There are other important factors to consider when entering a new international market.
Problem: Recently, my company was presented with an opportunity to expand its sales to Argentina. We have several people on our team who speak fluent Spanish and are eager to visit the country to explore the opportunity. Are there any other factors to consider before we send the team to Argentina?
A business opportunity has emerged in Argentina that could result in significant sales growth for your company. The business benefits of those sales include improving your cost competitiveness, providing a hedge against the seasonal demand from domestic customers and extending the life of your product. Several of your employees speak the local language, in this case, Spanish. But it's important to recognize, in addition to being able to communicate, that there are other important factors to consider when entering a new international market.
Let's start with the basics: What do you know about that country other than the language they speak?
Several important factors to consider include your marketing message, consumer preferences and buying habits. For example, what does your brand mean in the international destination? Does it have any negative connotations? Coors launched its slogan "Turn it loose" in Latin America only to discover that the literal translation referred to suffering a strong case of diarrhea. Also, there are many variations of Spanish spoken in Spain and Latin America. Make sure that your team understands the nuances in vocabulary and expressions across the country's various dialects.
Do your products match the price, packaging and distribution needs and preferences of the market? For example, in most Latin American countries the ease of use, size, technology and aesthetics of small home appliances such as irons or steamers are irrelevant to buyers who purchase such products for their housemaids to use. To such a buyer, price is the main factor. On the other hand, if you are selling grocery products to the middle class of most Latin American countries, it is important to recognize that housekeepers do most of the shopping. Recognizing this is important to crafting a fitting marketing message and advertising model.
What about distribution channels? Should you just export your product to that country and use a local distributor? Should you start a strategic alliance with a local partner or set up your own subsidiary?
When Nokia first entered the Peruvian market with a local mobile operator, Tele2000, one of the most successful campaigns for its mobile phones was promoted through a chain of rotisserie chicken restaurants.
And don't forget about currency-exchange issues. Does your company have the financial knowledge to work with other currencies? Strategies that will be valuable include instruments for hedging currency fluctuations and using letters of credit to collect from the sale of products. There are brokers who can assist with financial matters, but they can be expensive.
Finally, it's important to develop cultural awareness, which involves a combination of conscious and unconscious elements. Conscious elements include individual mores, practices and courtesies. Unconscious elements or practices include group values, beliefs, priorities and assumptions. These elements will determine your behaviors and actions toward others. Lack of cultural awareness may create awkward situations and the potential for failure. This is often aggravated by the propensity to be ethnocentric, including a tendency to assume that our beliefs and culture are superior to those of other cultures.
Here are some things companies can do to prepare to expand into international markets:
- Learn as much as you can about the country. Read about its history, politics, culture, business practices and consumer behavior. Talk to experts (commercial, legal and tax experts) but beware of stereotypes or generalizations.
- Develop cultural awareness among those who will be interacting in the international market. The use of profiling tools, such as the Implicit Association Test and Kozai Group´s Intercultural Effectiveness Scale will prepare you for your cross-cultural engagement.
- Understand areas of potential conflict and "misalignment" between the two cultures. Assessments such as Itim's Cultural Compass and Erin Meyer's book, The Culture Map, may help identify potential differences in communication styles, power perceptions, risk tolerance, scheduling, and others. Developing the proper background on the host country and understanding one's limitations and potential areas of conflict will make those first meetings more effective, productive and enjoyable.
Juan-Maria Gallego is an instructor in the College of Business at UCCS and a faculty member at the Center for Creative Leadership. Over the past 20 years, he has worked on four continents managing sales, marketing and strategy development in the telecommunications industry. His current research, training and consulting work focus on globalization, cultural awareness, diversity, inclusion and organizational performance. Contact: OPED@uccs.edu.