It’s true there are markets waiting for American products and services around the globe. But the main success factors for market entry have not always been money, market power or advertising. Successful market entry is often a function of flexibility and creativity.

We’ve all seen examples:

Market failures
We’ve all heard stories of Chevrolet Nova being sold in South America where the name Nova translates to “it doesn’t go.” We’ve also heard that Pepsi’s “come alive with Pepsi” was translated into Mandarin as “your ancestors will come out of the grave with Pepsi.”

But translation is only part of the story

In Taiwan, Whirlpool came into the market with large, American style refrigerators. The Chinese in Taiwan prefer a smaller fridge (their kitchens and homes are much smaller, and they prefer to purchase groceries more regularly that busy Americans). So Whirlpool failed. A “Lowe Taiwan” or “Taiwan hand” could have helped Whirlpool prevent the losses and embarrassment. Whirlpool also might have been advised to pick a name that Chinese could actually pronounce!

During the Viet Nam war, US troops distributed toothbrushes to the South Vietnamese army (who thought there were rifle cleaners). The toothbrush company that donated these for eventual market share therefore got no benefit.

Many European food processing companies opted to break into China’s market in the 80’s, with China becoming on of the world’s largest consumers of Chicken. However, the neatly wrapped cellophane chicken sections did not sell; Chinese prefer to pick out live chickens at a market, and have them slaughtered and prepared at purchase.

And who could ever forget the doomed Presidential trade mission of 1992, where American Auto icons demanded that Japanese purchase more US autos. The Japanese simply replied: “the steering wheel is on the wrong side.”

Market surprises

The Sony Walkman was an enormous hit in Japan in the 1970’s. It was launched with the main benefit that using it “would not disturb others.” Walkman entered Los Angeles in the late 1970’s as its entry point to greater America. It was immediately adopted by the cool, California beach scene. However, when consumers were polled, they said they bought the Walkman “so they wouldn’t be disturbed BY others.”
A great American export success is Tabasco sauce. It could be found throughout Japan. It has nothing to do with Louisiana food, Cajun food, or even hot food! Tabasco appears for a macho approach to spice up the rather delicate Japanese cuisine. But nothing else on the table may be spicy at all!

Market adaptations

McDonalds prides itself on inexpensive, quick food. The dining experience should be convenient. The food comes out within seconds of ordering it, and the restaurant itself is brightly lit with hard plastic furniture, so that customers don’t really want to linger very long. The drive-through made perfect sense to rushed Americans who want to power down a burger while driving on a highway.

Asian McDonalds are “sit and chat” places. Because many of the items are imported, they are more expensive. It’s possible for Chinese families to spend an hour or two in a McDonalds. In Europe, many McDonald’s serve beer, redefining the “family restaurant” theme. Additionally, McDonalds is a quick service or casual dining restaurant outside the USA (where it is classified as fast food).

Budweiser
Budweiser is a high volume, low margin, inexpensive beer. In Japan, Budweiser is a premium beer, selling at some restaurants for 8-10$ per can. Japanese have been known to instruct the waiter at a restaurant to leave the empty BUD can on the table, and have glasses refilled with less expensive local beers, as BUD is a status symbol.

Heineken
The same holds true for Heineken, which could be called the “Budweiser of The Netherlands.” In the USA, however, it is a premium product.

Levis
The Americans get their revenge with Levis though. Levis are a workingman’s blue jean. But in Holland prices can be 3-5 times what Americans spend at home, and the Dutch wear Levis to cafes and clubs.

Market Flips

Bottled water

In a bottled water deal I was once with, we surveyed the landscape of bottled waters in Europe and realized we would never compete as a water drink. We would therefore compete as a club drink. We found a sexy fashion magazine to put their name on our water, and we sold “Scena” (the scene) water through fashion magazines and nightclubs. Our quantities were less than if we were in supermarkets, but our margins were enormous.

Media
In bringing media companies to Asia we found that the content (the movies, the radio show, even home shopping) was less important than the English that was being spoken. We were able to sell American TV as a means for Asians to practice their English.

So the lessons?

Get a Lowe Taiwan. Walk into a few kitchens. (Or just go where the customers are) Be flexible. And be on the lookout for market surprises and market adaptations. And when you can’t find those surprises, “flip.”

Technorati Tags: international business, international advice, international strategy, international markets

It’s no secret that Asian merger fever is a major trend. It seems the Chinese government holds endless foreign reserves, and is using that cash to acquire Western firms. China and India are showing the world they’re not just low-cost exporters, but also global M&A players.

We’ve seen examples with factories that made clothing and computers for American firms turning around and buying their overseas customers, such as the clothing factory Li & Fung in China, which purchased four of designer Liz Claiborne’s brands.

And while Lenovo’s purchase of IBM’s pc division wasn’t China’s largest acquisition, it certainly was one of the most newsworthy purchases.

Indian firms that were formerly outsourced back offices are purchasing their clients. The 2007 list of big-ticket purchases was impressive. In India:
Hindalco Industries bought Novelis, a Canadian aluminum company, for $3.6 billion. Suzlon Energy (India’s largest wind power company) nabbed REpower, a German engineering firm, for $1.7 billion. United Breweries, India’s largest beer and spirits conglomerate, snapped up Whyte & Mackay, the world’s fourth-largest distiller of Scotch whisky, for $1 billion. Wipro, one of India’s software giants, bought New Jersey-based Infocrossing for $600 million.

In China:
ICBC, a state-owned Chinese bank, put up $5.5 billion — China’s largest overseas investment ever — for a 20 percent stake in Standard Bank, South Africa’s biggest lender. China Development Bank announced a $3 billion investment in Barclays PLC to support the British bank’s bid for the Dutch bank ABN AMRO. In March, the Chinese government put together an investment fund that invested $3 billion for a 10 percent stake in the U.S. private equity firm Blackstone Group.

So what are Chinese and Indian firms actually buying? And how would we want to position our firms to sell to them, if desired?

First, we have to see who the customer is.

In China, we are dealing primarily with government officials, even if they masquerade as business people and have titles such as CEO or director on their cards. Prominence within the Communist Party enables them to have cash to commit to overseas purchases; the party will be highly involved in all dealings.

In India, we’re usually dealing with actual business people. They will, of course, have strong government ties, but many are true entrepreneurs or come from entrepreneurial families.

What do these new buyers want?
Chinese firms don’t necessarily demand management control of their acquisitions or investments, if the trend is any kind of indicator.
When an American company buys a business, it asks one of two questions: Will it make a profit? Or will it give us market share?

When Chinese companies make acquisitions, they often do it as a way to educate themselves about a specific market or industry.
Indian firms are quite different, and shouldn’t be examined through the same lens as Chinese firms. Indian firms clearly want control of the properties they buy. There is often a more strategic reason to make the buy, which fits into the parent firm’s business model.

What is the “win”?
Both countries want a win. And that looks different in different countries.
Tata’s (of India) acquisition of Jaguar and Land Rover (two former British brands that were owned by Ford) seems to make little sense financially.

These brands steadily declined in the last several years (Ford paid about $5 billion for Jaguar, and sold it with Land Rover for $2 billion).

Culturally, the acquisition makes sense, though. As a former colony of Great Britain, India is always showing the world that it’s a power to be dealt with.

And if Tata can turn around Jaguar, it will demonstrate it can revive the sick brand, doing it better than either the British or Americans. It’s more about pride than money.

Chinese victories are about policy, and going global. Chinese state-owned enterprises (SOEs) have been ordered to polish the Chinese reputation and spread Chinese multinationalism.

Last year, President Hu Jintao promised to “accelerate the growth of Chinese brand names in the world.” But since the acquiring firms from China are SOEs, they run into problems, and governments can block the purchase.

But they may buy a company — even if it’s inferior — just to make the Communist Party happy, which they must do.

In selling to India, be prepared to give up control. Seek a piece of the matrix that’s missing from Indian buyers, and fill the void.

When dealing with China, add value in a different way. Show an opening to Chinese brands, education of Chinese executives and willingness to work with the Chinese to teach them your business, market and industry.

Technorati Tags: international business, international advice, international strategy, Chian, India

Aren’t there easier markets to sell into? After all, the language, the culture, the politics and the business methodology are all different in China.

Maybe you should start with Denmark?

Technorati Tags: international business, international advice, international strategy, marketing strategy

Here are examples of the worst international business strategies we’ve seen.

• Follow the client — How many times do we talk to firms that decide to enter a market because their client is doing so? What happens if you lose the client? Does that mean you are stuck in Turkey with no other business? While making clients unhappy is unpleasant, and losing clients even worse, it’s better to commit to a market than just a client.

• Since we speak English, let’s start with an English-speaking country — Are we just too lazy to learn another language? Do we want to cut out a better market opportunity in an English-speaking one? It’s far better to go where the prospects are the greatest, regardless of the language spoken (most of your counterparts have some working knowledge of English anyway).

• Assume Canada is just like the United States — The first thing one may notice in Canada is that the cereal boxes are in two languages. You might hear wacky terms, such as “province” instead of “state.” Canadians prefer long-term business relations. Canada is one of the most U.S.-friendly countries out there, but is still a different culture.

• Sell out of our bag — When you limit your offerings to one or two items, you’ll fail if they new market rejects them. You must be willing to modify what you have, and adapt pricing, promotion and distribution strategies as well.

• Send the wrong people — The correct people must understand the game they’re entering. They must have enough rank and support to educate a firm and modify strategy. They must be able to deal with a country’s hierarchies and structures. They must be patient, and willing to learn. Yet they must be credible business people to accomplish company objectives. When you need a graybeard to enter a market, you send a graybeard.

• Pick the biggest market — Again, the biggest market may not be the best opportunity. You may not be able to compete with entrenched players there. The market may not have a “fair play” atmosphere. For example, Germany’s beer market is fragmented. While they may drink more beer per capita than anyone else, the Germans’ alliance is to small, local breweries.

• Sell first, research later — This can be disastrous on business trips, as you have only one chance to make a first impression. It also shows the people you are dealing with that you haven’t done your homework, and hence, aren’t committed to their market.

• Hand over the intellectual property — IP is a corporate asset, and has a value. Selling the IP makes sense only if you aren’t worried about creating a new competitor. Many firms overseas pose as buyers to get IP from their competitors. If local law mandates that your IP becomes part of a market entry strategy, then choose your partners slowly and carefully.

• Switching partners when there’s a problem — This is always difficult. It seems that in every industry, everyone knows everyone. And foreign firms and joint ventures are very visible.

If we really take our time to get to know our partners, and provide them the proper support, then there shouldn’t be a need to keep changing those relationships. And many others who know of your failed marriage may not want to work with you anyway.

• The three-team approach — U.S. firms like to send in a research team, a negotiation team and an implementation team. This strategy is flawed for many reasons: Relationship-building is a key activity to international deals, there’s no champion in-house to follow the progress and communicate effectively to the company, and it simply confuses many Asian companies. It also shows no personal commitment by any of the players.

• Find a partner who does what we do — So if the U.S. firm makes dial tones, and the Ukrainian firm makes dial tones, then adoption of the U.S. technology means all the Ukrainians lose their jobs? Better to find a partner that complements (not directly competes with) our services.

• Assume we have Europe covered because we have a person there — Europe has about 1 billion residents. And one person with a briefcase will cover it?

• Use our in-house people who know our business — They may know your business well, but do they know your new market? Do they know the players? Do they know the nuances of international market entry? Do they know how to negotiate in foreign countries? Will they educate your firm properly as to the problems they encounter and how to fix them?

• Make no investment — This is the worst of all. Firms must invest people, time, education and often money to get into a market. Firms must realize that our counterparts overseas often see us as exploiters, who know nothing of their country or culture.

Avoiding these strategies increases your chances of succeeding as you enter a new country’s market.

Technorati Tags: international business, international advice, international strategy, marketing strategy

Many firms are rushing to get their products and services overseas ‹ giving rise to charlatans who try to take advantage of the situation. Trading companies and consultants materialize that seem to be able to fix anything for you overseas.
Here are some telltale signs of fakes and frauds:

“I know everyone in China”
China has quite a few people. While the international English-speaking business community is astonishingly small, the idea that the entire country is ³covered² is preposterous. It¹s amazing how many firms fall for it.

“I have a brother in Russia”
Does this mean your brother knows how to do what we need done in Russia? And does it mean that if you have a local relative, we¹re guaranteed success? How do we verify this?

Referring to a “partner” when they mean a “supplier”
Many times, consultants will tell you all about the “partners” they have in Asia, when they’re really referring to a factory to which they’ve given work. Always ask for a definition of “partner.”

“I’m doing you a favor by taking you on as a client”
This is insulting.
All businesses need clients, and without them, there is no business. Why was this person pitching you if they didn’t want you as a client?

“My wife is from India; she can handle the negotiations”
Is your wife a seasoned international negotiator? If ethnicity and skin color alone make one an international business expert, why not hire the foreign-born waiter who served you lunch?

“I know the international market”
There is no such thing. Anyone using this terminology is expressing ignorance. Do they mean Ghana or Bulgaria? There are hundreds of international marketplaces; grouping them together just doesn¹t make sense.

Taking you into introductions too quickly
There’s an enormous relationship aspect to doing business in almost every country. Hence, the client and vendor must trust each other, as the vendor is risking the loss of long-term overseas relationships.

The one-trip promise
If anyone really can sell into a foreign market with only one sales trip, then give me their phone number. In 25 years, I’ve never seen it happen. Promising it to a client is implausible.

Working in all countries
According to the United Nations, there are 192 countries, plus 61 territories, on the planet. Hence, the notion of one “go to person” for all of these is ludicrous. While many vendors can be connected in many countries, it’s impossible to be connected in all of them.

Working in all disciplines
“International” is an adjective. Expertise has to be quantified into some type of functional discipline, whether it¹s finance, human resources, law, marketing, technology etc. You wouldn¹t send a production supervisor to market in your home country, so why would you do it overseas? Some of us can have more than one area of expertise, just not all of them.

Stating that their technical skills will transfer abroad
Selling in France is very different than selling in Chicago. Managing people in Kansas has almost no similarity to managing Czechs. People who claim their skills are interchangeable with overseas needs obviously have never worked overseas.

“My buddy at the Korean restaurant can get us into Korea.”
If your buddy is an international market entry specialist, than what is he doing serving bulgogi (Korean barbecued beef) and cleaning up with a bus bucket? How could anyone make that leap?

No grasp at all of culture
Business is about people. If you want to work with people from other cultures, then you must understand them. When culture is glossed over or downplayed, one has to doubt the success of the vendor.

Meyer the buyer
If you have a vendor that¹s been purchasing coffee mugs in Taiwan for 20 years, then use him to purchase more coffee mugs. Don’t hire him to market your product (he¹s a buyer, not a seller) or solve complex overseas issues.

Not willing to prepare and educate you
International business involves education, expectations management, coaching of executives and management of negotiations. A true intermediary will insist on doing these activities mentioned. The best client is one who understands exactly what will happen, and why it’s happening.

Trying to keep too much “mud” in the relationship
Again, when the parties don’t get to know each other, it’s a recipe for disaster. The true intermediary in international business needs to feed back market intelligence, let you know their foreign counterparts and be as transparent as possible.

It’s too good to be true
If it seems too good to be true, then it probably is. The same wisdom holds true for your domestic endeavors. When a vendor can do absolutely everything and has no limitations, then it’s a fairy tale.

Bill Decker, managing director of Partners International, which consults with firms on global business and creates partnerships in foreign countries, can be reached at Bill@partnersinternational.com.

Technorati Tags: International business, spotting frauds, business frauds, international advice

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