Integrating effectively into external markets can be a complex task – one which even the largest businesses (e.g. Tesco, Walmart and Wendy’s) have found challenging. For retailers expanding overseas, difficulties often arise because of;
a) poorly executed plans
b) expansion without reasoning
c) false assumptions of the external markets
d) failure to properly investigate the costs of development.
Internationalising successfully requires a solid but flexible and strategic plan, covering the following areas:
Local and regional partnerships
Local and regional partnerships bring valuable insight from existing businesses in foreign countries. It also allows for understanding of consumer psychology and cultural nuances. Positive regional and/or local partnerships can help increase the success of internationalisation through aided education from companies who have already been working in the specific international market which you wish to enter. A local alliance can also help in understanding international tariffs, exchange rates or external costs (transport, fees, etc.), which can dampen company profits. For example, in the US there are tax variations between states which need to be taken into account along with the tax issues that surround cross-border sales. Instead of having to learn all of this, businesses can attain knowledge from local retailers who already have the correct permits and understanding of business within that particular region.
Continuous organisational learning
Many retailers fail to understand the importance of researching international markets, therefore missing the mark on what consumers want – know your customer before trying to sell to them! For example, while fashion is worldwide, shoppers around the world have different tastes, preferences, habits, styles, sizes and shapes – one style does not fit all. Learning about international retail preferences can allow organisations to adapt to particular cultural styles and effectively sell to the consumers. The web has revolutionised retailing, and instep with that is the overhauled of the supply chain by China and other Asian countries which is driving the success of fast fashion. Low cost retailers, pushing value propositions have changed shoppers attitudes and behaviour to value – throw away fashion has become the norm.
Understanding of the international pricing system
It is imperative to establish which investment and financial structure will be required for overseas expansion. Issues, which must be covered thoroughly in order to fully utilise every penny spent on overseas investments, include:
- Cost of transportation (from renting trucks to establishing a relationship with mail services)
- Tariffs on exports and imports (VAT rates and costs of shipping – would it be cheaper to air mail or deliver via container ships, or perhaps even establish a partnership with a manufacturer? – for example)
- Analysis of exchange rate fluctuations (what currency do consumers pay with? What do surrounding organisations want to be paid in?)
- Establishing what constitutes a luxury item (personal disposable income in Russia, for example, is almost four times less than in the UK)
Selecting appropriate product lines
When moving into international markets it is important that retailers understand the needs of their intended customers, taking careful consideration of multiple factors that affect the demand of a product. These include:
- Consumer culture (purchasing patterns and buying habits – frequency, when, where, who?)
- Historical background (what do consumers treasure, respect, etc.? Who do they follow?)
- Religious views (in some religions pig skin cannot be worn because pigs are seen as dirty and unhygienic)
Drawing from a very simple global example, Coca-Cola is made to taste sweeter in the west than in the east to make it appeal more to the western palette.
Culture specific USP (unique selling points) and sensitivities
When creating advertising campaigns and developing marketing plans for overseas markets there are several factors to take into consideration. They include, spoken and written languages, political views and climates, religious practices and cultural attitudes towards taste and suitability. When developing marketing plans, retailers should also take into account the level of broadcasting development and the availability of media in each specific market. For example, in the US, the most effective advertising is TV. Revenue from television advertising is estimated to be worth a staggering $125.31bn and almost 90% of the population is exposed to TV coverage.
However, in other countries such as India, Pakistan, and Mongolia have much smaller populations of people with access to a television. This information is key when considering the print media versus television advertising debate. Also, the control of government and level of censorship should also be taken into account when creating a media presence. For example the media is heavily controlled and censored by the central government in China so precautions must be taken when considering how to advertise to a Chinese market.
If retailers wish to successfully integrate into foreign markets it is essential that a strong plan is implemented, looking at all internal AND external aspects of the business. Flexibility, partnerships, learning, pricing, product lines and USPS are all important factors in dominating overseas. Understanding the nuances of your international customer is also vital to success. If understanding that changing a detail, which may seems small or strange to you, will lead to your ultimate success in a new market, why not make the change!
The key to success lies in the approach. “By failing to prepare, you are preparing to fail” – Benjamin Franklin.