is cultural adaptation so important? Ask Walmart, which failed to take cultural nuances onboard when it expanded into Germany in 1997. The US retail behemoth opened 85 stores across the country but found it a tough nut to crack due to Germany’s labour laws, regulatory red tape and restricted business hours. However, the big story to emerge was Walmart’s cultural misjudgement of the German people, who were put off by the supermarket’s door greeters and staff who insisted on packing their bags for them. This standard added value service in the US was an unusual practice in Germany, leading the company to withdraw from the country at the cost of $1 billion.
Another story of cultural mismatch comes from Mattel, which built a vast Barbie superstore in 2009 in Shanghai, China, in hopes to capitalise on a lucrative toy market. Mattel failed to realise until it was too late that toys in Chinese culture tend to be aimed at educating children and building their skills. As a result, Barbie was shunned, and Mattel was forced to close the doors of its 36,000-foot store after just two years.
Businesses must conduct research and adapt to cultural differences. If you’re thinking of expanding your global footprint, here are just some ways you can make sure your cultural adaptation is a success.
1. STUDY LOCAL PRACTICES
Local culture impacts everything in business, including how you manage employees, how meetings are conducted, how negotiations are handled and how risks and challenges are addressed and overcome. For example, in Japanese business, “HORENSO” is a practice that means report, communicate, consult. These values form the backbone of keeping a healthy flow of information through a business. Let’s break it down:
HO stands for houkoku, meaning report or inform, so if a boss or superior assigns a task, the employee is expected to keep them regularly informed about progress.
REN stands for renraku, which means contact or coordinate. If an employee experiences a problem or a change in work, no matter how minor, they must notify their superiors and co-workers immediately.
SO stands for soudan, meaning to consult. The employee needs to consult with their team and boss before taking any action on their own.
Japan is not an individualist society, and the need to report before taking action can go against traditional Western working practices.
It illustrates the importance of conducting in-depth research into local business customers so you can adapt and effectively win over new employees, stakeholders and customers.
2. REMODEL PRODUCTS/SERVICES/PROCESSES
You may be onto a winning formula with your business, but nothing should be set in stone if you want to reach new markets. Different cultures may require different approaches and even a slightly different end product. Does your current operational framework mesh with the cultural and economic realities of the territories you’re targeting?
A good example comes from Disney. Following accusations of cultural insensitivity when Disneyland Paris (then Euro Disney) opened its doors in 1992, the entertainment giant learned its lessons when building Hong Kong Disneyland. Instead of rolling out tried and tested plans, Disney hired Feng Shui experts to ensure the park layout was culturally appropriate. It meant everything Disney had learned from previous parks had to be effectively scrapped to create a space that adhered to this ancient Chinese practice. With the elements of wood, fire, earth, metal and water being carefully balanced, Hong Kong Disneyland was built with large expanses of water broken up with small islands.
The result for Disney was an end product that, while set apart from a previous winning formula, was perfectly aligned to and respected the needs of the local people.
3. HIRE LOCALLY
It should go without saying that the people you hire have the potential to significantly impact the success of your expansion. Hiring local talent will help you navigate cultural differences effectively and, in turn, streamline the customer acquisition process and increase your company’s team diversity.
However, overseas hiring can be tricky so consider implementing a local team or specialist recruiter who understands the market and effectively communicates your company's values, best practices and goals, particularly if they differ from cultural norms.
In turn, they will be able to guide you and help set expectations regarding the people you’re looking to hire. For example, experience and education levels may differ, or candidates may have a completely different set of priorities and expectations when it comes to who they work for.
SUPPORT IN BUILDING YOUR INTERNATIONAL TEAM
At Strive, we source top tier sales talent for hyper-growth tech companies. To learn more about how Strive can help your business scale, contact our team on 0203 983 0770 or email firstname.lastname@example.org.