How to successfully launch a business overseas
8 min read
17 November 2016
Global expansion is a natural step for companies looking to increase revenues beyond the home country – so here's how to launch a business overseas.
In the summer, Primark announced plans to expand the number of its stores in the US and Cath Kidston declared it would expand its operations into India, while Poundland is also being geared up for global expansion, following its purchase by Steinhoff International in August. These are all great cases of how to launch a business overseas. But international expansion can be risky even retail giants such as Tesco, Sainsbury’s and Target have found it difficult – Tesco withdrew its Kippa brand from Turkey this summer. But there are a few key steps you can take to ensure you launch a business overseas with the best chance of success.
(1) Identifying your reason to exist
One of the first steps in how to launch a business overseas lies in identifying if there’s a genuine need and desire for the business in your chosen country or region. This may sound obvious, but you’d be surprised how many companies fail to follow this basic rule. Take Tesco for example. Its Fresh & Easy format launched in America in 2007, but by 2013 had pulled out of the country at a cost of $1.3bn.
It had all started so well. The supermarket spent close to two decades contemplating its move to the US market, and invested two years of time and money into intensive on-the-ground research, even sending senior executives to live with Californian families to observe the way they shopped and ate. But according to experts it ignored its research, and set-up its Fresh and Easy format in the way it wanted, rather than listening to its future customers – not the best way to launch a business overseas.
Its small-format, neighbourhood stores conflicted with a car-dependent, buy-in-bulk culture among US shoppers, and it initially relied heavily on self-service tills – a huge turn-off for American customers who value good service. The format was simply too alien to Americans, and therefore failed to catch-on.
(2) Test on a small scale before you launch a business overseas
Compare this to successful British businesses that launched in America such as Pret A Manger and it is easy to see the defining factors of success. Pret spent ten years refining its offering via a single store in New York. Taking on board customer insights and feedback – apparently its sandwiches had too much mayo in for America’s palate! It refined its offering until it had a business which it knew would be a success. The sandwich retailer has now successfully expanded across the country.
Another savvy approach to testing an idea out is those businesses that open pop-ups overseas. Businesses are getting bolder in the way they do their field research – rapidly prototyping with consumers to understand how their offering works in new markets. Popular American burger joint “In-N-Out” trialled pop-up concepts in both Sydney and London this year; the “get it while you can” temporary nature of the format meant there were queues from the early hours with people eager to try the product. Consumers are familiar with pop-ups and like the concept; it’s a sound move for brands to gain acceptance of trial formats and get valuable feedback in one fell swoop.
(3) Analyse sales data to inform your next move
Tesco’s failure is a lesson in how you must put the customer and their needs at the centre of your expansion strategy. If it had followed its research, then the supermarket’s venture might not have fallen down so badly. Your business launch strategy needs to be led by the people who buy your products. This is where analysing sales patterns and data is important. If you’re receiving increasing amounts of orders from a specific territory, then look into whether it’s plausible for you to launch in that country.
But it’s not just your own data that you should be analysing. General sales trends can give you unique insights that can unlock success for your company. Entrepreneur Maxime Legardez did this with his beautician booking service Vaniday. He identified Brazil as the first market to launch into, down to the fact it’s the third largest beauty and personal care market in the world, but most of the country’s quarter million beauty salons had no online booking service. So there was a clear demand for his business.
(4) Understand cultural nuances and tastes
If you’ve identified the reason to exist, analysed sales patterns and know where your future customers are going to be, then one final point which should underpin everything lies in understanding cultural nuances. Despite globalisation, customers still identify themselves and their country as a separate culture. Businesses that adopt a one-sized-fits-all model, and fail to adapt culturally are the ones that fail to identify and work with the nuances and idiosyncrasies of that country.
Sainsbury’s launched new stores in Egypt during the Arab-Spring, and failed to recognise and understand the anti-Western sentiment present in the national psyche at the time. Another spectacular fail is the P&G’s Pampers ad which ran in Japan. The nappy brand repurposed an ad featuring an animated stork delivering diapers to homes, dubbed in Japanese. But to P&G’s dismay, the campaign failed to build the market. It was only until some belated consumer research revealed consumers were confused about why a giant bird was delivering diapers. According to Japanese folklore, giant peaches that float on the river bring babies to deserving parents not storks.
As a business looking to expand overseas, the benefits are obvious. Launch successfully, and that equals more revenue and a stepping stone to future global expansion. But you must understand the consumer in the market of your choice – research into what they want, when they want it and if it fits culturally. Nail all three, and your business can thrive.
Michelle Mitchell is strategy director at Five by Five.