Globalization is a great tool for companies wanting to “go global” and tap into foreign markets. But how far should businesses take this strategy?
If you read our blog on a regular basis, you are probably aware of the importance of localization. In an article on Forbes, however, Christopher Koch wonders how drastically companies should alter their products and services in order to be successful in emerging global markets.
According to Koch, western consumers know that products differ from country to country; we all know that the products we encounter in the supermarkets we visit on holidays do not have the same features on offer that we can buy in our home countries. Thus, a very thorough localization is unnecessary.
Babak Hafezi, CEO of Hafezi Capital, a company that helps businesses that wish to launch their products in foreign markets, asks himself why companies do not use this same strategy for emerging markets.
If companies try to launch their products with little adaptation or with the wrong strategy (a general Spanish one for the Latin American market, for example), their chances of success are slim.
However, even companies that do recognize this can struggle with adaptation. Koch believes that the key to finding the right adaptation lies in properly researching the foreign market.
Koch also states three different ways in which companies can adapt their products successfully:
• Immerse your company in the market. According to Koch, it is not enough to gather data from feasibility studies. He believes businesses can greatly benefit from management trips to the country to target. On a trip to China, Hafezi’s room service order was taken by a waiter that appeared at his doorstep. “That’s the Chinese definition of room service, but if that happened in the United States, you’d say, why are you wasting my time? I could’ve placed this over the phone!”
• Locally sourced and – managed products might be worth consideration. In Turkey, for example, the average consumer is faced with customs regulations and payments issues when buying items online. Koch says this is why it is wise to join in a joint venture that is managed locally to ensure customers receive their goods quickly.
• Downscaling expensive or complex products is a wise move. As Koch believes that price and complexity are directly related to the speed with which consumers on the new market will accept your products, downscaling could be a wise move. When they simplify their apps, for example, ecommerce businesses might have more success in foreign countries with slow internet connections.
These are some great tips, but according to Koch, the most important thing for executives to remember is to have a global mindset.
He concludes with a quote by Joe Carella, managing director of executive education at Thunderbird School of Global Management in Arizona Joe Carella, who agrees with him: “If there is any one-size-fits-all strategy for rapid and successful expansion it’s that organizations need to understand and respond to local needs all the time.”