Thursday, February 29, 2024

3 Costly Blunders to Avoid During International Expansion Efforts

The decision to expand any business into the global marketplace is usually a result of limited growth options at home. The company has already captured as much domestic market share as possible, or developing new products or services is deemed insufficiently profitable. Businesses also tend to follow their competitors into global markets. They make the move hoping to realize some of the same successes and financial rewards.

However, international expansions aren’t free of threats. They can leave companies open to new and unforeseen vulnerabilities.

Achieving global growth means understanding cultural nuances for all operational aspects, including labor markets and advertising. Because of these cultural nuances, mistakes are common. This happens even to big, respected conglomerates at the top of their games. Below are three of the most frequent errors your business should avoid when expanding internationally.

1. Overlooking Local Labor Market Dynamics

Global expansions typically involve hiring local employees and contractors. However, many companies are caught off guard by different employment laws and regulations. These can include everything from how to classify workers to required benefits and payroll taxes. Cultural differences can also impact what type of working conditions, organizational cultures, and management styles workers will tolerate.

The need to hire a mix of remote and onsite international employees can further complicate things. Remote workers who live across political boundaries will still require onboarding, management, and oversight. There may also be language barriers and vastly different expectations and regulations about work-from-home arrangements.

A global workforce report from Remote shows that 30% of business decision-makers are concerned that issues of local compliance will affect their ability to offer remote work options. Differences in labor and tax regulations can slow down or even prevent the hiring of international remote workers. Not understanding these dynamics can also result in expensive fines if authorities discover a business operating out of compliance.

Some organizations choose to hire a local consultant or manager as a workaround. This is usually someone with vast, in-depth knowledge of the country’s labor and tax laws. While this strategy works great for onsite workers, it’s more difficult to implement with a remote team. Using an international payroll or HR management solution can fulfill the same functions as those of a local manager. These solutions ensure your business stays compliant, even as regulatory changes occur.

2. Skimping on Research

When businesses expand into international markets, it can be due to competitive drive or a desire to capitalize on trends. Oftentimes, though, decision-makers don’t take the time to fully research the country and the local market. Even if a market shows overall economic promise, that doesn’t mean there’s sufficient demand for your company’s products or services. There may also be things about your brand, pricing strategy, or general marketing approach that won’t resonate.

Walmart, for example, is generally considered to be a global success story. The company generates billions in worldwide sales and dominates the big box retail market in the United States. However, Walmart tried its trademark “everyday low prices” strategy in the grocery sector in Japan, but the concept never really caught on. As a result, the company eventually decided to sell its interest in the Seiyu grocery chain.

It turns out Japanese consumers aren’t nearly as concerned as American shoppers with finding the lowest-priced deal at a single store. Japanese shoppers would rather search multiple retail locations to find the best price. Walmart didn’t uncover this key cultural and behavioral difference — which would render its American strategy irrelevant — beforehand. The ordinary Japanese consumer didn’t find Walmart’s approach a compelling reason to shop at the grocery chain, so its investment didn’t pan out.

Thorough research, including interviewing locals embedded in the culture, might have helped Walmart avoid this mistake. In this case, testing central messaging and pricing strategies tied to that messaging was overlooked. Even though similarities often exist between cultures, it’s a bad idea to make any assumptions. Walmart’s stumble in Japan provides an object lesson in how slight differences can spell success or failure.

3. Getting Lost in Translation

Unfortunately, you can’t simply rely on Google Translate to help your business craft its advertising messages for international markets. Recent history is full of translation mistakes that ended up costing top-notch companies like Ford and KFC.

At times, translations can be technically correct but don’t take into account cultural contexts, slang words, or dual meanings. You can send the wrong message to your international audience when you’re unaware of these factors. Your business will either have to backtrack marketing themes or face product failure.

One example was when the Ford Motor Company launched a vehicle in Belgium. The goal of Ford’s advertising was to accentuate the quality of its manufacturing process. However, instead of drawing attention to the “body” of the vehicle, the message translated as “corpse” instead. Although Ford still sells its vehicles in Belgium, its sales in that country have steadily declined throughout the past decade. While other factors contributed to this decline, the company’s initial blunder didn’t help.

KFC, on the other hand, overcame an amusing translation error that occurred when it first expanded into China in the 1980s. American consumers recognize KFC by the famous “It’s finger-lickin’ good” tagline. That long-standing campaign emphasizes the irresistible taste of KFC’s chicken. In Chinese, however, that well-known slogan literally translates to “Eat your fingers off” or, worse, “We’ll eat your fingers off.”

Despite this error, KFC was able to regroup, correct its messaging, and move on. Today, KFC is the most popular fast-food chain in China, with more than 5,000 locations.

Due Diligence Can Help Prevent Embarrassing Mistakes

Oversights are bound to happen with any business growth strategy, including global expansions. Venturing into unfamiliar territory can increase the odds that errors will happen, but that doesn’t mean you should avoid it. Learning from the missteps of others — especially your competitors — can prevent your company from doing the same.

Your business must examine local labor and tax regulations, perform thorough market research, and triple-check language translations. Don’t make the mistake of trying to address these three typical pitfalls on your own. It can help to enlist the expertise of local consultants and partners with intimate knowledge of the culture. They can effectively point out the unspoken and subtle distinctions that could end up reshaping your strategy.

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