Here’s Why Global Expansion Needs a Local Focus

There’s an old saying in business that you should focus on what you know. More often than not, this means choosing an industry or sector you’re familiar with.

However, this cliched but still useful adage can also apply to the demographics you target. Although it’s not foolproof, logic suggests that targeting local consumers is the best way to get a product off the ground. Of course, in the age of the internet, the idea of what’s “local” has changed dramatically. But even with easier access to a global audience, targeting certain countries and regions often has its benefits.

Size Doesn’t Guarantee Success in New Markets

Indeed, there’s inherent value in understanding local tastes, preferences and economics. However, what happens when things start to plateau at home? For many businesses, the answer is simple: go global. In reality, the process of taking a local business international isn’t easy. Take, for example, Walmart. The US retailer is a veritable powerhouse in North America but faltered when it tried to crack Germany. After opening 85 stores across the country in 1997, it was forced to pull out in 2006 at a cost of $1 billion. At the heart of the failure was a difference in business and consumer culture.

With tougher labor laws, restrictions on business hours and different attitudes to the shopping experience, operating conditions in Germany didn’t fit Walmart’s model. Of course, there are plenty of examples of business that went international and thrived. As is often the case, the US is the proverbial land of hope and glory for a number of companies. With a population of 327 million and a GDP approaching $20 trillion, America is the home of capitalism. But just like actors and music acts, not all businesses can crack America. However, those that do, can thrive.

Get a Feel for the Market and Business Can Boom

A recent example of the US market providing a beacon of hope comes from gaming company NetEnt. As stated by the CEO of NetEnt in the company’s 2019 interim report, revenue in the US has countered subpar performances in Europe. Despite calling Sweden home, local earnings dropped by 7% during the third quarter of 2019. Add to that struggles in Norway and NetEnt’s European stronghold was weakened in 2019. However, CEO Therese Hillman did note that US earnings in New Jersey and Pennsylvania continued to improve. That’s noteworthy given how the gaming sector in the US is evolving. Short of federal regulation, states have enacted their own laws.

For outside companies, that means compliance isn’t universal. That, in turn, makes access to US markets more of a task. However, those that can make it in are reaping the benefits. Indeed, it was a similar story when restaurant brand Giraffas crossed over from Brazil to the US. According to the Elliot Group, American diners have certain tasks and expectations. Fast-food is more engrained into the culture and that promoted Giraffas to launch US-focused products such as Picanha burgers. What’s more, the company introduced special cuts of beef that not only came from American cattle but that diners would recognize.

International Growth Needs a Local Focus

Although it may not have “cracked” the US, Giraffas showed that there is money to be made if you’re willing to change. That seems to be the lesson here. Staying local is great, but having an international presence can help boost earnings. However, without an understanding of the market you’re entertaining, success can be hard to come by. Whether it’s a company venturing out of the US or one moving into it, local knowledge is paramount. Any global expansion strategy must have a local focus. If CEOs can find this balance, anything is possible.

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