Growth plans gone wrong: why even some leading companies fail when expanding internationally
Growth Decisions Inc. All rights reserved.
I find it fascinating when even large companies with known brands, many resources, decades of experience and world-class management teams still find it challenging to growth in markets and geographies different that their own. Customer preferences evolve and competitive dynamics change, and yet many companies fail to fully comprehend those new dynamics—which means they also fail to adjust their growth strategy, business models, cost structure and operations.
Even when a company prospers in this time of available information and instant communication, you may believe it is because their global team has easily leveraged strong market sensing abilities and sound corresponding strategies. Unfortunately, this is all too rare a case: Most succeed in spite of themselves, because they are actually impeded by their own systems, processes and dynamics, which greatly slow their capacity to grow, adapt, react and re-invent.
This continued disconnect is as frequent now as it ever was. It can be seen in cases as recent as RadioShack, Best Buy and Target.
RadioShack’s failure to spot competition: The 94 year-old company and household brand with more than 4,000 stores announced on February 5, 2015 that it was filing for bankruptcy after 11 consecutive quarterly losses. The NYSE started delisting proceedings. The company has interestingly started discussions to sell leases and locations to Amazon—one of the competitors it did not account for—and Sprint. The chain exited the UK in 1999, Australia in 2002 and Canada in 2004. This company is a prime example of failing to spot up-and-coming competition, having unfocused marketing strategies and carrying a poor inventory mix.
Best Buy’s blind eye towards cultural difference: Another Amazon victim, this 49 year-old $42b (as of 2013) big box retailer is still struggling at home but has been really challenged in foreign markets. Analysts believe that poor European results were due to poor marketing strategy and failing to recognize that Europeans prefer small shops to large box stores. In China and Turkey, they failed to differentiate product lines, struggled with a compelling pricing and value proposition, and did not adapt to local consumer shopping preferences.
Target Corporation’s overextension: The 113 year-old retailer with revenue of about US$72.6b—the second-largest discount retailer after Wal-Mart—also failed in international growth in Canada, a country with many similarities and even geographical proximity. Analysts argue that its Canadian growth strategy was overambitious as they rushed to open more than 120 stores in 10 months in its first year, picking locations in rundown shopping centers with poor access, according to the Wall Street Journal. Wal-Mart got there 20 years ago, and Target’s disorganized store shelves offered a limited selection under a faulty pricing strategy.
Disney’s hubris: This iconic brand’s European expansion is so typical of international expansion challenges that I use it as a discussion case with my Northwestern students. Disney spent years in analyses and negotiations as well of billions of dollars planning for its 1992 Euro-Disney Grand Opening. Unfortunately, their failure to read differences between American and European cultures and spending habits contributed to their initial failure. Management seemed to have zero skepticism about the European market (especially after their success in Japan).
The list of leading companies facing international growth challenges is longer than you may think, as management teams struggle to understand competitive landscapes and adjust growth strategies to match. Even Internet-based companies—which, in theory, have few boundaries—make avoidable mistakes in international expansion. For example:
Ebay: Chinese customers prefer to develop trust through their own interactions rather than acting on other users’ ratings. Ebay overlooked this customer insight, while its main competitor TaoBao offered a built-in instant messaging feature.
Google: Once a nimble start-up, Google’s size, bureaucracy and slower ability to respond to customer demands have been blamed for dulling their competitive edge in China, allowing local competitors such as Baidu to gain strength.
Groupon: Its growth struggles in China are mainly blamed on the company’s reliance on largely foreign managers who didn’t have a strong understanding of Chinese purchasers and used marketing tactics counter to their preferences.
I assert that if any of these companies had maintained solid market- and customer insight-sensing abilities in place, coupled with intentional processes for quickly translating those insights into relevant growth plans, they could have avoided or minimized their foreign-market growing pains.
Developing these capabilities has become a critical competitive requirement to allow companies to sense change, quickly adapt their growth strategies, and refocus their resources. If they succeed in doing so, they can properly adapt to and capitalize on the exciting challenges afforded by expanding into new or rapidly shifting environments.
Led worldwide customer strategy program for leading multinational in OEM automotive sector (AGP Glass, Brazil). Articulated and executed analysis of customer needs for core B2B customers in 20+ countries. Interviewed 80+ CEOs and top executives. Created system to allow company to track detailed customer metrics and insights periodically.